-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HheXEoD7SUrlgTSAoUV8qTykH27+HrDnnbWTGNYloAxP4NWRFj6uS8S4s2BW49V8 jBiHrRQsfURZVDQ8n287oQ== 0000836346-08-000027.txt : 20080424 0000836346-08-000027.hdr.sgml : 20080424 20080424163100 ACCESSION NUMBER: 0000836346-08-000027 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20080424 DATE AS OF CHANGE: 20080424 EFFECTIVENESS DATE: 20080501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANZ LIFE VARIABLE ACCOUNT B CENTRAL INDEX KEY: 0000836346 IRS NUMBER: 411366075 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-95729 FILM NUMBER: 08774804 BUSINESS ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416-1297 BUSINESS PHONE: 800-328-5600 MAIL ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416-1297 FORMER COMPANY: FORMER CONFORMED NAME: NALAC VARIABLE ACCOUNT B DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANZ LIFE VARIABLE ACCOUNT B CENTRAL INDEX KEY: 0000836346 IRS NUMBER: 411366075 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05618 FILM NUMBER: 08774805 BUSINESS ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416-1297 BUSINESS PHONE: 800-328-5600 MAIL ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416-1297 FORMER COMPANY: FORMER CONFORMED NAME: NALAC VARIABLE ACCOUNT B DATE OF NAME CHANGE: 19920703 0000836346 S000002612 ALLIANZ LIFE VARIABLE ACCOUNT B C000007180 Allianz Rewards Variable Annuity 485BPOS 1 file001.txt REWARDS 485B MAY 1, 2008 File Nos. 333-95729 and 811-05618 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( ) Pre-Effective Amendment No. ( ) ------------ ------------ Post-Effective Amendment No. 18 (X) ------------ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( ) Amendment No. 238 (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) 5701 GOLDEN HILLS DRIVE, MINNEAPOLIS, MN 55416-1297 (ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (763) 765-2913 (DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE) STEWART D. GREGG, SENIOR SECURITIES COUNSEL ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA 5701 GOLDEN HILLS DRIVE MINNEAPOLIS, MN 55416-1297 (763) 765-2913 (NAME AND ADDRESS OF AGENT FOR SERVICE) IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK THE APPROPRIATE BOX): ____ immediately upon filing pursuant to paragraph (b) of Rule 485 __X__ on May 1, 2008 pursuant to paragraph (b) of Rule 485 ____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485 ____ on (date) pursuant to paragraph (a)(1) of Rule 485 IF APPROPRIATE, CHECK THE FOLLOWING: ____ this post-effective amendment designates a new effective date for a previously filed post-effective amendment. APPROXIMATE DATE OF THE PROPOSED PUBLIC OFFERING: May 1, 2008 TITLES OF SECURITIES BEING REGISTERED: Individual Flexible Purchase Payment Variable Deferred Annuity Contracts PART A - PROSPECTUS 1 THE ALLIANZ REWARDS(TM) VARIABLE ANNUITY CONTRACT ISSUED BY ALLIANZ LIFE(R) VARIABLE ACCOUNT B AND ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA For your convenience we have provided a glossary (see section 13) that defines key, capitalized terms that are used in this prospectus. This prospectus describes a bonus individual flexible purchase payment variable deferred annuity contract (Contract) issued by Allianz Life Insurance Company of North America (Allianz Life, we, us, our). The Contract is a "flexible purchase payment" contract because you (the Owner) can make more than one Purchase Payment, subject to certain restrictions. The Contract is "variable" because the value of the Contract and any variable Annuity Payments you receive will increase or decrease depending on the performance of the Investment Options you select (in this prospectus, the term "Investment Options" refers only to the variable Investment Choices listed on the following page, and not to any fixed Investment Choices). The Contract is "deferred" because you do not have to begin receiving regular Annuity Payments immediately. The Contract offers the PRIME Plus Benefit that includes a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit (GPWB). We designed the PRIME Plus Benefit to give you options for turning your accumulated retirement assets into a stream of retirement income. The PRIME Plus Benefit carries a higher Contract expense. The Contract also provides a bonus on net Purchase Payments we receive before the older Owner's 81st birthday. The bonus is subject to a vesting schedule. Additional information about the Separate Account has been filed with the Securities and Exchange Commission (SEC) and is available upon written or oral request without charge. A Statement of Additional Information (SAI) dated the same date as this prospectus includes additional information about the annuity offered by this prospectus. The SAI is incorporated by reference into this prospectus. The SAI is filed with the SEC and is available without charge by contacting us at the telephone number or address listed at the back of this prospectus. The table of contents of the SAI appears before the Privacy and Security Statement in this prospectus. The SEC also maintains a website (http://www.sec.gov). The prospectus, the SAI and other information about the Contract are available on the EDGAR database on the SEC's website. Please read this prospectus before investing and keep it for future reference. It contains important information about your annuity and Allianz Life that you ought to know before investing. This prospectus is not an offering 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. We have not authorized anyone to provide you with information that is different. The SEC 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. An investment in this Contract is not a deposit of a bank or financial institution and is not federally insured or guaranteed by the Federal Deposit Insurance Corporation or any other federal government agency. An investment in this Contract involves investment risk including the possible loss of principal. Variable annuity contracts are complex insurance and investment vehicles. Before you invest, be sure to ask your registered representative about the Contract's features, benefits, risks and fees, and whether the Contract is appropriate for you based upon your financial situation and objectives. Dated: May 1, 2008 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 2 This prospectus contains information on currently offered Contracts. Information regarding the product features and expenses of older Contracts that we no longer offer can be found in the SAI. We currently offer the Investment Options listed below. You can invest in up to 15 Investment Options at any one time. Currently, the only fixed Investment Choice we offer under our general account is the DCA Fixed Option. One or more of the Investment Choices may not be available in your state. We may add, substitute or remove Investment Choices in the future. Contracts with the PRIME Plus Benefit may be subject to restrictions on allocations and transfers into certain Investment Options. INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT - -------------------------------------------------------------------------------- AIM AZL(R) AIM International Equity Fund BLACKROCK AZL(R) Money Market Fund BlackRock Global Allocation V.I. Fund CLEARBRIDGE AZL(R) LMP Large Cap Growth Fund COLUMBIA AZL(R) Columbia Technology Fund DAVIS AZL(R) Davis NY Venture Fund Davis VA Financial Portfolio Davis VA Value Portfolio(1) DREYFUS AZL(R) Dreyfus Founders Equity Growth Fund AZL(R) Dreyfus Premier Small Cap Value Fund AZL(R) S&P 500 Index Fund AZL(R) Small Cap Stock Index Fund Dreyfus IP Small Cap Stock Index Portfolio(3) Dreyfus Stock Index Fund, Inc. (3) FIRST TRUST AZL(R) First Trust Target Double Play Fund FRANKLIN TEMPLETON AZL(R) Franklin Small Cap Value Fund Franklin Global Communications Securities Fund Franklin Global Real Estate Securities Fund Franklin Growth and Income Securities Fund Franklin High Income Securities Fund Franklin Income Securities Fund Franklin Large Cap Growth Securities Fund Franklin Rising Dividends Securities Fund Franklin Small-Mid Cap Growth Securities Fund Franklin Small Cap Value Securities Fund(2) Franklin Templeton VIP Founding Funds Allocation Fund Franklin U.S. Government Fund Franklin Zero Coupon Fund 2010 Mutual Discovery Securities Fund Mutual Shares Securities Fund Templeton Developing Markets Securities Fund(3) Templeton Foreign Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund FUSION PORTFOLIOS AZL(R) Fusion Balanced Fund AZL(R) Fusion Growth Fund AZL(R) Fusion Moderate Fund JENNISON AZL(R) Jennison 20/20 Focus Fund AZL(R) Jennison Growth Fund Jennison 20/20 Focus Portfolio(3) LEGG MASON AZL(R) Legg Mason Growth Fund AZL(R) Legg Mason Value Fund NEUBERGER BERMAN AZL(R) Neuberger Berman Regency Fund NICHOLAS-APPLEGATE AZL(R) NACM International Fund OPPENHEIMER CAPITAL AZL(R) OCC Opportunity Fund AZL(R) OCC Value Fund OpCap Mid Cap Portfolio(4) OPPENHEIMER FUNDS AZL(R) Oppenheimer Global Fund AZL(R) Oppenheimer International Growth Fund AZL(R) Oppenheimer Main Street Fund Oppenheimer Global Securities Fund/VA(1) Oppenheimer High Income Fund/VA Oppenheimer Main Street Fund(R)/VA(1) PIMCO AZL(R) PIMCO Fundamental IndexPLUS Total Return Fund PIMCO VIT All Asset Portfolio PIMCO VIT CommodityRealReturn(TM) Strategy Portfolio PIMCO VIT Emerging Markets Bond Portfolio PIMCO VIT Global Bond Portfolio (Unhedged) PIMCO VIT High Yield Portfolio PIMCO VIT Real Return Portfolio PIMCO VIT StocksPLUS(R) Growth and Income Portfolio PIMCO VIT Total Return Portfolio PRUDENTIAL SP International Growth Portfolio SP Strategic Partners Focused Growth Portfolio SCHRODER AZL(R) Schroder Emerging Markets Equity Fund AZL(R) Schroder International Small Cap Fund SELIGMAN Seligman Smaller-Cap Value Portfolio(1) TARGETPLUS PORTFOLIOS AZL TargetPLUS(TM) Balanced Fund AZL TargetPLUS(TM) Equity Fund AZL TargetPLUS(TM) Growth Fund AZL TargetPLUS(TM) Moderate Fund TURNER AZL(R) Turner Quantitative Small Cap Growth Fund VAN KAMPEN AZL(R) Van Kampen Comstock Fund AZL(R) Van Kampen Equity and Income Fund AZL(R) Van Kampen Global Franchise Fund AZL(R) Van Kampen Global Real Estate Fund AZL(R) Van Kampen Growth and Income Fund AZL(R) Van Kampen Mid Cap Growth Fund (1) The Investment Option is available for additional Purchase Payments and/or transfers only to Owners with Contract Value in the Investment Option on April 30, 2004. (2) The Franklin Small Cap Value Securities Fund is available for additional Purchase Payments and/or transfers only to Owners with Contract Value in this Investment Option on April 29, 2005. (3) We have filed an exemptive order application with the SEC requesting the following substitutions. If the order is issued, the shares of the replacement Investment Options will be exchanged for the replaced Investment Options, and shares of the replaced Investment Options will no longer be available through the Contracts. It is currently anticipated that if the SEC grants the relief requested, the substitutions will occur in 2008.
Replacement Investment Option Replaced Investment Option - --------------------------------------------- ------------------------------------------- AZL Jennison 20/20 Focus Fund Jennison 20/20 Focus Portfolio AZL S&P 500 Index Fund Dreyfus Stock Index Fund, Inc. AZL Small Cap Stock Index Fund Dreyfus IP Small Cap Stock Index Portfolio AZL Schroder Emerging Markets Equity Fund Templeton Developing Markets Securities Fund
(4) A fund of the Premier VIT series. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Fee Tables............................................5 Contract Owner Transaction Expenses...............5 Contract Owner Periodic Expenses..................6 Annual Operating Expenses of the Investment Options.............................7 Examples..........................................7 1. The Variable Annuity Contract.....................9 Ownership........................................10 2. Purchase.........................................11 Purchase Payments................................11 Bonus............................................12 Automatic Investment Plan (AIP)..................13 Allocation of Purchase Payments..................13 Tax-Free Section 1035 Exchanges..................14 Faxed Applications...............................14 Free Look/Right to Examine.......................14 Accumulation Units/Computing the Contract Value..15 3. The Annuity Phase................................16 Income Date......................................16 Partial Annuitization............................16 Annuity Options..................................17 Traditional Annuity Payments.....................19 4. Protected Retirement Income Made Easy: The PRIME Plus Benefit...........................20 Adding the PRIME Plus Benefit To Your Contract...21 Removing the PRIME Plus Benefit From Your Contract................................21 Investment Option Allocation and Transfer Restrictions Under the PRIME Plus Benefit....22 PB Value.........................................24 Using the PRIME Plus Benefit.....................28 GPWB Payments....................................30 Taxation of GPWB Payments........................31 Termination of the GPWB..........................32 GMIB Payments....................................32 Amount Used to Calculate GMIB Payments...........32 Taxation of GMIB Payments........................33 Termination of the GMIB..........................33 Required Minimum Distributions (RMDs) Under Qualified Contracts with the PRIME Plus Benefit.................................33 5. Investment Options...............................34 Substitution and Limitation on Further Investments..........................42 Transfers........................................42 Excessive Trading and Market Timing..............43 Dollar Cost Averaging (DCA) Program..............45 Flexible Rebalancing.............................46 Financial Advisers - Asset Allocation Programs...46 Voting Privileges................................46 6. Our General Account..............................47 7. Expenses.........................................47 Separate Account Annual Expenses.................47 Contract Maintenance Charge......................48 Withdrawal Charge................................48 Transfer Fee.....................................50 Premium Taxes....................................51 Income Taxes.....................................51 Investment Option Expenses.......................51 8. Taxes............................................51 Annuity Contracts in General.....................51 Qualified Contracts..............................52 Multiple Contracts...............................53 Partial 1035 Exchanges...........................53 Distributions - Non-Qualified Contracts..........53 Distributions - Qualified Contracts..............54 Assignments, Pledges and Gratuitous Transfers....55 Death Benefits...................................55 Withholding......................................55 Federal Estate Taxes.............................56 Generation-Skipping Transfer Tax.................56 Foreign Tax Credits..............................56 Annuity Purchases by Nonresident Aliens and Foreign Corporations.........................56 Possible Tax Law Changes.........................56 Diversification..................................56 Required Distributions...........................56 9. Access to Your Money.............................57 Partial Withdrawal Privilege.....................59 Systematic Withdrawal Program....................59 The Minimum Distribution Program and Required Minimum Distribution (RMD) Payments..........59 Suspension of Payments or Transfers..............60 10. Illustrations....................................60 11. Death Benefit....................................61 Traditional Guaranteed Minimum Death Benefit (Traditional GMDB)...........................61 Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB)..............................62 Termination of the Death Benefit.................63 Death of the Owner Under Inherited IRA Contracts.63 Death of the Owner and/or Annuitant Under All Other Contracts..............................64 Death Benefit Payment Options....................67 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 4 12. Other Information................................67 Allianz Life.....................................67 The Separate Account.............................67 Distribution.....................................68 Additional Credits for Certain Groups............69 Administration/Allianz Service Center............69 Legal Proceedings................................70 Financial Statements.............................70 13. Glossary.........................................70 14. Table of Contents of the Statement of Additional Information (SAI).....................73 15. Privacy and Security Statement...................74 Appendix A - Annual Operating Expenses for Each Investment Option...........................76 Appendix B - Condensed Financial Information.........81 Appendix C - PB Value Calculation Examples...........92 Appendix D - GPWB Under the PRIME Plus Benefit.......94 Appendix E - Death Benefit Calculation Examples......96 Appendix F - Withdrawal Charge Examples..............97 For Service or More Information......................99 The following is a list of common abbreviations used in this prospectus: AIA = Annual Increase Amount GPWB = Guaranteed Partial Withdrawal Benefit GMDB = Guaranteed Minimum Death Benefit MAV = Maximum Anniversary Value GMIB = Guaranteed Minimum Income Benefit PRIME = Protected Retirement Income Made Easy - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- FEE TABLES The following tables describe the fees and expenses that you will pay when purchasing, owning and taking a withdrawal from the Contract. For more information, see section 7, Expenses. The first tables describe the fees and expenses that you will pay if you take a withdrawal from the Contract during the Accumulation Phase, or if you make transfers. CONTRACT OWNER TRANSACTION EXPENSES Withdrawal Charge During the Accumulation Phase(1), (2),(3) (as a percentage of each Purchase Payment withdrawn) Number of Complete Years Since We Received Your Purchase Payment Charge 0 8.5% 1 8.5% 2 8.5% 3 8.5% 4 8.0% 5 7.0% 6 6.0% 7 5.0% 8 4.0% 9 3.0% 10 years or more 0.0% Transfer Fee(4)............................................$25 Premium Taxes(5)....................................0% to 3.5% (as a percentage of each Purchase Payment) (1) The partial withdrawal privilege for each Contract Year is equal to 10% of your total Purchase Payments, not including any bonus, less any previous withdrawals taken during the Contract Year that were not subject to a withdrawal charge. We will not deduct a withdrawal charge from amounts withdrawn under the partial withdrawal privilege. There is no partial withdrawal privilege after you exercise the GPWB (if applicable) or during the Annuity Phase. Any unused partial withdrawal privilege in one Contract Year does not carry over to the next Contract Year. For more details and additional information on other penalty-free withdrawal options, please see the discussion of the partial withdrawal privilege and other information that appears in section 9, Access to Your Money; and section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - GPWB Payments. (2) The total amount under your Contract that is subject to a withdrawal charge is the Withdrawal Charge Basis. The Withdrawal Charge Basis is equal to the total Purchase Payments (not including any bonus), less any Purchase Payments withdrawn (excluding any bonus and any penalty-free withdrawals). (3) In Connecticut and New Jersey, the withdrawal charge is 8.5%, 8.5%, 8.0%, 7.0%, 6.0%, 5.0%, 4.0%, 3.0%, 2.0%, 1.0%, and 0.0% for the time periods referenced. For more information, please see section 7, Expenses - Withdrawal Charge. (4) The first twelve transfers in a Contract Year are free. We do not count any transfers made under the dollar cost averaging program, flexible rebalancing program, or the allocation and transfer restrictions for the PRIME Plus Benefit against any free transfers we allow. Currently we deduct this fee only during the Accumulation Phase, but we reserve the right to deduct this fee during the Annuity Phase. For more information, please see section 7, Expenses - Transfer Fee. (5) It is our current practice not to make deductions from the Contract to reimburse ourselves for premium taxes that we pay until the earliest of: the Income Date that you take a Full Annuitization, the date of full withdrawal, or full distribution of the death benefit. We do not make deductions to reimburse ourselves for premium taxes that we pay from amounts applied to GMIB Payments. This charge varies by state. For more information, please see section 7, Expenses - Premium Taxes. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 6 CONTRACT OWNER PERIODIC EXPENSES The next tables describe the fees and expenses that you will pay periodically during the time that you own your Contract, not including the Investment Options' fees and expenses. The Separate Account annual expenses include the mortality and expense risk (M&E) charges and the administrative charge. During the Accumulation Phase: Contract Maintenance Charge(6).............................$40 (per Contract per year) Separate Account Annual Expenses(7) (as a percentage of average daily assets invested in a subaccount on an annual basis)
Maximum and Current Charges Current Charges for a Contract with for a Base Contract the PRIME Plus Benefit(8),(9) Admin. M&E Charges Admin. Charge Total M&E Charges Charge Total Traditional GMDB 1.55% 0.15% 1.70% 2.25% 0.15% 2.40% Enhanced GMDB 1.85% 0.15% 2.00% 2.45% 0.15% 2.60%
Maximum Charges(10) for a Contract with the PRIME Plus Benefit Admin. M&E Charges Charge Total Traditional GMDB 2.70% 0.15% 2.85% Enhanced GMDB 2.90% 0.15% 3.05% During the Annuity Phase: Contract Maintenance Charge(11)............................$40 (per Contract per year) Separate Account Annual Expenses - if you request variable Traditional Annuity Payments (as a percentage of average daily assets invested in a subaccount on an annual basis) M&E Charge(1(2)) 1.55% Administrative Charge 0.15% Total 1.70% (6) We waive the contract maintenance charge if the Rewards Value of your Contract is at least $75,000 at the time we are to deduct the charge. If the total Rewards Value of all your Contracts that are registered with the same social security number is at least $75,000 we waive the charge on all your Contracts (except in Texas). For more information, please see section 7, Expenses - Contract Maintenance Charge. (7) The Enhanced GMDB and PRIME Plus Benefit may not be available in all states; check with your registered representative. (8) You can add the PRIME Plus Benefit to your Contract once before age 76. The current charges apply if you add the PRIME Plus Benefit at issue, after issue, or if you reset the 7% AIA. (9) If you exercise the GPWB, the increased expenses associated with the PRIME Plus Benefit will continue until both the GMIB and GPWB terminate and the increased expenses associated with the Enhanced GMDB (if applicable) will continue as long as the Enhanced GMDB value is greater than zero. (10) This is the maximum charge we could impose if you add the PRIME Plus Benefit to your Contract at issue, after issue, or if you reset the 7% AIA. (11) We waive the contract maintenance charge during the Annuity Phase if your Contract Value on the Income Date is at least $75,000. For more information, please see section 7, Expenses - Contract Maintenance Charge. (12) Because the Contract allows Partial Annuitization, it is possible for different portions of the Contract to be in both the Accumulation and Annuity Phases at the same time. It is also possible to have different M&E charges on different portions of the Contract at the same time if you request variable Traditional Annuity Payments under a Partial Annuitization. For more information, please see section 3, The Annuity Phase - Partial Annuitization. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 7 ANNUAL OPERATING EXPENSES OF THE INVESTMENT OPTIONS This table describes the total annual operating expenses associated with the Investment Options and shows the minimum and maximum expenses for the period ended December 31, 2007, charged by any of the Investment Options before the effect of any contractual expense reimbursement or fee waiver. We show the expenses as a percentage of an Investment Option's average daily net assets.
Minimum Maximum Total annual Investment Option operating expenses* (including management fees, distribution or 12b-1 fees, and other expenses) before fee waivers and expense reimbursements 0.52% 1.96%
* Some of the Investment Options or their affiliates may also pay service fees to us or our affiliates. The amount of these fees may be different for each Investment Option. The maximum current fee is 0.25%. The amount of these fees, if deducted from Investment Option assets, is reflected in the above table and is disclosed in Appendix A. Appendix A also contains more details regarding the annual operating expenses for each of the Investment Options, including the amount and effect of any waivers and/or reimbursements. - -------------------------------------------------------------------------------- EXAMPLES The expenses for your Contract may be different from those shown in the examples below depending upon which Investment Option(s) you select and the benefits that apply. These examples are intended to help you compare the cost of investing in a Contract with the cost of investing in other variable annuity contracts. These costs include Contract Owner transaction expenses, Contract Owner periodic expenses, and the annual operating expenses of the Investment Options before the effect of reimbursements and waivers. You should not consider the examples below as a representation of past or future expenses. Actual expenses may be greater or less than those shown. The $40 contract maintenance charge is included in the examples as a charge of 0.031% of the average daily assets invested in a subaccount for the most recent calendar year based on the total charges collected under the Contract divided by the total average net assets for the Contract. Please note that this is an average and some Owners may pay more or less than the average. Transfer fees and deductions we make to reimburse ourselves for premium taxes that we pay may apply, but are not reflected in these examples. For additional information, see section 7, Expenses. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 8 If you take a full withdrawal at the end of each time period, and assuming a $10,000 investment and a 5% annual return on your money, you may pay expenses as follows. a) Maximum charges* for a Contract that has the Enhanced GMDB and the PRIME Plus Benefit (which carries the highest Separate Account annual expense of 3.05%) b) Current charges for a Contract that has the Enhanced GMDB and the PRIME Plus Benefit (which carries a Separate Account annual expense of 2.60%). c) The Base Contract with the Traditional GMDB (which carries the lowest Separate Account annual expense of 1.70%).
Total annual Investment Option operating expenses before any fee waivers or expense reimbursements of: 1 Year 3 Years 5 Years 10 Years ------------- ------------- -------------- ------------- 1.96% (the maximum Investment Option operating expense) a) $1,354 a) $2,362 a) $3,320 a) $5,338 b) $1,310 b) $2,236 b) $3,121 b) $4,993 c) $1,222 c) $1,980 c) $2,708 c) $4,246 - ------------------------------------------------------------- ------------- ------------- -------------- ------------- 0.52% (the minimum Investment Option operating expense) a) $1,213 a) $1,953 a) $2,665 a) $4,167 b) $1,168 b) $1,822 b) $2,450 b) $3,761 c) $1,078 c) $1,554 c) $2,005 c) $2,885 - ------------------------------------------------------------- ------------- ------------- -------------- ------------- In Connecticut and New Jersey the lower withdrawal charge would result in slightly lower expense examples. If you do not take a full withdrawal or if you take a Full Annuitization** of the Contract at the end of each time period, and assuming a $10,000 investment and a 5% annual return on your money, you may pay expenses as follows. Total annual Investment Option operating expenses before any fee waivers or expense reimbursements of: 1 Year 3 Years 5 Years 10 Years ------------- ------------- -------------- ------------- 1.96% (the maximum Investment Option operating expense) a) $504 a) $1,512 a) $2,520 a) $5,038 b) $460 b) $1,386 b) $2,321 b) $4,693 c) $372 c) $1,130 c) $1,908 c) $3,946 - ------------------------------------------------------------- ------------- ------------- -------------- ------------- 0.52% (the minimum Investment Option operating expense) a) $363 a) $1,103 a) $1,865 a) $3,867 b) $318 b) $ 972 b) $1,650 b) $3,461 c) $228 c) $ 704 c) $1,205 c) $2,585 - ------------------------------------------------------------- ------------- ------------- -------------- -------------
* If you add the PRIME Plus Benefit to your Contract after the Issue Date, or if you reset the 7% AIA, your Separate Account annual expense may be less than this amount, but it cannot be greater than this amount. ** Traditional Annuity Payments are generally not available until after the second Contract Anniversary in most states. GMIB Payments are not available until ten Contract Years after: a) the date the PRIME Plus Benefit was added to your Contract, or b) after the date of any 7% AIA reset. See Appendix B for condensed financial information regarding the Accumulation Unit values (AUVs) for the highest and lowest Separate Account annual expenses. See the appendix to the Statement of Additional Information for condensed financial information regarding the AUVs for other expense levels and for older Contracts that we no longer offer. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- 1. THE VARIABLE ANNUITY CONTRACT An annuity is a contract between you (the Owner), and an insurance company (in this case Allianz Life), where you make payments to us and, in turn, we promise to make regular periodic income payments (Annuity Payments) to the Payee. The Contract is tax deferred. You generally are not taxed on any earnings or appreciation on the assets in your Contract until you take money out of your Contract. For Qualified Contracts, the tax deferral is provided through compliance with specialized tax-qualification rules, and you do not receive any additional tax benefit by purchasing the Contract. However, the Contract may offer other features that meet your needs. Accordingly, if you are purchasing a Qualified Contract, you should consider purchasing this Contract for its death benefit, annuity benefits and other non-tax deferral related benefits. Please consult a tax adviser for information specific to your circumstances to determine whether a Qualified Contract is an appropriate investment for you. The Contract has an Accumulation Phase and an Annuity Phase. You can take withdrawals from the Contract during the Accumulation Phase and subject to certain restrictions, you can make additional Purchase Payments. The Accumulation Phase begins on the Issue Date and ends upon the earliest of the following. o The Business Day before the Income Date if you take a Full Annuitization. o The Business Day we process your request for a full withdrawal. o Upon the death of any Owner (or the Annuitant if the Contract is owned by a non-individual), it will terminate on the Business Day we receive in good order at our Service Center, both due proof of death and an election of the death benefit payment option, unless the spouse of the deceased continues the Contract. The Annuity Phase is the period during which we will make Annuity Payments from the Contract. Under all Contracts, Traditional Annuity Payments are available during the Annuity Phase. Traditional Annuity Payments must begin on a designated date (the Income Date) that is at least three years after your Issue Date. For Contracts with the PRIME Plus Benefit, you can request fixed Annuity Payments under the GMIB (GMIB Payments) beginning ten Contract Years after the date the PRIME Plus Benefit is added to your Contract, or ten years after the date of any 7% AIA reset. If you apply the entire Contract Value to Annuity Payments, we call that a Full Annuitization, and if you apply only part of the Contract Value to Annuity Payments, we call that a Partial Annuitization.* The maximum number of annuitizations you can have at any one time is five. Because the Contract allows Partial Annuitization, it is possible for different portions of the Contract to be in both the Accumulation and Annuity Phases at the same time. The Annuity Phase begins on the Income Date (or the first Income Date if you take any Partial Annuitizations) and ends when all portion(s) of the Contract that you apply to Annuity Payments have terminated, as indicated in section 3, The Annuity Phase. * GMIB Partial Annuitizations are based on the PB Value. They are not available after you exercise the GPWB, or if the PB Value is less than the Contract Value. Your Investment Choices include the Investment Options and any available general account Investment Choice. You cannot invest in more than 15 Investment Options at any one time. Contracts with the PRIME Plus Benefit may be subject to restrictions on allocations and transfers into certain Investment Options (see the "Investment Option Allocation and Transfer Restrictions under the PRIME Plus Benefit" discussion in section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit). Depending upon market conditions, you can gain or lose value in the Contract based on the investment performance of the Investment Options. The Investment Options are designed to offer the opportunity for a better return than any available general account Investment Choice; however, this is not guaranteed. The amount of Contract Value you are able to accumulate in your Contract during the Accumulation Phase and the amount of any variable Traditional Annuity Payments we make during the Annuity Phase depends in large part upon the investment performance of any Investment Options you select. We will not make any changes to your Contract without your permission except as may be required by law. The Contract will terminate when: o the Accumulation Phase has terminated, o the Annuity Phase has terminated, and/or o all applicable death benefit payments have been made. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 10 State Specific Contract Restrictions If you purchase a Contract, it will be subject to the law of the state in which it is issued. Some of the terms of your Contract may differ from the terms of a Contract delivered in another state because of state-specific legal requirements. Areas in which there may be state-specific Contract provisions may include the following. o The withdrawal charge schedule. o Availability of Investment Options, Annuity Options, endorsements, and/or riders. o Free look rights. o Selection of certain Income Dates. o Restrictions on your ability to make additional Purchase Payments. o Deductions we make to reimburse ourselves for premium taxes that we pay. o Selection of certain assumed investment rates for variable Annuity Payments. o Our ability to restrict transfer rights. If you would like information regarding state-specific Contract provisions, you should contact your registered representative or contact our Service Center at the toll free number listed at the back of this prospectus. OWNERSHIP Owner You, as the Owner, have all the rights under the Contract. The Owner is designated at Contract issue. You can change Owners at any time subject to our approval. However, Qualified Contracts can only have one Owner and there may be Internal Revenue Service (IRS) or other restrictions on changing the ownership of a Qualified Contract. Upon our approval, any change will become effective as of the date you sign the request. Changing ownership may be a taxable event. You should consult with your tax adviser before doing this. Joint Owner A Non-Qualified Contract can be owned by up to two Owners. Upon the death of either Joint Owner, the surviving Joint Owner will become the primary Beneficiary. We will then treat any other Beneficiary designation on record at the time of death as a contingent Beneficiary. You can change Joint Owners under the same conditions as described for an Owner. If a Contract has Joint Owners, we require the signature of both Owners on any forms that are submitted to our Service Center, unless we allow otherwise. NOTE FOR PARTIAL ANNUITIZATIONS: Partial Annuitizations are not available to Joint Owners. There can be only one Owner, the Owner must be the Annuitant, and we will not allow the Owner to add a joint Annuitant. Annuitant The Annuitant is the individual on whose life we base Annuity Payments. Subject to our approval, you designate an Annuitant and you can add a joint Annuitant for the Annuity Phase if you take a Full Annuitization. You may change the Annuitant at any time before the Income Date unless the Contract is owned by a non-individual (for example, a qualified plan or trust). You cannot change the Annuitant if the Contract is owned by a non-individual, but you can add a joint Annuitant (subject to our approval) for the Annuity Phase if you take a Full Annuitization. For Qualified Contracts, the Owner must be the Annuitant unless the Contract is owned by a qualified plan or is part of a custodial arrangement. Designating different persons as Owner(s) and Annuitant(s) can have important impacts on whether a death benefit is paid, and on who would receive it. Use care when designating Owners and Annuitants, and consult your registered representative if you have questions. Payee The Payee is the person or entity you designate (subject to our approval) to receive Annuity Payments during the Annuity Phase. The Owner will receive tax reporting on those payments. For Non-Qualified Contracts, an Owner or Annuitant can be the Payee, but it is not required. For Qualified Contracts owned by a qualified plan, the qualified plan must be the Payee. For all other Qualified Contracts, the Owner is not required to be the Payee, but the Owner cannot transfer or assign his or her rights under the Contract to someone else. If you do not designate a Payee by the Income Date, we will make Annuity Payments to the Owner unless the Contract is a Qualified Contract owned by a qualified plan. The Owner can change the Payee at any time, subject to our approval, provided that designation of a Payee is consistent with federal and state laws and regulations. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 11 Beneficiary The Beneficiary is the person(s) or entity you designate at Contract issue to receive any death benefit. You can change the Beneficiary or contingent Beneficiary at any time before your death unless you name an irrevocable Beneficiary. If you do not designate a Beneficiary, any death benefit will be paid to your estate. NOTE FOR JOINT OWNERS: For jointly owned Contracts, the sole primary Beneficiary will be the surviving Joint Owner. For Contracts that are jointly owned by spouses, if both spousal Joint Owners die before we pay the death benefit, we will pay the death benefit to the contingent Beneficiaries, or to the estate of the Joint Owner who died last if there are no named contingent Beneficiaries. However, for tax reasons, if the Joint Owners were not spouses and both Joint Owners die before we pay the death benefit, we will pay the death benefit to the estate of the Joint Owner who died last. Assignment of a Contract An authorized request specifying the terms of an assignment of a Contract must be provided to our Service Center and approved by us. We will not be liable for any payment made or action taken before we record the assignment. An assignment may be a taxable event. We will not be responsible for the validity or tax consequences of any assignment. After the death benefit has become payable, an assignment can only be made with our consent. If the Contract is assigned, your rights may only be exercised with the consent of the assignee of record. Qualified Contracts generally cannot be assigned. - -------------------------------------------------------------------------------- 2. PURCHASE PURCHASE PAYMENTS A Purchase Payment is the money you put into the Contract. To purchase this Contract, all Owners and Annuitant(s) must be age 80 or younger on the Issue Date. The initial Purchase Payment is due on the Issue Date. The Purchase Payment requirements for this Contract are as follows. o If you select the PRIME Plus Benefit, the minimum initial payment we will accept is $25,000. For all other Contracts, the minimum initial payment we will accept is $15,000. o You can make additional Purchase Payments of $50 or more during the Accumulation Phase before you exercise the GPWB, if applicable. o You cannot make any additional Purchase Payments to the Contract after the Income Date that you take a Full Annuitization (including a required Full Annuitization on the maximum permitted Income Date) or after you exercise the GPWB. In certain states, additional Purchase Payments can only be made during the first Contract Year or may be otherwise restricted. (In Connecticut, no Purchase Payments may be made on or after the older Owner's 81st birthday, or the Annuitant's 81st birthday if the Contract is owned by a non-individual). o The maximum total amount we will accept without our prior approval is $1 million (including amounts already invested in other Allianz Life variable annuities). o If we make this Contract available as an Inherited IRA, the death benefit proceeds of the previous tax-qualified investment must be directly transferred into this Contract (see section 9, Access to Your Money - The Minimum Distribution Program and Required Minimum Distribution (RMD) Payments). A beneficiary can apply the death benefit proceeds from multiple tax-qualified investments that were owned by the same owner to the purchase of an Inherited IRA Contract. We will not accept any other forms of Purchase Payment on an Inherited IRA Contract. The death benefit proceeds cannot be received by the beneficiary and then applied to an Inherited IRA Contract. For more information on Inherited IRA Contracts, see section 8, Taxes - Qualified Contracts - Inherited IRA. Purchase Payments to Qualified Contracts must not be greater than allowed under federal law and must be from earned income or a qualified transfer. Purchase Payments to Qualified Contracts other than from a qualified transfer may be restricted after the Owner reaches age 70 1/2. We may, at our sole discretion, waive the minimum Purchase Payment requirements. We reserve the right to decline any Purchase Payment. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 12 BONUS We will credit each Purchase Payment we receive before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual) with a bonus at the time it is received. During the first 90 days of your Contract, we will base the bonus rate on all net Purchase Payments (not including any bonus) received, which is the total amount of Purchase Payments received in the first 90 days of your Contract, less any withdrawals (but including any withdrawal charge) taken during this period. After this initial period, we will base the bonus rate on all net Purchase Payments (not including any bonus) received from the Issue Date until the time of the contribution. The bonus rates are as follows: Net Purchase Payment Bonus $0 - $24,999 4% $25,000 - $99,999 5% $100,000 - $999,999 6% $1,000,000 - $4,999,999 7% $5,000,000 + 8% We will credit the bonus to your Contract subject to the following terms: 1) Bonus amounts are available for withdrawal, annuitization or payment of a death benefit only when such amounts become vested. The bonus only becomes part of any guaranteed benefits that are based on Contract Value as it becomes vested. You will not receive the amount of the bonus credited in any guaranteed benefits that are based on Purchase Payments. Any bonus amounts you receive during the first 90 days of your Contract will vest based on the date of the additional Purchase Payment to which they are applied. The vesting schedule is as follows: Number of Complete Years Since Purchase Payment Vesting Receipt Percentage 0 0% 1 35% 2 70% 3+ 100% 2) We treat all bonus amounts and any gains or losses attributable to such amounts as earnings under the Contract and are treated as such for purposes of the withdrawal charge. 3) All gains and losses attributable to the bonus are part of your Contract Value and are always 100% vested. 4) If the Contract is owned by a non-individual, then we use the age of the Annuitant to determine whether a bonus applies. We pay all bonus amounts from the general account assets of Allianz Life. Contract charges are deducted from your Rewards Value. Therefore, your Contract incurs expenses on the total Contract Value and any unvested bonus amounts. If you cancel your Contract during the free look/right to examine period, or if you take a withdrawal, take a Full Annuitization, or when a death benefit is payable in the first three years from any Purchase Payment receipt date, you will forfeit all or some of your bonus. Since charges will have been assessed against the Rewards Value, it is possible that upon withdrawal, 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 annuity. You may alleviate this risk by allocating the bonus amounts to the AZL Money Market Fund. If you select the AZL 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 AZL Money Market Fund for your bonus allocation, then the bonus will be allocated the same way as the corresponding Purchase Payment. We expect to profit from certain charges assessed under the Contract (for example, the withdrawal charge and the mortality and expense risk charge) associated with the bonus. NOTE: You will be required to take a Full Annuitization of your Contract on or before the maximum permitted Income Date. (For more information see section 3, The Annuity Phase.) Upon such a Full Annuitization you will no longer have a Contract Value or Rewards Value and, therefore, any unvested bonus amounts will cease to exist. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 13 Example o You purchase the Contract with an initial Purchase Payment of $80,000. The bonus rate for this payment would be 5% and the bonus amount would be $4,000. This bonus will be completely vested on the third Contract Anniversary. o 30 days later we receive a second Purchase Payment of $25,000. The bonus rate for this payment would be 6% and the bonus amount would be $1,500. o At the time we receive your second payment, you would also receive an additional bonus of 1% (or $800) on your initial Purchase Payment because the second payment was received within the first 90 days of your Contract. The total bonus you would receive on your second Purchase Payment would be $2,300 and this bonus will become vested based on the date we receive your second Purchase Payment. AUTOMATIC INVESTMENT PLAN (AIP) The AIP is a program that allows you to make additional Purchase Payments to your Contract during the Accumulation Phase on a monthly or quarterly basis by electronic transfer of money from your savings, checking or brokerage account. You may participate in this program by completing the appropriate form. Our Service Center 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 if the 20th is not a Business Day. The minimum investment that you can make by AIP is $50. You may stop or change the AIP at any time you want. We must be notified by the first of the month in order to stop or change the AIP for that month. If the AIP is used for a Qualified Contract, you should consult your tax adviser for advice regarding maximum contributions. The AIP is not available if the Qualified Contract is funding a plan that is tax qualified under Section 401 of the Internal Revenue Code. You cannot exercise the GPWB and participate in the AIP at the same time. The AIP will no longer be available to you after the Income Date on which you take a Full Annuitization. ALLOCATION OF PURCHASE PAYMENTS We do not currently accept allocation instructions from you via email, website, or other electronic communications. This service may be available to you in the future. When you purchase a Contract, we will allocate your initial Purchase Payment to the Investment Choices you selected according to your instructions. We ask that you allocate your money in whole percentages. Transfers of Contract Value between Investment Choices will not change the allocation instructions for any future additional Purchase Payments. You can instruct us how to allocate additional Purchase Payments you make. If you do not instruct us, we will allocate them according to your most recent allocation instructions. Contracts with the PRIME Plus Benefit may be subject to restrictions on allocations and transfers into certain Investment Options (see the "Investment Option Allocation and Transfer Restrictions Under the PRIME Plus Benefit" discussion in section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit). If you select the AZL 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 AZL Money Market Fund for your bonus allocation, then the bonus will be allocated the same way as the corresponding Purchase Payment. You may provide us with new allocation instructions at any time without fee, penalty or other charge upon written notice or telephone instructions to our Service Center. The new allocation instructions will be effective for Purchase Payments received on or after the Business Day we receive your notice or instructions in good order at our Service Center. If you change your allocation instructions and you are participating in the automatic investment plan or the flexible rebalancing program, your allocation instructions must include directions for the plan/program. We reserve the right to limit the number of Investment Options that you can invest in at any one time. Currently, you can invest in up to 15 of the Investment Options at any one time. We may change this in the future; however, we will always allow you to invest in at least five Investment Options. Once we receive your initial Purchase Payment and the necessary information, we will issue the Contract and allocate your initial Purchase Payment within two 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 five 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 the Contract within one Business Day. Our Business Day closes when regular trading on the New York Stock Exchange closes. If you submit a Purchase Payment and/or application to your registered representative, we will not begin processing the Purchase - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 14 Payment until it is received at our Service Center. We consider a Purchase Payment to be "received" when it is received at our Service Center regardless of how or when you made the payment. If mandated under applicable law, we may be required to reject a Purchase Payment. We also may be required to provide information about you or your Contract to government regulators. In addition, we may be required to block an Owner's Contract and thereby refuse to pay any request for transfers, withdrawals, surrenders, or death benefits until instructions are received from the appropriate regulator. TAX-FREE SECTION 1035 EXCHANGES Subject to certain restrictions, you can make a "tax-free" exchange under Section 1035 of the Internal Revenue Code for all or a portion of one annuity contract for another, or all or a portion of a life insurance policy for an annuity contract. Before making an exchange, you should compare both contracts carefully. Remember that if you exchange a life insurance policy or annuity contract for the Contract described in this prospectus: o you might have to pay a withdrawal charge on your previous contract, o there will be a new withdrawal charge period for this Contract, o other charges under this Contract may be higher (or lower), o the benefits may be different, and o you will no longer have access to any benefits from your previous contract. If the exchange does not qualify for Section 1035 treatment, you also may have to pay federal income tax, including a possible federal penalty tax, on the exchange. You should not exchange an existing life insurance policy or another annuity contract for this Contract unless you determine that the exchange is in your best interest and not just better for the person trying to sell you the Contract (that person will generally earn a commission on each contract sale). If you contemplate such an exchange, you should consult a tax adviser to discuss the potential tax effects of such a transaction. FAXED APPLICATIONS We will accept Contract applications delivered in writing and, in most states, we will accept applications via fax. It is important that you verify that we have received any faxed application you send. We are not liable for faxed transaction requests that were sent by you but not received by us. We will treat a manually signed faxed application as an application delivered in writing. Please note that fax communications may not always be available. Any fax system, whether it is ours, yours, your service provider's, or your registered representative's, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should submit your application in writing to our Service Center. We reserve the right to discontinue or modify the faxed application privilege at any time and for any reason. We do not currently accept applications delivered via email or our website. This may be available in the future. FREE LOOK/RIGHT TO EXAMINE If you change your mind about owning the Contract, you can cancel it within ten days after receiving it (or the period required in your state). When you cancel the Contract within this time period, we will not assess a withdrawal charge. In most states, you will receive your Contract Value as of the day we receive your request. This may be more or less than your initial Purchase Payment. In certain states, or if you purchased this Contract as an IRA, we are required to refund your Purchase Payment (not including any bonus) less withdrawals if you decide to cancel your Contract within the free look period. In these instances, if you cancel your Contract you will receive the greater of Purchase Payments less withdrawals, or Contract Value. In cases where we are required to refund the Purchase Payment, we reserve the right to allocate your initial Purchase Payment (and any bonus) to the AZL Money Market Fund until the expiration of the free look period. At the end of that period, we will re-allocate your money as you selected. If we are required to refund the Purchase Payments and you cancel your Contract or we reject your application, you will receive the greater of Purchase Payments less withdrawals or Contract Value, regardless of how your Purchase Payments were allocated. For Owners in California age 60 or older, we are required to allocate your money to the AZL Money Market Fund during the free look period unless you specify otherwise on the appropriate form. The free look provision under the Contract is also called the right to examine. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 15 ACCUMULATION UNITS/COMPUTING THE CONTRACT VALUE The Rewards Value (the Contract Value plus any unvested bonus amounts) in the subaccounts will go up or down based upon the investment performance of the Investment Option(s) you choose. Your Rewards Value will also be affected by the charges of the Contract and any interest you earn on any general account Investment Choices. In order to keep track of your Rewards Value in the Separate Account, we use a measurement called an Accumulation Unit. If you request variable Traditional Annuity Payments during the Annuity Phase of the Contract, we call this measurement an Annuity Unit. When we receive a Purchase Payment, we credit your Contract with Accumulation Units for any portion of your Purchase Payment and bonus allocated to an Investment Option at the daily price next determined after receipt of the Purchase Payment at our Service Center. The daily purchase price is normally determined at the end of each Business Day, and any Purchase Payment received at or after the end of the current Business Day will receive the next Business Day's price. The Purchase Payments and bonus you allocate to the Investment Options are actually placed into subaccounts. Each subaccount invests exclusively in one Investment Option. We determine the number of Accumulation Units we credit to your Contract by dividing the amount of the Purchase Payment and bonus allocated to a subaccount by the value of the corresponding Accumulation Unit. Every Business Day, we determine the value of an Accumulation Unit for each subaccount by multiplying the Accumulation Unit value for the previous Business Day by the net investment factor for the current Business Day. We determine the net investment factor by: o dividing the net asset value of a subaccount at the end of the current Business Day by the net asset value of the subaccount for the previous Business Day, o adding any applicable dividends or capital gains, and o multiplying this result by one minus the amount of the Separate Account annual expenses for the current Business Day and any charges for taxes. We calculate the value of each Accumulation Unit after regular trading on the New York Stock Exchange closes each Business Day. The value of an Accumulation Unit may go up or down from Business Day to Business Day. We calculate your Rewards Value in the Separate Account by multiplying the Accumulation Unit value in each subaccount by the number of Accumulation Units for each subaccount and then adding those results together. (For example, the Contract Value on any Contract Anniversary will reflect the number and value of the Accumulation Units at the end of the previous Business Day.) Example o On Wednesday, we receive at our Service Center an additional Purchase Payment of $3,000 from you before the end of the Business Day. o The bonus rate is 4%. o When the New York Stock Exchange closes on that Wednesday, we determine that the value of an Accumulation Unit based on the Investment Option you chose 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 subaccount Accumulation Units for the Investment Option you chose. If the $3,000 payment had been received at or after the end of the current Business Day, it would have received the next Business Day's price. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 16 - -------------------------------------------------------------------------------- 3. THE ANNUITY PHASE You can apply your Contract Value to regular periodic income payments (Annuity Payments). A Full Annuitization occurs when you apply the entire Contract Value to Annuity Payments. A Partial Annuitization occurs when you apply only part of your Contract Value to Annuity Payments.* The Payee will receive the Annuity Payments. You will receive tax reporting on those payments, however, whether or not you are the Payee. We may require proof of the Annuitant(s)' age before making any life contingent Annuity Payment. If the age or sex of the Annuitant(s) have been misstated, the amount payable will be the amount that would have been provided at the true age or sex. * GMIB Partial Annuitizations are based on the PB Value. They are not available after you exercise the GPWB, or if the PB Value is less than the Contract Value. For more information, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - PB Value. NOTE: You will be required to take a Full Annuitization of your Contract on or before the maximum permitted Income Date. At our discretion, we may extend the maximum permitted Income Date subject to the requirements of applicable law. The maximum permitted Income Date may vary depending on the broker/dealer you purchase your Contract through and your state of residence. Upon Full Annuitization you will no longer have a Contract Value, any periodic withdrawal or income payments other than Annuity Payments (which includes GPWB Payments) will stop, and the death benefit will terminate. INCOME DATE The Income Date is the date Annuity Payments (GMIB Payments and/or Traditional Annuity Payments) will begin. Your Income Date is specified in your Contract as the maximum permitted date allowed for your Contract, which is the first day of the calendar month following the later of: a) the Annuitant's 90th birthday, or b) ten years from the Issue Date. This limitation may not apply when the Contract is issued to a charitable remainder trust. You can make an authorized request for a different Income Date after the Issue Date, however, any such request is subject to our approval. Your Income Date must be the first day of a calendar month and must be at least three years after the Issue Date. To receive the annuity income protection of the GMIB, your Income Date must be within 30 days following a Contract Anniversary beginning ten Contract Years after the date the PRIME Plus Benefit is added to your Contract, or ten Contract Years after the date of any 7% AIA reset (and certain other conditions must also be met). The Income Date will never be later than what is permitted under applicable law. An earlier Income Date may be required to satisfy minimum required distribution rules under certain Qualified Contracts. PARTIAL ANNUITIZATION Partial Annuitizations are not available to everyone. There can be only one Owner, the Owner must be the Annuitant, and we will not allow the Owner to add a joint Annuitant. You can take Partial Annuitizations as Traditional Annuity Payments after the third Contract Anniversary, and/or as GMIB Payments (if applicable) beginning ten Contract Years after the date the PRIME Plus Benefit is added to your Contract, or after the date of any 7% AIA reset. However, if your Contract includes the PRIME Plus Benefit, you cannot take a Partial Annuitization after you exercise the GPWB, and you cannot take a GMIB Partial Annuitization if the PB Value is less than the Contract Value. Partial Annuitizations are also not available after you take a Full Annuitization. If you take a Full Annuitization, the Accumulation Phase of the Contract will end. You can take one Partial Annuitization every 12 months. The maximum number of annuitizations we allow at any one time is five. We do not allow you to allocate additional Contract Value (or PB Value) to an existing stream of Annuity Payments. You also cannot transfer any amounts allocated to a stream of Annuity Payments to any other portion of the Contract. If you have four Partial Annuitizations and you would like to take a fifth, you must take a Full Annuitization and apply the entire remaining Contract Value to Annuity Payments, and the Accumulation Phase of the Contract will end. The amounts you apply to a Partial Annuitization and Annuity Payments we make under a Partial Annuitization are not subject to the withdrawal charge. A Partial Annuitization will decrease the Contract Value, the Withdrawal Charge Basis, the GMDB value, and for Contracts with the PRIME Plus Benefit, it will also decrease the PB Value. This will decrease the amounts available for withdrawals (including GPWB Payments), additional Annuity Payments (including GMIB Payments), and payment of the death benefit. The type of Annuity Payments (traditional or GMIB) you request under a Partial Annuitization will reduce the PB Value and GMDB values differently. For more information, see the discussion of the PB Value in section 4, - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 17 Protected Retirement Income Made Easy: The PRIME Plus Benefit; section 7, Expenses - Withdrawal Charge; and see the discussion of the GMDB that applies to your Contract in section 11, Death Benefit. For tax purposes, Annuity Payments we make under a Partial Annuitization will be treated as partial withdrawals and not as annuity payments. However, once the entire Contract Value has been applied to Annuity Payments, we intend to treat all Annuity Payments we make after that as annuity payments (and not withdrawals) for tax purposes. If you take a Partial Annuitization(s) and subsequently take a full withdrawal of the entire remaining Contract Value, all Annuity Payments we make on or after the Business Day you take the withdrawal, should be treated as annuity payments (and not withdrawals) for tax purposes. If the Annuity Payments we make are treated as withdrawals (and not annuity payments) for tax purposes, under Non-Qualified Contracts, any gains in the entire Contract will be considered to be distributed before Purchase Payments and will be subject to ordinary income tax. For Qualified Contracts, in most cases, the entire Annuity Payment we make under a Partial Annuitization will be subject to ordinary income taxes. If any Owner is younger than age 59 1/2, the taxable portion of the Annuity Payments we make under a Partial Annuitization may also be subject to a 10% federal penalty tax. Partial Annuitizations may also affect the tax treatment of any future Annuity Payments. We may also make deductions to reimburse ourselves for premium taxes that we pay from partially annuitized amounts. You should consult a tax adviser before requesting a Partial Annuitization. ANNUITY OPTIONS You can choose one of the income plans (Annuity Options) described below or any other payment option to which we agree. Before the Income Date, you can select and/or change the Annuity Option with at least 30 days written notice to us. After Annuity Payments begin, you cannot change the Annuity Option. Annuity Payments will usually be lower if you select an Annuity Option that requires us to make more frequent Annuity Payments or to make payments over a longer period of time. For example, the guaranteed initial monthly fixed payout rates under Annuity Option 4 with a guarantee period of 20 years or more are the lowest fixed rates we offer, and the guaranteed initial monthly fixed payout rates under Annuity Option 1 are the highest fixed rates we offer. Annuity Payments will also be lower if you request Annuity Payments at an early age (for example, when the Annuitant is age 50) as opposed to waiting until the Annuitant is older (for example, when the Annuitant is age 70). Option 1. Life Annuity. We will make Annuity Payments during the life of the Annuitant, and the last payment will be the one that is due before the Annuitant's death. If the Annuitant dies shortly after the Income Date, the Payee may receive less than your investment in the Contract. Option 2. Life Annuity with Payments Over 10, 15 or 20 Years Guaranteed. We will make Annuity Payments during the life of the Annuitant. If you take one single Full Annuitization and the Annuitant dies before the end of the selected guaranteed period, we will continue to make Annuity Payments to the Payee for the rest of the guaranteed period. Alternatively, the Owner may elect to receive a lump sum payment. Under a Partial Annuitization, if the Annuitant dies before the end of the selected guaranteed period, we will make a lump sum payment to the Beneficiary. The lump sum payment is equal to the present value of the remaining guaranteed Annuity Payments as of the date we receive proof of the Annuitant's death and a payment election form at our Service Center. For variable Traditional Annuity Payments, in most states, we base the remaining guaranteed Traditional Annuity Payments on the current value of the Annuity Units and we use the assumed investment rate to calculate the present value. For fixed payouts, in most states, we calculate the present value of the remaining guaranteed Annuity Payments using the Statutory Calendar Year Interest Rate based on the NAIC Standard Valuation Law for Single Premium Immediate Annuities corresponding to the Income Date. However, some states require us to use different interest rates for variable and fixed payouts for the present value calculation. We require proof of the Annuitant's death and return of the Contract before we will make any lump sum payment. There are no additional costs associated with a lump sum payment. Option 3. Joint and Last Survivor Annuity. We will make Annuity Payments during the joint lifetime of the Annuitant and the joint Annuitant. Upon the death of one Annuitant, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant at a level of 100%, 75% or 50% of the previous amount, as selected by the Owner. Annuity Payments will stop with the last payment that is due before the last surviving joint Annuitant's death. If both Annuitants die shortly after the Income Date, the Payee may receive less than your investment in the Contract. This Annuity Option is not available to you under a Partial Annuitization. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 18 Option 4. Joint and Last Survivor Annuity with Payments Over 10, 15 or 20 Years Guaranteed. We will make Annuity Payments during the joint lifetime of the Annuitant and the joint Annuitant. Upon the death of one Annuitant, Annuity Payments will continue to the Payee during the lifetime of the surviving joint Annuitant at 100% of the amount that was paid when both Annuitants were alive. However, if both joint Annuitants die before the end of the selected guaranteed period, we will continue to make Annuity Payments to the Payee for the rest of the guaranteed period. Alternatively, the Owner may elect to receive a lump sum payment equal to the present value of the remaining guaranteed Annuity Payments as of the date we receive proof of the last surviving joint Annuitant's death and a payment election form at our Service Center. For variable Traditional Annuity Payments, in most states, we base the remaining guaranteed Traditional Annuity Payments on the current value of the Annuity Units and we use the assumed investment rate to calculate the present value. For fixed payouts, in most states, we calculate the present value of the remaining guaranteed Annuity Payments using the Statutory Calendar Year Interest Rate based on the NAIC Standard Valuation Law for Single Premium Immediate Annuities corresponding to the Income Date. However, some states require us to use different interest rates for variable and fixed payouts for the present value calculation. We require proof of death of both joint Annuitants and return of the Contract before we will make any lump sum payment. There are no additional costs associated with a lump sum payment. This Annuity Option is not available to you under a Partial Annuitization. Option 5. Refund Life Annuity. We will make Annuity Payments during the lifetime of the Annuitant, and the last payment will be the one that is due before the Annuitant's death. After the Annuitant's death, the Payee may receive a lump sum refund. For a fixed payout, the amount of the refund will equal the amount applied to this Annuity Option minus the total of all Annuity Payments made under this option. For variable Traditional Annuity Payments, the amount of the refund will depend on the current Investment Option allocation and will be the sum of refund amounts attributable to each Investment Option. We calculate the refund amount for a given Investment Option using the following formula. (A) x {[(B) x (C) x (D)/(E)] - [(D) x (F)]} where: (A) = Annuity Unit value of the subaccount for that given Investment Option when due proof of the Annuitant's death is received at our Service Center. (B) = The amount applied to variable Traditional Annuity Payments on the Income Date. (C) = Allocation percentage in a given subaccount (in decimal form) when due proof of the Annuitant's death is received at our Service Center. (D) = The number of Annuity Units used in determining each variable Traditional Annuity Payment attributable to that given subaccount when due proof of the Annuitant's death is received at our Service Center. (E) = Dollar value of first variable Traditional Annuity Payment. (F) = Number of variable Traditional Annuity Payments made since the Income Date. We will base this calculation upon the allocation of Annuity Units actually in-force at the time due proof of the Annuitant's death is received at our Service Center. We will not pay a refund if the total refund determined using the above calculation is less than or equal to zero. EXAMPLE o The Contract has one Owner who is a 65-year-old male. He elects variable Annuity Payments under Annuity Option 5 based on a Contract Value of $100,000 (item "B"). o The Owner/Annuitant allocates all the Contract Value to one Investment Option, so the allocation percentage in this subaccount is 100% (item "C"). o The purchase rate for the selected assumed investment rate is $6.15 per month per thousand dollars of Contract Value annuitized. Therefore, the first variable Annuity Payment is: $6.15 x ($100,000 / $1,000) = $615 (item "E"). o Assume the Annuity Unit value on the Income Date is $12, then the number of Annuity Units used in determining each Annuity Payment is: $615 / $12 = 51.25 (item "D"). o The Owner/Annuitant dies after receiving 62 Annuity Payments (item "F") and the Annuity Unit value for the subaccount on the date the Service Center receives due proof of death is $15 (item "A"). - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 19 We calculate the refund as follows: (A) x {[(B) x (C) x (D)/(E)] - [(D) x (F)]} = 15 x {[100,000 x 1.00 x (51.25 / 615)] - [51.25 x 62]} = 15 x {[100,000 x 0.083333] - 3,177.50} = 15 x {8,333.33 - - 3,177.50} = 15 x 5,155.83 = $77,337.50 NOTE FOR CONTRACTS ISSUED IN OREGON: Liquidations are available under Annuity Option 2 (life annuity with payments over 10, 15 or 20 years guaranteed) and Annuity Option 4 (joint and last survivor with payments over 10, 15 or 20 years guaranteed) if you select variable Traditional Annuity Payments. While an Annuitant is alive and the number of variable Traditional Annuity Payments made is less than the guaranteed number of payments elected, you may request a partial withdrawal (partial liquidation) of up to 75% of the total liquidation value, less any previously liquidated amounts. The total liquidation value is equal to the present value of the remaining guaranteed variable Traditional Annuity Payments, to the end of the guaranteed period, using the selected assumed investment rate as the interest rate for the present value calculation. The minimum amount that you can liquidate is $500, or the remaining portion of the total liquidation value available (whichever is less). We will process partial liquidations within seven days after your written request is received in good order at our Service Center. After a partial liquidation, we will reduce the subsequent variable Traditional Annuity Payments during the remaining guaranteed period by the percentage of liquidation value withdrawn. After we have made the guaranteed number of variable Traditional Annuity Payments, we will restore the number of Annuity Units used in calculating the variable Traditional Annuity Payments to their original values as if no liquidation had taken place. Option 6. Specified Period Certain Annuity. This option is generally only available as a ten-year or more period certain for GMIB Payments. However, in Florida, it is also available for fixed Traditional Annuity Payments based on your Contract Value. Under this option, we will make Annuity Payments for a specified period of time. You select the specified period, which must be a whole number of years from ten to 30. If the last Annuitant dies before the end of the specified period certain, then we will continue to make Annuity Payments to the Payee for the rest of the period certain. This Annuity Option is not available to you under a Partial Annuitization. NOTE FOR OWNERS THAT ARE YOUNGER THAN AGE 59 1/2: Your Annuity Payments under Annuity Option 6 may be subject to a 10% federal penalty tax if the specified period certain you select is less than your life expectancy. TRADITIONAL ANNUITY PAYMENTS Annuity Payments offer a guaranteed income stream with certain tax advantages and are designed for Owners who are not concerned with continued access to Contract Value. You can request Traditional Annuity Payments under Annuity Options 1-5 as: o a variable payout, o a fixed payout, or o a combination of both. Annuity Option 6 is generally only available as a ten-year or more period certain for GMIB Payments. However, in Florida, Annuity Option 6 is also available for fixed Traditional Annuity Payments based on your Contract Value. If you do not choose an Annuity Option before the Income Date, we will make variable Traditional Annuity Payments to the Payee under Annuity Option 2 with ten years of guaranteed monthly payments. Under a fixed payout, all of the Annuity Payments will be the same dollar amount (equal installments) except as provided under Annuity Option 3. If you choose variable Traditional Annuity Payments, you can continue to invest in up to 15 of the available Investment Options. We may change this in the future, but we will always allow you to invest in at least five Investment Options. If you do not tell us otherwise, we will base variable Traditional Annuity Payments on the investment allocations that were in place on the Income Date. Currently, it is our business practice that the initial Traditional Annuity Payment exceed $50. We will contact you to discuss alternate payment arrangements if the initial Traditional Annuity Payment would be $50 or less. Guaranteed fixed Traditional Annuity Payments are based on an interest rate and mortality table specified in your Contract. The payout rates for fixed Traditional Annuity Payments provided by your Contract are guaranteed and in no event will we use lower fixed payout rates to calculate your fixed Traditional Annuity Payments. However, we may use higher fixed payout rates to calculate fixed Traditional Annuity Payments than the guaranteed rates provided by your Contract. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 20 If you choose to have any portion of the Traditional Annuity Payments based on the investment performance of the Investment Option(s), the dollar amount of the payments will depend upon the following factors. o The Contract Value (less any deduction we make to reimburse ourselves for premium tax that we pay) on the Income Date. o The age of the Annuitant and any joint Annuitant on the Income Date. o The sex of the Annuitant and any joint Annuitant, where permitted. o The Annuity Option you select. o The assumed investment rate (AIR) you select. o The mortality table specified in the Contract. o The future performance of the Investment Option(s) you select. The AIR is 5%. We may agree with you to use a different value, however, the AIR will never exceed 7%. The 7% AIR is not available in all states. Using a higher AIR results in a higher initial variable Traditional Annuity Payment, but later payments will increase more slowly when investment performance rises and decrease more rapidly when investment performance declines. If the actual performance of your Investment Options exceeds the AIR you selected, the variable Traditional Annuity Payments will increase. Similarly, if the actual performance is less than the AIR you selected, the variable Traditional Annuity Payments will decrease. Each portion of the Contract that you apply to Traditional Annuity Payments will terminate upon the earliest of the following. o Under Annuity Options 1 and 3, the death of the last surviving Annuitant. o Under Annuity Options 2 and 4, the death of the last surviving Annuitant and expiration of the guaranteed period. If we make a lump sum payment of the remaining guaranteed Traditional Annuity Payments at the death of the last surviving Annuitant, this portion of the Contract will terminate upon payment of the lump sum. o Under Annuity Option 5, the death of the Annuitant and payment of any lump sum refund. o Under Annuity Option 6, the expiration of the specified period certain. o Contract termination. - -------------------------------------------------------------------------------- 4. PROTECTED RETIREMENT INCOME MADE EASY: THE PRIME PLUS BENEFIT The PRIME Plus Benefit is not available in the state of Oregon. The PRIME Plus Benefit provides a guaranteed minimum fixed income stream and is designed for Owners who want flexibility in the way they access income and can wait at least ten years before taking income. The PRIME Plus Benefit includes a GMIB and GPWB and carries an additional M&E charge. We calculate the additional M&E charge based on the average daily assets in each subaccount. These benefits are provided as a package and are not available individually. The additional M&E charge for the PRIME Plus Benefit will reduce the performance of your selected Investment Options, and in the long term may provide less Contract Value to you than would otherwise be available from the same Contract without the PRIME Plus Benefit. The PRIME Plus Benefit does not create Contract Value or guarantee the performance of any Investment Option. We designed the PRIME Plus Benefit to give you options for turning your accumulated retirement assets into a stream of retirement income. The GMIB provides a guaranteed minimum fixed income in the form of Annuity Payments (GMIB Payments). Depending on the Annuity Option you select, the GMIB can provide guaranteed lifetime income, but if the Annuitant(s) die shortly after the Income Date, the Payee may receive less than your investment in the Contract. The GPWB provides a guaranteed minimum amount of income in the form of annual partial withdrawals (GPWB Payments). However, GPWB Payments are not guaranteed for life and you could outlive your payment stream. You must wait ten complete Contract Years after the date the PRIME Plus Benefit is added to your Contract, or ten complete Contract Years after the date of any 7% AIA reset, before you can exercise a GMIB or GPWB and they can only be exercised within 30 days after a Contract Anniversary. Bonus amounts do not become part of the PB Value that is based on Contract Value until they are vested. You will not receive the amount of the bonus credited on the parts of the PB Value that are based on Purchase Payments. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 21 Because the PRIME Plus Benefit carries a higher Contract expense it may not be appropriate if you: o do not intend to exercise either the GMIB or GPWB, o do not intend to hold the Contract for the entire ten year waiting period, or o intend to take a Full Annuitization before the end of the ten year waiting period. If your Contract includes the PRIME Plus Benefit and you do not exercise either the GMIB or GPWB, you will have incurred higher Contract expenses without receiving any advantage from the PRIME Plus Benefit. Be sure to discuss with your registered representative whether or not the PRIME Plus Benefit is appropriate for your situation. Contracts with the PRIME Plus Benefit may also be subject to restrictions on allocations and transfers into certain Investment Options. These restrictions are effected to support the guarantees provided by the PRIME Plus Benefit, and not to meet any Owner's investment objectives. To the extent that these restrictions limit your investment flexibility, you may not be able to fully participate in any upside potential returns available from the Investment Options, and your Contract Value may potentially be less than the Contract Value you would have had without the PRIME Plus Benefit. ADDING THE PRIME PLUS BENEFIT TO YOUR CONTRACT The PRIME Plus Benefit is available for selection once before the older Owner's 76th birthday (or the Annuitant's 76th birthday if the Contract is owned by a non-individual). You cannot add the PRIME Plus Benefit to a Contract after the older Owner reaches age 76. The PRIME Plus Benefit may not be appropriate for Owners who are nearing age 75 because benefit values are limited after age 81. You can select the PRIME Plus Benefit at Contract issue, or after the Issue Date you can select it within 30 days before a Contract Anniversary by completing the appropriate form. We will process your request to add the PRIME Plus Benefit after the Issue Date on the Contract Anniversary* that occurs after your request is received in good order at our Service Center and the rider effective date will be that Contract Anniversary. If you add the PRIME Plus Benefit to your Contract after the Issue Date, on the rider effective date we will increase the M&E charge by the additional M&E charge for the PRIME Plus Benefit that is in effect for a newly issued Contract as of the rider effective date. We guarantee that it will not be more than the maximum M&E charge for Contracts with the PRIME Plus Benefit that is set forth in the Fee Tables. Because we change the M&E charge, we will change the number of Accumulation Units so that the Contract Value on the rider effective date will remain the same. Because the performance of the Investment Options causes the Accumulation Unit values to fluctuate, the adjustment to the number of Accumulation Units may be positive or negative. * Or on the next Business Day if the Contract Anniversary is not a Business Day. NOTE FOR CONTRACTS ISSUED IN PENNSYLVANIA: The PRIME Plus Benefit rider has a ten-day right to examine period. If you change your mind about the PRIME Plus Benefit, you can remove it from your Contract within ten days after receiving the rider. If you remove the PRIME Plus Benefit rider from your Contract, we will treat the rider as if we had never issued it and it will no longer be available for future selection. REMOVING THE PRIME PLUS BENEFIT FROM YOUR CONTRACT You can elect to remove the PRIME Plus Benefit from the Contract after selecting it anytime before you exercise the GMIB or the GPWB. You cannot remove the PRIME Plus Benefit after you exercise the GMIB or the GPWB and if you remove the PRIME Plus Benefit from the Contract it will no longer be available for future selection. You can request the removal of the PRIME Plus Benefit within 30 days before a Contract Anniversary by completing the appropriate form. We will process your request on the Contract Anniversary* that occurs immediately after your request is received in good order at our Service Center. If you remove the PRIME Plus Benefit from your Contract, we will decrease the M&E charge to equal the charge shown in the Fee Table for a Contract with your selected death benefit as of the rider removal date. Because we decrease the M&E charge, we will change the number of Accumulation Units so that the Contract Value on the rider removal date will remain the same. Because the performance of the Investment Options causes the Accumulation Unit values to fluctuate, the adjustment to the number of Accumulation Units may be positive or negative. * Or on the next Business Day if the Contract Anniversary is not a Business Day. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 22 Although you cannot remove the PRIME Plus Benefit from your Contract after you exercise the GPWB or GMIB, you can terminate the GPWB by electing to stop GPWB Payments and instead do one of the following. o Take an Excess Withdrawal of the entire Contract Value, less any withdrawal charge and any deduction we make to reimburse ourselves for premium tax that we pay (available at anytime). o Request Traditional Annuity Payments under a Full Annuitization based on the entire Contract Value, less any deduction we make to reimburse ourselves for premium tax that we pay (available at anytime). o Request GMIB Payments under a Full Annuitization based on the entire remaining PB Value (only available within 30 days following a Contract Anniversary and before we make the next GPWB Payment). If you take an Excess Withdrawal of the entire Contract Value, the Contract will terminate and you may receive less money than you would have received under the GPWB. If you request fixed Traditional Annuity Payments or GMIB Payments, the GPWB will terminate and we will no longer assess the Separate Account annual expense on that portion of the Contract. If you request variable Traditional Annuity Payments, the GPWB will terminate and we will reduce the Separate Account annual expense to 1.70% on that portion of the Contract. Although you can elect to stop GPWB Payments, you cannot elect to stop GMIB Payments. If you do elect to stop GPWB Payments: o the GPWB will terminate, o the Accumulation Phase of the Contract will end, o the GMDB will terminate, and o if you request Annuity Payments, that portion of the Contract will terminate as indicated in section 3, The Annuity Phase. INVESTMENT OPTION ALLOCATION AND TRANSFER RESTRICTIONS UNDER THE PRIME PLUS BENEFIT These restrictions will apply to Contracts with the PRIME Plus Benefit as described below. By electing the PRIME Plus Benefit, you are consenting to have us reallocate your Contract Value in accordance with the procedures described in this section and in your Contract. Contracts with the PRIME Plus Benefit may be subject to restrictions on allocations of Purchase Payments and transfers of Contract Value into certain Investment Options. These restrictions are effected to support the guarantees provided by the PRIME Plus Benefit, and not to meet any Owner's investment objectives. To the extent that these restrictions limit your investment flexibility, you may not be able to fully participate in any upside potential returns available from the Investment Options, and your Contract Value may potentially be less than the Contract Value you would have had without the PRIME Plus Benefit. Under Contracts with the PRIME Plus Benefit, we will restrict your selection of certain Investment Options and the percentage of Contract Value that you can have in certain Investment Options if any of the following limits on volatility or risk are triggered in regard to aggregate Owner assets in the Investment Options held by Contracts with the PRIME Plus Benefit: o the average one year volatility* is greater than 15%. o the average three year volatility* is greater than 15%. o the average one year risk** is greater than 75%. o the average three year risk** is greater than 75%. * As measured by standard deviation. This means that if the standard deviation in regard to aggregate Owner assets in the Investment Options held by Contracts with the PRIME Plus Benefit is greater than 0.15, this limit will be exceeded. ** As measured by the beta compared to the Standard & Poor's(R) 500 Composite Price Index (S&P 500(R)). This means that if the beta in regard to aggregate Owner assets in the Investment Options held by Contracts with the PRIME Plus Benefit as compared to the S&P 500(R) is greater than 0.75, this limit will be exceeded. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 23 We will monitor these limits on volatility and risk on the first of each calendar month, or the next Business Day if the first is not a Business Day. If any of these limits are triggered, we will notify you and restrict future allocations and transfers as follows: o Group A Investment Options will no longer be available to you, and o you cannot have more than 70% of your total Contract Value in the Group B Investment Options.
Group A Investment Options --------------------------------------------------------- AZL Columbia Technology Fund AZL Small Cap Stock Index Fund AZL OCC Opportunity Fund Franklin Global Communications Securities Fund AZL OCC Value Fund PIMCO VIT CommodityRealReturn Strategy Portfolio AZL Schroder International Small Cap Fund Templeton Developing Markets Securities Fund Group B Investment Options --------------------------------------------------------- AZL AIM International Equity Fund AZL TargetPLUS Equity Fund AZL Dreyfus Founders Equity Growth Fund AZL Turner Quantitative Small Cap Growth Fund AZL Dreyfus Premier Small Cap Value Fund AZL Van Kampen Comstock Fund AZL First Trust Target Double Play Fund AZL Van Kampen Global Real Estate Fund AZL Fusion Growth Fund AZL Van Kampen Mid Cap Growth Fund AZL Fusion Moderate Fund Davis VA Financial Portfolio AZL Jennison Growth Fund Dreyfus IP Small Cap Stock Index Portfolio AZL Legg Mason Growth Fund Franklin Growth and Income Securities Fund AZL Legg Mason Value Fund Franklin Small-Mid Cap Growth Securities Fund AZL NACM International Fund Franklin Small Cap Value Securities Fund AZL Neuberger Berman Regency Fund OpCap Mid Cap Portfolio AZL Oppenheimer Global Fund Oppenheimer Global Securities Fund/VA AZL Oppenheimer International Growth Fund Templeton Foreign Securities Fund AZL PIMCO Fundamental IndexPLUS Total Return Fund Templeton Growth Securities Fund AZL S&P 500 Index Fund Group C Investment Options will be available for any amount of Contract Value whether or not the limits are triggered. Group C Investment Options --------------------------------------------------------- AZL Davis NY Venture Fund Franklin Rising Dividends Securities Fund AZL Franklin Small Cap Value Fund Franklin Templeton VIP Founding Funds Allocation Fund AZL Fusion Balanced Fund Franklin U.S. Government Fund AZL Jennison 20/20 Focus Fund Franklin Zero Coupon Fund 2010 AZL LMP Large Cap Growth Fund Jennison 20/20 Focus Portfolio AZL Money Market Fund Mutual Discovery Securities Fund AZL Oppenheimer Developing Markets Fund Mutual Shares Securities Fund AZL Oppenheimer Main Street Fund Oppenheimer High Income Fund/VA AZL TargetPLUS Balanced Fund Oppenheimer Main Street Fund(R)/VA AZL TargetPLUS Growth Fund PIMCO VIT All Asset Portfolio AZL TargetPLUS Moderate Fund PIMCO VIT Emerging Markets Bond Portfolio AZL Van Kampen Equity and Income Fund PIMCO VIT Global Bond Portfolio (Unhedged) AZL Van Kampen Global Franchise Fund PIMCO VIT High Yield Portfolio AZL Van Kampen Growth and Income Fund PIMCO VIT Real Return Portfolio BlackRock Global Allocation V.I. Fund PIMCO VIT StocksPLUS(R) Growth and Income Portfolio Davis VA Value Portfolio PIMCO VIT Total Return Portfolio Dreyfus Stock Index Fund, Inc. Seligman Smaller-Cap Value Portfolio Franklin Global Real Estate Securities Fund SP International Growth Portfolio Franklin High Income Securities Fund SP Strategic Partners Focused Growth Portfolio Franklin Income Securities Fund Templeton Global Income Securities Fund Franklin Large Cap Growth Securities Fund
- -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 24 If any of the volatility or risk limits are triggered, we will send you written notice at least 30 days before implementing any restrictions. At that time, we will ask you to reallocate any Contract Value you have in the Group A Investment Options, and any amount in excess of 70% of your Contract Value you have in the Group B Investment Options. We will implement restrictions 60 days after any of the volatility or risk limits are triggered. If we receive instructions from you before the implementation date, we will reallocate your Contract Value according to those instructions. If we do not receive any instructions from you by the implementation date, or if your Contract is still in violation of the allocation or transfer restrictions, we will reallocate your Contract Value on the implementation date in the following order. First, if you have Contract Value in the Group A Investment Options: o If your most recent allocation instructions include both Group B and Group C Investment Options, we will transfer all Contract Value out of the Group A Investment Options and apply it to the Group B and Group C Investment Options according to your most recent allocation instructions (excluding any allocations you made to the Group A Investment Options). o If your most recent allocation instructions include only Group B Investment Options, we will transfer all Contract Value out of the Group A Investment Options and apply it to the Group B Investment Options according to your most recent allocation instructions (excluding any allocations you made to the Group A Investment Options). o If your most recent allocation instructions include only Group C Investment Options, we will transfer all Contract Value out of the Group A Investment Options and apply it to the Group C Investment Options according to your most recent allocation instructions (excluding any allocations you made to the Group A Investment Options). o If your most recent allocation instructions do not include any Group B or Group C Investment Options, we will transfer all Contract Value out of the Group A Investment Options and apply it to the AZL Money Market Fund. Then, if you have more than 70% of total Contract Value in the Group B Investment Options (including any Contract Value transferred out of the Group A Investment Options as previously described): o If your most recent allocation instructions include any Group C Investment Options, we will transfer the excess Contract Value* out of the Group B Investment Options proportionately and apply it to the Group C Investment Options according to your most recent allocation instructions (excluding any allocations you made to the Group A and Group B Investment Options). o If your most recent allocation instructions do not include any Group C Investment Options, we will transfer the excess Contract Value out of the Group B Investment Options and apply it to the AZL Money Market Fund. * The amount of Contract Value in the Group B Investment Options that is in excess of 70% of the total Contract Value. After we implement the allocation or transfer restrictions, Group A Investment Options will no longer be available for allocations or transfers, and we will only allow you to make allocations or transfers to Group B Investment Options as long as the Contract Value in the Group B options would be 70% or less of your total Contract Value after the allocation or transfer. In addition, we will monitor your Contract Value in the Group B Investment Options to ensure that it does not exceed 70% of the total Contract Value on the first of each calendar month, or the next Business Day if the first is not a Business Day. If you have more than 70% of the total Contract Value in the Group B Investment Options we will reallocate your Contract Value as indicated above without providing any advance written notice. Once we implement these restrictions, they will remain in effect until the GMIB and the GPWB terminate. You may continue to make allocations or transfers to the Group C Investment Options after we implement these restrictions without limitation as to the amount of Contract Value. We will not recategorize the Investment Options currently available under the Contract, but we may add or remove Investment Options from your Contract in the future. If we do, we will provide written notice regarding changes to the Investment Option groupings. PB VALUE GMIB and/or GPWB Payments under the PRIME Plus Benefit are based on the PB Value. You can only access the PB Value by exercising the GMIB or GPWB. The PB Value before the date of any Owner's death or exercise of the GPWB is equal to either: o the 7% AIA; o the MAV; or o the Contract Value. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 25 If you exercise the GMIB, the PB Value is equal to the MAV if it is greater than the 7% AIA. However, if the 7% AIA is greater than the MAV, you can decide whether to set the PB Value equal to the 7% AIA or the MAV. If you exercise the GPWB and select the 5% payment option, the PB Value is equal to the greater of: a) the MAV, b) the 7% AIA, or c) the Contract Value as of the most recent Contract Anniversary, less any withdrawals and adjusted for any Partial Annuitization taken since that anniversary. If you exercise the GPWB and select the 10% payment option the PB Value is equal to the greater of: a) the MAV, or b) the Contract Value as of the most recent Contract Anniversary, less any withdrawals and adjusted for any Partial Annuitization taken since that anniversary. The 7% AIA may be more limited than the MAV because: o under the 7% AIA, the 7% increase is only applied to Purchase Payments (not including any bonus) received in the first five Contract Years and the 7% AIA is subject to a maximum of two times Purchase Payments (not including any bonus) received in the first five Contract Years; o under the GMIB, there are fewer available Annuity Options; and o under the GPWB, you can only receive GPWB Payments of up to 5% of the PB Value each year. If you take a GMIB Partial Annuitization, the 7% AIA and MAV will decrease, but will continue to be calculated. If you take a GMIB Full Annuitization or exercise the GPWB, we will establish a PB Value and the 7% AIA and MAV will cease to exist. After you exercise the GPWB, only the PB Value will remain and continue to be calculated. 7% AIA Resets Before the older Owner's 80th birthday (or the Annuitant's 80th birthday if the Contract is owned by a non-individual) and before you exercise either the GPWB or GMIB, you can elect to reset the 7% AIA to equal the Contract Value if that amount is greater than the 7% AIA on any Contract Anniversary. You cannot request a reset: a) after the older Owner reaches age 80 (or after the Annuitant reaches age 80 if the Contract is owned by a non-individual), b) after you exercise the GPWB or GMIB (including taking a GMIB Partial Annuitization), c) after you take a Full Annuitization, or d) if the Contract Value is less than the 7% AIA. If you reset the 7% AIA, you will have to wait ten Contract Years from the reset anniversary before you can begin GMIB or GPWB Payments. You can request a reset within 30 days following a Contract Anniversary. If your request is in good order we will process it as of the current Contract Anniversary* and we will increase the 7% AIA to equal the Contract Value on that anniversary. If you reset the 7% AIA, on the reset anniversary we will change the additional M&E charge for the PRIME Plus Benefit to the additional M&E charge that is in effect for a newly issued Contract as of the reset anniversary. We guarantee that the M&E charge will not be more than the maximum M&E charge for Contracts with the PRIME Plus Benefit that is set forth in the Fee Tables. If we change the M&E charge we will change the number of Accumulation Units so that the Contract Value on the reset anniversary will remain the same. Because the performance of the Investment Options causes the Accumulation Unit values to fluctuate, the adjustment to the number of Accumulation Units may be positive or negative. * Or on the next Business Day if the Contract Anniversary is not a Business Day. Calculating the 7% AIA If the rider effective date is the Issue Date, the 7% AIA on the Issue Date is equal to the Purchase Payment (not including any bonus) received on the Issue Date. If the rider effective date occurs after the Issue Date, or if you reset the 7% AIA, the 7% AIA on the rider effective date or reset anniversary is equal to the Contract Value (including any vested bonus) on that date. On each Business Day other than a Contract Anniversary, the 7% AIA is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments (not including any bonus) received that day, o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge), and o if you took a GMIB Partial Annuitization that day based on the: - 7% AIA, we will reduce the 7% AIA by the dollar amount applied to GMIB Payments. - MAV, we will reduce the 7% AIA proportionately by the percentage of the MAV applied to GMIB Payments. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 26 For each of the first five Contract Anniversaries that occur after the later of the rider effective date or the reset anniversary and before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual), the 7% AIA is equal to its value on the immediately preceding Business Day increased by 7%. We then process any transactions we received on that Contract Anniversary (such as additional Purchase Payments, withdrawals and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. For each Contract Anniversary that occurs after the fifth, and after the later of the rider effective date or the reset anniversary, and before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual), the 7% AIA is equal to the sum of a) plus b) where: a) is all Purchase Payments (not including any bonus) received on or after the later of the fifth Contract Anniversary or the reset anniversary. b) is the difference of i) minus ii) with the result increased by 7% where: i) is the 7% AIA on the immediately preceding Business Day, and ii) is all Purchase Payments (not including any bonus) received on or after the later of the fifth Contract Anniversary or the reset anniversary. We then process any transactions we received on that Contract Anniversary (such as additional Purchase Payments, withdrawals and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. Beginning with the Contract Anniversary that occurs on or after the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual), we calculate the 7% AIA in the same way that we do on each Business Day other than a Contract Anniversary. If the rider effective date or reset anniversary occurs before the fifth Contract Anniversary, we limit the 7% AIA to the following maximum. If the rider effective date is the Issue Date, the 7% AIA cap on the Issue Date is equal to two times the initial Purchase Payment (not including any bonus) received on the Issue Date. If the rider effective date occurs after the Issue Date, or if you reset the 7% AIA, the 7% AIA cap on the rider effective date or reset anniversary is equal to two times the Contract Value (including any vested bonus) on that date. On each Business Day before the fifth Contract Anniversary, the 7% AIA cap is equal to: o its value on the immediately preceding Business Day, o plus two times any additional Purchase Payments (not including any bonus) received that day, o reduced proportionately by the percentage of any Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge), and o reduced proportionately by the percentage of the PB Value applied to a GMIB Partial Annuitization that day. Beginning on the fifth Contract Anniversary, the 7% AIA cap will no longer increase unless you reset the 7% AIA, but it will decrease if you take a partial withdrawal or Partial Annuitization in the same way that it does on each Business Day before the fifth Contract Anniversary. If the rider effective date or reset anniversary occurs on or after the fifth Contract Anniversary, we limit the 7% AIA to the following maximum. On the rider effective date or the reset anniversary, the 7% AIA cap is equal to two times the Contract Value (including any vested bonus) on that date. The 7% AIA cap will no longer increase after the rider effective date or the reset anniversary unless you reset the 7% AIA, but it will decrease if you take a partial withdrawal or Partial Annuitization as follows: o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to each traditional Partial Annuitization or withdrawn (including any withdrawal charge) for each traditional annuitization or withdrawal taken, and o reduced proportionately by the percentage of the PB Value applied to each GMIB Partial Annuitization. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 27 Calculating the MAV If the rider effective date is the Issue Date, the MAV on the Issue Date is initially equal to the Purchase Payment (not including any bonus) received on the Issue Date. If the rider effective date is after the Issue Date, the MAV on the rider effective date is initially equal to the Contract Value (including any vested bonus) on the rider effective date. On each Business Day other than a Contract Anniversary, the MAV is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments (not including any bonus) received that day, o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge), and o if you take a GMIB Partial Annuitization that day based on the: - MAV, we will reduce the MAV by the dollar amount applied to GMIB Payments, and - the 7% AIA, we will reduce the MAV proportionately by the percentage of the 7% AIA applied to GMIB Payments. On each Contract Anniversary before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual), the MAV is equal to the greater of its value on the immediately preceding Business Day, or the Contract Value (including any vested bonus) that occurs on that Contract Anniversary before we process any transactions. We then process any transactions we received on that Contract Anniversary (such as additional Purchase Payments, withdrawals, and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. Beginning with the Contract Anniversary that occurs on or after the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual), we calculate the MAV in the same way that we do on each Business Day other than a Contract Anniversary. Any traditional Partial Annuitizations or withdrawals you take may reduce the 7% AIA or the MAV by more than the amount annuitized or withdrawn. If the Contract Value (including any vested bonus) at the time of annuitization or withdrawal is less than the 7% AIA (or MAV as appropriate), we will deduct more than the amount annuitized or withdrawn from the 7% AIA (or MAV). If you exercise the GPWB and elect the 5% payment option, the PB Value will only increase after you begin receiving GPWB Payments as a result of any step ups. If you exercise the GPWB and elect the 10% payment option, the PB Value will stop increasing on the date you begin receiving GPWB Payments. In addition, if you exercise the GPWB, the PB Value will decrease: o on a dollar for dollar basis for withdrawals (GPWB Payments and Excess Withdrawals) that do not exceed the GPWB Maximum; and o proportionately by the percentage of any Contract Value (including any vested bonus) taken as a withdrawal (including both GPWB Payments and Excess Withdrawals), including any withdrawal charge, for each withdrawal you take that exceeds the GPWB Maximum. Please see Appendix C for examples of the calculations of the PB Value. Step Ups Under the GPWB With the 5% Payment Option Step ups are not available under the 10% payment option and are not available after the older Owner reaches age 91. On every third Contract Anniversary after you exercise the GPWB, if you elect the 5% payment option, we will automatically step up the PB Value to equal the Contract Value (including any vested bonus) if that amount is greater than the PB Value. Step ups will continue to happen automatically until the earliest of: a) the older Owner's 91st birthday (or the Annuitant's 91st birthday if the Contract is owned by a non-individual), or b) the PB Value is zero. If we step up the PB Value, we will also step up the GPWB Maximum to equal 5% of the increased PB Value if that amount is greater than the current GPWB Maximum. However, we will not also automatically step up the GPWB Payment. If we increase the GPWB Maximum, you can request to increase the amount of next year's GPWB Payments by submitting a written request to our Service Center. (For more information, please see the discussion of "GPWB Payments" later in this section.) - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 28 Step ups will increase the total amount available to you under the GPWB. When the amount available to you is increased by a step up, the length of time over which you can receive GPWB Payments will also increase, unless you elect to increase your GPWB Payments. Step ups may or may not increase the GPWB Maximum as demonstrated in Appendix D - GPWB Under the PRIME Plus Benefit. Appendix D contains examples showing the effect of the step up available under the 5% payment option and the effect of an Excess Withdrawal on GPWB Payments. USING THE PRIME PLUS BENEFIT The GPWB guarantees a minimum amount of income in the form of partial withdrawals (GPWB Payments) during the Accumulation Phase. In addition, if you select the 5% GPWB Payment option we will increase (step up) the total amount of money you can withdraw (the PB Value) on every third Contract Anniversary after you exercise the GPWB and before the older Owner's 91st birthday to "lock in" any gains that are present in the remaining Contract Value as long as there is PB Value remaining in the Contract. The GMIB guarantees a minimum amount of fixed income in the form of Annuity Payments (GMIB Payments) during the Annuity Phase. Depending on the Annuity Option you select, the GMIB can provide guaranteed lifetime income, but if the Annuitant(s) die shortly after the Income Date, the Payee may receive less than your investment in the Contract. The GPWB and GMIB do not create Contract Value or guarantee the performance of any Investment Option. Be sure to discuss with your registered representative if the GPWB and GMIB are appropriate for your situation. You must hold your Contract for ten complete Contract Years after the date the PRIME Plus Benefit is added to your Contract, or after the date of any 7% AIA reset, before you can exercise the GPWB or GMIB and you can only exercise the GPWB or GMIB within 30 days following a Contract Anniversary. You cannot exercise the GPWB or GMIB before the expiration of the ten-year waiting period. If you exercise the GPWB: o You can no longer remove the PRIME Plus Benefit from the Contract. o You can no longer make additional Purchase Payments to the Contract and the automatic investment plan (AIP) will no longer be available to you. If you are participating in the AIP, your participation will stop. o Partial Annuitizations are no longer available. o The additional M&E charge for the PRIME Plus Benefit will continue until both the GPWB and GMIB terminate. o If you have the Enhanced GMDB, the additional M&E charge for the Enhanced GMDB will continue as long as the Enhanced GMDB value is greater than zero. o The partial withdrawal privilege will no longer be available to you; however, you can still take GPWB Payments and Excess Withdrawals up to the annual GPWB Maximum without a withdrawal charge. o The systematic withdrawal and minimum distribution programs will no longer be available to you and if you are participating in these programs, your participation will stop. o The Contract Value will continue to fluctuate as a result of market performance, and it will decrease on a dollar for dollar basis with each GPWB Payment and any Excess Withdrawals. o The GMDB value will no longer increase, and each GPWB Payment and any Excess Withdrawals will reduce the GMDB value proportionately by the percentage of Contract Value withdrawn. o The PB Value will no longer increase if you elect the 10% payment option and 7% AIA resets will no longer be available. o If you elect the 5% payment option, the PB Value may increase (step up) on every third Contract Anniversary after you exercise the GPWB and before the older Owner's 91st birthday as long as there is PB Value. If we step up the PB Value we may also step up the GPWB Maximum. o Each withdrawal (GPWB Payment and/or Excess Withdrawal) will reduce the PB Value as follows: - withdrawals taken during the Contract Year that do not exceed the GPWB Maximum will reduce the PB Value on a dollar for dollar basis, and - withdrawals taken during the Contract Year that do exceed the GPWB Maximum will reduce the PB Value proportionately by the percentage of Contract Value withdrawn (including any withdrawal charge). - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 29 o Withdrawals (GPWB Payments and/or Excess Withdrawals) that do not exceed the annual GPWB Maximum will not reduce the Withdrawal Charge Basis, but withdrawals that exceed the annual GPWB Maximum (including GPWB Payments) may be subject to a withdrawal charge and will reduce the Withdrawal Charge Basis, as set out in section 7, Expenses - Withdrawal Charge. Excess Withdrawals will not affect the GPWB Payment amount or frequency, but they may decrease the time over which you will receive GPWB Payments. If you exercise a GMIB under a Full Annuitization: o You can no longer remove the PRIME Plus Benefit from the Contract and 7% AIA resets will no longer be available. o The Accumulation Phase will end and the Annuity Phase will begin. o The portion of the Contract that you apply to the GMIB will no longer be subject to the Separate Account annual expense, but any portion of the Contract that has been applied to variable Traditional Annuity Payments will continue to be subject to a 1.70% Separate Account annual expense. o If you have not exercised the GPWB, it will no longer be available to you, and you will no longer be able to make additional Purchase Payments to the Contract. o If you exercised the GPWB, GPWB Payments will stop and the GPWB will terminate. o The GMDB will terminate. If you exercise a GMIB under a Partial Annuitization*: o You can no longer remove the PRIME Plus Benefit from the Contract and 7% AIA resets will no longer be available. o The Annuity Phase will begin and the Accumulation Phase will continue. o The portion of the Contract that you apply to the GMIB will no longer be subject to the Separate Account annual expense, but any portion of the Contract that is in the Accumulation Phase or that has been applied to variable Traditional Annuity Payments will continue to be subject to the appropriate Separate Account annual expense. o If any portion of the Contract is still in the Accumulation Phase, you may be able to make additional Purchase Payments to the Contract, but you cannot make additional Purchase Payments to any portion of the Contract that is in the Annuity Phase. o The GPWB will continue to be available to you. o The Partial Annuitization will reduce each Purchase Payment, the Contract Value and GMDB value proportionately by the percentage of PB Value you apply to the GMIB. o GMIB Payments will not affect the Contract Value available under the portion of the Contract that is in the Accumulation Phase. * Not available after you exercise the GPWB, or if the PB Value is less than the Contract Value. In addition, if you exercise the GPWB after taking a GMIB Partial Annuitization, all payments (GMIB Payments and GPWB Payments) will be treated as withdrawals and not annuity payments for tax purposes. However, once the entire Contract Value has been applied to Annuity Payments, we intend to treat all Annuity Payments we make after that as annuity payments (and not withdrawals) for tax purposes. Under the PRIME Plus Benefit the Owner controls: o when to exercise a benefit, o which benefit(s) to exercise, o the amount of the GPWB Payment (subject to the GPWB Maximum) and Excess Withdrawals from the portion of the Contract that is in the Accumulation Phase,* o the frequency of GPWB Payments,* and o whether to stop or restart GPWB Payments on an annual basis. * Owners do not have this flexibility under the GMIB. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 30 GPWB PAYMENTS In order to begin receiving GPWB Payments, you must submit a GPWB Payment election form to our Service Center after the expiration of the ten-year waiting period and within 30 days following a Contract Anniversary. GPWB Payments will not begin until your request has been received at our Service Center and determined to be in good order. If you exercise the GPWB, we will ask you to select either the 5% payment option or the 10% payment option. Once you select a payment option, you cannot change it. The payment option you select determines the GPWB Maximum, the PB Value and whether or not you will receive an automatic increase or "step up" feature. The GPWB Maximum is the largest annual GPWB Payment that is available to you each Contract Year. Under the 5% payment option the GPWB Maximum is 5% of the PB Value each year, and under the 10% payment option it is 10% of the PB Value each year. Under the 5% payment option, the PB Value is the greater of the MAV, 7% AIA, or the Contract Value. Under the 10% payment option, the PB Value is the greater of the MAV or Contract Value. The 5% payment option contains an automatic step up* feature. Step ups are not available under the 10% payment option. * See the discussion of "Step Ups Under the GPWB with the 5% Payment Option" earlier in this section. If you exercise the GPWB, we will also ask you to select the amount of the annual GPWB Payment you would like to receive subject to the GPWB Maximum. You cannot request GPWB Payments that would exceed the GPWB Maximum in a given Contract Year. Because GPWB Payments are non-cumulative, if you elect to receive less than the GPWB Maximum in a given year, it will not carry over to the next Contract Year. If you request an Excess Withdrawal while you are receiving GPWB Payments and the amount you request plus your GPWB Payments exceeds the annual GPWB Maximum, the amount that exceeds the GPWB Maximum will be subject to any applicable withdrawal charge* and will reduce: o the Withdrawal Charge Basis,** o the Contract Value, o the PB Value (which determines the amount available for future GPWB Payments and/or future GMIB Payments), and o the GMDB value. * Amounts paid as part of a required minimum distribution are never subject to a withdrawal charge. ** GPWB Payments and Excess Withdrawals that do not exceed the annual GPWB Maximum will not reduce the Withdrawal Charge Basis. Excess Withdrawals will not affect the GPWB Payment amount or frequency, but they may decrease the time over which you will receive GPWB Payments. If you take no Excess Withdrawals while the GPWB is in effect, we would pay the PB Value to you: o within ten years if you elect the 10% payment option and take the maximum allowable payment each year, or o within 20 years if you elect the 5% payment option and take the maximum allowable payment each year (assuming no step ups). You can elect to receive GPWB Payments on an annual, semi-annual, quarterly, or monthly basis. If the scheduled GPWB Payment date does not fall on a Business Day, we will make payment to you on the next Business Day. Each GPWB Payment will be equal to the annual GPWB Payment divided by the number of payments you elected to receive during the Contract Year, until the PB Value is less than the GPWB Payment amount. Once the PB Value is less than the GPWB Payment amount, you will receive one last GPWB Payment that will be equal to the remaining PB Value. The initial GPWB Payment must be at least $100. If we are unable to structure the initial GPWB Payment so that it is at least $100, the GPWB will not be available to you and we will contact you to discuss alternate arrangements. Once each Contract Year, you can elect to: o change the frequency of next year's GPWB Payments, o change the amount of next year's GPWB Payment subject to the GPWB Maximum, or o stop GPWB Payments for the next GPWB Year. You must provide notice of any of these requested changes to GPWB Payments to our Service Center at least 30 days before a Contract Anniversary. We will effect any change on the Contract Anniversary and the change will remain in effect for the entire following Contract Year. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 31 The following changes* are available at any time and will be effective when your request is received in good order at our Service Center. o Stop GPWB Payments completely and have us make GMIB Payments under a Full Annuitization based on the entire remaining PB Value. o Stop GPWB Payments completely and take an Excess Withdrawal of the entire Contract Value (including any vested bonus and less any withdrawal charge and any deduction we make to reimburse ourselves for premium tax that we pay). o Stop GPWB Payments completely and have us make Traditional Annuity Payments under a Full Annuitization based on the entire Contract Value (including any vested bonus and less any deductions we make to reimburse ourselves for premium tax that we pay). * These changes will cause the GPWB to terminate. For more details, see the discussion of "Removing the PRIME Plus Benefit From Your Contract" earlier in this section. In addition, if you request an Excess Withdrawal while you are receiving GPWB Payments you can instruct us to stop GPWB Payments that are due for the remainder of the Contract Year at the time you request the Excess Withdrawal. We will deduct each GPWB Payment proportionately from the Investment Choices. We will continue to allocate the Contract Value among the Investment Choices according to your instructions while the GPWB is in effect. You can also continue to make transfers between the Investment Options (subject to certain restrictions**) while the GPWB is in effect. ** For more information, see the discussion of "Investment Option Allocation and Transfer Restrictions Under the PRIME Plus Benefit" earlier in this section and section 5, Investment Options - Transfers. You can continue to receive GPWB Payments until the PB Value is exhausted or the GPWB terminates, even if you have no remaining Contract Value. If there is Contract Value remaining after you exhaust the PB Value, you can elect to either: o receive a lump sum payment of the entire remaining Contract Value (including any vested bonus and less any withdrawal charges and any deduction we make to reimburse ourselves for premium taxes that we pay), the Accumulation Phase of the Contract will end, and the Contract will terminate+; or o request Traditional Annuity Payments under a Full Annuitization based on the entire remaining Contract Value (including any vested bonus and less any deduction we make to reimburse ourselves for premium taxes that we pay). We will send you notice at least 30 days before the last GPWB Payment date to ask for your instructions. If we do not receive any instructions from you by the date we make the last GPWB Payment, we will pay you the entire remaining Contract Value (including any vested bonus and less any withdrawal charges and any deductions we make for premium tax that we pay) in a lump sum, the Accumulation Phase of the Contract will end, and the Contract will terminate+. + If you took a Partial Annuitization, those portions of the Contract will continue and we will continue to make Annuity Payments as provided for in the selected Annuity Option. NOTE: You will be required to take a Full Annuitization of your Contract on or before the maximum permitted Income Date. (For more information see section 3, The Annuity Phase.) Upon such a Full Annuitization the Guaranteed Partial Withdrawal Benefit will no longer be available to you and any GPWB Payments you were receiving will stop. TAXATION OF GPWB PAYMENTS GPWB Payments are withdrawals and will be treated as such for tax purposes. This means that for Non-Qualified Contracts, Contract gains from the entire Contract are considered to be distributed first and are subject to ordinary income tax. Purchase Payments are distributed after gains have been paid out and are generally considered to be a return of your investment and are not subject to income tax. For Qualified Contracts, the entire GPWB Payment will most likely be subject to ordinary income tax. In addition, GPWB Payments may be subject to premium taxes and, if any Owner is younger than age 59 1/2, may also be subject to a 10% federal penalty tax. GPWB Payments are not subject to a withdrawal charge as long as you withdraw no more than your GPWB Maximum in any Contract Year. However, if you take an Excess Withdrawal and exceed your annual GPWB Maximum, the amount that exceeds the GPWB Maximum (including GPWB Payments) will be subject to a withdrawal charge* based on the date of Purchase Payment receipt and it will reduce the Withdrawal Charge Basis, as indicated in section 7, Expenses - Withdrawal Charge. * Amounts paid as part of a required minimum distribution are never subject to a withdrawal charge. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 32 TERMINATION OF THE GPWB The GPWB will terminate upon the earliest of the following. o Termination of the PRIME Plus Benefit rider. o The Business Day you take an Excess Withdrawal of the entire Contract Value. o The Business Day that the PB Value and Contract Value are both zero. o The Business Day before the Income Date that you take a Full Annuitization, including a required Full Annuitization on the maximum permitted Income Date. For more information, see section 3, The Annuity Phase. o Contract termination. o The death of any Owner (unless the deceased Owner's spouse continues the Contract as the new Owner). GMIB PAYMENTS The annuity income protection provided by the GMIB will apply only under the following circumstances. o Your Income Date must be within 30 days following a Contract Anniversary beginning ten Contract Years after the date the PRIME Plus Benefit is added to your Contract, or ten Contract Years after the date of any 7% AIA reset. o GMIB Payments can only be made as fixed payments, regardless of the Annuity Option* you select. o Annuity Option 6* is only available if the PB Value is the MAV and the duration of the period certain must be at least ten years. o If the PB Value is the 7% AIA, your available Annuity Options* are restricted to Annuity Option 2 or 4 and the duration of the period certain must be at least ten years. o We will base all GMIB Payments on an interest rate of 1% per year. * For more information see section 3, The Annuity Phase - Annuity Options. In order to begin receiving GMIB Payments, you must submit an income option election form to our Service Center after the expiration of the ten-year waiting period and within 30 days following a Contract Anniversary. GMIB Payments will begin after your request has been received at our Service Center and is determined to be in good order. We will make GMIB Payments to you beginning on the 30th day after your Contract Anniversary. If the scheduled GMIB Payment date does not fall on a Business Day, we will make payment to you on the next Business Day. Under the GMIB you can take either a Full Annuitization, or before you exercise the GPWB, you can take Partial Annuitization(s) if the PB Value is greater than the Contract Value. Any GMIB Partial Annuitization will reduce the Contract Value and GMDB value proportionately by the percentage of PB Value you apply to the GMIB. If you take a Partial Annuitization you cannot: o transfer any amounts you allocated to GMIB Payments back to any portion of the Contract that is in the Accumulation Phase; o transfer amounts from one Annuity Payment stream to another; or o allocate additional PB Value (or Contract Value) to an existing stream of Annuity Payments. You can elect to receive GMIB Payments on an annual, semi-annual, quarterly, or monthly basis. Each GMIB Payment will be equal to the annual GMIB Payment divided by the number of payments you elected to receive during the Contract Year. If the scheduled GMIB Payment date does not fall on a Business Day, we will make payment to you on the next Business Day. AMOUNT USED TO CALCULATE GMIB PAYMENTS The GMIB guarantees that the GMIB Payments will be equal to the guaranteed fixed payout rates applied to the PB Value. There may be situations where the PB Value is greater than the Contract Value, but the GMIB Payments are less than fixed Traditional Annuity Payments based on the Contract Value. This may occur because the guaranteed fixed payout rates available with the GMIB may be less than the current fixed payout rates that are otherwise available under Traditional Annuity Payments. We will base your Annuity Payments on whichever amount (PB Value or Contract Value) produces the greater payment. However, if we use the Contract Value and the current fixed payout rates to calculate Traditional Annuity Payments, you will have incurred higher Contract expenses without receiving any explicit benefit from the GMIB. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 33 While the 7% AIA may be larger than the MAV, it may produce a lower GMIB Payment because under the 7% AIA you have fewer available Annuity Options. If the GMIB Payment available under the 7% AIA would always be less than the GMIB Payment available under the MAV, we will base GMIB Payments on the amount that produces the largest payment. However, it is possible that the GMIB Payments under the 7% AIA may be more or less than the GMIB Payments available under the MAV depending on the Annuity Option you select. In these instances we will allow you to select the amount we use to calculate GMIB Payments and the Annuity Option that you feel is most appropriate. TAXATION OF GMIB PAYMENTS If you take a GMIB Partial Annuitization, GMIB Payments will be treated as withdrawals and not annuity payments for tax purposes. This means that for tax purposes, any Contract earnings in the entire Contract will be considered to be distributed before Purchase Payments and may be subject to ordinary income tax and a 10% federal penalty tax. For Non-Qualified Contracts, gains are generally subject to ordinary income tax and Purchase Payments are not. For Qualified Contracts, the entire GMIB Payment under a Partial Annuitization will most likely be subject to ordinary income taxes. For more information on Partial Annuitizations, please see section 3, The Annuity Phase - Partial Annuitization. If you take a Full Annuitization under the GMIB, GMIB Payments should be treated as annuity payments for tax purposes. If you take a GMIB Partial Annuitization, GMIB Payments should be treated as annuity payments (and not withdrawals) for tax purposes only after the Income Date on which you have applied the entire remaining Contract Value to Annuity Payments under the GMIB and/or Traditional Annuity Payments, that is, the Income Date after the Contract has been fully annuitized. For Non-Qualified Contracts that have been fully annuitized, a portion of each payment may be treated as gains that are subject to tax as ordinary income, and the remaining portion of the payment will be considered to be a return of your investment and will not be subject to income tax. Once we have paid out all of your Purchase Payments, however, the full amount of each GMIB Payment will be subject to tax as ordinary income. For Qualified Contracts, the entire GMIB Payment will most likely be subject to tax as ordinary income. Once you apply the entire Contract Value to Annuity Payments, GMIB Payments will generally not be subject to the 10% federal penalty tax. TERMINATION OF THE GMIB If you have not exercised the GMIB, it will terminate upon the earliest of the following. o Termination of the PRIME Plus Benefit rider. o The Business Day that the PB Value and Contract Value are both zero. o The Business Day before the Income Date you take a Full Annuitization and request Traditional Annuity Payments. o Contract termination. o The death of any Owner (unless the deceased Owner's spouse continues the Contract as the new Owner). If you exercise the GMIB, each portion of the Contract that you apply to GMIB Payments will terminate upon the earliest of the following. o Under Annuity Options 1 and 3, the death of the last surviving Annuitant. o Under Annuity Options 2 and 4, the death of the last surviving Annuitant and expiration of the guaranteed period.* o Under Annuity Option 5, the death of the Annuitant and payment of any lump sum refund. o Under Annuity Option 6, the expiration of the specified period certain. o Termination of the PRIME Plus Benefit rider. o Contract termination. * If we make a lump sum payment of the remaining guaranteed GMIB Payments at the death of the last surviving Annuitant, this portion of the Contract will terminate upon payment of the lump sum. REQUIRED MINIMUM DISTRIBUTIONS (RMDs) UNDER QUALIFIED CONTRACTS WITH THE PRIME PLUS BENEFIT The GMIB and GPWB under the PRIME Plus Benefit may have limited usefulness if you purchase a Qualified Contract that is subject to a RMD. If your Contract includes the PRIME Plus Benefit and you do not exercise the GMIB on or before the date RMD payments must begin under a qualified plan, the Owner or Beneficiary may not be able to exercise the GMIB due to the restrictions imposed by the minimum distribution requirements. You should consider whether the GMIB is appropriate for your situation if you plan to exercise the GMIB after your RMD beginning date. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 34 You also cannot participate in the minimum distribution program available under this Contract if you elect to receive GPWB Payments. If you exercise the GPWB, we will ask you to select either the 5% payment option or the 10% payment option. Once you select a payment option, you cannot change it. Therefore, under a Qualified Contract that is subject to RMDs, you may not be able to adjust your GPWB Payment to meet your required minimum distribution needs. If you own a Qualified Contract that is subject to RMDs and your RMD payment is greater than the GPWB Maximum, you will not be able to meet your RMD needs without taking Excess Withdrawals. In addition, RMD payments will reduce your PB Value. We encourage prospective owners who are considering purchasing Qualified Contracts that are subject to RMD payments to consult a tax adviser regarding the PRIME Plus Benefit. - -------------------------------------------------------------------------------- 5. INVESTMENT OPTIONS The Contract offers the Investment Options listed in the following table. Each Investment Option has its own investment objective. In the future, we may add, eliminate or substitute Investment Options. Depending on market conditions, you can gain or lose value by investing in the Investment Options. You should read the Investment Options' prospectuses carefully. The Investment Options invest in different types of securities and follow varying investment strategies. There are potential risks associated with each of these types of securities and investment strategies. For example, an Investment Option'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 an Investment Option with a small asset base. An Investment Option may not experience similar performance as its assets grow. The operation of the Investment Options and the various risks associated with the Investment Options are described in the Investment Options' prospectuses. To obtain a current prospectus for any of the Investment Options, contact your registered representative or call us at the toll free telephone number listed at the back of this prospectus. We will send copies of the Investment Options' prospectuses to you when we issue the Contract. Certain Investment Options issue two or more classes of shares and certain share classes may have Rule 12b-1 fees. The classes of shares currently offered by this Contract are listed in the table of annual operating expenses for each Investment Option that appears in Appendix A. For more information about share classes, see the Investment Options' prospectuses. Currently, the Investment Options are not publicly traded mutual funds. They are available only as investment options in variable annuity contracts or variable life insurance policies issued by life insurance companies or in some cases, through participation in certain qualified pension or retirement plans. The names, investment objectives and policies of certain Investment Options may be similar to the names, investment objectives and policies of other portfolios that the same investment advisers manage. Although the names, objectives and policies may be similar, the investment results of the Investment Options may be higher or lower than the results of such portfolios. The investment advisers cannot guarantee, and make no representation, that the investment results of similar funds will be comparable even though the Investment Options have the same names, investment advisers, objectives and policies. The AZL FusionPortfolios are offered by the Allianz Variable Insurance Products Fund of Funds Trust. Each of the AZL FusionPortfolios is a "fund of funds" and diversifies its assets by investing in the shares of several other affiliated mutual funds. The underlying funds may pay 12b-1 fees to the distributor of the Contracts, our affiliate, Allianz Life Financial Services, LLC, for distribution and/or administrative services. The underlying funds do not pay service fees or 12b-1 fees to the AZL FusionPortfolios, and the AZL FusionPortfolios do not pay service fees or 12b-1 fees. The underlying funds of the AZL FusionPortfolios or their advisers may pay service fees to us and our affiliates for providing customer service and other administrative services to Contract Owners. The amount of such service fees may vary depending on the underlying fund. We offer other variable annuity contracts that may invest in the same Investment Options. These contracts may have different charges and may offer different benefits more appropriate to your needs. For more information about these contracts, please contact our Service Center. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 35 The following advisers and subadvisers are affiliated with us: Allianz Investment Management LLC, Nicholas-Applegate Capital Management, Oppenheimer Capital LLC and Pacific Investment Management Company LLC. The following is a list of the Investment Options available under the Contract, the investment advisers and subadvisers for each Investment Option, the investment objectives for each Investment Option, and the primary investments of each Investment Option.
INVESTMENT OPTIONS - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Investment Management Company Name of and Investment Asset Primary Investments Adviser/Subadviser Option Category Objective(s) (Normal market conditions) - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ AIM - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL AIM International Long-term At least 80% of its assets in a diversified Investment Management International Equity growth of portfolio of international equity LLC/Investco Aim Equity Fund capital securities whose issuers are considered by Capital Management, the fund's subadviser to have strong Inc. earnings momentum. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ BLACKROCK - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Money Cash Current income Invests in a broad range of short-term, Investment Management Market Fund Equivalent consistent with high quality U.S. dollar-denominated money LLC/BlackRock stability of market instruments, including government, Institutional principal U.S. and foreign bank, commercial and other Management Corporation obligations. During extended periods of low interest rates, and due in part to contract fees and expenses, the yield of the AZL Money Market Fund may also become extremely low and possibly negative. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by BlackRock BlackRock Specialty High total Invests in both equity and debt securities Advisors, Global investment of issuers located around the world to LLC/BlackRock Allocation V.I. return achieve a combination of capital growth and Investment Fund income. Management, LLC and BlackRock Asset Management U.K. Limited - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ CLEARBRIDGE - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL LMP Large Large Growth Long-term At least 80% of its net assets in equity Investment Management Cap Growth Fund growth of securities of U.S. companies with large LLC/ClearBridge capital market capitalizations, similar to Advisors, LLC companies in the Russell 1000(R) Growth Index. Also may invest in preferred stocks, warrants and convertible securities and up to 15% of its assets in securities of foreign issuers. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ COLUMBIA - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Columbia Specialty Capital At least 80% of its total net assets in Investment Management Technology Fund Appreciation common stocks of U.S and foreign technology LLC/Columbia companies that may benefit from Management Advisors, technological improvements, advancements or LLC developments. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ DAVIS - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Davis NY Large Value Long-term Invests the majority of assets in equity Investment Management Venture Fund growth of securities issued by large companies with LLC/Davis Selected capital market capitalizations of at least $10 Advisers, L.P. billion. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Davis Davis VA Specialty Long-term At least 80% of net assets in securities Advisors Financial growth of issued by companies principally engaged in Portfolio capital the financial services sector. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Davis VA Value Large Value Long-term Invests primarily in equity securities Portfolio growth of issued by large companies with market capital capitalizations of at least $10 billion. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ DREYFUS - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Dreyfus Large Growth Long-term Primarily invests in common stocks of Investment Management Founders Equity growth of large, well-established and mature LLC/Founders Asset Growth Fund capital and companies. Normally invests at least 80% of Management LLC income its net assets in stocks that are included in a widely recognized index of stock market performance. May invest in non-dividend paying companies if they offer better prospects for capital appreciation. May invest up to 30% of its total assets in foreign securities. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 36 - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Dreyfus Small Cap Seeks returns Normally invests at least 80% of its net Investment Management Premier Small that are assets in stocks of small U.S. companies LLC/The Dreyfus Cap Value Fund consistently with market capitalizations between $100 Corporation superior to the million and $3 billion at the time of Russell 2000(R) purchase. Value Index ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL S&P 500 Large Blend Match total Normally invests in all 500 stocks in the Index Fund return of the S&P 500(R) in proportion to their weighting S&P 500(R) in the index. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Small Cap Small Cap Match Invests in a representative sample of Stock Index Fund performance of stocks included in the S&P SmallCap 600 the S&P Index(R), and in futures whose performance SmallCap 600 is related to the index, rather than Index(R) attempt to replicate the index. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by The Dreyfus IP Small Cap Match Invests in a representative sample of Dreyfus Corporation Small Cap Stock performance of stocks included in the S&P SmallCap 600 Index Portfolio the S&P Index(R), and in futures whose performance SmallCap 600 is related to the index, rather than Index(R) attempt to replicate the index. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Dreyfus Stock Large Blend Match total Invests in all 500 stocks in the S&P 500(R) Index Fund, Inc. return of the in proportion to their weighting in the S&P 500(R) index. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ FIRST TRUST - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL First Trust Large Blend Total Return Invests primarily in common stocks of Investment Management Target Double companies that are identified by a model LLC/First Trust Play Fund based on an allocation of 50% in two Advisors L.P. separate strategies that seek to provide above-average total return. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ FRANKLIN TEMPLETON - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Franklin Small Cap Long-term total Under normal market conditions, invests at Investment Management Small Cap Value return least 80% of its net assets in investments LLC/Franklin Advisory Fund of small capitalization companies similar Services, LLC to those that comprise the Russell 2500(TM) Index at the time of investment. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Franklin Global Specialty Capital At least 80% of net assets in investments Advisers, Inc. Communications appreciation of communications companies anywhere in the Securities Fund and current world and normally invests primarily to income predominantly in equity securities. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Franklin Global Specialty High Total At least 80% of net assets in investments Templeton Real Estate Return of companies located anywhere in the world Institutional, LLC Securities Fund that operate in the real estate sector and normally invests predominantly in equity securities. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Franklin Growth Large Value Capital Invests predominantly in a broadly Advisers, Inc. and Income appreciation, diversified portfolio of equity securities, Securities Fund with current including securities convertible into income as a common stock. secondary goal ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Franklin High High-Yield High current Invests primarily to predominantly in debt Income Bonds income with securities offering high yield and expected Securities Fund capital total return. appreciation as a secondary goal ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Franklin Income Specialty Maximize income Normally invests in debt and equity Securities Fund while securities, including corporate, foreign maintaining and U.S. Treasury bonds and stocks with prospects for dividend yields the manager believes are capital attractive. appreciation ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Franklin Large Large Blend Capital At least 80% of net assets in investments Cap Growth appreciation of large capitalization companies, and Securities Fund normally invests predominantly in equity securities. ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Franklin Rising Mid Cap Long-term At least 80% of net assets in investments Advisory Services, LLC Dividends capital of companies that have paid rising Securities Fund appreciation dividends, and normally invests with predominantly in equity securities. preservation of capital as an important consideration - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 37 - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Franklin Mid Cap Long-term At least 80% of net assets in investments Advisers, Inc. Small-Mid Cap capital growth of small capitalization and mid Growth capitalization companies and normally Securities Fund invests predominantely in equity securities. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Franklin Small Small Cap Long term total At least 80% of net assets in investments Advisory Services, Cap Value return of small capitalization companies and LLC Securities Fund normally invests predominantly in equity securities. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Administered by Franklin Specialty Capital Invests equal portions in Class 1 shares of Franklin Templeton Templeton VIP (Fund of appreciation the Franklin Income Securities Fund, Mutual Services, LLC Founding Funds Funds) with income as Shares Securities Fund, and Templeton Allocation Fund a secondary Growth Securities Fund. goal. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Franklin U.S. Short-Term Income At least 80% of its net assets in U.S. Advisers, Inc. Government Fund Bonds government securities and normally invests primarily in fixed and variable rate mortgage-backed securities. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Franklin Zero Intermediate- As high an Normally invests at least 80% of its net Coupon Fund 2010 Term Bonds investment assets in zero coupon debt securities. The return as is fund will mature in December of 2010 and consistent with will then no longer be available as an capital Investment Option under the Contract. For preservation additional information regarding the maturity of the fund, please see the Franklin Zero Coupon Fund prospectus. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Mutual International Capital Invests primarily in U.S. and foreign Mutual Advisers, LLC Discovery Equity appreciation equity securities that the manager believes Securities Fund are undervalued. The Fund also invests, to a lesser extent, in risk arbitrage securities and distressed companies. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Mutual Shares Large Value Capital Invests primarily in U.S. and foreign Securities Fund appreciation, equity securities that the manager believes with income as are undervalued. The fund also invests, to a secondary goal a lesser extent, in risk arbitrage securities and distressed companies. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Templeton Templeton Specialty Long-term At least 80% of net assets in emerging Asset Management, Ltd. Developing capital market investments, and normally invests Markets appreciation predominantly in equity securities. Securities Fund - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Templeton Templeton International Long-term Normally invests at least 80% of net assets Investment Counsel, Foreign Equity capital growth in investments of issuers located outside LLC Securities Fund the U.S., including those in emerging markets, and normally invests predominantly in equity securities. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Franklin Templeton Intermediate- High current Normally invests mainly in debt securities Advisers, Inc. Global Income Term Bonds income, of governments and their political Securities Fund consisent with subdivisions and agencies, supranational preservation of organizations and companies located capital, with anywhere in the world, including emerging capital markets. appreciation as a secondary consideration. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Templeton Templeton International Long-term Normally invests primarily in equity Global Advisors Growth Equity capital growth securities of companies located anywhere in Limited Securities Fund the world, including those in the U.S. and in emerging markets. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ FUSION PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Fusion A "Fund of Long-term Allocation among the underlying Investment Management Balanced Fund Funds" Model capital investments, to achieve a range generally LLC Portfolio appreciation from 45% to 55% of assets in equity funds with with the remaining balance invested in preservation of fixed income funds. capital as an important consideration ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Fusion A "Fund of Long-term Allocation among the underlying Growth Fund Funds" Model capital investments, to achieve a range generally Portfolio appreciation from 75% to 85% of assets in equity funds with the remaining balance invested in fixed income funds. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Fusion A "Fund of Long-term Allocation among the underlying Moderate Fund Funds" Model capital investments, to achieve a range generally Portfolio appreciation from 60% to 70% of assets in equity funds with the remaining balance invested in fixed income funds. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 38 - ------------------------------------------------------------------------------------------------------------------------ JENNISON - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Jennison Large Blend Long-term At least 80% of its total assets in Investment Management 20/20 Focus Fund growth of approximately 40 (which may range up to 45) LLC/Jennison capital equity and equity-related securities of Associates LLC companies that the subadviser believes have strong capital appreciation potential. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Jennison Large Growth Long-term At least 65% of its total assets in equity Growth Fund growth of and equity-related securities of companies capital that exceed $1 billion in market capitalization at the time of investment and that the subadviser believes have above-average growth prospects. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Prudential Jennison 20/20 Large Blend Long-term Invests primarily in up to 40 equity Investments Focus Portfolio growth of securities of U.S. companies that the LLC/Jennison capital subadviser believes to have strong capital Associates LLC appreciation potential. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ LEGG MASON - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Legg Mason Large Growth Maximum Invests primarily in common stocks or Investment Management Growth Fund long-term securities convertible into or exchangeable LLC/Legg Mason capital for common stock. May invest up to 25% of Capital Management, appreciation total assets in foreign securities. Inc. with minimum long-term risk to principal ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Legg Mason Large Blend Long-term Invests primarily in equity securities Value Fund growth of that, in the subadviser's opinion, offer capital the potential for capital growth. May invest up to 25% of total assets in long-term debt securities and up to 10% of total assets in debt securities rated below investment grade (junk bonds). - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ NEUBERGER BERMAN - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Neuberger Mid Cap Long-term Invests mainly in common stocks of mid-cap Investment Management Berman Regency growth of companies, with a total market LLC/Neuberger Berman Fund capital capitalization within the range of the Management Inc. Russell Midcap(R) Index. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ NICHOLAS-APPLEGATE - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL NACM International Maximum At least 80% of its net assets in Investment Management International Equity long-term securities of companies in developed LLC/Nicholas-Applegate Fund capital countries located outside the U.S., Capital Management, appreciation represented in the Morgan Stanley Capital LLC International Europe Australasia Far East ("MSCI EAFE") Index. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ OPPENHEIMER CAPITAL - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL OCC Small Cap Capital At least 65% of its assets in common stocks Investment Management Opportunity Fund appreciation of "growth" companies with market LLC/ Oppenheimer capitalizations of less than $2 billion at Capital LLC the time of investment. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL OCC Value Large Value Long-term At least 65% of its total assets in common Fund growth of stocks of companies with market capital and capitalizations of more than $5 billion at income the time of investment and prices below the subadviser's estimate of intrinsic value. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by OpCap OpCap Mid Cap Mid Cap Long-term Invests at least 80% of its net assets in Advisers LLC Portfolio capital equity securities of companies with market appreciation capitalizations between $500 million and $15 billion at the time of purchase that the adviser believes are undervalued in the marketplace. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ OPPENHEIMERFUNDS - ------------------------------------------------------------------------------------------------------------------------ ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Oppenheimer International Capital Invests mainly in common stocks of mid and Investment Management Global Fund Equity appreciation large-cap companies in the U.S. and foreign LLC/ countries, including countries with OppenheimerFunds, Inc. developed and emerging markets. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Oppenheimer International Long-term Common stocks of growth companies that are International Equity capital domiciled outside the U.S. or have their Growth Fund appreciation primary operations outside the U.S., including companies in emerging markets. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Oppenheimer Large Blend High total Common stocks of U.S. companies of Main Street Fund return different capitalization ranges, currently focusing on large-capitalization issuers. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 39 - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Oppenheimer International Long-term Invests mainly in common stocks of U.S. and OppenheimerFunds, Inc. Global Equity capital foreign issuers, currently with an emphasis Securities appreciation in developed markets. Fund/VA ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Oppenheimer High-Yield High level of Invests mainly in a variety of high-yield High Income Bonds current income fixed-income securities of domestic and Fund/VA foreign issuers with at least 65% of total assets in high-yield, lower-grade fixed income securities commonly known as junk bonds. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- Oppenheimer Large Blend High total Invests mainly in common stocks of U.S. Main Street return (which companies of different capitalization Fund(R)/VA includes growth ranges, presently focusing on in the value of large-capitalization issuers. its shares as well as current income) - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ PIMCO - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL PIMCO Specialty Exceed the Invests substantially all assets in Investment Management Fundamental total return of derivative instruments based on the LLC/Pacific IndexPLUS Total the FTSE RAFI(TM) Enhanced RAFI(TM)1000, backed by a portfolio Investment Management Return Fund 1000 Index of short and intermediate term fixed income Company LLC instruments. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Pacific PIMCO VIT All Specialty Maximum real Invests in institutional class shares of Investment Management Asset Portfolio (Fund of return the underlying PIMCO Funds and does not Company LLC Funds) consistent with invest directly in stocks or bonds of other preservation of issuers. real capital and prudent investment management ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- PIMCO VIT Specialty Maximum real Invests in commodity linked derivative CommodityReal return instruments backed by a portfolio of Return(TM) consistent with inflation-indexed securities and other Strategy prudent fixed income securities. Portfolio investment management ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- PIMCO VIT Intermediate- Maximum total At least 80% of its assets in fixed income Emerging Term Bonds return, instruments of issuers that economically Markets Bond consistent with are tied to countries with emerging Portfolio preservation of securities markets. capital and prudent investment management ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- PIMCO VIT Intermediate- Maximum total At least 80% of its assets in fixed income Global Bond Term Bonds return, instruments of issuers in at least three Portfolio consistent with countries (one of which may be the U.S.), (Unhedged) preservation of which may be represented by futures capital and contracts. Invests primarily in securities prudent of issuers located in economically investment developed countries. management ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- PIMCO VIT High High-Yield Maximum total At least 80% of assets in a diversified Yield Portfolio Bonds return, portfolio of high-yield securities (junk consistent with bonds) rated below investment grade, but at preservation of least Caa by Moody's or equivalently rated capital and by S&P or Fitch. May invest up to 20% of prudent total asets in securities denominated in investment foreign currencies. management ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- PIMCO VIT Real Intermediate- Maximum real At least 80% of its net assets in Return Portfolio Term Bonds return, inflation-indexed bonds of varying consistent with maturities issued by the U.S. and non-U.S. preservation of governments, their agencies or real capital instrumentalities and corporations. and prudent investment management ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- PIMCO VIT Large Growth Total return Invests substantially in S&P 500(R) StocksPLUS(R) exceeding that derivatives, backed by a portfolio of fixed Growth and of the S&P income instruments. Income Portfolio 500(R) - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 40 - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Pacific PIMCO VIT Total Intermediate- Maximum total At least 65% of total assets in a Investment Management Return Portfolio Term-Bonds return, diversified portfolio of fixed income Company LLC consistent with instruments of varying maturities. preservation of capital and prudent investment management - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ PRUDENTIAL - ------------------------------------------------------------------------------------------------------------------------ ----------------- -------------- ----------------- --------------------------------------------- Managed by Prudential SP International Long-term Invests primarily in equity-related Investments International Equity growth of securities of foreign issuers with at least LLC/William Blair & Growth Portfolio capital 65% of its total assets in common stocks of Company LLC and foreign companies operating or based in at Marsico Capital least five different countries. Management LLC - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Prudential SP Strategic Large Growth Long-term At least 65% of total assets in equity and Investments Partners growth of equity-related securities of U.S. companies LLC/Jennison Focused Growth capital that the adviser believes to have strong Associates LLC and Portfolio capital appreciation potential. AllianceBernstein L.P. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ SCHRODER - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Schroder Specialty Capital Invests at least 80% of its net assets in Investment Management Emerging appreciation equity securities of companies that the LLC/Schroder Markets Equity subadviser believes to be "emerging market" Investment Management Fund issuers. May invest remainder of assets in North America Inc. securities of issuers located anywhere in the world. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Schroder International Long-term At least 80% of net assets in equity International Equity capital securities of small capitalization Small Cap Fund appreciation companies located outside the U.S. (generally with market capitalizations of $3.5 billion or less at the time of investment) that it believes offer the potential for capital appreciation. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ SELIGMAN - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by J. & W. Seligman Small Cap Long-term At least 80% of net assets in common stocks Seligman & Co. Smaller-Cap capital of "value" companies with smaller market Incorporated Value Portfolio appreciation capitalizations (up to $3 billion) at the time of purchase by the portfolio. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ TARGETPLUS PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL TargetPLUS Model Long-term capital Invests primarily in a diversified Investment Management Balanced Fund Portfolio appreciation with portfolio of equity and fixed income LLC/First Trust preservation of securities with 45% to 55% allocated to the Advisors L.P. and capital as an equity portfolio and the balance allocated Pacific Investment important to the fixed income portfolio. May invest a Management Company LLC consideration significant portion of its total assets in securities of non-U.S. companies. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL TargetPLUS Model Total return Invests at least 80% of net assets in Investment Management Equity Fund Portfolio common stocks of companies that are LLC/First Trust identified by a model based on an Advisors L.P. allocation of 20% of fund assets in each of five separate strategies that seek to provide above-average total return. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL TargetPLUS Model Long-term Invests primarily in a diversified Investment Management Growth Fund Portfolio capital portfolio of equity and fixed income LLC/First Trust appreciation securities with 75% to 85% allocated to the Advisors L.P. and equity portfolio and the balance allocated Pacific Investment to the fixed income portfolio. May invest a Management Company LLC significant portion of its total assets in securities of non-U.S. companies. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL TargetPLUS Model Long-term Invests primarily in a diversified Moderate Fund Portfolio capital portfolio of equity and fixed income appreciation securities with 60% to 70% allocated to the equity portfolio and the balance allocated to the fixed income portfolio. May invest a significant portion of its total assets in securities of non-U.S. companies. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 41 - ------------------------------------------------------------------------------------------------------------------------ TURNER - ------------------------------------------------------------------------------------------------------------------------ ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Turner Small Cap Long-term At least 80% of its net assets in common Investment Management Quantitative growth of stocks and other equity securities of U.S. LLC/Turner Investment Small Cap capital companies with small market Partners, Inc. Growth Fund capitalizations that the subadviser believes, based on a quantitative model, have strong earnings growth potential. Small capitalization companies are defined as companies with market capitalizations, at the time of purchase, in the range of companies included in the Russell 2000(R) Growth Index. - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ VAN KAMPEN - ------------------------------------------------------------------------------------------------------------------------ - ----------------------- ----------------- -------------- ----------------- --------------------------------------------- Managed by Allianz AZL Van Kampen Large Value Capital growth Invests at least 80% of net assets in Investment Management Comstock Fund and income common stocks with the potential for LLC/Van Kampen Asset capital growth and income. May invest up Management to 25% of total assets in foreign securities. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Van Kampen Specialty Highest Invests at least 65% of its total assets in Equity and possible income income-producing equity securities and also Income Fund consistent with invests in investment grade quality debt safety of securities. May invest up to 25% ot total principal with assets in foreign securities. long-term growth of capital as an important secondary objective ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Van Kampen International Long term Invests primarily in a portfolio of equity Global Equity capital securities of issuers located throughout Franchise Fund appreciation the world that it believes have, among other things, resilient business franchises and growth potential. Normally invests at least 65% of total assets in securities of issuers from at least three different countries, which may include the U.S. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Van Kampen Specialty Income and Invests at least 80% of assets in equity Global Real capital securities of companies in the real estate Estate Fund appreciation industry located throughout the world, including real estate investment trusts and real estate operating companies established outside the U.S. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Van Kampen Large Value Income and Invests at least 65% of total assets in Growth and long-term income-producing equity securities, Income Fund growth of including common stocks and convertible capital securities; also in non-convertible preferred stocks and debt securities rated "investment grade." May invest up to 25% of total assets in foreign securities. ----------------- -------------- ----------------- --------------------------------------------- ----------------- -------------- ----------------- --------------------------------------------- AZL Van Kampen Mid Cap Capital growth At least 80% of net assets in common stocks Mid Cap Growth and other equity securities of mid Fund capitalization growth companies. - ----------------------- ----------------- -------------- ----------------- ---------------------------------------------
Shares of the Investment Options may be offered in connection with certain variable annuity contracts and variable life insurance policies of various insurance companies that may or may not be affiliated with us. Certain Investment Options may also be sold directly to pension and retirement plans that qualify under Section 401 of the Internal Revenue Code. As a result, a material conflict of interest may arise between insurance companies, owners of different types of contracts and retirement plans or their participants. Each Investment Option's Board of Directors will monitor for the existence of any material conflicts, and determine what action, if any, should be taken. We may enter into certain arrangements under which we, or our affiliate Allianz Life Financial Services, LLC, the principal underwriter for the Contracts, are compensated by the Investment Options' advisers, distributors and/or affiliates for the administrative services and benefits that we provide to the Investment Options. The amount of the compensation usually is based on the aggregate assets of the Investment Options or other investment portfolios that are attributable to contracts that we issue or administer. Some advisers may pay us more or less than others. The maximum fee that we currently receive is at the annual rate of 0.25% of the average aggregate amount invested by us in the Investment Options. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 42 In addition, our affiliate Allianz Life Financial Services, LLC, may receive Rule 12b-1 fees deducted from certain Investment Option assets attributable to the Contract for providing distribution and support services to some Investment Options. Because 12b-1 fees are paid out of an Investment Option's assets on an ongoing basis, over time they will increase the cost of an investment in the Investment Option. SUBSTITUTION AND LIMITATION ON FURTHER INVESTMENTS We may substitute another Investment Option for one of the Investment Options you selected for any reason in our sole discretion. Substitutions may be made with respect to existing investments, the investment of future Purchase Payments, or both. New or substitute Investment Options may have different fees and expenses, and their availability may be limited to certain classes of purchasers. We may limit further investment in, or transfers to, an Investment Option if marketing, tax or investment considerations warrant, or for any reason in our sole discretion. We also may close Investment Options to allocations of Purchase Payments and/or Contract Value, at any time and at our sole discretion. The fund companies that sell shares of the Investment Options to us, pursuant to participation agreements, may terminate those agreements and discontinue offering their shares to us. To the extent required by the Investment Company Act of 1940 or other applicable law, we will not substitute any shares without notice to you and prior approval of the SEC. TRANSFERS Contracts with the PRIME Plus Benefit will be subject to restrictions on transfers into certain Investment Options if these Contracts exceed certain limits on volatility or risk. For more information, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - Investment Option Allocation and Transfer Restrictions Under the PRIME Plus Benefit. You can make transfers among the Investment Choices, subject to certain restrictions. Transfers may be subject to a transfer fee. For more information, see section 7, Expenses - Transfer Fee. We currently allow you to make as many transfers each Contract Year as you wish. We may change this practice in the future. There is no minimum required transfer amount. This product is not designed for professional market timing organizations, other entities or persons using programmed, large, or frequent transfers, and excessive or inappropriate transfer activity may be restricted. The following applies to any transfer. o We may choose not to allow you to make transfers during the free look/right to examine period. o Your request for a transfer must clearly state: - which Investment Choices are involved in the transfer; and - how much you wish to transfer. o After the Income Date, you cannot make a transfer from a fixed Annuity Payment stream to a variable Annuity Payment stream. o After the Income Date, you can make a transfer from a variable Annuity Payment stream to establish a new fixed Annuity Payment stream. o Your right to make transfers is subject to modification if we determine, in our sole discretion, that exercise of the right by one or more Owners is, or may be, to the disadvantage of other Owners. For more information, see the "Excessive Trading and Market Timing" discussion in this section. o Transfer instructions apply equally to the accumulation and annuitization portions of the Contract. You cannot make transfers selectively within different portions of the Contract. o Transfers of Contract Value between Investment Options will not change the allocation instructions for any future Purchase Payments. When you make a transfer request, we will process the request based on the Accumulation Unit values and/or Annuity Unit values next determined after receipt of the request in good order at our Service Center. The Accumulation Unit values and Annuity Unit values are normally determined at the end of each Business Day and any transfer request received at or after the end of the current Business Day will receive the next Business Day's Accumulation Unit values and/or Annuity Unit values. The Investment Options may, in the future, add policies or change existing policies designed to restrict market timing activities. For example, Investment Options may impose restrictions on transfers between Investment Options in an affiliated group of Investment Options if the investment adviser to one or more of the Investment Options determines that the Owner or his or her designee requesting the transfer has engaged, or is engaging in, market timing or other abusive - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 43 trading activities. In addition, an Investment Option may impose a short-term trading fee on purchases and sales within a specified period. You should review the Investment Options' prospectuses regarding any applicable transfer restrictions and the imposition of any fee to discourage short-term trading. The imposition of these restrictions would occur as a result of Investment Option restrictions and actions taken by the managers of the Investment Options. Telephone and Other Electronic Transfers You can request transfers by telephone, fax, or by website at www.allianzlife.com. We may allow you to authorize someone else to request transfers by telephone, fax, or website on your behalf. We will accept instructions from either you or a Joint Owner unless we are instructed otherwise. We will use reasonable procedures to confirm that instructions given to us by telephone or by website are genuine. If we do not use such procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. We record all telephone instructions and log all website instructions. We reserve the right to deny any transfer request submitted by telephone, website, or by fax, and to discontinue or modify the telephone, fax and/or website transfer privileges at any time and for any reason. We do not currently accept transfer instructions from you via email or via electronic communications other than by telephone, fax, or by website. This service may be available to you in the future. When you make a transfer request by telephone, fax, or by website, we will process the request based on the Accumulation Unit values next determined after receipt of the request at our Service Center. If you or your authorized representative have not given instructions to a Service Center representative before the end of the Business Day, even if due to our delay in answering your call or a delay caused by our telephone, fax and/or computer system, we will consider the request to be received at or after the end of the current Business Day and the request will receive the next Business Day's Accumulation Unit values. Please note that telephone, fax and/or the website may not always be available. Any telephone, fax and/or computer system, whether it is ours, yours, your service provider's, or your registered representative's, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your transfer by writing to our Service Center. By authorizing transfers by telephone or website, you authorize us to accept and act upon such instructions for transfers involving your Contract. There are risks associated with telephone and website transactions that do not occur if a written request is submitted. Anyone authorizing or making such requests bears those risks. You should protect your website password, because the website is available to anyone who provides your password; we will not be able to verify that the person providing electronic transfer instructions via the website is you or is authorized by you. EXCESSIVE TRADING AND MARKET TIMING Your ability to make transfers under the Contract is subject to modification if we determine, in our sole discretion, that the exercise of the transfer privilege may disadvantage or potentially harm the rights or interests of other Owners. Frequent transfers, programmed transfers, transfers into and then out of an Investment Choice in a short period of time, and transfers of large amounts at one time (collectively referred to as "potentially disruptive trading") may have harmful effects for other Owners, Annuitants and Beneficiaries. These risks and harmful effects include the following. o Dilution of the interests of long-term investors in an Investment Choice, if market timers or others transfer into the Investment Choice at prices that are below their true value or transfer out of the Investment Choice at prices that are higher than their true value. o An adverse effect on portfolio management, such as causing the Investment Choice to maintain a higher level of cash than would otherwise be the case, or causing the Investment Choice to liquidate investments prematurely. o Increased brokerage and administrative expenses. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 44 In order to attempt to protect our Owners and the Investment Choices from potentially disruptive trading, we have adopted certain excessive trading and market timing policies and procedures. Under our excessive trading and market timing policy, we could modify your transfer privileges for some or all of the Investment Choices. Unless prohibited by the terms of the Contract or applicable state law, the modifications we may apply include (but are not limited to) the following. o Limiting the frequency of transfers (for example, prohibit more than one transfer a week, or more than two a month, etc.). o Restricting the method of making a transfer (for example, requiring that all transfers be sent by first class U.S. mail and rescinding the telephone, fax or website transfer privileges). o Requiring a minimum time period between each transfer into or out of a particular Investment Choice. Our current policy, which is subject to change without notice, prohibits "round trips" with Investment Choices, other than the AZL Money Market Fund and the AZL FusionPortfolios, within 14 calendar days. Round trips are transfers into and back out of a particular Investment Choice, or transfers out of and back into a particular Investment Choice. o Not accepting transfer requests made on your behalf by an asset allocation and/or market timing service. o Limiting the dollar amount of any Purchase Payment or transfer request allocated to any Investment Choice at any one time. o Imposing redemption fees on short-term trading (or implementing and administering redemption fees imposed by one or more of the Investment Options). o Prohibiting transfers into specific Investment Choices. o Imposing other limitations or restrictions. We also reserve the right to reject any specific Purchase Payment allocation or transfer request from any person if in the investment adviser's, subadviser's or our judgment, an Investment Choice may be unable to invest effectively in accordance with its investment objectives and policies. Currently, we attempt to deter disruptive trading as follows. If a transfer(s) is/are identified as potentially disruptive trading, we may (but are not required to) send a warning letter. If the conduct continues and we determine that it constitutes disruptive trading, we will also impose transfer restrictions. Transfer restrictions may include refusing to take orders by fax, telephone or website and requiring the submission of all transfer requests via first-class U.S. mail. We do not enter into agreements permitting market timing and would not permit activities determined to be disruptive trading to continue. We also reserve the right to impose transfer restrictions on a Contract if we determine, in our sole discretion, that the transfers are disadvantageous to other Owners. We will notify the Owner in writing if we impose transfer restrictions on the Owner. We do not include automatic transfers made under any programs we provide, or automatic transfers made under any of the Contract features, when applying our market timing policy. We have adopted these policies and procedures as a preventative measure to protect all Owners from the potential effects of disruptive trading, while also abiding by the Owners' legitimate interest in diversifying their investment and making periodic asset re-allocations based upon their personal situations or overall market conditions. We attempt to protect the Owners' interests in making legitimate transfers by providing reasonable and convenient methods of making transfers that do not harm other Owners. We may make exceptions when imposing transfer restrictions if we determine a transfer is appropriate, although it may technically violate our policies and procedures that are discussed above. In determining whether a transfer is appropriate, we may, but are not required to, take into consideration the relative size of a transaction, whether the transaction was purely a defensive transfer into the AZL Money Market Fund, and whether the transaction involved an error or similar event. We may also reinstate telephone, fax or website transfer privileges after we have revoked them, but we will not reinstate these privileges if we have reason to believe that they might be used for disruptive trading purposes in the future. We cannot guarantee the following. o Our monitoring will be 100% successful in detecting all potentially disruptive trading activity. o Revoking telephone, fax or website transfer privileges will successfully deter all potentially disruptive trading. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 45 In addition, certain of the Investment Options are available to insurance companies other than us and we do not know whether those other insurance companies have adopted policies and procedures to detect and deter potentially disruptive trading, or what their policies and procedures might be. As a result of the fact that we may not be completely successful at detecting and preventing market timing activities, and other insurance companies that offer the Investment Options may not have adopted adequate market timing procedures, there is some risk that market timing activity may occur and negatively affect other Owners. We may, without prior notice to any party, take whatever action we deem appropriate to comply with or take advantage of any state or federal regulatory requirement. In addition, orders for the purchase of an Investment Choice's shares are subject to acceptance by that Investment Choice. We reserve the right to reject, without prior notice, any transfer request into an Investment Choice or allocation of a Purchase Payment to an Investment Choice if the order to purchase the Investment Choice's shares is not accepted for any reason. We have entered into agreements required under SEC Rule 22c-2 (Rule 22c-2 agreements) whereby, upon request by an underlying fund or its designee, we are required to provide the underlying fund with information about you and your trading activities into or out of one or more Investment Options. This information will be provided to the underlying fund or its designee. Under the terms of the Rule 22c-2 agreements, we are required to: (1) provide details concerning every purchase, redemption, transfer, or exchange of Investment Options during a specified period; and (2) restrict your trading activity if the party receiving the information so requests. Under certain Rule 22c-2 agreements, if we fail to comply with a request to restrict trading activity, the underlying fund or its designee may refuse to accept transfers from us until we comply. We retain some discretion in determining what actions constitute potentially disruptive trading and in determining when and how to impose trading restrictions. Therefore, persons engaging in potentially disruptive trading may be subjected to some uncertainty as to when and in what form trading restrictions may be applied, and persons not engaging in potentially disruptive trading may not know precisely what actions will be taken against a person engaging in potentially disruptive trading. For example, if we determine a person is engaging in potentially disruptive trading, we may revoke that person's telephone, fax or website transfer privileges and require all future requests to be sent by first class U.S. mail. In the alternative, if the disruptive trading affects only a single Investment Choice, we may prohibit transfers into or allocations of Purchase Payments to that Investment Choice. We will notify the person or entity making the potentially disruptive trade when we revoke any transfer privileges. The retention of some level of discretion by us may result in disparate treatment among persons engaging in potentially disruptive trading, and it is possible that some persons could experience adverse consequences if other persons are able to engage in practices that may constitute disruptive trading, and that result in negative effects. DOLLAR COST AVERAGING (DCA) PROGRAM The DCA program allows you to systematically transfer a set amount of money each month or quarter from any one of the available Investment Choices to other Investment Options. The Investment Option you transfer from may not be the Investment Option you transfer to in this program. You cannot dollar cost average to a general account Investment Choice. The only general account Investment Choice that you can dollar cost average from is the DCA Fixed Option. 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. There may be two DCA options available to you. The first option is the DCA Fixed Option. It is only available for a period of either 6 or 12 months for both initial and additional Purchase Payments. Under the DCA Fixed Option, you will receive a fixed interest rate guaranteed for the period by us. The DCA Fixed Option may not be available in your state. The second option is the Standard DCA Option. It requires a $1,500 minimum allocation and participation for at least six months. Only the Investment Options are available with this option. All DCA transfers will be made on the tenth day of the month or the next Business Day if the tenth is not a Business Day. You can elect either program by properly completing the DCA form provided by us. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 46 Your participation in the program will end when any of the following occurs. o The number of desired transfers has been made. o You do not have enough money in the Investment Choices to make the transfer (if less money is available, that amount will be dollar cost averaged and the program will end). o You request to terminate the program (your request must be received at our Service Center by the first of the month to terminate that month). o Contract termination. If you participate in the DCA program, there are no fees for the transfers made under this program, we do not currently count these transfers against the free transfers that we allow, and you will not be charged additional fees for participating in or terminating from this program. We reserve the right to discontinue or modify the DCA program at any time and for any reason. FLEXIBLE REBALANCING You can choose to have us rebalance your account. Once your money has been invested, the performance of the Investment Options may cause your chosen allocation to shift. Flexible rebalancing is designed to help you maintain your specified allocation mix among the different Investment Options. The general account Investment Choices are not part of the flexible rebalancing program. You can direct us to automatically readjust your balance in the Investment Options on a quarterly, semi-annual or annual basis to return to your selected Investment Option allocations. Flexible rebalancing transfers will be made on the 20th day of the month or the previous Business Day if the 20th is not a Business Day. If you participate in the flexible rebalancing program, there are no fees for the transfers made under this program, we do not currently count these transfers against any free transfers that we allow, and you will not be charged additional fees for participating in or terminating from this program. We reserve the right to discontinue or modify the flexible rebalancing program at any time and for any reason. To participate in this program, your request must be received in good order at our Service Center by the eighth of the month so that we may rebalance your account on the 20th of the month. To terminate your participation in this program, your request must also be received at our Service Center by the eighth of the month to terminate that month. FINANCIAL ADVISERS - ASSET ALLOCATION PROGRAMS If you have or establish a relationship with a personal financial adviser and the advisory agreement provides that you will pay all or a portion of your adviser's fees out of the Contract, we will, pursuant to written instructions from you in a form acceptable to us, make a partial withdrawal of the Contract Value to pay for the services of the financial adviser. We will treat any fee that is withdrawn as a withdrawal under the terms of this Contract. If the Contract is Non-Qualified, the withdrawal will be treated like any other distribution; it may be included in your gross income for federal tax purposes and, if any Owner is under age 59 1/2, it may be subject to a 10% federal penalty tax. 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 financial adviser fees from your Contract. We do not set the amount of the fees charged or receive any portion of the fees from your adviser. Any fee that is charged by your adviser is in addition to the fees and expenses that apply under your Contract. We are not party to the agreement you have with your adviser. You should ask your adviser for any details about the compensation he or she receives in connection with your Contract. Please note that the adviser you engage to provide advice and/or to make transfers for you is not acting on our behalf, but is acting on your behalf. We do not review or approve the actions of any adviser, and do not assume any responsibility for these actions. However, we do reserve the right to request and review prior transaction history of any adviser prior to granting your request to allow the adviser to act on your behalf. If, in our sole discretion, we believe the adviser's trading history indicates a pattern of excessive trading, we reserve the right to deny that adviser trading authority. If an adviser is granted trading authority, that adviser is subject to the same limitations applicable to contract owners as stated above. VOTING PRIVILEGES We are the legal owner of the Investment Option shares. However, when an Investment Option solicits proxies in conjunction with a shareholder vote that affects your investment, we will obtain from you and other affected Owners instructions as to how to vote those shares. When we receive those instructions, we will vote all of the shares we own including any shares that we own on our own behalf, in proportion to those instructions. Because of this proportional voting and because many Owners do not respond to our request for them to provide us with voting instructions, a small - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 47 number of Owners may determine the outcome of the vote. Should we determine that we are no longer required to obtain your voting instructions, we will vote the shares in our own right. Only Owners have voting privileges under the Contract. Annuitants, Beneficiaries, Payees and other persons have no voting privileges unless they are also Owners. We determine your voting interest in an Investment Option as follows. o You are permitted to cast votes based on the dollar value of the Investment Option's shares that we hold for your Contract in the corresponding subaccount. We calculate this value based on the number of Accumulation/Annuity Units allocated to your Contract on the record date and the value of each unit on that date. We count fractional votes. o We will determine the number of shares that you can vote. o You will receive any proxy materials and a form to give us voting instructions as well as periodic reports relating to the Investment Options in which you have an interest. - -------------------------------------------------------------------------------- 6. OUR GENERAL ACCOUNT Our general account consists of all of our assets other than those in our separate accounts. We have complete ownership of all assets in our general account and we use these assets to support our insurance and annuity obligations other than those funded by our separate accounts. These assets are subject to our general liabilities from business operations. Subject to applicable law, we have sole discretion over the investment of the assets of our general account. We have not registered our general account as an investment company under the Investment Company Act of 1940, nor have we registered interests in our general account under the Securities Act of 1933. As a result, the SEC has not reviewed the disclosures in this prospectus relating to our general account. Currently, we only offer a DCA Fixed Option as an Investment Choice under our general account during the Accumulation Phase. Any amounts you allocate to this Investment Choice under our general account become part of our general account. Additionally, any amounts that you allocate to provide fixed Annuity Payments during the Annuity Phase become part of our general account. We may change the terms of the general account Investment Choices in the future. Please contact us for the most current terms. - -------------------------------------------------------------------------------- 7. EXPENSES There are charges and other expenses associated with the Contract that will reduce your investment return. These charges and expenses are described in detail in this section. SEPARATE ACCOUNT ANNUAL EXPENSES Each Business Day during the Accumulation and Annuity Phases, we make a deduction from your Separate Account assets for the mortality and expense risk (M&E) charges and the administrative charge (together they are called the Separate Account annual expenses). We do this as part of our calculation of the value of the Accumulation and Annuity Units. We calculate the charges as a percentage of the average daily assets invested in a subaccount on an annual basis. The amount of the M&E charge during the Accumulation Phase depends on the benefit options that apply. The annual administrative charge is equal to 0.15% during both phases of your Contract. During the Accumulation Phase, the current Separate Account annual expenses* are as follows: Base Contract M&E Admin. Charges Charge Total Traditional GMDB 1.55% 0.15% 1.70% Enhanced GMDB 1.85% 0.15% 2.00% Charges for a Contract with the PRIME Plus Benefit Admin. M&E Charges Charge Total Traditional GMDB 2.25% 0.15% 2.40% Enhanced GMDB 2.45% 0.15% 2.60% * Some or all of the guaranteed benefits may not be available in all states. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 48 If you exercise the GPWB, the increased expenses associated with the PRIME Plus Benefit will continue until both the GPWB and GMIB benefits terminate and the increased expenses associated with the Enhanced GMDB (if applicable) will continue as long as the Enhanced GMDB value is greater than zero. During the Annuity Phase, if you request variable Traditional Annuity Payments, the Separate Account annual expenses are equal, on an annual basis, to 1.70%. This expense is equal to the lowest charge because we do not pay a death benefit separate from the benefits provided by the Annuity Option if the Annuitant dies during the Annuity Phase. Because the Contract allows Partial Annuitization, it is possible for different portions of the Contract to be in both the Accumulation and Annuity Phases at the same time. It is also possible to have different M&E charges on different portions of the Contract at the same time if you take a variable traditional Partial Annuitization. Mortality and Expense Risk (M&E) Charges These charges compensate us for all the insurance benefits provided by your Contract, for example: o our contractual obligation to make Annuity Payments, o the death, income, and withdrawal benefits under the Contract, o certain expenses related to the Contract, and o for assuming the risk (expense risk) that the current charges will be insufficient in the future to cover the cost of administering the Contract. If the M&E charges are sufficient to cover such costs and risks, any excess will be profit to us. We anticipate making such a profit, and using it to cover distribution expenses as well as the cost of providing certain features under the Contract. Administrative Charge This charge is equal to 0.15% of the average daily assets invested in a subaccount on an annual basis. We deduct this charge during both the Accumulation and Annuity Phases. This charge, together with the contract maintenance charge (which is explained next), is for all the expenses associated with the administration and maintenance of the Contracts. CONTRACT MAINTENANCE CHARGE We deduct $40 from the Contract annually as a contract maintenance charge during the Accumulation and Annuity Phases. The charge is for the expenses associated with the administration and maintenance of the Contract. We deduct this charge on the last day of each Contract Year and we deduct it proportionately from the Investment Choices as set out in your Contract. During the Annuity Phase, we will collect a portion of the charge out of each Annuity Payment. During the Accumulation Phase, we will not deduct this charge if the Rewards Value is at least $75,000 at the time we are to deduct the charge. If you own more than one Contract offered under this prospectus, we 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, we will not assess the contract maintenance charge. We also will waive this charge during the Annuity Phase if the Contract Value on the Income Date is at least $75,000. If you take a full withdrawal from your Contract (other than on a Contract Anniversary), and the Rewards Value is less than $75,000, we will deduct the full contract maintenance charge. If the Contract is owned by a non-individual (for example, a qualified plan or trust), we will look to the Annuitant to determine if we will assess the charge. In some states, we are not permitted to assess the contract maintenance charge against the general account Investment Choices, during the Annuity Phase, or both. WITHDRAWAL CHARGE You can take withdrawals from the portion of the Contract that is in the Accumulation Phase. A withdrawal charge applies if all or part of the amount withdrawn is from Purchase Payments we received within ten complete years before the withdrawal. The withdrawal charge compensates us for expenses associated with selling the Contract. We do not assess the withdrawal charge for amounts paid out: as Annuity Payments (including GMIB Payments), as death benefits, or as part of a minimum distribution payment under our minimum distribution program. We also do not assess the withdrawal charge on GPWB Payments and/or Excess Withdrawals unless they exceed the GPWB Maximum. (For more information, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - GPWB Payments and section 9, Access to Your Money - The Minimum Distribution Program and Required Minimum Distribution (RMD) - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 49 Payments.) In the Contract or marketing materials, the withdrawal charge may also be referred to as the surrender charge or contingent deferred sales charge (CDSC) and withdrawals may be referred to as surrenders. The total amount under your Contract that is subject to a withdrawal charge is the Withdrawal Charge Basis. The Withdrawal Charge Basis is equal to the total Purchase Payments (not including any bonus), less any Purchase Payments withdrawn (excluding any bonus and any penalty-free withdrawals). Amounts applied to Partial Annuitizations will reduce each Purchase Payment proportionately by the percentage of Contract Value or GMIB value you annuitize. We do not reduce the Withdrawal Charge Basis for any penalty-free withdrawals. This means that if you take a full withdrawal while the withdrawal charge applies and you have taken penalty-free withdrawals, you may be assessed a withdrawal charge on more than the amount you are withdrawing. Penalty-free withdrawals include the following amounts: withdrawals under the GPWB of the PRIME Plus Benefit that do not exceed the GPWB Maximum, withdrawals under the partial withdrawal privilege, and any amounts paid as part of a required minimum distribution. We also do not adjust the Withdrawal Charge Basis for any withdrawal charges, or any gains or losses on your Investment Options. This means that on a full withdrawal, if the Contract Value has declined due to poor performance of your selected Investment Options, the withdrawal charge may be greater than the amount available for withdrawal. Because we assess the withdrawal charge against the Withdrawal Charge Basis, in some instances, the Contract Value may be positive, but you will not receive a distribution due to the amount of the withdrawal charge. For more information, please see the examples in Appendix F. For purposes of calculating any withdrawal charge, we withdraw Purchase Payments on a "first-in-first-out" (FIFO) basis and we make withdrawals from your Contract in the following order. 1. First, we withdraw any Purchase Payments that are beyond the withdrawal charge period shown in your Contract (for example, Purchase Payments that we have had for ten or more complete years). We do not assess a withdrawal charge on these Purchase Payments. 2. Then, we withdraw any Purchase Payments that are under the partial withdrawal privilege and we do not assess a withdrawal charge. However, the partial withdrawal privilege is not available if you are taking a full withdrawal. For more information, see section 9, Access to Your Money - Partial Withdrawal Privilege. 3. Next, on a FIFO basis, we withdraw Purchase Payments that are within the withdrawal charge period shown in your Contract. We do assess a withdrawal charge on these Purchase Payments, but we withdraw them on a FIFO basis, which may help reduce the total withdrawal charge you will pay because the withdrawal charge declines over time. We determine your total withdrawal charge by multiplying each of these payments by the applicable withdrawal charge percentage and then totaling the charges. 4. Finally, we withdraw any Contract earnings. Bonuses and any earnings thereon are treated as earnings under the Contract for purposes of the withdrawal charge. We do not assess a withdrawal charge on Contract earnings. We keep track of each Purchase Payment we receive. The amount of the withdrawal charge depends upon the length of time since we received your Purchase Payment. The charge as a percentage of each Purchase Payment withdrawn is as follows. Number of Complete Years Since We Received Your Purchase Payment Charge 0 8.5% 1 8.5% 2 8.5% 3 8.5% 4 8.0% 5 7.0% 6 6.0% 7 5.0% 8 4.0% 9 3.0% 10 years or more 0.0% - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 50 After we have had a Purchase Payment for ten complete years, there is no charge when you withdraw that Purchase Payment. In the States of Connecticut and New Jersey, the withdrawal charge, as a percentage of each Purchase Payment withdrawn, is 8.5%, 8.5%, 8.0%, 7.0%, 6.0%, 5.0%, 4.0%, 3.0%, 2.0%, 1.0%, and 0.0% for the time periods referenced above. We calculate the withdrawal charge at the time of withdrawal. For a withdrawal that is subject to a withdrawal charge, the amount we deduct for the withdrawal charge will be a percentage of the requested withdrawal amount. For partial withdrawals, we deduct the charge from the remaining Rewards Value and we deduct it proportionately from the Investment Choices. Example: You purchase a Contract with an initial Purchase Payment of $30,000 and make another Purchase Payment in the first month of the second Contract Year of $70,000. In the third month of the third Contact Year, your Contract Value is $110,000 and you request a withdrawal of $52,000. We would withdraw money from the Contract Value and compute the withdrawal charge as follows. 1) Purchase Payments that are beyond the withdrawal charge period. All payments are still within the withdrawal charge period so this does not apply. 2) Amounts available under the partial withdrawal privilege. You have not taken any other withdrawals this year so you can withdraw up to 10% of your total payments (or $10,000) without incurring a withdrawal charge. 3) Purchase Payments on a FIFO basis. The total amount we deduct from the first Purchase Payment is $30,000, which is subject to an 8.5% withdrawal charge, and we pay you this entire amount. We determine the withdrawal charge on this amount as follows: $30,000 x 0.085 = $2,550 Next we determine how much we need to deduct from the second Purchase Payment. So far we have deducted $40,000 ($10,000 under the partial withdrawal privilege and $30,000 from the first Purchase Payment), so we would need to deduct $12,000 from the second Purchase Payment to get you the $52,000 you requested. The second Purchase Payment is also subject to an 8.5% withdrawal charge. We determine the withdrawal charge on this amount this amount as follows: $12,000 x 0.085 = $1,020 4) Contract earnings. The withdrawal charges of $3,570 are deducted from contract earnings. In total we withdrew $55,570 from your Contract, of which you received $52,000 and paid total withdrawal charges of $3,570. NOTE: Withdrawals may have tax consequences and, if taken before age 59 1/2, may be subject to a 10% federal penalty tax. For tax purposes, under Non-Qualified Contracts, withdrawals are considered to have come from the last money you put into the Contract. Thus, for tax purposes, earnings are considered to come out first. Reduction or Elimination of the Withdrawal Charge We may reduce or eliminate the amount of the withdrawal charge when the Contract is sold under circumstances that reduce its sales expenses. For example, if there is a large group of individuals that will be purchasing the Contract or if a prospective purchaser already has a relationship with us. We may choose not to deduct a withdrawal charge under a Contract issued to an officer, director, or employee of Allianz Life or any of its affiliates. Also, we may reduce or waive the withdrawal charge when a Contract is sold by a registered representative appointed with 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 withdrawal charge. TRANSFER FEE You can currently make 12 free transfers every Contract Year. If you make more than 12 transfers in a Contract Year, we will deduct a transfer fee of $25 for each additional transfer. Currently, we deduct this fee only during the Accumulation Phase, but we reserve the right to deduct it during the Annuity Phase. We will deduct the transfer fee from the Investment Choice from which the transfer is made. If you transfer the entire amount in the Investment Choice, then we will deduct the transfer fee from the amount transferred. If you are transferring from multiple Investment Choices, we will treat the transfer as a single transfer and we will deduct any transfer fee proportionately from the Investment Choices if you - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 51 transfer less than the entire amount that is in the Investment Choice. If the transfer is made under the dollar cost averaging or flexible rebalancing programs, or the allocation and transfer restrictions for the PRIME Plus Benefit, there is no fee for the transfer and we currently do not count these transfers against any free transfers we allow. PREMIUM TAXES Some states and other governmental entities (for example, municipalities) assess a tax (premium tax) on us based on the amount of Purchase Payments we receive from you. In some states, the tax is based on the amount applied to Annuity Payments. We are responsible for the payment of these taxes. We will make a deduction from your Contract Value equal to the amount we are required to pay for premium tax. Some of these taxes are due on the Issue Date, others are due on the Income Date. It is our current practice not to make deductions from the Contract to reimburse ourselves for the premium taxes that we pay until the earliest of the following: upon the Income Date* if you take a Full Annuitization, the date of full withdrawal from the Contract, or full distribution of the death benefit. We may change this practice in the future and deduct the charge when the tax is due. Premium taxes normally range from 0% to 3.5% of the Purchase Payment, depending on the state or governmental entity. * We do not make deductions to reimburse ourselves for premium taxes from amounts applied to GMIB Payments. INCOME TAXES We reserve the right to deduct from the Contract any income taxes that we may incur because of the Contract. Currently, we are not making any such deductions. INVESTMENT OPTION EXPENSES There are deductions from the assets of the various Investment Options for operating expenses (including management fees) that are described in the Fee Tables and in the table of annual operating expenses for each Investment Option in Appendix A in this prospectus and in the prospectuses for the Investment Options. These charges apply during the Accumulation and Annuity Phases if you make allocations to the Investment Options. These expenses will reduce the performance of the Investment Options and, therefore, will negatively affect your Contract Value and the amounts available for withdrawals and Annuity Payments. They may also negatively impact the death benefit proceeds. The investment advisers for the Investment Options provided the fee and expense information and we did not independently verify it. - -------------------------------------------------------------------------------- 8. TAXES NOTE: We have prepared the following information on taxes as a general discussion of the subject. The Contract offers flexibility regarding how distributions can be taken. Not all of these distributions (or their attendant tax consequences) are discussed in this section. This information is not intended as tax advice. You should, therefore, consult your own tax adviser about your own circumstances. We have included additional information regarding taxes in the Statement of Additional Information. For more information on the taxation of Annuity Payments made under a Partial Annuitization, see section 3, The Annuity Phase - Partial Annuitization. For more information on the taxation of GPWB Payments, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - Taxation of GPWB Payments. For more information on the taxation of GMIB Payments, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - Taxation of GMIB Payments. 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. These rules generally provide that you will not be taxed on any earnings on the money held in your annuity until you take the money out. This is called tax deferral. There are different rules regarding how you will be taxed, depending upon how you take the money out and whether the annuity is Qualified or Non-Qualified (see the following discussion in this section). - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 52 If you do not purchase the Contract under a tax qualified retirement plan, the Contract is referred to as a Non-Qualified Contract. When a Non-Qualified Contract is owned by a non-individual (for example, a corporation or certain other entities other than a trust holding the Contract as an agent for an individual), 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 and Contract earnings may be taxed as ordinary income every year. QUALIFIED CONTRACTS If you purchase the Contract under a pension or retirement plan that is qualified under the Code, the Contract is referred to as a Qualified Contract. Qualified Contracts are subject to special rules. Adverse tax consequences may result if contributions, distributions, and transactions in connection with the Qualified Contract do not comply with the law. 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 before purchasing a Qualified Contract. We may issue the following types of Qualified Contracts. o Traditional Individual Retirement Annuity. Section 408 of the Code permits eligible individuals to maintain Individual Retirement Annuities (IRAs). IRA contributions are limited each year to the lesser of a dollar amount specified in the Code or 100% of the amount of compensation included in the Owner's income. The limit on the amount contributed to an IRA does not apply to distributions from certain other types of qualified plans that are "rolled over" on a tax-deferred basis into an IRA. Purchasers of a Contract for use with IRAs will have the right to revoke their purchase within seven days of the earlier of the establishment of the IRA or their purchase. o Simplified Employee Pension (SEP) IRA. Employers may establish Simplified Employee Pension (SEP) IRAs under Code Section 408(k) to provide IRA contributions on behalf of their employees. In addition to all of the general rules governing IRAs, such plans are subject to additional requirements and different contribution limits. o Roth IRA. Section 408A of the Code permits certain eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA are limited each year to the lesser of a dollar amount specified in the Code or 100% of the amount of compensation included in the Owner's income and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. Distributions from a Roth IRA generally are not taxed until after the total amount distributed from the Roth IRA exceeds the amount contributed to the Roth IRA. After that, income tax and a 10% federal penalty tax may apply to distributions made: (1) before age 59 1/2 (subject to certain exceptions), or (2) during the five tax years starting with the year in which the first contribution is made to any Roth IRA. o TSAs or 403(b) Contracts. Section 403(b) of the Code allows employees of certain Section 501(c)(3) organizations and public schools to exclude from their gross income the purchase payments made, within certain limits, on a contract that will provide an annuity for the employee's retirement. As a result of changes to the regulations regarding 403(b)/TSA contracts which requires information sharing agreements between the financial organization or insurance company and employers sponsoring 403(b)/TSA plans, these plans are no longer offered with this Contract. However, that may change in the future. o Inherited IRA. The Code permits beneficiaries of investments that were issued under certain tax-qualified pension or retirement plans to directly transfer the death benefit from that investment into a variable annuity contract (Inherited IRA Contract). If we make this Contract available as an Inherited IRA Contract, the beneficiary of the previous tax-qualified investment will become the Owner of the new Inherited IRA Contract. The ownership of the Contract must also reflect the name of the previous deceased owner. The purpose of the Inherited IRA Contract is to allow the Owner to change the investment vehicle to an annuity and receive required minimum distribution withdrawal payments instead of receiving a lump sum death benefit payment. If we make this Contract available as an Inherited IRA Contract, the death benefit proceeds must be directly transferred into this Contract; they cannot be received by the beneficiary and then applied to the Contract. A beneficiary can apply the death benefit proceeds from multiple tax-qualified investments that were owned by the same owner to the purchase of an Inherited IRA Contract. We will not accept any other forms of Purchase Payment on an Inherited IRA Contract. We permit you to add enhanced optional benefits to an Inherited IRA Contract. We currently believe this is allowable because enhanced optional benefits can be added to traditional IRA plans. However, the Internal Revenue Service (IRS) has not yet issued any rulings on this issue with respect to Inherited IRA Contracts. Therefore, Owners should - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 53 discuss this issue with their tax and legal advisers before adding enhanced optional benefits to an Inherited IRA Contract. Qualified Plans. A qualified plan is a retirement or pension plan that meets the requirements for tax qualification under the Code. If the Contract is an investment for assets of a qualified plan under Section 401 of the Code, the plan is both the Owner and the Beneficiary. The authorized signatory or plan trustee for the plan must make representations to us that the plan is qualified under the Code on the Issue Date and is intended to continue to be qualified for the entire Accumulation Phase of the Contract, or as long as the qualified plan owns the Contract. The qualified plan may designate a third party administrator to act on its behalf. All tax reporting will be the responsibility of the plan. In the event the qualified plan instructs us to roll the plan assets into an IRA for the Annuitant under this Contract, we will change the qualification type of the Contract to an IRA and make the Annuitant the Owner. The qualified plan will be responsible for any reporting required for the rollover transactions. MULTIPLE CONTRACTS Section 72(e)(12) of the Code provides that multiple Non-Qualified deferred annuity contracts that are issued within a calendar year period to the same 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 before purchasing more than one Non-Qualified Contract in any calendar year period. PARTIAL 1035 EXCHANGES Section 1035 of the Code provides that an annuity contract may be exchanged in a tax-free transaction for another annuity contract. Historically, it was presumed that only the exchange of an entire contract (as opposed to a partial exchange) would be accorded tax-free status. Guidance from the IRS, however, confirmed that the direct transfer of a portion of an annuity contract into another annuity contract can qualify as a non-taxable exchange. IRS guidance provides that this direct transfer can go into an existing annuity contract as well as a new annuity contract. IRS guidance also provides that certain partial exchanges may not qualify as tax-free exchanges. Therefore, Owners should consult their own tax advisers before entering into a partial exchange of an annuity contract. DISTRIBUTIONS - NON-QUALIFIED CONTRACTS You, as the Owner, generally will not be taxed on increases in the value of the Contract until an actual or deemed distribution occurs - either as a withdrawal (including, if available, Partial Annuitizations, GPWB Payments and Excess Withdrawals) or as Traditional Annuity Payments or GMIB Payments under a Full Annuitization. Section 72 of the Code governs treatment of distributions. When a withdrawal from a Non-Qualified Contract occurs, the amount received will generally be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the Contract Value immediately before the distribution over your investment in the Contract (generally, the Purchase Payments or other consideration paid for the Contract, reduced by any amount previously distributed from the Contract that was not subject to tax) at that time. GPWB Payments and amounts received as a result of a Partial Annuitization are treated as partial withdrawals. If you exercise the GPWB and the PB Value is greater than the Contract Value, it is possible that the IRS could assert that the amount you receive will be taxable as ordinary income up to an amount equal to the excess of the PB Value immediately before the withdrawal over your investment in the Contract at that time. In the case of a full withdrawal under a Non-Qualified Contract, the amount received generally will be taxable only to the extent it exceeds your investment in the Contract. If you take a Full Annuitization, different rules apply. Periodic installments (for example, GMIB Payments) scheduled to be received at regular intervals (for example, monthly) after you take a Full Annuitization should be treated as annuity payments (and not withdrawals) for tax purposes. (In this regard, we intend to make tax reporting on periodic installments scheduled to be received at regular intervals under a Partial Annuitization as annuity payments ONLY after a Contract's entire Contract Value has been applied to Annuity Payments, provided that such installments extend over a period of more than one full year from the time of the Full Annuitization. Due to the lack of guidance on whether this is the appropriate tax treatment for such payments, however, Owners should consult with a tax adviser on this issue.) After a Full Annuitization, a portion of each Annuity Payment may be treated as a partial return of your Purchase Payment and will not be taxed. The remaining portion of the payment will be treated as ordinary income. How the Annuity Payment is - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 54 divided between taxable and non-taxable portions depends upon the period over which we expect to make the payments. Once we have paid out all of your Purchase Payment(s), the entire Annuity Payment is taxable as ordinary income. Section 72 of the Code further provides that any amount received under an annuity contract, which is included in income, may be subject to a federal penalty tax. The amount of the federal penalty tax is equal to 10% of the amount that is included in income. Some distributions will be exempt from the federal penalty tax. There is an exception to this 10% federal penalty tax for 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 Section 72(m)(7) of the Code); 4) paid in a series of substantially equal payments made annually (or more frequently) under a lifetime annuity; 5) paid as annuity payments under an immediate annuity; or 6) that come from Purchase Payments made before August 14, 1982. With respect to (4) above, if the series of substantially equal periodic payments is modified, as permitted by the Code, before the later of your attaining age 59 1/2 or the close of the five year period that began on the Income Date, then the tax for the year of the modification is increased by the 10% federal penalty tax, plus interest, for the tax years in which the exception was used. A partial withdrawal taken after a series of substantially equal periodic payments has begun may result in the modification of the series of substantially equal payments and therefore could result in the imposition of the 10% federal penalty tax and interest for the period as described above. DISTRIBUTIONS - QUALIFIED CONTRACTS Section 72 of the Code governs treatment of distributions from Qualified Contracts. Special rules may apply to withdrawals from certain types of Qualified Contracts, including Roth IRAs. You should consult with your qualified plan sponsor and tax adviser to determine how these rules affect the distribution of your benefits. Section 72(t) of the Code provides that any amount received under a Qualified Contract, which is included in income, may be subject to a federal penalty tax. The amount of the federal penalty tax is equal to 10% of the amount that is included in income. Some distributions will be exempt from the federal penalty tax. There is an exception to this 10% federal penalty tax for: 1) distributions made on or after the date you (or the Annuitant as applicable) reach age 59 1/2; 2) distributions following your death or disability (or the Annuitant as applicable) (for this purpose disability is as defined in Section 72(m)(7) of the Code); 3) after separation from service, paid in a series of substantially equal payments made annually (or more frequently) under a lifetime annuity; 4) distributions made to you to the extent such distributions do not exceed the amount allowed as a deduction under Code Section 213 for amounts paid during the tax year for medical care; 5) distributions made on account of an IRS levy upon the Qualified Contract; 6) distributions from an IRA for the purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code) for you (or the Annuitant as applicable) and his or her spouse and dependents if you have received unemployment compensation for at least 12 weeks (this exception will no longer apply after you have been re-employed for at least 60 days); 7) distributions from an IRA made to you, to the extent such distributions do not exceed your qualified higher education expenses (as defined in Section 72(t)(7) of the Code) for the tax year; 8) distributions from an IRA which are qualified first-time homebuyer distributions (as defined in Section 72(t)(8) of the Code); 9) distributions made to an alternate Payee pursuant to a qualified domestic relations order (does not apply to an IRA); and 10) a reservist called to active duty during the period between September 11, 2001 and December 31, 2007, for a period in excess of 179 days (or for an indefinite period), distributions from IRAs or amounts attributable to elective deferrals under a 401(k) plan made during such active period. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 55 The exception stated in (3) above applies to an IRA without the requirement that there be a separation from service. With respect to (3) above, if the series of substantially equal periodic payments is modified as permitted by the Code, before the later of the Annuitant attaining age 59 1/2 or the close of the five year period that began on the Income Date, then the tax for the year of the modification is increased by the 10% federal penalty tax, plus interest for the tax years in which the exception was used. A partial withdrawal taken after a series of substantially equal periodic payments has begun may result in the modification of the series of substantially equal payments and therefore could result in the imposition of the 10% federal penalty tax and interest for the period as described above, unless another exception to the federal penalty tax applies. You should obtain competent tax advice before you take any partial withdrawals from your Contract. Distributions from a Qualified Contract must commence no later than the required beginning date. For IRAs, the required beginning date is April 1 of the calendar year following the year in which you attain age 70 1/2. Under a qualified plan, the required beginning date is generally April 1 of the calendar year following the later of the calendar year in which you reach age 70 1/2 or retire. Generally, required minimum distributions must be made over a period not exceeding the life or life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated Beneficiary. If the required minimum distributions are not made, a 50% federal penalty tax is imposed as to the amount not distributed. It is unclear whether a partial withdrawal taken after an Income Date will have an adverse impact on the determination of required minimum distributions. If you are attempting to satisfy these rules through partial withdrawals, the present value of future benefits provided under the Contract may need to be included in calculating the amount required to be distributed. If you are receiving Annuity Payments or are age 70 1/2 or older, you should consult with a tax adviser before taking a partial withdrawal. ASSIGNMENTS, PLEDGES AND GRATUITOUS TRANSFERS Other than in the case of Qualified Contracts (which generally cannot be assigned or pledged), any assignment or pledge of (or agreement to assign or pledge) the Contract Value is treated for federal income tax purposes as a full withdrawal. The investment in the Contract is increased by the amount includible as income with respect to such amount or portion, though it is not affected by any other aspect of the assignment or pledge (including its release). If an Owner transfers a Contract without adequate consideration to a person other than the Owner's spouse (or to a former spouse incidental to divorce), the Owner will be taxed on the difference between his or her Contract Value and the investment in the Contract at the time of transfer and for each subsequent year until the assignment is released. In such case, the transferee's investment in the Contract will be increased to reflect the increase in the transferor's income. The transfer or assignment of ownership of the Contract, the designation of an Annuitant, the selection of certain Income Dates, or the exchange of the Contract may result in certain other tax consequences that are not discussed here. An Owner contemplating any such transfer, assignment, or exchange should consult a tax adviser as to the tax consequences. DEATH BENEFITS Any death benefits paid under the Contract are taxable to the recipient as ordinary income. The rules governing the taxation of payments from an annuity contract 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. WITHHOLDING Annuity distributions are generally subject to withholding for the recipient's federal income tax liability. Recipients can, however, generally elect not to have tax withheld from distributions unless they are subject to mandatory state withholding. "Eligible rollover distributions" from qualified plans are subject to a mandatory federal income tax withholding of 20%. An eligible rollover distribution is any distribution to an employee (or employee's spouse or former spouse as Beneficiary or alternate Payee) from such a plan, except certain distributions such as distributions required by the Code, distributions in a specified annuity form, or hardship distributions. The 20% withholding does not apply, however, to nontaxable distributions or if the employee chooses a "direct rollover" from the Contract plan to a qualified plan, IRA, TSA or 403(b) plan, or to a governmental Section 457 plan that agrees to separately account for rollover contributions. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 56 FEDERAL ESTATE TAXES While no attempt is being made to discuss the federal estate tax implications of the Contract, a purchaser should keep in mind that the value of an annuity contract owned by a decedent and payable to a Beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated Beneficiary or the actuarial value of the payments to be received by the Beneficiary. Consult an estate planning adviser for more information. GENERATION-SKIPPING TRANSFER TAX Under certain circumstances, the Code may impose a "generation-skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS. FOREIGN TAX CREDITS We may benefit from any foreign tax credits attributable to taxes paid by certain funds to foreign jurisdictions to the extent permitted under the federal tax law. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS The preceding discussion provides general information regarding federal income tax consequences to annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state, and foreign taxation with respect to an annuity contract purchase. In Revenue Ruling 2004-75, 2004-31 I.R.B. 109, the IRS announced that income received by residents of Puerto Rico under life insurance policies or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States federal income tax. POSSIBLE TAX LAW CHANGES Although the likelihood of legislative or regulatory changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation, regulation or otherwise. Consult a tax adviser with respect to legislative or regulatory developments and their effect on the Contract. We have the right to modify the Contract in response to legislative or regulatory changes that could otherwise diminish the favorable tax treatment that annuity owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend the above discussion as tax advice. DIVERSIFICATION The Code provides that the underlying investments for a Non-Qualified variable annuity must satisfy certain diversification requirements in order to be treated as an annuity contract. We believe that the Investment Options are being managed so as to comply with the requirements. In some circumstances, owners of variable annuities who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the policies, we believe that the Owner should not be treated as the owner of the Separate Account assets. We reserve the right to modify the Contract to bring it into conformity with applicable standards should such modification be necessary to prevent Owners from being treated as the owners of the underlying Separate Account assets. REQUIRED DISTRIBUTIONS Section 72(s) of the Code requires that, to be treated as an annuity contract for federal income tax purposes, a Non-Qualified Contract must contain certain provisions specifying how amounts will be distributed in the event of the death of an Owner of the Contract. Specifically, Section 72(s) requires that: (a) if any Owner dies on or after you take a Full Annuitization, but before the time the entire interest in the Contract has been distributed, the entire interest in the Contract - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 57 must be distributed at least as rapidly as under the method of distribution being used as of the date of the Owner's death; and (b) if any Owner dies before you take a Full Annuitization, the entire interest in the Contract must be distributed within five years after the date of the Owner's death. These requirements will be considered satisfied as to any portion of an Owner's interest that is payable to or for the benefit of a designated Beneficiary and that is distributed over the life of such designated Beneficiary, or over a period not extending beyond the life expectancy of that Beneficiary, provided that such distributions begin within one year of the Owner's death. The designated Beneficiary refers to an individual designated by the Owner as a Beneficiary and to whom ownership of the Contract passes by reason of death. However, if the designated Beneficiary is the surviving spouse of the deceased Owner, the Contract may be continued with the surviving spouse as the new Owner. Non-Qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. When such requirements are clarified by regulation or otherwise, we intend to review such provisions and modify them, as necessary, to assure that they comply with the applicable requirements. Other rules may apply to Qualified Contracts. - -------------------------------------------------------------------------------- 9. ACCESS TO YOUR MONEY The money in the Contract is available under the following circumstances: o by taking a withdrawal (including GPWB Payments); o by receiving Annuity Payments; or o when we pay a death benefit. You can only take withdrawals during the Accumulation Phase. When you make a withdrawal request, we will process the request based on the Accumulation Unit values next determined after receipt of the request at our Service Center. The Accumulation Unit values are normally determined at the end of each Business Day. Any withdrawal request received at or after the end of the current Business Day will receive the next Business Day's Accumulation Unit values. When you take a full withdrawal, we will process the withdrawal: o based upon the number of Accumulation Units held by the Contract on that Business Day and valued at the next available daily price established after receipt in good order of the withdrawal request at our Service Center, o less any applicable withdrawal charge, o less any deductions we make to reimburse ourselves for premium tax that we pay, and o less any contract maintenance charge. See the Fee Tables and section 7, Expenses for a discussion of the charges. Any partial withdrawal must be for at least $500.* The Contract Value after a partial withdrawal must be at least $10,000.* We reserve the right to treat a request for a partial withdrawal that would reduce the Contract Value below this minimum as a request for a full withdrawal of the Contract. Unless you instruct us otherwise, we will deduct any partial withdrawal (including any withdrawal charge) proportionately from the Investment Choices. * These limitations do not apply to GPWB Payments. In the event that there are multiple bonuses applied to the Contract, we will reduce the oldest unvested bonus amounts first. Partial withdrawals in excess of the partial withdrawal privilege will reduce unvested bonus amounts by the excess amount's percentage of the Contract Value on the day of (but before) the partial withdrawal. This percentage is determined by dividing the amount of the partial withdrawal (including any withdrawal charge) in excess of the partial withdrawal privilege amount by the Contract Value. We will pay the amount of any withdrawal from the Investment Options within seven days of when we receive your request in good order, unless the suspension of payments or transfers provision is in effect (see the "Suspension of Payments or Transfers" discussion later in this section). - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 58 Upon withdrawal, we assess the withdrawal charge against the Withdrawal Charge Basis. Penalty-free withdrawals do not reduce the Withdrawal Charge Basis, but any other withdrawals of Purchase Payments will reduce the Withdrawal Charge Basis. Penalty-free withdrawals include the following amounts: withdrawals under the GPWB of the PRIME Plus Benefit that do not exceed the GPWB Maximum, withdrawals under the partial withdrawal privilege, and any amounts paid as part of a required minimum distribution. We also do not adjust the Withdrawal Charge Basis for any current withdrawal charges or any gains or losses on your Investment Options. This means that if you take a full withdrawal while the withdrawal charge applies and you have taken penalty-free withdrawals or you have had losses in your Investment Options, you may be assessed a withdrawal charge on more than the amount you are withdrawing. In some instances, you will not receive a distribution due to the amount of the withdrawal charge. For more information, please see section 7, Expenses - Withdrawal Charge and the examples in Appendix F. Ordinary income taxes, tax penalties and certain restrictions may apply to any withdrawal you take. Example o You purchase a Contract with an initial Purchase Payment of $100,000. We apply a bonus to your Contract of $6,000. o You request a $50,000 partial withdrawal (not including the withdrawal charge) during the first Contract Year when the withdrawal charge is 8.5%. On the day of (but before) the partial withdrawal, your Contract Value is $110,600, the Rewards Value is $116,600, and your partial withdrawal privilege is $10,000. Your bonus has not vested at all at this time.
Calculating the total withdrawal charge: Amount requested that is subject to a withdrawal charge (amount requested minus the partial withdrawal privilege) = $50,000 - $10,000 =.................................................................................$ 40,000 Multiplied by the withdrawal charge percentage.............................................................x 0.085 Total withdrawal charge =..................................................................................$ 3,400 Reducing the Contract Value: Contract Value on the day of (but before) the partial withdrawal..........................................$110,600 Minus the total amount withdrawn (amount requested plus the total withdrawal charge) = $50,000 + $3,400 =..................................................................................- 53,400 Contract Value after the partial withdrawal...............................................................$ 57,200 Reducing the unvested bonus: Amount of the unvested bonus...............................................................................$ 6,000 Multiplied by the result of the total amount withdrawn, minus the partial withdrawal privilege, divided by the Contract Value on the day of (but before the partial withdrawal) = ($53,400 - $10,000) / $110,600 =.....................................................................x 0.392 Reduction in the unvested bonus due to the partial withdrawal..............................................$ 2,354 Unvested bonus after the partial withdrawal = $6,000 - $2,354 =............................................$ 3,646 Reducing the Rewards Value: Rewards Value on the day of (but before) the partial withdrawal...........................................$116,600 Minus the total amount withdrawn (amount requested plus the total withdrawal charge) = $50,000 + $3,400 =..................................................................................- 53,400 Minus the reduction in the unvested bonus due to the partial withdrawal..................................- 2,354 Rewards Value after the partial withdrawal................................................................$ 60,846
- -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 59 PARTIAL WITHDRAWAL PRIVILEGE The partial withdrawal privilege for each Contract Year is equal to 10% of your total Purchase Payments, not including any bonus, less any previous withdrawals taken during the Contract Year that were not subject to a withdrawal charge. We will not deduct a withdrawal charge from amounts withdrawn under the partial withdrawal privilege. Any unused partial withdrawal privilege in one Contract Year does not carry over to the next Contract Year. There is no partial withdrawal privilege after you exercise the GPWB (if applicable) or during the Annuity Phase. However, if you exercise the GPWB (if applicable) you can still take GPWB Payments and Excess Withdrawals up to the annual GPWB Maximum without a withdrawal charge. Excess Withdrawals (including a full withdrawal of the Contract Value) are available while you are receiving GPWB Payments, however, amounts withdrawn in excess of the annual GPWB Maximum (including GPWB Payments) are subject to a withdrawal charge as set out in section 7, Expenses - Withdrawal Charge. If you take a withdrawal of more than the partial withdrawal privilege, the excess amount will be subject to the withdrawal charge and it will reduce the Withdrawal Charge Basis unless the excess amount is part of a penalty-free withdrawal. If you take a full withdrawal, we will assess the withdrawal charge with no reduction for the partial withdrawal privilege. Amounts withdrawn under the partial withdrawal privilege do not reduce the Withdrawal Charge Basis. The partial withdrawal privilege may also be referred to as the partial surrender privilege. The minimum distribution program allows you to take withdrawals without the deduction of the withdrawal charge under certain circumstances. For more information, see "The Minimum Distribution Program and Required Minimum Distribution (RMD) Payments" discussion later in this section. SYSTEMATIC WITHDRAWAL PROGRAM If your Contract Value is at least $25,000, the systematic withdrawal program provides automatic monthly or quarterly payments to you. The minimum amount you can withdraw under this program is $500. You may withdraw any amount you want under this program if your Purchase Payments are no longer subject to the withdrawal charge. While the withdrawal charge is in effect, the systematic withdrawal program is subject to the partial withdrawal privilege. The total systematic withdrawals that you can take each Contract Year without incurring a withdrawal charge is limited to your partial withdrawal privilege amount for that Contract Year. With the exception of penalty-free withdrawals, any withdrawals in a Contract Year (including systematic withdrawals) will be subject to any applicable withdrawal charge. For more information, see section 7, Expenses - Withdrawal Charge and the "Partial Withdrawal Privilege" discussion that appears earlier in this section. All systematic withdrawals will be made on the ninth day of the month or the previous Business Day if the ninth is not a Business Day. You will not be charged additional fees for participating in or terminating from this program. Ordinary income taxes, tax penalties and certain restrictions may apply to systematic withdrawals. You cannot participate in the systematic withdrawal program and the minimum distribution program at the same time. You also cannot exercise the GPWB and participate in the systematic withdrawal program at the same time. THE MINIMUM DISTRIBUTION PROGRAM AND REQUIRED MINIMUM DISTRIBUTION (RMD) PAYMENTS If you own a Qualified Contract, you may participate in the minimum distribution program during the Accumulation Phase of the Contract. Under this program, we will make payments to you from your Contract that are designed to meet the applicable minimum distribution requirements imposed by the Code for this Qualified Contract. We can make payments to you on a monthly, quarterly, or annual basis. However, we will only make annual payments if your Contract Value is less than $25,000. RMD payments from this Contract will not be subject to a withdrawal charge and will not reduce the Withdrawal Charge Basis. However, they will count against your partial withdrawal privilege. You cannot aggregate RMD payments between this Contract and other qualified contracts that you own. Any RMD payments from this Contract that exceed the RMD amount calculated for this Contract will be subject to any applicable withdrawal charge. If you take any additional withdrawals that are not penalty-free withdrawals while you are receiving RMD payments, withdrawals will be subject to any applicable withdrawal charge. This Contract offers a choice of GMDBs. Contracts with the PRIME Plus Benefit include a GMIB and GPWB. These benefits may have limited usefulness if you purchase a Qualified Contract that is subject to a RMD. If your Contract includes the PRIME Plus Benefit and you do not exercise the GMIB on or before the date RMD payments must begin under a qualified plan, the Owner or Beneficiary may not be able to exercise the GMIB due to the restrictions imposed by - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 60 the minimum distribution requirements. You should consider whether the GMIB is appropriate for your situation if you plan to exercise the GMIB after your RMD beginning date. You also cannot participate in the minimum distribution program available under this Contract if you elect to receive GPWB Payments. Once you choose your GPWB Payment option, you cannot change it. Therefore, you may not be able to adjust your GPWB Payment to meet your RMD needs. In addition, RMD payments will reduce your GMDB, and PB Values. You cannot participate in the systematic withdrawal and the minimum distribution programs at the same time. You also cannot exercise the GPWB and participate in the minimum distribution program at the same time. We encourage prospective owners who are considering purchasing Qualified Contracts that are subject to RMD payments to consult a tax adviser regarding these benefits. Inherited IRA Contracts. If you (the Owner) were the spouse of the deceased owner of the previous tax-qualified investment, and your spouse had not yet reached the date at which he/she was required to begin receiving required minimum distribution (RMD) payments, then you can wait to begin receiving RMD payments until the year that your spouse would have reached age 70 1/2. Alternatively, if the deceased owner of the previous tax-qualified investment had already reached the date at which he/she was required to begin receiving RMD payments, you can begin RMD payments based on your single life expectancy in the year following the deceased owner's death, or (if longer) the deceased previous owner's life expectancy in the year of his/her death reduced by one. You must begin to receive these RMD payments by December 31 of the year following the year of the deceased previous owner's death. SUSPENSION OF PAYMENTS OR TRANSFERS We may be required to suspend or postpone payments for withdrawals (including GPWB Payments if available) or transfers for any period when: o the New York Stock Exchange is closed (other than customary weekend and holiday closings); o trading on the New York Stock Exchange is restricted; o an emergency (as determined by the SEC) exists as a result of which disposal of the Investment Option shares is not reasonably practicable or we cannot reasonably value the Investment Option shares; or o during any other period when the SEC, by order, so permits for the protection of Owners. We reserve the right to defer payment for a withdrawal or transfer from any general account Investment Choice for the period permitted by law, but not for more than six months. - -------------------------------------------------------------------------------- 10. ILLUSTRATIONS In order to help you understand how your Contract Values vary over time and under different sets of assumptions, we may provide you with certain personalized illustrations upon request and free of charge. These illustrations may provide hypothetical depictions of either the Accumulation Phase or the Annuity Phase. You can request an illustration free of charge by contacting your registered representative. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 61 - -------------------------------------------------------------------------------- 11. DEATH BENEFIT At Contract issue, you may be able to select one of two death benefit options. If you do not make a selection, the Traditional GMDB will apply to your Contract. The death benefit is only available during the Accumulation Phase of the Contract. The Enhanced GMDB is available at Contract issue for an additional M&E charge if all Owners are age 79 or younger on the Issue Date (or the Annuitant is age 79 or younger if the Contract is owned by a non-individual). The Enhanced GMDB does not provide any additional benefit before the first Contract Anniversary and the benefit values are limited after age 81. As a result, any Owner who is nearing age 79 should determine if selecting the Enhanced GMDB (which has an additional cost) is appropriate for their situation. The death benefit provided by the Enhanced GMDB will never be less than the death benefit provided by the Traditional GMDB, but they may be equal. Bonus amounts do not become part of the GMDB values that are based on Contract Value until they are vested. You will not receive the amount of the bonus credited on the parts of the GMDB values that are based on Purchase Payments. You can only select one death benefit at Contract issue. Once you select a death benefit, you cannot change or cancel it. The Enhanced GMDB may not be available in your state. Check with your registered representative regarding availability and be sure to discuss whether your selected death benefit is appropriate for your situation. The use of the term "you" in this section refers to the Annuitant if the Contract is owned by a non-individual; otherwise it refers to the Owner. We will process the death benefit based on the Accumulation Unit values next determined after receipt in good order at our Service Center of both due proof of death and an election of the death benefit payment option. We consider due proof of death to be any of the following: a copy of the certified death certificate, a decree of court of competent jurisdiction as to the finding of death, or any other proof that we consider to be satisfactory. The Accumulation Unit values are normally determined at the end of each Business Day and due proof of death and an election of the death benefit payment option received at or after the end of the current Business Day will receive the next Business Day's Accumulation Unit values. Any part of the death benefit amount that had been invested in the Investment Options remains in the Investment Options until distribution begins. From the time the death benefit is determined until we make a complete distribution, any amount in the Investment Options will continue to be subject to investment risk that will be borne by the recipient. TRADITIONAL GUARANTEED MINIMUM DEATH BENEFIT (TRADITIONAL GMDB) If the Traditional GMDB applies, the amount of the death benefit will be the greater of 1 or 2, less any deduction we make to reimburse ourselves for premium tax that we pay. 1) The Contract Value (including any vested bonus amounts), determined as of the end of the Business Day during which we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. 2) The Traditional GMDB value, which is the total of all Purchase Payments received (not including any bonus) before you exercise the GPWB (if applicable), reduced as follows. o Proportionately by the percentage of Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn (including any withdrawal charge) for each traditional annuitization or withdrawal taken before you exercise the GPWB (if applicable). o Proportionately by the percentage of PB Value applied to each GMIB Partial Annuitization taken before you exercise the GPWB (if applicable). Any withdrawals taken before you exercise the GPWB, Excess Withdrawals, and/or amounts applied to traditional Partial Annuitizations may reduce the Traditional GMDB value by more than the amount withdrawn and/or annuitized. If the Contract Value at the time of withdrawal and/or annuitization is less than the Traditional GMDB value, we will deduct more than the amount withdrawn and/or annuitized from the Traditional GMDB value. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 62 Any amounts applied to GMIB Partial Annuitizations may reduce the Traditional GMDB value by more than the amount annuitized. If the PB Value at the time of annuitization is less than the Traditional GMDB value, we will deduct more than the amount annuitized from the Traditional GMDB value. ENHANCED GUARANTEED MINIMUM DEATH BENEFIT (ENHANCED GMDB) If the Enhanced GMDB applies, the amount of the death benefit will be the greater of 1 or 2, less any deduction we make to reimburse ourselves for premium tax that we pay. 1. The Contract Value (including any vested bonus), determined as of the end of the Business Day during which we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. 2. The Enhanced GMDB value, determined as of the end of the Business Day during which we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. The Enhanced GMDB value is equal to the greater of: a) the 3% Annual Increase Amount (AIA), or b) the Maximum Anniversary Value (MAV). We only calculate the 3% AIA and the MAV until the date of any Owner's death. A. Annual Increase Amount (3% AIA) The 3% AIA on the Issue Date is equal to the initial Purchase Payment received on the Issue Date (not including any bonus). On each Business Day other than a Contract Anniversary and before the exercise of the GPWB (if applicable), the 3% AIA is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments (not including any bonus) received that day, o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge), and o reduced proportionately by the percentage of PB Value applied to a GMIB Partial Annuitization that day (if applicable). On each Contract Anniversary before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual) and before the exercise of the GPWB (if applicable), the 3% AIA is equal to its value on the immediately preceding Business Day, increased by 3%. We then process any transactions we received on that Contract Anniversary (such as additional Purchase Payments, withdrawals and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. Beginning with the Contract Anniversary that occurs on or after the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual) and before the exercise of the GPWB (if applicable), we calculate the 3% AIA in the same way that we do on each Business Day other than a Contract Anniversary. We limit the 3% AIA to a maximum of 1.5 times your total Purchase Payments (not including any bonus), reduced as follows: o proportionately, by the percentage of PB Value applied to each GMIB Partial Annuitiazation (if applicable). o proportionately, by the percentage of Contract Value (including any vested bonus) annuitized and/or withdrawn (including any withdrawal charge) for each of the following: withdrawals taken before you exercise the GPWB, amounts applied to traditional Partial Annuitizations (not subject to a withdrawal charge), GPWB Payments (not subject to a withdrawal charge), and/or Excess Withdrawals. B. Maximum Anniversary Value (MAV) The MAV on the Issue Date is equal to your initial Purchase Payment (not including any bonus) received on the Issue Date. On each Business Day other than a Contract Anniversary and before the exercise of the GPWB (if applicable), the MAV is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments (not including any bonus) received that day, - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 63 o reduced proportionately by the percentage of Contract Value (including any vested bonus amounts) applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge), and o reduced proportionately by the percentage of PB Value applied to a GMIB Partial Annuitization that day (if applicable). On each Contract Anniversary before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual) and before the exercise of the GPWB (if applicable), the MAV is equal to the greater of its value on the immediately preceding Business Day, or the Contract Value (including any vested bonus) that occurs on that Contract Anniversary before we process any transactions. We then process any transactions received on that Contract Anniversary (such as additional Purchase Payments, withdrawals and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. Beginning with the Contract Anniversary that occurs on or after the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual) and before the exercise of the GPWB (if applicable), we calculate the MAV in the same way that we do on each Business Day other than a Contract Anniversary. Any withdrawals taken before you exercise the GPWB and/or amounts applied to traditional Partial Annuitizations may reduce the 3% AIA and MAV by more than the amount withdrawn and/or annuitized. If the Contract Value at the time of withdrawal and/or annuitization is less than the 3% AIA (or MAV as applicable), we will deduct more than the amount withdrawn and/or annuitized from the 3% AIA (or MAV as applicable). Any amounts applied to GMIB Partial Annuitizations may reduce the 3% AIA and MAV by more than the amount annuitized. If the PB Value at the time of annuitization is less than the 3% AIA (or MAV as applicable), we will deduct more than the amount annuitized from the 3% AIA (or MAV as applicable). NOTE FOR CONTRACTS WITH THE PRIME PLUS BENEFIT: If you exercise the GPWB, then on and after the exercise date: o the Traditional GMDB value or Enhanced GMDB value that applies to your Contract will stop increasing and each GPWB Payment we make and any Excess Withdrawals you take will reduce the GMDB value proportionately by the percentage of Contract Value withdrawn (including any withdrawal charge); o the death benefit that is equal to your Contract Value will continue to fluctuate with market performance but it will decrease with each GPWB Payment we make and any Excess Withdrawals you take; and o the increased M&E charge associated with the Enhanced GMDB (if applicable) will continue as long as the Enhanced GMDB value is greater than zero. Please see Appendix E for examples of calculations of the death benefit. TERMINATION OF THE DEATH BENEFIT The GMDB that applies to your Contract will terminate upon the earliest of the following. o The Business Day before the Income Date that you take a Full Annuitization, including a required Full Annuitization on the maximum permitted Income Date (for more information, see section 3, The Annuity Phase). o The Business Day that the GMDB value and Contract Value are both zero. o Contract termination. DEATH OF THE OWNER UNDER INHERITED IRA CONTRACTS Upon the death of the Owner under an Inherited IRA Contract, the Beneficiary can either: o continue to receive the required minimum distribution payments based on the remaining life expectancy of the deceased Owner and the Contract Value (less any deduction we make to reimburse ourselves for premium taxes that we pay) as of the Business Day we receive in good order at our Service Center both due proof of death and the appropriately completed election form; or o receive a lump sum payment based on the Contract Value (less any deduction we make to reimburse ourselves for premium taxes that we pay) as of the Business Day we receive in good order at our Service Center both due proof of death and the appropriately completed election form. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 64 DEATH OF THE OWNER AND/OR ANNUITANT UNDER ALL OTHER CONTRACTS The following tables are intended to help you better understand what happens upon the death of any Owner and/or Annuitant under the different portions of the Contract. For Qualified Contracts, there can be only one Owner and the Owner must be the Annuitant, unless the Contract is a Qualified Contract owned by a qualified plan or is part of a custodial arrangement. Partial Annuitizations are not available to Joint Owners. If you take a Partial Annuitization, there can be only one Owner; the Owner must be the Annuitant, and we will not allow the Owner to add a joint Annuitant. Designating different persons as Owner(s) and Annuitant(s) can have an important impact on whether a death benefit is paid, and on who would receive it. Use care when designating Owners and Annuitants, and consult your registered representative if you have questions. UPON THE DEATH OF A SOLE OWNER Action under the portion of the Contract that is in the Accumulation Phase - -------------------------------------------------------------------------------- o We will pay a death benefit to the Beneficiary.* For a description of the payout options, see the "Death Benefit Payment Options" discussion later in this section. o If the GPWB was in effect, it will terminate unless the deceased Owner's spouse continues the Contract. Action under any portion of the Contract applied to Annuity Payments - -------------------------------------------------------------------------------- o The Beneficiary becomes the Owner. o If the deceased was not an Annuitant, Annuity Payments to the Payee will continue. No death benefit is payable. o If the deceased was the only surviving Annuitant, Annuity Payments to the Payee will continue until that portion of the Contract terminates and will be paid at least as rapidly as they were being paid at the Annuitant's death. For more information on when any portion of the Contract applied to Traditional Annuity Payments terminates, see section 3, The Annuity Phase - Traditional Annuity Payments. For more information on when any portion of the Contract applied to GMIB Payments terminates, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - Termination of the GMIB. No death benefit is payable under Annuity Options 1 through 4, or Annuity Option 6. However, there may be a lump sum refund due to the Payee under Annuity Option 5. For more information, see section 3, The Annuity Phase - Annuity Options. o If the deceased was an Annuitant and there is a surviving joint Annuitant, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant. No death benefit is payable. * If the Beneficiary is the spouse of the deceased Owner, the spouse/Beneficiary may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option on the death claim form. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 65 UPON THE DEATH OF A JOINT OWNER (NOTE: We do not allow Joint Owners to take Partial Annuitizations) Action under the portion of the Contract that is in the Accumulation Phase - -------------------------------------------------------------------------------- o The surviving Joint Owner is the sole primary Beneficiary. If the Joint Owners were spouses there may also be contingent Beneficiaries. o We will pay a death benefit to the surviving Joint Owner.* For a description of the payout options available, see the "Death Benefit Payment Options" discussion later in this section. o If the GPWB was in effect, it will terminate unless the Joint Owners were spouses and the surviving spouse/Joint Owner continues the Contract. Action under any portion of the Contract applied to Annuity Payments - -------------------------------------------------------------------------------- o The surviving Joint Owner becomes the sole Owner. o If the deceased was not an Annuitant, Annuity Payments to the Payee will continue. No death benefit is payable. o If the deceased was the only surviving Annuitant, Annuity Payments to the Payee will continue until that portion of the Contract terminates and will be paid at least as rapidly as they were being paid at the Annuitant's death. For more information on when any portion of the Contract applied to Traditional Annuity Payments terminates, see section 3, The Annuity Phase - Traditional Annuity Payments. For more information on when any portion of the Contract applied to GMIB Payments terminates, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - Termination of the GMIB. No death benefit is payable under Annuity Options 1 through 4, or Annuity Option 6. However, there may be a lump sum refund due to the Payee under Annuity Option 5. For more information, see section 3, The Annuity Phase - Annuity Options. o If the deceased was an Annuitant and there is a surviving joint Annuitant, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant. No death benefit is payable. * If the surviving Joint Owner is the spouse of the deceased Owner, the spouse/surviving Joint Owner may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option on the death claim form. If both spousal Joint Owners die before we pay the death benefit, we will pay any contingent Beneficiaries or the estate of the Joint Owner who died last if there are no contingent Beneficiaries. If the Joint Owners were not spouses and they both die before we pay the death benefit, for tax reasons, we will pay the estate of the Joint Owner who died last. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 66 UPON THE DEATH OF THE ANNUITANT AND THERE IS NO SURVIVING JOINT ANNUITANT Action under the portion of the Contract that is in the Accumulation Phase - -------------------------------------------------------------------------------- o If the Contract is owned by a non-individual (for example a qualified plan or a trust), we will treat the death of the Annuitant as the death of an Owner; we will pay the Beneficiary* a death benefit, and a new Annuitant cannot be named. If the GPWB was in effect, it will terminate unless the deceased Owner's spouse continues the Contract. o If the deceased Annuitant was not an Owner, and the Contract is owned only by an individual(s), no death benefit is payable. The Owner can name a new Annuitant subject to our approval. If the GPWB was in effect, it will continue. o If the deceased Annuitant was a sole Owner, we will pay the Beneficiary* a death benefit. If the GPWB was in effect, it will terminate unless the deceased Owner's spouse continues the Contract. o If the deceased Annuitant was a Joint Owner and there is a surviving Joint Owner, the surviving Joint Owner is the sole primary Beneficiary. If the Joint Owners were spouses, there may also be contingent Beneficiaries. We will pay a death benefit to the surviving Joint Owner.** If the GPWB was in effect, it will terminate unless the Joint Owners were spouses and the surviving spouse/Joint Owner continues the Contract. o For a description of the payout options, see the "Death Benefit Payment Options" discussion later in this section. Action under any portion of the Contract applied to Annuity Payments - -------------------------------------------------------------------------------- o Annuity Payments to the Payee will continue until that portion of the Contract terminates and will be paid at least as rapidly as they were being paid at the Annuitant's death. For more information on when any portion of the Contract applied to Traditional Annuity Payments terminates, see section 3, The Annuity Phase - Traditional Annuity Payments. For more information on when any portion of the Contract applied to GMIB Payments terminates, see section 4, Protected Retirement Income Made Easy: The PRIME Plus Benefit - Termination of the GMIB. No death benefit is payable under Annuity Options 1 through 4, or Annuity Option 6. However, there may be a lump sum refund due to the Payee under Annuity Option 5. For more information, see section 3, The Annuity Phase - Annuity Options. o If the deceased was a sole Owner, the Beneficiary will become the Owner if the Contract continues. o If the deceased was a Joint Owner, the surviving Joint Owner becomes the sole Owner if the Contract continues. * If the Beneficiary is the spouse of the deceased Owner, the spouse/Beneficiary may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option on the death claim form. ** If the surviving Joint Owner is the spouse of the deceased Owner, the spouse/surviving Joint Owner may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option on the death claim form. If both spousal Joint Owners die before we pay the death benefit, we will pay any contingent Beneficiaries or the estate of the Joint Owner who died last if there are no contingent Beneficiaries. If the Joint Owners were not spouses and they both die before we pay the death benefit, for tax reasons, we will pay the estate of the Joint Owner who died last. UPON THE DEATH OF THE ANNUITANT AND THERE IS A SURVIVING JOINT ANNUITANT (NOTE: We do not allow joint Annuitants under a Partial Annuitization and we do not allow joint Annuitants during the Accumulation Phase, so this can only occur under a Full Annuitization) - -------------------------------------------------------------------------------- o Only Annuity Options 3 and 4 allow joint Annuitants. Under Annuity Options 3 and 4, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant and, for Annuity Option 4, during any remaining specified period of time. For more information, see section 3, The Annuity Phase - Annuity Options. o No death benefit is payable. o If the deceased was a sole Owner, the Beneficiary will become the Owner. o If the deceased was a Joint Owner, the surviving Joint Owner becomes the sole Owner. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 67 DEATH BENEFIT PAYMENT OPTIONS If you have not previously designated a death benefit payment option, a Beneficiary must request the death benefit be paid under one of the death benefit payment options below. If the Beneficiary is the spouse of the deceased Owner, he/she can choose to continue the Contract in his/her own name. An election by the spouse to continue the Contract must be made on the death claim form before we pay the death benefit. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. If a lump sum payment is requested, we will pay the amount within seven days of our receipt of proof of death and a valid election of a death benefit payment option, including any required governmental forms, unless the suspension of payments or transfers provision is in effect. Payment of the death benefit may be delayed, pending receipt of any applicable tax consents and/or state forms. Option A: Lump sum payment of the death benefit. We will not deduct the contract maintenance charge at the time of a full withdrawal if the distribution is due to death. Option B: Payment of the entire death benefit within five years of the date of any Owner's death. We will assess the full contract maintenance charge on each Beneficiary's portion on each Contract Anniversary. However, we will waive the contract maintenance charge if the Contract Value at the time we are to deduct the charge is at least $75,000. Option C: If the Beneficiary is an individual, payment of the death benefit as a Traditional Annuity Payment 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 any Owner's death. We will continue to assess the full contract maintenance charge on each Beneficiary's portion proportionately over the Traditional Annuity Payments. However, we will waive the contract maintenance charge if the Contract Value on the Income Date is at least $75,000. GMIB Payments are not available under this option. Any portion of the death benefit not applied to Traditional Annuity Payments within one year of the date of the Owner's death must be distributed within five years of the date of death. If the Contract is owned by a non-individual, then we treat the death of any Annuitant as the death of an Owner for purposes of the Internal Revenue Code's distribution at death rules, which are set forth in Section 72(s) of the Code. In all events, notwithstanding any provision to the contrary in the Contract or this prospectus, the Contract will be interpreted and administered in accordance with Section 72(s) of the Code. - -------------------------------------------------------------------------------- 12. OTHER INFORMATION ALLIANZ LIFE Allianz Life is a stock life insurance company organized under the laws of the state of Minnesota in 1896. Our address is 5701 Golden Hills Drive, Minneapolis, MN 55416. We offer fixed and variable annuities, individual and group life insurance, and long-term care insurance. We are licensed to do direct business in 49 states and the District of Columbia. We are a subsidiary of Allianz SE, a provider of integrated financial services. THE SEPARATE ACCOUNT We established Allianz Life Variable Account B (the Separate Account) as a separate account under Minnesota insurance law on May 31, 1985. The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. The SEC does not supervise our management of the Separate Account. The Separate Account holds the assets that underlie the Contracts, except assets allocated to our general account. We keep the Separate Account assets separate from the assets of our general account and other separate accounts. The Separate Account is divided into subaccounts, each of which invests exclusively in a single Investment Option. We own the assets of the Separate Account. We credit gains to or charge losses against the Separate Account, whether or not realized, without regard to the performance of other investment accounts. The Separate Account's assets may not be used to pay any of our liabilities, other than those arising from the Contracts. If the Separate Account's assets exceed the required reserves and other liabilities, we may transfer the excess to our general account. Amounts transferred to our - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 68 general account will represent seed money invested by us or earned fees and charges. The obligations of the Separate Account are not generalized obligations of Allianz Life. The obligations under the Contracts are obligations of Allianz Life. DISTRIBUTION Allianz Life Financial Services, LLC (Allianz Life Financial), a wholly-owned subsidiary of Allianz Life Insurance Company of North America, serves as principal underwriter for the Contracts. Allianz Life Financial, a limited liability company organized in Minnesota, is located at 5701 Golden Hills Drive, Minneapolis, MN 55416. Allianz Life Financial is registered as a broker/dealer with the SEC under the Securities Exchange Act of 1934 (the 1934 Act), as well as with the securities commissions in the states in which it operates, and is a member of the Financial Industry Regulatory Authority (FINRA). Allianz Life Financial is not a member of Securities Investors Protection Corporation. More information about Allianz Life Financial is available at http://www.finra.org or by calling 1-800-289-9999. You also can obtain an investor brochure from FINRA describing its Public Disclosure Program. We have entered into a distribution agreement with our affiliate Allianz Life Financial for the distribution and sale of the Contracts. Allianz Life Financial does not itself sell the Contracts on a retail basis. Rather, Allianz Life Financial enters into selling agreements with other broker/dealers registered under the 1934 Act (selling firms) for the sale of the Contracts. These selling firms include third party broker/dealers and Questar Capital Corporation, an affiliated broker/dealer. We pay sales commissions to the selling firms and their registered representatives. Investment Options that assess Rule 12b-1 fees make payments of the fees to Allianz Life Financial as consideration for providing certain services and incurring certain expenses permitted under the Investment Option's plan. These payments typically equal 0.25% of an Investment Option's average daily net assets for the most recent calendar year. The investment adviser and/or subadviser (and/or their affiliates) of an Investment Option may from time to time make payments for administrative services to Allianz Life Financial or its affiliates. The maximum commission payable to the selling firms for Contract sales is expected not to exceed 6% of Purchase Payments. Sometimes, we enter into an agreement with a selling firm to pay 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. We may fund Allianz Life Financial's operating and other expenses, including: overhead; legal and accounting fees; registered representative training; compensation for the Allianz Life Financial management team; and other expenses associated with the Contracts. Registered representatives and their managers are also eligible for various benefits, such as production incentive bonuses, insurance benefits, and non-cash compensation items that we may provide jointly with Allianz Life Financial. Non-cash items include conferences, seminars and trips (including travel, lodging and meals in connection therewith), entertainment, awards, merchandise and other similar items. Selling firms and their registered representatives and managers may receive other payments from us for services that do not directly involve the sale of the Contracts, including payments made for the recruitment and training of personnel, production of promotional literature and similar services. In addition, certain firms and their representatives may receive compensation for distribution and administrative services when acting in a wholesaling capacity and working with retail firms. We and/or Allianz Life Financial may pay certain selling firms additional marketing support allowances for: o marketing services and increased access to registered representatives; o sales promotions relating to the Contracts; o costs associated with sales conferences and educational seminars for their registered representatives; o the cost of client meetings and presentations; and o other sales expenses incurred by them. We retain substantial discretion in determining whether to grant a marketing support payment to a particular broker/dealer firm and the amount of any such payment. However, we do consider a number of specific factors in determining marketing support payments, which may include a review of the following: o the level of existing sales and assets held in contracts issued by us that are sold through the broker/dealer firm and the potential for new or additional sales; o the organizational "fit" between the broker/dealer firm and the type of wholesaling and marketing force we operate; - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 69 o whether the broker/dealer firm's operational, IT, and support services structure and requirements are compatible with our method of operation; o whether the broker/dealer firm's product mix is oriented toward our core markets; o whether the broker/dealer firm has a structure facilitating a marketing support arrangement, such as frequent registered representative meetings and training sessions; o the potential return on investment of investing in a particular firm's system; o our potential ability to obtain a significant level of the market share in the broker/dealer firm's distribution channel; o the broker/dealer firm's registered representative and customer profiles; and o the prominence and reputation of the broker/dealer firm in its marketing channel. We may also make payments for marketing and wholesaling support to broker/dealer affiliates of Investment Options that are available through the variable annuities we offer. Additional information regarding marketing support payments can be found in the Distributor section of the Statement of Additional Information. We and/or Allianz Life Financial may make bonus payments to certain selling firms based on aggregate sales of our variable insurance contracts (including this Contract) or persistency standards, or as part of a special promotion. These additional payments are not offered to all selling firms, and the terms of any particular agreement governing the payments may vary among selling firms. In some instances, the amount paid may be significant. A portion of the payments made to selling firms may be passed on to their registered representatives in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. Ask your registered representative for further information about what your registered representative and the selling firm for which he or she works may receive in connection with your purchase of a Contract. We intend to recover commissions and other sales expenses through fees and charges imposed under the Contract. Commissions paid on the Contract, including other incentives or payments, are not charged directly to the Owners or the Separate Account. We offer the Contracts to the public on a continuous basis. We anticipate continuing to offer the Contracts but reserve the right to discontinue the offering. ADDITIONAL CREDITS FOR CERTAIN GROUPS We may credit additional amounts to a Contract instead of modifying charges because of special circumstances that result in lower sales or administrative expenses or better than expected mortality or persistency experience. ADMINISTRATION/ALLIANZ SERVICE CENTER Delaware Valley Financial Services, LLC (DVFS or the Allianz Service Center) performs certain administrative services regarding the Contracts. DVFS is a wholly owned subsidiary of Allianz Life, and is located at 300 Berwyn Park, Berwyn, Pennsylvania. The administrative services performed by our Service Center include: o issuance and maintenance of the Contracts, o maintenance of Owner records, o processing and mailing of account statements and other mailings to Owners, and o routine customer service including: - responding to Owner correspondence and inquiries, - processing of Contract changes, - processing withdrawal requests (both partial and total), and - processing annuitization requests. Historically, we have compensated DVFS based on a specified fee per transaction and an additional negotiated fee for enhancements to computer systems used to process our business. Currently, we are on a cost basis. For the past three calendar years, Allianz Life Financial has paid DVFS $71,889,235.98 for performing administrative services regarding the Contracts. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 70 To reduce expenses, only one copy of most financial reports and prospectuses, including reports and prospectuses for the Investment Options, will be mailed to your household, even if you or other persons in your household have more than one contract issued by us or our affiliate. Call us at the toll-free number listed at the back of this prospectus if you need additional copies of financial reports, prospectuses, or annual and semiannual reports, or if you would like to receive one copy for each contract in future mailings. LEGAL PROCEEDINGS We and our subsidiaries, like other life insurance companies, from time to time are involved in legal proceedings of various kinds, including regulatory proceedings and individual and class action lawsuits. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any such proceedings cannot be predicted with certainty, we believe that, at the present time, there are no pending or threatened legal proceedings to which we, the Separate Account, or Allianz Life Financial is a party that are reasonably likely to materially affect the Separate Account, our ability to meet our obligations under the Contracts, or Allianz Life Financial's ability to perform its obligations. FINANCIAL STATEMENTS The consolidated financial statements of Allianz Life and the financial statements of the Separate Account have been included in the Statement of Additional Information. - -------------------------------------------------------------------------------- 13. GLOSSARY This prospectus is written in plain English to make it as understandable as possible. However, there are some technical words or terms that are defined below and are capitalized in the prospectus. The following is a list of common abbreviations used in this prospectus: AIA = Annual Increase Amount GPWB = Guaranteed Partial Withdrawal Benefit GMDB = Guaranteed Minimum Death Benefit MAV = Maximum Anniversary Value GMIB = Guaranteed Minimum Income Benefit PRIME = Protected Retirement Income Made Easy Accumulation Phase - the period of time before you apply the entire Contract Value to Annuity Payments. Subject to certain restrictions, you can make additional Purchase Payments during this time. The Accumulation Phase may occur at the same time as the Annuity Phase if you take Partial Annuitizations. Accumulation Unit - the units into which we convert amounts invested in the subaccounts that invest in the Investment Options during the Accumulation Phase. AIA (Annual Increase Amount) - a calculation used in determining the PB Value under the PRIME Plus Benefit, and in determining the GMDB value under the Enhanced GMDB. Annuitant - the individual upon whose life we base the Annuity Payments. Subject to our approval, the Owner designates the Annuitant and can add a joint Annuitant for the Annuity Phase if they take a Full Annuitization. Annuity Options - the income options available to you under the Contract. Annuity Payments - payments made by us to the Payee pursuant to the Annuity Option chosen. Annuity Payments may be variable, fixed, or a combination of both variable and fixed. Annuity Phase - the phase the Contract is in once Annuity Payments begin. This may occur at the same time as the Accumulation Phase if you take a Partial Annuitization. Annuity Unit - the units into which we convert amounts invested in the subaccounts that invest in the Investment Options during the Annuity Phase. Base Contract - the contract corresponding to this prospectus that does not include the PRIME Plus Benefit. Beneficiary - the person(s) or entity the Owner designates to receive any death benefit. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 71 Business Day - each day on which the New York Stock Exchange is open for trading, except when an Investment Option does not value its shares. Allianz Life is open for business on each day that the New York Stock Exchange is open. Our Business Day closes when regular trading on the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern Time. Contract - the deferred annuity contract described by this prospectus that allows you to accumulate money tax deferred by making one or more Purchase Payments. It provides for lifetime or other forms of Annuity Payments beginning on the Income Date. Contract Anniversary - a 12-month anniversary of the Issue Date of your Contract. If the Contract Anniversary does not occur on a Business Day, we will consider it to occur on the next Business Day. Contract Value - on any Business Day it is equal to the sum of the values in your selected Investment Choices, less any unvested bonus amounts. It does not include amounts applied to Annuity Payments. Contract Year - any period of 12 months commencing on the Issue Date and on each Contract Anniversary thereafter. Excess Withdrawal - for Contracts with the PRIME Plus Benefit that exercise the GPWB, this is an additional withdrawal you take while you are receiving GPWB Payments. Full Annuitization - the application of the entire Contract Value to Annuity Payments. You will be required to take a Full Annuitization of your Contract on or before the maximum permitted Income Date. Upon Full Annuitization you will no longer have a Contract Value, any periodic withdrawal or income payments other than Annuity Payments (which includes GPWB Payments) will stop, and the death benefit will terminate. GMDB (Guaranteed Minimum Death Benefit) - you can select one of two GMDBs at Contract issue that may provide different guaranteed death benefit values. The Traditional GMDB is the default death benefit, or you can select the Enhanced GMDB for an additional M&E charge, subject to certain age restrictions and state availability. GMIB (Guaranteed Minimum Income Benefit) - a feature under the PRIME Plus Benefit that provides a guaranteed minimum fixed income in the form of Annuity Payments based on the PB Value. You must wait at least ten Contract Years after the date the PRIME Plus Benefit is added to your Contract, or ten Contract Years after the date of any 7% AIA reset before you can exercise the GMIB and it can only be exercised within 30 days following a Contract Anniversary. GMIB Payments - Annuity Payments we make to the Payee based on the PB Value. GPWB (Guaranteed Partial Withdrawal Benefit) - a feature under the PRIME Plus Benefit that provides a guaranteed minimum amount of income in the form of partial withdrawals based on the PB Value. You must wait ten Contract Years after the date the PRIME Plus Benefit is added to your Contract, or ten Contract Years after the date of any 7% AIA reset before you can exercise the GPWB and it can only be exercised within 30 days following a Contract Anniversary. GPWB Maximum - if you have a Contract with the PRIME Plus Benefit and you exercise the GPWB, this is the annual limit of guaranteed partial withdrawals (or GPWB Payments) available to you under the GPWB. The GPWB Maximum is equal to 5% of the PB Value if you select the 5% payment option, or 10% of the PB Value if you select the 10% payment option. GPWB Payments - withdrawal payments we make to the Owner based on the PB Value. Income Date - the date we begin making Annuity Payments to the Payee from the Contract. This date must be the first day of a calendar month. Because the Contract allows for Partial Annuitizations there may be multiple Income Dates. Investment Choices - the Investment Options and any general account Investment Choices available under the Contract for Purchase Payments or transfers. We may add, substitute or remove Investment Choices in the future. Investment Options - the variable Investment Choices available under the Separate Account. You may invest in up to 15 of the Investment Options at any one time. Issue Date - the date shown on the Contract that starts the first Contract Year. Contract Anniversaries and Contract Years are measured from the Issue Date. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 72 Joint Owners - two Owners who own a Non-Qualified Contract. We do not allow Joint Owners to take Partial Annuitizations. MAV (Maximum Anniversary Value) - a calculation used in determining the PB Value under the PRIME Plus Benefit, and in determining the GMDB value under the Enhanced GMDB. Non-Qualified Contract - a Contract that is not purchased under a pension or retirement plan qualified under sections of the Internal Revenue Code. Owner - "you," "your" and "yours." The person or entity (or persons or entities if there are Joint Owners) named in the Contract who may exercise all rights granted by the Contract. The Owner is designated at Contract issue. Partial Annuitization - the application of only part of the Contract Value to Traditional Annuity Payments (or part of the PB Value to GMIB Payments if your Contract includes the PRIME Plus Benefit). If you take a Partial Annuitization, the Accumulation Phase and Annuity Phase of the Contract may occur at the same time. You can take one Partial Annuitization every 12 months. The maximum number of annuitizations we allow at any one time is five. Partial Annuitizations are not available to Joint Owners. If you take a Partial Annuitization, there can be only one Owner, the Owner must be the Annuitant, and we will not allow the Owner to designate a joint Annuitant. Payee - the person or entity you designate (subject to our approval) to receive Annuity Payments during the Annuity Phase. If you do not designate a Payee by the Income Date, we will make Annuity Payments to the Owner. PB Value - the amount used to calculate GPWB Payments and GMIB Payments under the PRIME Plus Benefit. PRIME (Protected Retirement Income Made Easy) Plus Benefit - an optional benefit package that includes a GMIB and GPWB and carries a higher M&E charge. You may add the PRIME Plus Benefit once before age 76 and later remove it from the Contract if you so choose. We designed the PRIME Plus Benefit to give you options for turning your accumulated retirement assets into a stream of retirement income. Purchase Payment - the money you put in the Contract. Qualified Contract - a Contract purchased under a pension or retirement plan qualified under sections of the Internal Revenue Code (for example, 401(k) and H.R. 10 plans), Individual Retirement Annuities (IRAs), or Tax-Sheltered Annuities (referred to as TSA or 403(b) contracts). Currently, we may issue Qualified Contracts that may include, but are not limited to, Roth IRAs, Traditional IRAs, Simplified Employee Pension (SEP) IRAs and Inherited IRAs. Rewards Value - on any Business Day it is equal to the sum of the values of your Investment Choices and includes unvested bonus amounts. Separate Account - Allianz Life Variable Account B is the Separate Account that issues your Contract. It is a separate investment account of Allianz Life. The Separate Account holds the assets invested in the Investment Options that underlie the Contracts. The Separate Account is divided into subaccounts, each of which invests exclusively in a single Investment Option. Service Center - the Allianz Service Center. Our Service Center address and telephone number are listed at the back of this prospectus. Traditional Annuity Payments - Annuity Payments we make to the Payee based on the Contract Value. Withdrawal Charge Basis - the total amount under your Contract that is subject to a withdrawal charge. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 73 - -------------------------------------------------------------------------------- 14. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION (SAI) Allianz Life..........................................2 Experts...............................................2 Legal Opinions........................................2 Distributor...........................................2 Reduction or Elimination of the Withdrawal Charge.....3 Federal Tax Status....................................3 General...........................................3 Diversification...................................4 Owner Control.....................................4 Contracts Owned by Non-Individuals................5 Income Tax Withholding............................5 Required Distributions............................5 Qualified Contracts...............................6 Annuity Provisions....................................7 Annuity Units/Calculating Annuity Payments........7 Mortality and Expense Risk Guarantee..................7 Information on May 2003 Contracts.....................8 Information on Contracts That Were Offered Before April 29, 2005....................15 Information on Original and September 2002 Contracts........................................16 Financial Statements.................................18 Appendix - Condensed Financial Information...........19 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 74 - -------------------------------------------------------------------------------- 15. PRIVACY AND SECURITY STATEMENT January 2008 Your privacy is a high priority for Allianz. Our pledge to protect your privacy is reflected in our Privacy and Security Statement. This statement outlines our principles for collecting, using and protecting your personal information. This statement applies to all of the companies within the Allianz family of companies that issue insurance policies. The law allows us to share personal information among our insurance companies. The law does not allow customers to prevent these disclosures. A list of our companies can be found at the end of this notice. Allianz does not sell your personal information to anyone. We do not share your personal information with anyone for their own marketing purposes. For this reason, depending on your state of residence, no "opt-in," "opt-out," or authorization is required. We also do not share your personal information with any of our affiliated companies outside of the Allianz family of companies. Personal information about you Allianz collects Allianz collects personal information about you so that we can process the insurance transactions you request. We limit the amount of personal information collected to what we feel is needed to maintain your account. We may collect your personal information from the following sources: o From you, either directly or through your agent. This may include information on your insurance application or other forms you may complete, such as your name, address and telephone number. o From others, through the process of handling a claim. This may include information from medical or accident reports. o From your doctor or during a home visit by a health assessment professional. This may include medical information about you gathered with your written authorization. o From your relationship with us, such as the number of years you have been a customer or the types of insurance products you purchased. o From a consumer reporting agency such as a credit or motor vehicle report. The information in these reports may be kept by the consumer reporting agency and shared with others. If you visit one of our websites, we may use "cookies" (small text files sent from our site to your hard drive). These cookies help us to recognize repeat visitors and allow easy access to and use of the site. We do not use cookies to gather personal information. The cookies only enable you to use our website more easily. Personal information about you Allianz shares Allianz does not share personal information about current or former customers with anyone, except as "allowed by law." "Allowed by law" means that we may share your personal information, such as your name, address, and policy information, as follows: o To consumer reporting agencies to obtain a credit report or motor vehicle report. These reports are used to determine eligibility for coverage or to process your requested transactions. o To your insurance agent so that they can perform services for you. o To medical professionals in order to process your claim. o To a state Department of Insurance in order to examine our records or business practices. o To state or federal law enforcement agency, as required by law, or to report suspected fraud activities. o To research groups to conduct studies on claims results. No individual is identified in any study or report. We advise the vendors with whom we legally share your personal information of our privacy policy. We make every effort to use vendors whose privacy policy reflects our own. Allianz policies and practices regarding security of personal information Allianz uses computer hardware and software tools to maintain physical and electronic safeguards. These safeguards comply with applicable federal and state regulations. We restrict access to personal information about you to those employees who need the information to service your policy. Allianz works hard to ensure that our websites are secure. We use state of the art technology to protect the personal information that may be shared over these sites. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 75 Your ability to access and correct your personal information (residents of AZ, AK, CA, CT, GA, IL, ME, MA, MN, MT, NC, NV, NJ, OH, OR, and VA) If you wish to review your personal information, please write us at the address below. Provide your full name, address and policy number(s). For your protection, please have your request notarized. This will ensure the identity of the person requesting the information. Within 30 working days, you may see and copy your information in person. If you prefer, we will send you a copy of your information. You will not be given access to your information collected or in connection with a claim, or a civil or criminal proceeding. If medical information is contained in your file, we may request that you name a medical professional to whom we will send the information. If you believe any of your information is incorrect, notify us in writing at the address below. Within 30 working days, we will let you know if our review has resulted in a correction of your information. If we do not believe there is an error, you may file a statement disputing the information. We will attach the statement to your file. We will send any corrections we make, or your statement, to anyone we shared your information with over the past two years, and to anyone who may receive your information from us in the future. We do not control the information about you obtained from a consumer reporting agency or a Department of Motor Vehicles. We will provide you with the names and addresses of these agencies so that you can contact them directly. Montana residents: You may write to us and also ask for a record of any disclosure of your medical information made within the last three years. Notification of change Your trust is one of our most important assets. If we revise our privacy practices in the future, we will notify you prior to introducing any changes. This Privacy and Security Statement is also displayed on our website. (www.allianzlife.com) For more information or if you have questions If you have any questions or concerns about our privacy policies or procedures, please call the Corporate Compliance Department at 800.328.5600, write us at the following address, or visit www.allianzlife.com. Allianz Life Insurance Company of North America PO Box 1344 Minneapolis, MN 55440-1344 Allianz family of companies: o Allianz Life Insurance Company of North America o Allianz Life Financial Services, LLC M40018-B (R-2/2008) - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 76 - -------------------------------------------------------------------------------- APPENDIX A - ANNUAL OPERATING EXPENSES FOR EACH INVESTMENT OPTION This table describes, in detail, the annual expenses for each of the Investment Options. We show the expenses as a percentage of an Investment Option's average daily net assets for the most recent calendar year. Except for the AZL Funds, the PIMCO VIT portfolios, and the Premier VIT OpCap Mid Cap Portfolio, neither the Investment Options nor their advisers are affiliated with Allianz Life. Expenses may vary in current and future years. The investment advisers for the Investment Options provided the fee and expense information and we did not independently verify it. See the Investment Options' prospectuses for further information regarding the expenses you may expect to pay.
Annual Investment Option operating expenses before Total annual fee waivers or expense reimbursements operating --------------------------------------------------------------- expenses --------------------------------------------------------------- Amount of after Acquired contractual contractual Rule fund fees fee waivers fee waivers Management 12b-1 Service Other and and or expense Investment Option fees fees* fees expenses expenses Total reimbursements reimbursements - ----------------------------------------------------------------------------------------------------------------------------- AIM - ----------------------------------------------------------------------------------------------------------------------------- AZL AIM International Equity .90 .25 - .18 - 1.33 - 1.33 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- BLACKROCK - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Money Market Fund(1) .35 .25 - .09 - .69 - .69 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- BlackRock Global Allocation .55 .25 - .23 - 1.03 - 1.03 V.I. Fund - Class 3(6) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- CLEARBRIDGE - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL LMP Large Cap Growth .80 .25 - .08 - 1.13 - 1.13 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- COLUMBIA - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Columbia Technology .80 .25 - .15 - 1.20 - 1.20 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- DAVIS - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Davis NY Venture Fund - .75 - - .09 - .84 - .84 Class 1(1),(8),(9) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Davis NY Venture Fund - .75 .25 - .09 - 1.09 - 1.09 Class 2(1),(8) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Davis VA Financial .75 - - .10 - .85 - .85 Portfolio(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Davis VA Value Portfolio(7) .75 - - .06 - .81 - .81 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- DREYFUS - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Dreyfus Founders Equity .77 .25 - .16 - 1.18 - 1.18 Growth Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Dreyfus Premier Small Cap .90 - - .14 - 1.04 - 1.04 Value Fund - Class 1(1),(8),(9) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Dreyfus Premier Small Cap .90 .25 - .14 - 1.29 - 1.29 Value Fund - Class 2(1),(8) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL S&P 500 Index Fund - .17 .25 - .31 - .73 .24 .49 Class 2(1),(8) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Small Cap Stock Index .26 .25 - .36 - .87 .29 .58 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus IP Small Cap Stock .35 .25 - .01 - .61 - .61 Index Portfolio - Service Shares(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund, .25 .25 - .02 - .52 - .52 Inc. - Service Shares(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- FIRST TRUST - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL First Trust Target Double .60 .25 - .18 - 1.03 .24 .79 Play Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Franklin Small Cap Value .75 .25 - .11 - 1.11 - 1.11 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Global .54 .25 - .07 - .86 - .86 Communications Securities Fund - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Global Real Estate .75 .25 - .31 - 1.31 .42 .89 Securities Fund - Class 2(4) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Growth and Income .48 .25 - .04 - .77 - .77 Securities Fund - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin High Income .55 .25 - .06 - .86 - .86 Securites Fund - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 77 - ----------------------------------------------------------------------------------------------------------------------------- Franklin Income Securities .45 .25 - .02 - .72 - .72 Fund - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Large Cap Growth .70 .25 - .04 - .99 - .99 Securities Fund - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Rising Dividends .58 .25 - .02 .01 .86 .01 .85 Securities Fund - Class 2(3),(5) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Small-Mid Cap Growth .47 .25 - .28 .01 1.01 .01 1.00 Securities Fund - Class 2(5) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Small Cap Value .51 .25 - .15 .02 .93 .02 .91 Securities Fund - Class 2(5) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Templeton VIP .00 .25 - .41 .65 1.31 .28 1.03 Founding Funds Allocation Fund - Class 2((10)) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin U.S. Government Fund .49 .25 - .04 - .78 - .78 - - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Franklin Zero Coupon Fund .61 - - .05 - .66 - .66 2010 - Class 1(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Mutual Discovery Securities .80 .25 - .17 - 1.22 - 1.22 Fund - Class 2 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Mutual Shares Securities Fund .59 .25 - .13 - .97 - .97 - - Class 2 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Templeton Developing Markets 1.23 .25 - .25 - 1.73 - 1.73 Securities Fund - Class 2 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Templeton Foreign Securities .63 .25 - .14 .02 1.04 .02 1.02 Fund - Class 2(5) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Templeton Global Income .50 .25 - .14 - .89 - .89 Securities Fund - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Templeton Growth Securities .73 .25 - .03 - 1.01 - 1.01 Fund - Class 2(3) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- JENNISON - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Jennison 20/20 Focus .77 .25 - .10 - 1.12 - 1.12 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Jennison Growth Fund(1) .80 .25 - .17 - 1.22 - 1.22 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Jennison 20/20 Focus .75 .25 - .22 - 1.22 - 1.22 Portfolio - Class 2(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- LEGG MASON - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Legg Mason Growth Fund(1) .85 .25 - .11 - 1.21 - 1.21 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Legg Mason Value Fund(1) .75 .25 - .09 - 1.09 - 1.09 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- NEUBERGER BERMAN - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Neuberger Berman Regency .75 .25 - .10 - 1.10 - 1.10 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- NICHOLAS-APPLEGATE - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL NACM International Fund(1) .85 .25 - .35 - 1.45 - 1.45 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER CAPITAL - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL OCC Opportunity Fund(1) .85 .25 - .11 - 1.21 - 1.21 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL OCC Value Fund(1) .75 .25 - .16 - 1.16 - 1.16 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- OpCap Mid Cap Portfolio(11) .80 - - .19 - .99 - .99 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER FUNDS - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer Global Fund - .90 - - .15 - 1.05 - 1.05 Class 1(1),(8),(9) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer Global Fund - .90 .25 - .15 - 1.30 - 1.30 Class 2(1),(8) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer International .73 .25 - .21 - 1.19 - 1.19 Growth Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer Main Street .80 - - .15 - .95 - .95 Fund - Class 1(1),(8),(9) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer Main Street .80 .25 - .15 - 1.20 - 1.20 Fund - Class 2(1),(8) - ----------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 78 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Global Securities .62 - - .03 - .65 - .65 Fund/VA(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer High Income .73 - - .03 - .76 - .76 Fund/VA(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street .64 - - .01 - .65 - .65 Fund(R)/VA(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL PIMCO Fundamental .75 .25 - .21 - 1.21 .01 1.20 IndexPLUS Total Return Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT All Asset Portfolio .18 - .15 .25 .69 1.27 .02 1.25 - - Admin. Class(7),(12),(13) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT CommodityRealReturn .49 - .15 .31 .05 1.00 .05 .95 Strategy Portfolio - Admin. Class(2),(7) ,(13) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT Emerging Markets .45 - .15 .40 - 1.00 - 1.00 Bond Portfolio - Admin. Class(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT Global Bond .25 - .15 .50 - .90 - .90 Portfolio (Unhedged) - Admin. Class(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT High Yield .25 - .15 .35 - .75 - .75 Portfolio - Admin. Class(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT Real Return .25 - .15 .25 - .65 - .65 Portfolio - Admin. Class(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT StocksPLUS(R) .25 - .15 .10 - .50 - .50 Growth and Income Portfolio - Admin. Class(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PIMCO VIT Total Return .25 - .15 .43 - .83 - .83 Portfolio - Admin. Class(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PRUDENTIAL - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- SP International Growth .85 .25 - .24 - 1.34 - 1.34 Portfolio - Class 2(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- SP Strategic Partners Focused .90 .25 - .40 - 1.55 - 1.55 Growth Portfolio - Class 2(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- SCHRODER - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Schroder Emerging Markets 1.23 .25 - .48 - 1.96 .31 1.65 Equity Fund - Class 2(1),(8) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Schroder International 1.00 .25 - .27 - 1.52 - 1.52 Small Cap Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- SELIGMAN - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Seligman Smaller-Cap Value 1.00 - - .14 - 1.14 - 1.14 Portfolio - Class 1(7) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- TARGETPLUS PORTFOLIOS - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Balanced .52 .25 - .53 - 1.30 .41 .89 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Equity Fund(1) .60 .25 - .29 - 1.14 .35 .79 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Growth Fund(1) .52 .25 - .29 - 1.06 .17 .89 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Moderate .52 .25 - .37 - 1.14 .25 .89 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- TURNER - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Turner Quantitative Small .85 .25 - .13 - 1.23 - 1.23 Cap Growth Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- VAN KAMPEN - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Comstock .72 .25 - .11 - 1.08 - 1.08 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Equity and .75 .25 - .11 - 1.11 - 1.11 Income Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Global .95 .25 - .12 - 1.32 - 1.32 Franchise Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Global Real .90 .25 - .22 - 1.37 .02 1.35 Estate Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Growth and .75 .25 - .09 - 1.09 - 1.09 Income Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Mid Cap Growth .80 .25 - .12 - 1.17 - 1.17 Fund(1) - ----------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 79 * The 12b-1 fees cover certain distribution and shareholder support services provided by the companies selling Contracts. Our principal underwriter, Allianz Life Financial Services, LLC, will receive 12b-1 fees, except for those classes of shares that do not pay a 12b-1 fee, as identified in footnote (8). (1) Allianz Investment Management LLC (AZL), the Investment Option's investment adviser, and the Investment Option have entered into a written contract limiting operating expenses to the "after waiver" amount listed above through April 30, 2009. The operating expenses covered by the expense limitation agreement include fees deducted from Investment Option assets such as audit fees and payments to independent trustees, but do not include the operating expenses of other investment companies in which the Investment Option may invest (acquired fund fees and expenses). The Investment Option is authorized to reimburse AZL for management fees previously waived and/or for the cost of other expenses paid by AZL provided that such reimbursement will not cause the Investment Option to exceed the expense limits in effect at the time of such reimbursement. The Investment Option's ability to reimburse AZL in this manner only applies to fees paid or reimbursement made by AZL within the three fiscal years prior to the date of such reimbursement. (2) PIMCO has contractually agreed to waive the advisory fee and the administration fee it receives from the Portfolio in an amount equal to the advisory fee and administration fee, respectively, paid to PIMCO by the subsidiary. This waiver may not be terminated by PIMCO and will remain in effect for as long as PIMCO's contract with the subsidiary is in place. (3) The Fund administration fee is paid indirectly through the management fee. (4) The Fund's fees and expenses have been restated as if the Fund's new investment management and fund administration agreements had been in place for the fiscal year ended December 31, 2007. The manager and administrator, however, have contractually agreed in advance to waive or limit their respective fees so that the increase in investment management and fund administration fees paid by the Fund are phased in over a five year period, with there being no increase in the rate of such fees for the first year ending April 30, 2008. For each of the four years thereafter through April 30, 2012, the manager and administrator will receive one-fifth of the increase in the rate of fees. Beginning May 1, 2012, the full new investment management and administration fees will then be in effect. (5) The manager has agreed in advance to reduce its fee from assets invested by the Fund in a Franklin Templeton money market fund (the acquired fund) to the extent that the Fund's fees and expenses are due to those of the acquired fund. This reduction is required by the Trust's board of trustees and an exemptive order of the Securities and Exchange Commission (SEC). (6) The Investment Option commenced operations under this Contract as of May 1, 2008. Therefore, the expenses shown are estimated for the current calendar year. (7) We may enter into certain arrangements under which we, or our affiliate Allianz Life Financial Services, LLC, the principal underwriter for the Contracts, are compensated by the Investment Options' advisers, distributors and/or affiliates for the administrative services and benefits which we provide to the Investment Options. The amount of the compensation usually is based on the aggregate assets of the Investment Options of other investment portfolios from contracts that we issue or administer. Some advisers may pay us more or less than others, however, the maximum fee that we currently receive is at the annual rate of 0.25% of the average aggregate amount invested by us in the Investment Options. (8) The Investment Option has both Class 1 shares and Class 2 shares. Class 2 shares pay a 12b-1 fee of up to 0.25% of its average daily assets. Class 1 shares do not pay a 12b-1 fee. (9) Not currently available. (10) Effective December 1, 2007, the administrator has contractually agreed to waive or limit its fee and to assume as its own expense certain expenses, otherwise payable by the Fund, excluding acquired funds' fees and expenses, so that direct operating expenses of the fund do not exceed 0.38% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2009. (11) OpCap Advisors has contractually agreed to reduce the total annual portfolio operating expenses to the extent they would exceed 1.00% (net of any expenses offset by earnings credits from the custodian bank) of the Portfolio's average daily net assets. This reduction of annual portfolio operating expenses is guaranteed by OpCap Advisors through December 31, 2015. Net portfolio operating expenses do not reflect a reduction of custody expenses offset by custody credits earned on cash balances at the custodian bank. (12) Acquired fund fees and expenses for the Portfolio are based upon an allocation of the Portfolio's assets among the underlying funds and upon the total annual operating expenses of the institutional shares of these underlying funds. Acquired fund fees and expenses will vary with changes in the expenses of the underlying funds, as well as allocation of the Portfolio's assets, and may be higher or lower than those shown above. (13) PIMCO has contractually agreed to waive the advisory fee and/or administration fee. See the Investment Option prospectus for further information.
- -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 80 This table describes, in detail, the annual expenses for each of the AZL FusionPortfolios. We show the expenses as a percentage of an Investment Option's average daily net assets. The underlying funds may pay 12b-1 fees to the distributor of the Contracts for distribution and/or administrative services. The underlying funds do not pay service fees or 12b-1 fees to the AZL FusionPortfolios, and the AZL FusionPortfolios do not pay service fees or 12b-1 fees. The underlying funds of the AZL FusionPortfolios may pay service fees to the insurance companies issuing variable contracts, or their affiliates, for providing customer service and other administrative services to contract purchasers. The amount of such service fees may vary depending on the underlying fund.
TOTAL ANNUAL ANNUAL INVESTMENT OPTION OPERATING EXPENSES BEFORE OPERATING FEE WAIVERS OR EXPENSE REIMBURSEMENTS EXPENSES ------------------------------------------------------------ AFTER ACQUIRED AMOUNT OF CONTRACTUAL RULE FUND FEES TOTAL ANNUAL CONTRACTUAL FEE WAIVERS MANAGEMENT 12B-1 OTHER AND OPERATING FEE WAIVERS AND OR EXPENSE INVESTMENT OPTION FEES FEES* EXPENSES TOTAL EXPENSES(2) EXPENSES REIMBURSEMENTS REIMBURSEMENTS - ------------------------------------------------------------------------------------------------------------------------ FUSION PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------ AZL Fusion Balanced Fund(1) .20% -% .06% .26% 1.01% 1.27% -% 1.27% - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AZL Fusion Growth Fund(1) .20 - .05 .25 1.07 1.32 - 1.32 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AZL Fusion Moderate Fund(1) .20 - .05 .25 1.14 1.39 - 1.39 - ------------------------------------------------------------------------------------------------------------------------ * The 12b-1 fees cover certain distribution and shareholder support services provided by the companies selling Contracts. Our principal underwriter, Allianz Life Financial Services, LLC, will receive 12b-1 fees. (1) Allianz Investment Management LLC (AZL), the Investment Option's investment adviser, and the Investment Option have entered into a written contract limiting operating expenses (excluding certain fund expenses including, but not limited to, any taxes, interest, brokerage fees or extraordinary expenses) from exceeding 0.30% through at least April 30, 2009. The operating expenses covered by the expense limitation include fees deducted from fund assets such as audit fees and payments to outside trustees, but do not include the operating expenses of other investment companies in which the funds may invest (acquired fund fees and expenses). Acquired fund fees and expenses are incurred indirectly by the Investment Option(s) through the Investment Option's investment in permitted underlying funds. Accordingly, acquired fees and expenses affect the Investment Option's total returns. The Investment Option is authorized to reimburse AZL for fees previously waived and/or for the cost of other expenses paid by AZL provided that such reimbursement will not cause the Investment Option to exceed the expense limits in effect at the time of such reimbursement. AZL may request and receive reimbursement of fees waived or limited and other reimbursements made by AZL. The Investment Option's ability to reimburse AZL in this manner only applies to fees paid or reimbursement made by AZL within the three fiscal years prior to the date of such reimbursement. (2) Persons with Contract Value allocated to the AZL FusionPortfolios will also indirectly pay the expenses of the underlying funds. The underlying fund fees and expenses are an estimate. These expenses will vary, depending upon the allocation of assets to individual underlying funds. In addition, it can be expected that underlying funds may be added or deleted as investments, with a resulting change in expenses. The investment advisers to the underlying funds or their affiliates may pay "service fees" to Allianz Life or its affiliates for providing customer service and other administrative services to Contract purchasers. The amount of such fees may vary by underlying fund. The underlying funds may also pay Rule 12b-1 distribution fees to the distributor of the Contracts. The underlying funds do not pay service fees or 12b-1 fees to the AZL FusionPortfolios, and the AZL FusionPortfolios do not pay service fees or 12b-1 fees.
- -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 81 - -------------------------------------------------------------------------------- APPENDIX B - CONDENSED FINANCIAL INFORMATION The consolidated financial statements of Allianz Life Insurance Company of North America and the financial statements of Allianz Life Variable Account B may be found in the Statement of Additional Information. Accumulation Unit value (AUV) information corresponding to the highest and lowest combination of charges for the Contract currently offered by this prospectus is listed in the tables below. You can find AUV information corresponding to the additional combinations of charges in the appendix to the Statement of Additional Information. This information should be read in conjunction with the financial statements and related notes of the Separate Account included in the Statement of Additional Information. The Statement of Additional Information is available without charge by contacting us at the telephone number or address listed at the back of this prospectus.
* Key to Benefit Option Separate Account Annual Expenses(1) Allianz Rewards - Base Contract with the Traditional GMDB...................... 1.70% Allianz Rewards - Contract with the Enhanced GMDB and the PRIME Plus Benefit .. 2.60%
(1) The Separate Account annual expenses for a May 2003 Contract with the Traditional GMDB and no PRIME Benefit (1.70%) and a May 2003 Contract with the Enhanced GMDB and Enhanced PRIME Benefit (2.60%) are the same as the expenses for the currently offered Contract, therefore the AUV information is the same. Please see the Statement of Additional Information for more information on the May 2003 Contract. The following Investment Option commenced operations under this Contract after December 31, 2007. Therefore, no AUV information is shown for it: BlackRock Global Allocation V.I. Fund (Number of Accumulation Units in thousands) Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL AIM International Equity Fund 1.70% 12/31/2003 N/A 10.084 4 12/31/2004 10.084 12.107 30 12/31/2005 12.107 13.852 73 12/31/2006 13.852 17.302 94 12/31/2007 17.302 19.496 117 2.60% 12/31/2003 N/A 9.934 72 12/31/2004 9.934 11.819 356 12/31/2005 11.819 13.401 790 12/31/2006 13.401 16.590 1568 12/31/2007 16.590 18.525 1951 AZL Columbia Technology Fund 1.70% 12/31/2003 N/A 8.675 40 12/31/2004 8.675 8.160 48 12/31/2005 8.160 8.079 43 12/31/2006 8.079 8.146 40 12/31/2007 8.146 9.830 43 2.60% 12/31/2003 N/A 8.508 206 12/31/2004 8.508 7.930 460 12/31/2005 7.930 7.782 506 12/31/2006 7.782 7.777 563 12/31/2007 7.777 9.300 1373 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL Davis NY Venture Fund 1.70% 12/31/2003 N/A 9.901 45 12/31/2004 9.901 10.761 134 12/31/2005 10.761 11.604 176 12/31/2006 11.604 12.996 243 12/31/2007 12.996 13.306 218 2.60% 12/31/2003 N/A 9.710 153 12/31/2004 9.710 10.459 960 12/31/2005 10.459 11.178 1655 12/31/2006 11.178 12.407 2193 12/31/2007 12.407 12.588 2386 AZL Dreyfus Founders Equity Growth Fund 1.70% 12/31/2003 N/A 8.756 40 12/31/2004 8.756 9.272 58 12/31/2005 9.272 9.532 59 12/31/2006 9.532 10.584 76 12/31/2007 10.584 11.315 176 2.60% 12/31/2003 N/A 8.587 181 12/31/2004 8.587 9.012 445 12/31/2005 9.012 9.182 531 12/31/2006 9.182 10.103 721 12/31/2007 10.103 10.704 2050 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 82 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL Dreyfus Premier Small Cap Value Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.034 20 12/31/2005 12.034 12.232 19 12/31/2006 12.232 13.639 23 12/31/2007 13.639 12.303 29 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.961 197 12/31/2005 11.961 12.050 465 12/31/2006 12.050 13.315 583 12/31/2007 13.315 11.903 551 AZL First Trust Target Double Play Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.577 54 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.481 830 AZL Franklin Small Cap Value Fund 1.70% 12/31/2003 N/A 12.692 24 12/31/2004 12.692 15.359 53 12/31/2005 15.359 16.163 95 12/31/2006 16.163 18.341 125 12/31/2007 18.341 17.242 126 2.60% 12/31/2003 N/A 12.616 171 12/31/2004 12.616 15.130 774 12/31/2005 15.130 15.779 1427 12/31/2006 15.779 17.745 1794 12/31/2007 17.745 16.532 1777 AZL Fusion Balanced Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.608 100 12/31/2006 10.608 11.419 1681 12/31/2007 11.419 12.025 1808 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.544 889 12/31/2006 10.544 11.249 1965 12/31/2007 11.249 11.739 1984 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL Fusion Growth Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.083 198 12/31/2006 11.083 12.226 426 12/31/2007 12.226 12.711 516 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.016 4752 12/31/2006 11.016 12.044 9277 12/31/2007 12.044 12.408 10241 AZL Fusion Moderate Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.786 57 12/31/2006 10.786 11.741 172 12/31/2007 11.741 12.297 268 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.721 2298 12/31/2006 10.721 11.566 4080 12/31/2007 11.566 12.004 5264 AZL Jennison 20/20 Focus Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.221 32 12/31/2006 12.221 13.552 71 12/31/2007 13.552 14.752 51 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.148 459 12/31/2006 12.148 13.350 848 12/31/2007 13.350 14.401 912 AZL Jennison Growth Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.943 15 12/31/2006 11.943 11.927 10 12/31/2007 11.927 13.005 29 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.871 233 12/31/2006 11.871 11.749 399 12/31/2007 11.749 12.696 551 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 83 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL Legg Mason Growth Fund 1.70% 12/31/2003 N/A 10.109 22 12/31/2004 10.109 10.740 24 12/31/2005 10.740 11.727 31 12/31/2006 11.727 11.611 41 12/31/2007 11.611 13.129 84 2.60% 12/31/2003 N/A 9.958 281 12/31/2004 9.958 10.485 667 12/31/2005 10.485 11.346 826 12/31/2006 11.346 11.133 835 12/31/2007 11.133 12.475 1508 AZL Legg Mason Value Fund 1.70% 12/31/2003 N/A 10.004 25 12/31/2004 10.004 11.325 72 12/31/2005 11.325 11.832 115 12/31/2006 11.832 12.414 136 12/31/2007 12.414 11.448 127 2.60% 12/31/2003 N/A 9.811 206 12/31/2004 9.811 11.007 821 12/31/2005 11.007 11.397 1624 12/31/2006 11.397 11.851 1524 12/31/2007 11.851 10.830 1498 AZL LMP Large Cap Growth Fund 1.70% 12/31/2003 N/A 9.783 95 12/31/2004 9.783 10.039 176 12/31/2005 10.039 10.827 177 12/31/2006 10.827 11.095 182 12/31/2007 11.095 11.421 172 2.60% 12/31/2003 N/A 9.637 407 12/31/2004 9.637 9.800 1275 12/31/2005 9.800 10.475 1704 12/31/2006 10.475 10.639 1612 12/31/2007 10.639 10.852 1428 AZL Money Market Fund 1.70% 12/31/2003 N/A 10.288 129 12/31/2004 10.288 10.183 384 12/31/2005 10.183 10.269 409 12/31/2006 10.269 10.545 450 12/31/2007 10.545 10.864 904 2.60% 12/31/2003 N/A 9.932 885 12/31/2004 9.932 9.741 2151 12/31/2005 9.741 9.736 2761 12/31/2006 9.736 9.908 2785 12/31/2007 9.908 10.116 4187 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL NACM International Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.452 1 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.395 37 AZL Neuberger Berman Regency Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.057 21 12/31/2007 10.057 10.267 26 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.996 163 12/31/2007 9.996 10.113 252 AZL OCC Opportunity Fund 1.70% 12/31/2003 N/A 12.741 34 12/31/2004 12.741 13.498 79 12/31/2005 13.498 13.945 79 12/31/2006 13.945 15.312 97 12/31/2007 15.312 16.390 80 2.60% 12/31/2003 N/A 12.551 361 12/31/2004 12.551 13.177 1053 12/31/2005 13.177 13.492 1196 12/31/2006 13.492 14.682 1406 12/31/2007 14.682 15.574 1316 AZL OCC Value Fund 1.70% 12/31/2003 N/A 11.523 57 12/31/2004 11.523 13.200 143 12/31/2005 13.200 13.324 112 12/31/2006 13.324 15.734 105 12/31/2007 15.734 14.575 193 2.60% 12/31/2003 N/A 11.301 266 12/31/2004 11.301 12.829 1195 12/31/2005 12.829 12.834 1410 12/31/2006 12.834 15.020 1403 12/31/2007 15.020 13.789 2729 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 84 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL Oppenheimer Global Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.449 40 12/31/2005 11.449 12.677 65 12/31/2006 12.677 14.494 109 12/31/2007 14.494 15.069 85 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.380 684 12/31/2005 11.380 12.488 1182 12/31/2006 12.488 14.150 1558 12/31/2007 14.150 14.579 1378 AZL Oppenheimer International Growth Fund 1.70% 12/31/2003 N/A 11.380 2 12/31/2004 11.380 12.808 13 12/31/2005 12.808 14.378 21 12/31/2006 14.378 18.234 42 12/31/2007 18.234 20.128 44 2.60% 12/31/2003 N/A 11.161 128 12/31/2004 11.161 12.448 362 12/31/2005 12.448 13.849 584 12/31/2006 13.849 17.406 1117 12/31/2007 17.406 19.041 1620 AZL Oppenheimer Main Street Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.737 44 12/31/2005 10.737 11.132 64 12/31/2006 11.132 12.542 78 12/31/2007 12.542 12.798 79 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.672 615 12/31/2005 10.672 10.966 976 12/31/2006 10.966 12.245 1125 12/31/2007 12.245 12.382 1306 AZL PIMCO Fundamental IndexPLUS Total Return Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.059 14 12/31/2007 11.059 11.596 11 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.992 29 12/31/2007 10.992 11.422 54 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL S&P 500 Index Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.862 12 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.803 74 AZL Schroder Emerging Markets Equity Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.450 14 12/31/2007 10.450 13.388 69 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.388 435 12/31/2007 10.388 13.187 1455 AZL Schroder International Small Cap Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.224 4 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.169 32 AZL Small Cap Stock Index Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.310 0 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.254 33 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 85 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL TargetPLUS Balanced Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.096 1 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.035 68 AZL TargetPLUS Equity Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.492 4 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.397 344 AZL TargetPLUS Growth Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.919 0 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.859 60 AZL TargetPLUS Moderate Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.059 3 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.999 22 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL Turner Quantitative Small Cap Growth Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.103 5 12/31/2006 11.103 12.150 9 12/31/2007 12.150 12.670 7 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.036 126 12/31/2006 11.036 11.969 283 12/31/2007 11.969 12.369 299 AZL Van Kampen Comstock Fund 1.70% 12/31/2003 N/A 9.432 100 12/31/2004 9.432 10.860 181 12/31/2005 10.860 11.096 183 12/31/2006 11.096 12.630 197 12/31/2007 12.630 12.140 357 2.60% 12/31/2003 N/A 9.208 738 12/31/2004 9.208 10.507 2346 12/31/2005 10.507 10.639 3400 12/31/2006 10.639 12.001 3637 12/31/2007 12.001 11.432 4603 AZL Van Kampen Equity and Income Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.788 11 12/31/2005 10.788 11.323 21 12/31/2006 11.323 12.526 71 12/31/2007 12.526 12.691 167 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.723 446 12/31/2005 10.723 11.154 948 12/31/2006 11.154 12.229 1203 12/31/2007 12.229 12.279 1140 AZL Van Kampen Global Franchise Fund 1.70% 12/31/2003 N/A 12.250 13 12/31/2004 12.250 13.512 29 12/31/2005 13.512 14.832 63 12/31/2006 14.832 17.683 100 12/31/2007 17.683 19.090 113 2.60% 12/31/2003 N/A 12.176 170 12/31/2004 12.176 13.310 874 12/31/2005 13.310 14.480 1681 12/31/2006 14.480 17.108 2225 12/31/2007 17.108 18.303 2183 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 86 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ AZL Van Kampen Global Real Estate Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.028 56 12/31/2007 12.028 10.797 42 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.955 529 12/31/2007 11.955 10.636 640 AZL Van Kampen Growth and Income Fund 1.70% 12/31/2003 N/A 10.138 62 12/31/2004 10.138 11.344 187 12/31/2005 11.344 12.183 216 12/31/2006 12.183 13.883 223 12/31/2007 13.883 14.008 198 2.60% 12/31/2003 N/A 9.897 506 12/31/2004 9.897 10.975 1355 12/31/2005 10.975 11.681 1769 12/31/2006 11.681 13.192 1916 12/31/2007 13.192 13.191 1850 AZL Van Kampen Mid Cap Growth Fund 1.70% 12/31/2003 N/A 8.935 37 12/31/2004 8.935 10.649 98 12/31/2005 10.649 12.306 150 12/31/2006 12.306 13.213 129 12/31/2007 13.213 15.872 217 2.60% 12/31/2003 N/A 8.723 157 12/31/2004 8.723 10.303 520 12/31/2005 10.303 11.800 1229 12/31/2006 11.800 12.556 1535 12/31/2007 12.556 14.946 3489 Davis VA Financial Portfolio 1.70% 12/31/2003 N/A 12.431 11 12/31/2004 12.431 13.482 40 12/31/2005 13.482 14.367 47 12/31/2006 14.367 16.739 55 12/31/2007 16.739 15.460 45 2.60% 12/31/2003 N/A 12.001 235 12/31/2004 12.001 12.898 576 12/31/2005 12.898 13.621 682 12/31/2006 13.621 15.729 711 12/31/2007 15.729 14.396 663 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ Davis VA Value Portfolio 1.70% 12/31/2003 N/A 10.074 148 12/31/2004 10.074 11.125 197 12/31/2005 11.125 11.971 185 12/31/2006 11.971 13.536 171 12/31/2007 13.536 13.923 154 2.60% 12/31/2003 N/A 9.725 479 12/31/2004 9.725 10.643 856 12/31/2005 10.643 11.350 786 12/31/2006 11.350 12.719 705 12/31/2007 12.719 12.965 640 Dreyfus IP Small Cap Stock Index Portfolio 1.70% 12/31/2003 N/A 10.279 32 12/31/2004 10.279 12.316 118 12/31/2005 12.316 12.985 152 12/31/2006 12.985 14.607 117 12/31/2007 14.607 14.265 95 2.60% 12/31/2003 N/A 10.125 290 12/31/2004 10.125 12.023 898 12/31/2005 12.023 12.563 1373 12/31/2006 12.563 14.005 1318 12/31/2007 14.005 13.555 1193 Dreyfus Stock Index Fund, Inc. 1.70% 12/31/2003 N/A 10.251 71 12/31/2004 10.251 11.121 170 12/31/2005 11.121 11.419 200 12/31/2006 11.419 12.934 169 12/31/2007 12.934 13.349 119 2.60% 12/31/2003 N/A 10.098 646 12/31/2004 10.098 10.856 1750 12/31/2005 10.856 11.047 1898 12/31/2006 11.047 12.402 1931 12/31/2007 12.402 12.685 1633 Franklin Global Communications Securities Fund 1.70% 12/31/2003 N/A 15.506 12 12/31/2004 15.506 17.405 21 12/31/2005 17.405 19.814 27 12/31/2006 19.814 24.266 37 12/31/2007 24.266 29.638 32 2.60% 12/31/2003 N/A 13.575 73 12/31/2004 13.575 15.101 133 12/31/2005 15.101 17.037 217 12/31/2006 17.037 20.679 459 12/31/2007 20.679 25.029 853 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 87 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ Franklin Global Real Estate Securities Fund 1.70% 12/31/2003 N/A 37.962 35 12/31/2004 37.962 49.189 68 12/31/2005 49.189 54.878 81 12/31/2006 54.878 65.062 62 12/31/2007 65.062 50.616 47 2.60% 12/31/2003 N/A 33.235 161 12/31/2004 33.235 42.676 509 12/31/2005 42.676 47.187 750 12/31/2006 47.187 55.444 723 12/31/2007 55.444 42.745 572 Franklin Growth and Income Securities Fund 1.70% 12/31/2003 N/A 28.767 27 12/31/2004 28.767 31.283 57 12/31/2005 31.283 31.838 55 12/31/2006 31.838 36.547 59 12/31/2007 36.547 34.596 58 2.60% 12/31/2003 N/A 25.185 139 12/31/2004 25.185 27.141 467 12/31/2005 27.141 27.376 621 12/31/2006 27.376 31.144 636 12/31/2007 31.144 29.216 607 Franklin High Income Securities Fund 1.70% 12/31/2003 N/A 20.143 77 12/31/2004 20.143 21.758 241 12/31/2005 21.758 22.101 52 12/31/2006 22.101 23.764 53 12/31/2007 23.764 23.996 50 2.60% 12/31/2003 N/A 17.635 175 12/31/2004 17.635 18.877 421 12/31/2005 18.877 19.004 599 12/31/2006 19.004 20.251 679 12/31/2007 20.251 20.264 618 Franklin Income Securities Fund 1.70% 12/31/2003 N/A 34.570 11 12/31/2004 34.570 38.694 57 12/31/2005 38.694 38.654 95 12/31/2006 38.654 44.936 139 12/31/2007 44.936 45.834 174 2.60% 12/31/2003 N/A 30.265 23 12/31/2004 30.265 33.571 329 12/31/2005 33.571 33.237 702 12/31/2006 33.237 38.293 918 12/31/2007 38.293 38.706 1042 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ Franklin Large Cap Growth Securities Fund 1.70% 12/31/2003 N/A 16.959 39 12/31/2004 16.959 17.995 98 12/31/2005 17.995 17.880 93 12/31/2006 17.880 19.495 96 12/31/2007 19.495 20.359 67 2.60% 12/31/2003 N/A 15.828 184 12/31/2004 15.828 16.644 717 12/31/2005 16.644 16.389 1023 12/31/2006 16.389 17.710 961 12/31/2007 17.710 18.328 871 Franklin Rising Dividends Securities Fund 1.70% 12/31/2003 N/A 28.938 42 12/31/2004 28.938 31.578 98 12/31/2005 31.578 32.111 105 12/31/2006 32.111 36.977 97 12/31/2007 36.977 35.373 87 2.60% 12/31/2003 N/A 25.989 278 12/31/2004 25.989 28.105 1029 12/31/2005 28.105 28.323 1290 12/31/2006 28.323 32.324 1197 12/31/2007 32.324 30.644 1051 Franklin Small Cap Value Securities Fund 1.70% 12/31/2003 N/A 12.233 27 12/31/2004 12.233 14.881 75 12/31/2005 14.881 15.914 87 12/31/2006 15.914 18.303 69 12/31/2007 18.303 17.565 61 2.60% 12/31/2003 N/A 11.624 155 12/31/2004 11.624 14.014 756 12/31/2005 14.014 14.852 922 12/31/2006 14.852 16.929 835 12/31/2007 16.929 16.100 701 Franklin Small-Mid Cap Growth Securities Fund 1.70% 12/31/2003 N/A 18.506 38 12/31/2004 18.506 20.280 67 12/31/2005 20.280 20.894 69 12/31/2006 20.894 22.328 68 12/31/2007 22.328 24.417 64 2.60% 12/31/2003 N/A 17.193 170 12/31/2004 17.193 18.673 537 12/31/2005 18.673 19.066 643 12/31/2006 19.066 20.193 619 12/31/2007 20.193 21.883 586 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 88 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ Franklin Templeton VIP Founding Funds Allocation Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.232 0 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.191 562 Franklin U.S. Government Fund 1.70% 12/31/2003 N/A 22.508 77 12/31/2004 22.508 22.897 175 12/31/2005 22.897 23.053 200 12/31/2006 23.053 23.576 162 12/31/2007 23.576 24.707 133 2.60% 12/31/2003 N/A 19.705 291 12/31/2004 19.705 19.865 854 12/31/2005 19.865 19.822 1102 12/31/2006 19.822 20.090 1185 12/31/2007 20.090 20.865 1010 Franklin Zero Coupon Fund 2010 1.70% 12/31/2003 N/A 34.098 7 12/31/2004 34.098 35.103 12 12/31/2005 35.103 35.043 16 12/31/2006 35.043 35.388 11 12/31/2007 35.388 37.788 11 2.60% 12/31/2003 N/A 29.851 38 12/31/2004 29.851 30.455 96 12/31/2005 30.455 30.131 185 12/31/2006 30.131 30.157 198 12/31/2007 30.157 31.911 213 Jennison 20/20 Focus Portfolio 1.70% 12/31/2003 N/A 10.355 8 12/31/2004 10.355 11.745 25 12/31/2005 11.745 14.003 31 12/31/2006 14.003 15.641 32 12/31/2007 15.641 16.932 27 2.60% 12/31/2003 N/A 10.200 103 12/31/2004 10.200 11.466 546 12/31/2005 11.466 13.548 715 12/31/2006 13.548 14.997 611 12/31/2007 14.997 16.089 561 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ Mutual Discovery Securities Fund 1.70% 12/31/2003 N/A 16.384 50 12/31/2004 16.384 19.037 114 12/31/2005 19.037 21.705 174 12/31/2006 21.705 26.260 225 12/31/2007 26.260 28.874 262 2.60% 12/31/2003 N/A 15.362 251 12/31/2004 15.362 17.690 790 12/31/2005 17.690 19.989 1269 12/31/2006 19.989 23.968 1739 12/31/2007 23.968 26.116 2014 Mutual Shares Securities Fund 1.70% 12/31/2003 N/A 16.403 81 12/31/2004 16.403 18.162 181 12/31/2005 18.162 19.742 232 12/31/2006 19.742 22.977 343 12/31/2007 22.977 23.374 397 2.60% 12/31/2003 N/A 15.380 497 12/31/2004 15.380 16.877 926 12/31/2005 16.877 18.181 1696 12/31/2006 18.181 20.972 2355 12/31/2007 20.972 21.141 2474 OpCap Mid Cap Portfolio 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.989 18 12/31/2007 9.989 10.530 24 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.929 84 12/31/2007 9.929 10.372 187 Oppenheimer Global Securities Fund/VA 1.70% 12/31/2003 N/A 9.634 102 12/31/2004 9.634 11.286 172 12/31/2005 11.286 12.684 135 12/31/2006 12.684 14.677 117 12/31/2007 14.677 15.340 105 2.60% 12/31/2003 N/A 9.300 565 12/31/2004 9.300 10.797 1194 12/31/2005 10.797 12.026 1035 12/31/2006 12.026 13.791 946 12/31/2007 13.791 14.284 859 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 89 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ Oppenheimer High Income Fund/VA 1.70% 12/31/2003 N/A 11.142 36 12/31/2004 11.142 11.935 58 12/31/2005 11.935 12.006 52 12/31/2006 12.006 12.917 49 12/31/2007 12.917 12.685 46 2.60% 12/31/2003 N/A 10.756 137 12/31/2004 10.756 11.418 243 12/31/2005 11.418 11.384 217 12/31/2006 11.384 12.137 199 12/31/2007 12.137 11.812 241 Oppenheimer Main Street Fund/VA 1.70% 12/31/2003 N/A 8.252 138 12/31/2004 8.252 8.880 197 12/31/2005 8.880 9.252 152 12/31/2006 9.252 10.463 135 12/31/2007 10.463 10.741 107 2.60% 12/31/2003 N/A 7.966 695 12/31/2004 7.966 8.495 1428 12/31/2005 8.495 8.772 1192 12/31/2006 8.772 9.832 1035 12/31/2007 9.832 10.002 960 PIMCO VIT All Asset Portfolio 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.854 121 12/31/2005 11.854 12.381 708 12/31/2006 12.381 12.740 1521 12/31/2007 12.740 13.567 1378 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.783 561 12/31/2005 11.783 12.196 922 12/31/2006 12.196 12.438 789 12/31/2007 12.438 13.126 776 PIMCO VIT CommodityRealReturn Strategy Portfolio 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.014 21 12/31/2006 11.014 10.494 58 12/31/2007 10.494 12.713 55 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.948 323 12/31/2006 10.948 10.337 679 12/31/2007 10.337 12.411 911 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ PIMCO VIT Emerging Markets Bond Portfolio 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.905 13 12/31/2006 10.905 11.717 14 12/31/2007 11.717 12.189 33 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.840 114 12/31/2006 10.840 11.542 190 12/31/2007 11.542 11.899 235 PIMCO VIT Global Bond Portfolio (Unhedged) 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.330 25 12/31/2006 9.330 9.600 28 12/31/2007 9.600 10.357 67 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.274 104 12/31/2006 9.274 9.457 218 12/31/2007 9.457 10.111 420 PIMCO VIT High Yield Portfolio 1.70% 12/31/2003 N/A 11.179 66 12/31/2004 11.179 12.041 146 12/31/2005 12.041 12.327 408 12/31/2006 12.327 13.223 440 12/31/2007 13.223 13.456 95 2.60% 12/31/2003 N/A 10.792 347 12/31/2004 10.792 11.519 877 12/31/2005 11.519 11.688 1131 12/31/2006 11.688 12.425 1254 12/31/2007 12.425 12.530 1115 PIMCO VIT Real Return Portfolio 1.70% 12/31/2003 N/A 10.495 112 12/31/2004 10.495 11.238 315 12/31/2005 11.238 11.281 349 12/31/2006 11.281 11.170 345 12/31/2007 11.170 12.153 309 2.60% 12/31/2003 N/A 10.432 398 12/31/2004 10.432 11.070 1502 12/31/2005 11.070 11.013 2142 12/31/2006 11.013 10.808 2016 12/31/2007 10.808 11.652 1925 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 90 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ PIMCO VIT StocksPLUS Growth and Income Portfolio 1.70% 12/31/2003 N/A 8.263 1 12/31/2004 8.263 9.002 2 12/31/2005 9.002 9.159 2 12/31/2006 9.159 10.347 2 12/31/2007 10.347 10.869 2 2.60% 12/31/2003 N/A 7.977 1 12/31/2004 7.977 8.612 6 12/31/2005 8.612 8.684 7 12/31/2006 8.684 9.723 5 12/31/2007 9.723 10.121 5 PIMCO VIT Total Return Portfolio 1.70% 12/31/2003 N/A 12.566 150 12/31/2004 12.566 12.958 430 12/31/2005 12.958 13.053 418 12/31/2006 13.053 13.328 421 12/31/2007 13.328 14.250 382 2.60% 12/31/2003 N/A 12.131 677 12/31/2004 12.131 12.397 1560 12/31/2005 12.397 12.376 2154 12/31/2006 12.376 12.523 2233 12/31/2007 12.523 13.269 2345 Seligman Smaller-Cap Value Portfolio 1.70% 12/31/2003 N/A 20.308 42 12/31/2004 20.308 23.948 56 12/31/2005 23.948 22.608 40 12/31/2006 22.608 26.951 35 12/31/2007 26.951 27.592 34 2.60% 12/31/2003 N/A 19.604 317 12/31/2004 19.604 22.910 592 12/31/2005 22.910 21.436 492 12/31/2006 21.436 25.325 410 12/31/2007 25.325 25.694 350 SP International Growth Portfolio 1.70% 12/31/2003 N/A 5.546 22 12/31/2004 5.546 6.331 22 12/31/2005 6.331 7.208 19 12/31/2006 7.208 8.516 13 12/31/2007 8.516 9.973 12 2.60% 12/31/2003 N/A 5.396 192 12/31/2004 5.396 6.105 424 12/31/2005 6.105 6.888 370 12/31/2006 6.888 8.066 335 12/31/2007 8.066 9.360 362 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ SP Strategic Partners Focused Growth Portfolio 1.70% 12/31/2003 N/A 5.947 14 12/31/2004 5.947 6.425 24 12/31/2005 6.425 7.254 31 12/31/2006 7.254 7.053 26 12/31/2007 7.053 7.951 16 2.60% 12/31/2003 N/A 5.786 78 12/31/2004 5.786 6.195 374 12/31/2005 6.195 6.932 439 12/31/2006 6.932 6.679 394 12/31/2007 6.679 7.462 333 Templeton Developing Markets Securities Fund 1.70% 12/31/2003 N/A 11.062 38 12/31/2004 11.062 13.562 71 12/31/2005 13.562 16.991 111 12/31/2006 16.991 21.398 93 12/31/2007 21.398 27.090 69 2.60% 12/31/2003 N/A 10.127 260 12/31/2004 10.127 12.305 938 12/31/2005 12.305 15.278 1575 12/31/2006 15.278 19.069 1502 12/31/2007 19.069 23.924 1319 Templeton Foreign Securities Fund 1.70% 12/31/2003 N/A 17.945 6 12/31/2004 17.945 20.911 21 12/31/2005 20.911 22.650 27 12/31/2006 22.650 27.045 39 12/31/2007 27.045 30.696 49 2.60% 12/31/2003 N/A 16.120 6 12/31/2004 16.120 18.615 235 12/31/2005 18.615 19.983 525 12/31/2006 19.983 23.647 740 12/31/2007 23.647 26.597 607 Templeton Global Income Securities Fund 1.70% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 30.650 6 2.60% 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 26.004 91 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 91 Number of AUV Accumulation Period at Units or AUV at End Outstanding Benefit Year Beginning of at End of Option * Ended of Period Period Period - ------------------------------------------------------------ Investment Option - ------------------------------------------------------------ Templeton Growth Securities Fund 1.70% 12/31/2003 N/A 19.275 15 12/31/2004 19.275 21.985 60 12/31/2005 21.985 23.532 92 12/31/2006 23.532 28.182 119 12/31/2007 28.182 28.354 146 2.60% 12/31/2003 N/A 17.652 31 12/31/2004 17.652 19.954 438 12/31/2005 19.954 21.167 1015 12/31/2006 21.167 25.123 1306 12/31/2007 25.123 25.049 1352 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 92 - -------------------------------------------------------------------------------- APPENDIX C - PB VALUE CALCULATION EXAMPLES o You purchase a Contract with the PRIME Plus Benefit. You are the only Owner. o You make an initial Purchase Payment of $100,000 (not including any bonus). o You make an additional Purchase Payment of $10,000 in the sixth Contract Year and allocate the entire amount to the Investment Options. You make no other Purchase Payments. o The MAV on the ninth Contract Anniversary is $180,000. o You take a partial withdrawal of $20,000 (including the withdrawal charge) in the tenth Contract Year when the Contract Value (on the day of but before the partial withdrawal) is $160,000. You take no other partial withdrawals. o The Contract Value on the tenth Contract Anniversary is $140,000. o As of the tenth Contract Anniversary you have not yet reached your 81st birthday and the Contracts have not exceeded the limits on volatility or risk that trigger allocation and transfer restrictions under the PRIME Plus Benefit. On the tenth Contract Anniversary, the PB Value is equal to 1 or 2:
1) The 7% AIA Initial Purchase Payment...............................................................................$100,000.00 Increased by 7% on the first Contract Anniversary.................................................x 1.07 $107,000.00 Increased by 7% on the second Contract Anniversary................................................x 1.07 $114,490.00 Beginning on the sixth Contract Anniversary we will only apply the 7% increase to the 7% AIA amount as of the fifth Contract Anniversary. On the sixth Contract Anniversary the 7% AIA is: The fifth Contract Anniversary 7% AIA..................................................................$140,255.17 Increased by 7% on the sixth Contract Anniversary.................................................x 1.07 $150,073.04 Plus the additional Purchase Payment received in the sixth Contract Year..............................+ 10,000.00 $160,073.04 On the seventh Contract Anniversary the 7% AIA is: The fifth Contract Anniversary 7% AIA..................................................................$140,255.17 Increased by 7% on the sixth Contract Anniversary.................................................x 1.07 $150,073.04 Increased by 7% on the seventh Contract Anniversary...............................................x 1.07 $160,578.15 Plus the additional Purchase Payment received in the sixth Contract Year..............................+ 10,000.00 $170,578.15 On the ninth Contract Anniversary the 7% AIA is:.......................................................$193,845.92 On the tenth Contract Anniversary the 7% AIA is: The fifth Contract Anniversary 7% AIA increased by 7% for each anniversary since, up to and including the tenth:.....................................................................$196,715.14 Plus the additional Purchase Payment received in the sixth Contract Year..............................+ 10,000.00 Reduced proportionately by the percentage of Contract Value withdrawn during the tenth Contract Year: ($20,000 / $160,000) = 0.125 x $193,845.92 =.....................- 24,230.74 $182,484.40 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 93 Verifying that the 7% AIA is within the maximum limit: 2 times Purchase Payments made in the first five Contract Years: 2 x $100,000 =.......................$200,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $200,000 =.........................................................- 25,000 $175,000 Therefore the 7% AIA on the tenth Contract Anniversary will be limited to the maximum.....................$175,000 2) The MAV The MAV on the ninth Contract Anniversary.................................................................$180,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $180,000 =............................................................- 22,500 $157,500
The 7% AIA is greater than the MAV on the tenth Contract Anniversary. However, if you chose to exercise the GMIB on the tenth Contract Anniversary you may be able choose to set the PB Value equal to either the 7% or the MAV. This is because the GMIB Payments available under the 7% AIA may be less than the GMIB Payments available under the MAV depending on the Annuity Option you select, your age, and sex (where applicable) at the time of annuitization. In addition, it is possible that fixed Traditional Annuity Payments based on the $140,000 Contract Value would be more than GMIB Payments based on the MAV or the 7% AIA depending on the current interest rates available at the time of annuitization. If instead you exercise the GPWB you can select either the 5% payment option or the 10% payment option. Under the 5% payment option the PB Value will be the 7% AIA, the PB Value could increase (step up) on every third Contract Anniversary* the maximum allowable payment will be less than what is available under the 10% payment option, but we will make payments for at least 20 years (assuming no Excess Withdrawals or step ups). Under the 10% payment option the PB Value will be the MAV, step ups are not available, we will make payments for ten years (assuming no Excess Withdrawals), but the maximum allowable payment will be more. Under the GPWB you would choose the payment option that is most appropriate for your situation. * Step ups will continue to happen automatically until the earliest of: a) the older Owner's 91st birthday, or b) you exhaust the PB Value. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 94 - -------------------------------------------------------------------------------- APPENDIX D - GPWB UNDER THE PRIME PLUS BENEFIT o On the tenth Contract Anniversary you exercise the GPWB and select the 5% payment option with annual payments. o On the tenth Contract Anniversary the PB Value is the 7% AIA, which is $175,000, and your Contract Value (including any vested bonus) is $140,000 (see the example that appears in Appendix C). o You elect the maximum allowable payment and your annual GPWB Payments are 5% x $175,000 = $8,750. You take no Excess Withdrawals and do not elect to stop your GPWB Payments Contract PB Value GPWB Payment Value - -------------------------------------------------------------------------------- On the 10th Contract Anniversary $140,000 $175,000 $8,750 - -------------------------------------------- ---------- ----------- ------------ 11th Contract Anniversary $144,800 $166,250 $8,750 - -------------------------------------------- ---------- ----------- ------------ 12th Contract Anniversary $151,900 $157,500 $8,750 - -------------------------------------------- ---------- ----------- ------------ 13th Contract Anniversary before the step up $160,000 $148,750 $8,750 - -------------------------------------------- ---------- ----------- ------------ 13th Contract Anniversary after the step up $160,000 $160,000 $8,750 - -------------------------------------------- ---------- ----------- ------------ 14th Contract Anniversary $151,700 $151,250 $8,750 - -------------------------------------------- ---------- ----------- ------------ 15th Contract Anniversary $144,300 $142,500 $8,750 - ------------------------------------------- ---------- ----------- ------------ 16th Contract Anniversary before the step up $132,900 $133,750 $8,750 - -------------------------------------------- ---------- ----------- ------------ 16th Contract Anniversary after the step up $132,900 $133,750 $8,750 - -------------------------------------------- ---------- ----------- ------------ o In this example the PB Value was stepped up on the 13th Contract Anniversary because the Contract Value (including any vested bonus) was greater than the PB Value. However, the GPWB Maximum was not stepped up because the current GPWB Maximum ($8,750) was greater than 5% of the increased PB Value (5% x $160,000 = $8,000). o There was no step up to either the PB Value or the GPWB Payment on the 16th Contract Anniversary in this example because the Contract Value was less than the PB Value. o If on the 16th Contract Anniversary the Contract Value (including any vested bonus) had grown to $180,000, the remaining PB Value would be stepped up to $180,000. The GPWB Maximum would also be stepped up because 5% of the increased PB Value (5% x $180,000 = $9,000) is greater than the current GPWB Maximum ($8,750), however, you would not be able to increase your GPWB Payments until the 17th Contract Anniversary because we do not automatically increase your GPWB Payments upon a step up. Example of the effect of an Excess Withdrawal on GPWB Payments o Continue the assumptions from the previous example except that you elect to receive $600 per month as your GPWB Payment. If you do not take any Excess Withdrawals you would receive $7,200 of GPWB Payments over the course of each Contract Year without incurring a withdrawal charge. o Assume the Contract Value (including any vested bonus) on the day of (but before) the Excess Withdrawal is $150,000. The PB Value on the day of (but before) the Excess Withdrawal is $170,200. If you take a $500 Excess Withdrawal in the 11th Contract Year after receiving the eighth monthly GPWB Payment: The total partial withdrawals (GPWB Payments and the Excess Withdrawal) for the Contract Year = $7,200 + $500 = $7,700. Because the total partial withdrawals are less than the $8,750 GPWB Maximum, none of the withdrawals will be subject to the withdrawal charge, and the Excess Withdrawal will reduce both the PB Value and Contract Value by the amount withdrawn ($500). The PB Value after the Excess Withdrawal would be $170,200 - $500 = $169,700. If you take a $5,000 Excess Withdrawal in the 11th Contract Year after receiving the eighth monthly GPWB Payment: The total partial withdrawals for the Contract Year = $7,200 + $5,000 = $12,200. Because the total partial withdrawals are greater than the $8,750 GPWB Maximum, some of the withdrawals will be subject to the withdrawal charge. We determine which withdrawals are subject to the withdrawal charge as follows:
The GPWB Maximum............................................................................................$8,750 First eight GPWB Payments..................................................................................- 4,800 Remaining GPWB Maximum......................................................................................$3,950 Portion of the Excess Withdrawal that is subject to the withdrawal charge = $5,000 - $3,950 =...............$1,050 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 95 When we compute the withdrawal charge we withdraw Purchase Payments on a "first-in-first-out" (FIFO) basis. Your initial Purchase Payment was $100,000 and the withdrawal charge period for this payment has expired. Therefore, there is no withdrawal charge on the Excess Withdrawal. We will adjust the PB Value for the Excess Withdrawal as follows: The PB Value on the day of (but before) the partial withdrawal.....................................$170,200.00 The amount of the Excess Withdrawal that does not exceed the GPWB Maximum..........................- 3,950.00 Reduced proportionately by the remaining amount of the Excess Withdrawal's percentage of Contract Value on the day of (but before) the partial withdrawal = $1,050 / $150,000 = 0.007 x $170,200 =........................................................- 1,191.40 Remaining PB Value after the Excess Withdrawal.....................................................$165,058.60 In addition, because the Excess Withdrawal exhausts the GPWB Maximum for the year, the four remaining GPWB Payments will also be subject to a withdrawal charge. To avoid a withdrawal charge you could instruct us to stop GPWB Payments for the remainder of the year. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 96 - -------------------------------------------------------------------------------- APPENDIX E - DEATH BENEFIT CALCULATION EXAMPLES o You purchase a Contract with an initial Purchase Payment of $100,000 (not including any bonus). You are the only Owner and are age 69 or younger on the Issue Date. You make no additional Purchase Payments. o The MAV on the ninth Contract Anniversary is $180,000. o You take a partial withdrawal of $20,000 (this includes the withdrawal charge) in the tenth Contract Year when the Contract Value on the date of (but before the partial withdrawal) is $160,000. You take no other partial withdrawals. o The Contract Value on the tenth Contract Anniversary is $140,000. NOTE: We calculate the 3% AIA and MAV only for Contracts with the Enhanced GMDB. The M&E charges are higher for Contracts with the Enhanced GMDB than for Contracts with the Traditional GMDB. If the differences in these charges were reflected above, the Contract Values would be lower for Contracts with the Enhanced GMDB than for Contracts with the Traditional GMDB. If you elected the Traditional GMDB: We calculate the death benefit on the tenth Contract Anniversary as the greater of: 1) Contract Value............................................................................................$140,000 2) The Traditional GMDB value: Total Purchase Payments received..........................................................................$100,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $100,000 =...............................................- 12,500 $ 87,500 Therefore, the death benefit that would be payable as of the tenth Contract Anniversary is the $140,000 Contract Value. If you elected the Enhanced GMDB: We calculate the death benefit on the tenth Contract Anniversary as the greater of: 1) Contract Value.........................................................................................$140,000.00 2) The 3% AIA: Initial Purchase Payment...............................................................................$100,000.00 Increased by 3% on the first Contract Anniversary.............................................x 1.03 $103,000.00 Increased by 3% on the second Contract Anniversary............................................x 1.03 $106,090.00 Increased by 3% on the third Contract Anniversary.............................................x 1.03 $109,272.70 On the ninth Contract Anniversary the 3% AIA is....................................................$130,477.32 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $130,477.32 =.............................................- 16,309.66 $114,167.65 Increased by 3% on the tenth Contract Anniversary.............................................x 1.03 $117,592.68 Verifying that the 3% AIA is within the maximum limit: 1.5 times Purchase Payments: 1.5 x $100,000 =................................$150,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $150,000 =..............................- 18,750 .$131,250 3) The MAV: The MAV on the ninth Contract Anniversary.................................................................$180,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $180,000 =.......................................................- 22,500 $157,500 Therefore, the death benefit that would be payable as of the tenth Contract Anniversary is the $157,500 MAV. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 97 - -------------------------------------------------------------------------------- APPENDIX F - WITHDRAWAL CHARGE EXAMPLES All of the following examples assume you purchase a Contract with an initial Purchase Payment of $150,000 and receive a $9,000 bonus. You make no additional Purchase Payments. The partial withdrawal privilege for each Contract Year is 10% of your total Purchase Payments (not including any bonus), less any previous withdrawals taken during the Contract Year that were not subject to a withdrawal charge. Any unused partial withdrawal privilege in one Contract Year does not carry over to the next Contract Year. This means at the beginning of each Contract Year, there would be $15,000 available under the partial withdrawal privilege. Full withdrawal when the Contract Value has declined due to a loss in your selected Investment Options: o You take a full withdrawal in the third Contract Year when the Contract Value is $140,000 and the withdrawal charge is 8.5%. You have taken no other withdrawals from the Contract. o There are no Purchase Payments that are beyond the withdrawal charge period and the partial withdrawal privilege does not apply upon a full withdrawal. Because this is a full withdrawal, we assess the withdrawal charge against the entire Withdrawal Charge Basis. We calculate the withdrawal charge as follows: The Withdrawal Charge Basis is equal to total Purchase Payments (excluding any bonus) less any Purchase Payments withdrawn (excluding any bonus and any penalty-free withdrawals) = $150,000 - $0 = ......$150,000 Multiplied by the withdrawal charge...............................................................x 8.5% ...........................................................................................$ 12,750 Therefore, we would withdraw $140,000 from the Contract and pay you $127,250 ($140,000 less the $12,750 withdrawal charge). Partial withdrawal under the partial withdrawal privilege followed by a full withdrawal: o You take a partial withdrawal of $9,000 in the second Contract Year. The total amount available under the partial withdrawal privilege at this time is $15,000. The $9,000 withdrawn is not subject to a withdrawal charge and will not reduce the Withdrawal Charge Basis. o You take a full withdrawal in the third Contract Year when the Contract Value is $140,000 and the withdrawal charge is 8.5%. At this time, there are no Purchase Payments that are beyond the withdrawal charge period. Because this is a full withdrawal, the partial withdrawal privilege does not apply and we will assess the withdrawal charge against the entire Withdrawal Charge Basis. We calculate the withdrawal charge for the full withdrawal as follows: The Withdrawal Charge Basis is equal to total Purchase Payments (excluding any bonus) less any Purchase Payments withdrawn (excluding any bonus and any penalty-free withdrawals) = $150,000 - $0 = ......$150,000 Multiplied by the withdrawal charge..............................................................x 8.5% ...........................................................................................$ 12,750 Therefore, upon the full withdrawal, we would withdraw $140,000 from the Contract and pay you $127,250 ($140,000 less the $12,750 withdrawal charge). In this example, your total distributions from the Contract after deducting the withdrawal charges are $136,250. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 98 Partial withdrawal in excess of the partial withdrawal privilege followed by a full withdrawal: o You take a partial withdrawal of $18,000 in the second Contract Year when the withdrawal charge is 8.5%. The total amount available under the partial withdrawal privilege at this time is $15,000, so $3,000 of the withdrawal is subject to a withdrawal charge and will reduce the Withdrawal Charge Basis. We calculate the withdrawal charge for the partial withdrawal as follows: The amount you will receive that is subject to a withdrawal charge..................................$3,000 Multiplied by the withdrawal charge.................................................................x 8.5% ............................................................................................$ 255 Therefore, we would withdraw $18,255 from the Contract and pay you $18,000. o Continuing the example, assume you take a full withdrawal in the third Contract Year when the Contract Value is $140,000 and the withdrawal charge is 8.5%. At this time, there are no Purchase Payments that are beyond the withdrawal charge period. Because this is a full withdrawal, the partial withdrawal privilege does not apply and we will assess the withdrawal charge against the entire Withdrawal Charge Basis. We calculate the withdrawal charge for the full withdrawal as follows: The Withdrawal Charge Basis is equal to total Purchase Payments (excluding any bonus) less any Purchase Payments withdrawn (excluding any bonus and any penalty-free withdrawals) = $150,000 - $3,000 = ..$147,000 Multiplied by the withdrawal charge..............................................................x 8.5% ..........................................................................................$ 12,495 Therefore, upon the full withdrawal, we would withdraw $140,000 from the Contract and pay you $127,505 ($140,000 less the $12,495 withdrawal charge). In this example, your total distributions from the Contract after deducting the withdrawal charges are $145,505. A series of partial withdrawals under the partial withdrawal privilege followed by a full withdrawal: o You take the maximum amount available under the partial withdrawal privilege each year for five years (total distributions = $75,000). The $75,000 withdrawn is not subject to a withdrawal charge and will not reduce the Withdrawal Charge Basis. o In the sixth Contract Year, the Contract Value is $14,000. Although the maximum available under the partial withdrawal privilege is $15,000, there is only $14,000 of Contract Value available. Assuming you withdraw the $14,000, the partial withdrawal privilege will not apply because this is a full withdrawal. At this time, there are no Purchase Payments that are beyond the withdrawal charge period. Because this is a full withdrawal, we will assess the withdrawal charge against the entire Withdrawal Charge Basis. The withdrawal charge in the sixth Contract Year is 6%. We calculate the withdrawal charge for the full withdrawal as follows: The Withdrawal Charge Basis is equal to total Purchase Payments (excluding any bonus) less any Purchase Payments withdrawn (excluding any bonus and any penalty-free withdrawals) = $150,000 - $0 = ......$150,000 Multiplied by the withdrawal charge.............................................................x 6% .........................................................................................$ 9,000
Therefore, upon the full withdrawal, we would withdraw $14,000 from the Contract and pay you $5,000 ($14,000 less the $9,000 withdrawal charge). In this example, your total distributions from the Contract after deducting the withdrawal charges are $80,000. Alternatively, the largest available partial withdrawal at this time is $4,000, as this amount would reduce the Contract Value to the minimum required Contract Value of $10,000. If instead of a full withdrawal, you take a partial withdrawal of $4,000, it will not be subject to a withdrawal charge. After four additional years, the initial Purchase Payment will be beyond its withdrawal charge period and you could then withdraw all remaining Contract Value without incurring a withdrawal charge. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 99 - -------------------------------------------------------------------------------- FOR SERVICE OR MORE INFORMATION In order to help you understand how your Contract Values vary over time and under different sets of assumptions, we will provide you with certain personalized illustrations upon request and free of charge. You can request illustrations by contacting your registered representative. Illustrations demonstrate how your Contract Value, cash surrender value, death benefits, and (if applicable) the PB Value under the GMIB and/or GPWB change based on the investment experience of the Investment Options or the hypothetical rate of return. The illustrations are hypothetical and may not be used to project or predict investment results. You can review and copy information about us, the Separate Account, the prospectus and the SAI at the SEC's Public Reference Room in Washington, D.C. You may obtain information about the operation of the Public Reference Room by calling (202) 551-8090. The SEC also maintains a website (http://www.sec.gov). The prospectus, the SAI and other information about the Contract are available on the EDGAR database on the SEC's website. If you do not have access to the website you can get copies of information from the website upon payment of a duplication fee by writing to: Public Reference Section of the Commission 100 F Street, NE Washington, DC 20549 You can contact us at: Allianz Life Insurance Company of North America 5701 Golden Hills Drive Minneapolis, MN 55416 (800) 624-0197 If you need service (such as changes in Contract information, inquiry into Contract Values, to request a withdrawal, etc.), please contact our Service Center: Allianz Service Center P.O. Box 1122 Southeastern, PA 19398-1122 (800) 624-0197 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- 100 This page intentionally left blank - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract Prospectus May 1, 2008 - -------------------------------------------------------------------------------- PART B - SAI 1 STATEMENT OF ADDITIONAL INFORMATION ALLIANZ REWARDS(TM) INDIVIDUAL FLEXIBLE PURCHASE PAYMENT VARIABLE DEFERRED ANNUITY CONTRACT ISSUED BY ALLIANZ LIFE(R) VARIABLE ACCOUNT B (THE SEPARATE ACCOUNT) AND ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA (ALLIANZ LIFE, WE, US, OUR) MAY 1, 2008 This is not a prospectus. This Statement of Additional Information (SAI) should be read in conjunction with the prospectus for the Contract, which is dated the same date as this SAI. Definitions of capitalized terms can be found in the glossary in the prospectus. The prospectus is incorporated in this SAI by reference. The prospectus for the Contract concisely sets forth information that a prospective investor ought to know before investing. For a copy of the Contract's prospectus, call or write us at: ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA 5701 Golden Hills Drive Minneapolis, MN 55416 (800) 624-0197 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ALLIANZ LIFE..........................................2 EXPERTS...............................................2 LEGAL OPINIONS........................................2 DISTRIBUTOR...........................................2 REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE.....3 FEDERAL TAX STATUS....................................3 GENERAL...........................................3 DIVERSIFICATION...................................4 OWNER CONTROL.....................................4 CONTRACTS OWNED BY NON-INDIVIDUALS................5 INCOME TAX WITHHOLDING............................5 REQUIRED DISTRIBUTIONS............................5 QUALIFIED CONTRACTS...............................6 ANNUITY PROVISIONS....................................7 ANNUITY UNITS/CALCULATING VARIABLE ANNUITY PAYMENTS..............................7 MORTALITY AND EXPENSE RISK GUARANTEE..................7 INFORMATION ON MAY 2003 CONTRACTS.....................8 INFORMATION ON CONTRACTS THAT WERE OFFERED BEFORE APRIL 29, 2005............................15 INFORMATION ON ORIGINAL AND SEPTEMBER 2002 CONTRACTS.16 FINANCIAL STATEMENTS.................................18 APPENDIX - CONDENSED FINANCIAL INFORMATION...........19 REWSAI-0508 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 2 ALLIANZ LIFE Allianz Life is a stock life insurance company organized under the laws of the state of Minnesota in 1896. We are a subsidiary of Allianz of America, Inc. (AZOA), a financial holding company. AZOA is a subsidiary of Allianz SE, a provider of integrated financial services. Allianz SE is headquartered in Munich, Germany, and has sales outlets throughout the world. We offer fixed and variable annuities, individual and group life insurance, and long-term care insurance. Allianz Life does not have a separate custodian for the assets owned through the Separate Account. Most mutual fund shares are not in certificated form, and as such, Allianz Life in effect acts as self custodian for the non-certificated shares we own through the Separate Account. EXPERTS The financial statements of Allianz Life Variable Account B as of and for the year ended December 31, 2007 (including the statements of changes in net assets for each of the years or periods in the two year period then ended) and the consolidated financial statements and supplemental schedules of Allianz Life as of December 31, 2007 and 2006 and for each of the years in the three-year period ended December 31, 2007, included in this SAI have been audited by KPMG LLP, independent registered public accounting firm, as indicated in their report included in this SAI and are included herein in reliance upon such reports and upon the authority of said firm as experts in accounting and auditing. The principal business address of KPMG LLP is 4200 Wells Fargo Center, Minneapolis, MN. LEGAL OPINIONS Stewart D. Gregg, Senior Securities Counsel of Allianz Life, has provided legal advice on certain matters in connection with the issuance of the Contracts. DISTRIBUTOR Allianz Life Financial Services, LLC (Allianz Life Financial (previously USAllianz Investor Services, LLC)), a wholly owned subsidiary of Allianz Life Insurance Company of North America, acts as the distributor. Allianz Life Financial does not sell the Contracts on a retail basis. Rather, Allianz Life Financial enters into selling agreements with other third-party broker/dealers registered under the Securities Exchange Act of 1934 (selling firms) for the sale of the Contracts. The Contracts are offered to the public on a continuous basis. We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering. We pay commissions for sales of the Contracts. Allianz Life Financial passes through most of the commissions it receives to selling firms for their sales. Allianz Life Financial received sales compensation with respect to the Contracts issued under Allianz Life Variable Account B in the following amounts during the last three calendar years:
------------- ---------------------------------- -------------------------------------- ------------ AGGREGATE AMOUNT OF COMMISSIONS AGGREGATE AMOUNT OF COMMISSIONS CALENDAR PAID TO RETAINED BY ALLIANZ LIFE FINANCIAL YEAR ALLIANZ LIFE FINANCIAL AFTER PAYMENTS TO SELLING FIRMS ------------- ---------------------------------- -------------------------------------- ------------- ---------------------------------- -------------------------------------- 2005 $232,215,191.60 $0 ------------- ---------------------------------- -------------------------------------- ------------- ---------------------------------- -------------------------------------- 2006 $207,968,987.55 $0 ------------- ---------------------------------- -------------------------------------- ------------- ---------------------------------- -------------------------------------- 2007 $218,444,880.80 $0 ------------- ---------------------------------- --------------------------------------
We may fund Allianz Life Financial's operating and other expenses including: overhead; legal and accounting fees; registered representative training; deferred compensation and insurance benefits for registered representatives; compensation for the Allianz Life Financial management team; and other expenses associated with the Contracts. We also pay for Allianz Life Financial's operating and other expenses, including overhead, legal and accounting fees. As described above, Allianz Life Financial sells its Contracts primarily through "wholesaling", in which Allianz Life Financial sells contracts through a large group of mostly non-affiliated broker/dealer firms. Currently, Allianz Life Financial has agreements with approximately 1,116 retail broker/dealers to sell its Contracts. All of the broker/dealer firms except one are non-affiliated. As described in the prospectus, Allianz Life Financial may pay marketing support payments to certain of these firms for providing marketing support services in the sale of the Contracts. Currently, Allianz Life Financial makes marketing support payments to approximately 40-45 firms. These payments vary in amount. In 2007, the five firms receiving the largest payments, ranging from $525,320 to $1,867,575, are listed below. Marketing support payments may also be made to managers of Investment Options or their affiliates for providing Investment Option information and marketing support. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 3 FIRM NAME - --------------------------------------- - --------------------------------------- 1 LPL Financial Network 2 AIG Advisor Group 3 National Planning Holdings 4 H D Vest Investments 5 Raymond James REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE We may reduce or eliminate the amount of the withdrawal charge on the Contracts when Contract sales are made to individuals or to a group of individuals in a manner that results in savings of sales expenses. We will determine the entitlement to a reduction of the withdrawal charge after examination of the following factors: o the size of the group; o the total amount of Purchase Payments expected to be received from the group; o the nature of the group for which the Contracts are purchased, and the persistency expected in that group (for example, the expectation that the Owners will continue to hold the Contracts for a certain period of time); o the purpose for which the Contracts are purchased and whether that purpose makes it likely that expenses will be reduced; and o any other circumstances which we believe to be relevant to determining whether reduced sales or administrative expenses may be expected. None of these reductions are contractually guaranteed. We may eliminate the withdrawal charge when the Contracts are issued to an officer, director or employee of Allianz Life or any of its affiliates. We may reduce or eliminate the withdrawal charge when the Contract is sold by a registered representative appointed with Allianz Life to any members of his or her immediate family and the commission is waived. In no event will any reduction or elimination of the withdrawal charge be permitted where the reduction or elimination will be unfairly discriminatory to any person. FEDERAL TAX STATUS NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON OUR UNDERSTANDING OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. WE 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. WE DO 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 (the Code) governs taxation of annuities in general. An Owner is generally 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. For a lump sum payment received as a full withdrawal (total redemption) or death benefit, the recipient is taxed on the portion of the payment that exceeds the cost basis of the Contract (your investment). 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. A partial withdrawal results in tax on any gain in the Contract (for example, the difference, if any, between the Contract Value immediately before the withdrawal, unreduced by any charges, and the Contract's cash basis). Lump sum withdrawals, whether partial or full, may also be subject to a federal penalty tax equal to 10% of the taxable amount. For Annuity Payments, the portion of each payment included in income equals the excess of the payment over the exclusion amount. The exclusion amount for Annuity Payments based on a variable Annuity Option is determined by dividing the investment in the Contract (adjusted for any period certain or refund guarantee) by the number of years over which the annuity is expected to be paid (which is determined by Treasury Regulations). The exclusion amount for Annuity Payments based on a fixed Annuity Option is determined by multiplying the Annuity Payment by the ratio that the investment in the Contract (adjusted for any period certain or refund guarantee) bears to the expected return under the Contract. Annuity Payments received after the investment in the Contract has been recovered (for example, when the total of the excludable amounts equal the investment in the Contract) are fully taxable. The taxable portion of an Annuity - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 4 Payment is taxed at ordinary income tax rates. Partial Annuitizations are taxed as partial withdrawals, not as Annuity Payments, until the entire Contract Value has been applied to Annuity Payments. For certain types of Qualified Contracts there may be no cost basis in the Contract within the meaning of Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts should seek competent financial advice about the tax consequences of any distributions. We are taxed as a life insurance company under the Code. For federal income tax purposes, the Separate Account is not a separate entity from us, and its operations form a part of Allianz Life. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Contract. We have the right to modify the Contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity Owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend the above discussion as tax advice. DIVERSIFICATION Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable annuity contracts. The Code provides that a variable annuity contract will not be treated as an annuity contract for any period (and any subsequent period) for which the investments are not adequately diversified in accordance with regulations prescribed by the United States Treasury Department (Treasury Department). Disqualification of the Contract as an annuity contract would result in the imposition of federal income tax to the Owner with respect to earnings allocable to the Contract before the receipt of Annuity Payments under the Contract. The Code contains a safe harbor provision which provides that annuity contracts, such as the Contract, 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 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 Options underlying variable contracts such as the Contract. 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 these regulations, an Investment Option will be deemed adequately diversified if: o no more than 55% of the value of the total assets of the Investment Option is represented by any one investment; o no more than 70% of the value of the total assets of the Investment Option is represented by any two investments; o no more than 80% of the value of the total assets of the Investment Option is represented by any three investments; and o no more than 90% of the value of the total assets of the Investment Option 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." We intend that all Investment Options underlying the Contracts will be managed by the investment advisers in such a manner as to comply with these diversification requirements. OWNER CONTROL The Treasury Department has indicated that the diversification regulations do not provide guidance regarding the circumstances in which Owner control of the investments of the Separate Account will cause the 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. In certain circumstances, owners of variable annuity contracts have been considered for federal income tax purposes to be the owners of the assets of the separate account, supporting their contracts due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets. There is little guidance in this area, and some features of our Contracts, such as the flexibility of an Owner to allocate Purchase Payments and transfer amounts among the investment divisions of the Separate Account, have not been explicitly addressed in published rulings. While we believe that the Contracts do not give Owners investment control over Separate Account assets, we reserve the right to modify the Contracts as necessary to prevent an Owner from being treated as the owner of the Separate Account assets supporting the Contract. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 5 CONTRACTS OWNED BY NON-INDIVIDUALS Under Section 72(u) of the Code, the investment earnings on Purchase Payments for the Contracts will be taxed currently to the Owner if the Owner is a non-individual, for example, 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 an individual or to Contracts held by qualified retirement plans. Purchasers should consult a tax adviser before purchasing a Contract to be owned by a non-individual. INCOME TAX WITHHOLDING All distributions or the portion thereof which is included in the gross income of the 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 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 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: o 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 ten years or more; or o distributions which are required minimum distributions; or o the portion of the distributions not included in gross income (for example, returns of after-tax contributions); or o hardship withdrawals. Participants should consult a tax adviser regarding withholding requirements. REQUIRED DISTRIBUTIONS In order to be treated as an annuity contract for federal income tax purposes, Section 72(s) of the Code requires any non-qualified contract to contain certain provisions specifying how your interest in the contract will be distributed in the event of the death of an owner. Specifically, with regard to this Contract, Section 72(s) requires that: o if any Owner dies on or after the Income Date, but before the time the entire interest in the Contract has been distributed, the entire interest in the Contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such Owner's death; and o if any Owner dies before the Income Date, the entire interest in the Contract will be distributed within five years after the date of such Owner's death. These requirements will be considered satisfied as to any portion of an Owner's interest which is payable to or for the benefit of a designated Beneficiary and which is distributed over the life of such designated Beneficiary or over a period not extending beyond the life expectancy of that Beneficiary, provided that such distributions begin within one year of the Owner's death. The designated Beneficiary refers to an individual designated by the Owner as a Beneficiary and to whom ownership of the Contract passes by reason of death. However, if the designated Beneficiary is the surviving spouse of the deceased Owner, the Contract may be continued with the surviving spouse as the new Owner. If the Owner is a non-individual, then the death or change of an Annuitant is treated as the death of the Owner. Non-Qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. Other rules may apply to Qualified Contracts. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 6 QUALIFIED CONTRACTS The Contract is 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 Contract varies with the type of plan and terms and conditions of each specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a Qualified Contract may be subject to the terms and conditions of the plan regardless of the terms and conditions of the Contracts issued pursuant to the plan. Some retirement plans are subject to distribution and other requirements that are not incorporated into our administrative procedures. We are not bound by the terms and conditions of such plans to the extent such terms conflict with the terms of a Contract, unless we specifically consent to be bound. Owners, participants and Beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contracts comply with applicable law. General descriptions of the types of qualified plans with which the Contracts may be used can be found in the prospectus. 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 before 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 us in connection with qualified plans may utilize annuity tables that do not differentiate on the basis of sex. These annuity tables will also be available for use in connection with certain non-qualified deferred compensation plans. Qualified plans include special provisions restricting Contract provisions that may otherwise be available and described in this SAI. 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. Many withdrawals from Qualified Contracts can be rolled over to an IRA or another qualified retirement plan. If you receive a withdrawal from a Qualified Contract that could be rolled over and you do not elect to make a direct rollover of that amount to an IRA or qualified plan, by law 20% of the taxable amount must be withheld by us for taxes. In situations where this mandatory tax withholding does not apply, other tax amounts may be withheld unless you elect out of the withholding. You may request more detailed information about income tax withholding at the time of a withdrawal. For more information see prospectus section 8, Taxes - Distributions - Qualified Contracts. 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 included 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. For more information see prospectus section 8, Taxes - 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. We may choose not to allow pension or profit-sharing plans to purchase this Contract. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 7 ANNUITY PROVISIONS We base Traditional Annuity Payments upon the following. o Whether you request fixed payments, variable payments, or a combination of both fixed and variable Traditional Annuity Payments. o The Contract Value (less any deduction we make to reimburse ourselves for premium tax that we pay) on the Income Date. o The Annuity Option you select. o The age of the Annuitant and any joint Annuitant. o The sex of the Annuitant and any joint Annuitant where allowed. We guarantee fixed Traditional Annuity Payments as to dollar amount and the amount does not vary with the investment experience of an Investment Option. If you request fixed Traditional Annuity Payments, the amount of Contract Value that you apply to fixed Traditional Annuity Payments will be placed in our general account and it will not participate in the investment experience of the Investment Options. Variable payments are not predetermined as to dollar amount and will vary in amount with the investment experience of the Investment Option(s) you select. We use Annuity Units to determine the amount of any variable Traditional Annuity Payments you elect to receive. ANNUITY UNITS/CALCULATING VARIABLE ANNUITY PAYMENTS The first variable Traditional Annuity Payment is equal to the amount of adjusted Contract Value you are applying to variable Traditional Annuity Payments on the Income Date, divided first by $1,000 and then multiplied by the appropriate variable annuity payout factor for each $1,000 of value for the Annuity Option you selected. We will then purchase a fixed number of Annuity Units on the Income Date for each subaccount of the Investment Options you select. We do this by dividing the amount of the first Traditional Annuity Payment among the subaccounts for your selected Investment Options according to your most recent allocation instructions. We then divide the amount in each subaccount by the Annuity Unit value for each subaccount on the Income Date. We determine the Annuity Unit value on each Business Day as follows: o multiply the Annuity Unit value for the immediately preceding Business Day by the net investment factor for the current Business Day; and o divide by the assumed net investment factor for the current Business Day. The assumed net investment factor for the current Business Day is one plus the annual AIR adjusted to reflect the number of calendar days that have elapsed since the immediately preceding Business Day. We will allow an AIR of 5% based on your selection and applicable law. Thereafter, the number of Annuity Units in each subaccount generally remains unchanged unless you make a transfer. However, the number of Annuity Units will change if Annuity Option 3 is in effect, one Annuitant dies, and the Owner requests Traditional Annuity Payments at 75% or 50% of the previous payment amount. All calculations will appropriately reflect the payment frequency you selected. The Traditional Annuity Payment on each subsequent payment date is equal to the sum of the Traditional Annuity Payments for each subaccount. We determine the Traditional Annuity Payment for each subaccount by multiplying the number of Annuity Units allocated to the subaccount by the Annuity Unit value for that subaccount on the payment date. MORTALITY AND EXPENSE RISK GUARANTEE Allianz Life guarantees that the dollar amount of each Variable Annuity Payment after the first Annuity Payment will not be affected by variations in mortality and expense experience. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 8 INFORMATION ON MAY 2003 CONTRACTS The May 2003 Contracts were replaced by the currently offered Contracts beginning in May 2006. The May 2003 Contracts are no longer offered for sale, but Owners of these Contracts can still make additional Purchase Payments. Therefore, we are including information on these Contracts in this SAI. The primary difference between May 2003 Contracts and the currently offered Contracts is that the May 2003 Contracts offered the optional Traditional PRIME Benefit and the optional Enhanced PRIME Benefit. THE PRIME BENEFITS The PRIME Benefits include a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit and carry an additional M&E charge. The PRIME Benefits were available for selection at Contract issue. AFTER THE ISSUE DATE, NEITHER THE TRADITIONAL PRIME BENEFIT NOR THE ENHANCED PRIME BENEFIT CAN BE ADDED TO, CHANGED, OR REMOVED FROM A CONTRACT. IF YOUR CONTRACT INCLUDES A PRIME BENEFIT AND YOU DO NOT EXERCISE EITHER THE GMIB OR GPWB, YOU WILL HAVE INCURRED HIGHER CONTRACT EXPENSES WITHOUT RECEIVING ANY ADVANTAGE FROM THE PRIME BENEFIT. PLEASE REFER TO THE APPLICABLE ENDORSEMENTS AND/OR RIDERS TO YOUR CONTRACT FOR THE SPECIFIC TERMS AND CONDITIONS OF THE GMIB AND GPWB. We designed the PRIME Benefits to give you options on how to turn your accumulated retirement assets into a stream of retirement income. The GMIBs provide a guaranteed minimum fixed income in the form of Annuity Payments (GMIB Payments). Depending on the Annuity Option you select, the GMIB can provide guaranteed lifetime income, but if the Annuitant(s) die shortly after the Income Date, the Payee may receive less than your investment in the Contract. The GPWBs provide a guaranteed minimum amount of income in the form of annual partial withdrawals (GPWB Payments). However, GPWB Payments are not guaranteed for life and you could outlive your payment stream. You must wait ten complete Contract Years before you can exercise a GMIB or GPWB, and they can only be exercised within 30 days after a Contract Anniversary. Bonus amounts do not become part of the PB Value that is based on Contract Value until they are vested. You will not receive the benefit of the bonus on the parts of the PB Value that are based on Purchase Payments. THE PRIME BENEFITS DO NOT CREATE CONTRACT VALUE OR GUARANTEE THE PERFORMANCE OF ANY INVESTMENT OPTION. Benefit payments under the PRIME Benefits are based on the PB Value. Under Traditional PRIME Benefit the PB Value is total Purchase Payments adjusted for partial withdrawals and Partial Annuitizations. Under the Enhanced PRIME Benefit the PB Value is either the MAV, 3% AIA, or 7% AIA. THE PB VALUE UNDER THE ENHANCED PRIME BENEFIT WILL NEVER BE LESS THAN THE PB VALUE UNDER THE TRADITIONAL PRIME BENEFIT, BUT THEY MAY BE EQUAL. YOU CAN ONLY ACCESS THE PB VALUE BY EXERCISING THE GMIB OR GPWB. CANCELING THE PRIME BENEFITS ONCE YOU EXERCISE A PRIME BENEFIT, YOU CANNOT CANCEL IT. However, you can terminate the GPWB by electing to stop GPWB Payments and instead do one of the following. o Take an Excess Withdrawal of the entire Contract Value, including any vested bonus, less any withdrawal charge and any deduction we make to reimburse ourselves for premium tax (available at anytime). o Request Traditional Annuity Payments under a Full Annuitization based on the entire Contract Value, including any vested bonus, less any deduction we make to reimburse ourselves for premium tax (available at anytime). o Request GMIB Payments under a Full Annuitization based on the entire remaining PB Value (only available within 30 days following a Contract Anniversary and before we make the next GPWB Payment). If you take an Excess Withdrawal of the entire Contract Value, the Contract will terminate and you may receive less money than you would have received under the GPWB. If you request fixed Traditional Annuity Payments or GMIB Payments, the GPWB will terminate and we will no longer assess the Separate Account annual expense on that portion of the Contract. If you request variable Traditional Annuity Payments, the GPWB will terminate and we will reduce the Separate Account annual expense to 1.70% on that portion of the Contract. Although you can elect to terminate the GPWB, you cannot elect to terminate the GMIB. If you do elect to stop GPWB Payments: o the GPWB will terminate, o the Accumulation Phase of the Contract will end, o the GMDB will terminate, and - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 9 o if you request Annuity Payments, that portion of the Contract will terminate as indicated in prospectus section 3, The Annuity Phase. PB VALUE UNDER THE TRADITIONAL PRIME BENEFIT The PB Value before the date of any Owner's death or exercise of the GPWB is equal to: o total Purchase Payments received (not including any bonus), o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn (including any withdrawal charge) for each traditional annuitization or withdrawal taken, and o if you took a GMIB Partial Annuitization, reduced by the dollar amount applied to the GMIB Payments. ANY TRADITIONAL PARTIAL ANNUITIZATIONS OR WITHDRAWALS YOU TAKE MAY REDUCE THE PB VALUE BY MORE THAN THE AMOUNT ANNUITIZED OR WITHDRAWN. If the Contract Value at the time of annuitization or withdrawal is less than the PB Value, we will deduct more than the amount annuitized or withdrawn from the PB Value. IF YOU EXERCISE THE GPWB, THE PB VALUE WILL STOP INCREASING ON THE DATE YOU BEGIN RECEIVING GPWB PAYMENTS AND IT WILL DECREASE: o on a dollar for dollar basis with each GPWB Payment we make; and o proportionately by the percentage of any Contract Value (including any vested bonus) taken as an Excess Withdrawal (including any withdrawal charge) for each Excess Withdrawal taken. PB VALUE UNDER THE ENHANCED PRIME BENEFIT The PB Value before the date of any Owner's death or exercise of the GPWB is equal to either: o the AIA; or o the MAV. We calculate the AIA two ways. We increase your total Purchase Payments (not including any bonus) adjusted for partial withdrawals on each Contract Anniversary by: a) 3%, and b) 7%*. * Not available in the state of Washington. If the MAV is greater than both the 3% AIA and the 7% AIA, the PB Value is equal to the MAV. If the 3% AIA is greater than the MAV, you can decide whether to set the PB Value equal to the 3% AIA or the 7% AIA. If only the 7% AIA is greater than the MAV, you can decide whether to set the PB Value equal to the 7% AIA or the MAV. THE 7% AIA MAY BE MORE LIMITED THAN THE 3% AIA OR THE MAV BECAUSE: o the 7% AIA is subject to a maximum of two times Purchase Payments (not including any bonus) received in the first five Contract Years; o under the GMIB, the guaranteed fixed payout rates for the 7% AIA are lower and there are fewer available Annuity Options; and o under the GPWB, you can only receive GPWB Payments of up to 5% of the PB Value each year. If you take a GMIB Partial Annuitization, the AIA and MAV will decrease, but will continue to be calculated. If you take a GMIB Full Annuitization or exercise the GPWB, we will establish a PB Value and the AIA and MAV will cease to exist. After you exercise the GPWB, only the PB Value will remain and continue to be calculated. CALCULATING THE AIAS For each AIA that was effective on the Issue Date, the AIA on the Issue Date is equal to the initial Purchase Payment (not including any bonus) received on the Issue Date. For any AIA that was effective after the Issue Date, the AIA on the endorsement effective date is equal to the Contract Value (including any vested bonus) on the endorsement effective date. ON EACH BUSINESS DAY OTHER THAN A CONTRACT ANNIVERSARY, each AIA is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments (not including any bonus) received that day, o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge), and o if you took a GMIB Partial Annuitization that day based on the: - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 10 - 3% AIA, we will reduce the 3% AIA by the dollar amount applied to GMIB Payments and we will reduce the 7% AIA proportionately by the percentage of the 3% AIA applied to GMIB Payments. - 7% AIA, we will reduce the 7% AIA by the dollar amount applied to GMIB Payments and we will reduce the 3% AIA proportionately by the percentage of the 7% AIA applied to GMIB Payments. - MAV, we will reduce both the 3% AIA and the 7% AIA proportionately by the percentage of the MAV applied to GMIB Payments. ON EACH CONTRACT ANNIVERSARY BEFORE THE OLDER OWNER'S 81ST BIRTHDAY,* each AIA is equal to its value on the immediately preceding Business Day increased by 3% for Contracts with the 3% AIA, and increased by 7% for Contracts with the 7% AIA. We then process any transactions received on that Contract Anniversary (such as additional Purchase Payments, withdrawals, and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. BEGINNING WITH THE CONTRACT ANNIVERSARY THAT OCCURS ON OR AFTER THE OLDER OWNER'S 81ST BIRTHDAY,* we calculate each AIA in the same way that we do on each Business Day other than a Contract Anniversary. * If the Contract is owned by a non-individual (for example, a qualified plan or trust), we will use the Annuitant's age. WE LIMIT THE 3% AIA TO A MAXIMUM OF: o 1.5 times total Purchase Payments received (not including any bonus), o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to each traditional Partial Annuitization or withdrawal (including any withdrawal charge) for each traditional annuitization or withdrawal taken, and o reduced proportionately by the percentage of GMIB value applied to each GMIB Partial Annuitization. WE LIMIT THE 7% AIA TO A MAXIMUM OF: o 2 times the total Purchase Payments (not including any bonus) received in the first five Contract Years, o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to each traditional Partial Annuitization or withdrawal (including any withdrawal charge) for each traditional annuitization or withdrawal taken, and o reduced proportionately by the percentage of GMIB value applied to each GMIB Partial Annuitization. CALCULATING THE MAV The MAV on the Issue Date is equal to your initial Purchase Payment (not including any bonus) received on the Issue Date. ON EACH BUSINESS DAY OTHER THAN A CONTRACT ANNIVERSARY, the MAV is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments (not including any bonus) received that day, o reduced proportionately by the percentage of Contract Value (including any vested bonus) applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge), and o if you take a GMIB Partial Annuitization that day based on the: - MAV, we will reduce the MAV by the dollar amount applied to GMIB Payments, and - 3% AIA or the 7% AIA, we will reduce the MAV proportionately by the percentage of the 3% AIA or 7% AIA applied to GMIB Payments. ON EACH CONTRACT ANNIVERSARY BEFORE THE OLDER OWNER'S 81ST BIRTHDAY,* the MAV is equal to the greater of its value on the immediately preceding Business Day, or the Contract Value (including any vested bonus) that occurs on that Contract Anniversary before we process any transactions. We then process any transactions we received on that Contract Anniversary (such as additional Purchase Payments, withdrawals, and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. BEGINNING WITH THE CONTRACT ANNIVERSARY THAT OCCURS ON OR AFTER THE OLDER OWNER'S 81ST BIRTHDAY,* we calculate the MAV in the same way that we do on each Business Day other than a Contract Anniversary. * If the Contract is owned by a non-individual (for example, a qualified plan or trust), we will use the Annuitant's age. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 11 ANY TRADITIONAL PARTIAL ANNUITIZATIONS OR WITHDRAWALS YOU TAKE MAY REDUCE THE AIAS OR THE MAV BY MORE THAN THE AMOUNT ANNUITIZED OR WITHDRAWN. If the Contract Value at the time of annuitization or withdrawal is less than the AIA (or MAV as appropriate), we will deduct more than the amount annuitized or withdrawn from the AIA (or MAV). IF YOU EXERCISE THE GPWB, THE PB VALUE WILL STOP INCREASING ON THE DATE YOU BEGIN RECEIVING GPWB PAYMENTS AND IT WILL DECREASE: o on a dollar for dollar basis with each GPWB Payment we make; and o proportionately by the percentage of any Contract Value (including any vested bonus) taken as an Excess Withdrawal (including any withdrawal charge) for each withdrawal taken. USING THE PRIME BENEFITS The GPWB guarantees a minimum amount of income in the form of partial withdrawals (GPWB Payments) during the Accumulation Phase. The GMIB guarantees a minimum amount of fixed income in the form of Annuity Payments (GMIB Payments) during the Annuity Phase. Depending on the Annuity Option you select, the GMIB can provide guaranteed lifetime income, but if the Annuitant(s) die shortly after the Income Date, the Payee may receive less than your investment in the Contract. You must hold your Contract for ten complete Contract Years before you can exercise the GPWB or GMIB and you can only exercise the GPWB or GMIB within 30 days following a Contract Anniversary. You cannot exercise the GPWB or GMIB before the expiration of the ten-year waiting period. IF YOU EXERCISE THE GPWB: o You can no longer make additional Purchase Payments to the Contract. o Partial Annuitizations are no longer available. o The additional M&E charge for the PRIME Benefit will continue until both the GPWB and GMIB terminate. o If you have the Enhanced GMDB, the additional M&E charge for the GMDB will continue as long as the Enhanced GMDB value is greater than zero. o The partial withdrawal privilege will no longer be available to you, however, you can still take GPWB Payments and Excess Withdrawals up to the annual GPWB Maximum without a withdrawal charge. Excess Withdrawals (including a full withdrawal of the Contract Value) are available while you are receiving GPWB Payments, however, amounts withdrawn in excess of the annual GPWB Maximum (including GPWB Payments) are subject to a withdrawal charge as set out in prospectus section 7, Expenses - Withdrawal Charge. o The systematic withdrawal and minimum distribution programs will no longer be available to you and if you are participating in these programs, your participation will stop. o The Contract Value will continue to fluctuate as a result of market performance, and it will decrease on a dollar for dollar basis with each GPWB Payment and any Excess Withdrawals. o The GMDB value will no longer increase, each GPWB Payment will reduce the GMDB value on a dollar for dollar basis and any Excess Withdrawals will reduce the GMDB value proportionately by the percentage of Contract Value withdrawn. o The PB Value will no longer increase, each GPWB Payment will reduce the PB Value on a dollar for dollar basis and any Excess Withdrawals will reduce the PB Value proportionately by the percentage of Contract Value withdrawn. o Excess Withdrawals will not affect the GPWB Payment amount or frequency, but they may decrease the time over which you will receive GPWB Payments. IF YOU EXERCISE A GMIB UNDER A FULL ANNUITIZATION: o The Accumulation Phase will end and the Annuity Phase will begin. o The portion of the Contract that you apply to the GMIB will no longer be subject to the Separate Account annual expense, but any portion of the Contract that has been applied to variable Traditional Annuity Payments will continue to be subject to a 1.70% Separate Account annual expense. o If you have not exercised the GPWB, it will no longer be available to you, and you will no longer be able to make additional Purchase Payments to the Contract. o If you exercised the GPWB, GPWB Payments will stop and the GPWB will terminate. o The GMDB will terminate. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 12 IF YOU EXERCISE A GMIB UNDER A PARTIAL ANNUITIZATION*: o The Annuity Phase will begin and the Accumulation Phase will continue. o The portion of the Contract that you apply to the GMIB will no longer be subject to the Separate Account annual expense, but any portion of the Contract that is in the Accumulation Phase or that has been applied to variable Traditional Annuity Payments will continue to be subject to the appropriate Separate Account annual expense. o If any portion of the Contract is still in the Accumulation Phase, you may be able to make additional Purchase Payments to the Contract, but you cannot make additional Purchase Payments to any portion of the Contract that is in the Annuity Phase. o The GPWB will continue to be available to you. o The Partial Annuitization will reduce the Contract Value and GMDB value proportionately by the percentage of PB Value you apply to the GMIB. o GMIB Payments will not affect the Contract Value available under the portion of the Contract that is in the Accumulation Phase. * Not available after you exercise the GPWB, or if the PB Value is less than the Contract Value. In addition, if you exercise the GPWB after taking a GMIB Partial Annuitization, all payments (GMIB Payments and GPWB Payments) will be treated as withdrawals and not annuity payments for tax purposes. However, once the entire Contract Value has been applied to Annuity Payments, we intend to treat all Annuity Payments we make after that as annuity payments (and not withdrawals) for tax purposes. Under the PRIME Benefits the Owner controls: o when to exercise a benefit, o which benefit(s) to exercise, and o the amount of the GPWB Payment (subject to the GPWB Maximum) and Excess Withdrawals from the portion of the Contract that is in the Accumulation Phase. GPWB PAYMENTS In order to begin receiving GPWB Payments, you must submit a GPWB Payment election form to our Service Center after the expiration of the ten-year waiting period and within 30 days following a Contract Anniversary. GPWB Payments will not begin until your request has been received at our Service Center and determined to be in good order. If you exercise the GPWB, we will make GPWB Payments based on the percentage of the initial PB Value you select, subject to the maximum allowable payment (the GPWB Maximum). If you exercise the GPWB you can elect to receive up to: o 10% of the PB Value under the Traditional PRIME Benefit, o 10% of the PB Value under the Enhanced PRIME Benefit if the 3% AIA or MAV applies, or o 5% of the PB Value under the Enhanced PRIME Benefit if the 7% AIA applies. ONCE YOU CHOOSE THE PERCENTAGE OF GPWB VALUE YOU WANT TO RECEIVE YOU CANNOT CHANGE IT. Therefore, under a Qualified Contract that is subject to a minimum distribution requirement, once you select your GPWB Payment percentage you will not be able to adjust your GPWB Payment to meet your required minimum distribution needs. Although GPWB Payments are partial withdrawals, they are not subject to the withdrawal charge. However, withdrawal charges will apply to any Excess Withdrawals you take in the first ten years after you exercise the GPWB. In addition, if you take an Excess Withdrawal, the amount withdrawn will reduce o the Contract Value, o the PB Value (which determines the amount available for future GPWB Payments and/or future GMIB Payments), and o the GMDB value. Excess Withdrawals will not affect the GPWB Payment amount or frequency, but they may decrease the time over which you will receive GPWB Payments. If you take no Excess Withdrawals while the GPWB is in effect, we would pay the PB value to you: o within ten years under the Traditional PRIME Benefit if you take the maximum allowable payment each year. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 13 o within ten years if you elect the 10% payment option under the Enhanced PRIME Benefit and take the maximum allowable payment each year. o within 20 years if you elect the 5% payment option under the Enhanced PRIME Benefit and take the maximum allowable payment each year (assuming no step ups). We will deduct each GPWB Payment proportionately from the Investment Choices. We will continue to allocate the Contract Value among the Investment Choices according to your instructions while the GPWB is in effect. You can also continue to make transfers between the Investment Options (subject to certain restrictions) while the GPWB is in effect. You can continue to receive GPWB Payments until the PB Value is exhausted or the GPWB terminates, even if you have no remaining Contract Value. If there is Contract Value remaining after you exhaust the PB Value, you can elect to either: o receive a lump sum payment of the entire remaining Contract Value (including any vested bonus and less any withdrawal charges and any deduction we make for premium taxes), the Accumulation Phase of the Contract will end, and the Contract will terminate; or o request Traditional Annuity Payments under a Full Annuitization based on the entire remaining Contract Value (including any vested bonus and less any deduction we make for premium taxes). We will send you notice at least 30 days before the last GPWB Payment date to ask for your instructions. If we do not receive any instructions from you by the date we make the last GPWB Payment, we will pay you the entire remaining Contract Value (less any withdrawal charges and any deductions we make for premium tax) in a lump sum, the Accumulation Phase of the Contract will end, and the Contract will terminate.* * If you took a Partial Annuitization, those portions of the Contract will continue and we will continue to make Annuity Payments as provided for in the selected Annuity Option. TAXATION OF GPWB PAYMENTS GPWB Payments are withdrawals and will be treated as such for tax purposes. This means that for Non-Qualified Contracts, Contract gains from the entire Contract are considered to be distributed first and are subject to ordinary income tax. Purchase Payments are distributed after gains have been paid out and are generally considered to be a return of your investment and are not subject to income tax. For Qualified Contracts, the entire GPWB Payment will most likely be subject to ordinary income tax. In addition, GPWB Payments may be subject to premium taxes and, if any Owner is younger than age 59 1/2, may also be subject to a 10% federal penalty tax. GPWB Payments are not subject to a withdrawal charge. TERMINATION OF THE GPWB THE GPWB WILL TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o The Business Day you take an Excess Withdrawal of the entire Contract Value. o The Business Day that the PB Value and Contract Value are both zero. o The Business Day before the Income Date that you take a Full Annuitization. o Contract termination. o The death of any Owner (unless the deceased Owner's spouse continues the Contract as the new Owner). GMIB PAYMENTS The annuity income protection provided by the GMIB will apply only under the following circumstances. o Your Income Date must be within 30 days following a Contract Anniversary beginning with tenth Contract Anniversary. o GMIB Payments can only be made as fixed payments, regardless of the Annuity Option* you select. o Annuity Option 6* is only available if the PB Value is the MAV. o If the PB Value is the 7% AIA, your available Annuity Options* are restricted to Annuity Option 2 or 4. o We will base all GMIB Payments on an interest rate of 1% per year if the PB Value is the MAV and you select Annuity Option 6, or if the PB value is the 7% AIA. * For more information see prospectus section 3, The Annuity Phase - Annuity Options. In order to begin receiving monthly GMIB Payments, you must submit an income option election form to our Service Center after the expiration of the ten-year waiting period and within 30 days following a Contract Anniversary. GMIB - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 14 Payments will begin after your request has been received at our Service Center and is determined to be in good order. We will make GMIB Payments to you beginning on the 30th day after your Contract Anniversary. If the scheduled GMIB Payment date does not fall on a Business Day, we will make payment to you on the next Business Day. Under the GMIB you can take either a Full Annuitization, or before you exercise the GPWB, or you can take Partial Annuitization(s) if the PB Value is greater than the Contract Value. Any GMIB Partial Annuitization will reduce the Contract Value and GMDB value proportionately by the percentage of PB Value you apply to the GMIB. If you take a Partial Annuitization you cannot: o transfer any amounts you allocated to GMIB Payments back to any portion of the Contract that is in the Accumulation Phase; o transfer amounts from one Annuity Payment stream to another; or o allocate additional PB Value (or Contract Value) to an existing stream of Annuity Payments. If you purchased this Contract under a qualified plan that is subject to minimum distribution requirement and you do not exercise the GMIB on or before the date required minimum distribution payments must begin under the qualified plan, the Owner or Beneficiary may not be able to exercise the GMIB due to the restrictions imposed by the minimum distribution requirements. AMOUNT USED TO CALCULATE GMIB PAYMENTS The GMIB guarantees that the GMIB Payments will be equal to the guaranteed fixed payout rates applied to the PB Value. There may be situations where the PB Value is greater than the Contract Value, but the GMIB Payments are less than fixed Traditional Annuity Payments based on the Contract Value. This may occur because the guaranteed fixed payout rates available with the GMIB may be less than the current fixed payout rates that are otherwise available under Traditional Annuity Payments. We will base your Annuity Payments on whichever amount (PB Value or Contract Value) produces the greatest payment. However, if we use the Contract Value and the current fixed payout rates to calculate Traditional Annuity Payments, you will have incurred higher Contract expenses without receiving any explicit benefit from the GMIB. While the 7% AIA may be larger than the 3% AIA and/or MAV, it may produce a lower GMIB Payment because under the 7% AIA you have fewer available Annuity Options and guaranteed fixed payout rates are lower. If the GMIB Payment available under the 7% AIA would always be less than the GMIB Payment available under the 3% AIA or MAV, we will base GMIB Payments on the amount that produces the largest payment. However, it is possible that the GMIB Payments under the 7% AIA may be more or less than the GMIB Payments available under the 3% AIA and/or MAV depending on the Annuity Option you select. In these instances we will allow you to select the amount we use to calculate GMIB Payments and the Annuity Option that you feel is most appropriate. TAXATION OF GMIB PAYMENTS If you take a GMIB Partial Annuitization, GMIB Payments will be treated as withdrawals and not annuity payments for tax purposes. This means that for tax purposes, any Contract earnings in the entire Contract will be considered to be distributed before Purchase Payments and may be subject to ordinary income tax and a 10% federal penalty tax. For Non-Qualified Contracts, gains are generally subject to ordinary income tax and Purchase Payments are not. For Qualified Contracts, the entire GMIB Payment under a Partial Annuitization will most likely be subject to ordinary income taxes. For more information on Partial Annuitizations, please see prospectus section 3, The Annuity Phase - Partial Annuitization. If you take a Full Annuitization under the GMIB, GMIB Payments should be treated as annuity payments for tax purposes. If you take a GMIB Partial Annuitization, GMIB Payments should be treated as annuity payments (and not withdrawals) for tax purposes ONLY after the Income Date on which you have applied the entire remaining Contract Value to Annuity Payments under the GMIB and/or Traditional Annuity Payments, that is, the Income Date after the Contract has been fully annuitized. For Non-Qualified Contracts that have been fully annuitized, a portion of each payment may be treated as gains that are subject to tax as ordinary income, and the remaining portion of the payment will be considered to be a return of your investment and will not be subject to income tax. Once we have paid out all of your Purchase Payments, however, the full amount of each GMIB Payment will be subject to tax as ordinary income. For Qualified Contracts, the entire GMIB Payment will most likely be subject to tax as ordinary income. Once you apply the entire Contract Value to Annuity Payments, GMIB Payments will generally not be subject to the 10% federal penalty tax. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 15 TERMINATION OF THE GMIB IF YOU HAVE NOT EXERCISED THE GMIB, IT WILL TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o The Business Day that the PB Value and Contract Value are both zero. o The Business Day before the Income Date you take a Full Annuitization and request Traditional Annuity Payments. o Contract termination. o The death of any Owner (unless the deceased Owner's spouse continues the Contract as the new Owner). IF YOU EXERCISE THE GMIB, EACH PORTION OF THE CONTRACT THAT YOU APPLY TO GMIB PAYMENTS WILL TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o Under Annuity Options 1 and 3, the death of the last surviving Annuitant. o Under Annuity Options 2 and 4, the death of the last surviving Annuitant and expiration of the guaranteed period.* o Under Annuity Option 5, the death of the Annuitant and payment of any lump sum refund. o Under Annuity Option 6, the expiration of the specified period certain. o Contract termination. * If we make a lump sum payment of the remaining guaranteed GMIB Payments at the death of the last surviving Annuitant, this portion of the Contract will terminate upon payment of the lump sum. SEPARATE ACCOUNT ANNUAL EXPENSES FOR MAY 2003 CONTRACTS The Separate Account annual expenses for May 2003 Contracts without a PRIME Benefit during the Accumulation Phase are the same as the expenses for the currently offered Base Contracts. The Separate Account annual expenses for May 2003 Contracts with Enhanced PRIME Benefit during the Accumulation Phase are the same as the current charges for the currently offered Contracts with the PRIME Plus Benefit. The Separate Account annual expenses for May 2003 Contracts with Enhanced PRIME Benefit during the Accumulation Phase are as follows: SEPARATE ACCOUNT ANNUAL EXPENSES(1) (as a percentage of average daily assets invested in a subaccount on an annual basis) MAY 2003 CONTRACTS WITH THE TRADITIONAL PRIME BENEFIT M&E ADMIN. CHARGES CHARGE TOTAL TRADITIONAL GMDB 1.75% 0.15% 1.90% ENHANCED GMDB 2.00% 0.15% 2.15% (1) Some or all of the guaranteed benefits may not be available in all states; check with your registered representative. The Separate Account annual expenses for May 2003 Contracts during the Annuity Phase are the same as the charges for currently offered Contracts. For more information on the expenses and charges of currently offered Contracts please see the Fee Tables in the prospectus. INFORMATION ON CONTRACTS THAT WERE OFFERED BEFORE APRIL 29, 2005 Before April 29, 2005, we offered Contracts that allowed the Owner to take money out of the Contract (take a liquidation) during the Annuity Phase if the Owner elects to have us make variable Annuity Payments under Annuity Options 2, or 4. These liquidations were subject to an additional charge. These Contracts are no longer offered for sale. LIQUIDATIONS UNDER ANNUITY OPTION 2 (LIFE ANNUITY WITH MONTHLY PAYMENTS OVER 10, 15 OR 20 YEARS GUARANTEED). During the lifetime of the Annuitant, and while the number of variable Traditional Annuity Payments made is less than the guaranteed number of payments elected, you may request a partial withdrawal (partial liquidation) of up to 75% of the total liquidation value, less any previously liquidated amounts. The total liquidation value is equal to the present value of the remaining guaranteed variable Traditional Annuity Payments, to the end of the guaranteed period, using the selected AIR as the interest rate for the present value calculation, less a commutation fee, or as set forth in your Contract. The minimum amount that you can liquidate is $500, or the remaining portion of the total liquidation value available (whichever is less). We will subtract a commutation fee from the amount liquidated before we pay you the proceeds. We - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 16 will process partial liquidations within seven days after your written request is received in good order at our Service Center. After a partial liquidation, we will reduce the subsequent monthly variable Traditional Annuity Payments during the remaining guaranteed period by the percentage of liquidation value withdrawn, including the commutation fee. After we have made the guaranteed number of variable Traditional Annuity Payments, we will restore the number of Annuity Units used in calculating the monthly variable Traditional Annuity Payments to their original values as if no liquidations had taken place. LIQUIDATIONS UNDER ANNUITY OPTION 4 (JOINT AND LAST SURVIVOR ANNUITY WITH MONTHLY PAYMENTS OVER 10, 15 OR 20 YEARS GUARANTEED). While either the Annuitant or joint Annuitant is alive and the number of variable Traditional Annuity Payments we have made is less than the guaranteed number of payments elected, you may request a partial withdrawal (partial liquidation) of up to 75% of the total liquidation value, less any previously liquidated amounts. The total liquidation value is equal to the present value of the remaining guaranteed variable Traditional Annuity Payments, to the end of the guaranteed period, using the selected AIR as the interest rate for the present value calculation, less a commutation fee, or as set forth in your Contract. The minimum amount that you can liquidate is $500, or the remaining portion of the total liquidation value available (whichever is less). We will subtract a commutation fee from the amount liquidated before we pay you the proceeds. We will process partial liquidations within seven days after your written request is received in good order at our Service Center. After a partial liquidation, we will reduce the subsequent monthly variable Traditional Annuity Payments during the remaining guaranteed period by the percentage of liquidation value withdrawn, including the commutation fee. After we have made the guaranteed number of variable Traditional Annuity Payments, we will restore the number of Annuity Units used in calculating the monthly variable Traditional Annuity Payments to their original values as if no liquidations had taken place. COMMUTATION FEE/WITHDRAWAL CHARGE FOR LIQUIDATIONS UNDER ANNUITY OPTIONS 2, OR 4. If you request variable Traditional Annuity Payments under Annuity Options 2, or 4 and take a liquidation, we may assess a commutation fee. The commutation fee as a percentage of the amount liquidated is equal to: ---------------------------------- --------------- NUMBER OF COMPLETE YEARS SINCE INCOME DATE CHARGE ---------------------------------- --------------- ---------------------------------- --------------- 0 7% ---------------------------------- --------------- ---------------------------------- --------------- 1 6% ---------------------------------- --------------- ---------------------------------- --------------- 2 5% ---------------------------------- --------------- ---------------------------------- --------------- 3 4% ---------------------------------- --------------- ---------------------------------- --------------- 4 3% ---------------------------------- --------------- ---------------------------------- --------------- 5 2% ---------------------------------- --------------- ---------------------------------- --------------- 6 years or more 1% ---------------------------------- --------------- We assess the commutation fee to cover distribution expense and lost revenue, as well as internal costs incurred in conjunction with the liquidation. The commutation fee may not apply or may be revised in some states. INFORMATION ON ORIGINAL AND SEPTEMBER 2002 CONTRACTS Original Contracts were first offered in May 2000, and September 2002 Contracts were first offered at that time. Both Contracts were replaced by the May 2003 Contracts. Original and September 2002 Contracts are no longer offered for sale, but Owners of these Contracts can still make additional Purchase Payments. Therefore, we are including information on these Contracts in this SAI. Original Contracts had a minimum mortality and expense risk (M&E) charge of 1.50%, a maximum potential M&E charge of 2.40%, and allowed Owners to add, after the Issue Date, the optional Traditional PRIME Benefit or Enhanced PRIME Benefit that were available on May 2003 Contracts. September 2002 Contracts had a minimum M&E charge of 1.50%, a maximum potential M&E charge of 2.15%, offered an optional Enhanced GMIB, and did not include the GPWBs. The Enhanced GMIB value on September 2002 Contracts is equal to the greater of: o the Annual Increase Amount (AIA) before the older Owner's 81st birthday, adjusted for subsequent partial withdrawals and subsequent Purchase Payments; or o the Maximum Anniversary Value (MAV) before the older Owner's 81st birthday, adjusted for subsequent partial withdrawals and subsequent Purchase Payments. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 17 For September 2002 Contracts, the 5% AIA on each Business Day other than a Contract Anniversary is calculated in the same way as it is under the Enhanced PRIME Benefit for May 2003 Contracts. Then, on each Contract Anniversary before the older Owner's 81st birthday it is equal to its value on the immediately preceding Business Day increased by 5%. We then process any transactions we received on that Contract Anniversary (such as additional Purchase Payments withdrawals, and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. We limit the AIA under the Enhanced GMIB for September 2002 Contracts to a maximum of two times the total Purchase Payments received (not including any bonus), reduced proportionately by the percentage of GMIB value applied to each GMIB Partial Annuitization, and reduced proportionately by the percentage of any Contract Value withdrawn (including any withdrawal charge) and/or annuitized for each withdrawal taken or traditional Partial Annuitization taken. The MAV for September 2002 Contracts is calculated in the same manner as the MAV for May 2003 Contracts. For more information, please see the discussion earlier in this SAI. The Traditional GMDB available under both of these older Contracts is the same as what is available under the Contracts we currently offer. The Enhanced GMDB value on Original Contracts is equal to the greater of: o total Purchase Payments received (not including any bonus), reduced proportionately by the percentage of the Contract Value withdrawn (including any withdrawal charge) and/or annuitized for each withdrawal taken or traditional Partial Annuitization taken, and reduced proportionately by the percentage of GMIB value applied to each GMIB Partial Annuitization; or o the MAV before the older Owner's 81st birthday, adjusted for subsequent partial withdrawals and subsequent Purchase Payments (not including any bonus). The Enhanced GMDB on September 2002 Contracts is the same as what is available under the Contracts we currently offer. However, the AIA under the Enhanced GMDB on September 2002 Contracts is calculated in the same manner as it is for September 2002 Contracts with the Enhanced GMIB, but there is no limit on the AIA under the Enhanced GMDB for September 2002 Contracts. The MAV under the Enhanced GMDB on Original and September 2002 Contracts is calculated in the same manner as it is for currently offered Contracts. For more details on the death benefits see prospectus section 11, Death Benefit. Original and September 2002 Contracts did not include the Dollar Cost Averaging Fixed Option. If you purchased one of these older Contracts before June 16, 2000 you can elect to receive variable Traditional Annuity Payments under Annuity Option 6. Under these variable Traditional Annuity Payments you can also take partial liquidations at least once each Contract Year of up to 100% of the liquidation value in the Contract. We do not assess a commutation fee on the amount liquidated. We will process these liquidations within seven days after your written request is received in good order at the Service Center. After a partial liquidation, we will reduce the subsequent monthly variable Traditional Annuity Payments during the remaining guarantee period by the percentage of the liquidation value you withdraw. Original and September 2002 Contracts also provided a waiver of withdrawal charge that permits you to take money out of the Contract under certain circumstances without incurring a withdrawal charge: o if after the third Contract Year, any Owners become confined to a nursing home or hospital for 90 consecutive days; or o if after the first Contract Year, any Owners 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 your Issue Date. If the Contract is owned by a non-individual, we will base this benefit on the Annuitant. Also, after the first Contract Year, if any Owner becomes unemployed for at least 90 consecutive days, you can take up to 50% of your Contract Value out of the Contract without incurring a withdrawal charge. This benefit is available only once during the life of the Contract. You may not use both this benefit and the partial withdrawal privilege in the same Contract Year. When the Contract is owned by a qualified plan, this waiver does not apply. These waivers vary from state to state and may not be available in all states. Check with your registered representative for details on the waivers available in your state. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 18 The charges for older Contracts differ from the charges of the currently offered Contracts as follows: SEPARATE ACCOUNT ANNUAL EXPENSES DURING THE ACCUMULATION PHASE (as a percentage of average daily assets invested in a subaccount on an annual basis)
FOR SEPTEMBER 2002 CONTRACTS: * CHARGES FOR A CONTRACT WITHOUT THE GMIB CHARGES FOR A CONTRACT WITH THE ENHANCED GMIB M&E CHARGES ADMIN. CHARGE TOTAL M&E CHARGES ADMIN. CHARGE TOTAL Traditional GMDB 1.50% 0.15% 1.65% 1.80% 0.15% 1.95% Enhanced GMDB 1.80% 0.15% 1.95% 2.00% 0.15% 2.15% FOR ORIGINAL CONTRACTS: * CHARGES FOR A CONTRACT CHARGES FOR A CONTRACT WITH CHARGES FOR A CONTRACT WITH WITHOUT A PRIME BENEFIT THE TRADITIONAL PRIME BENEFIT THE ENHANCED PRIME BENEFIT M&E ADMIN. M&E ADMIN. M&E ADMIN. CHARGES CHARGE TOTAL CHARGES CHARGE TOTAL CHARGES CHARGE TOTAL Traditional GMDB 1.50% 0.15% 1.65% 1.70% 0.15% 1.85% 2.20% 0.15% 2.35% Enhanced GMDB 1.70% 0.15% 1.85% 1.90% 0.15% 2.05% 2.40% 0.15% 2.55%
During the Annuity Phase, if you request variable Annuity Payments, the Separate Account annual expenses for these older Contracts is equal on an annual basis to 1.65%. This expense is equal to the lowest charge because we do not pay a death benefit separate from the benefits provided by the Annuity Option if the Annuitant dies during the Annuity Phase. * Some or all of the guaranteed benefits may not have been available in all states. FINANCIAL STATEMENTS The audited consolidated financial statements of Allianz Life as of and for the year ended December 31, 2007, included herein should be considered only as bearing upon the ability of Allianz Life to meet its obligations under the Contracts. The audited financial statements of the Separate Account as of and for the year ended December 31, 2007 are also included herein. - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 19 APPENDIX - CONDENSED FINANCIAL INFORMATION The consolidated financial statements of Allianz Life Insurance Company of North America and the financial statements of Allianz Life Variable Account B are found in this SAI. Accumulation Unit value (AUV) information corresponding to the highest and lowest combination of charges for Contracts we currently offer is found in Appendix B to the prospectus. AUV information listing the additional combinations of charges for the Contracts we currently offer and for older Rewards Contracts that we no longer offer is found below. This information should be read in conjunction with the financial statements and related notes of the Separate Account included in this SAI.
SEPARATE ACCOUNT KEY TO BENEFIT OPTION* ANNUAL EXPENSES(1) RWDE 1..... Allianz Rewards - Original Contract with the Enhanced GMDB and no PRIME Benefit....... 1.85% RWDE 2..... Allianz Rewards - September 2002 Contract with the Enhanced GMDB and no GMIB.......... 1.95% RWDE 3..... Allianz Rewards - September 2002 Contract with the Enhanced GMDB and Enhanced GMIB... 2.15% RWDE 4..... Allianz Rewards - May 2003 Contract with the Enhanced GMDB and no GMIB, and the currently offered Base Contract with the Enhanced GMDB................................ 2.00% RWDE 5..... Allianz Rewards - May 2003 Contract with the Enhanced GMDB and Traditional PRIME Benefit............................................................................... 2.15% RWDE 7..... Allianz Rewards - Original Contract with the Enhanced GMDB and Traditional PRIME Benefit............................................................................... 2.05% RWDE 8..... Allianz Rewards - Original Contract with the Enhanced GMDB and Enhanced PRIME Benefit. 2.55% RWDT 1..... Allianz Rewards - Original Contract with the Traditional GMDB and no PRIME Benefit, and September 2002 Contract with the Traditional GMDB and no GMIB..................... 1.65% RWDT 2..... Allianz Rewards - September 2002 Contract with the Traditional GMDB and Enhanced GMIB. 1.95% RWDT 5..... Allianz Rewards - May 2003 Contract with the Enhanced GMDB and Traditional PRIME Benefit............................................................................... 1.90% RWDT 6..... Allianz Rewards - May 2003 Contract with the Traditional GMDB and Enhanced PRIME Benefit, and currently offered Contract with the Traditional GMDB and the PRIME Plus Benefit............................................................................... 2.40% RWDT 7..... Allianz Rewards - Original Contract with the Traditional GMDB and Traditional PRIME Benefit............................................................................... 1.85% RWDT 8..... Allianz Rewards - Original Contract with the Traditional GMDB and Enhanced PRIME Benefit............................................................................... 2.35% (1) The Separate Account annual expenses for a May 2003 Contract with the Traditional GMDB and no PRIME Benefit (1.70%) and a May 2003 Contract with the Enhanced GMDB and Enhanced PRIME Benefit (2.60%) are the same as the expenses for the currently offered Contract, therefore the AUV information is included in the prospectus.
The following Investment Option commenced operations under this Contract after December 31, 2007. Therefore, no AUV information is shown for it: BlackRock Global Allocation V.I. Fund - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 20 (Number of Accumulation Units in thousands) NUMBER OF AUV ACCUMULATION PERIOD AT UNITS OR AUV AT END OUTSTANDING BENEFIT YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL AIM International Equity Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.059 18 12/31/2003 8.059 10.059 18 12/31/2004 10.059 12.059 40 12/31/2005 12.059 13.776 56 12/31/2006 13.776 17.181 56 12/31/2007 17.181 19.330 68 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.054 0 12/31/2003 8.054 10.042 3 12/31/2004 10.042 12.027 4 12/31/2005 12.027 13.725 7 12/31/2006 13.725 17.101 10 12/31/2007 17.101 19.221 11 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.043 19 12/31/2003 8.043 10.009 115 12/31/2004 10.009 11.962 155 12/31/2005 11.962 13.625 180 12/31/2006 13.625 16.942 229 12/31/2007 16.942 19.004 255 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.034 5 12/31/2004 10.034 12.011 31 12/31/2005 12.011 13.700 43 12/31/2006 13.700 17.061 104 12/31/2007 17.061 19.167 111 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.009 2 12/31/2004 10.009 11.962 11 12/31/2005 11.962 13.625 12 12/31/2006 13.625 16.942 17 12/31/2007 16.942 19.004 11 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.025 0 12/31/2004 10.025 11.995 0 12/31/2005 11.995 13.675 0 12/31/2006 13.675 17.021 4 12/31/2007 17.021 19.112 3 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.942 0 12/31/2004 9.942 11.835 0 12/31/2005 11.835 13.426 4 12/31/2006 13.426 16.629 13 12/31/2007 16.629 18.578 13 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.070 73 12/31/2003 8.070 10.093 40 12/31/2004 10.093 12.124 43 12/31/2005 12.124 13.877 41 12/31/2006 13.877 17.342 71 12/31/2007 17.342 19.551 80 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.054 8 12/31/2003 8.054 10.042 75 12/31/2004 10.042 12.027 108 12/31/2005 12.027 13.725 110 12/31/2006 13.725 17.101 112 12/31/2007 17.101 19.221 145 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.051 3 12/31/2004 10.051 12.043 10 12/31/2005 12.043 13.750 23 12/31/2006 13.750 17.141 40 12/31/2007 17.141 19.276 39 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.967 39 12/31/2004 9.967 11.883 268 12/31/2005 11.883 13.500 602 12/31/2006 13.500 16.745 1032 12/31/2007 16.745 18.736 1382 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.059 0 12/31/2004 10.059 12.059 0 12/31/2005 12.059 13.776 0 12/31/2006 13.776 17.181 0 12/31/2007 17.181 19.330 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.975 0 12/31/2004 9.975 11.899 0 12/31/2005 11.899 13.525 5 12/31/2006 13.525 16.785 2 12/31/2007 16.785 18.790 7 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 21 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Columbia Technology Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.738 1 12/31/2002 10.738 6.205 29 12/31/2003 6.205 8.647 95 12/31/2004 8.647 8.121 57 12/31/2005 8.121 8.029 10 12/31/2006 8.029 8.083 11 12/31/2007 8.083 9.740 20 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.198 16 12/31/2003 6.198 8.628 24 12/31/2004 8.628 8.095 30 12/31/2005 8.095 7.995 18 12/31/2006 7.995 8.042 18 12/31/2007 8.042 9.680 18 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.184 37 12/31/2003 6.184 8.591 274 12/31/2004 8.591 8.044 273 12/31/2005 8.044 7.929 160 12/31/2006 7.929 7.959 145 12/31/2007 7.959 9.561 160 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.619 9 12/31/2004 8.619 8.082 9 12/31/2005 8.082 7.979 11 12/31/2006 7.979 8.021 12 12/31/2007 8.021 9.650 18 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.591 0 12/31/2004 8.591 8.044 1 12/31/2005 8.044 7.929 2 12/31/2006 7.929 7.959 2 12/31/2007 7.959 9.561 12 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.610 0 12/31/2004 8.610 8.070 4 12/31/2005 8.070 7.962 0 12/31/2006 7.962 8.000 4 12/31/2007 8.000 9.620 10 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.517 3 12/31/2004 8.517 7.943 3 12/31/2005 7.943 7.798 2 12/31/2006 7.798 7.797 2 12/31/2007 7.797 9.328 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.741 6 12/31/2002 10.741 6.220 51 12/31/2003 6.220 8.685 129 12/31/2004 8.685 8.173 87 12/31/2005 8.173 8.096 94 12/31/2006 8.096 8.167 94 12/31/2007 8.167 9.860 124 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.198 16 12/31/2003 6.198 8.628 70 12/31/2004 8.628 8.095 88 12/31/2005 8.095 7.995 83 12/31/2006 7.995 8.042 70 12/31/2007 8.042 9.680 85 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.638 1 12/31/2004 8.638 8.108 2 12/31/2005 8.108 8.012 2 12/31/2006 8.012 8.063 3 12/31/2007 8.063 9.710 25 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.545 73 12/31/2004 8.545 7.981 299 12/31/2005 7.981 7.847 479 12/31/2006 7.847 7.857 671 12/31/2007 7.857 9.415 1055 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.647 0 12/31/2004 8.647 8.121 0 12/31/2005 8.121 8.029 0 12/31/2006 8.029 8.083 0 12/31/2007 8.083 9.740 1 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.554 15 12/31/2004 8.554 7.993 16 12/31/2005 7.993 7.863 19 12/31/2006 7.863 7.877 19 12/31/2007 7.877 9.444 21 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 22 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Davis NY Venture Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.435 10 12/31/2002 10.435 7.767 70 12/31/2003 7.767 9.869 84 12/31/2004 9.869 10.710 87 12/31/2005 10.710 11.532 103 12/31/2006 11.532 12.896 111 12/31/2007 12.896 13.184 106 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.758 4 12/31/2003 7.758 9.847 48 12/31/2004 9.847 10.676 45 12/31/2005 10.676 11.484 55 12/31/2006 11.484 12.830 55 12/31/2007 12.830 13.103 53 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.740 70 12/31/2003 7.740 9.805 288 12/31/2004 9.805 10.609 291 12/31/2005 10.609 11.389 388 12/31/2006 11.389 12.698 382 12/31/2007 12.698 12.942 396 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.837 13 12/31/2004 9.837 10.659 44 12/31/2005 10.659 11.460 63 12/31/2006 11.460 12.797 115 12/31/2007 12.797 13.062 113 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.805 0 12/31/2004 9.805 10.609 8 12/31/2005 10.609 11.389 33 12/31/2006 11.389 12.698 31 12/31/2007 12.698 12.942 31 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.826 0 12/31/2004 9.826 10.642 0 12/31/2005 10.642 11.437 0 12/31/2006 11.437 12.764 0 12/31/2007 12.764 13.022 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.720 1 12/31/2004 9.720 10.475 1 12/31/2005 10.475 11.201 5 12/31/2006 11.201 12.439 12 12/31/2007 12.439 12.627 15 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.439 18 12/31/2002 10.439 7.785 109 12/31/2003 7.785 9.911 150 12/31/2004 9.911 10.778 149 12/31/2005 10.778 11.629 204 12/31/2006 11.629 13.030 220 12/31/2007 13.030 13.347 207 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.758 40 12/31/2003 7.758 9.847 154 12/31/2004 9.847 10.676 144 12/31/2005 10.676 11.484 163 12/31/2006 11.484 12.830 204 12/31/2007 12.830 13.103 200 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.858 15 12/31/2004 9.858 10.693 53 12/31/2005 10.693 11.508 86 12/31/2006 11.508 12.863 87 12/31/2007 12.863 13.143 102 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.752 111 12/31/2004 9.752 10.525 764 12/31/2005 10.525 11.271 1478 12/31/2006 11.271 12.535 1774 12/31/2007 12.535 12.744 1907 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.869 1 12/31/2004 9.869 10.710 2 12/31/2005 10.710 11.532 2 12/31/2006 11.532 12.896 2 12/31/2007 12.896 13.184 2 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.763 1 12/31/2004 9.763 10.542 3 12/31/2005 10.542 11.295 17 12/31/2006 11.295 12.568 17 12/31/2007 12.568 12.784 16 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 23 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Dreyfus Founders Equity Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.518 11 12/31/2002 10.518 7.155 61 12/31/2003 7.155 8.727 74 12/31/2004 8.727 9.228 71 12/31/2005 9.228 9.473 65 12/31/2006 9.473 10.502 55 12/31/2007 10.502 11.211 266 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.147 1 12/31/2003 7.147 8.709 21 12/31/2004 8.709 9.199 23 12/31/2005 9.199 9.433 18 12/31/2006 9.433 10.448 26 12/31/2007 10.448 11.142 64 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.131 42 12/31/2003 7.131 8.671 475 12/31/2004 8.671 9.141 347 12/31/2005 9.141 9.355 327 12/31/2006 9.355 10.341 328 12/31/2007 10.341 11.005 750 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.699 14 12/31/2004 8.699 9.185 54 12/31/2005 9.185 9.414 53 12/31/2006 9.414 10.421 55 12/31/2007 10.421 11.108 129 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.671 0 12/31/2004 8.671 9.141 8 12/31/2005 9.141 9.355 12 12/31/2006 9.355 10.341 11 12/31/2007 10.341 11.005 14 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.690 0 12/31/2004 8.690 9.170 0 12/31/2005 9.170 9.394 0 12/31/2006 9.394 10.394 0 12/31/2007 10.394 11.073 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.596 1 12/31/2004 8.596 9.026 1 12/31/2005 9.026 9.201 1 12/31/2006 9.201 10.129 4 12/31/2007 10.129 10.737 10 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.522 33 12/31/2002 10.522 7.172 191 12/31/2003 7.172 8.765 122 12/31/2004 8.765 9.287 112 12/31/2005 9.287 9.552 125 12/31/2006 9.552 10.611 119 12/31/2007 10.611 11.350 249 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.147 106 12/31/2003 7.147 8.709 163 12/31/2004 8.709 9.199 172 12/31/2005 9.199 9.433 170 12/31/2006 9.433 10.448 139 12/31/2007 10.448 11.142 412 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.718 1 12/31/2004 8.718 9.214 7 12/31/2005 9.214 9.453 8 12/31/2006 9.453 10.475 17 12/31/2007 10.475 11.176 34 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.624 72 12/31/2004 8.624 9.069 348 12/31/2005 9.069 9.258 478 12/31/2006 9.258 10.208 560 12/31/2007 10.208 10.837 1530 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.727 0 12/31/2004 8.727 9.228 0 12/31/2005 9.228 9.473 0 12/31/2006 9.473 10.502 0 12/31/2007 10.502 11.211 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.634 0 12/31/2004 8.634 9.083 6 12/31/2005 9.083 9.278 6 12/31/2006 9.278 10.234 1 12/31/2007 10.234 10.870 8 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 24 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Dreyfus Premier Small Cap Value Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.021 3 12/31/2005 12.021 12.202 5 12/31/2006 12.202 13.584 12 12/31/2007 13.584 12.236 11 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.013 3 12/31/2005 12.013 12.182 3 12/31/2006 12.182 13.548 0 12/31/2007 13.548 12.191 2 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.997 58 12/31/2005 11.997 12.141 83 12/31/2006 12.141 13.476 77 12/31/2007 13.476 12.101 33 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.009 12 12/31/2005 12.009 12.171 7 12/31/2006 12.171 13.530 9 12/31/2007 13.530 12.168 10 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.997 3 12/31/2005 11.997 12.141 3 12/31/2006 12.141 13.476 7 12/31/2007 13.476 12.101 5 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.005 0 12/31/2005 12.005 12.161 0 12/31/2006 12.161 13.512 0 12/31/2007 13.512 12.146 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.965 0 12/31/2005 11.965 12.060 0 12/31/2006 12.060 13.333 0 12/31/2007 13.333 11.925 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.038 30 12/31/2005 12.038 12.243 39 12/31/2006 12.243 13.657 42 12/31/2007 13.657 12.326 17 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.013 7 12/31/2005 12.013 12.182 20 12/31/2006 12.182 13.548 22 12/31/2007 13.548 12.191 9 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.017 18 12/31/2005 12.017 12.192 36 12/31/2006 12.192 13.566 41 12/31/2007 13.566 12.213 31 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.977 212 12/31/2005 11.977 12.090 492 12/31/2006 12.090 13.387 557 12/31/2007 13.387 11.991 634 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 12.021 6 12/31/2005 12.021 12.202 0 12/31/2006 12.202 13.584 0 12/31/2007 13.584 12.236 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.981 0 12/31/2005 11.981 12.100 11 12/31/2006 12.100 13.404 11 12/31/2007 13.404 12.013 11 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 25 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL First Trust Target Double Play Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.561 2 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.550 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.529 146 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.545 14 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.529 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.539 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.486 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.582 23 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.550 94 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.555 1 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.502 594 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.561 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.507 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 26 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Franklin Small Cap Value Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.679 13 12/31/2004 12.679 15.321 83 12/31/2005 15.321 16.098 109 12/31/2006 16.098 18.240 84 12/31/2007 18.240 17.121 52 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.671 0 12/31/2004 12.671 15.295 1 12/31/2005 15.295 16.056 6 12/31/2006 16.056 18.173 8 12/31/2007 18.173 17.042 7 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.654 87 12/31/2004 12.654 15.244 162 12/31/2005 15.244 15.970 174 12/31/2006 15.970 18.041 199 12/31/2007 18.041 16.883 166 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.667 4 12/31/2004 12.667 15.282 40 12/31/2005 15.282 16.034 48 12/31/2006 16.034 18.140 48 12/31/2007 18.140 17.002 49 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.654 1 12/31/2004 12.654 15.244 13 12/31/2005 15.244 15.970 20 12/31/2006 15.970 18.041 23 12/31/2007 18.041 16.883 24 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.662 2 12/31/2004 12.662 15.270 4 12/31/2005 15.270 16.013 2 12/31/2006 16.013 18.107 2 12/31/2007 18.107 16.962 3 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.620 1 12/31/2004 12.620 15.142 3 12/31/2005 15.142 15.800 4 12/31/2006 15.800 17.778 7 12/31/2007 17.778 16.570 6 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.696 15 12/31/2004 12.696 15.372 47 12/31/2005 15.372 16.185 77 12/31/2006 16.185 18.375 99 12/31/2007 18.375 17.282 71 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.671 14 12/31/2004 12.671 15.295 59 12/31/2005 15.295 16.056 46 12/31/2006 16.056 18.173 46 12/31/2007 18.173 17.042 42 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.675 5 12/31/2004 12.675 15.308 14 12/31/2005 15.308 16.077 26 12/31/2006 16.077 18.207 34 12/31/2007 18.207 17.081 30 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.633 126 12/31/2004 12.633 15.180 523 12/31/2005 15.180 15.864 1101 12/31/2006 15.864 17.876 1487 12/31/2007 17.876 16.687 1403 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.679 0 12/31/2004 12.679 15.321 0 12/31/2005 15.321 16.098 0 12/31/2006 16.098 18.240 0 12/31/2007 18.240 17.121 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.637 0 12/31/2004 12.637 15.193 6 12/31/2005 15.193 15.885 22 12/31/2006 15.885 17.909 28 12/31/2007 17.909 16.726 14 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 27 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Fusion Balanced Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.598 3 12/31/2006 10.598 11.391 30 12/31/2007 11.391 11.976 94 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.590 0 12/31/2006 10.590 11.372 0 12/31/2007 11.372 11.944 45 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.576 125 12/31/2006 10.576 11.334 125 12/31/2007 11.334 11.881 179 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.587 74 12/31/2006 10.587 11.362 221 12/31/2007 11.362 11.929 227 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.576 0 12/31/2006 10.576 11.334 10 12/31/2007 11.334 11.881 10 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.583 0 12/31/2006 10.583 11.353 0 12/31/2007 11.353 11.913 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.548 2 12/31/2006 10.548 11.259 2 12/31/2007 11.259 11.754 7 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.612 34 12/31/2006 10.612 11.429 96 12/31/2007 11.429 12.041 187 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.590 14 12/31/2006 10.590 11.372 10 12/31/2007 11.372 11.944 34 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.594 32 12/31/2006 10.594 11.381 82 12/31/2007 11.381 11.960 77 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.559 695 12/31/2006 10.559 11.287 1678 12/31/2007 11.287 11.802 2269 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.598 0 12/31/2006 10.598 11.391 16 12/31/2007 11.391 11.976 23 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.562 7 12/31/2006 10.562 11.296 7 12/31/2007 11.296 11.817 6 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 28 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Fusion Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.072 69 12/31/2006 11.072 12.196 161 12/31/2007 12.196 12.660 129 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.064 5 12/31/2006 11.064 12.175 5 12/31/2007 12.175 12.626 20 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.049 226 12/31/2006 11.049 12.135 436 12/31/2007 12.135 12.559 582 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.061 62 12/31/2006 11.061 12.165 117 12/31/2007 12.165 12.609 139 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.049 11 12/31/2006 11.049 12.135 36 12/31/2007 12.135 12.559 36 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.057 0 12/31/2006 11.057 12.155 0 12/31/2007 12.155 12.592 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.020 3 12/31/2006 11.020 12.054 3 12/31/2007 12.054 12.425 3 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.087 145 12/31/2006 11.087 12.237 198 12/31/2007 12.237 12.728 191 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.064 197 12/31/2006 11.064 12.175 274 12/31/2007 12.175 12.626 234 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.068 117 12/31/2006 11.068 12.186 137 12/31/2007 12.186 12.643 127 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.031 3234 12/31/2006 11.031 12.084 8052 12/31/2007 12.084 12.475 9982 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.072 0 12/31/2006 11.072 12.196 0 12/31/2007 12.196 12.660 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.035 0 12/31/2006 11.035 12.094 0 12/31/2007 12.094 12.492 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 29 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Fusion Moderate Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.775 54 12/31/2006 10.775 11.711 86 12/31/2007 11.711 12.248 88 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.768 0 12/31/2006 10.768 11.692 0 12/31/2007 11.692 12.215 4 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.754 348 12/31/2006 10.754 11.653 379 12/31/2007 11.653 12.150 614 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.765 106 12/31/2006 10.765 11.682 194 12/31/2007 11.682 12.199 149 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.754 0 12/31/2006 10.754 11.653 1 12/31/2007 11.653 12.150 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.761 0 12/31/2006 10.761 11.672 0 12/31/2007 11.672 12.182 8 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.725 3 12/31/2006 10.725 11.575 2 12/31/2007 11.575 12.020 12 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.790 96 12/31/2006 10.790 11.751 119 12/31/2007 11.751 12.313 130 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.768 131 12/31/2006 10.768 11.692 205 12/31/2007 11.692 12.215 148 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.772 49 12/31/2006 10.772 11.702 128 12/31/2007 11.702 12.231 117 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.736 2113 12/31/2006 10.736 11.604 4449 12/31/2007 11.604 12.069 4953 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.775 0 12/31/2006 10.775 11.711 0 12/31/2007 11.711 12.248 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.739 13 12/31/2006 10.739 11.614 0 12/31/2007 11.614 12.085 41 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 30 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Jennison 20/20 Focus Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.209 29 12/31/2006 12.209 13.518 31 12/31/2007 13.518 14.693 28 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.201 7 12/31/2006 12.201 13.496 8 12/31/2007 13.496 14.654 14 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.184 104 12/31/2006 12.184 13.451 128 12/31/2007 13.451 14.576 126 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.197 8 12/31/2006 12.197 13.484 21 12/31/2007 13.484 14.634 32 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.184 3 12/31/2006 12.184 13.451 5 12/31/2007 13.451 14.576 5 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.193 10 12/31/2006 12.193 13.473 0 12/31/2007 13.473 14.615 4 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.152 2 12/31/2006 12.152 13.361 4 12/31/2007 13.361 14.421 4 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.225 35 12/31/2006 12.225 13.563 45 12/31/2007 13.563 14.772 70 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.201 54 12/31/2006 12.201 13.496 52 12/31/2007 13.496 14.654 69 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.205 9 12/31/2006 12.205 13.507 17 12/31/2007 13.507 14.674 14 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.164 366 12/31/2006 12.164 13.395 805 12/31/2007 13.395 14.479 1020 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.209 0 12/31/2006 12.209 13.518 0 12/31/2007 13.518 14.693 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.168 0 12/31/2006 12.168 13.406 2 12/31/2007 13.406 14.498 8 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 31 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Jennison Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.931 11 12/31/2006 11.931 11.897 4 12/31/2007 11.897 12.953 9 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.923 0 12/31/2006 11.923 11.877 0 12/31/2007 11.877 12.918 1 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.907 33 12/31/2006 11.907 11.838 52 12/31/2007 11.838 12.850 48 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.919 3 12/31/2006 11.919 11.867 5 12/31/2007 11.867 12.901 7 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.907 2 12/31/2006 11.907 11.838 3 12/31/2007 11.838 12.850 5 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.915 11 12/31/2006 11.915 11.857 2 12/31/2007 11.857 12.884 2 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.875 1 12/31/2006 11.875 11.759 1 12/31/2007 11.759 12.713 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.947 25 12/31/2006 11.947 11.937 16 12/31/2007 11.937 13.023 22 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.923 7 12/31/2006 11.923 11.877 24 12/31/2007 11.877 12.918 31 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.927 17 12/31/2006 11.927 11.887 21 12/31/2007 11.887 12.936 18 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.887 228 12/31/2006 11.887 11.788 422 12/31/2007 11.788 12.764 545 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.931 3 12/31/2006 11.931 11.897 3 12/31/2007 11.897 12.953 3 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.891 5 12/31/2006 11.891 11.798 10 12/31/2007 11.798 12.781 5 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 32 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Legg Mason Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.526 9 12/31/2003 7.526 10.083 38 12/31/2004 10.083 10.697 24 12/31/2005 10.697 11.663 18 12/31/2006 11.663 11.530 27 12/31/2007 11.530 13.017 38 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.521 5 12/31/2003 7.521 10.067 24 12/31/2004 10.067 10.669 22 12/31/2005 10.669 11.620 16 12/31/2006 11.620 11.476 7 12/31/2007 11.476 12.944 13 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.511 33 12/31/2003 7.511 10.033 183 12/31/2004 10.033 10.612 175 12/31/2005 10.612 11.535 228 12/31/2006 11.535 11.369 226 12/31/2007 11.369 12.798 278 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.058 7 12/31/2004 10.058 10.655 21 12/31/2005 10.655 11.599 24 12/31/2006 11.599 11.449 70 12/31/2007 11.449 12.907 154 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.033 0 12/31/2004 10.033 10.612 0 12/31/2005 10.612 11.535 1 12/31/2006 11.535 11.369 2 12/31/2007 11.369 12.798 3 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.050 0 12/31/2004 10.050 10.640 0 12/31/2005 10.640 11.578 0 12/31/2006 11.578 11.423 0 12/31/2007 11.423 12.870 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.966 1 12/31/2004 9.966 10.499 3 12/31/2005 10.499 11.367 3 12/31/2006 11.367 11.159 5 12/31/2007 11.159 12.510 3 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.536 14 12/31/2003 7.536 10.117 47 12/31/2004 10.117 10.755 37 12/31/2005 10.755 11.749 99 12/31/2006 11.749 11.638 105 12/31/2007 11.638 13.166 98 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.521 6 12/31/2003 7.521 10.067 51 12/31/2004 10.067 10.669 53 12/31/2005 10.669 11.620 59 12/31/2006 11.620 11.476 72 12/31/2007 11.476 12.944 108 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.075 6 12/31/2004 10.075 10.683 16 12/31/2005 10.683 11.642 21 12/31/2006 11.642 11.503 14 12/31/2007 11.503 12.980 29 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.991 98 12/31/2004 9.991 10.541 272 12/31/2005 10.541 11.430 440 12/31/2006 11.430 11.237 542 12/31/2007 11.237 12.617 1154 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.083 0 12/31/2004 10.083 10.697 0 12/31/2005 10.697 11.663 6 12/31/2006 11.663 11.530 0 12/31/2007 11.530 13.017 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.999 2 12/31/2004 9.999 10.555 0 12/31/2005 10.555 11.451 12 12/31/2006 11.451 11.264 12 12/31/2007 11.264 12.653 13 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 33 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Legg Mason Value Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.133 0 12/31/2002 10.133 8.069 33 12/31/2003 8.069 9.972 35 12/31/2004 9.972 11.271 46 12/31/2005 11.271 11.759 42 12/31/2006 11.759 12.318 44 12/31/2007 12.318 11.343 40 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.060 1 12/31/2003 8.060 9.950 9 12/31/2004 9.950 11.236 13 12/31/2005 11.236 11.710 18 12/31/2006 11.710 12.255 15 12/31/2007 12.255 11.273 13 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.041 23 12/31/2003 8.041 9.907 152 12/31/2004 9.907 11.165 206 12/31/2005 11.165 11.613 300 12/31/2006 11.613 12.129 309 12/31/2007 12.129 11.135 204 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.939 7 12/31/2004 9.939 11.218 19 12/31/2005 11.218 11.685 34 12/31/2006 11.685 12.223 32 12/31/2007 12.223 11.238 30 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.907 0 12/31/2004 9.907 11.165 7 12/31/2005 11.165 11.613 11 12/31/2006 11.613 12.129 12 12/31/2007 12.129 11.135 12 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.928 1 12/31/2004 9.928 11.200 1 12/31/2005 11.200 11.661 1 12/31/2006 11.661 12.192 1 12/31/2007 12.192 11.204 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.822 3 12/31/2004 9.822 11.024 3 12/31/2005 11.024 11.421 3 12/31/2006 11.421 11.881 3 12/31/2007 11.881 10.864 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.136 4 12/31/2002 10.136 8.088 46 12/31/2003 8.088 10.015 70 12/31/2004 10.015 11.343 63 12/31/2005 11.343 11.857 167 12/31/2006 11.857 12.446 103 12/31/2007 12.446 11.483 93 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.060 44 12/31/2003 8.060 9.950 106 12/31/2004 9.950 11.236 116 12/31/2005 11.236 11.710 157 12/31/2006 11.710 12.255 165 12/31/2007 12.255 11.273 90 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.961 5 12/31/2004 9.961 11.254 23 12/31/2005 11.254 11.734 43 12/31/2006 11.734 12.286 52 12/31/2007 12.286 11.308 56 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.854 140 12/31/2004 9.854 11.077 507 12/31/2005 11.077 11.493 1322 12/31/2006 11.493 11.974 1387 12/31/2007 11.974 10.965 1234 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.972 0 12/31/2004 9.972 11.271 0 12/31/2005 11.271 11.759 6 12/31/2006 11.759 12.318 0 12/31/2007 12.318 11.343 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.864 2 12/31/2004 9.864 11.095 2 12/31/2005 11.095 11.517 2 12/31/2006 11.517 12.005 2 12/31/2007 12.005 10.998 2 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 34 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL LMP Large Cap Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.992 72 12/31/2003 7.992 9.759 99 12/31/2004 9.759 9.998 106 12/31/2005 9.998 10.768 55 12/31/2006 10.768 11.018 48 12/31/2007 11.018 11.324 48 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.987 24 12/31/2003 7.987 9.743 55 12/31/2004 9.743 9.972 51 12/31/2005 9.972 10.729 44 12/31/2006 10.729 10.967 23 12/31/2007 10.967 11.260 25 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.976 130 12/31/2003 7.976 9.710 466 12/31/2004 9.710 9.919 509 12/31/2005 9.919 10.650 501 12/31/2006 10.650 10.865 439 12/31/2007 10.865 11.133 374 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.720 16 12/31/2004 9.720 9.944 68 12/31/2005 9.944 10.693 69 12/31/2006 10.693 10.925 79 12/31/2007 10.925 11.212 75 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.710 2 12/31/2004 9.710 9.919 8 12/31/2005 9.919 10.650 11 12/31/2006 10.650 10.865 13 12/31/2007 10.865 11.133 12 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.726 1 12/31/2004 9.726 9.945 1 12/31/2005 9.945 10.689 1 12/31/2006 10.689 10.916 1 12/31/2007 10.916 11.196 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.645 0 12/31/2004 9.645 9.813 0 12/31/2005 9.813 10.495 2 12/31/2006 10.495 10.664 2 12/31/2007 10.664 10.883 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.003 67 12/31/2003 8.003 9.792 118 12/31/2004 9.792 10.052 103 12/31/2005 10.052 10.847 109 12/31/2006 10.847 11.121 147 12/31/2007 11.121 11.453 142 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.987 20 12/31/2003 7.987 9.743 131 12/31/2004 9.743 9.972 129 12/31/2005 9.972 10.729 130 12/31/2006 10.729 10.967 116 12/31/2007 10.967 11.260 83 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.751 25 12/31/2004 9.751 9.985 44 12/31/2005 9.985 10.748 61 12/31/2006 10.748 10.992 53 12/31/2007 10.992 11.292 46 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.670 322 12/31/2004 9.670 9.852 1073 12/31/2005 9.852 10.553 1488 12/31/2006 10.553 10.739 1550 12/31/2007 10.739 10.976 1396 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.759 3 12/31/2004 9.759 9.998 3 12/31/2005 9.998 10.768 2 12/31/2006 10.768 11.018 2 12/31/2007 11.018 11.324 2 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.678 3 12/31/2004 9.678 9.866 14 12/31/2005 9.866 10.572 15 12/31/2006 10.572 10.764 16 12/31/2007 10.764 11.007 13 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 35 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Money Market Fund RWDE 1 1.85% 12/31/2000 N/A 10.347 55 12/31/2001 10.347 10.489 790 12/31/2002 10.489 10.383 941 12/31/2003 10.383 10.228 520 12/31/2004 10.228 10.108 409 12/31/2005 10.108 10.178 394 12/31/2006 10.178 10.436 425 12/31/2007 10.436 10.735 435 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 10.353 49 12/31/2003 10.353 10.188 83 12/31/2004 10.188 10.058 77 12/31/2005 10.058 10.118 56 12/31/2006 10.118 10.364 193 12/31/2007 10.364 10.651 73 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 10.293 653 12/31/2003 10.293 10.108 698 12/31/2004 10.108 9.960 542 12/31/2005 9.960 9.999 651 12/31/2006 9.999 10.222 578 12/31/2007 10.222 10.483 754 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.168 29 12/31/2004 10.168 10.033 81 12/31/2005 10.033 10.088 106 12/31/2006 10.088 10.328 119 12/31/2007 10.328 10.609 119 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.108 26 12/31/2004 10.108 9.960 2 12/31/2005 9.960 9.999 19 12/31/2006 9.999 10.222 13 12/31/2007 10.222 10.483 16 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.148 0 12/31/2004 10.148 10.009 2 12/31/2005 10.009 10.058 2 12/31/2006 10.058 10.292 0 12/31/2007 10.292 10.567 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.951 30 12/31/2004 9.951 9.765 23 12/31/2005 9.765 9.765 8 12/31/2006 9.765 9.943 1 12/31/2007 9.943 10.156 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 10.366 921 12/31/2001 10.366 10.529 1514 12/31/2002 10.529 10.444 1571 12/31/2003 10.444 10.308 819 12/31/2004 10.308 10.208 597 12/31/2005 10.208 10.299 511 12/31/2006 10.299 10.581 517 12/31/2007 10.581 10.907 728 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 10.353 119 12/31/2003 10.353 10.188 264 12/31/2004 10.188 10.058 186 12/31/2005 10.058 10.118 263 12/31/2006 10.118 10.364 249 12/31/2007 10.364 10.651 411 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.208 70 12/31/2004 10.208 10.083 95 12/31/2005 10.083 10.148 146 12/31/2006 10.148 10.400 114 12/31/2007 10.400 10.693 111 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.010 679 12/31/2004 10.010 9.838 1199 12/31/2005 9.838 9.852 1627 12/31/2006 9.852 10.046 2644 12/31/2007 10.046 10.278 3544 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.228 0 12/31/2004 10.228 10.108 2 12/31/2005 10.108 10.178 8 12/31/2006 10.178 10.436 1 12/31/2007 10.436 10.735 4 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.030 24 12/31/2004 10.030 9.862 27 12/31/2005 9.862 9.881 57 12/31/2006 9.881 10.081 44 12/31/2007 10.081 10.318 37 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 36 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL NACM International Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.443 3 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.436 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.424 0 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.433 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.424 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.430 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.398 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.455 0 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.436 6 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.439 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.408 31 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.443 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.411 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 37 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Neuberger Berman Regency Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.046 1 12/31/2007 10.046 10.241 8 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.040 13 12/31/2007 10.040 10.224 7 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.026 27 12/31/2007 10.026 10.190 37 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.036 3 12/31/2007 10.036 10.216 7 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.026 0 12/31/2007 10.026 10.190 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.033 0 12/31/2007 10.033 10.207 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.999 0 12/31/2007 9.999 10.122 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.060 35 12/31/2007 10.060 10.276 12 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.040 1 12/31/2007 10.040 10.224 29 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.043 2 12/31/2007 10.043 10.233 6 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.009 146 12/31/2007 10.009 10.147 320 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.046 0 12/31/2007 10.046 10.241 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.013 0 12/31/2007 10.013 10.156 4 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 38 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL OCC Opportunity Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.990 13 12/31/2003 7.990 12.709 104 12/31/2004 12.709 13.444 55 12/31/2005 13.444 13.869 46 12/31/2006 13.869 15.205 36 12/31/2007 15.205 16.251 23 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.985 5 12/31/2003 7.985 12.688 9 12/31/2004 12.688 13.408 9 12/31/2005 13.408 13.818 18 12/31/2006 13.818 15.134 10 12/31/2007 15.134 16.159 8 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.974 27 12/31/2003 7.974 12.646 420 12/31/2004 12.646 13.337 359 12/31/2005 13.337 13.717 320 12/31/2006 13.717 14.994 279 12/31/2007 14.994 15.977 260 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.677 25 12/31/2004 12.677 13.391 38 12/31/2005 13.391 13.793 45 12/31/2006 13.793 15.099 57 12/31/2007 15.099 16.114 56 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.646 2 12/31/2004 12.646 13.337 7 12/31/2005 13.337 13.717 12 12/31/2006 13.717 14.994 9 12/31/2007 14.994 15.977 10 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.667 0 12/31/2004 12.667 13.373 2 12/31/2005 13.373 13.767 0 12/31/2006 13.767 15.064 4 12/31/2007 15.064 16.068 4 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.561 7 12/31/2004 12.561 13.195 8 12/31/2005 13.195 13.517 7 12/31/2006 13.517 14.716 7 12/31/2007 14.716 15.618 4 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.001 26 12/31/2003 8.001 12.752 152 12/31/2004 12.752 13.516 80 12/31/2005 13.516 13.971 74 12/31/2006 13.971 15.348 56 12/31/2007 15.348 16.437 66 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.985 17 12/31/2003 7.985 12.688 117 12/31/2004 12.688 13.408 111 12/31/2005 13.408 13.818 106 12/31/2006 13.818 15.134 85 12/31/2007 15.134 16.159 70 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.699 10 12/31/2004 12.699 13.426 19 12/31/2005 13.426 13.843 24 12/31/2006 13.843 15.170 23 12/31/2007 15.170 16.205 23 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.593 125 12/31/2004 12.593 13.248 513 12/31/2005 13.248 13.592 751 12/31/2006 13.592 14.820 896 12/31/2007 14.820 15.752 926 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.709 0 12/31/2004 12.709 13.444 0 12/31/2005 13.444 13.869 0 12/31/2006 13.869 15.205 0 12/31/2007 15.205 16.251 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.603 4 12/31/2004 12.603 13.266 5 12/31/2005 13.266 13.617 3 12/31/2006 13.617 14.854 4 12/31/2007 14.854 15.797 2 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 39 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL OCC Value Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.930 5 12/31/2002 10.930 8.058 79 12/31/2003 8.058 11.486 117 12/31/2004 11.486 13.137 96 12/31/2005 13.137 13.241 91 12/31/2006 13.241 15.613 91 12/31/2007 15.613 14.441 230 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.048 5 12/31/2003 8.048 11.461 18 12/31/2004 11.461 13.096 25 12/31/2005 13.096 13.186 23 12/31/2006 13.186 15.532 28 12/31/2007 15.532 14.352 57 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.030 54 12/31/2003 8.030 11.411 382 12/31/2004 11.411 13.013 452 12/31/2005 13.013 13.077 322 12/31/2006 13.077 15.373 289 12/31/2007 15.373 14.176 676 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.449 23 12/31/2004 11.449 13.075 99 12/31/2005 13.075 13.159 102 12/31/2006 13.159 15.492 104 12/31/2007 15.492 14.308 151 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.411 0 12/31/2004 11.411 13.013 13 12/31/2005 13.013 13.077 10 12/31/2006 13.077 15.373 10 12/31/2007 15.373 14.176 14 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.436 0 12/31/2004 11.436 13.054 8 12/31/2005 13.054 13.131 0 12/31/2006 13.131 15.452 0 12/31/2007 15.452 14.264 3 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.313 4 12/31/2004 11.313 12.849 5 12/31/2005 12.849 12.861 7 12/31/2006 12.861 15.059 9 12/31/2007 15.059 13.831 13 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.934 2 12/31/2002 10.934 8.076 99 12/31/2003 8.076 11.535 148 12/31/2004 11.535 13.221 199 12/31/2005 13.221 13.352 128 12/31/2006 13.352 15.775 116 12/31/2007 15.775 14.620 293 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.048 15 12/31/2003 8.048 11.461 154 12/31/2004 11.461 13.096 183 12/31/2005 13.096 13.186 126 12/31/2006 13.186 15.532 87 12/31/2007 15.532 14.352 290 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.473 11 12/31/2004 11.473 13.116 42 12/31/2005 13.116 13.214 47 12/31/2006 13.214 15.572 52 12/31/2007 15.572 14.397 68 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.350 126 12/31/2004 11.350 12.911 751 12/31/2005 12.911 12.941 948 12/31/2006 12.941 15.176 950 12/31/2007 15.176 13.960 1957 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.486 0 12/31/2004 11.486 13.137 8 12/31/2005 13.137 13.241 0 12/31/2006 13.241 15.613 0 12/31/2007 15.613 14.441 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.362 11 12/31/2004 11.362 12.931 27 12/31/2005 12.931 12.968 28 12/31/2006 12.968 15.215 25 12/31/2007 15.215 14.003 24 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 40 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Oppenheimer Global Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.437 11 12/31/2005 11.437 12.645 14 12/31/2006 12.645 14.436 23 12/31/2007 14.436 14.986 22 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.429 3 12/31/2005 11.429 12.624 7 12/31/2006 12.624 14.398 4 12/31/2007 14.398 14.931 4 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.414 34 12/31/2005 11.414 12.582 48 12/31/2006 12.582 14.321 47 12/31/2007 14.321 14.822 51 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.426 16 12/31/2005 11.426 12.613 22 12/31/2006 12.613 14.379 42 12/31/2007 14.379 14.904 32 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.414 1 12/31/2005 11.414 12.582 3 12/31/2006 12.582 14.321 11 12/31/2007 14.321 14.822 14 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.422 0 12/31/2005 11.422 12.603 0 12/31/2006 12.603 14.360 0 12/31/2007 14.360 14.876 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.383 0 12/31/2005 11.383 12.498 0 12/31/2006 12.498 14.169 1 12/31/2007 14.169 14.606 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.452 2 12/31/2005 11.452 12.687 13 12/31/2006 12.687 14.513 32 12/31/2007 14.513 15.096 26 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.429 4 12/31/2005 11.429 12.624 21 12/31/2006 12.624 14.398 33 12/31/2007 14.398 14.931 28 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.433 21 12/31/2005 11.433 12.635 41 12/31/2006 12.635 14.417 46 12/31/2007 14.417 14.958 41 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.395 552 12/31/2005 11.395 12.530 999 12/31/2006 12.530 14.226 1252 12/31/2007 14.226 14.686 1356 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.437 0 12/31/2005 11.437 12.645 0 12/31/2006 12.645 14.436 3 12/31/2007 14.436 14.986 3 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.399 3 12/31/2005 11.399 12.540 0 12/31/2006 12.540 14.245 1 12/31/2007 14.245 14.713 1 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 41 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Oppenheimer International Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.219 0 12/31/2002 10.219 8.638 12 12/31/2003 8.638 11.343 9 12/31/2004 11.343 12.747 10 12/31/2005 12.747 14.289 16 12/31/2006 14.289 18.093 27 12/31/2007 18.093 19.942 21 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.628 0 12/31/2003 8.628 11.319 1 12/31/2004 11.319 12.707 1 12/31/2005 12.707 14.229 3 12/31/2006 14.229 18.000 4 12/31/2007 18.000 19.820 9 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.608 2 12/31/2003 8.608 11.270 34 12/31/2004 11.270 12.627 75 12/31/2005 12.627 14.111 61 12/31/2006 14.111 17.815 101 12/31/2007 17.815 19.577 152 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.306 4 12/31/2004 11.306 12.687 13 12/31/2005 12.687 14.200 24 12/31/2006 14.200 17.954 114 12/31/2007 17.954 19.759 39 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.270 1 12/31/2004 11.270 12.627 4 12/31/2005 12.627 14.111 6 12/31/2006 14.111 17.815 11 12/31/2007 17.815 19.577 7 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.294 0 12/31/2004 11.294 12.667 0 12/31/2005 12.667 14.170 0 12/31/2006 14.170 17.907 0 12/31/2007 17.907 19.698 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.173 0 12/31/2004 11.173 12.468 0 12/31/2005 12.468 13.878 1 12/31/2006 13.878 17.451 1 12/31/2007 17.451 19.100 3 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.223 0 12/31/2002 10.223 8.658 20 12/31/2003 8.658 11.392 68 12/31/2004 11.392 12.828 24 12/31/2005 12.828 14.408 33 12/31/2006 14.408 18.281 67 12/31/2007 18.281 20.190 110 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.628 1 12/31/2003 8.628 11.319 23 12/31/2004 11.319 12.707 33 12/31/2005 12.707 14.229 29 12/31/2006 14.229 18.000 57 12/31/2007 18.000 19.820 85 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.331 4 12/31/2004 11.331 12.727 4 12/31/2005 12.727 14.259 9 12/31/2006 14.259 18.046 18 12/31/2007 18.046 19.881 16 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.209 53 12/31/2004 11.209 12.527 229 12/31/2005 12.527 13.965 378 12/31/2006 13.965 17.587 869 12/31/2007 17.587 19.277 1076 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.343 0 12/31/2004 11.343 12.747 0 12/31/2005 12.747 14.289 0 12/31/2006 14.289 18.093 0 12/31/2007 18.093 19.942 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.221 11 12/31/2004 11.221 12.547 11 12/31/2005 12.547 13.994 2 12/31/2006 13.994 17.632 10 12/31/2007 17.632 19.337 6 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 42 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Oppenheimer Main Street Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.726 4 12/31/2005 10.726 11.104 3 12/31/2006 11.104 12.492 14 12/31/2007 12.492 12.727 9 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.719 0 12/31/2005 10.719 11.086 0 12/31/2006 11.086 12.459 1 12/31/2007 12.459 12.681 3 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.705 13 12/31/2005 10.705 11.049 14 12/31/2006 11.049 12.392 25 12/31/2007 12.392 12.588 28 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.715 23 12/31/2005 10.715 11.076 20 12/31/2006 11.076 12.442 29 12/31/2007 12.442 12.657 26 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.705 12 12/31/2005 10.705 11.049 17 12/31/2006 11.049 12.392 17 12/31/2007 12.392 12.588 16 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.712 0 12/31/2005 10.712 11.067 0 12/31/2006 11.067 12.426 0 12/31/2007 12.426 12.634 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.676 0 12/31/2005 10.676 10.975 0 12/31/2006 10.975 12.261 0 12/31/2007 12.261 12.404 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.741 23 12/31/2005 10.741 11.141 25 12/31/2006 11.141 12.559 46 12/31/2007 12.559 12.821 33 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.719 3 12/31/2005 10.719 11.086 12 12/31/2006 11.086 12.459 12 12/31/2007 12.459 12.681 15 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.723 13 12/31/2005 10.723 11.095 43 12/31/2006 11.095 12.475 46 12/31/2007 12.475 12.704 43 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.687 481 12/31/2005 10.687 11.003 747 12/31/2006 11.003 12.310 859 12/31/2007 12.310 12.473 983 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.726 0 12/31/2005 10.726 11.104 0 12/31/2006 11.104 12.492 0 12/31/2007 12.492 12.727 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.690 0 12/31/2005 10.690 11.012 5 12/31/2006 11.012 12.327 0 12/31/2007 12.327 12.496 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 43 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL PIMCO Fundamental IndexPLUS Total Return Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.048 0 12/31/2007 11.048 11.567 5 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.040 0 12/31/2007 11.040 11.547 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.026 4 12/31/2007 11.026 11.509 6 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.037 0 12/31/2007 11.037 11.538 2 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.026 2 12/31/2007 11.026 11.509 2 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.033 0 12/31/2007 11.033 11.528 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.996 3 12/31/2007 10.996 11.432 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.063 0 12/31/2007 11.063 11.606 2 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.040 0 12/31/2007 11.040 11.547 0 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.044 1 12/31/2007 11.044 11.557 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.007 67 12/31/2007 11.007 11.461 84 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.048 0 12/31/2007 11.048 11.567 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.011 0 12/31/2007 11.011 11.470 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 44 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL S&P 500 Index Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.852 1 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.846 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.832 24 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.842 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.832 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.839 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.806 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.865 5 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.846 11 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.849 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.816 54 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.852 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.819 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 45 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Schroder Emerging Markets Equity Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.440 22 12/31/2007 10.440 13.354 26 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.433 10 12/31/2007 10.433 13.332 17 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.419 56 12/31/2007 10.419 13.287 168 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.429 3 12/31/2007 10.429 13.321 10 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.419 0 12/31/2007 10.419 13.287 10 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.426 9 12/31/2007 10.426 13.310 9 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.391 0 12/31/2007 10.391 13.198 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.454 39 12/31/2007 10.454 13.399 46 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.433 21 12/31/2007 10.433 13.332 80 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.436 6 12/31/2007 10.436 13.343 25 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.402 261 12/31/2007 10.402 13.232 916 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.440 0 12/31/2007 10.440 13.354 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.405 0 12/31/2007 10.405 13.243 2 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 46 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Schroder International Small Cap Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.215 2 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.209 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.196 7 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.206 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.196 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.202 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.172 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.227 1 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.209 1 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.212 1 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.181 29 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.215 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.184 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 47 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Small Cap Stock Index Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.301 0 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.295 2 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.282 20 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.292 5 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.282 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.289 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.257 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.314 2 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.295 0 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.298 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.267 38 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.301 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.270 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 48 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL TargetPLUS Balanced Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.086 0 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.079 31 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.066 0 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.076 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.066 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.072 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.039 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.100 1 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.079 0 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.083 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.049 44 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.086 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.052 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 49 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL TargetPLUS Equity Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.476 0 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.466 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.445 68 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.460 4 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.445 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.455 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.402 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.498 22 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.466 13 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.471 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.418 543 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.476 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.424 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 50 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL TargetPLUS Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.909 0 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.903 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.889 15 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.899 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.889 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.896 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.863 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.923 0 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.903 1 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.906 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.873 140 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.909 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.876 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 51 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL TargetPLUS Moderate Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.049 1 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.043 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.029 0 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.039 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.029 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.036 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.002 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.063 0 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.043 4 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.046 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.012 13 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.049 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.016 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 52 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Turner Quantitative Small Cap Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.091 13 12/31/2006 11.091 12.120 7 12/31/2007 12.120 12.619 14 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.084 5 12/31/2006 11.084 12.100 3 12/31/2007 12.100 12.585 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.069 60 12/31/2006 11.069 12.060 63 12/31/2007 12.060 12.518 40 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.080 4 12/31/2006 11.080 12.090 5 12/31/2007 12.090 12.569 6 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.069 0 12/31/2006 11.069 12.060 1 12/31/2007 12.060 12.518 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.077 5 12/31/2006 11.077 12.080 2 12/31/2007 12.080 12.552 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.039 2 12/31/2006 11.039 11.979 3 12/31/2007 11.979 12.385 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.106 7 12/31/2006 11.106 12.161 10 12/31/2007 12.161 12.687 14 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.084 6 12/31/2006 11.084 12.100 8 12/31/2007 12.100 12.585 11 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.088 1 12/31/2006 11.088 12.110 2 12/31/2007 12.110 12.602 1 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.051 114 12/31/2006 11.051 12.009 223 12/31/2007 12.009 12.435 261 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.091 0 12/31/2006 11.091 12.120 0 12/31/2007 12.120 12.619 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.054 0 12/31/2006 11.054 12.019 0 12/31/2007 12.019 12.452 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 53 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Van Kampen Comstock Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 9.321 446 12/31/2002 9.321 7.331 664 12/31/2003 7.331 9.395 562 12/31/2004 9.395 10.800 535 12/31/2005 10.800 11.019 519 12/31/2006 11.019 12.523 467 12/31/2007 12.523 12.019 467 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.319 18 12/31/2003 7.319 9.369 31 12/31/2004 9.369 10.761 39 12/31/2005 10.761 10.968 40 12/31/2006 10.968 12.452 44 12/31/2007 12.452 11.939 65 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.295 198 12/31/2003 7.295 9.320 1063 12/31/2004 9.320 10.682 1162 12/31/2005 10.682 10.866 1125 12/31/2006 10.866 12.312 947 12/31/2007 12.312 11.781 1281 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.357 20 12/31/2004 9.357 10.741 97 12/31/2005 10.741 10.942 79 12/31/2006 10.942 12.417 84 12/31/2007 12.417 11.899 127 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.320 1 12/31/2004 9.320 10.682 17 12/31/2005 10.682 10.866 18 12/31/2006 10.866 12.312 17 12/31/2007 12.312 11.781 24 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.344 13 12/31/2004 9.344 10.721 8 12/31/2005 10.721 10.916 6 12/31/2006 10.916 12.382 6 12/31/2007 12.382 11.860 4 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.220 50 12/31/2004 9.220 10.526 52 12/31/2005 10.526 10.664 42 12/31/2006 10.664 12.035 32 12/31/2007 12.035 11.471 28 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 9.333 161 12/31/2002 9.333 7.356 386 12/31/2003 7.356 9.445 550 12/31/2004 9.445 10.880 624 12/31/2005 10.880 11.122 601 12/31/2006 11.122 12.665 544 12/31/2007 12.665 12.181 482 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.319 65 12/31/2003 7.319 9.369 457 12/31/2004 9.369 10.761 481 12/31/2005 10.761 10.968 472 12/31/2006 10.968 12.452 409 12/31/2007 12.452 11.939 420 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.382 5 12/31/2004 9.382 10.781 46 12/31/2005 10.781 10.993 71 12/31/2006 10.993 12.487 73 12/31/2007 12.487 11.979 98 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.257 261 12/31/2004 9.257 10.584 1084 12/31/2005 10.584 10.739 1886 12/31/2006 10.739 12.138 2047 12/31/2007 12.138 11.586 2649 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.395 0 12/31/2004 9.395 10.800 0 12/31/2005 10.800 11.019 1 12/31/2006 11.019 12.523 1 12/31/2007 12.523 12.019 3 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.270 8 12/31/2004 9.270 10.604 14 12/31/2005 10.604 10.764 12 12/31/2006 10.764 12.173 9 12/31/2007 12.173 11.625 15 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 54 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Van Kampen Equity and Income Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.777 302 12/31/2005 10.777 11.295 284 12/31/2006 11.295 12.476 261 12/31/2007 12.476 12.622 250 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.770 4 12/31/2005 10.770 11.276 8 12/31/2006 11.276 12.443 9 12/31/2007 12.443 12.575 10 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.756 28 12/31/2005 10.756 11.238 85 12/31/2006 11.238 12.377 127 12/31/2007 12.377 12.483 131 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.767 22 12/31/2005 10.767 11.266 31 12/31/2006 11.266 12.427 28 12/31/2007 12.427 12.552 33 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.756 6 12/31/2005 10.756 11.238 8 12/31/2006 11.238 12.377 9 12/31/2007 12.377 12.483 8 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.763 0 12/31/2005 10.763 11.257 0 12/31/2006 11.257 12.410 0 12/31/2007 12.410 12.529 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.727 4 12/31/2005 10.727 11.163 1 12/31/2006 11.163 12.246 1 12/31/2007 12.246 12.301 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.792 24 12/31/2005 10.792 11.332 51 12/31/2006 11.332 12.543 58 12/31/2007 12.543 12.715 61 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.770 16 12/31/2005 10.770 11.276 21 12/31/2006 11.276 12.443 55 12/31/2007 12.443 12.575 39 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.774 5 12/31/2005 10.774 11.285 13 12/31/2006 11.285 12.460 14 12/31/2007 12.460 12.599 15 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.738 362 12/31/2005 10.738 11.191 750 12/31/2006 11.191 12.295 856 12/31/2007 12.295 12.369 879 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.777 0 12/31/2005 10.777 11.295 0 12/31/2006 11.295 12.476 0 12/31/2007 12.476 12.622 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 10.741 0 12/31/2005 10.741 11.201 0 12/31/2006 11.201 12.311 1 12/31/2007 12.311 12.392 1 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 55 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Van Kampen Global Franchise Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.237 35 12/31/2004 12.237 13.479 193 12/31/2005 13.479 14.773 183 12/31/2006 14.773 17.585 147 12/31/2007 17.585 18.956 131 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.229 0 12/31/2004 12.229 13.456 0 12/31/2005 13.456 14.734 6 12/31/2006 14.734 17.521 5 12/31/2007 17.521 18.868 7 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.213 91 12/31/2004 12.213 13.411 142 12/31/2005 13.411 14.655 229 12/31/2006 14.655 17.393 240 12/31/2007 17.393 18.692 205 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.225 6 12/31/2004 12.225 13.445 21 12/31/2005 13.445 14.714 38 12/31/2006 14.714 17.489 64 12/31/2007 17.489 18.824 60 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.213 0 12/31/2004 12.213 13.411 5 12/31/2005 13.411 14.655 5 12/31/2006 14.655 17.393 11 12/31/2007 17.393 18.692 10 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.221 0 12/31/2004 12.221 13.434 0 12/31/2005 13.434 14.694 4 12/31/2006 14.694 17.457 0 12/31/2007 17.457 18.780 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.180 0 12/31/2004 12.180 13.322 12 12/31/2005 13.322 14.499 12 12/31/2006 14.499 17.140 15 12/31/2007 17.140 18.346 14 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.254 21 12/31/2004 12.254 13.524 56 12/31/2005 13.524 14.852 94 12/31/2006 14.852 17.715 89 12/31/2007 17.715 19.135 106 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.229 13 12/31/2004 12.229 13.456 50 12/31/2005 13.456 14.734 72 12/31/2006 14.734 17.521 83 12/31/2007 17.521 18.868 81 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.233 3 12/31/2004 12.233 13.467 12 12/31/2005 13.467 14.753 30 12/31/2006 14.753 17.553 34 12/31/2007 17.553 18.912 31 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.192 61 12/31/2004 12.192 13.355 461 12/31/2005 13.355 14.558 988 12/31/2006 14.558 17.234 1325 12/31/2007 17.234 18.475 1401 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.237 0 12/31/2004 12.237 13.479 0 12/31/2005 13.479 14.773 1 12/31/2006 14.773 17.585 0 12/31/2007 17.585 18.956 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.196 1 12/31/2004 12.196 13.366 1 12/31/2005 13.366 14.577 11 12/31/2006 14.577 17.266 11 12/31/2007 17.266 18.519 10 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 56 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Van Kampen Global Real Estate Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.015 36 12/31/2007 12.015 10.770 8 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.007 14 12/31/2007 12.007 10.752 5 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.991 31 12/31/2007 11.991 10.716 48 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.003 12 12/31/2007 12.003 10.743 18 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.991 5 12/31/2007 11.991 10.716 2 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.999 0 12/31/2007 11.999 10.734 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.959 2 12/31/2007 11.959 10.645 5 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.032 69 12/31/2007 12.032 10.806 61 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.007 40 12/31/2007 12.007 10.752 36 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.011 9 12/31/2007 12.011 10.761 4 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.971 287 12/31/2007 11.971 10.671 490 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.015 0 12/31/2007 12.015 10.770 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.975 0 12/31/2007 11.975 10.680 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 57 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Van Kampen Growth and Income Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 9.638 743 12/31/2002 9.638 8.070 827 12/31/2003 8.070 10.097 721 12/31/2004 10.097 11.281 355 12/31/2005 11.281 12.098 330 12/31/2006 12.098 13.765 279 12/31/2007 13.765 13.868 242 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.056 24 12/31/2003 8.056 10.070 68 12/31/2004 10.070 11.240 81 12/31/2005 11.240 12.042 65 12/31/2006 12.042 13.687 64 12/31/2007 13.687 13.776 52 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.030 108 12/31/2003 8.030 10.017 692 12/31/2004 10.017 11.157 759 12/31/2005 11.157 11.930 734 12/31/2006 11.930 13.533 684 12/31/2007 13.533 13.593 603 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.057 17 12/31/2004 10.057 11.219 53 12/31/2005 11.219 12.013 59 12/31/2006 12.013 13.648 50 12/31/2007 13.648 13.730 55 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.017 8 12/31/2004 10.017 11.157 15 12/31/2005 11.157 11.930 19 12/31/2006 11.930 13.533 23 12/31/2007 13.533 13.593 23 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.044 2 12/31/2004 10.044 11.199 2 12/31/2005 11.199 11.985 4 12/31/2006 11.985 13.610 4 12/31/2007 13.610 13.684 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.910 40 12/31/2004 9.910 10.995 33 12/31/2005 10.995 11.709 28 12/31/2006 11.709 13.229 22 12/31/2007 13.229 13.235 16 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 9.651 138 12/31/2002 9.651 8.097 287 12/31/2003 8.097 10.151 343 12/31/2004 10.151 11.364 360 12/31/2005 11.364 12.212 356 12/31/2006 12.212 13.922 314 12/31/2007 13.922 14.055 275 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.056 85 12/31/2003 8.056 10.070 365 12/31/2004 10.070 11.240 369 12/31/2005 11.240 12.042 387 12/31/2006 12.042 13.687 307 12/31/2007 13.687 13.776 271 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.084 9 12/31/2004 10.084 11.260 34 12/31/2005 11.260 12.070 56 12/31/2006 12.070 13.726 68 12/31/2007 13.726 13.822 70 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.950 200 12/31/2004 9.950 11.055 765 12/31/2005 11.055 11.791 1185 12/31/2006 11.791 13.342 1462 12/31/2007 13.342 13.368 1404 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.097 1 12/31/2004 10.097 11.281 1 12/31/2005 11.281 12.098 2 12/31/2006 12.098 13.765 2 12/31/2007 13.765 13.868 2 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.963 11 12/31/2004 9.963 11.076 26 12/31/2005 11.076 11.819 34 12/31/2006 11.819 13.380 38 12/31/2007 13.380 13.413 33 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 58 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ AZL Van Kampen Mid Cap Growth Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 9.491 335 12/31/2002 9.491 7.058 368 12/31/2003 7.058 8.899 317 12/31/2004 8.899 10.590 93 12/31/2005 10.590 12.220 146 12/31/2006 12.220 13.102 132 12/31/2007 13.102 15.714 174 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.047 2 12/31/2003 7.047 8.875 11 12/31/2004 8.875 10.552 15 12/31/2005 10.552 12.163 26 12/31/2006 12.163 13.028 21 12/31/2007 13.028 15.609 26 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.023 42 12/31/2003 7.023 8.828 271 12/31/2004 8.828 10.474 218 12/31/2005 10.474 12.050 316 12/31/2006 12.050 12.881 354 12/31/2007 12.881 15.402 580 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.864 15 12/31/2004 8.864 10.532 82 12/31/2005 10.532 12.135 109 12/31/2006 12.135 12.991 82 12/31/2007 12.991 15.557 91 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.828 6 12/31/2004 8.828 10.474 23 12/31/2005 10.474 12.050 26 12/31/2006 12.050 12.881 19 12/31/2007 12.881 15.402 32 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.852 0 12/31/2004 8.852 10.513 0 12/31/2005 10.513 12.107 2 12/31/2006 12.107 12.954 4 12/31/2007 12.954 15.505 5 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.734 22 12/31/2004 8.734 10.322 14 12/31/2005 10.322 11.827 16 12/31/2006 11.827 12.592 10 12/31/2007 12.592 14.996 12 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 9.504 37 12/31/2002 9.504 7.082 104 12/31/2003 7.082 8.947 158 12/31/2004 8.947 10.669 148 12/31/2005 10.669 12.335 160 12/31/2006 12.335 13.251 179 12/31/2007 13.251 15.925 262 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.047 22 12/31/2003 7.047 8.875 76 12/31/2004 8.875 10.552 97 12/31/2005 10.552 12.163 153 12/31/2006 12.163 13.028 145 12/31/2007 13.028 15.609 223 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.887 9 12/31/2004 8.887 10.571 20 12/31/2005 10.571 12.192 30 12/31/2006 12.192 13.065 35 12/31/2007 13.065 15.661 67 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.769 87 12/31/2004 8.769 10.379 364 12/31/2005 10.379 11.910 958 12/31/2006 11.910 12.699 1327 12/31/2007 12.699 15.147 2367 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.899 0 12/31/2004 8.899 10.590 0 12/31/2005 10.590 12.220 0 12/31/2006 12.220 13.102 0 12/31/2007 13.102 15.714 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.781 1 12/31/2004 8.781 10.398 3 12/31/2005 10.398 11.938 4 12/31/2006 11.938 12.735 6 12/31/2007 12.735 15.198 11 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 59 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Davis VA Financial Portfolio RWDE 1 1.85% 12/31/2000 N/A 13.265 76 12/31/2001 13.265 11.669 134 12/31/2002 11.669 9.526 166 12/31/2003 9.526 12.359 152 12/31/2004 12.359 13.383 134 12/31/2005 13.383 14.240 114 12/31/2006 14.240 16.566 109 12/31/2007 16.566 15.278 86 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.499 5 12/31/2003 9.499 12.310 11 12/31/2004 12.310 13.317 13 12/31/2005 13.317 14.156 8 12/31/2006 14.156 16.452 7 12/31/2007 16.452 15.157 8 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.443 51 12/31/2003 9.443 12.214 319 12/31/2004 12.214 13.187 277 12/31/2005 13.187 13.989 208 12/31/2006 13.989 16.226 182 12/31/2007 16.226 14.919 164 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.286 8 12/31/2004 12.286 13.285 20 12/31/2005 13.285 14.114 21 12/31/2006 14.114 16.395 17 12/31/2007 16.395 15.097 18 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.214 1 12/31/2004 12.214 13.187 2 12/31/2005 13.187 13.989 2 12/31/2006 13.989 16.226 1 12/31/2007 16.226 14.919 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.262 6 12/31/2004 12.262 13.252 3 12/31/2005 13.252 14.072 1 12/31/2006 14.072 16.339 1 12/31/2007 16.339 15.038 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.024 8 12/31/2004 12.024 12.930 9 12/31/2005 12.930 13.662 6 12/31/2006 13.662 15.783 8 12/31/2007 15.783 14.454 6 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 13.289 90 12/31/2001 13.289 11.714 192 12/31/2002 11.714 9.582 182 12/31/2003 9.582 12.456 181 12/31/2004 12.456 13.515 149 12/31/2005 13.515 14.409 101 12/31/2006 14.409 16.797 104 12/31/2007 16.797 15.522 95 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.499 34 12/31/2003 9.499 12.310 138 12/31/2004 12.310 13.317 124 12/31/2005 13.317 14.156 109 12/31/2006 14.156 16.452 100 12/31/2007 16.452 15.157 73 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.334 1 12/31/2004 12.334 13.350 13 12/31/2005 13.350 14.198 12 12/31/2006 14.198 16.509 13 12/31/2007 16.509 15.217 14 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.095 50 12/31/2004 12.095 13.026 223 12/31/2005 13.026 13.784 328 12/31/2006 13.784 15.948 451 12/31/2007 15.948 14.626 395 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.359 1 12/31/2004 12.359 13.383 0 12/31/2005 13.383 14.240 0 12/31/2006 14.240 16.566 0 12/31/2007 16.566 15.278 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.119 16 12/31/2004 12.119 13.058 17 12/31/2005 13.058 13.824 16 12/31/2006 13.824 16.003 15 12/31/2007 16.003 14.684 13 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 60 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Davis VA Value Portfolio RWDE 1 1.85% 12/31/2000 N/A 10.874 68 12/31/2001 10.874 9.565 227 12/31/2002 9.565 7.863 329 12/31/2003 7.863 10.015 314 12/31/2004 10.015 11.043 294 12/31/2005 11.043 11.865 281 12/31/2006 11.865 13.396 249 12/31/2007 13.396 13.759 204 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.840 13 12/31/2003 7.840 9.976 36 12/31/2004 9.976 10.989 39 12/31/2005 10.989 11.795 37 12/31/2006 11.795 13.304 30 12/31/2007 13.304 13.650 32 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.794 193 12/31/2003 7.794 9.898 809 12/31/2004 9.898 10.882 811 12/31/2005 10.882 11.657 732 12/31/2006 11.657 13.121 662 12/31/2007 13.121 13.436 582 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.957 12 12/31/2004 9.957 10.962 26 12/31/2005 10.962 11.761 20 12/31/2006 11.761 13.258 16 12/31/2007 13.258 13.596 16 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.898 2 12/31/2004 9.898 10.882 2 12/31/2005 10.882 11.657 2 12/31/2006 11.657 13.121 2 12/31/2007 13.121 13.436 2 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.937 12 12/31/2004 9.937 10.935 4 12/31/2005 10.935 11.726 4 12/31/2006 11.726 13.212 4 12/31/2007 13.212 13.543 4 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.744 11 12/31/2004 9.744 10.670 8 12/31/2005 10.670 11.384 4 12/31/2006 11.384 12.763 2 12/31/2007 12.763 13.017 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 10.894 130 12/31/2001 10.894 9.601 441 12/31/2002 9.601 7.909 846 12/31/2003 7.909 10.094 776 12/31/2004 10.094 11.153 741 12/31/2005 11.153 12.007 648 12/31/2006 12.007 13.582 584 12/31/2007 13.582 13.979 517 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.840 81 12/31/2003 7.840 9.976 286 12/31/2004 9.976 10.989 270 12/31/2005 10.989 11.795 248 12/31/2006 11.795 13.304 211 12/31/2007 13.304 13.650 179 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.996 24 12/31/2004 9.996 11.016 35 12/31/2005 11.016 11.830 34 12/31/2006 11.830 13.350 34 12/31/2007 13.350 13.704 32 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.802 284 12/31/2004 9.802 10.749 647 12/31/2005 10.749 11.485 622 12/31/2006 11.485 12.896 535 12/31/2007 12.896 13.172 459 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.015 8 12/31/2004 10.015 11.043 8 12/31/2005 11.043 11.865 8 12/31/2006 11.865 13.396 8 12/31/2007 13.396 13.759 8 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.821 12 12/31/2004 9.821 10.775 16 12/31/2005 10.775 11.519 12 12/31/2006 11.519 12.941 12 12/31/2007 12.941 13.225 9 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 61 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Dreyfus IP Small Cap Stock Index Portfolio RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.581 40 12/31/2003 7.581 10.253 106 12/31/2004 10.253 12.267 125 12/31/2005 12.267 12.914 72 12/31/2006 12.914 14.505 54 12/31/2007 14.505 14.144 30 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.575 2 12/31/2003 7.575 10.236 8 12/31/2004 10.236 12.234 18 12/31/2005 12.234 12.866 18 12/31/2006 12.866 14.437 18 12/31/2007 14.437 14.064 24 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.565 86 12/31/2003 7.565 10.202 541 12/31/2004 10.202 12.169 552 12/31/2005 12.169 12.772 522 12/31/2006 12.772 14.303 499 12/31/2007 14.303 13.905 426 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.227 7 12/31/2004 10.227 12.218 31 12/31/2005 12.218 12.843 30 12/31/2006 12.843 14.403 30 12/31/2007 14.403 14.024 25 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.202 5 12/31/2004 10.202 12.169 9 12/31/2005 12.169 12.772 13 12/31/2006 12.772 14.303 14 12/31/2007 14.303 13.905 14 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.219 0 12/31/2004 10.219 12.202 0 12/31/2005 12.202 12.819 0 12/31/2006 12.819 14.370 0 12/31/2007 14.370 13.984 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.134 3 12/31/2004 10.134 12.039 6 12/31/2005 12.039 12.586 7 12/31/2006 12.586 14.038 5 12/31/2007 14.038 13.593 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.591 20 12/31/2003 7.591 10.287 178 12/31/2004 10.287 12.333 154 12/31/2005 12.333 13.009 158 12/31/2006 13.009 14.641 137 12/31/2007 14.641 14.306 99 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.575 77 12/31/2003 7.575 10.236 279 12/31/2004 10.236 12.234 270 12/31/2005 12.234 12.866 246 12/31/2006 12.866 14.437 206 12/31/2007 14.437 14.064 174 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.244 7 12/31/2004 10.244 12.251 19 12/31/2005 12.251 12.890 31 12/31/2006 12.890 14.471 28 12/31/2007 14.471 14.104 27 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.159 211 12/31/2004 10.159 12.088 722 12/31/2005 12.088 12.656 1127 12/31/2006 12.656 14.137 1192 12/31/2007 14.137 13.709 1069 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.253 0 12/31/2004 10.253 12.267 11 12/31/2005 12.267 12.914 0 12/31/2006 12.914 14.505 0 12/31/2007 14.505 14.144 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.168 2 12/31/2004 10.168 12.104 5 12/31/2005 12.104 12.679 5 12/31/2006 12.679 14.170 2 12/31/2007 14.170 13.748 2 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 62 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Dreyfus Stock Index Fund, Inc. RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.134 158 12/31/2003 8.134 10.225 156 12/31/2004 10.225 11.076 218 12/31/2005 11.076 11.356 147 12/31/2006 11.356 12.843 94 12/31/2007 12.843 13.236 54 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.129 1 12/31/2003 8.129 10.208 35 12/31/2004 10.208 11.047 43 12/31/2005 11.047 11.314 39 12/31/2006 11.314 12.784 22 12/31/2007 12.784 13.161 18 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.118 217 12/31/2003 8.118 10.174 1043 12/31/2004 10.174 10.988 1089 12/31/2005 10.988 11.232 907 12/31/2006 11.232 12.665 807 12/31/2007 12.665 13.013 656 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.200 26 12/31/2004 10.200 11.032 52 12/31/2005 11.032 11.294 50 12/31/2006 11.294 12.754 46 12/31/2007 12.754 13.124 47 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.174 4 12/31/2004 10.174 10.988 32 12/31/2005 10.988 11.232 38 12/31/2006 11.232 12.665 32 12/31/2007 12.665 13.013 29 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.191 0 12/31/2004 10.191 11.017 0 12/31/2005 11.017 11.273 0 12/31/2006 11.273 12.724 0 12/31/2007 12.724 13.087 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.106 2 12/31/2004 10.106 10.871 4 12/31/2005 10.871 11.068 5 12/31/2006 11.068 12.430 2 12/31/2007 12.430 12.721 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.145 173 12/31/2003 8.145 10.259 539 12/31/2004 10.259 11.136 450 12/31/2005 11.136 11.440 397 12/31/2006 11.440 12.964 298 12/31/2007 12.964 13.387 264 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.129 64 12/31/2003 8.129 10.208 436 12/31/2004 10.208 11.047 434 12/31/2005 11.047 11.314 384 12/31/2006 11.314 12.784 355 12/31/2007 12.784 13.161 225 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.217 7 12/31/2004 10.217 11.062 45 12/31/2005 11.062 11.335 60 12/31/2006 11.335 12.814 37 12/31/2007 12.814 13.199 35 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.132 411 12/31/2004 10.132 10.915 1541 12/31/2005 10.915 11.129 1952 12/31/2006 11.129 12.518 1960 12/31/2007 12.518 12.829 1693 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.225 0 12/31/2004 10.225 11.076 13 12/31/2005 11.076 11.356 1 12/31/2006 11.356 12.843 1 12/31/2007 12.843 13.236 1 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.140 1 12/31/2004 10.140 10.929 7 12/31/2005 10.929 11.149 8 12/31/2006 11.149 12.547 8 12/31/2007 12.547 12.866 8 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 63 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Global Communications Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 16.857 1 12/31/2002 16.857 11.001 11 12/31/2003 11.001 15.166 22 12/31/2004 15.166 16.998 22 12/31/2005 16.998 19.322 19 12/31/2006 19.322 23.628 28 12/31/2007 23.628 28.815 31 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 10.850 3 12/31/2003 10.850 14.944 16 12/31/2004 14.944 16.732 8 12/31/2005 16.732 19.001 14 12/31/2006 19.001 23.211 17 12/31/2007 23.211 28.279 20 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 10.555 2 12/31/2003 10.555 14.509 25 12/31/2004 14.509 16.212 47 12/31/2005 16.212 18.374 60 12/31/2006 18.374 22.401 81 12/31/2007 22.401 27.237 98 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 14.834 10 12/31/2004 14.834 16.601 16 12/31/2005 16.601 18.842 16 12/31/2006 18.842 23.006 22 12/31/2007 23.006 28.015 29 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 14.509 0 12/31/2004 14.509 16.212 1 12/31/2005 16.212 18.374 2 12/31/2006 18.374 22.401 3 12/31/2007 22.401 27.237 4 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 14.725 0 12/31/2004 14.725 16.470 0 12/31/2005 16.470 18.684 0 12/31/2006 18.684 22.802 3 12/31/2007 22.802 27.753 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 13.676 0 12/31/2004 13.676 15.221 2 12/31/2005 15.221 17.181 2 12/31/2006 17.181 20.863 2 12/31/2007 20.863 25.265 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 17.294 0 12/31/2002 17.294 11.308 4 12/31/2003 11.308 15.621 12 12/31/2004 15.621 17.543 8 12/31/2005 17.543 19.981 11 12/31/2006 19.981 24.483 18 12/31/2007 24.483 29.918 24 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 10.850 0 12/31/2003 10.850 14.944 8 12/31/2004 14.944 16.732 26 12/31/2005 16.732 19.001 19 12/31/2006 19.001 23.211 22 12/31/2007 23.211 28.279 35 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.055 1 12/31/2004 15.055 16.865 2 12/31/2005 16.865 19.161 2 12/31/2006 19.161 23.419 7 12/31/2007 23.419 28.546 12 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 13.983 13 12/31/2004 13.983 15.585 74 12/31/2005 15.585 17.619 189 12/31/2006 17.619 21.427 341 12/31/2007 21.427 25.987 552 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.166 0 12/31/2004 15.166 16.998 0 12/31/2005 16.998 19.322 2 12/31/2006 19.322 23.628 0 12/31/2007 23.628 28.815 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 14.086 0 12/31/2004 14.086 15.709 2 12/31/2005 15.709 17.767 1 12/31/2006 17.767 21.618 1 12/31/2007 21.618 26.233 11 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 64 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Global Real Estate Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 27.807 5 12/31/2002 27.807 27.863 46 12/31/2003 27.863 37.130 97 12/31/2004 37.130 48.038 104 12/31/2005 48.038 53.515 96 12/31/2006 53.515 63.351 60 12/31/2007 63.351 49.210 35 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 27.482 5 12/31/2003 27.482 36.585 17 12/31/2004 36.585 47.286 19 12/31/2005 47.286 52.624 20 12/31/2006 52.624 62.235 11 12/31/2007 62.235 48.295 8 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 26.735 39 12/31/2003 26.735 35.520 179 12/31/2004 35.520 45.817 210 12/31/2005 45.817 50.888 186 12/31/2006 50.888 60.061 166 12/31/2007 60.061 46.514 115 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 36.316 10 12/31/2004 36.316 46.914 31 12/31/2005 46.914 52.185 32 12/31/2006 52.185 61.684 27 12/31/2007 61.684 47.843 21 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 35.520 2 12/31/2004 35.520 45.817 7 12/31/2005 45.817 50.888 7 12/31/2006 50.888 60.061 6 12/31/2007 60.061 46.514 5 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 36.049 1 12/31/2004 36.049 46.546 3 12/31/2005 46.546 51.749 3 12/31/2006 51.749 61.138 1 12/31/2007 61.138 47.396 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 33.481 3 12/31/2004 33.481 43.014 6 12/31/2005 43.014 47.585 6 12/31/2006 47.585 55.939 4 12/31/2007 55.939 43.148 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 28.527 7 12/31/2002 28.527 28.641 54 12/31/2003 28.641 38.244 133 12/31/2004 38.244 49.578 145 12/31/2005 49.578 55.341 120 12/31/2006 55.341 65.643 96 12/31/2007 65.643 51.094 61 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 27.482 16 12/31/2003 27.482 36.585 87 12/31/2004 36.585 47.286 121 12/31/2005 47.286 52.624 111 12/31/2006 52.624 62.235 98 12/31/2007 62.235 48.295 80 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 36.856 4 12/31/2004 36.856 47.661 18 12/31/2005 47.661 53.068 29 12/31/2006 53.068 62.790 28 12/31/2007 62.790 48.750 20 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 34.232 66 12/31/2004 34.232 44.045 304 12/31/2005 44.045 48.798 508 12/31/2006 48.798 57.451 496 12/31/2007 57.451 44.381 421 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 37.130 1 12/31/2004 37.130 48.038 1 12/31/2005 48.038 53.515 1 12/31/2006 53.515 63.351 0 12/31/2007 63.351 49.210 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 34.485 3 12/31/2004 34.485 44.394 4 12/31/2005 44.394 49.209 7 12/31/2006 49.209 57.963 3 12/31/2007 57.963 44.800 1 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 65 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Growth and Income Securities Fund RWDE 1 1.85% 12/31/2000 N/A 30.769 10 12/31/2001 30.769 29.515 62 12/31/2002 29.515 24.420 92 12/31/2003 24.420 30.132 86 12/31/2004 30.132 32.718 72 12/31/2005 32.718 33.249 71 12/31/2006 33.249 38.110 59 12/31/2007 38.110 36.021 49 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 22.491 2 12/31/2003 22.491 27.724 9 12/31/2004 27.724 30.073 15 12/31/2005 30.073 30.530 14 12/31/2006 30.530 34.959 10 12/31/2007 34.959 33.009 10 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 21.880 30 12/31/2003 21.880 26.917 148 12/31/2004 26.917 29.138 144 12/31/2005 29.138 29.522 141 12/31/2006 29.522 33.738 133 12/31/2007 33.738 31.792 114 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 27.520 5 12/31/2004 27.520 29.836 24 12/31/2005 29.836 30.275 31 12/31/2006 30.275 34.649 31 12/31/2007 34.649 32.701 36 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 26.917 2 12/31/2004 26.917 29.138 6 12/31/2005 29.138 29.522 8 12/31/2006 29.522 33.738 8 12/31/2007 33.738 31.792 7 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 27.317 1 12/31/2004 27.317 29.602 1 12/31/2005 29.602 30.022 1 12/31/2006 30.022 34.343 1 12/31/2007 34.343 32.395 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 25.372 2 12/31/2004 25.372 27.356 2 12/31/2005 27.356 27.606 2 12/31/2006 27.606 31.422 2 12/31/2007 31.422 29.491 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 30.892 15 12/31/2001 30.892 29.692 76 12/31/2002 29.692 24.616 116 12/31/2003 24.616 30.434 138 12/31/2004 30.434 33.112 134 12/31/2005 33.112 33.716 119 12/31/2006 33.716 38.723 108 12/31/2007 38.723 36.674 93 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 22.491 14 12/31/2003 22.491 27.724 69 12/31/2004 27.724 30.073 68 12/31/2005 30.073 30.530 54 12/31/2006 30.530 34.959 49 12/31/2007 34.959 33.009 44 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 28.029 4 12/31/2004 28.029 30.419 28 12/31/2005 30.419 30.896 39 12/31/2006 30.896 35.396 36 12/31/2007 35.396 33.439 35 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 25.940 62 12/31/2004 25.940 28.011 334 12/31/2005 28.011 28.310 465 12/31/2006 28.310 32.271 512 12/31/2007 32.271 30.334 485 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 28.137 1 12/31/2004 28.137 30.551 1 12/31/2005 30.551 31.046 1 12/31/2006 31.046 35.586 1 12/31/2007 35.586 33.635 1 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 26.133 16 12/31/2004 26.133 28.233 15 12/31/2005 28.233 28.548 12 12/31/2006 28.548 32.559 8 12/31/2007 32.559 30.620 8 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 66 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin High Income Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 17.308 0 12/31/2002 17.308 15.299 32 12/31/2003 15.299 19.701 112 12/31/2004 19.701 21.249 50 12/31/2005 21.249 21.552 44 12/31/2006 21.552 23.139 40 12/31/2007 23.139 23.329 25 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 15.090 3 12/31/2003 15.090 19.412 25 12/31/2004 19.412 20.916 18 12/31/2005 20.916 21.193 17 12/31/2006 21.193 22.731 15 12/31/2007 22.731 22.895 11 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 14.680 18 12/31/2003 14.680 18.847 203 12/31/2004 18.847 20.266 183 12/31/2005 20.266 20.494 168 12/31/2006 20.494 21.937 186 12/31/2007 21.937 22.051 94 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.270 11 12/31/2004 19.270 20.752 35 12/31/2005 20.752 21.016 30 12/31/2006 21.016 22.530 32 12/31/2007 22.530 22.681 31 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.847 1 12/31/2004 18.847 20.266 5 12/31/2005 20.266 20.494 8 12/31/2006 20.494 21.937 5 12/31/2007 21.937 22.051 6 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.128 0 12/31/2004 19.128 20.589 1 12/31/2005 20.589 20.841 1 12/31/2006 20.841 22.331 1 12/31/2007 22.331 22.469 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.765 1 12/31/2004 17.765 19.027 1 12/31/2005 19.027 19.164 1 12/31/2006 19.164 20.432 4 12/31/2007 20.432 20.455 4 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 17.756 0 12/31/2002 17.756 15.726 41 12/31/2003 15.726 20.292 182 12/31/2004 20.292 21.930 75 12/31/2005 21.930 22.287 71 12/31/2006 22.287 23.976 67 12/31/2007 23.976 24.222 43 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 15.090 9 12/31/2003 15.090 19.412 65 12/31/2004 19.412 20.916 48 12/31/2005 20.916 21.193 32 12/31/2006 21.193 22.731 31 12/31/2007 22.731 22.895 31 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.556 9 12/31/2004 19.556 21.082 28 12/31/2005 21.082 21.372 35 12/31/2006 21.372 22.934 32 12/31/2007 22.934 23.111 29 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.164 125 12/31/2004 18.164 19.482 457 12/31/2005 19.482 19.652 366 12/31/2006 19.652 20.984 459 12/31/2007 20.984 21.040 450 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.701 1 12/31/2004 19.701 21.249 0 12/31/2005 21.249 21.552 0 12/31/2006 21.552 23.139 0 12/31/2007 23.139 23.329 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.298 2 12/31/2004 18.298 19.637 1 12/31/2005 19.637 19.818 1 12/31/2006 19.818 21.171 1 12/31/2007 21.171 21.238 3 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 67 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Income Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 26.801 0 12/31/2002 26.801 26.149 46 12/31/2003 26.149 33.812 63 12/31/2004 33.812 37.789 79 12/31/2005 37.789 37.693 85 12/31/2006 37.693 43.754 110 12/31/2007 43.754 44.561 105 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 25.792 4 12/31/2003 25.792 33.316 23 12/31/2004 33.316 37.197 34 12/31/2005 37.197 37.066 30 12/31/2006 37.066 42.983 25 12/31/2007 42.983 43.732 23 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 25.091 22 12/31/2003 25.091 32.346 126 12/31/2004 32.346 36.042 148 12/31/2005 36.042 35.843 145 12/31/2006 35.843 41.482 177 12/31/2007 41.482 42.120 165 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 33.071 6 12/31/2004 33.071 36.905 32 12/31/2005 36.905 36.757 43 12/31/2006 36.757 42.603 68 12/31/2007 42.603 43.323 83 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 32.346 0 12/31/2004 32.346 36.042 3 12/31/2005 36.042 35.843 4 12/31/2006 35.843 41.482 7 12/31/2007 41.482 42.120 5 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 32.827 0 12/31/2004 32.827 36.615 1 12/31/2005 36.615 36.450 1 12/31/2006 36.450 42.226 1 12/31/2007 42.226 42.918 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 30.489 6 12/31/2004 30.489 33.837 7 12/31/2005 33.837 33.517 8 12/31/2006 33.517 38.635 9 12/31/2007 38.635 39.071 10 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 27.495 6 12/31/2002 27.495 26.880 73 12/31/2003 26.880 34.826 87 12/31/2004 34.826 39.001 115 12/31/2005 39.001 38.980 131 12/31/2006 38.980 45.337 153 12/31/2007 45.337 46.266 162 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 25.792 19 12/31/2003 25.792 33.316 94 12/31/2004 33.316 37.197 69 12/31/2005 37.197 37.066 71 12/31/2006 37.066 42.983 87 12/31/2007 42.983 43.732 93 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 33.563 0 12/31/2004 33.563 37.492 13 12/31/2005 37.492 37.378 30 12/31/2006 37.378 43.367 47 12/31/2007 43.367 44.144 44 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 31.173 9 12/31/2004 31.173 34.648 239 12/31/2005 34.648 34.371 537 12/31/2006 34.371 39.679 816 12/31/2007 39.679 40.188 947 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 33.812 0 12/31/2004 33.812 37.789 1 12/31/2005 37.789 37.693 1 12/31/2006 37.693 43.754 1 12/31/2007 43.754 44.561 1 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 31.404 3 12/31/2004 31.404 34.922 3 12/31/2005 34.922 34.660 3 12/31/2006 34.660 40.033 3 12/31/2007 40.033 40.567 2 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 68 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Large Cap Growth Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 17.841 4 12/31/2002 17.841 13.453 38 12/31/2003 13.453 16.765 39 12/31/2004 16.765 17.763 39 12/31/2005 17.763 17.622 44 12/31/2006 17.622 19.185 36 12/31/2007 19.185 20.005 28 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.364 3 12/31/2003 13.364 16.637 21 12/31/2004 16.637 17.609 23 12/31/2005 17.609 17.453 22 12/31/2006 17.453 18.982 19 12/31/2007 18.982 19.773 20 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.187 74 12/31/2003 13.187 16.384 239 12/31/2004 16.384 17.306 227 12/31/2005 17.306 17.118 226 12/31/2006 17.118 18.581 205 12/31/2007 18.581 19.317 171 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.573 10 12/31/2004 16.573 17.533 29 12/31/2005 17.533 17.369 37 12/31/2006 17.369 18.881 35 12/31/2007 18.881 19.658 38 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.384 0 12/31/2004 16.384 17.306 3 12/31/2005 17.306 17.118 9 12/31/2006 17.118 18.581 11 12/31/2007 18.581 19.317 11 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.510 0 12/31/2004 16.510 17.457 1 12/31/2005 17.457 17.285 0 12/31/2006 17.285 18.780 0 12/31/2007 18.780 19.543 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.889 1 12/31/2004 15.889 16.716 1 12/31/2005 16.716 16.469 1 12/31/2006 16.469 17.805 2 12/31/2007 17.805 18.435 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 18.045 6 12/31/2002 18.045 13.634 63 12/31/2003 13.634 17.024 85 12/31/2004 17.024 18.073 109 12/31/2005 18.073 17.967 111 12/31/2006 17.967 19.599 93 12/31/2007 19.599 20.478 87 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.364 41 12/31/2003 13.364 16.637 141 12/31/2004 16.637 17.609 144 12/31/2005 17.609 17.453 124 12/31/2006 17.453 18.982 102 12/31/2007 18.982 19.773 87 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.701 3 12/31/2004 16.701 17.686 28 12/31/2005 17.686 17.537 34 12/31/2006 17.537 19.083 36 12/31/2007 19.083 19.889 32 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.072 121 12/31/2004 16.072 16.935 601 12/31/2005 16.935 16.709 897 12/31/2006 16.709 18.092 916 12/31/2007 18.092 18.761 862 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.765 0 12/31/2004 16.765 17.763 0 12/31/2005 17.763 17.622 1 12/31/2006 17.622 19.185 2 12/31/2007 19.185 20.005 3 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.134 3 12/31/2004 16.134 17.009 5 12/31/2005 17.009 16.790 8 12/31/2006 16.790 18.189 6 12/31/2007 18.189 18.871 7 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 69 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Rising Dividends Securities Fund RWDE 1 1.85% 12/31/2000 N/A 22.545 5 12/31/2001 22.545 25.131 90 12/31/2002 25.131 24.280 159 12/31/2003 24.280 29.695 174 12/31/2004 29.695 32.355 164 12/31/2005 32.355 32.852 177 12/31/2006 32.852 37.774 130 12/31/2007 37.774 36.081 109 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 22.988 11 12/31/2003 22.988 28.087 27 12/31/2004 28.087 30.572 29 12/31/2005 30.572 31.011 27 12/31/2006 31.011 35.621 25 12/31/2007 35.621 33.990 19 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 22.490 100 12/31/2003 22.490 27.424 444 12/31/2004 27.424 29.791 450 12/31/2005 29.791 30.158 422 12/31/2006 30.158 34.572 377 12/31/2007 34.572 32.923 323 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 27.453 14 12/31/2004 27.453 29.867 57 12/31/2005 29.867 30.280 70 12/31/2006 30.280 34.765 71 12/31/2007 34.765 33.157 56 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 27.424 2 12/31/2004 27.424 29.791 12 12/31/2005 29.791 30.158 15 12/31/2006 30.158 34.572 16 12/31/2007 34.572 32.923 15 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 27.753 3 12/31/2004 27.753 30.179 5 12/31/2005 30.179 30.581 3 12/31/2006 30.581 35.093 3 12/31/2007 35.093 33.453 3 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 26.144 6 12/31/2004 26.144 28.287 8 12/31/2005 28.287 28.522 7 12/31/2006 28.522 32.566 7 12/31/2007 32.566 30.889 5 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 22.634 9 12/31/2001 22.634 25.282 135 12/31/2002 25.282 24.475 220 12/31/2003 24.475 29.993 234 12/31/2004 29.993 32.745 235 12/31/2005 32.745 33.314 210 12/31/2006 33.314 38.382 198 12/31/2007 38.382 36.736 150 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 22.988 43 12/31/2003 22.988 28.087 162 12/31/2004 28.087 30.572 175 12/31/2005 30.572 31.011 167 12/31/2006 31.011 35.621 134 12/31/2007 35.621 33.990 115 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 28.255 4 12/31/2004 28.255 30.771 24 12/31/2005 30.771 31.228 43 12/31/2006 31.228 35.888 34 12/31/2007 35.888 34.263 29 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 26.617 109 12/31/2004 26.617 28.842 475 12/31/2005 28.842 29.124 708 12/31/2006 29.124 33.304 698 12/31/2007 33.304 31.637 593 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 28.424 0 12/31/2004 28.424 30.971 0 12/31/2005 30.971 31.446 0 12/31/2006 31.446 36.157 0 12/31/2007 36.157 34.537 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 26.776 14 12/31/2004 26.776 29.029 16 12/31/2005 29.029 29.328 8 12/31/2006 29.328 33.554 10 12/31/2007 33.554 31.890 8 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 70 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Small Cap Value Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.498 0 12/31/2002 10.498 9.351 52 12/31/2003 9.351 12.129 41 12/31/2004 12.129 14.733 72 12/31/2005 14.733 15.732 49 12/31/2006 15.732 18.067 49 12/31/2007 18.067 17.312 27 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.308 1 12/31/2003 9.308 12.060 11 12/31/2004 12.060 14.635 29 12/31/2005 14.635 15.611 28 12/31/2006 15.611 17.911 19 12/31/2007 17.911 17.145 15 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.221 60 12/31/2003 9.221 11.924 391 12/31/2004 11.924 14.441 418 12/31/2005 14.441 15.374 385 12/31/2006 15.374 17.603 331 12/31/2007 17.603 16.816 293 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.026 15 12/31/2004 12.026 14.586 27 12/31/2005 14.586 15.552 30 12/31/2006 15.552 17.833 22 12/31/2007 17.833 17.062 21 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.924 1 12/31/2004 11.924 14.441 7 12/31/2005 14.441 15.374 8 12/31/2006 15.374 17.603 8 12/31/2007 17.603 16.816 8 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.992 0 12/31/2004 11.992 14.538 2 12/31/2005 14.538 15.492 0 12/31/2006 15.492 17.756 0 12/31/2007 17.756 16.980 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.657 9 12/31/2004 11.657 14.061 4 12/31/2005 14.061 14.909 5 12/31/2006 14.909 17.003 3 12/31/2007 17.003 16.178 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 10.576 19 12/31/2002 10.576 9.439 102 12/31/2003 9.439 12.267 117 12/31/2004 12.267 14.931 150 12/31/2005 14.931 15.975 160 12/31/2006 15.975 18.383 146 12/31/2007 18.383 17.650 114 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.308 20 12/31/2003 9.308 12.060 139 12/31/2004 12.060 14.635 149 12/31/2005 14.635 15.611 125 12/31/2006 15.611 17.911 101 12/31/2007 17.911 17.145 71 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.095 9 12/31/2004 12.095 14.684 26 12/31/2005 14.684 15.671 32 12/31/2006 15.671 17.989 33 12/31/2007 17.989 17.228 26 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.756 155 12/31/2004 11.756 14.202 574 12/31/2005 14.202 15.082 789 12/31/2006 15.082 17.225 707 12/31/2007 17.225 16.415 625 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.129 0 12/31/2004 12.129 14.733 0 12/31/2005 14.733 15.732 0 12/31/2006 15.732 18.067 0 12/31/2007 18.067 17.312 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.790 14 12/31/2004 11.790 14.250 18 12/31/2005 14.250 15.140 8 12/31/2006 15.140 17.300 7 12/31/2007 17.300 16.494 7 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 71 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Small-Mid Cap Growth Securities Fund RWDE 1 1.85% 12/31/2000 N/A 23.739 21 12/31/2001 23.739 19.748 73 12/31/2002 19.748 13.826 149 12/31/2003 13.826 18.627 142 12/31/2004 18.627 20.383 97 12/31/2005 20.383 20.968 87 12/31/2006 20.968 22.374 84 12/31/2007 22.374 24.431 63 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.471 7 12/31/2003 13.471 18.131 26 12/31/2004 18.131 19.820 21 12/31/2005 19.820 20.369 20 12/31/2006 20.369 21.713 17 12/31/2007 21.713 23.685 18 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.279 59 12/31/2003 13.279 17.837 261 12/31/2004 17.837 19.460 281 12/31/2005 19.460 19.959 207 12/31/2006 19.959 21.234 181 12/31/2007 21.234 23.115 168 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.057 15 12/31/2004 18.057 19.730 55 12/31/2005 19.730 20.266 55 12/31/2006 20.266 21.592 49 12/31/2007 21.592 23.541 40 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.837 2 12/31/2004 17.837 19.460 10 12/31/2005 19.460 19.959 10 12/31/2006 19.959 21.234 12 12/31/2007 21.234 23.115 9 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.984 3 12/31/2004 17.984 19.639 1 12/31/2005 19.639 20.163 1 12/31/2006 20.163 21.472 1 12/31/2007 21.472 23.399 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.264 2 12/31/2004 17.264 18.759 4 12/31/2005 18.759 19.163 4 12/31/2006 19.163 20.306 4 12/31/2007 20.306 22.016 4 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 23.833 96 12/31/2001 23.833 19.867 143 12/31/2002 19.867 13.936 218 12/31/2003 13.936 18.814 228 12/31/2004 18.814 20.628 219 12/31/2005 20.628 21.263 153 12/31/2006 21.263 22.734 130 12/31/2007 22.734 24.874 100 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.471 37 12/31/2003 13.471 18.131 106 12/31/2004 18.131 19.820 98 12/31/2005 19.820 20.369 88 12/31/2006 20.369 21.713 76 12/31/2007 21.713 23.685 64 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.205 8 12/31/2004 18.205 19.911 9 12/31/2005 19.911 20.473 15 12/31/2006 20.473 21.835 17 12/31/2007 21.835 23.830 15 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.476 81 12/31/2004 17.476 19.019 328 12/31/2005 19.019 19.457 498 12/31/2006 19.457 20.649 470 12/31/2007 20.649 22.422 419 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.280 3 12/31/2004 18.280 20.003 4 12/31/2005 20.003 20.577 8 12/31/2006 20.577 21.957 5 12/31/2007 21.957 23.975 5 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.548 3 12/31/2004 17.548 19.106 8 12/31/2005 19.106 19.557 7 12/31/2006 19.557 20.764 4 12/31/2007 20.764 22.559 4 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 72 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Templeton VIP Founding Funds Allocation Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.225 39 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.221 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.212 3 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.219 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.212 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.216 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.194 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.235 1 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.221 1 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.223 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.200 51 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.225 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.203 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 73 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin U.S. Government Fund RWDE 1 1.85% 12/31/2000 N/A 20.689 19 12/31/2001 20.689 21.804 113 12/31/2002 21.804 23.496 385 12/31/2003 23.496 23.576 351 12/31/2004 23.576 23.947 264 12/31/2005 23.947 24.074 163 12/31/2006 24.074 24.584 122 12/31/2007 24.584 25.725 106 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 21.640 46 12/31/2003 21.640 21.692 74 12/31/2004 21.692 22.011 52 12/31/2005 22.011 22.106 45 12/31/2006 22.106 22.551 39 12/31/2007 22.551 23.574 37 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 21.052 218 12/31/2003 21.052 21.060 602 12/31/2004 21.060 21.327 525 12/31/2005 21.327 21.377 454 12/31/2006 21.377 21.763 399 12/31/2007 21.763 22.705 364 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 21.532 20 12/31/2004 21.532 21.838 54 12/31/2005 21.838 21.921 75 12/31/2006 21.921 22.351 70 12/31/2007 22.351 23.354 67 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 21.060 1 12/31/2004 21.060 21.327 6 12/31/2005 21.327 21.377 12 12/31/2006 21.377 21.763 12 12/31/2007 21.763 22.705 11 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 21.374 10 12/31/2004 21.374 21.666 9 12/31/2005 21.666 21.738 4 12/31/2006 21.738 22.154 3 12/31/2007 22.154 23.136 4 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.851 7 12/31/2004 19.851 20.023 9 12/31/2005 20.023 19.989 9 12/31/2006 19.989 20.270 5 12/31/2007 20.270 21.062 5 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 20.771 64 12/31/2001 20.771 21.935 243 12/31/2002 21.935 23.684 652 12/31/2003 23.684 23.813 446 12/31/2004 23.813 24.236 379 12/31/2005 24.236 24.413 306 12/31/2006 24.413 24.979 259 12/31/2007 24.979 26.192 223 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 21.640 77 12/31/2003 21.640 21.692 297 12/31/2004 21.692 22.011 249 12/31/2005 22.011 22.106 209 12/31/2006 22.106 22.551 190 12/31/2007 22.551 23.574 176 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 21.917 7 12/31/2004 21.917 22.251 14 12/31/2005 22.251 22.358 21 12/31/2006 22.358 22.819 26 12/31/2007 22.819 23.866 27 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 20.296 146 12/31/2004 20.296 20.502 497 12/31/2005 20.502 20.498 696 12/31/2006 20.498 20.817 692 12/31/2007 20.817 21.664 681 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 22.015 1 12/31/2004 22.015 22.361 6 12/31/2005 22.361 22.480 6 12/31/2006 22.480 22.955 0 12/31/2007 22.955 24.021 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 20.447 11 12/31/2004 20.447 20.665 17 12/31/2005 20.665 20.671 17 12/31/2006 20.671 21.003 16 12/31/2007 21.003 21.868 17 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 74 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Franklin Zero Coupon Fund 2010 RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 27.816 0 12/31/2002 27.816 32.795 70 12/31/2003 32.795 33.350 21 12/31/2004 33.350 34.281 5 12/31/2005 34.281 34.172 6 12/31/2006 34.172 34.457 5 12/31/2007 34.457 36.738 33 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 32.346 10 12/31/2003 32.346 32.861 17 12/31/2004 32.861 33.745 8 12/31/2005 33.745 33.603 8 12/31/2006 33.603 33.850 8 12/31/2007 33.850 36.055 8 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 31.467 28 12/31/2003 31.467 31.904 81 12/31/2004 31.904 32.696 61 12/31/2005 32.696 32.494 62 12/31/2006 32.494 32.668 55 12/31/2007 32.668 34.725 54 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 32.619 2 12/31/2004 32.619 33.480 5 12/31/2005 33.480 33.322 11 12/31/2006 33.322 33.550 16 12/31/2007 33.550 35.718 16 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 31.904 0 12/31/2004 31.904 32.696 0 12/31/2005 32.696 32.494 1 12/31/2006 32.494 32.668 1 12/31/2007 32.668 34.725 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 32.379 0 12/31/2004 32.379 33.216 0 12/31/2005 33.216 33.044 0 12/31/2006 33.044 33.254 0 12/31/2007 33.254 35.384 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 30.073 0 12/31/2004 30.073 30.696 1 12/31/2005 30.696 30.385 1 12/31/2006 30.385 30.426 0 12/31/2007 30.426 32.212 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 28.536 2 12/31/2002 28.536 33.711 110 12/31/2003 33.711 34.350 64 12/31/2004 34.350 35.381 52 12/31/2005 35.381 35.338 55 12/31/2006 35.338 35.704 35 12/31/2007 35.704 38.144 36 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 32.346 11 12/31/2003 32.346 32.861 55 12/31/2004 32.861 33.745 73 12/31/2005 33.745 33.603 70 12/31/2006 33.603 33.850 69 12/31/2007 33.850 36.055 63 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 33.105 1 12/31/2004 33.105 34.012 4 12/31/2005 34.012 33.886 4 12/31/2006 33.886 34.152 5 12/31/2007 34.152 36.395 4 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 30.747 17 12/31/2004 30.747 31.432 70 12/31/2005 31.432 31.160 120 12/31/2006 31.160 31.248 127 12/31/2007 31.248 33.133 153 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 33.350 0 12/31/2004 33.350 34.281 1 12/31/2005 34.281 34.172 1 12/31/2006 34.172 34.457 0 12/31/2007 34.457 36.738 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 30.975 0 12/31/2004 30.975 31.681 0 12/31/2005 31.681 31.422 2 12/31/2006 31.422 31.527 7 12/31/2007 31.527 33.445 15 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 75 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Jennison 20/20 Focus Portfolio RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.169 32 12/31/2003 8.169 10.329 34 12/31/2004 10.329 11.698 38 12/31/2005 11.698 13.926 50 12/31/2006 13.926 15.532 49 12/31/2007 15.532 16.788 43 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.164 1 12/31/2003 8.164 10.312 19 12/31/2004 10.312 11.667 18 12/31/2005 11.667 13.875 21 12/31/2006 13.875 15.459 20 12/31/2007 15.459 16.693 17 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.153 26 12/31/2003 8.153 10.277 148 12/31/2004 10.277 11.605 229 12/31/2005 11.605 13.773 204 12/31/2006 13.773 15.316 200 12/31/2007 15.316 16.505 211 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.303 5 12/31/2004 10.303 11.651 18 12/31/2005 11.651 13.849 22 12/31/2006 13.849 15.423 23 12/31/2007 15.423 16.646 20 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.277 0 12/31/2004 10.277 11.605 1 12/31/2005 11.605 13.773 1 12/31/2006 13.773 15.316 2 12/31/2007 15.316 16.505 1 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.294 0 12/31/2004 10.294 11.636 0 12/31/2005 11.636 13.824 1 12/31/2006 13.824 15.387 5 12/31/2007 15.387 16.599 2 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.209 1 12/31/2004 10.209 11.481 1 12/31/2005 11.481 13.572 1 12/31/2006 13.572 15.032 1 12/31/2007 15.032 16.134 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.180 30 12/31/2003 8.180 10.363 75 12/31/2004 10.363 11.761 92 12/31/2005 11.761 14.028 78 12/31/2006 14.028 15.678 76 12/31/2007 15.678 16.980 67 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 8.164 16 12/31/2003 8.164 10.312 53 12/31/2004 10.312 11.667 64 12/31/2005 11.667 13.875 68 12/31/2006 13.875 15.459 60 12/31/2007 15.459 16.693 56 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.320 2 12/31/2004 10.320 11.683 14 12/31/2005 11.683 13.900 28 12/31/2006 13.900 15.496 22 12/31/2007 15.496 16.741 22 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.234 63 12/31/2004 10.234 11.527 373 12/31/2005 11.527 13.647 484 12/31/2006 13.647 15.138 494 12/31/2007 15.138 16.272 429 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.329 3 12/31/2004 10.329 11.698 8 12/31/2005 11.698 13.926 2 12/31/2006 13.926 15.532 2 12/31/2007 15.532 16.788 2 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.243 0 12/31/2004 10.243 11.543 1 12/31/2005 11.543 13.672 1 12/31/2006 13.672 15.173 0 12/31/2007 15.173 16.319 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 76 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Mutual Discovery Securities Fund RWDE 1 1.85% 12/31/2000 N/A 14.806 3 12/31/2001 14.806 14.567 41 12/31/2002 14.567 12.956 132 12/31/2003 12.956 16.405 105 12/31/2004 16.405 19.034 58 12/31/2005 19.034 21.669 64 12/31/2006 21.669 26.178 81 12/31/2007 26.178 28.740 73 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 12.722 5 12/31/2003 12.722 16.093 23 12/31/2004 16.093 18.653 24 12/31/2005 18.653 21.214 24 12/31/2006 21.214 25.602 22 12/31/2007 25.602 28.080 21 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 12.566 107 12/31/2003 12.566 15.865 466 12/31/2004 15.865 18.351 466 12/31/2005 18.351 20.830 501 12/31/2006 20.830 25.088 479 12/31/2007 25.088 27.460 437 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.036 16 12/31/2004 16.036 18.577 31 12/31/2005 18.577 21.117 32 12/31/2006 21.117 25.473 74 12/31/2007 25.473 27.924 85 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.865 2 12/31/2004 15.865 18.351 3 12/31/2005 18.351 20.830 5 12/31/2006 20.830 25.088 10 12/31/2007 25.088 27.460 9 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.979 3 12/31/2004 15.979 18.501 2 12/31/2005 18.501 21.021 4 12/31/2006 21.021 25.344 3 12/31/2007 25.344 27.769 4 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.417 16 12/31/2004 15.417 17.762 14 12/31/2005 17.762 20.081 16 12/31/2006 20.081 24.090 20 12/31/2007 24.090 26.262 19 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 14.864 13 12/31/2001 14.864 14.654 100 12/31/2002 14.654 13.060 264 12/31/2003 13.060 16.570 208 12/31/2004 16.570 19.263 232 12/31/2005 19.263 21.974 292 12/31/2006 21.974 26.599 287 12/31/2007 26.599 29.261 310 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 12.722 37 12/31/2003 12.722 16.093 202 12/31/2004 16.093 18.653 217 12/31/2005 18.653 21.214 227 12/31/2006 21.214 25.602 253 12/31/2007 25.602 28.080 257 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.151 8 12/31/2004 16.151 18.729 22 12/31/2005 18.729 21.312 43 12/31/2006 21.312 25.733 45 12/31/2007 25.733 28.237 54 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.584 150 12/31/2004 15.584 17.981 591 12/31/2005 17.981 20.358 1103 12/31/2006 20.358 24.459 1502 12/31/2007 24.459 26.705 1689 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.209 0 12/31/2004 16.209 18.805 0 12/31/2005 18.805 21.409 5 12/31/2006 21.409 25.864 0 12/31/2007 25.864 28.395 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.639 6 12/31/2004 15.639 18.054 9 12/31/2005 18.054 20.452 17 12/31/2006 20.452 24.584 14 12/31/2007 24.584 26.855 12 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 77 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Mutual Shares Securities Fund RWDE 1 1.85% 12/31/2000 N/A 14.754 4 12/31/2001 14.754 15.502 164 12/31/2002 15.502 13.420 266 12/31/2003 13.420 16.487 267 12/31/2004 16.487 18.228 207 12/31/2005 18.228 19.784 229 12/31/2006 19.784 22.992 261 12/31/2007 22.992 23.353 214 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.128 15 12/31/2003 13.128 16.112 45 12/31/2004 16.112 17.796 36 12/31/2005 17.796 19.295 39 12/31/2006 19.295 22.402 48 12/31/2007 22.402 22.731 44 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 12.967 75 12/31/2003 12.967 15.883 404 12/31/2004 15.883 17.508 449 12/31/2005 17.508 18.945 492 12/31/2006 18.945 21.952 527 12/31/2007 21.952 22.229 499 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.055 18 12/31/2004 16.055 17.723 51 12/31/2005 17.723 19.207 61 12/31/2006 19.207 22.288 94 12/31/2007 22.288 22.605 144 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.883 3 12/31/2004 15.883 17.508 10 12/31/2005 17.508 18.945 11 12/31/2006 18.945 21.952 15 12/31/2007 21.952 22.229 12 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.997 1 12/31/2004 15.997 17.651 1 12/31/2005 17.651 19.119 1 12/31/2006 19.119 22.175 4 12/31/2007 22.175 22.479 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.435 21 12/31/2004 15.435 16.946 19 12/31/2005 16.946 18.264 19 12/31/2006 18.264 21.078 22 12/31/2007 21.078 21.259 23 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 14.812 5 12/31/2001 14.812 15.594 240 12/31/2002 15.594 13.528 326 12/31/2003 13.528 16.652 364 12/31/2004 16.652 18.448 376 12/31/2005 18.448 20.062 373 12/31/2006 20.062 23.362 388 12/31/2007 23.362 23.777 371 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.128 63 12/31/2003 13.128 16.112 179 12/31/2004 16.112 17.796 183 12/31/2005 17.796 19.295 179 12/31/2006 19.295 22.402 223 12/31/2007 22.402 22.731 209 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.170 6 12/31/2004 16.170 17.869 23 12/31/2005 17.869 19.384 52 12/31/2006 19.384 22.516 90 12/31/2007 22.516 22.858 90 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.602 163 12/31/2004 15.602 17.155 566 12/31/2005 17.155 18.517 1248 12/31/2006 18.517 21.402 1820 12/31/2007 21.402 21.618 2144 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.228 0 12/31/2004 16.228 17.942 1 12/31/2005 17.942 19.473 6 12/31/2006 19.473 22.630 1 12/31/2007 22.630 22.986 1 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 15.658 16 12/31/2004 15.658 17.225 18 12/31/2005 17.225 18.602 20 12/31/2006 18.602 21.510 21 12/31/2007 21.510 21.739 22 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 78 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ OpCap Mid Cap Portfolio RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.979 0 12/31/2007 9.979 10.504 6 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.972 0 12/31/2007 9.972 10.486 5 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.959 20 12/31/2007 9.959 10.451 40 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.969 2 12/31/2007 9.969 10.477 6 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.959 0 12/31/2007 9.959 10.451 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.966 0 12/31/2007 9.966 10.468 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.932 8 12/31/2007 9.932 10.381 5 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.992 13 12/31/2007 9.992 10.539 16 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.972 3 12/31/2007 9.972 10.486 1 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.976 0 12/31/2007 9.976 10.495 1 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.942 33 12/31/2007 9.942 10.407 150 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.979 0 12/31/2007 9.979 10.504 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.946 0 12/31/2007 9.946 10.416 2 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 79 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Oppenheimer Global Securities Fund/VA RWDE 1 1.85% 12/31/2000 N/A 10.336 35 12/31/2001 10.336 8.924 124 12/31/2002 8.924 6.822 293 12/31/2003 6.822 9.577 257 12/31/2004 9.577 11.203 202 12/31/2005 11.203 12.572 178 12/31/2006 12.572 14.525 160 12/31/2007 14.525 15.159 131 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.802 21 12/31/2003 6.802 9.540 64 12/31/2004 9.540 11.148 67 12/31/2005 11.148 12.498 65 12/31/2006 12.498 14.425 61 12/31/2007 14.425 15.039 54 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.762 284 12/31/2003 6.762 9.466 1135 12/31/2004 9.466 11.039 1162 12/31/2005 11.039 12.350 1006 12/31/2006 12.350 14.227 887 12/31/2007 14.227 14.803 730 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.521 22 12/31/2004 9.521 11.121 49 12/31/2005 11.121 12.461 48 12/31/2006 12.461 14.375 47 12/31/2007 14.375 14.980 46 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.466 2 12/31/2004 9.466 11.039 13 12/31/2005 11.039 12.350 13 12/31/2006 12.350 14.227 13 12/31/2007 14.227 14.803 10 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.503 0 12/31/2004 9.503 11.093 0 12/31/2005 11.093 12.424 0 12/31/2006 12.424 14.326 0 12/31/2007 14.326 14.920 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.318 22 12/31/2004 9.318 10.824 22 12/31/2005 10.824 12.062 12 12/31/2006 12.062 13.839 10 12/31/2007 13.839 14.341 6 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 10.355 179 12/31/2001 10.355 8.959 311 12/31/2002 8.959 6.862 562 12/31/2003 6.862 9.653 570 12/31/2004 9.653 11.314 542 12/31/2005 11.314 12.721 485 12/31/2006 12.721 14.728 437 12/31/2007 14.728 15.401 385 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.802 163 12/31/2003 6.802 9.540 540 12/31/2004 9.540 11.148 511 12/31/2005 11.148 12.498 461 12/31/2006 12.498 14.425 421 12/31/2007 14.425 15.039 378 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.559 8 12/31/2004 9.559 11.175 27 12/31/2005 11.175 12.535 26 12/31/2006 12.535 14.475 25 12/31/2007 14.475 15.099 24 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.373 244 12/31/2004 9.373 10.904 718 12/31/2005 10.904 12.169 617 12/31/2006 12.169 13.983 540 12/31/2007 13.983 14.512 459 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.577 8 12/31/2004 9.577 11.203 8 12/31/2005 11.203 12.572 8 12/31/2006 12.572 14.525 8 12/31/2007 14.525 15.159 8 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 9.392 18 12/31/2004 9.392 10.931 18 12/31/2005 10.931 12.205 18 12/31/2006 12.205 14.032 23 12/31/2007 14.032 14.570 22 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 80 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Oppenheimer High Income Fund/VA RWDE 1 1.85% 12/31/2000 N/A 9.491 5 12/31/2001 9.491 9.500 63 12/31/2002 9.500 9.102 74 12/31/2003 9.102 11.076 69 12/31/2004 11.076 11.848 64 12/31/2005 11.848 11.900 51 12/31/2006 11.900 12.783 44 12/31/2007 12.783 12.535 37 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.076 18 12/31/2003 9.076 11.033 16 12/31/2004 11.033 11.790 9 12/31/2005 11.790 11.830 8 12/31/2006 11.830 12.695 4 12/31/2007 12.695 12.436 4 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.023 17 12/31/2003 9.023 10.947 108 12/31/2004 10.947 11.674 101 12/31/2005 11.674 11.691 84 12/31/2006 11.691 12.521 78 12/31/2007 12.521 12.241 75 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.011 2 12/31/2004 11.011 11.761 19 12/31/2005 11.761 11.795 19 12/31/2006 11.795 12.652 16 12/31/2007 12.652 12.387 15 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.947 2 12/31/2004 10.947 11.674 3 12/31/2005 11.674 11.691 3 12/31/2006 11.691 12.521 3 12/31/2007 12.521 12.241 5 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.990 0 12/31/2004 10.990 11.732 0 12/31/2005 11.732 11.760 0 12/31/2006 11.760 12.608 0 12/31/2007 12.608 12.338 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.777 4 12/31/2004 10.777 11.447 4 12/31/2005 11.447 11.417 4 12/31/2006 11.417 12.179 3 12/31/2007 12.179 11.859 3 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 9.508 71 12/31/2001 9.508 9.536 157 12/31/2002 9.536 9.155 244 12/31/2003 9.155 11.163 186 12/31/2004 11.163 11.964 145 12/31/2005 11.964 12.041 114 12/31/2006 12.041 12.960 88 12/31/2007 12.960 12.734 84 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.076 15 12/31/2003 9.076 11.033 61 12/31/2004 11.033 11.790 59 12/31/2005 11.790 11.830 47 12/31/2006 11.830 12.695 46 12/31/2007 12.695 12.436 32 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.055 8 12/31/2004 11.055 11.819 26 12/31/2005 11.819 11.865 28 12/31/2006 11.865 12.739 23 12/31/2007 12.739 12.486 25 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.840 73 12/31/2004 10.840 11.531 181 12/31/2005 11.531 11.519 171 12/31/2006 11.519 12.306 156 12/31/2007 12.306 12.001 168 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.076 0 12/31/2004 11.076 11.848 0 12/31/2005 11.848 11.900 0 12/31/2006 11.900 12.783 0 12/31/2007 12.783 12.535 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.862 3 12/31/2004 10.862 11.560 5 12/31/2005 11.560 11.553 3 12/31/2006 11.553 12.349 3 12/31/2007 12.349 12.048 3 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 81 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Oppenheimer Main Street Fund/VA RWDE 1 1.85% 12/31/2000 N/A 9.381 161 12/31/2001 9.381 8.273 473 12/31/2002 8.273 6.595 515 12/31/2003 6.595 8.203 506 12/31/2004 8.203 8.814 469 12/31/2005 8.814 9.170 412 12/31/2006 9.170 10.355 380 12/31/2007 10.355 10.614 250 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.575 17 12/31/2003 6.575 8.171 59 12/31/2004 8.171 8.771 52 12/31/2005 8.771 9.116 46 12/31/2006 9.116 10.284 40 12/31/2007 10.284 10.530 31 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.537 225 12/31/2003 6.537 8.107 1091 12/31/2004 8.107 8.685 932 12/31/2005 8.685 9.009 791 12/31/2006 9.009 10.143 726 12/31/2007 10.143 10.365 653 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.155 55 12/31/2004 8.155 8.749 94 12/31/2005 8.749 9.089 85 12/31/2006 9.089 10.248 86 12/31/2007 10.248 10.489 74 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.107 7 12/31/2004 8.107 8.685 8 12/31/2005 8.685 9.009 7 12/31/2006 9.009 10.143 6 12/31/2007 10.143 10.365 6 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.139 1 12/31/2004 8.139 8.728 1 12/31/2005 8.728 9.062 1 12/31/2006 9.062 10.213 1 12/31/2007 10.213 10.447 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 7.981 23 12/31/2004 7.981 8.516 22 12/31/2005 8.516 8.798 18 12/31/2006 8.798 9.866 16 12/31/2007 9.866 10.041 6 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 9.398 269 12/31/2001 9.398 8.305 462 12/31/2002 8.305 6.633 717 12/31/2003 6.633 8.268 727 12/31/2004 8.268 8.901 667 12/31/2005 8.901 9.279 584 12/31/2006 9.279 10.499 448 12/31/2007 10.499 10.783 393 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.575 100 12/31/2003 6.575 8.171 458 12/31/2004 8.171 8.771 445 12/31/2005 8.771 9.116 393 12/31/2006 9.116 10.284 369 12/31/2007 10.284 10.530 335 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.187 27 12/31/2004 8.187 8.793 32 12/31/2005 8.793 9.143 34 12/31/2006 9.143 10.319 37 12/31/2007 10.319 10.572 32 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.028 321 12/31/2004 8.028 8.579 759 12/31/2005 8.579 8.877 706 12/31/2006 8.877 9.969 605 12/31/2007 9.969 10.161 522 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.203 3 12/31/2004 8.203 8.814 5 12/31/2005 8.814 9.170 4 12/31/2006 9.170 10.355 4 12/31/2007 10.355 10.614 3 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.044 39 12/31/2004 8.044 8.600 47 12/31/2005 8.600 8.903 24 12/31/2006 8.903 10.003 26 12/31/2007 10.003 10.202 23 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 82 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT All Asset Portfolio RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.842 43 12/31/2005 11.842 12.350 54 12/31/2006 12.350 12.689 54 12/31/2007 12.689 13.492 36 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.834 1 12/31/2005 11.834 12.329 10 12/31/2006 12.329 12.655 10 12/31/2007 12.655 13.443 7 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.818 116 12/31/2005 11.818 12.288 172 12/31/2006 12.288 12.588 151 12/31/2007 12.588 13.344 95 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.830 9 12/31/2005 11.830 12.319 19 12/31/2006 12.319 12.638 13 12/31/2007 12.638 13.418 12 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.818 6 12/31/2005 11.818 12.288 4 12/31/2006 12.288 12.588 4 12/31/2007 12.588 13.344 4 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.826 5 12/31/2005 11.826 12.309 6 12/31/2006 12.309 12.621 3 12/31/2007 12.621 13.393 2 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.787 5 12/31/2005 11.787 12.206 8 12/31/2006 12.206 12.454 4 12/31/2007 12.454 13.150 4 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.858 69 12/31/2005 11.858 12.391 125 12/31/2006 12.391 12.757 106 12/31/2007 12.757 13.592 96 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.834 59 12/31/2005 11.834 12.329 61 12/31/2006 12.329 12.655 27 12/31/2007 12.655 13.443 15 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.838 6 12/31/2005 11.838 12.339 16 12/31/2006 12.339 12.672 15 12/31/2007 12.672 13.467 14 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.798 328 12/31/2005 11.798 12.237 967 12/31/2006 12.237 12.504 846 12/31/2007 12.504 13.222 631 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.842 1 12/31/2005 11.842 12.350 1 12/31/2006 12.350 12.689 0 12/31/2007 12.689 13.492 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A 11.802 14 12/31/2005 11.802 12.247 4 12/31/2006 12.247 12.521 4 12/31/2007 12.521 13.247 3 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 83 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT CommodityRealReturn Strategy Portfolio RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.003 11 12/31/2006 11.003 10.467 47 12/31/2007 10.467 12.662 33 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.996 15 12/31/2006 10.996 10.450 4 12/31/2007 10.450 12.629 3 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.981 110 12/31/2006 10.981 10.415 147 12/31/2007 10.415 12.561 87 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.992 4 12/31/2006 10.992 10.441 7 12/31/2007 10.441 12.612 8 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.981 3 12/31/2006 10.981 10.415 2 12/31/2007 10.415 12.561 2 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.988 0 12/31/2006 10.988 10.433 0 12/31/2007 10.433 12.595 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.952 2 12/31/2006 10.952 10.346 5 12/31/2007 10.346 12.428 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.018 25 12/31/2006 11.018 10.502 83 12/31/2007 10.502 12.730 97 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.996 49 12/31/2006 10.996 10.450 47 12/31/2007 10.450 12.629 50 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.000 4 12/31/2006 11.000 10.459 3 12/31/2007 10.459 12.645 4 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.963 321 12/31/2006 10.963 10.372 519 12/31/2007 10.372 12.478 768 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.003 0 12/31/2006 11.003 10.467 0 12/31/2007 10.467 12.662 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.966 0 12/31/2006 10.966 10.380 13 12/31/2007 10.380 12.494 13 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 84 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT Emerging Markets Bond Portfolio RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.895 0 12/31/2006 10.895 11.687 3 12/31/2007 11.687 12.140 12 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.887 0 12/31/2006 10.887 11.668 0 12/31/2007 11.668 12.108 2 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.873 23 12/31/2006 10.873 11.629 31 12/31/2007 11.629 12.043 29 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.884 0 12/31/2006 10.884 11.658 2 12/31/2007 11.658 12.091 2 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.873 1 12/31/2006 10.873 11.629 2 12/31/2007 11.629 12.043 2 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.880 0 12/31/2006 10.880 11.649 0 12/31/2007 11.649 12.075 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.843 3 12/31/2006 10.843 11.552 2 12/31/2007 11.552 11.915 2 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.909 4 12/31/2006 10.909 11.727 10 12/31/2007 11.727 12.205 11 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.887 4 12/31/2006 10.887 11.668 8 12/31/2007 11.668 12.108 17 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.891 3 12/31/2006 10.891 11.678 7 12/31/2007 11.678 12.124 7 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.854 115 12/31/2006 10.854 11.581 234 12/31/2007 11.581 11.963 303 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.895 0 12/31/2006 10.895 11.687 0 12/31/2007 11.687 12.140 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.858 1 12/31/2006 10.858 11.590 0 12/31/2007 11.590 11.979 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 85 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT Global Bond Portfolio (Unhedged) RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.321 0 12/31/2006 9.321 9.576 3 12/31/2007 9.576 10.315 7 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.314 0 12/31/2006 9.314 9.560 0 12/31/2007 9.560 10.288 1 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.302 32 12/31/2006 9.302 9.528 36 12/31/2007 9.528 10.233 26 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.311 5 12/31/2006 9.311 9.552 6 12/31/2007 9.552 10.274 13 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.302 9 12/31/2006 9.302 9.528 13 12/31/2007 9.528 10.233 13 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.308 0 12/31/2006 9.308 9.544 0 12/31/2007 9.544 10.260 2 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.277 0 12/31/2006 9.277 9.465 0 12/31/2007 9.465 10.124 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.333 8 12/31/2006 9.333 9.608 54 12/31/2007 9.608 10.371 112 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.314 2 12/31/2006 9.314 9.560 12 12/31/2007 9.560 10.288 17 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.318 5 12/31/2006 9.318 9.568 15 12/31/2007 9.568 10.302 17 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.286 54 12/31/2006 9.286 9.488 137 12/31/2007 9.488 10.165 490 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.321 0 12/31/2006 9.321 9.576 0 12/31/2007 9.576 10.315 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.289 0 12/31/2006 9.289 9.496 0 12/31/2007 9.496 10.178 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 86 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT High Yield Portfolio RWDE 1 1.85% 12/31/2000 N/A 9.453 2 12/31/2001 9.453 9.498 46 12/31/2002 9.498 9.211 110 12/31/2003 9.211 11.113 134 12/31/2004 11.113 11.952 119 12/31/2005 11.952 12.218 112 12/31/2006 12.218 13.087 97 12/31/2007 13.087 13.297 71 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.184 9 12/31/2003 9.184 11.070 57 12/31/2004 11.070 11.894 52 12/31/2005 11.894 12.146 57 12/31/2006 12.146 12.997 45 12/31/2007 12.997 13.192 41 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.131 71 12/31/2003 9.131 10.984 493 12/31/2004 10.984 11.777 462 12/31/2005 11.777 12.003 403 12/31/2006 12.003 12.818 341 12/31/2007 12.818 12.984 275 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.048 23 12/31/2004 11.048 11.865 78 12/31/2005 11.865 12.110 116 12/31/2006 12.110 12.952 117 12/31/2007 12.952 13.140 63 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.984 0 12/31/2004 10.984 11.777 15 12/31/2005 11.777 12.003 20 12/31/2006 12.003 12.818 20 12/31/2007 12.818 12.984 19 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.027 0 12/31/2004 11.027 11.835 0 12/31/2005 11.835 12.074 1 12/31/2006 12.074 12.907 1 12/31/2007 12.907 13.088 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.813 13 12/31/2004 10.813 11.548 14 12/31/2005 11.548 11.722 14 12/31/2006 11.722 12.468 9 12/31/2007 12.468 12.579 6 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 9.471 14 12/31/2001 9.471 9.535 77 12/31/2002 9.535 9.265 186 12/31/2003 9.265 11.201 420 12/31/2004 11.201 12.071 346 12/31/2005 12.071 12.363 291 12/31/2006 12.363 13.269 289 12/31/2007 13.269 13.509 173 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 9.184 91 12/31/2003 9.184 11.070 222 12/31/2004 11.070 11.894 218 12/31/2005 11.894 12.146 178 12/31/2006 12.146 12.997 146 12/31/2007 12.997 13.192 116 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.092 10 12/31/2004 11.092 11.923 41 12/31/2005 11.923 12.182 57 12/31/2006 12.182 13.042 52 12/31/2007 13.042 13.244 39 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.876 253 12/31/2004 10.876 11.633 653 12/31/2005 11.633 11.827 930 12/31/2006 11.827 12.598 1047 12/31/2007 12.598 12.730 902 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 11.113 9 12/31/2004 11.113 11.952 5 12/31/2005 11.952 12.218 3 12/31/2006 12.218 13.087 0 12/31/2007 13.087 13.297 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.898 8 12/31/2004 10.898 11.662 13 12/31/2005 11.662 11.862 12 12/31/2006 11.862 12.642 10 12/31/2007 12.642 12.780 9 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 87 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT Real Return Portfolio RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.484 33 12/31/2004 10.484 11.210 54 12/31/2005 11.210 11.236 101 12/31/2006 11.236 11.109 90 12/31/2007 11.109 12.068 97 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.477 7 12/31/2004 10.477 11.191 10 12/31/2005 11.191 11.206 11 12/31/2006 11.206 11.068 12 12/31/2007 11.068 12.011 13 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.463 117 12/31/2004 10.463 11.153 152 12/31/2005 11.153 11.146 128 12/31/2006 11.146 10.987 92 12/31/2007 10.987 11.900 91 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.474 59 12/31/2004 10.474 11.182 102 12/31/2005 11.182 11.191 76 12/31/2006 11.191 11.048 93 12/31/2007 11.048 11.983 97 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.463 2 12/31/2004 10.463 11.153 11 12/31/2005 11.153 11.146 15 12/31/2006 11.146 10.987 18 12/31/2007 10.987 11.900 14 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.470 0 12/31/2004 10.470 11.172 3 12/31/2005 11.172 11.176 2 12/31/2006 11.176 11.028 2 12/31/2007 11.028 11.955 3 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.435 9 12/31/2004 10.435 11.079 9 12/31/2005 11.079 11.027 7 12/31/2006 11.027 10.827 5 12/31/2007 10.827 11.679 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.499 84 12/31/2004 10.499 11.247 201 12/31/2005 11.247 11.296 215 12/31/2006 11.296 11.191 164 12/31/2007 11.191 12.181 157 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.477 41 12/31/2004 10.477 11.191 87 12/31/2005 11.191 11.206 80 12/31/2006 11.206 11.068 61 12/31/2007 11.068 12.011 54 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.481 24 12/31/2004 10.481 11.200 61 12/31/2005 11.200 11.221 88 12/31/2006 11.221 11.089 85 12/31/2007 11.089 12.039 76 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.446 264 12/31/2004 10.446 11.107 1108 12/31/2005 11.107 11.072 1570 12/31/2006 11.072 10.887 1490 12/31/2007 10.887 11.761 1655 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.484 0 12/31/2004 10.484 11.210 0 12/31/2005 11.210 11.236 0 12/31/2006 11.236 11.109 0 12/31/2007 11.109 12.068 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.449 3 12/31/2004 10.449 11.116 25 12/31/2005 11.116 11.086 24 12/31/2006 11.086 10.907 20 12/31/2007 10.907 11.789 16 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 88 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT StocksPLUS Growth and Income Portfolio RWDE 1 1.85% 12/31/2000 N/A 9.427 17 12/31/2001 9.427 8.195 79 12/31/2002 8.195 6.419 118 12/31/2003 6.419 8.215 99 12/31/2004 8.215 8.936 94 12/31/2005 8.936 9.078 82 12/31/2006 9.078 10.240 56 12/31/2007 10.240 10.741 50 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.400 0 12/31/2003 6.400 8.183 12 12/31/2004 8.183 8.892 2 12/31/2005 8.892 9.025 2 12/31/2006 9.025 10.170 1 12/31/2007 10.170 10.656 1 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.363 38 12/31/2003 6.363 8.119 217 12/31/2004 8.119 8.805 129 12/31/2005 8.805 8.919 122 12/31/2006 8.919 10.030 101 12/31/2007 10.030 10.488 86 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.167 0 12/31/2004 8.167 8.870 0 12/31/2005 8.870 8.998 0 12/31/2006 8.998 10.135 0 12/31/2007 10.135 10.614 0 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.119 0 12/31/2004 8.119 8.805 0 12/31/2005 8.805 8.919 0 12/31/2006 8.919 10.030 0 12/31/2007 10.030 10.488 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.151 0 12/31/2004 8.151 8.848 0 12/31/2005 8.848 8.972 0 12/31/2006 8.972 10.100 0 12/31/2007 10.100 10.572 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 7.993 8 12/31/2004 7.993 8.633 8 12/31/2005 8.633 8.710 8 12/31/2006 8.710 9.756 8 12/31/2007 9.756 10.161 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 9.445 49 12/31/2001 9.445 8.227 127 12/31/2002 8.227 6.456 197 12/31/2003 6.456 8.280 164 12/31/2004 8.280 9.024 149 12/31/2005 9.024 9.186 114 12/31/2006 9.186 10.383 103 12/31/2007 10.383 10.912 86 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 6.400 17 12/31/2003 6.400 8.183 78 12/31/2004 8.183 8.892 79 12/31/2005 8.892 9.025 58 12/31/2006 9.025 10.170 48 12/31/2007 10.170 10.656 43 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.199 0 12/31/2004 8.199 8.914 0 12/31/2005 8.914 9.052 0 12/31/2006 9.052 10.205 0 12/31/2007 10.205 10.698 0 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.040 9 12/31/2004 8.040 8.697 18 12/31/2005 8.697 8.788 17 12/31/2006 8.788 9.858 11 12/31/2007 9.858 10.283 14 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.215 0 12/31/2004 8.215 8.936 0 12/31/2005 8.936 9.078 0 12/31/2006 9.078 10.240 0 12/31/2007 10.240 10.741 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 8.056 5 12/31/2004 8.056 8.719 5 12/31/2005 8.719 8.814 5 12/31/2006 8.814 9.892 3 12/31/2007 9.892 10.324 4 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 89 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ PIMCO VIT Total Return Portfolio RWDE 1 1.85% 12/31/2000 N/A 10.634 3 12/31/2001 10.634 11.314 310 12/31/2002 11.314 12.115 906 12/31/2003 12.115 12.493 754 12/31/2004 12.493 12.863 554 12/31/2005 12.863 12.938 503 12/31/2006 12.938 13.190 415 12/31/2007 13.190 14.081 374 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 12.079 77 12/31/2003 12.079 12.444 165 12/31/2004 12.444 12.800 140 12/31/2005 12.800 12.861 131 12/31/2006 12.861 13.099 115 12/31/2007 13.099 13.970 82 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 12.009 317 12/31/2003 12.009 12.347 1183 12/31/2004 12.347 12.674 1073 12/31/2005 12.674 12.710 924 12/31/2006 12.710 12.919 843 12/31/2007 12.919 13.751 776 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.360 70 12/31/2004 12.360 12.707 173 12/31/2005 12.707 12.762 153 12/31/2006 12.762 12.991 143 12/31/2007 12.991 13.848 220 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.347 7 12/31/2004 12.347 12.674 36 12/31/2005 12.674 12.710 42 12/31/2006 12.710 12.919 44 12/31/2007 12.919 13.751 35 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.395 13 12/31/2004 12.395 12.737 13 12/31/2005 12.737 12.785 12 12/31/2006 12.785 13.009 6 12/31/2007 13.009 13.860 13 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.155 18 12/31/2004 12.155 12.427 22 12/31/2005 12.427 12.412 17 12/31/2006 12.412 12.567 17 12/31/2007 12.567 13.322 14 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 10.653 117 12/31/2001 10.653 11.358 568 12/31/2002 11.358 12.186 1405 12/31/2003 12.186 12.591 1339 12/31/2004 12.591 12.990 1130 12/31/2005 12.990 13.092 1025 12/31/2006 13.092 13.374 978 12/31/2007 13.374 14.306 931 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 12.079 160 12/31/2003 12.079 12.444 621 12/31/2004 12.444 12.800 582 12/31/2005 12.800 12.861 528 12/31/2006 12.861 13.099 504 12/31/2007 13.099 13.970 400 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.468 35 12/31/2004 12.468 12.831 75 12/31/2005 12.831 12.899 114 12/31/2006 12.899 13.145 98 12/31/2007 13.145 14.026 88 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.226 308 12/31/2004 12.226 12.519 960 12/31/2005 12.519 12.523 1264 12/31/2006 12.523 12.698 1534 12/31/2007 12.698 13.481 1457 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.493 4 12/31/2004 12.493 12.863 6 12/31/2005 12.863 12.938 2 12/31/2006 12.938 13.190 1 12/31/2007 13.190 14.081 1 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 12.250 43 12/31/2004 12.250 12.550 48 12/31/2005 12.550 12.560 42 12/31/2006 12.560 12.742 40 12/31/2007 12.742 13.535 37 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 90 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Seligman Smaller-Cap Value Portfolio RWDE 1 1.85% 12/31/2000 N/A 13.616 16 12/31/2001 13.616 16.509 149 12/31/2002 16.509 13.716 206 12/31/2003 13.716 20.189 197 12/31/2004 20.189 23.772 168 12/31/2005 23.772 22.409 135 12/31/2006 22.409 26.673 108 12/31/2007 26.673 27.266 98 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.676 11 12/31/2003 13.676 20.110 32 12/31/2004 20.110 23.655 20 12/31/2005 23.655 22.276 15 12/31/2006 22.276 26.489 13 12/31/2007 26.489 27.051 13 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.596 78 12/31/2003 13.596 19.953 609 12/31/2004 19.953 23.423 571 12/31/2005 23.423 22.014 358 12/31/2006 22.014 26.125 292 12/31/2007 26.125 26.626 250 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 20.070 25 12/31/2004 20.070 23.597 40 12/31/2005 23.597 22.211 34 12/31/2006 22.211 26.398 28 12/31/2007 26.398 26.944 27 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.953 1 12/31/2004 19.953 23.423 1 12/31/2005 23.423 22.014 0 12/31/2006 22.014 26.125 0 12/31/2007 26.125 26.626 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 20.031 7 12/31/2004 20.031 23.539 3 12/31/2005 23.539 22.145 1 12/31/2006 22.145 26.307 1 12/31/2007 26.307 26.838 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.642 14 12/31/2004 19.642 22.967 17 12/31/2005 22.967 21.499 12 12/31/2006 21.499 25.412 4 12/31/2007 25.412 25.795 3 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 13.641 76 12/31/2001 13.641 16.572 328 12/31/2002 16.572 13.796 371 12/31/2003 13.796 20.347 384 12/31/2004 20.347 24.007 320 12/31/2005 24.007 22.675 238 12/31/2006 22.675 27.044 191 12/31/2007 27.044 27.702 166 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.676 54 12/31/2003 13.676 20.110 232 12/31/2004 20.110 23.655 204 12/31/2005 23.655 22.276 159 12/31/2006 22.276 26.489 141 12/31/2007 26.489 27.051 111 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 20.149 5 12/31/2004 20.149 23.713 7 12/31/2005 23.713 22.342 5 12/31/2006 22.342 26.581 5 12/31/2007 26.581 27.158 4 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.758 122 12/31/2004 19.758 23.137 299 12/31/2005 23.137 21.691 222 12/31/2006 21.691 25.677 188 12/31/2007 25.677 26.104 148 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 20.189 4 12/31/2004 20.189 23.772 4 12/31/2005 23.772 22.409 4 12/31/2006 22.409 26.673 4 12/31/2007 26.673 27.266 4 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.797 14 12/31/2004 19.797 23.194 18 12/31/2005 23.194 21.755 10 12/31/2006 21.755 25.766 7 12/31/2007 25.766 26.207 6 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 91 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ SP International Growth Portfolio RWDE 1 1.85% 12/31/2000 N/A 8.484 0 12/31/2001 8.484 5.336 2 12/31/2002 5.336 4.042 32 12/31/2003 4.042 5.521 34 12/31/2004 5.521 6.293 27 12/31/2005 6.293 7.154 27 12/31/2006 7.154 8.440 24 12/31/2007 8.440 9.868 15 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 4.034 0 12/31/2003 4.034 5.504 8 12/31/2004 5.504 6.268 8 12/31/2005 6.268 7.118 8 12/31/2006 7.118 8.389 8 12/31/2007 8.389 9.799 8 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 4.017 19 12/31/2003 4.017 5.470 186 12/31/2004 5.470 6.217 116 12/31/2005 6.217 7.046 79 12/31/2006 7.046 8.288 77 12/31/2007 8.288 9.662 75 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.496 12 12/31/2004 5.496 6.255 23 12/31/2005 6.255 7.100 13 12/31/2006 7.100 8.363 13 12/31/2007 8.363 9.765 27 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.470 2 12/31/2004 5.470 6.217 15 12/31/2005 6.217 7.046 14 12/31/2006 7.046 8.288 13 12/31/2007 8.288 9.662 13 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.487 0 12/31/2004 5.487 6.242 0 12/31/2005 6.242 7.082 0 12/31/2006 7.082 8.338 0 12/31/2007 8.338 9.730 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.404 0 12/31/2004 5.404 6.117 0 12/31/2005 6.117 6.905 0 12/31/2006 6.905 8.090 0 12/31/2007 8.090 9.393 0 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 8.484 0 12/31/2001 8.484 5.347 41 12/31/2002 5.347 4.058 87 12/31/2003 4.058 5.554 260 12/31/2004 5.554 6.344 92 12/31/2005 6.344 7.226 82 12/31/2006 7.226 8.542 73 12/31/2007 8.542 10.008 66 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 4.034 4 12/31/2003 4.034 5.504 117 12/31/2004 5.504 6.268 70 12/31/2005 6.268 7.118 30 12/31/2006 7.118 8.389 24 12/31/2007 8.389 9.799 29 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.512 3 12/31/2004 5.512 6.280 8 12/31/2005 6.280 7.136 7 12/31/2006 7.136 8.414 7 12/31/2007 8.414 9.834 5 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.429 147 12/31/2004 5.429 6.154 328 12/31/2005 6.154 6.958 290 12/31/2006 6.958 8.164 267 12/31/2007 8.164 9.493 276 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.521 0 12/31/2004 5.521 6.293 0 12/31/2005 6.293 7.154 0 12/31/2006 7.154 8.440 0 12/31/2007 8.440 9.868 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.437 7 12/31/2004 5.437 6.167 4 12/31/2005 6.167 6.975 2 12/31/2006 6.975 8.188 1 12/31/2007 8.188 9.527 1 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 92 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ SP Strategic Partners Focused Growth Portfolio RWDE 1 1.85% 12/31/2000 N/A 7.947 0 12/31/2001 7.947 6.574 53 12/31/2002 6.574 4.807 58 12/31/2003 4.807 5.920 49 12/31/2004 5.920 6.386 44 12/31/2005 6.386 7.199 32 12/31/2006 7.199 6.989 24 12/31/2007 6.989 7.867 21 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 4.797 0 12/31/2003 4.797 5.902 1 12/31/2004 5.902 6.360 0 12/31/2005 6.360 7.163 0 12/31/2006 7.163 6.947 0 12/31/2007 6.947 7.812 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 4.777 28 12/31/2003 4.777 5.866 122 12/31/2004 5.866 6.309 127 12/31/2005 6.309 7.091 113 12/31/2006 7.091 6.863 110 12/31/2007 6.863 7.702 92 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.893 4 12/31/2004 5.893 6.348 23 12/31/2005 6.348 7.145 37 12/31/2006 7.145 6.926 14 12/31/2007 6.926 7.784 14 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.866 0 12/31/2004 5.866 6.309 0 12/31/2005 6.309 7.091 0 12/31/2006 7.091 6.863 0 12/31/2007 6.863 7.702 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.884 2 12/31/2004 5.884 6.335 2 12/31/2005 6.335 7.127 2 12/31/2006 7.127 6.905 2 12/31/2007 6.905 7.757 2 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.795 3 12/31/2004 5.795 6.208 4 12/31/2005 6.208 6.949 4 12/31/2006 6.949 6.699 4 12/31/2007 6.699 7.488 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 7.948 0 12/31/2001 7.948 6.588 30 12/31/2002 6.588 4.826 188 12/31/2003 4.826 5.956 66 12/31/2004 5.956 6.438 86 12/31/2005 6.438 7.272 64 12/31/2006 7.272 7.074 52 12/31/2007 7.074 7.979 45 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 4.797 10 12/31/2003 4.797 5.902 23 12/31/2004 5.902 6.360 28 12/31/2005 6.360 7.163 43 12/31/2006 7.163 6.947 40 12/31/2007 6.947 7.812 35 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.911 0 12/31/2004 5.911 6.373 2 12/31/2005 6.373 7.181 6 12/31/2006 7.181 6.968 11 12/31/2007 6.968 7.839 11 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.821 15 12/31/2004 5.821 6.246 184 12/31/2005 6.246 7.002 286 12/31/2006 7.002 6.761 260 12/31/2007 6.761 7.568 239 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.920 0 12/31/2004 5.920 6.386 2 12/31/2005 6.386 7.199 0 12/31/2006 7.199 6.989 0 12/31/2007 6.989 7.867 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 5.830 1 12/31/2004 5.830 6.258 1 12/31/2005 6.258 7.020 1 12/31/2006 7.020 6.781 2 12/31/2007 6.781 7.594 1 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 93 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Templeton Developing Markets Securities Fund RWDE 1 1.85% 12/31/2000 N/A 8.455 0 12/31/2001 8.455 7.629 29 12/31/2002 7.629 7.478 42 12/31/2003 7.478 11.231 87 12/31/2004 11.231 13.749 138 12/31/2005 13.749 17.200 144 12/31/2006 17.200 21.628 126 12/31/2007 21.628 27.340 87 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.194 4 12/31/2003 7.194 10.794 10 12/31/2004 10.794 13.200 12 12/31/2005 13.200 16.497 13 12/31/2006 16.497 20.724 14 12/31/2007 20.724 26.171 16 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.069 14 12/31/2003 7.069 10.584 102 12/31/2004 10.584 12.918 304 12/31/2005 12.918 16.112 332 12/31/2006 16.112 20.200 288 12/31/2007 20.200 25.458 220 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.741 16 12/31/2004 10.741 13.129 33 12/31/2005 13.129 16.400 41 12/31/2006 16.400 20.591 42 12/31/2007 20.591 25.991 38 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.584 4 12/31/2004 10.584 12.918 6 12/31/2005 12.918 16.112 9 12/31/2006 16.112 20.200 9 12/31/2007 20.200 25.458 8 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.688 0 12/31/2004 10.688 13.058 2 12/31/2005 13.058 16.303 5 12/31/2006 16.303 20.460 5 12/31/2007 20.460 25.812 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.177 4 12/31/2004 10.177 12.371 5 12/31/2005 12.371 15.369 6 12/31/2006 15.369 19.191 7 12/31/2007 19.191 24.090 3 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 8.489 11 12/31/2001 8.489 7.675 33 12/31/2002 7.675 7.538 86 12/31/2003 7.538 11.344 206 12/31/2004 11.344 13.915 224 12/31/2005 13.915 17.442 222 12/31/2006 17.442 21.976 181 12/31/2007 21.976 27.836 111 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 7.194 7 12/31/2003 7.194 10.794 102 12/31/2004 10.794 13.200 142 12/31/2005 13.200 16.497 167 12/31/2006 16.497 20.724 113 12/31/2007 20.724 26.171 102 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.847 12 12/31/2004 10.847 13.272 32 12/31/2005 13.272 16.594 57 12/31/2006 16.594 20.857 55 12/31/2007 20.857 26.352 43 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.328 86 12/31/2004 10.328 12.574 453 12/31/2005 12.574 15.643 1105 12/31/2006 15.643 19.563 1210 12/31/2007 19.563 24.594 958 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.900 2 12/31/2004 10.900 13.344 0 12/31/2005 13.344 16.693 7 12/31/2006 16.693 20.991 0 12/31/2007 20.991 26.535 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 10.379 3 12/31/2004 10.379 12.642 13 12/31/2005 12.642 15.736 16 12/31/2006 15.736 19.689 19 12/31/2007 19.689 24.764 17 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 94 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Templeton Foreign Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 16.990 1 12/31/2002 16.990 13.583 43 12/31/2003 13.583 17.629 47 12/31/2004 17.629 20.511 28 12/31/2005 20.511 22.184 29 12/31/2006 22.184 26.448 24 12/31/2007 26.448 29.974 18 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.435 4 12/31/2003 13.435 17.420 15 12/31/2004 17.420 20.248 11 12/31/2005 20.248 21.877 14 12/31/2006 21.877 26.057 10 12/31/2007 26.057 29.501 10 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.145 48 12/31/2003 13.145 17.009 204 12/31/2004 17.009 19.731 200 12/31/2005 19.731 21.276 214 12/31/2006 21.276 25.290 221 12/31/2007 25.290 28.575 196 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.318 1 12/31/2004 17.318 20.119 6 12/31/2005 20.119 21.727 11 12/31/2006 21.727 25.865 25 12/31/2007 25.865 29.269 14 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.009 0 12/31/2004 17.009 19.731 3 12/31/2005 19.731 21.276 10 12/31/2006 21.276 25.290 11 12/31/2007 25.290 28.575 9 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.214 0 12/31/2004 17.214 19.988 0 12/31/2005 19.988 21.575 1 12/31/2006 21.575 25.671 1 12/31/2007 25.671 29.034 1 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.216 0 12/31/2004 16.216 18.736 1 12/31/2005 18.736 20.122 0 12/31/2006 20.122 23.824 1 12/31/2007 23.824 26.810 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A 17.329 4 12/31/2002 17.329 13.881 36 12/31/2003 13.881 18.052 45 12/31/2004 18.052 21.046 79 12/31/2005 21.046 22.807 86 12/31/2006 22.807 27.246 95 12/31/2007 27.246 30.940 93 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 13.435 21 12/31/2003 13.435 17.420 71 12/31/2004 17.420 20.248 80 12/31/2005 20.248 21.877 74 12/31/2006 21.877 26.057 80 12/31/2007 26.057 29.501 63 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.525 2 12/31/2004 17.525 20.379 7 12/31/2005 20.379 22.030 12 12/31/2006 22.030 26.253 17 12/31/2007 26.253 29.737 15 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.509 5 12/31/2004 16.509 19.103 193 12/31/2005 19.103 20.548 415 12/31/2006 20.548 24.364 534 12/31/2007 24.364 27.459 507 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.629 0 12/31/2004 17.629 20.512 0 12/31/2005 20.512 22.184 0 12/31/2006 22.184 26.449 0 12/31/2007 26.449 29.975 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 16.608 2 12/31/2004 16.608 19.227 11 12/31/2005 19.227 20.691 12 12/31/2006 20.691 24.546 15 12/31/2007 24.546 27.679 12 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 95 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Templeton Global Income Securities Fund RWDE 1 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.822 0 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.282 0 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 28.232 14 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.016 20 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 28.232 0 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 28.752 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 26.243 1 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 30.931 6 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.282 13 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.551 2 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 26.971 89 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.822 0 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A N/A N/A 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 27.219 0 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- 96 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ Templeton Growth Securities Fund RWDE 1 1.85% 12/31/2000 N/A 19.507 8 12/31/2001 19.507 18.896 49 12/31/2002 18.896 15.120 159 12/31/2003 15.120 19.613 153 12/31/2004 19.613 22.338 144 12/31/2005 22.338 23.873 156 12/31/2006 23.873 28.548 134 12/31/2007 28.548 28.679 124 RWDE 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 14.519 4 12/31/2003 14.519 18.814 20 12/31/2004 18.814 21.407 20 12/31/2005 21.407 22.855 20 12/31/2006 22.855 27.303 21 12/31/2007 27.303 27.401 26 RWDE 3 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 14.266 71 12/31/2003 14.266 18.449 252 12/31/2004 18.449 20.949 262 12/31/2005 20.949 22.322 279 12/31/2006 22.322 26.613 291 12/31/2007 26.613 26.655 285 RWDE 4 2.00% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.722 1 12/31/2004 18.722 21.291 18 12/31/2005 21.291 22.721 31 12/31/2006 22.721 27.129 42 12/31/2007 27.129 27.213 57 RWDE 5 2.15% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.449 0 12/31/2004 18.449 20.949 5 12/31/2005 20.949 22.322 4 12/31/2006 22.322 26.613 6 12/31/2007 26.613 26.655 4 RWDE 7 2.05% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.631 0 12/31/2004 18.631 21.176 1 12/31/2005 21.176 22.587 0 12/31/2006 22.587 26.956 0 12/31/2007 26.956 27.026 0 RWDE 8 2.55% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 17.739 8 12/31/2004 17.739 20.062 9 12/31/2005 20.062 21.292 9 12/31/2006 21.292 25.284 15 12/31/2007 25.284 25.222 16 BENEFIT PERIOD AUV AT AUV NUMBER OF ACCUMULATION AT UNITS OR END OUTSTANDING YEAR BEGINNING OF AT END OF OPTION * ENDED OF PERIOD PERIOD PERIOD - ------------ ---------- ------------ -------- -------------- - ------------------------------------------------------------ INVESTMENT OPTION - ------------------------------------------------------------ RWDT 1 1.65% 12/31/2000 N/A 19.584 6 12/31/2001 19.584 19.009 64 12/31/2002 19.009 15.241 165 12/31/2003 15.241 19.809 184 12/31/2004 19.809 22.607 206 12/31/2005 22.607 24.209 192 12/31/2006 24.209 29.007 223 12/31/2007 29.007 29.199 226 RWDT 2 1.95% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A 14.519 27 12/31/2003 14.519 18.814 94 12/31/2004 18.814 21.407 96 12/31/2005 21.407 22.855 96 12/31/2006 22.855 27.303 123 12/31/2007 27.303 27.401 96 RWDT 5 1.90% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.907 1 12/31/2004 18.907 21.523 14 12/31/2005 21.523 22.990 37 12/31/2006 22.990 27.478 51 12/31/2007 27.478 27.591 52 RWDT 6 2.40% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.002 23 12/31/2004 18.002 20.390 317 12/31/2005 20.390 21.672 694 12/31/2006 21.672 25.774 968 12/31/2007 25.774 25.750 1171 RWDT 7 1.85% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 19.000 1 12/31/2004 19.000 21.639 1 12/31/2005 21.639 23.126 1 12/31/2006 23.126 27.655 2 12/31/2007 27.655 27.782 2 RWDT 8 2.35% 12/31/2000 N/A N/A N/A 12/31/2001 N/A N/A N/A 12/31/2002 N/A N/A N/A 12/31/2003 N/A 18.090 8 12/31/2004 18.090 20.501 10 12/31/2005 20.501 21.801 14 12/31/2006 21.801 25.940 9 12/31/2007 25.940 25.929 9 - -------------------------------------------------------------------------------- The Allianz Rewards(TM) Variable Annuity Contract*SAI*May 1, 2008 - -------------------------------------------------------------------------------- ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA FINANCIAL STATEMENTS DECEMBER 31, 2007 (WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THEREON) Report of Independent Registered Public Accounting Firm 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 (the Variable Account) as of December 31, 2007, and the related statements of operations for the year or period in the period then ended, the statements of changes in net assets for each of the years or periods in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Investment securities held in custody for the benefit of the Variable Account were confirmed to us by the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the assets and liabilities of the sub-accounts of Allianz Life Variable Account B as of December 31, 2007, the results of their operations, the changes in their net assets, and the financial highlights for each of the periods stated above, in conformity with U.S. generally accepted accounting principles. Minneapolis, Minnesota April 15, 2008 2 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2007 (IN THOUSANDS)
ALGER ALGER AIM V.I. AIM V.I. ALGER AMERICAN AMERICAN CAPITAL AIM V.I. INTERNATIONAL AMERICAN LEVERAGED MIDCAP APPRECIATION CORE EQUITY GROWTH GROWTH ALLCAP GROWTH FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Assets: Investments at net asset value* $9,390 5,199 2,493 6,352 3,881 8,955 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 9,390 5,199 2,493 6,352 3,881 8,955 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $9,390 5,199 2,493 6,352 3,881 8,955 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 9,377 5,199 2,487 6,333 3,820 8,954 Contracts in annuity payment period (note 2) 13 - 6 19 61 1 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $9,390 5,199 2,493 6,352 3,881 8,955 -------------------------------------------------------------------------- *Investment shares 320 179 74 129 70 379 Investments at cost $8,393 4,491 1,337 7,005 3,599 7,330 See accompanying notes to financial statements 3 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL ALGER DREYFUS AMERICAN AZL AIM AZL AIM AZL FOUNDERS SMALL BASIC VALUE INTERNATIONAL COLUMBIA AZL DAVIS EQUITY CAPITALIZATION FUND EQUITY TECHNOLOGY NY VENTURE GROWTH PORTFOLIO FUND FUND FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $1,076 - 300,838 101,713 395,443 287,472 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 1,076 - 300,838 101,713 395,443 287,472 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $1,076 - 300,838 101,713 395,443 287,472 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 1,076 - 300,817 101,711 395,370 287,421 Contracts in annuity payment period (note 2) - - 21 2 73 51 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $1,076 - 300,838 101,713 395,443 287,472 -------------------------------------------------------------------------- *Investment shares 32 - 15,080 9,400 28,006 26,016 Investments at cost $627 - 256,106 91,670 331,964 272,914 See accompanying notes to financial statements 4 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL AZL FRANKLIN DREYFUS AZL FIRST SMALL AZL AZL PREMIER TRUST TARGET CAP FUSION FUSION SMALL CAP DOUBLE PLAY VALUE BALANCED AZL FUSION MODERATE VALUE FUND FUND FUND FUND GROWTH FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $57,106 87,109 282,993 357,955 1,103,016 809,286 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 57,106 87,109 282,993 357,955 1,103,016 809,286 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $57,106 87,109 282,993 357,955 1,103,016 809,286 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 57,090 87,109 282,984 357,829 1,103,016 809,280 Contracts in annuity payment period (note 2) 16 - 9 126 - 6 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $57,106 87,109 282,993 357,955 1,103,016 809,286 -------------------------------------------------------------------------- *Investment shares 5,058 8,096 17,182 29,437 85,241 65,003 Investments at cost $61,911 87,395 283,787 332,708 1,014,995 744,873 See accompanying notes to financial statements 5 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL AZL LEGG JENNISON AZL MASON AZL LEGG AZL LMP AZL MONEY 20/20 JENNISON GROWTH MASON LARGE CAP MARKET FOCUS FUND GROWTH FUND FUND VALUE FUND GROWTH FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $198,067 60,239 188,913 173,309 146,827 576,147 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 198,067 60,239 188,913 173,309 146,827 576,147 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $198,067 60,239 188,913 173,309 146,827 576,147 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 198,056 60,239 188,913 173,258 146,777 576,018 Contracts in annuity payment period (note 2) 11 - - 51 50 129 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $198,067 60,239 188,913 173,309 146,827 576,147 -------------------------------------------------------------------------- *Investment shares 13,338 4,426 14,014 14,359 11,996 576,147 Investments at cost $180,158 54,763 178,573 165,088 124,156 576,148 See accompanying notes to financial statements 6 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL LNEUBERGER AZL AZL NACM BERMAN AZL OCC AZL OCC OPPENHEIMER INTERNATIONA REGENCY OPPORTUNITY RENAISSANCE AZL OCC GLOBAL FUND FUND FUND FUND VALUE FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $6,280 39,787 163,914 - 435,237 211,936 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 6,280 39,787 163,914 - 435,237 211,936 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $6,280 39,787 163,914 - 435,237 211,936 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 6,280 39,787 163,905 - 435,178 211,936 Contracts in annuity payment period (note 2) - - 9 - 59 - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $6,280 39,787 163,914 - 435,237 211,936 -------------------------------------------------------------------------- *Investment shares 658 3,778 10,950 - 34,819 14,082 Investments at cost $6,596 39,926 158,884 - 463,971 179,381 See accompanying notes to financial statements 7 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL PIMCO AZL AZL AZL FUNDAMENTAL SCHRODER SCHRODER OPPENHEIMER AZL INDEXPLUS EMERGING EMERGING INTERNATIONAL OPPENHEIMER TOTAL AZL S&P MARKETS MARKETS GROWTH MAIN STREET RETURN 500 INDEX EQUITY FUND EQUITY FUND FUND FUND FUND CL 1 FUND CL 2 -------------------------------------------------------------------------- Assets: Investments at net asset value* $240,548 134,696 7,075 27,330 335 169,313 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 240,548 134,696 7,075 27,330 335 169,313 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $240,548 134,696 7,075 27,330 335 169,313 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 240,548 134,696 7,075 27,330 335 169,309 Contracts in annuity payment period (note 2) - - - - - 4 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $240,548 134,696 7,075 27,330 335 169,313 -------------------------------------------------------------------------- *Investment shares 11,654 10,854 692 2,772 24 12,305 Investments at cost $207,731 124,397 7,373 27,971 343 151,530 See accompanying notes to financial statements 8 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL SCHRODER AZL AZL AZL INTERNATIONAL AZL SMALL TARGETPLUS TARGETPLUS AZL TARGETPLUS SMALL CAP CAP STOCK BALANCED EQUITY TARGETPLUS MODERATE FUND LINDEX FUND FUND FUND GROWTH FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $10,474 11,585 10,810 84,465 37,794 22,400 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 10,474 11,585 10,810 84,465 37,794 22,400 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $10,474 11,585 10,810 84,465 37,794 22,400 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 10,474 11,585 10,810 84,465 37,794 22,400 Contracts in annuity payment period (note 2) - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $10,474 11,585 10,810 84,465 37,794 22,400 -------------------------------------------------------------------------- *Investment shares 1,123 1,250 1,077 7,991 3,806 2,231 Investments at cost $10,904 12,419 10,935 86,375 38,637 22,951 See accompanying notes to financial statements 9 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL AZL VAN TURNER AZL VAN KAMPEN QUANTITATIVE AZL VAN AZL VAN KAMPEN AZL VAN GLOBAL SMALL CAP KAMPEN KAMPEN EQUITY AND KAMPEN GLOBAL REAL GROWTH AGGRESSIVE COMSTOCK INCOME FRANCHISE ESTATE FUND GROWTH FUND FUND FUND FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $33,333 - 564,367 242,363 406,292 84,856 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 33,333 - 564,367 242,363 406,292 84,856 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $33,333 - 564,367 242,363 406,292 84,856 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 33,333 - 564,351 242,363 406,280 84,856 Contracts in annuity payment period (note 2) - - 16 - 12 - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $33,333 - 564,367 242,363 406,292 84,856 -------------------------------------------------------------------------- *Investment shares 2,584 - 50,345 19,281 20,761 7,764 Investments at cost $31,640 - 543,397 224,717 334,304 91,922 See accompanying notes to financial statements 10 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) AZL VAN KAMPEN AZL VAN AZL VAN GROWTH AND KAMPEN MID KAMPEN DAVIS VA DAVIS VA DAVIS VA INCOME CAP GROWTH STRATEGIC FINANCIAL REAL ESTATE VALUE FUND FUND GROWTH FUND PORTFOLIO PORTFOLIO PORTFOLIO --------------------------------------------------------------------------- Assets: Investments at net asset value* $323,375 464,770 - 97,925 1,605 166,627 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Total Assets 323,375 464,770 - 97,925 1,605 166,627 --------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - --------------------------------------------------------------------------- --------------------------------------------------------------------------- Total Liabilities - - - - - - --------------------------------------------------------------------------- --------------------------------------------------------------------------- Net Assets $323,375 464,770 - 97,925 1,605 166,627 --------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 323,329 464,768 - 97,917 1,605 166,579 Contracts in annuity payment period (note 2) 46 2 - 8 - 48 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $323,375 464,770 - 97,925 1,605 166,627 --------------------------------------------------------------------------- *Investment shares 24,971 29,812 - 6,862 140 11,507 Investments at cost $287,847 405,238 - 90,271 1,778 116,050 See accompanying notes to financial statements 11 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) FRANKLIN FRANKLIN DREYFUS FRANKLIN GROWTH HIGH INCOME IP SMALL GLOBAL AND SECURITIES FRANKLIN CAP STOCK DREYFUS COMMUNICATIONS INCOME FUND INCOME INDEX STOCK INDEX SECURITIES SECURITIES SECURITIES PORTFOLIO FUND FUND FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $223,520 329,493 275,000 439,537 194,157 1,236,149 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 223,520 329,493 275,000 439,537 194,157 1,236,149 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $223,520 329,493 275,000 439,537 194,157 1,236,149 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 223,519 329,491 274,591 438,222 193,963 1,235,077 Contracts in annuity payment period (note 2) 1 2 409 1,315 194 1,072 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $223,520 329,493 275,000 439,537 194,157 1,236,149 -------------------------------------------------------------------------- *Investment shares 12,671 8,808 22,116 29,329 29,267 71,053 Investments at cost $192,961 263,906 269,068 449,211 200,208 1,125,941 See accompanying notes to financial statements 12 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) FRANKLIN FRANKLIN FRANKLIN FRANKLIN LARGE CAP FRANKLIN RISING SMALL CAP SMALL-MID GROWTH FRANKLIN REAL DIVIDENDS VALUE CAP GROWTH SECURITIES MONEY ESTATE SECURITIES SECURITIES SECURITIES FUND MARKET FUND FUND FUND FUND FUND -------------------------------------------------------------------------- Assets: Investments at net asset value* $293,997 26,980 306,481 549,522 149,192 242,499 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 293,997 26,980 306,481 549,522 149,192 242,499 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $293,997 26,980 306,481 549,522 149,192 242,499 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 293,791 26,756 306,183 548,765 149,012 242,259 Contracts in annuity payment period (note 2) 206 224 298 757 180 240 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $293,997 26,980 306,481 549,522 149,192 242,499 -------------------------------------------------------------------------- *Investment shares 16,966 26,980 12,220 28,355 8,707 10,496 Investments at cost $250,769 26,936 318,453 448,175 121,340 191,304 See accompanying notes to financial statements 13 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) FRANKLIN TEMPLETON VIP J.P. J.P. FOUNDING FRANKLIN FRANKLIN MORGAN MORGAN U.S. JENNISON FUNDS U.S. ZERO INTERNATIONAL LARGE CAP 20/20 ALLOCATION GOVERNMENT COUPON OPPORTUNITIES CORE EQUITY FOCUS FUND FUND 2010 FUND PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Assets: Investments at net asset value* $41,977 429,720 90,911 491 596 111,090 -------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 41,977 429,720 90,911 491 596 111,090 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $41,977 429,720 90,911 491 596 111,090 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 41,977 429,188 90,850 491 596 111,080 Contracts in annuity payment period (note 2) - 532 61 - - 10 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $41,977 429,720 90,911 491 596 111,090 -------------------------------------------------------------------------- *Investment shares 4,509 33,644 5,577 31 38 7,040 Investments at cost $42,505 429,833 89,219 330 536 91,829 See accompanying notes to financial statements 14 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) MUTUAL MUTUAL OPPENHEIMER OPPENHEIMER OPPENHEIMER DISCOVERY SHARES OPCAP MID GLOBAL HIGH MAIN SECURITIES SECURITIES CAP SECURITIES INCOME STREET FUND FUND PORTFOLIO FUND/VA FUND/VA FUND/VA -------------------------------------------------------------------------- Assets: Investments at net asset value* $893,746 1,160,544 31,117 205,533 29,717 139,064 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 893,746 1,160,544 31,117 205,533 29,717 139,064 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $893,746 1,160,544 31,117 205,533 29,717 139,064 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 893,509 1,160,083 31,117 205,359 29,717 138,998 Contracts in annuity payment period (note 2) 237 461 - 174 - 66 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $893,746 1,160,544 31,117 205,533 29,717 139,064 -------------------------------------------------------------------------- *Investment shares 37,636 57,368 1,920 5,616 3,738 5,430 Investments at cost $676,962 994,216 30,798 137,227 30,579 98,344 See accompanying notes to financial statements 15 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) PIMCO VIT PIMCO VIT COMMODITY EMERGING PIMCO VIT PIMCO VIT PIMCO VIT REALRETURN MARKETS GLOBAL BOND PIMCO VIT REAL ALL ASSET STRATEGY BOND PORTFOLIO HIGH YIELD RETURN PORTFOLIO PORTFOLIO PORTFOLIO (UNHEDGED) PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Assets: Investments at net asset value* $180,302 112,433 44,213 55,781 173,285 249,436 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 180,302 112,433 44,213 55,781 173,285 249,436 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $180,302 112,433 44,213 55,781 173,285 249,436 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 180,284 112,433 44,213 55,781 173,254 249,353 Contracts in annuity payment period (note 2) 18 - - - 31 83 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $180,302 112,433 44,213 55,781 173,285 249,436 -------------------------------------------------------------------------- *Investment shares 15,384 8,422 3,234 4,365 21,526 19,844 Investments at cost $180,151 102,956 44,478 53,685 174,640 249,240 See accompanying notes to financial statements 16 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) SP PIMCO VIT STRATEGIC L STOCKSPLUS PIMCO VIT SELIGMAN SELIGMAN PARTNERS SP GROWTH AND TOTAL GLOBAL SMALLER-CAP FOCUSED INTERNATIONA INCOME RETURN TECHNOLOGY VALUE GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Assets: Investments at net asset value* $18,349 505,831 2,408 126,765 26,746 29,477 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 18,349 505,831 2,408 126,765 26,746 29,477 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $18,349 505,831 2,408 126,765 26,746 29,477 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 18,349 505,648 2,408 126,711 26,746 29,477 Contracts in annuity payment period (note 2) - 183 - 54 - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $18,349 505,831 2,408 126,765 26,746 29,477 -------------------------------------------------------------------------- *Investment shares 1,662 48,220 130 7,366 3,327 3,526 Investments at cost $14,437 495,662 2,186 111,847 22,225 25,765 See accompanying notes to financial statements 17 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) TEMPLETON TEMPLETON TEMPLETON DEVELOPING TEMPLETON GLOBAL TEMPLETON VAN ASSET MARKETS FOREIGN INCOME GROWTH KAMPEN LIT STRATEGY SECURITIES SECURITIES SECURITIES SECURITIES ENTERPRISE FUND FUND FUND FUND FUND PORTFOLIO -------------------------------------------------------------------------- Assets: Investments at net asset value* $15,017 342,414 443,786 84,083 870,214 149 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Assets 15,017 342,414 443,786 84,083 870,214 149 -------------------------------------------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Liabilities - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net Assets $15,017 342,414 443,786 84,083 870,214 149 -------------------------------------------------------------------------- Contract Owners' Equity: Contracts in accumulation period 14,993 342,269 443,309 83,932 869,448 149 Contracts in annuity payment period (note 2) 24 145 477 151 766 - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Total Contract Owners' Equity (note 6) $15,017 342,414 443,786 84,083 870,214 149 -------------------------------------------------------------------------- *Investment shares 1,018 21,348 21,725 5,002 56,140 9 Investments at cost $17,751 210,403 317,365 76,700 763,582 174 See accompanying notes to financial statements 18 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2007 (IN THOUSANDS) VAN VAN KAMPEN KAMPEN LIT LIT GROWTH STRATEGIC AND INCOME GROWTH TOTAL ALL PORTFOLIO PORTFOLIO FUNDS ------------------------------------- Assets: Investments at net asset value* $975 4,019 19,849,987 ------------------------------------- ------------------------------------- Total Assets 975 4,019 19,849,987 ------------------------------------- Liabilities: Accrued mortality and expense risk and administrative charges - - - ------------------------------------- ------------------------------------- Total Liabilities - - - ------------------------------------- ------------------------------------- Net Assets $975 4,019 19,849,987 ------------------------------------- Contract Owners' Equity: Contracts in accumulation period 975 4,019 19,840,769 Contracts in annuity payment period (note 2) - - 9,218 ------------------------------------- ------------------------------------- Total Contract Owners' Equity (note 6) $975 4,019 19,849,987 ------------------------------------- *Investment shares 46 121 1,900,002 Investments at cost $768 3,314 17,815,458
See accompanying notes to financial statements 19 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, 2007 (IN THOUSANDS)
ALGER ALGER AIM V.I. AIM V.I. ALGER AMERICAN AMERICAN CAPITAL AIM V.I. INTERNATIONAL AMERICAN LEVERAGED MIDCAP APPRECIATION CORE EQUITY GROWTH GROWTH ALLCAP GROWTH FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $- 59 10 23 - - -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 175 136 77 100 56 158 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (175) (77) (67) (77) (56) (158) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios - - - - - 1,221 Realized gains (losses) on sales of investments, net 261 232 436 (472) (53) 363 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 261 232 436 (472) (53) 1,584 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments 943 187 (62) 1,660 1,136 906 -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 1,204 419 374 1,188 1,083 2,490 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $1,029 342 307 1,111 1,027 2,332 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 20 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL ALGER DREYFUS AMERICAN AZL AIM AZL AIM AZL FOUNDERS SMALL BASIC VALUE INTERNATIONAL COLUMBIA AZL DAVIS EQUITY CAPITALIZATION FUND EQUITY TECHNOLOGY NY VENTURE GROWTH PORTFOLIO FUND FUND FUND FUND -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $- 951 1,411 - 1,806 108 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 18 2,471 5,284 1,327 7,690 3,300 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (18) (1,520) (3,873) (1,327) (5,884) (3,192) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios - 21,482 11,183 44 - 4,215 Realized gains (losses) on sales of investments, net 40 22,293 20,840 3,414 18,048 5,295 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 40 43,775 32,023 3,458 18,048 9,510 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments 126 (36,617) (1,918) 7,414 (4,716) 1,200 -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 166 7,158 30,105 10,872 13,332 10,710 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $148 5,638 26,232 9,545 7,448 7,518 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 21 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL DREYFUS AZL FIRST AZL AZL AZL PREMIER TRUST TARGET FRANKLIN FUSION FUSION SMALL CAP DOUBLE PLAY SMALL CAP BALANCED AZL FUSION MODERATE VALUE FUND FUND VALUE FUND FUND GROWTH FUND FUND -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $174 - 1,668 4,311 4,849 6,992 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 1,399 810 6,575 5,919 20,678 14,149 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (1,225) (810) (4,907) (1,608) (15,829) (7,157) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 4,191 - 11,378 3,913 16,714 11,231 Realized gains (losses) on sales of investments, net 1,652 (292) 11,704 6,872 23,210 15,803 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 5,843 (292) 23,082 10,785 39,924 27,034 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (11,696) (286) (39,216) 5,567 4,456 8,200 -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments (5,853) (578) (16,134) 16,352 44,380 35,234 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $(7,078) (1,388) (21,041) 14,744 28,551 28,077 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 22 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL AZL LEGG JENNISON AZL MASON AZL LEGG AZL LMP AZL MONEY 20/20 JENNISON GROWTH MASON LARGE CAP MARKET FOCUS FUND GROWTH FUND FUND VALUE FUND GROWTH FUND FUND -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $343 - - - - 24,173 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 3,408 1,020 2,507 3,939 3,191 9,477 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (3,065) (1,020) (2,507) (3,939) (3,191) 14,696 -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 6,136 - 2,497 3,079 - - Realized gains (losses) on sales of investments, net 6,993 1,612 4,719 9,003 6,493 - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 13,129 1,612 7,216 12,082 6,493 - investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments 2,077 3,416 4,069 (23,925) 916 1 -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 15,206 5,028 11,285 (11,843) 7,409 1 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $12,141 4,008 8,778 (15,782) 4,218 14,697 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 23 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL LNEUBERGER AZL AZL NACM BERMAN AZL OCC AZL OCC OPPENHEIMER INTERNATIONAL REGENCY OPPORTUNITY RENAISSANCE AZL OCC GLOBAL FUND FUND FUND FUND VALUE FUND FUND -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $13 3 - 3,024 2,705 1,081 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 40 744 3,258 4,715 5,703 4,355 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (27) (741) (3,258) (1,691) (2,998) (3,274) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios - - 20,209 83,816 15,425 6,966 Realized gains (losses) on sales of investments, net (67) 334 7,746 (30,796) 7,895 11,664 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on (67) 334 27,955 53,020 23,320 18,630 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (316) (1,154) (16,027) (28,368) (64,919) (8,185) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments (383) (820) 11,928 24,652 (41,599) 10,445 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $(410) (1,561) 8,670 22,961 (44,597) 7,171 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 24 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL PIMCO AZL AZL AZL FUNDAMENTAL SCHRODER SCHRODER OPPENHEIMER AZL INDEXPLUS EMERGING EMERGING INTERNATIONAL OPPENHEIMER TOTAL AZL S&P MARKETS MARKETS GROWTH MAIN STREET RETURN 500 INDEX EQUITY FUND EQUITY FUND FUND FUND FUND CL 1 FUND CL 2 -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $1,236 697 531 257 - 10 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 4,171 2,643 115 182 3 1,790 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (2,935) (1,946) 416 75 (3) (1,780) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 3,546 6,729 8 58 - - Realized gains (losses) on sales of investments, net 14,763 4,696 28 (82) 35 5,892 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 18,309 11,425 36 (24) 35 5,892 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments 598 (7,781) (263) (641) (8) 12,515 -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 18,907 3,644 (227) (665) 27 18,407 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $15,972 1,698 189 (590) 24 16,627 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 25 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL SCHRODER AZL AZL AZL INTERNATIONAL AZL SMALL TARGETPLUS TARGETPLUS AZL TARGETPLUS SMALL CAP CAP STOCK BALANCED EQUITY TARGETPLUS MODERATE FUND LINDEX FUND FUND FUND GROWTH FUND FUND -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $- 227 179 660 382 285 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 71 73 59 807 227 116 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (71) 154 120 (147) 155 169 -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios - 115 - 159 - - Realized gains (losses) on sales of investments, net (168) (106) (7) (176) (211) (177) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on (168) 9 (7) (17) (211) (177) investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (430) (834) (125) (1,910) (843) (550) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments (598) (825) (132) (1,927) (1,054) (727) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $(669) (671) (12) (2,074) (899) (558) operations -------------------------------------------------------------------------- See accompanying notes to financial statements 26 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL AZL VAN TURNER AZL VAN KAMPEN QUANTITATIVE AZL VAN AZL VAN KAMPEN AZL VAN GLOBAL SMALL CAP KAMPEN KAMPEN EQUITY AND KAMPEN GLOBAL REAL GROWTH AGGRESSIVE COMSTOCK INCOME FRANCHISE ESTATE FUND GROWTH FUND FUND FUND FUND FUND -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $- - 7,833 3,761 - 459 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 761 1,543 10,485 4,536 8,250 1,811 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (761) (1,543) (2,652) (775) (8,250) (1,352) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 975 18,065 13,507 5,554 7,289 357 Realized gains (losses) on sales of investments, net 1,545 8,519 22,614 7,512 26,607 1,399 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 2,520 26,584 36,121 13,066 33,896 1,756 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (647) (10,590) (63,244) (10,511) 2,872 (14,183) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 1,873 15,994 (27,123) 2,555 36,768 (12,427) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $1,112 14,451 (29,775) 1,780 28,518 (13,779) operations -------------------------------------------------------------------------- See accompanying notes to financial statements 27 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) AZL VAN KAMPEN AZL VAN AZL VAN GROWTH AND KAMPEN MID KAMPEN DAVIS VA DAVIS VA DAVIS VA INCOME CAP GROWTH STRATEGIC FINANCIAL REAL ESTATE VALUE FUND FUND GROWTH FUND PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $4,435 85 - 1,155 73 1,935 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 6,933 6,287 2,335 2,340 38 3,482 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (2,498) (6,202) (2,335) (1,185) 35 (1,547) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 14,944 15,616 21,677 5,758 512 6,753 Realized gains (losses) on sales of investments, net 19,401 15,636 24,628 10,469 192 14,515 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 34,345 31,252 46,305 16,227 704 21,268 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (29,641) 24,763 (24,325) (23,864) (1,093) (14,321) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 4,704 56,015 21,980 (7,637) (389) 6,947 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $2,206 49,813 19,645 (8,822) (354) 5,400 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 28 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) FRANKLIN FRANKLIN GROWTH FRANKLIN DREYFUS IP GLOBAL AND HIGH FRANKLIN SMALL CAP DREYFUS COMMUNICATIONS INCOME INCOME INCOME STOCK INDEX STOCK SECURITIES SECURITIES SECURITIES SECURITIES PORTFOLIO INDEX FUND FUND FUND FUND FUND --------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $1,102 5,492 - 12,450 14,767 43,750 --------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 5,185 7,114 4,109 8,454 3,848 21,088 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Investment Income (loss), net (4,083) (1,622) (4,109) 3,996 10,919 22,662 --------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 11,832 - - 28,735 - 8,015 Realized gains (losses) on sales of investments, net 16,026 25,175 4,036 8,683 (1,728) 30,767 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Realized gains (losses) on 27,858 25,175 4,036 37,418 (1,728) 38,782 investments, net --------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (28,325) (10,806) 45,281 (63,994) (7,638) (42,106) --------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments (467) 14,369 49,317 (26,576) (9,366) (3,324) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Net increase (decrease) in net assets from $(4,550) 12,747 45,208 (22,580) 1,553 19,338 operations --------------------------------------------------------------------------- See accompanying notes to financial statements 29 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) FRANKLIN FRANKLIN FRANKLIN FRANKLIN LARGE CAP FRANKLIN RISING SMALL CAP SMALL-MID GROWTH FRANKLIN REAL DIVIDENDS VALUE CAP GROWTH SECURITIES MONEY ESTATE SECURITIES SECURITIES SECURITIES FUND MARKET FUND FUND FUND FUND FUND -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $2,715 1,274 10,495 16,303 1,297 - -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 5,930 401 8,034 11,611 3,566 4,666 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (3,215) 873 2,461 4,692 (2,269) (4,666) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 2,477 - 31,667 9,755 12,782 19,718 Realized gains (losses) on sales of investments, net 14,409 - 17,864 38,063 14,710 16,797 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 16,886 - 49,531 47,818 27,492 36,515 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments 2,235 - (155,934) (77,137) (30,984) (6,906) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 19,121 - (106,403) (29,319) (3,492) 29,609 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $15,906 873 (103,942) (24,627) (5,761) 24,943 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 30 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) FRANKLIN TEMPLETON VIP J.P. J.P. FOUNDING FRANKLIN FRANKLIN MORGAN MORGAN U.S. JENNISON FUNDS U.S. ZERO INTERNATIONAL LARGE CAP 20/20 ALLOCATION GOVERNMENT COUPON OPPORTUNITIES CORE EQUITY FOCUS FUND FUND 2010 FUND PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $- 22,167 4,411 5 7 132 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 90 7,827 1,594 8 11 2,308 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (90) 14,340 2,817 (3) (4) (2,176) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios - - - - - 10,403 Realized gains (losses) on sales of investments, net (57) (3,628) (423) 24 17 11,648 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on (57) (3,628) (423) 24 17 22,051 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (528) 10,372 3,409 16 (11) (10,668) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments (585) 6,744 2,986 40 6 11,383 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $(675) 21,084 5,803 37 2 9,207 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 31 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) MUTUAL MUTUAL OPPENHEIMER OPPENHEIMER DISCOVERY SHARES OPCAP MID GLOBAL OPPENHEIMER MAIN SECURITIES SECURITIES CAP SECURITIES HIGH INCOME STREET FUND FUND PORTFOLIO FUND/VA FUND/VA FUND/VA -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $13,181 18,284 37 3,256 2,589 1,614 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 15,952 21,441 456 4,440 651 2,983 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net (2,771) (3,157) (419) (1,184) 1,938 (1,369) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 10,661 43,765 689 11,834 - - Realized gains (losses) on sales of investments, net 59,795 53,442 617 20,544 (180) 10,885 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 70,456 97,207 1,306 32,378 (180) 10,885 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments 8,728 (80,557) (391) (20,473) (2,414) (5,099) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 79,184 16,650 915 11,905 (2,594) 5,786 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $76,413 13,493 496 10,721 (656) 4,417 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 32 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) PIMCO VIT PIMCO VIT PIMCO VIT COMMODITY EMERGING GLOBAL PIMCO VIT PIMCO VIT REALRETURN MARKETS BOND PIMCO VIT REAL ALL ASSET STRATEGY BOND PORTFOLIO HIGH YIELD RETURN PORTFOLIO PORTFOLIO PORTFOLIO (UNHEDGED) PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $13,947 4,196 2,298 1,332 13,555 11,748 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 3,457 1,689 752 736 3,655 4,664 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net 10,490 2,507 1,546 596 9,900 7,084 -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios - - 875 119 - 576 Realized gains (losses) on sales of investments, net 581 (671) 76 125 347 (4,113) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 581 (671) 951 244 347 (3,537) investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments 231 14,960 (1,092) 2,227 (7,396) 16,616 -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 812 14,289 (141) 2,471 (7,049) 13,079 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $11,302 16,796 1,405 3,067 2,851 20,163 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 33 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) SP PIMCO VIT STRATEGIC STOCKSPLUS PIMCO VIT SELIGMAN SELIGMAN PARTNERS SP GROWTH AND TOTAL GLOBAL SMALLER-CAP FOCUSED INTERNATIONAL INCOME RETURN TECHNOLOGY VALUE GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $1,515 24,227 - - - 101 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 372 9,253 47 2,882 591 450 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net 1,143 14,974 (47) (2,882) (591) (349) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios - - - 13,777 1,023 3,913 Realized gains (losses) on sales of investments, net 1,242 (2,161) 45 10,961 1,726 1,566 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 1,242 (2,161) 45 24,738 2,749 5,479 investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (1,346) 19,947 344 (17,213) 1,111 (1,916) -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments (104) 17,786 389 7,525 3,860 3,563 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $1,039 32,760 342 4,643 3,269 3,214 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 34 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) TEMPLETON TEMPLETON TEMPLETON DEVELOPING TEMPLETON GLOBAL TEMPLETON VAN ASSET MARKETS FOREIGN INCOME GROWTH KAMPEN LIT STRATEGY SECURITIES SECURITIES SECURITIES SECURITIES ENTERPRISE FUND FUND FUND FUND FUND PORTFOLIO -------------------------------------------------------------------------- Investment Income: Dividends reinvested in fund shares $2,792 8,415 9,699 841 12,736 1 -------------------------------------------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 216 6,467 7,609 649 15,492 3 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Investment Income (loss), net 2,576 1,948 2,090 192 (2,756) (2) -------------------------------------------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 3,615 26,955 21,005 - 39,251 - Realized gains (losses) on sales of investments, net (43) 46,222 29,997 995 31,799 (14) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Realized gains (losses) on 3,572 73,177 51,002 995 71,050 (14) investments, net -------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on investments (4,781) 4,432 5,188 2,249 (66,815) 34 -------------------------------------------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments (1,209) 77,609 56,190 3,244 4,235 20 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net increase (decrease) in net assets from $1,367 79,557 58,280 3,436 1,479 18 operations -------------------------------------------------------------------------- See accompanying notes to financial statements 35 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) VAN VAN KAMPEN KAMPEN LIT LIT GROWTH AND STRATEGIC INCOME GROWTH PORTFOLIO PORTFOLIO TOTAL ------------------------------------- Investment Income: Dividends reinvested in fund shares $17 - 360,652 ------------------------------------- Expenses: Mortality and expense risk and administrative charges (note 2) 17 78 372,583 ------------------------------------- ------------------------------------- Investment Income (loss), net - (78) (11,931) ------------------------------------- Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions from underlying portfolios 39 - 658,803 Realized gains (losses) on sales of investments, net 22 181 789,135 ------------------------------------- ------------------------------------- Realized gains (losses) on 61 181 1,447,938 investments, net ------------------------------------- Net change in unrealized appreciation (depreciation) on investments (47) 496 (867,050) ------------------------------------- Total realized gains (losses) & unrealized appreciation (depreciation) on investments 14 677 580,888 ------------------------------------- ------------------------------------- Net increase (decrease) in net assets from $14 599 568,957 operations -------------------------------------
See accompanying notes to financial statements 36 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, 2007 AND 2006 (IN THOUSANDS)
AIM V.I. CAPITAL AIM V.I. CORE EQUITY AIM V.I. INTERNATIONAL APPRECIATION FUND FUND GROWTH FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(175) (204) (77) (9) (67) (22) Realized gains (losses) on investments, net 261 (4,955) 232 (283) 436 165 Net change in unrealized appreciation (depreciation) on investments 943 286 187 1,178 (62) 549 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 1,029 (4,873) 342 886 307 692 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 13 20 - - 7 - Transfers between funds (note 2) (1,137) 4,413 (212) (720) (250) (177) Surrenders and terminations, net (2,299) (2,029) (1,571) (990) (600) (300) Rescissions - - - - - - Bonus (recapture) - - - - - - Contract maintenance charges (note 2) (14) (9) (4) (5) (8) (4) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (3,437) 2,395 (1,787) (1,715) (851) (481) -------------------------------------------------------------------------- Increase (decrease) in net assets (2,408) (2,478) (1,445) (829) (544) 211 Net assets at beginning of period 11,798 14,276 6,644 7,473 3,037 2,826 -------------------------------------------------------------------------- Net assets at end of period $9,390 11,798 5,199 6,644 2,493 3,037 -------------------------------------------------------------------------- See accompanying notes to financial statements 37 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) ALGER AMERICAN ALGER AMERICAN GROWTH LEVERAGED ALLCAP ALGER AMERICAN MIDCAP PORTFOLIO PORTFOLIO GROWTH PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(77) (103) (56) (52) (158) (176) Realized gains (losses) on investments, net (472) (786) (53) (293) 1,584 1,658 Net change in unrealized appreciation (depreciation) on investments 1,660 1,124 1,136 910 906 (707) -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 1,111 235 1,027 565 2,332 775 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments - - 1 - - - Transfers between funds (note 2) (434) (710) (115) (148) (1,021) (1,091) Surrenders and terminations , net (1,427) (1,173) (552) (519) (1,780) (1,488) Rescissions - - - - - - Bonus (recapture) - - - - - - Contract maintenance charges (note 2) (3) (3) (3) (2) (5) (7) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (1,864) (1,886) (669) (669) (2,806) (2,586) -------------------------------------------------------------------------- Increase (decrease) in net assets (753) (1,651) 358 (104) (474) (1,811) Net assets at beginning of period 7,105 8,756 3,523 3,627 9,429 11,240 -------------------------------------------------------------------------- Net assets at end of period $6,352 7,105 3,881 3,523 8,955 9,429 -------------------------------------------------------------------------- See accompanying notes to financial statements 38 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) ALGER AMERICAN SMALL CAPITALIZATION AZL AIM BASIC VALUE AZL AIM INTERNATIONAL PORTFOLIO FUND EQUITY FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(18) (19) (1,520) (3,150) (3,873) (2,759) Realized gains (losses) on investments, net 40 69 43,775 10,940 32,023 10,191 Net change in unrealized appreciation (depreciation) on investments 126 125 (36,617) 9,432 (1,918) 26,511 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 148 175 5,638 17,222 26,232 33,943 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments - - 7,524 17,217 53,138 41,667 Transfers between funds (note 2) (8) (62) (182,712) (19,682) 21,678 36,180 Surrenders and terminations, net (81) (202) (10,725) (9,575) (18,915) (8,329) Rescissions - - (90) (524) (1,665) (1,172) Bonus (recapture) - - 104 204 996 711 Contract maintenance charges (note 2) (1) (1) (28) (58) (64) (49) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (90) (265) (185,927) (12,418) 55,168 69,008 -------------------------------------------------------------------------- Increase (decrease) in net assets 58 (90) (180,289) 4,804 81,400 102,951 Net assets at beginning of period 1,018 1,108 180,289 175,485 219,438 116,487 -------------------------------------------------------------------------- Net assets at end of period $1,076 1,018 - 180,289 300,838 219,438 -------------------------------------------------------------------------- See accompanying notes to financial statements 39 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL COLUMBIA AZL DAVIS NY VENTURE AZL DREYFUS FOUNDERS TECHNOLOGY FUND FUND EQUITY GROWTH FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(1,327) (993) (5,884) (5,112) (3,192) (1,730) Realized gains (losses) on investments, net 3,458 890 18,048 5,978 9,510 6,863 Net change in unrealized appreciation (depreciation) on investments 7,414 (147) (4,716) 36,983 1,200 4,488 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 9,545 (250) 7,448 37,849 7,518 9,621 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 11,434 7,784 56,546 72,604 22,751 12,074 Transfers between funds (note 2) 37,625 (3,562) (32,228) 17,723 154,630 15,176 Surrenders and terminations, net (5,256) (2,401) (24,990) (14,900) (15,713) (4,999) Rescissions (379) (291) (1,144) (1,262) (425) (384) Bonus (recapture) 255 162 654 759 331 169 Contract maintenance charges (note 2) (43) (23) (64) (109) (56) (20) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 43,636 1,669 (1,226) 74,815 161,518 22,016 -------------------------------------------------------------------------- Increase (decrease) in net assets 53,181 1,419 6,222 112,664 169,036 31,637 Net assets at beginning of period 48,532 47,113 389,221 276,557 118,436 86,799 -------------------------------------------------------------------------- Net assets at end of period $101,713 48,532 395,443 389,221 287,472 118,436 -------------------------------------------------------------------------- See accompanying notes to financial statements 40 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL FIRST TRUST AZL DREYFUS PREMIER TARGET DOUBLE PLAY AZL FRANKLIN SMALL CAP SMALL CAP VALUE FUND FUND VALUE FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(1,225) (1,204) (810) - (4,907) (4,631) Realized gains (losses) on investments, net 5,843 4,865 (292) - 23,082 23,152 Net change in unrealized appreciation (depreciation) on investments (11,696) 2,725 (286) - (39,216) 14,214 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (7,078) 6,386 (1,388) - (21,041) 32,735 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 11,921 15,839 41,733 - 59,874 70,093 Transfers between funds (note 2) (14,785) (4,368) 48,684 - (63,272) 7,607 Surrenders and terminations, net (3,907) (2,084) (1,490) - (19,363) (11,732) Rescissions (419) (340) (1,099) - (1,274) (1,731) Bonus (recapture) 185 252 653 - 791 969 Contract maintenance charges (note 2) 3 (20) 16 - (7) (42) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (7,002) 9,279 88,497 - (23,251) 65,164 -------------------------------------------------------------------------- Increase (decrease) in net assets (14,080) 15,665 87,109 - (44,292) 97,899 Net assets at beginning of period 71,186 55,521 - - 327,285 229,386 -------------------------------------------------------------------------- Net assets at end of period $57,106 71,186 87,109 - 282,993 327,285 -------------------------------------------------------------------------- See accompanying notes to financial statements 41 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL FUSION BALANCED AZL FUSION GROWTH AZL FUSION MODERATE FUND FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(1,608) (3,065) (15,829) (11,666) (7,157) (7,854) Realized gains (losses) on investments, net 10,785 3,662 39,924 6,745 27,034 5,781 Net change in unrealized appreciation (depreciation) on investments 5,567 15,974 4,456 68,906 8,200 44,932 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 14,744 16,571 28,551 63,985 28,077 42,859 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 83,096 108,768 316,144 408,777 214,906 308,564 Transfers between funds (note 2) 12,499 38,880 (67,113) 91,917 (23,219) 8,870 Surrenders and terminations, net (21,368) (9,858) (54,147) (12,985) (41,839) (17,797) Rescissions (1,556) (2,814) (9,133) (12,817) (4,493) (9,715) Bonus (recapture) 1,060 2,562 5,237 7,273 2,150 4,178 Contract maintenance charges (note 2) (35) 47 (102) 84 (190) 28 -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 73,696 137,585 190,886 482,249 147,315 294,128 -------------------------------------------------------------------------- Increase (decrease) in net assets 88,440 154,156 219,437 546,234 175,392 336,987 Net assets at beginning of period 269,515 115,359 883,579 337,345 633,894 296,907 -------------------------------------------------------------------------- Net assets at end of period $357,955 269,515 1,103,016 883,579 809,286 633,894 -------------------------------------------------------------------------- See accompanying notes to financial statements 42 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL JENNISON 20/20 AZL JENNISON GROWTH AZL LEGG MASON GROWTH FOCUS FUND FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(3,065) (2,293) (1,020) (828) (2,507) (1,669) Realized gains (losses) on investments, net 13,129 2,209 1,612 (166) 7,216 4,571 Net change in unrealized appreciation (depreciation) on investments 2,077 11,508 3,416 448 4,069 (3,735) -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 12,141 11,424 4,008 (546) 8,778 (833) -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 40,601 58,318 11,602 23,193 34,289 23,905 Transfers between funds (note 2) 1,438 10,439 (577) (9,048) 60,468 (2,961) Surrenders and terminations, net (9,547) (4,128) (3,002) (1,480) (8,964) (4,113) Rescissions (725) (888) (170) (399) (735) (542) Bonus (recapture) 391 676 154 274 512 317 Contract maintenance charges (note 2) (56) (11) (11) (4) (9) (15) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 32,102 64,406 7,996 12,536 85,561 16,591 -------------------------------------------------------------------------- Increase (decrease) in net assets 44,243 75,830 12,004 11,990 94,339 15,758 Net assets at beginning of period 153,824 77,994 48,235 36,245 94,574 78,816 -------------------------------------------------------------------------- Net assets at end of period $198,067 153,824 60,239 48,235 188,913 94,574 -------------------------------------------------------------------------- See accompanying notes to financial statements 43 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL LEGG MASON VALUE AZL LMP LARGE CAP FUND GROWTH FUND AZL MONEY MARKET FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(3,939) (3,845) (3,191) (3,203) 14,696 10,287 Realized gains (losses) on investments, net 12,082 3,766 6,493 6,888 - - Net change in unrealized appreciation (depreciation) on investments (23,925) 8,783 916 (1,088) 1 - -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (15,782) 8,704 4,218 2,597 14,697 10,287 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 22,718 45,410 7,668 15,414 342,462 266,201 Transfers between funds (note 2) (39,286) (25,021) (20,127) (16,000) 9,768 (119,514) Surrenders and terminations, net (14,722) (10,621) (11,736) (8,853) (170,998) (80,056) Rescissions (448) (1,020) (183) (331) (10,485) (8,188) Bonus (recapture) 314 431 105 219 3,561 3,700 Contract maintenance charges (note 2) (15) (40) (43) (74) (166) (79) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (31,439) 9,139 (24,316) (9,625) 174,142 62,064 -------------------------------------------------------------------------- Increase (decrease) in net assets (47,221) 17,843 (20,098) (7,028) 188,839 72,351 Net assets at beginning of period 220,530 202,687 166,925 173,953 387,308 314,957 -------------------------------------------------------------------------- Net assets at end of period $173,309 220,530 146,827 166,925 576,147 387,308 -------------------------------------------------------------------------- See accompanying notes to financial statements 44 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL NACM INTERNATIONAL AZL NEUBERGER BERMAN AZL OCC OPPORTUNITY FUND REGENCY FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(27) - (741) (60) (3,258) (3,002) Realized gains (losses) on investments, net (67) - 334 36 27,955 11,320 Net change in unrealized appreciation (depreciation) on investments (316) - (1,154) 1,015 (16,027) 2,444 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (410) - (1,561) 991 8,670 10,762 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 2,954 - 14,515 7,136 17,033 26,646 Transfers between funds (note 2) 3,990 - 10,317 11,112 (3,468) (7,251) Surrenders and terminations, net (283) - (2,229) (247) (10,977) (7,112) Rescissions (15) - (322) (277) (440) (1,016) Bonus (recapture) 43 - 211 121 310 443 Contract maintenance charges (note 2) 1 - 19 1 (35) (29) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 6,690 - 22,511 17,846 2,423 11,681 -------------------------------------------------------------------------- Increase (decrease) in net assets 6,280 - 20,950 18,837 11,093 22,443 Net assets at beginning of period - - 18,837 - 152,821 130,378 -------------------------------------------------------------------------- Net assets at end of period $6,280 - 39,787 18,837 163,914 152,821 -------------------------------------------------------------------------- See accompanying notes to financial statements 45 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL OPPENHEIMER GLOBAL AZL OCC RENAISSANCE FUND AZL OCC VALUE FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(1,691) (5,567) (2,998) (2,276) (3,274) (3,379) Realized gains (losses) on investments, net 53,020 38,666 23,320 19,701 18,630 8,829 Net change in unrealized appreciation (depreciation) on investments (28,368) (5,196) (64,919) 17,100 (8,185) 17,103 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 22,961 27,903 (44,597) 34,525 7,171 22,553 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 14,436 22,643 14,847 14,064 32,905 44,091 Transfers between funds (note 2) (353,604) (71,965) 249,680 (15,425) (29,776) 4,379 Surrenders and terminations, net (20,947) (19,198) (24,979) (11,059) (9,894) (5,814) Rescissions (443) (426) (350) (203) (1,142) (1,099) Bonus (recapture) 141 232 192 174 463 580 Contract maintenance charges (note 2) (58) (84) 30 (39) (27) (43) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (360,475) (68,798) 239,420 (12,488) (7,471) 42,094 -------------------------------------------------------------------------- Increase (decrease) in net assets (337,514) (40,895) 194,823 22,037 (300) 64,647 Net assets at beginning of period 337,514 378,409 240,414 218,377 212,236 147,589 -------------------------------------------------------------------------- Net assets at end of period $- 337,514 435,237 240,414 211,936 212,236 -------------------------------------------------------------------------- See accompanying notes to financial statements 46 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL OPPENHEIMER AZL PIMCO FUNDAMENTAL INTERNATIONAL GROWTH AZL OPPENHEIMER MAIN INDEXPLUS TOTAL RETURN FUND STREET FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(2,935) (2,089) (1,946) (1,508) 416 71 Realized gains (losses) on investments, net 18,309 5,186 11,425 4,061 36 236 Net change in unrealized appreciation (depreciation) on investments 598 21,989 (7,781) 9,886 (263) (34) -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 15,972 25,086 1,698 12,439 189 273 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 49,687 32,463 20,461 21,696 2,591 1,352 Transfers between funds (note 2) 30,635 36,535 (4,677) (559) 260 3,057 Surrenders and terminations, net (13,094) (5,513) (6,753) (4,127) (430) (34) Rescissions (1,542) (912) (687) (861) (177) (83) Bonus (recapture) 834 603 360 256 54 23 Contract maintenance charges (note 2) (25) (23) 20 (35) 1 (1) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 66,495 63,153 8,724 16,370 2,299 4,314 -------------------------------------------------------------------------- Increase (decrease) in net assets 82,467 88,239 10,422 28,809 2,488 4,587 Net assets at beginning of period 158,081 69,842 124,274 95,465 4,587 - -------------------------------------------------------------------------- Net assets at end of period $240,548 158,081 134,696 124,274 7,075 4,587 -------------------------------------------------------------------------- See accompanying notes to financial statements 47 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL SCHRODER EMERGING AZL SCHRODER EMERGING MARKETS EQUITY FUND CL MARKETS EQUITY FUND CL AZL S&P 500 INDEX FUND 1 2 -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $75 - (3) - (1,780) (251) Realized gains (losses) on investments, net (24) - 35 - 5,892 (937) Net change in unrealized appreciation (depreciation) on investments (641) - (8) - 12,515 5,268 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (590) - 24 - 16,627 4,080 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 13,299 - 82 - 39,102 15,362 Transfers between funds (note 2) 14,960 - 145 - 73,579 27,590 Surrenders and terminations, net (416) - (10) - (5,130) (351) Rescissions (82) - (3) - (1,331) (728) Bonus (recapture) 154 - 1 - 655 167 Contract maintenance charges (note 2) 5 - 96 - (317) 8 -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 27,920 - 311 - 106,558 42,048 -------------------------------------------------------------------------- Increase (decrease) in net assets 27,330 - 335 - 123,185 46,128 Net assets at beginning of period - - - - 46,128 - -------------------------------------------------------------------------- Net assets at end of period $27,330 - 335 - 169,313 46,128 -------------------------------------------------------------------------- See accompanying notes to financial statements 48 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL SCHRODER INTERNATIONAL SMALL CAP AZL SMALL CAP STOCK AZL TARGETPLUS FUND INDEX FUND BALANCED FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(71) - 154 - 120 - Realized gains (losses) on investments, net (168) - 9 - (7) - Net change in unrealized appreciation (depreciation) on investments (430) - (996) - (125) - -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (669) - (833) - (12) - -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 6,778 - 7,623 - 6,767 - Transfers between funds (note 2) 4,479 - 4,904 - 4,085 - Surrenders and terminations, net (87) - (82) - 6 - Rescissions (141) - (138) - (84) - Bonus (recapture) 114 - 104 - 48 - Contract maintenance charges (note 2) - - 7 - - - -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 11,143 - 12,418 - 10,822 - -------------------------------------------------------------------------- Increase (decrease) in net assets 10,474 - 11,585 - 10,810 - Net assets at beginning of period - - - - - - -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net assets at end of period $10,474 - 11,585 - 10,810 - -------------------------------------------------------------------------- See accompanying notes to financial statements 49 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL TARGETPLUS EQUITY AZL TARGETPLUS GROWTH AZL TARGETPLUS FUND FUND MODERATE FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(147) - 155 - 169 - Realized gains (losses) on investments, net (17) - (211) - (177) - Net change in unrealized appreciation (depreciation) on investments (1,910) - (843) - (550) - -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (2,074) - (899) - (558) - -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 38,767 - 34,373 - 14,086 - Transfers between funds (note 2) 50,148 - 5,094 - 9,707 - Surrenders and terminations, net (2,172) - (350) - (422) - Rescissions (798) - (978) - (575) - Bonus (recapture) 587 - 560 - 163 - Contract maintenance charges (note 2) 7 - (6) - (1) - -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 86,539 - 38,693 - 22,958 - -------------------------------------------------------------------------- Increase (decrease) in net assets 84,465 - 37,794 - 22,400 - Net assets at beginning of period - - - - - - -------------------------------------------------------------------------- - - $84,465 - 37,794 - 22,400 - -------------------------------------------------------------------------- See accompanying notes to financial statements 50 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL TURNER QUANTITATIVE SMALL CAP AZL VAN KAMPEN AZL VAN KAMPEN GROWTH FUND AGGRESSIVE GROWTH FUND COMSTOCK FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(761) (641) (1,543) (2,070) (2,652) (4,201) Realized gains (losses) on investments, net 2,520 384 26,584 12,272 36,121 43,312 Net change in unrealized appreciation (depreciation) on investments (647) 2,033 (10,590) (7,838) (63,244) 23,820 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 1,112 1,776 14,451 2,364 (29,775) 62,931 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 6,825 14,989 7,992 13,842 45,591 57,747 Transfers between funds (note 2) (8,321) (598) (115,230) (14,359) 66,912 (36,770) Surrenders and terminations, net (1,737) (1,445) (5,481) (5,246) (45,751) (28,091) Rescissions (211) (312) (184) (405) (1,108) (1,446) Bonus (recapture) 85 225 143 210 528 601 Contract maintenance charges (note 2) (11) (3) (17) (20) (74) (119) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (3,370) 12,856 (112,777) (5,978) 66,098 (8,078) -------------------------------------------------------------------------- Increase (decrease) in net assets (2,258) 14,632 (98,326) (3,614) 36,323 54,853 Net assets at beginning of period 35,591 20,959 98,326 101,940 528,044 473,191 -------------------------------------------------------------------------- Net assets at end of period $33,333 35,591 - 98,326 564,367 528,044 -------------------------------------------------------------------------- See accompanying notes to financial statements 51 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL VAN KAMPEN EQUITY AZL VAN KAMPEN GLOBAL AZL VAN KAMPEN GLOBAL AND INCOME FUND FRANCHISE FUND REAL ESTATE FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(775) (1,532) (8,250) (1,182) (1,352) (15) Realized gains (losses) on investments, net 13,066 5,846 33,896 14,489 1,756 438 Net change in unrealized appreciation (depreciation) on investments (10,511) 14,778 2,872 39,662 (14,183) 7,118 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 1,780 19,092 28,518 52,969 (13,779) 7,541 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 54,967 46,273 75,664 69,594 43,645 18,889 Transfers between funds (note 2) (23,017) 5,217 (59,289) 23,732 (3,123) 37,246 Surrenders and terminations, net (13,981) (8,024) (23,354) (11,916) (4,368) (520) Rescissions (1,237) (1,084) (2,157) (1,639) (1,166) (386) Bonus (recapture) 610 327 773 842 601 251 Contract maintenance charges (note 2) (46) (18) (73) (18) 27 (2) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 17,296 42,691 (8,436) 80,595 35,616 55,478 -------------------------------------------------------------------------- Increase (decrease) in net assets 19,076 61,783 20,082 133,564 21,837 63,019 Net assets at beginning of period 223,287 161,504 386,210 252,646 63,019 - -------------------------------------------------------------------------- Net assets at end of period $242,363 223,287 406,292 386,210 84,856 63,019 -------------------------------------------------------------------------- See accompanying notes to financial statements 52 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) AZL VAN KAMPEN GROWTH AZL VAN KAMPEN MID AZL VAN KAMPEN AND INCOME FUND CAP GROWTH FUND STRATEGIC GROWTH FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(2,498) (3,566) (6,202) (4,370) (2,335) (3,308) Realized gains (losses) on investments, net 34,345 29,817 31,252 16,777 46,305 5,498 Net change in unrealized appreciation (depreciation) on investments (29,641) 16,661 24,763 718 (24,325) (2,660) -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 2,206 42,912 49,813 13,125 19,645 (470) -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 37,293 45,270 53,080 56,587 9,035 19,795 Transfers between funds (note 2) (50,392) (15,159) 142,745 (12,616) (186,137) (16,765) Surrenders and terminations, net (29,922) (19,198) (21,342) (11,554) (8,939) (9,758) Rescissions (925) (971) (1,336) (1,275) (191) (354) Bonus (recapture) 451 480 778 692 120 252 Contract maintenance charges (note 2) (102) (51) (77) (60) (26) (42) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (43,597) 10,371 173,848 31,774 (186,138) (6,872) -------------------------------------------------------------------------- Increase (decrease) in net assets (41,391) 53,283 223,661 44,899 (166,493) (7,342) Net assets at beginning of period 364,766 311,483 241,109 196,210 166,493 173,835 -------------------------------------------------------------------------- Net assets at end of period $323,375 364,766 464,770 241,109 - 166,493 -------------------------------------------------------------------------- See accompanying notes to financial statements 53 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) DAVIS VA FINANCIAL DAVIS VA REAL ESTATE DAVIS VA VALUE PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(1,185) (1,372) 35 31 (1,547) (2,109) Realized gains (losses) on investments, net 16,227 5,268 704 597 21,268 9,026 Net change in unrealized appreciation (depreciation) on investments (23,864) 12,957 (1,093) 86 (14,321) 16,222 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (8,822) 16,853 (354) 714 5,400 23,139 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 12,849 12,385 - - 1,427 1,882 Transfers between funds (note 2) (26,607) 4,239 (111) (35) (16,660) (14,554) Surrenders and terminations, net (10,897) (6,300) (413) (759) (20,392) (11,464) Rescissions (234) (204) - - (24) (43) Bonus (recapture) 176 126 - - 12 13 Contract maintenance charges (note 2) (9) (31) - (2) (48) (52) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (24,722) 10,215 (524) (796) (35,685) (24,218) -------------------------------------------------------------------------- Increase (decrease) in net assets (33,544) 27,068 (878) (82) (30,285) (1,079) Net assets at beginning of period 131,469 104,401 2,483 2,565 196,912 197,991 -------------------------------------------------------------------------- Net assets at end of period $97,925 131,469 1,605 2,483 166,627 196,912 -------------------------------------------------------------------------- See accompanying notes to financial statements 54 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) FRANKLIN GLOBAL DREYFUS IP SMALL CAP DREYFUS STOCK INDEX COMMUNICATIONS STOCK INDEX PORTFOLIO FUND SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(4,083) (3,967) (1,622) (1,499) (4,109) (2,301) Realized gains (losses) on investments, net 27,858 17,526 25,175 11,150 4,036 (9,841) Net change in unrealized appreciation (depreciation) on investments (28,325) 16,032 (10,806) 35,546 45,281 48,655 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (4,550) 29,591 12,747 45,197 45,208 36,513 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 15,009 37,850 16,875 38,620 22,770 13,630 Transfers between funds (note 2) (53,361) (21,585) (66,741) (38,441) 25,643 18,037 Surrenders and terminations, net (16,840) (11,768) (31,112) (20,688) (27,173) (21,701) Rescissions (598) (897) (461) (719) (904) (403) Bonus (recapture) 154 420 132 259 524 249 Contract maintenance charges (note 2) (10) (66) (163) (49) (176) (101) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (55,646) 3,954 (81,470) (21,018) 20,684 9,711 -------------------------------------------------------------------------- Increase (decrease) in net assets (60,196) 33,545 (68,723) 24,179 65,892 46,224 Net assets at beginning of period 283,716 250,171 398,216 374,037 209,108 162,884 -------------------------------------------------------------------------- Net assets at end of period $223,520 283,716 329,493 398,216 275,000 209,108 -------------------------------------------------------------------------- See accompanying notes to financial statements 55 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) FRANKLIN GROWTH AND FRANKLIN HIGH INCOME FRANKLIN INCOME INCOME SECURITIES FUND SECURITIES FUND SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $3,996 4,935 10,919 9,262 22,662 16,978 Realized gains (losses) on investments, net 37,418 30,837 (1,728) (675) 38,782 17,858 Net change in unrealized appreciation (depreciation) on investments (63,994) 39,368 (7,638) 6,484 (42,106) 107,904 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (22,580) 75,140 1,553 15,071 19,338 142,740 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 17,642 24,065 28,435 23,815 271,558 171,764 Transfers between funds (note 2) (40,808) (18,418) (29,980) (2,436) (66,393) 87,699 Surrenders and terminations, net (69,802) (68,809) (23,361) (20,921) (108,671) (86,445) Rescissions (406) (400) (430) (1,142) (6,391) (3,283) Bonus (recapture) 203 235 351 260 2,265 1,487 Contract maintenance charges (note 2) (252) (200) (101) (71) (335) (476) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (93,423) (63,527) (25,086) (495) 92,033 170,746 -------------------------------------------------------------------------- Increase (decrease) in net assets (116,003) 11,613 (23,533) 14,576 111,371 313,486 Net assets at beginning of period 555,540 543,927 217,690 203,114 1,124,778 811,292 -------------------------------------------------------------------------- Net assets at end of period $439,537 555,540 194,157 217,690 1,236,149 1,124,778 -------------------------------------------------------------------------- See accompanying notes to financial statements 56 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) FRANKLIN LARGE CAP FRANKLIN MONEY MARKET FRANKLIN REAL ESTATE GROWTH SECURITIES FUND FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(3,215) (3,102) 873 1,007 2,461 1,041 Realized gains (losses) on investments, net 16,886 3,499 - - 49,531 67,553 Net change in unrealized appreciation (depreciation) on investments 2,235 28,016 - 1 (155,934) 18,384 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 15,906 28,413 873 1,008 (103,942) 86,978 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 10,944 27,067 7 3 8,125 44,589 Transfers between funds (note 2) (40,730) (32,583) (810) (1,475) (98,967) (78,660) Surrenders and terminations, net (33,550) (31,492) (4,658) (7,299) (46,942) (41,556) Rescissions (285) (812) - - (250) (1,128) Bonus (recapture) 104 315 - - 66 550 Contract maintenance charges (note 2) (168) (107) (15) (19) (84) (160) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (63,685) (37,612) (5,476) (8,790) (138,052) (76,365) -------------------------------------------------------------------------- Increase (decrease) in net assets (47,779) (9,199) (4,603) (7,782) (241,994) 10,613 Net assets at beginning of period 341,776 350,975 31,583 39,365 548,475 537,862 -------------------------------------------------------------------------- Net assets at end of period $293,997 341,776 26,980 31,583 306,481 548,475 -------------------------------------------------------------------------- See accompanying notes to financial statements 57 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) FRANKLIN RISING DIVIDENDS SECURITIES FRANKLIN SMALL CAP FRANKLIN SMALL-MID CAP FUND VALUE SECURITIES FUND GROWTH SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $4,692 (4,308) (2,269) (2,515) (4,666) (4,890) Realized gains (losses) on investments, net 47,818 32,016 27,492 21,706 36,515 13,319 Net change in unrealized appreciation (depreciation) on investments (77,137) 71,203 (30,984) 9,561 (6,906) 9,926 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (24,627) 98,911 (5,761) 28,752 24,943 18,355 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 14,048 41,780 2,274 3,483 3,139 14,360 Transfers between funds (note 2) (94,045) (54,060) (29,812) (28,512) (22,709) (29,261) Surrenders and terminations, net (68,098) (64,800) (19,262) (13,411) (32,635) (29,875) Rescissions (294) (972) (79) (133) (86) (369) Bonus (recapture) 46 334 38 12 23 190 Contract maintenance charges (note 2) (158) (206) (36) (50) (126) (91) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (148,501) (77,924) (46,877) (38,611) (52,394) (45,046) -------------------------------------------------------------------------- Increase (decrease) in net assets (173,128) 20,987 (52,638) (9,859) (27,451) (26,691) Net assets at beginning of period 722,650 701,663 201,830 211,689 269,950 296,641 -------------------------------------------------------------------------- Net assets at end of period $549,522 722,650 149,192 201,830 242,499 269,950 -------------------------------------------------------------------------- See accompanying notes to financial statements 58 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) FRANKLIN TEMPLETON VIP FOUNDING FUNDS FRANKLIN U.S. FRANKLIN ZERO COUPON ALLOCATION FUND GOVERNMENT FUND 2010 FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(90) - 14,340 12,847 2,817 2,050 Realized gains (losses) on investments, net (57) - (3,628) (3,921) (423) (740) Net change in unrealized appreciation (depreciation) on investments (528) - 10,372 1,667 3,409 (534) -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations (675) - 21,084 10,593 5,803 776 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 18,368 - 25,101 31,586 5,206 5,522 Transfers between funds (note 2) 24,944 - (19,576) (30,519) (105) (5,770) Surrenders and terminations, net (286) - (55,910) (48,843) (8,481) (8,770) Rescissions (571) - (291) (1,042) (187) (74) Bonus (recapture) 186 - 231 292 72 83 Contract maintenance charges (note 2) 11 - (194) (192) (17) (23) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 42,652 - (50,639) (48,718) (3,512) (9,032) -------------------------------------------------------------------------- Increase (decrease) in net assets 41,977 - (29,555) (38,125) 2,291 (8,256) Net assets at beginning of period - - 459,275 497,400 88,620 96,876 -------------------------------------------------------------------------- Net assets at end of period $41,977 - 429,720 459,275 90,911 88,620 -------------------------------------------------------------------------- See accompanying notes to financial statements 59 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) J.P. MORGAN J.P. MORGAN U.S. INTERNATIONAL LARGE CAP CORE EQUITY JENNISON 20/20 FOCUS OPPORTUNITIES PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(3) (3) (4) (5) (2,176) (2,281) Realized gains (losses) on investments, net 24 38 17 7 22,051 15,039 Net change in unrealized appreciation (depreciation) on investments 16 71 (11) 101 (10,668) (449) -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 37 106 2 103 9,207 12,309 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments - - - - 1,651 3,299 Transfers between funds (note 2) (23) (29) (40) (90) (17,803) (10,786) Surrenders and terminations, net (46) (147) (71) (168) (8,649) (5,979) Rescissions - - - - (52) (86) Bonus (recapture) - - - - 30 41 Contract maintenance charges (note 2) - - - (1) (30) (25) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (69) (176) (111) (259) (24,853) (13,536) -------------------------------------------------------------------------- Increase (decrease) in net assets (32) (70) (109) (156) (15,646) (1,227) Net assets at beginning of period 523 593 705 861 126,736 127,963 -------------------------------------------------------------------------- Net assets at end of period $491 523 596 705 111,090 126,736 -------------------------------------------------------------------------- See accompanying notes to financial statements 60 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) MUTUAL DISCOVERY MUTUAL SHARES OPCAP MID CAP SECURITIES FUND SECURITIES FUND PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(2,771) (4,890) (3,157) (3,862) (419) (63) Realized gains (losses) on investments, net 70,456 53,467 97,207 56,957 1,306 (7) Net change in unrealized appreciation (depreciation) on investments 8,728 76,474 (80,557) 87,658 (391) 710 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 76,413 125,051 13,493 140,753 496 640 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 125,184 102,731 257,489 184,568 15,115 5,598 Transfers between funds (note 2) (25,247) 36,403 (108,156) 78,740 1,983 8,365 Surrenders and terminations, net (69,851) (46,433) (104,919) (76,002) (845) (82) Rescissions (2,487) (2,039) (6,829) (3,529) (331) (96) Bonus (recapture) 1,538 1,123 2,467 1,683 222 58 Contract maintenance charges (note 2) (256) (144) (272) (238) (6) - -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 28,881 91,641 39,780 185,222 16,138 13,843 -------------------------------------------------------------------------- Increase (decrease) in net assets 105,294 216,692 53,273 325,975 16,634 14,483 Net assets at beginning of period 788,452 571,760 1,107,271 781,296 14,483 - -------------------------------------------------------------------------- Net assets at end of period $893,746 788,452 1,160,544 1,107,271 31,117 14,483 -------------------------------------------------------------------------- See accompanying notes to financial statements 61 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) OPPENHEIMER GLOBAL OPPENHEIMER HIGH OPPENHEIMER MAIN SECURITIES FUND/VA INCOME FUND/VA STREET FUND/VA -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(1,184) (1,951) 1,938 2,154 (1,369) (1,161) Realized gains (losses) on investments, net 32,378 26,849 (180) 4 10,885 6,835 Net change in unrealized appreciation (depreciation) on investments (20,473) 8,959 (2,414) 417 (5,099) 13,967 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 10,721 33,857 (656) 2,575 4,417 19,641 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 2,154 3,177 321 465 1,636 2,015 Transfers between funds (note 2) (24,242) (21,989) (4,312) (1,093) (13,137) (15,174) Surrenders and terminations, net (24,652) (15,670) (3,888) (3,009) (18,083) (11,691) Rescissions (69) (33) (4) (4) (30) (58) Bonus (recapture) 20 21 5 4 15 10 Contract maintenance charges (note 2) (135) (73) (8) (9) (54) (65) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (46,924) (34,567) (7,886) (3,646) (29,653) (24,963) -------------------------------------------------------------------------- Increase (decrease) in net assets (36,203) (710) (8,542) (1,071) (25,236) (5,322) Net assets at beginning of period 241,736 242,446 38,259 39,330 164,300 169,622 -------------------------------------------------------------------------- Net assets at end of period $205,533 241,736 29,717 38,259 139,064 164,300 -------------------------------------------------------------------------- See accompanying notes to financial statements 62 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) PIMCO VIT PIMCO VIT ALL ASSET COMMODITYREALRETURN PIMCO VIT EMERGING PORTFOLIO STRATEGY PORTFOLIO MARKETS BOND PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $10,490 7,577 2,507 2,062 1,546 1,037 Realized gains (losses) on investments, net 581 799 (671) (317) 951 496 Net change in unrealized appreciation (depreciation) on investments 231 (3,420) 14,960 (5,729) (1,092) 660 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 11,302 4,956 16,796 (3,984) 1,405 2,193 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 15,673 45,189 15,508 28,735 10,332 12,323 Transfers between funds (note 2) (37,988) (56,138) 445 14,011 (944) 293 Surrenders and terminations, net (13,842) (10,004) (4,530) (3,272) (2,061) (1,210) Rescissions (562) (1,317) (393) (680) (317) (278) Bonus (recapture) 288 802 237 370 174 187 Contract maintenance charges (note 2) (49) (40) (18) (21) (3) (4) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (36,480) (21,508) 11,249 39,143 7,181 11,311 -------------------------------------------------------------------------- Increase (decrease) in net assets (25,178) (16,552) 28,045 35,159 8,586 13,504 Net assets at beginning of period 205,480 222,032 84,388 49,229 35,627 22,123 -------------------------------------------------------------------------- Net assets at end of period $180,302 205,480 112,433 84,388 44,213 35,627 -------------------------------------------------------------------------- See accompanying notes to financial statements 63 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) PIMCO VIT GLOBAL BOND PIMCO VIT HIGH YIELD PIMCO VIT REAL RETURN PORTFOLIO (UNHEDGED) PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $596 346 9,900 9,764 7,084 6,341 Realized gains (losses) on investments, net 244 (166) 347 554 (3,537) 4,625 Net change in unrealized appreciation (depreciation) on investments 2,227 357 (7,396) 3,002 16,616 (14,338) -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 3,067 537 2,851 13,320 20,163 (3,372) -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 11,309 10,846 15,773 19,837 18,775 34,736 Transfers between funds (note 2) 14,109 6,693 (31,201) (18,983) (24,751) (43,935) Surrenders and terminations, net (2,201) (969) (15,650) (14,433) (17,777) (15,124) Rescissions (225) (305) (494) (699) (447) (593) Bonus (recapture) 205 139 231 246 206 314 Contract maintenance charges (note 2) (5) (10) (38) (42) (50) (86) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 23,192 16,394 (31,379) (14,074) (24,044) (24,688) -------------------------------------------------------------------------- Increase (decrease) in net assets 26,259 16,931 (28,528) (754) (3,881) (28,060) Net assets at beginning of period 29,522 12,591 201,813 202,567 253,317 281,377 -------------------------------------------------------------------------- Net assets at end of period $55,781 29,522 173,285 201,813 249,436 253,317 -------------------------------------------------------------------------- See accompanying notes to financial statements 64 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) PIMCO VIT STOCKSPLUS GROWTH AND INCOME PIMCO VIT TOTAL SELIGMAN GLOBAL PORTFOLIO RETURN PORTFOLIO TECHNOLOGY PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $1,143 487 14,974 12,361 (47) (53) Realized gains (losses) on investments, net 1,242 1,145 (2,161) 498 45 (102) Net change in unrealized appreciation (depreciation) on investments (1,346) 937 19,947 (3,944) 344 598 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 1,039 2,569 32,760 8,915 342 443 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 181 319 51,922 49,469 - - Transfers between funds (note 2) (1,984) (1,857) (22,574) (8,008) (194) (190) Surrenders and terminations, net (2,281) (1,717) (48,315) (31,912) (691) (369) Rescissions (1) (2) (1,039) (1,215) - - Bonus (recapture) 3 - 860 467 - - Contract maintenance charges (note 2) (12) (8) (123) (120) (3) - -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (4,094) (3,265) (19,269) 8,681 (888) (559) -------------------------------------------------------------------------- Increase (decrease) in net assets (3,055) (696) 13,491 17,596 (546) (116) Net assets at beginning of period 21,404 22,100 492,340 474,744 2,954 3,070 -------------------------------------------------------------------------- Net assets at end of period $18,349 21,404 505,831 492,340 2,408 2,954 -------------------------------------------------------------------------- See accompanying notes to financial statements 65 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) SP STRATEGIC PARTNERS SELIGMAN SMALLER-CAP FOCUSED GROWTH SP INTERNATIONAL VALUE PORTFOLIO PORTFOLIO GROWTH PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $(2,882) (3,027) (591) (665) (349) (82) Realized gains (losses) on investments, net 24,738 21,817 2,749 3,939 5,479 2,980 Net change in unrealized appreciation (depreciation) on investments (17,213) 9,108 1,111 (4,740) (1,916) 641 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 4,643 27,898 3,269 (1,466) 3,214 3,539 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 1,170 1,889 370 765 263 378 Transfers between funds (note 2) (20,010) (24,284) (4,819) (8,278) 5,978 (1,997) Surrenders and terminations, net (18,945) (13,110) (2,835) (2,358) (1,875) (1,270) Rescissions (36) (16) (2) (44) (2) (16) Bonus (recapture) 12 5 5 15 3 2 Contract maintenance charges (note 2) (48) (49) (11) (7) (5) (6) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (37,857) (35,565) (7,292) (9,907) 4,362 (2,909) -------------------------------------------------------------------------- Increase (decrease) in net assets (33,214) (7,667) (4,023) (11,373) 7,576 630 Net assets at beginning of period 159,979 167,646 30,769 42,142 21,901 21,271 -------------------------------------------------------------------------- Net assets at end of period $126,765 159,979 26,746 30,769 29,477 21,901 -------------------------------------------------------------------------- See accompanying notes to financial statements 66 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) TEMPLETON DEVELOPING TEMPLETON ASSET MARKETS SECURITIES TEMPLETON FOREIGN STRATEGY FUND FUND SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $2,576 987 1,948 (2,452) 2,090 (1,214) Realized gains (losses) on investments, net 3,572 1,341 73,177 36,528 51,002 17,151 Net change in unrealized appreciation (depreciation) on investments (4,781) 685 4,432 37,740 5,188 59,983 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 1,367 3,013 79,557 71,816 58,280 75,920 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 3 2 7,803 39,807 17,459 33,822 Transfers between funds (note 2) (462) (202) (62,469) (51,767) (35,142) (3,380) Surrenders and terminations, net (2,844) (2,898) (33,336) (25,683) (55,227) (49,314) Rescissions - - (112) (958) (665) (742) Bonus (recapture) - - 77 583 133 381 Contract maintenance charges (note 2) (5) (5) (107) (93) (214) (180) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (3,308) (3,103) (88,144) (38,111) (73,656) (19,413) -------------------------------------------------------------------------- Increase (decrease) in net assets (1,941) (90) (8,587) 33,705 (15,376) 56,507 Net assets at beginning of period 16,958 17,048 351,001 317,296 459,162 402,655 -------------------------------------------------------------------------- Net assets at end of period $15,017 16,958 342,414 351,001 443,786 459,162 -------------------------------------------------------------------------- See accompanying notes to financial statements 67 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) TEMPLETON GLOBAL TEMPLETON GROWTH VAN KAMPEN LIT INCOME SECURITIES FUND SECURITIES FUND ENTERPRISE PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $192 504 (2,756) (2,314) (2) (2) Realized gains (losses) on investments, net 995 841 71,050 40,882 (14) (17) Net change in unrealized appreciation (depreciation) on investments 2,249 1,801 (66,815) 92,505 34 29 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 3,436 3,146 1,479 131,073 18 10 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments 16,305 - 195,669 134,478 - - Transfers between funds (note 2) 42,634 (474) (89,312) 18,153 (23) (9) Surrenders and terminations, net (5,874) (4,770) (79,585) (64,040) (32) (41) Rescissions (352) - (4,416) (2,555) - - Bonus (recapture) 221 - 1,719 1,200 - - Contract maintenance charges (note 2) (13) (13) (291) (170) - - -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions 52,921 (5,257) 23,784 87,066 (55) (50) -------------------------------------------------------------------------- Increase (decrease) in net assets 56,357 (2,111) 25,263 218,139 (37) (40) Net assets at beginning of period 27,726 29,837 844,951 626,812 186 226 -------------------------------------------------------------------------- Net assets at end of period $84,083 27,726 870,214 844,951 149 186 -------------------------------------------------------------------------- See accompanying notes to financial statements 68 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 (IN THOUSANDS) VAN KAMPEN LIT VAN KAMPEN LIT GROWTH STRATEGIC GROWTH AND INCOME PORTFOLIO PORTFOLIO TOTAL -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $- (4) (78) (100) (11,931) (41,667) Realized gains (losses) on investments, net 61 124 181 36 1,447,938 815,362 Net change in unrealized appreciation (depreciation) on investments (47) 20 496 114 (867,050) 1,192,661 -------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 14 140 599 50 568,957 1,966,356 -------------------------------------------------------------------------- Contract Transactions-All Products (Note 5): Purchase payments - - - - 3,258,668 3,231,136 Transfers between funds (note 2) (18) (88) (736) (688) (1,282,366) (367,573) Surrenders and terminations, net (64) (192) (1,038) (648) (1,816,606) (1,257,235) Rescissions - - - - (82,542) (82,781) Bonus (recapture) - - - - 39,790 41,811 Contract maintenance charges (note 2) - - (2) (4) (5,229) (4,303) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from contract transactions (82) (280) (1,776) (1,340) 111,715 1,561,055 -------------------------------------------------------------------------- Increase (decrease) in net assets (68) (140) (1,177) (1,290) 680,672 3,527,411 Net assets at beginning of period 1,043 1,183 5,196 6,486 19,169,315 15,641,904 -------------------------------------------------------------------------- Net assets at end of period $975 1,043 4,019 5,196 19,849,987 19,169,315 --------------------------------------------------------------------------
See accompanying notes to financial statements 69 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements December 31, 2007 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 invest, at net asset values, in one or more of select portfolios of AIM Variable Insurance Funds, Inc., The Alger American Fund, Allianz Investment Management, LLC, Davis Variable Account Fund, Inc., Dreyfus Service Corporation, Franklin Templeton Variable Insurance Products Trust (formerly, Franklin Valuemark Funds), J.P. Morgan Series Trust II, OpCap Advisors, LLC, Oppenheimer Variable Account Funds, Pacific Investment Management Company, Prudential Investments Fund Management, LLC, Seligman Portfolios, Inc., LLC, Van Kampen Life Investment Trust and William Blair & Company LLC, 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 and Specialist Manager for each portfolio are listed in the following table.
PORTFOLIO INVESTMENT ADVISER SPECIALIST MANAGER \ ADVISER AIM V.I. Capital Appreciation Fund AIM Advisors, Inc. N\A AIM V.I. Core Equity Fund AIM Advisors, Inc. N\A AIM V.I. International Growth Fund AIM Advisors, Inc. N\A Alger American Growth Portfolio Fred Alger Management, Inc. N\A Alger American Leveraged AllCap Portfolio Fred Alger Management, Inc. N\A Alger American MidCap Growth Portfolio Fred Alger Management, Inc. N\A Alger American Small Capitalization Portfolio Fred Alger Management, Inc. N\A AZL AIM International Equity Fund * Allianz Investment A I M Capital Management, Inc. Management, LLC AZL Columbia Technology Fund * Allianz Investment Columbia Management Advisors, Management, LLC LLC AZL Davis NY Venture Fund * Allianz Investment Davis Selected Advisers, L.P. Management, LLC AZL Dreyfus Founders Equity Growth Fund * Allianz Investment Founders Asset Management, LLC Management, LLC AZL Dreyfus Premier Small Cap Value Fund * Allianz Investment The Dreyfus Corporation Management, LLC AZL First Trust Target Double Play Fund Allianz Investment First Trust, Inc. Management, LLC AZL Franklin Small Cap Value Fund * Allianz Investment Franklin Advisory Services LLC Management, LLC AZL Fusion Balanced Fund Allianz Investment Allianz Investment Management, Management, LLC LLC AZL Fusion Growth Fund Allianz Investment Allianz Investment Management, Management, LLC LLC AZL Fusion Moderate Fund Allianz Investment Allianz Investment Management, Management, LLC LLC AZL Jennison 20/20 Focus Fund * Allianz Investment Jennison Associates LLC Management, LLC AZL Jennison Growth Fund * Allianz Investment Jennison Associates LLC Management, LLC AZL Legg Mason Growth Fund * Allianz Investment Legg Mason Funds Management, Management, LLC Inc. AZL Legg Mason Value Fund * Allianz Investment Legg Mason Funds Management, Management, LLC Inc. AZL LMP Large Cap Growth Fund * Allianz Investment Legg Mason Funds Management, Management, LLC Inc. AZL Money Market Fund * Allianz Investment Prudential Investment Management, LLC Management, Inc. AZL NACM International Fund Allianz Investment Nicholas Applegate Management, Management, LLC Inc. AZL Neuberger Berman Regency Fund * Allianz Investment Neuberger Berman Management Management, LLC Inc. AZL OCC Opportunity Fund * Allianz Investment Oppenheimer Capital, LLC Management, LLC AZL OCC Value Fund * Allianz Investment Oppenheimer Capital, LLC Management, LLC AZL Oppenheimer Global Fund * Allianz Investment OppenheimerFunds, Inc. Management, LLC AZL Oppenheimer International Growth Fund * Allianz Investment OppenheimerFunds, Inc. Management, LLC AZL Oppenheimer Main Street Fund * Allianz Investment OppenheimerFunds, Inc. Management, LLC AZL PIMCO Fundamental IndexPLUS Total Return Allianz Investment Pacific Investment Management Fund * Management, LLC Company 70 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 1. ORGANIZATION (CONTINUED) PORTFOLIO INVESTMENT ADVISER SPECIALIST MANAGER \ ADVISER AZL S&P 500 Index Fund Allianz Investment The Dreyfus Corporation Management, LLC AZL Schroder Emerging Markets Allianz Investment Schroder Management Equity Fund CL 1 Management, LLC AZL Schroder Emerging Markets Allianz Investment Schroder Management Equity Fund CL 2 Management, LLC AZL Schroder International Small Allianz Investment Schroder Management Cap Fund Management, LLC AZL Small Cap Stock Index Fund Allianz Investment Management, LLC The Dreyfus Corporation AZL TargetPLUS Balanced Fund Allianz Investment Management, LLC The Dreyfus Corporation AZL TargetPLUS Equity Fund Allianz Investment Management, LLC The Dreyfus Corporation AZL TargetPLUS Growth Fund Allianz Investment Management, LLC The Dreyfus Corporation AZL TargetPLUS Moderate Fund Allianz Investment Management, LLC The Dreyfus Corporation AZL Turner Quantitative Small Cap Growth Fund Allianz Investment Management, LLC Turner Investment Partners AZL Van Kampen Comstock Fund *+ Allianz Investment Management, LLC Van Kampen Asset Management, Inc. AZL Van Kampen Equity and Income Fund *+ Allianz Investment Management, LLC Van Kampen Asset Management, Inc AZL Van Kampen Global Franchise Fund *+ Allianz Investment Management, LLC Van Kampen Asset Management, Inc AZL Van Kampen Global Real Estate Fund *+ Allianz Investment Management, LLC Van Kampen Asset Management, Inc AZL Van Kampen Growth and Income Fund *+ Allianz Investment Management, LLC Van Kampen Asset Management, Inc. AZL Van Kampen Mid Cap Growth Fund *+ Allianz Investment Management, LLC Van Kampen Investment Advisory Corp. Davis VA Financial Portfolio Davis Selected Advisers, LP N\A Davis VA Real Estate Portfolio Davis Selected Advisers, LP N\A Davis VA Value Portfolio Davis Selected Advisers, LP N\A Dreyfus IP Small Cap Stock Index Portfolio * The Dreyfus Corporation N\A Dreyfus Stock Index Fund * The Dreyfus Corporation N\A Franklin Global Communications Securities Fund * Franklin Advisers, Inc. N\A Franklin Growth and Income Securities Fund * Franklin Advisers, Inc. N\A Franklin High Income Securities Fund * Franklin Advisers, Inc. N\A Franklin Income Securities Fund * Franklin Advisers, Inc. N\A Franklin Large Cap Growth Securities Fund * Franklin Advisers, Inc. N\A Franklin Money Market Fund * Franklin Advisers, Inc. N\A Franklin Real Estate Fund * Franklin Advisers, Inc. N\A Franklin Rising Dividends Securities Fund * Franklin Advisory Services, LLC N\A Franklin Small Cap Value Securities Fund * Franklin Advisory Services, LLC N\A Franklin Small-Mid Cap Growth Securities Fund * Franklin Advisers, Inc. N\A Franklin Templeton VIP Founding Funds Allocation Fund Franklin Advisers, Inc. N\A Franklin U.S. Government Fund * Franklin Advisory Services, LLC N\A Franklin Zero Coupon 2010 Fund Franklin Advisers, Inc. N\A J.P. Morgan International J.P. Morgan Investment Opportunities Portfolio Management Inc. N\A J.P. Morgan U.S. Large Cap Core Equity Portfolio J.P. Morgan Investment Management Inc. N\A Jennison 20/20 Focus Portfolio * Prudential Investments Fund Management, LLC N/A Mutual Discovery Securities Fund * Franklin Mutual Advisers, LLC N\A Mutual Shares Securities Fund * Franklin Mutual Advisers, LLC N\A OpCap Mid Cap Portfolio OpCap Advisors, LLC N\A Oppenheimer Global Securities Fund/VA OppenheimerFunds, Inc. N\A Oppenheimer High Income Fund/VA OppenheimerFunds, Inc. N\A Oppenheimer Main Street Fund/VA OppenheimerFunds, Inc. N\A PIMCO VIT All Asset Portfolio Pacific Investment Management Company N\A PIMCO VIT CommodityRealReturn Pacific Investment Management Strategy Portfolio Company N\A 71 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 1. ORGANIZATION (CONTINUED) PORTFOLIO INVESTMENT ADVISER SPECIALIST MANAGER \ ADVISER PIMCO VIT Emerging Markets Bond Portfolio+ Pacific Investment Management Company N\A PIMCO VIT Global Bond Portfolio (Unhedged)+ Pacific Investment Management Company N\A PIMCO VIT High Yield Portfolio + Pacific Investment Management Company N\A PIMCO VIT Real Return Portfolio + Pacific Investment Management Company N\A PIMCO VIT StocksPLUS Growth and Pacific Investment Management Income Portfolio + Company N\A PIMCO VIT Total Return Portfolio + Pacific Investment Management Company N\A Seligman Global Technology Portfolio J & W Seligman & Co. Inc. N\A Seligman Smaller-Cap Value Portfolio J & W Seligman & Co. Inc. N\A SP Strategic Partners Focused Growth Prudential Investments Fund Portfolio * Management , LLC N\A SP International Growth Portfolio * William Blair & Company, LLC N\A Templeton Asset Strategy Fund * Templeton Global Advisors Limited N\A Templeton Developing Markets Templeton Asset Management Securities Fund * Ltd. N\A Templeton Foreign Securities Fund * Franklin Advisers, Inc. N\A Templeton Global Income Securities Fund * Franklin Advisers, Inc. N\A Templeton Growth Securities Fund * Templeton Global Advisors Limited N\A Van Kampen LIT Enterprise Portfolio Van Kampen Asset Management, Inc. N\A Van Kampen LIT Growth and Income Portfolio Van Kampen Asset Management, Inc. N\A Van Kampen LIT Strategic Growth Portfolio* Van Kampen Asset Management, Inc. N\A * Portfolio contains class 2 shares which assess 12b-1 fees. + The investment adviser of this fund is an affiliate of Allianz Life and is paid an investment management fee by the fund.
72 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with U.S. 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 each day the markets are open at fair value using net asset values provided by the investment advisers of the portfolios after the 4 PM Eastern market close. 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. Three Fixed Account investment options are available to deferred annuity contract owners. A Flexible Fixed Option is available to Valuemark II, Valuemark III, Allianz Valuemark IV, Allianz Rewards, and Allianz Alterity deferred annuity contract owners. Fixed Period Accounts are available to Allianz High Five and Allianz High Five Bonus contract owners. A Dollar Cost Averaging Option is available to Valuemark II, Valuemark III, Allianz Valuemark IV, Allianz Rewards, Allianz Alterity, Allianz High Five, Allianz High Five Bonus, and Allianz Vision 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, including the guaranteed minimum rate of return on the Fixed Account of 3%, are part of the general obligations of Allianz Life and are not included in the Variable Account. Certain of the sub-accounts invest in Investment Options that invest in various forms of fixed income securities, including mortgage backed securities. These types of securities may present a variety of potential risks, including credit risk, extension and prepayment risk, and interest rate risk. Recently, certain types of mortgage backed securities, such as structured investment vehicles (SIVs), subprime mortgage backed bonds, and commercial paper backed by mortgage backed securities have experienced losses as a result of defaults on underlying mortgages and a lack of liquidity. These securities have also been subject to price declines resulting from lack of a trading market for the securities. As a result of the lack of liquidity, it is possible that certain securities may become more difficult to value. It is possible that these types of securities may continue to experience price declines as a result of defaults and lack of liquidity. 73 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENTS (CONTINUED) Available investment options, including the date the investment option was available for each product, as of December 31, 2007 are listed in the following table.
ALLIANZ ALLIANZ ALLIANZ ALLIANZ ALLIANZ ALLIANZ VALUEMARK ALLIANZ ALLIANZ ALTERITY CONNECTIONS HIGH FIVE HIGH FIVE HIGH FIVE REWARDS III & III VALUEMARK VISION PORTFOLIO BONUS L AZL AIM International Equity Fund 5/1/2002 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/1/2002 5/1/2002 5/1/2002 5/1/2007 AZL Columbia Tecknology Fund 11/6/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 11/5/2001 11/5/2001 5/1/2007 AZL Davis NY Venture Fund 11/6/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 11/5/2001 11/5/2001 5/1/2007 AZL Dreyfus Founders Equity Growth Fund 11/6/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 11/5/2001 11/5/2001 5/1/2007 AZL Dreyfus Premier Small Cap Value Fund 5/3/2004 11/12/2007 5/3/2004 5/3/2004 5/2/2005 5/3/2004 5/3/2004 5/3/2004 5/1/2007 AZL First Trust Target Double Play Fund 12/28/2006 11/12/2007 12/28/2006 12/28/2006 12/28/2006 12/28/2006 12/28/2006 12/28/2006 5/1/2007 AZL Franklin Small Cap Value Fund 5/1/2003 11/12/2007 5/1/2003 5/3/2004 5/2/2005 5/1/2003 5/1/2003 5/1/2003 5/1/2007 AZL Fusion Balanced Fund 5/2/2005 11/12/2007 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 AZL Fusion Growth Fund 5/2/2005 11/12/2007 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 AZL Fusion Moderate Fund 5/2/2005 11/12/2007 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 AZL Jennison 20/20 Focus Fund 5/2/2005 11/12/2007 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 AZL Jennison Growth Fund 5/2/2005 11/12/2007 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 AZL Legg Mason Growth Fund 5/1/2002 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/1/2002 5/1/2002 5/1/2002 5/1/2007 AZL Legg Mason Value Fund 11/6/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 11/5/2001 11/5/2001 5/1/2007 AZL LMP Large Cap Growth Fund 5/1/2002 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/1/2002 5/1/2002 5/1/2002 5/1/2007 AZL Money Market Fund 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2001 11/5/2001 11/5/2001 5/1/2007 AZL NACM International Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL Neuberger Berman Regency Fund 5/1/2006 11/12/2007 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2007 AZL OCC Opportunity Fund 5/1/2002 11/12/2007 5/1/2002 5/1/2004 5/2/2005 5/1/2002 5/1/2002 5/1/2002 5/1/2007 AZL OCC Value Fund 11/6/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 11/5/2001 11/5/2001 5/1/2007 AZL Oppenheimer Global Fund 5/3/2004 11/12/2007 5/3/2004 5/3/2004 5/2/2005 5/3/2004 5/3/2004 5/3/2004 5/1/2007 AZL Oppenheimer International Growth Fund 11/6/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 11/5/2001 11/5/2001 5/1/2007 AZL Oppenheimer Main Street Fund 5/3/2004 11/12/2007 5/3/2004 5/3/2004 5/2/2005 5/3/2004 5/3/2004 5/3/2004 5/1/2007 AZL PIMCO Fundamental IndexPLUS Total Return Fund 5/1/2006 11/12/2007 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2007 AZL S&P 500 Index Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL Schroder Emerging Markets Equity Fund CL 2 5/1/2006 11/12/2007 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2007 AZL Schroder International Small Cap Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL Small Cap Stock Index Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Balanced Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Equity Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Growth Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Moderate Fund 5/1/2007 11/12/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 5/1/2007 AZL Turner Quantitative Small Cap Growth Fund 5/2/2005 11/12/2007 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 AZL Van Kampen Comstock Fund 5/1/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/1/2001 5/1/2001 5/1/2001 5/1/2007 AZL Van Kampen Equity and Income Fund 5/3/2004 11/12/2007 5/3/2004 5/3/2004 5/2/2005 5/3/2004 5/3/2004 5/3/2004 5/1/2007 74 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENTS (CONTINUED) ALLIANZ ALLIANZ ALLIANZ ALLIANZ ALLIANZ ALLIANZ VALUEMARK ALLIANZ ALLIANZ ALTERITY CONNECTIONS HIGH FIVE HIGH FIVE HIGH FIVE REWARDS III & III VALUEMARK VISION PORTFOLIO BONUS L AZL Van Kampen Global Franchise Fund 5/1/2003 11/12/2007 5/1/2003 5/3/2004 5/2/2005 5/1/2003 5/1/2003 5/1/2003 5/1/2007 AZL Van Kampen Global Real Estate Fund 5/1/2006 11/12/2007 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2007 AZL Van Kampen Growth and Income Fund 5/1/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/1/2001 5/1/2001 5/1/2001 5/1/2007 AZL Van Kampen Mid Cap Growth Fund 5/1/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/1/2001 5/1/2001 5/1/2001 5/1/2007 Davis VA Financial Portfolio 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2000 5/1/2002 5/1/2002 5/1/2007 Franklin Global Communications Securities Fund 11/5/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 1/24/1989 2/3/1997 5/1/2007 Franklin High Income Securities Fund 11/5/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 1/24/1989 2/3/1997 5/1/2007 Franklin Income Securities Fund 11/5/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 1/24/1989 2/3/1997 5/1/2007 Franklin Templeton VIP Founding Funds Allocation Fund 9/25/2007 11/12/2007 9/25/2007 9/25/2007 9/25/2007 9/25/2007 9/25/2007 9/25/2007 5/1/2007 Franklin U.S. Government Fund 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2000 3/14/1989 2/3/1997 5/1/2007 Franklin Zero Coupon 2010 Fund11/5/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 3/14/1989 2/3/1997 5/1/2007 Mutual Discovery Securities Fund 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2000 11/8/1996 2/3/1997 5/1/2007 Mutual Shares Securities Fund 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2000 11/8/1996 2/3/1997 5/1/2007 OpCap Mid Cap Portfolio 5/1/2006 11/12/2007 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2006 5/1/2007 PIMCO VIT All Asset Portfolio 5/3/2004 11/12/2007 5/3/2004 5/3/2004 5/2/2005 5/3/2004 5/3/2004 5/3/2004 5/1/2007 PIMCO VIT CommodityRealReturn Strategy Portfolio 5/2/2005 11/12/2007 5/2/2005 5/2/2006 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 PIMCO VIT Emerging Markets Bond Portfolio 5/2/2005 11/12/2007 5/2/2005 5/2/2006 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 PIMCO VIT Global Bond Portfolio (Unhedged) 5/2/2005 11/12/2007 5/2/2005 5/2/2006 5/2/2005 5/2/2005 5/2/2005 5/2/2005 5/1/2007 PIMCO VIT High Yield Portfolio 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2000 11/5/2001 11/5/2001 5/1/2007 PIMCO VIT Real Return Portfolio 5/1/2003 11/12/2007 5/1/2003 5/3/2004 5/2/2005 5/1/2003 5/1/2003 5/1/2003 5/1/2007 PIMCO VIT Total Return Portfolio 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2000 11/5/2001 11/5/2001 5/1/2007 Templeton Global Income Securities Fund 11/5/2001 11/12/2007 10/25/2002 5/3/2004 5/2/2005 11/5/2001 1/27/1992 2/3/1997 5/1/2007 Templeton Growth Securities Fund 2/1/2000 11/12/2007 10/25/2002 5/3/2004 5/2/2005 5/5/2000 3/15/1994 2/3/1997 5/1/2007 75 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENTS (CONTINUED) During the years ended December 31, 2007 and 2006, several portfolios changed their name as summarized, with the effective date of the change, in the following table. CURRENT PORTFOLIO NAME PRIOR PORTFOLIO NAME EFFECTIVE DATE AZL AIM Basic Value Fund USAZ AIM Basic Value Fund May 1, 2006 AZL AIM International Equity Fund USAZ AIM International Equity Fund May 1, 2006 AZL Davis NY Venture Fund USAZ Davis NY Venture Fund May 1, 2006 AZL Dreyfus Founders Equity Growth Fund USAZ Dreyfus Founders Equity Growth Fund May 1, 2006 AZL Dreyfus Premier Small Cap Value Fund USAZ Dreyfus Premier Small Cap Value Fund May 1, 2006 AZL Franklin Small Cap Value Fund USAZ Franklin Small Cap Value Fund May 1, 2006 AZL Fusion Balanced Fund USAZ Fusion Balanced Fund May 1, 2006 AZL Fusion Growth Fund USAZ Fusion Growth Fund May 1, 2006 AZL Fusion Moderate Fund USAZ Fusion Moderate Fund May 1, 2006 AZL Jennison 20/20 Focus Fund USAZ Jennison 20/20 Focus Fund May 1, 2006 AZL Jennison Growth Fund USAZ Jennison Growth Fund May 1, 2006 AZL Legg Mason Growth Fund USAZ Legg Mason Growth Fund May 1, 2006 AZL Legg Mason Value Fund USAZ Legg Mason Value Fund May 1, 2006 AZL Money Market Fund USAZ Money Market Fund May 1, 2006 AZL OCC Renaissance Fund USAZ OCC Renaissance Fund May 1, 2006 AZL OCC Value Fund USAZ OCC Value Fund May 1, 2006 AZL Oppenheimer Emerging Growth Fund USAZ Oppenheimer Emerging Growth Fund May 1, 2006 AZL Oppenheimer Emerging Technologies Fund USAZ Oppenheimer Emerging Technologies Fund May 1, 2006 AZL Oppenheimer Global Fund USAZ Oppenheimer Global Fund May 1, 2006 AZL Oppenheimer International Growth Fund USAZ Oppenheimer International Growth Fund May 1, 2006 AZL Oppenheimer Main Street Fund USAZ Oppenheimer Main Street Fund May 1, 2006 AZL Salomon Brothers Large Cap Growth Fund USAZ Salomon Brothers Large Cap Growth Fund May 1, 2006 AZL Salomon Brothers Small Cap Growth Fund USAZ Salomon Brothers Small Cap Growth Fund May 1, 2006 AZL Van Kampen Aggressive Growth Fund USAZ Van Kampen Aggressive Growth Fund May 1, 2006 AZL Van Kampen Comstock Fund USAZ Van Kampen Comstock Fund May 1, 2006 AZL Van Kampen Emerging Growth Fund USAZ Van Kampen Emerging Growth Fund May 1, 2006 AZL Van Kampen Equity and Income Fund USAZ Van Kampen Equity and Income Fund May 1, 2006 AZL Van Kampen Global Franchise Fund USAZ Van Kampen Global Franchise Fund May 1, 2006 AZL Van Kampen Growth and Income Fund USAZ Van Kampen Growth and Income Fund May 1, 2006 AZL Van Kampen Mid Cap Growth Fund USAZ Van Kampen Mid Cap Growth Fund May 1, 2006 AZL Columbia Technology Fund AZL Oppenheimer Emerging Technologies Fund July 7, 2006 AZL OCC Opportunity Fund AZL Oppenheimer Emerging Growth Fund August 28, 2006 AZL LMP Large Cap Growth Fund * AZL Salomon Brothers Large Cap Growth Fund September 26, 2006 AZL LMP Small Cap Growth Fund * AZL Salomon Brothers Small Cap Growth Fund September 26, 2006 AZL Van Kampen Strategic Growth Fund AZL Van Kampen Emerging Growth Fund November 5, 2006 AZL Turner Quantitative Small Cap Growth Fund AZL LMP Small Cap Growth Fund June 26, 2007 AZL Schroder Emerging Markets Equity Fund CL 2 AZL Oppenheimer Developing Markets Fund December 7, 2007
76 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENTS (CONTINUED) During the years ended December 31, 2007 and 2006, several portfolios were closed to new money. The portfolio names and effective date of the closures are summarized in the following table. PORTFOLIO DATE CLOSED Franklin Real Estate Fund May 1, 2006 Franklin Rising Dividends Securites Fund May 1, 2006 Franklin Small-Mid Cap Growth Securities Fund May 1, 2006 Templeton Developing Markets Securities Fund May 1, 2006 During the years ended December 31, 2007 and 2006, several portfolios merged. The portfolio names and effective date of the mergers are summarized in the following table.
CLOSED PORTFOLIO RECEIVING PORTFOLIO DATE MERGED AIM V.I. Premier Equity Fund AIM V.I. Core Equity Fund May 1, 2006 AIM V.I. Growth Fund AIM V.I. Capital Appreciation Fund May 1, 2006 AZL Aim Basic Value Fund AZL Van Kampen Comstock Fund 9/21/2007 AZL Van Kampen Strategic Equity Growth Fund AZL Dreyfus Founders Equity Growth Fund 9/21/2007 AZL OCC Renaissance Fund AZL OCC Value Fund 9/21/2007 AZL Van Kampen Aggressive Growth Fund AZL Van Kampen Mid Growth Fund 9/21/2007
CONTRACTS IN ANNUITY PAYMENT PERIOD Annuity reserves are computed for currently payable contracts according to the 1983 and 2000 Individual Annuity Mortality Tables, 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. PREMIUM BONUS A premium bonus is awarded to the contract owner of the Allianz Rewards and Allianz High Five Bonus products at the time of deposit. The bonus paid is based on the following schedule. ALLIANZ REWARDS ALLIANZ HIGH FIVE BONUS NET DEPOSIT BONUS PAID BONUS PAID $15,000 to 24,999 4% 3% $25,000 to 99,999 5% 4% $100,000 to 999,999 6% 5% $1,000,000 to 4,999,999 7% 6% $5,000,000 or more 8% 7% 77 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The bonus is vested over three years, therefore if the contract owner surrenders the policy before the full vesting period a portion of the bonus can be lost. The accumulated gain/loss on the bonus is 100% vested as it is earned. The vesting rates are presented in the following schedule. ALLIANZ REWARDS ALLIANZ HIGH FIVE BONUS MONTHS FOLLOWING DEPOSIT AMOUNT VESTED AMOUNT VESTED 0 to 12 0% 0% 13 to 24 35% 35% 25 to 36 70% 70% 37+ 100% 100% EXPENSES ASSET BASED EXPENSES A mortality and expense risk charge and an administrative charge are deducted from the Variable Account based on invested assets. The charges, on an annual basis, are summarized in the following table.
Mortality and Expense Administrative CONTRACT RISK CHARGE CHARGE Allianz Alterity Enhanced - Option 1 1.75% 0.15% Allianz Alterity Enhanced - Option 3 1.65% 0.15% Allianz Alterity Enhanced - Option 4 1.80% 0.15% Allianz Alterity Enhanced - Option 5 2.25% 0.15% Allianz Alterity Optional - Option 1 1.55% 0.15% Allianz Alterity Optional - Option 2 1.75% 0.15% Allianz Alterity Optional - Option 3 1.65% 0.15% Allianz Alterity Optional - Option 4 1.85% 0.15% Allianz Alterity Optional - Option 5 2.30% 0.15% Allianz Alterity Traditional - Option 1 1.25% 0.15% Allianz Alterity Traditional - Option 2 1.45% 0.15% Allianz Alterity Traditional - Option 3 1.35% 0.15% Allianz Alterity Traditional - Option 4 1.55% 0.15% Allianz Alterity Traditional - Option 5 2.05% 0.15% Allianz Charter - Traditional 1.00% 0.15% Allianz Charter - Enhanced 1.20% 0.15% Allianz Charter II - Option 1 1.75% 0.00% Allianz Charter II - Option 2 2.05% 0.00% Allianz Charter II - Option 3 2.05% 0.00% Allianz Charter II - Option 4 1.95% 0.00% Allianz Charter II - Option 5 2.20% 0.00% Allianz Charter II - Option 6 2.25% 0.00% Allianz Charter II - Option 7 2.45% 0.00% Allianz Charter II - Option 8 2.65% 0.00% Allianz Charter II - Option 9 2.70% 0.00% Allianz Dimensions - Option 1 1.50% 0.00% Allianz Dimensions - Option 2 1.70% 0.00% Allianz Dimensions - Option 3 1.80% 0.00% Allianz Dimensions - Option 4 2.00% 0.00% Allianz Dimensions - Option 5 1.70% 0.00% Allianz Dimensions - Option 6 1.90% 0.00% Allianz Elite Traditional - Option 1 1.00% 0.15% Allianz Elite Traditional - Option 2 1.05% 0.15% Allianz Elite Traditional - Option 3 1.10% 0.15% 78 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) Allianz Elite Traditional - Option 4 1.15% 0.15% Allianz Elite Traditional - Option 5 1.35% 0.15% Allianz Elite Traditional - Option 6 1.40% 0.15% Allianz Elite Traditional - Option 7 1.45% 0.15% Allianz Elite Traditional -Option 8 1.50% 0.15% Allianz Elite Traditional - Option 9 1.70% 0.15% Allianz Elite Traditional - Option 10 1.75% 0.15% Allianz Elite Traditional - Option 11 1.80% 0.15% Allianz Elite Traditional - Option 12 1.85% 0.15% Allianz Elite Traditional - Option 13 2.05% 0.15% Allianz Elite Traditional - Option 14 2.10% 0.15% Allianz Elite Traditional - Option 15 2.15% 0.15% Allianz Elite Traditional - Option 16 2.20% 0.15% Allianz Elite Enhanced - Option 1 1.30% 0.15% Allianz Elite Enhanced - Option 2 1.35% 0.15% Allianz Elite Enhanced - Option 3 1.40% 0.15% Allianz Elite Enhanced - Option 4 1.45% 0.15% Allianz Elite Enhanced - Option 5 1.65% 0.15% Allianz Elite Enhanced - Option 6 1.70% 0.15% Allianz Elite Enhanced - Option 7 1.75% 0.15% Allianz Elite Enhanced - Option 8 1.80% 0.15% Allianz Elite Enhanced - Option 9 1.90% 0.15% Allianz Elite Enhanced - Option 10 1.95% 0.15% Allianz Elite Enhanced - Option 11 2.00% 0.15% Allianz Elite Enhanced - Option 12 2.05% 0.15% Allianz Elite Enhanced - Option 13 2.25% 0.15% Allianz Elite Enhanced - Option 14 2.30% 0.15% Allianz Elite Enhanced - Option 15 2.35% 0.15% Allianz Elite Enhanced - Option 16 2.40% 0.15% Allianz High Five - Traditional 1.40% 0.00% Allianz High Five - Enhanced 1.60% 0.00% Allianz High Five Bonus - Traditional 1.55% 0.15% Allianz High Five Bonus - Enhanced 1.75% 0.15% Allianz High Five L - Option 1 1.65% 0.00% Allianz High Five L - Option 2 1.75% 0.00% Allianz High Five L - Option 3 1.85% 0.00% Allianz High Five L - Option 4 1.95% 0.00% Allianz Rewards Enhanced - Option 1 1.70% 0.15% Allianz Rewards Enhanced - Option 2 1.80% 0.15% Allianz Rewards Enhanced - Option 3 2.00% 0.15% Allianz Rewards Enhanced - Option 4 1.85% 0.15% Allianz Rewards Enhanced - Option 5 2.00% 0.15% Allianz Rewards Enhanced - Option 6 2.45% 0.15% Allianz Rewards Enhanced - Option 7 1.90% 0.15% Allianz Rewards Enhanced - Option 8 2.40% 0.15% Allianz Rewards Traditional - Option 1 1.50% 0.15% Allianz Rewards Traditional - Option 2 1.80% 0.15% Allianz Rewards Traditional - Option 4 1.55% 0.15% Allianz Rewards Traditional - Option 5 1.75% 0.15% Allianz Rewards Traditional - Option 6 2.25% 0.15% Allianz Rewards Traditional - Option 7 1.70% 0.15% Allianz Rewards Traditional - Option 8 2.20% 0.15% Allianz Valuemark II 1.25% 0.15% Allianz Valuemark III 1.25% 0.15% Allianz Valuemark Income Plus 1.25% 0.15% 79 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) Allianz Valuemark IV - Option 1 1.34% 0.15% Allianz Valuemark IV - Option 2 1.64% 0.15% Allianz Valuemark IV - Option 3 1.44% 0.15% Allianz Valuemark IV - Option 4 1.74% 0.15% Allianz Valuemark IV - Option 5 1.60% 0.15% Allianz Valuemark IV - Option 6 1.90% 0.15% Allianz Valuemark IV - Option 7 1.90% 0.15% Allianz Valuemark IV - Option 8 1.75% 0.15% Allianz Valuemark IV - Option 9 2.00% 0.15% Allianz Valuemark IV - Option 10 2.05% 0.15% Allianz Vision Bonus - Option 1 1.70% 0.15% Allianz Vision Bonus - Option 2 2.00% 0.15% Allianz Vision Bonus - Option 3 2.40% 0.15% Allianz Vision Bonus - Option 4 2.70% 0.15% Allianz Vision Bonus - Option 5 2.55% 0.15% Allianz Vision Bonus - Option 6 2.85% 0.15% Allianz Vision Bonus - Option 7 2.50% 0.15% Allianz Vision Bonus - Option 8 2.80% 0.15% Allianz Vision Bonus - Option 9 2.65% 0.15% Allianz Vision Bonus - Option 10 2.95% 0.15% Allianz Vision B - Option 1 1.40% 0.15% Allianz Vision B - Option 2 1.70% 0.15% Allianz Vision B - Option 3 2.10% 0.15% Allianz Vision B - Option 4 2.40% 0.15% Allianz Vision B - Option 5 2.25% 0.15% Allianz Vision B - Option 6 2.55% 0.15% Allianz Vision B - Option 7 2.20% 0.15% Allianz Vision B - Option 8 2.50% 0.15% Allianz Vision B - Option 9 2.35% 0.15% Allianz Vision B - Option 10 2.65% 0.15% Allianz Vision L - Option 1 1.65% 0.15% Allianz Vision L - Option 2 1.95% 0.15% Allianz Vision L - Option 3 2.35% 0.15% Allianz Vision L - Option 4 2.65% 0.15% Allianz Vision L - Option 5 2.50% 0.15% Allianz Vision L - Option 6 2.80% 0.15% Allianz Vision L - Option 7 2.45% 0.15% Allianz Vision L - Option 8 2.75% 0.15% Allianz Vision L - Option 9 2.60% 0.15% Allianz Vision L - Option 10 2.90% 0.15% Allianz Connections R - Option 1 1.15% 0.15% Allianz Connections R - Option 2 1.45% 0.15% Allianz Connections R - Option 3 1.95% 0.15% Allianz Connections R - Option 4 2.25% 0.15% Allianz Connections R - Option 5 2.10% 0.15% Allianz Connections R - Option 6 2.40% 0.15%
80 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) The M&E charge and administrative charge for Allianz Alterity can be summarized as follows: The currently offered Allianz Alterity Base Contract provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB), where the death benefit is the greater of current contract value or total purchase payments adjusted for partial withdrawals. If an owner so chooses, they can instead select either the Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB), or the Earnings Protection Guaranteed Minimum Death Benefit (Earnings Protection GMDB). Under the Enhanced GMDB the death benefit is the current contract value or the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 3%. Under the Earnings Protection GMDB the death benefit is the current contract value or the greater of: a) total purchase payments adjusted for partial withdrawals, or b) contract value plus an additional amount based on the owner's age and the lesser of total purchase payments or contract value. The currently offered Allianz Alterity Contract also provides an optional PRIME Plus Benefit, which includes a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit (GPWB). The PRIME Plus Benefit provides guaranteed minimum fixed income stream and is designed for owners who want flexibility in the way they access income. There are also two older versions of the Allianz Alterity Contract that are no longer offered for sale. The May 2003 Contract was replaced by the currently offered Contract in May 2006. The primary difference between May 2003 Contract and the currently offered Contract is that the May 2003 Contracts offered a choice of either the Traditional PRIME Benefit (where the guaranteed value is based on total purchase payments adjusted for partial withdrawals) or the Enhanced PRIME Benefit (where the guaranteed values are based on the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 3%). Both PRIME Benefits included a GMIB and a GPWB. The Original Contract was first offered in January 2000 and was replaced by the May 2003 Contract. The Original Contract automatically provided a Traditional GMIB, or owners could select the optional Enhanced GMIB for an additional charge.
Charges for Charges for Charges for a an Original Charges a Currently Currently Offered Contract for an Offered Base May 2003 Contract with the (which Original Contract and Contract PRIME Plus includes Contract May 2003 with the Benefit and May the with Contract Traditional 2003 Contract (INCLUDES 0.15% OF Traditional Enhanced without a PRIME with the Enhanced ADMINISTRATIVE CHARGE) GMIB) GMIB PRIME Benefit Benefit PRIME Benefit - -------------------------------- ------------- ------------ -------------- ------------ ------------------- - -------------------------------- ------------- ------------ -------------- ------------ ------------------- Traditional GMDB 1.40% 1.70% 1.50% 1.70% 2.20% (Traditional (Optional (Traditional (Traditional (Traditional - - Option 1) - Option 1) - Option 3) - Option 4) Option 5) Earnings Protection GMDB 1.60% 1.90% 1.80% 2.00% 2.45% (Traditional (Optional (Optional - (Optional (Optional - -Option 2) - Option 2) Option 3) - Option 4) Option 5) Enhanced GMDB 1.70% 1.90% 1.80% 1.95% 2.40% (Optional - (Enhanced (Enhanced - (Enhanced (Enhanced - Option 1) - Option 1) Option 3) - Option 4) Option 5)
The M&E charge and administrative charge for Allianz Rewards can be summarized as follows: The currently offered Allianz Rewards Base Contract provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB), where the death benefit is the greater of current contract value or total purchase payments adjusted for partial withdrawals. If an owner so chooses, they can instead select the Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB). Under the Enhanced GMDB the death benefit is the current contract value or the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 3%. The currently offered Allianz Rewards Contract also provides an optional PRIME Plus Benefit, which includes a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit (GPWB). The PRIME Plus Benefit provides guaranteed minimum fixed income stream and is designed for owners who want flexibility in the way they access income. The guaranteed income is based on the greater of: (a) current contract value, (b) the highest contract anniversary value, or (c) total purchase payments adjusted for partial withdrawals increased annually by 7% There are also three older versions of the Allianz Rewards Contract that are no longer offered for sale. The Original Contract was first offered in May 2000. The primary difference between the Original Contract and the currently offered Contract is the mortality and expense risk (M&E) charge for the Original Contract without any optional benefits is lower than the currently offered Contract, and the Original Contract also offered a choice of either the Traditional PRIME Benefit (where the guaranteed value is based on total purchase payments adjusted for partial withdrawals) or Enhanced PRIME Benefit (where the guaranteed values are based on the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 3%). Both PRIME Benefits included a GMIB and a GPWB. The September 2002 Contract without any optional benefits had the same M&E charge as the Original Contract, but the September 2002 Contract only offered an Enhanced GMIB and did not offer a PRIME Benefit. The May 2003 Contract replaced both the Original Contract and the September 2002 Contract. The May 2003 Contract also offered a choice of either the Traditional PRIME Benefit or Enhanced PRIME Benefit, but the charge for these features was higher than for the Original Contract. 81 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED)
Charges for Charges a Currently for a Offered Currently Contract Offered with the Charges Charges Charges Base Charges lPRIME Plus Charges for an for an Charges for a Contract for a Benefit and for an Original Original for a September and May May 2003 a May 2003 Original Contract Contract September 2002 2003 Contract Contract (INCLUDES 0.15% Contract with the with the 2002 Contract Contract with the with the OF without a TraditionalEnhanced Contract with the without a Traditiona Enhanced ADMINISTRATIVE PRIME PRIME PRIME without Enhanced PRIME PRIME PRIME CHARGE) Benefit Benefit Benefit the GMIB GMIB Benefit Benefit Benefit - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Traditional GMDB 1.65% 1.85% 2.35% 1.65% 1.95% 1.70% 1.90% 2.40% (Traditiona(Traditiona(Traditiona(Traditiona(Traditiona(Traditional(Tradition(Traditional-Option 1) 7) 8) 1) 2) 4) 5) 6) Enhanced GMDB 1.85% 2.05% 2.55% 1.95% 2.15% 2.00% 2.15% 2.60% (Enhanced-O(Enhanced-O(Enhanced-O(Enhanced-O(Enhanced-O(Enhanced-Op(Enhanced-(Enhanced-Option 1) 7) 8) 2) 3) 4) 5) 6)
The M&E charge and administrative charge for Allianz Charter can be summarized as follows: Allianz Charter was launched in January 1999 and sales were discontinued in May 2003. The Charter contract automatically provided a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments less partial withdrawals. For an additional charge, the owner could instead elect the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the current contract value or the greater of: a) total purchase payments less partial withdrawals, or b) the highest contract anniversary value. Charges (INCLUDES A 0.15% ADMINISTRATIVE CHARGE) ---------------------------- ---------------------------- Traditional GMDB 1.15% Enhanced GMDB 1.35% The M&E charge for Allianz Charter II can be summarized as follows: Allianz Charter II was launched in May 2003 and sales were discontinued in May 2006. The Charter II contract automatically provided a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner could instead elect either the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB), or the optional Earnings Protections Guaranteed Minimum Death Benefit (Earnings Protection GMDB). Under the Enhanced GMDB the death benefit is the current contract value or the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 3%. Under the Earnings Protection GMDB the death benefit is the current contract value or the greater of: a) total purchase payments adjusted for partial withdrawals, or b) contract value plus an additional amount based on the owner's age and the lesser of total purchase payments or contract value. The Charter II contract also offered a choice of the Traditional PRIME Benefit or Enhanced PRIME Benefit. The PRIME Benefits include a Guaranteed Partial Withdrawal Benefit (GPWB) and a Guaranteed Minimum Income Benefit (GMIB). The PRIME Benefits provide guarantees on future income that can be accessed through partial withdrawals under the GPWB or through annuity payments under the GMIB.
Charges Contracts without a PRIME Contracts with the Contracts with the Benefit Traditional PRIME Benefit Enhanced PRIME Benefit - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Traditional GMDB 1.75% 1.95% 2.45% (Option 1) (Option 4) (Option 7) Enhanced GMDB 2.05% 2.20% 2.65% (Option 2) (Option 5) (Option 8) Earnings Protection GMDB 2.05% 2.25% 2.70% (Option 3) (Option 6) (Option 9)
82 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) The M&E charge for Allianz Dimensions can be summarized as follows: Allianz Dimensions was launched in March 2001 and sales were discontinued in May 2002. The Dimensions contract automatically provided a Return of Principal Guaranteed Minimum Death Benefit (Return of Principal GMDB) where the death benefit is based on the greater of contract value or total purchase payments less partial withdrawals. For an additional charge, the owner could instead elect either the optional Double Principal Guaranteed Minimum Death Benefit (Double Principal GMDB), or the Earnings Protection Guaranteed Minimum Death Benefit (Earnings Protection GMDB). Under the Double Principal GMDB the death benefit is the greater of: a) current contract value, b) the highest contract anniversary value, or c) after the fifth Contract Anniversary, double total purchase payments adjusted for partial withdrawals. Under the Earnings Protection GMDB the death benefit is the current contract value or the greater of: a) total purchase payments adjusted for partial withdrawals, or b) contract value plus an additional amount based on the owner's age and the lesser of total purchase payments or contract value. The Dimensions contract also offered Guaranteed Value Protection (GVP) through the Guaranteed Principal Protector Benefit (GPP Benefit) or the Guaranteed Performance Accumulator Benefit (GPA Benefit). The GPP Benefit guaranteed the return of principal adjusted for withdrawals. The GPA Benefit locked in gains every ten years, with the minimum guarantee of two times the principal adjusted for withdrawals at the 20th Contract Anniversary. The Dimensions contract also included a pay only with performance provision. If the contract earns less than a 10% gross return (prior to the mortality and expense risk charge) in one year, the owner does not have to pay a GVP charge. If the contract earns greater than a 10% gross return in one year, the owner will pay an additional 2% to 3% GVP charge. Return of Double Principal Principal Earnings GMDB GMDB Protection GMDB - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- GPP Benefit or no GVP 1.50% 1.80% 1.70% (Option 5) (Option 1) (Option 3) GPA Benefit 1.70% (Option 2.00% 1.90% (Option 6) 2) (Option 4) 83 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) The M&E charge for Allianz Elite can be summarized as follows: Allianz Elite was launched in September of 2006 and sales were discontinued December 31, 2007. Allianz Elite featured a decreasing M&E charge. The M&E charge will decrease 0.05% each year for three years beginning in the third contract year, until it has decreased by a total of 0.15% by the fifth contract year. Allianz Elite also offered the optional Short Withdrawal Charge Option that reduced the withdrawal charge period from seven years to four years. The Short Withdrawal Charge Option carries an additional M&E charge of 0.35% for the first seven contract years. Allianz Elite automatically provided a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional 0.30% M&E charge, the owner can instead elect the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the current contract value or the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 3%. Allianz Elite also offered the optional PRIME Plus Benefit which carries an additional M&E charge. The PRIME Plus Benefit is the only optional benefit that can be selected after the contract is issued and it includes a Guaranteed Partial Withdrawal Benefit (GPWB) and a Guaranteed Minimum Income Benefit (GMIB). The PRIME Plus Benefit provides a guarantee on future income that can be accessed through partial withdrawals under the GPWB or through annuity payments under the GMIB.
Charges Contracts with Short Withdrawal Contracts with Contracts with the Charge Option and no optional Short Withdrawal Contracts with the the PRIME Plus benefits Charge Option PRIME Plus Benefit* Benefit* - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Traditional GMDB 1.15% 1.50% decreasing to 1.85% decreasing 2.20% decreasing decreasing to 1.00% by the 7th to 1.70% by the to 1.70% by the 1.00% by the contract anniversary 5th contract 7th contract 5th contract anniversary anniversary anniversary Enhanced GMDB 1.45% 1.80% decreasing to 2.05% decreasing 2.40% decreasing decreasing to 1.30% by the 7th to 1.90% by the to 1.90% by the 1.30% by the contract anniversary 5th contract 7th contract 5th contract anniversary anniversary anniversary
*Assumes the PRIME Plus Benefit is selected at contract issue. 84 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) The M&E charge for Allianz High 5 can be summarized as follows: The Allianz High 5 February 2007 Contract automatically provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner can instead elect the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the greater of: a) current contract value, b) total purchase payments adjusted for partial withdrawals, or c) the highest contract anniversary value. Allianz High 5 also automatically provides Living Guarantees unless the owner elects otherwise at Contract issue. The Living Guarantees include the Guaranteed Account Value Benefit (GAV Benefit), the Guaranteed Minimum Income Benefit (GMIB) and the Guaranteed Withdrawal Benefit (GWB). There are no additional fees or charges associated with the Living Guarantees. However, we monitor the Contract Value daily and systematically transfer amounts between the selected Investment Options and the Fixed Period Accounts (FPAs) to support the Living Guarantees. Owners that transfer or withdraw Contract Value from a FPA may have the value of the withdrawal or transfer adjusted based on a formula called a Market Value Adjustment (MVA). The MVA formula compares the interest rates credited at the time of investment, to interest rates being credited when the withdrawal or transfer is made. The amount of any MVA can be either positive or negative, depending on the rates that are currently being credited on the FPAs. The GAV Benefit guarantees that beginning on your fifth Contract Anniversary, and on each subsequent Contract Anniversary until the Contract terminates or you begin receiving Annuity Payments, your Contract Value will be at least equal to an amount we call the Guaranteed Account Value (GAV) from five years ago, reduced by subsequent withdrawals. The GAV is initially equal to the Purchase Payments received within 90 days of Contract issue. The GAV is recalculated on each Contract Anniversary to equal the greater of: a) the previous GAV adjusted for subsequent Purchase Payments and partial withdrawals, or b) the current Contract Value. The GAV Benefit does not provide any protection until the fifth and subsequent Contract Anniversaries, and does not lock in any investment gains until at least five years after they occur. The GMIB guarantees a minimum level of income through annuity payments after the fifth contract year. The GWB guarantees a minimum level of income through partial withdrawals. There are also three older versions of the Allianz High 5 Contract. The Original Contract first became available on September 20, 2002. The Original Contract issued before June 22, 2007 is no longer offered for sale, however, the Original Contract issued on or after June 22, 2007 is still for sale in the state of Washington. The primary difference between the February 2007 Contract and the Original Contract is the Original Contract had fewer restrictions on the availability of certain features and benefits. The May 2005 Contract was replaced by the February 2007 Contract. The primary difference between the February 2007 Contract and the May 2005 Contract is the M&E charge. February 2007 Contract and May 2005 Contract and Original Contract Original Contract issued on or after issued before June 22, June 22, 2007 2007 ---------------------------------------------------- ---------------------------------------------------- Traditional GMDB 1.25% 1.40% Enhanced GMDB 1.45% 1.60% The M&E charge and administrative charge for Allianz High 5 Bonus can be summarized as follows: The Allianz High 5 Bonus May 2007 Contract automatically provides a bonus of 3% to 7% on each Purchase Payment received before age 81. The bonus is subject to a three year vesting schedule. The High 5 Bonus Contracts also automatically provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner can instead elect the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the greater of: a) current contract value, b) total purchase payments adjusted for partial withdrawals, or c) the highest contract anniversary value. 85 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 Allianz High 5 Bonus also automatically provides Living Guarantees. The Living Guarantees include the Guaranteed Account Value Benefit (GAV Benefit), the Guaranteed Minimum Income Benefit (GMIB) and the Guaranteed Withdrawal Benefit (GWB). There are no additional fees or charges associated with the Living 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) Guarantees. However, we monitor the Contract Value daily and systematically transfer amounts between your selected Investment Options and the Fixed Period Accounts (FPAs) to support the Living Guarantees. Owners that transfer or withdraw Contract Value from a FPA may have the value of the withdrawal or transfer adjusted based on a formula called a Market Value Adjustment (MVA). The MVA formula compares the interest rates credited at the time of investment, to interest rates being credited when the withdrawal or transfer is made. The amount of any MVA can be either positive or negative, depending on the rates that are currently being credited on the FPAs. The GAV Benefit guarantees that beginning on your fifth Contract Anniversary, and on each subsequent Contract Anniversary until the Contract terminates or you begin receiving Annuity Payments, your Contract Value will be at least equal to an amount we call the Guaranteed Account Value (GAV) from five years ago, reduced by subsequent withdrawals. The GAV is initially equal to the Purchase Payments received within 90 days of Contract issue. The GAV is recalculated on each Contract Anniversary to equal the greater of: a) the previous GAV adjusted for subsequent Purchase Payments and partial withdrawals, or b) the current Contract Value. The GAV Benefit does not provide any protection until the fifth and subsequent Contract Anniversaries, and does not lock in any investment gains until at least five years after they occur. The GMIB guarantees a minimum level of income through annuity payments after the fifth contract year. The GWB guarantees a minimum level of income through partial withdrawals. There are also two older versions of the Allianz High 5 Bonus Contract. The Original Contract first became available on April 30, 2004. The May 2005 Contract is being replaced by the May 2007 Contract. The primary difference between the May 2007 Contract and the Original and May 2005 Contracts are the length of the withdrawal charge period. Original and May 2005 Contracts have a ten-year withdrawal charge period and the May 2007 Contract has a nine-year withdrawal charge period. The primary difference between the Original Contract and May 2005 Contract is that Original Contracts have no waiting period on the exercise of the GWB and there are no restrictions on allocations of Purchase Payments to the FPAs. (INCLUDES A 0.15% ADMINISTRATIVE CHARGE) Charges - -------------------------------------------------------- - -------------------------------------------------------- Traditional GMDB 1.70% Enhanced GMDB 1.90% 86 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) The M&E charge for Allianz High 5 L can be summarized as follows: Allianz High 5 L May 2007 Contract automatically provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner can instead elect the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the greater of: a) current contract value, b) total purchase payments adjusted for partial withdrawals, or c) the highest contract anniversary value. Allianz High 5 L also offers optional Living Guarantees. The Living Guarantees include the Guaranteed Withdrawal Benefit (GWB) and either the Guaranteed Principal Value Benefit (GPV Benefit) or the Guaranteed Account Value Benefit (GAV Benefit). There are no additional fees or charges if you select the Living Guarantees with the GPV Benefit, however, there is an additional charge for selecting the GAV Benefit. In addition, we monitor the Contract Value daily and systematically transfer amounts between your selected Investment Options and the Fixed Period Accounts (FPAs) to support the Living Guarantees. Owners that transfer or withdraw Contract Value from a FPA may have the value of the withdrawal or transfer adjusted based on a formula called a Market Value Adjustment (MVA). The MVA formula compares the interest rates credited at the time of investment, to interest rates being credited when the withdrawal or transfer is made. The amount of any MVA can be either positive or negative, depending on the rates that are currently being credited on the FPAs. The GPV and GAV Benefits guarantee that beginning on your fifth Contract Anniversary, and on each subsequent Contract Anniversary until the Contract terminates or you begin receiving Annuity Payments, your Contract Value will be at least equal to an amount we call the Guaranteed Principal Value (GPV) or Guaranteed Account Value (GAV) from five years ago, reduced by subsequent withdrawals. The GPV and GAV are initially equal to the Purchase Payments received within 90 days of Contract issue. The GPV is recalculated on each Contract Anniversary to equal the previous GPV adjusted for subsequent Purchase Payments and partial withdrawals. The GAV is recalculated on each Contract Anniversary to equal the greater of: a) the previous GAV adjusted for subsequent Purchase Payments and partial withdrawals, or b) the current Contract Value. The GPV and GAV Benefits do not provide any protection until the fifth and subsequent Contract Anniversaries, and the GAV does not lock in any investment gains until at least five years after they occur. The GWB guarantees a minimum level of income through partial withdrawals. There is also an older version of the Allianz High 5 L Contract that is still available in some states. The Original Contract first became available on April 29, 2005. The primary difference between the May 2007 Contract and the Original Contract is the length of the withdrawal charge period. The Original Contract had a three-year withdrawal charge period and the May 2007 Contract has a four-year withdrawal charge period. Charges Traditional GMDB Enhanced GMDB ----------------------------------- ----------------------------------- No Living Guarantees or Living Guarantees 1.65% 1.85% with the GPV Benefit Living Guarantees with the GAV Benefit 1.75% 1.95% 87 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) The M&E charge and administrative charge for Allianz Valuemark II and Allianz Valuemark III can be summarized as follows: Allianz Valuemark II was launched in January 1989 and sales were discontinued in June 1994. Allianz Valuemark III was launched in June 1994 and sales were discontinued in February 1997. The Valuemark II and Valuemark III Contracts automatically provided a death benefit of the contract value less any withdrawal charge, or the greater of: a) total purchase payments less partial withdrawals increased by 5% each year, or b) the highest Contract Value from any sixth Contract Anniversary. Charges (INCLUDES A 0.15% ADMINISTRATIVE CHARGE) ---------------------------- ---------------------------- Valuemark II 1.40% Valuemark III 1.40% The M&E charge and administrative charge for Allianz Valuemark IV can be summarized as follows: The Valuemark IV contract was launched in February of 1997 (Original Contract). For Original Contracts that did not have an Enhanced Death Benefit Endorsement (EDB Endorsement) the death benefit was the Contract Value. Before July 1999 Original Contracts with an EDB Endorsement included Death Benefit Option 1(DB Option 1) where the death benefit is based on the contract value or the greater of: a) total purchase payments less partial withdrawals increased annually by 5%, or b) the highest Contract Value from any sixth Contract Anniversary. Beginning in July 1999 the owner could instead select Death Benefit Option 2 (DB Option 2) where the death benefit is based on the contract value or the greater of: a) total purchase payments less partial withdrawals, or b) the highest contract anniversary value. Beginning in November 2001 the owner could select for an additional charge Death Benefit Option 3 (DB Option 3) where the death benefit is the greater of: a) current contract value, b) total purchase payments adjusted for partial withdrawals, or c) contract value plus an additional amount based on the owner's age and the lesser of total purchase payments or contract value. The Original Contract also offered a choice of optional Guaranteed Minimum Income Benefits (GMIBs) for an additional charge. The GMIBs provide guaranteed minimum annuity payments during the annuity phase. GMIB Option 1 provided a GMIB value of the greater of a) total purchase payments adjusted for partial withdrawals increased annually by 5%, or b) the highest Contract Value from any sixth Contract Anniversary. GMIB Option 1 provided a GMIB value of the greater of a) total purchase payments adjusted for partial withdrawals, or b) the highest contract anniversary value. The May 2003 Contract was launched in May 2003 and sales will be discontinued in May 2007. The May 2003 Contract replaced the Original Contract. The May 2003 Contract automatically provided a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner could instead elect either the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB), or the Earnings Protections Guaranteed Minimum Death Benefit (Earnings Protection GMDB). Under the Enhanced GMDB the death benefit is the current contract value or the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 3%. Under the Earnings Protection GMDB the death benefit is the current contract value or the greater of: a) total purchase payments adjusted for partial withdrawals, or b) contract value plus an additional amount based on the owner's age and the lesser of total purchase payments or contract value. The May 2003 Contract also offered an optional Traditional GMIB for an additional charge where the GMIB value is total purchase payments adjusted for partial withdrawals. 88 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) Charges May 2003 May 2003 Original Contracts Contracts Contracts Original without the with the (INCLUDES A 0.15% without a Contracts Traditional Traditional ADMINISTRATIVE CHARGE GMIB with a GMIB GMIB GMIB Without the EDB 1.49% 1.79% - - Endorsement, or with DB Option 1 or DB Option 2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DB Option 3 1.59% 1.89% - - Traditional GMDB - - 1.75% 1.90% Enhanced GMDB - - 2.05% 2.15% Earnings Protection GMDB - - 2.05% 2.20% The M&E charge and administrative charge for Allianz Valuemark Income Plus can be summarized as follows: Allianz Valuemark Income Plus was launched in July 1994 and sales were discontinued in May 2007. The Valuemark Income Plus was an immediate single payment annuity. Charges (INCLUDES A 0.15% ADMINISTRATIVE CHARGE) ---------------------------- ---------------------------- Valuemark Income Plus 1.40% 89 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXPENSES (CONTINUED) The M&E charge for Allianz Vision can be summarized as follows: The Allianz Vision Base Contract provides a Traditional Death Benefit or the owner can instead select the Quarterly Value Death Benefit., which locks in the highest Contract Value from any Quarterly Anniversary. The Contract also allows the owner to select at issue either a Bonus Option (which provides a 6% bonus that is subject to a three year vesting schedule) or a Short Withdrawal Charge Option (which shortens the withdrawal charge period from seven years to four years). The Contract also offers selection of either the Lifetime Plus Benefit or Lifetime Plus II Benefit. These benefits are designed for those who want lifetime income and continued access to Contract Value. The primary difference between these benefits is the mortality and expense risk (M&E) charge for the benefit and the reset feature. The Lifetime Plus Benefit allows owners to reset the guaranteed value to equal the Contract Value if that would provide a greater guarantee. Under the Lifetime Plus II Benefit these resets are automatic. Traditional Quarterly Death Value Death Benefit t Benefit - ------------------------------------------------ -------------- -------------- - ------------------------------------------------ -------------- -------------- Base Contract 1.40% 1.70% (xxx) (xxx) Contract with the Bonus Option 1.70% 2.00% (xxx) (xxx) Contract with the Short Withdrawal Charge 1.65% 1.95% Option (xxx) (xxx) Contract with the Lifetime Plus Benefit 2.10% 2.40% (single Lifetime Plus Payments) (xxx) (xxx) Contract with the Lifetime Plus Benefit (joint 2.25% 2.55% Lifetime Plus Payments) (xxx) (xxx) Contract with the Lifetime Plus II Benefit 2.20% 2.50% (single Lifetime Plus Payments) (xxx) (xxx) Contract with the Lifetime Plus II Benefit 2.35% 2.65% (joint Lifetime Plus Payments) (xxx) (xxx) Contract with the with the Bonus Option and 2.40% 2.70% Lifetime Plus Benefit (single Lifetime Plus (xxx) (xxx) Payments) Contract with the with the Bonus Option and 2.55% 2.85% Lifetime Plus Benefit (joint Lifetime Plus (xxx) (xxx) Payments) Contract with the with the Bonus Option and 2.50% 2.80% Lifetime Plus II Benefit (single Lifetime Plus (xxx) (xxx) Payments) Contract with the with the Bonus Option and 2.65% 2.95% Lifetime Plus II Benefit (joint Lifetime Plus (xxx) (xxx) Payments) Contract with the Short Withdrawal Charge 2.35% 2.65% Option and Lifetime Plus Benefit (single (xxx) (xxx) Lifetime Plus Payments) Contract with the Short Withdrawal Charge 2.50% 2.80% Option and Lifetime Plus Benefit (joint (xxx) (xxx) Lifetime Plus Payments) Contract with the Short Withdrawal Charge 2.45% 2.75% Option and Lifetime Plus II Benefit (single (xxx) (xxx) Lifetime Plus Payments) Contract with the Short Withdrawal Charge 2.60% 2.90% Option and Lifetime Plus II Benefit (joint (xxx) (xxx) Lifetime Plus Payments) The M&E charge for Allianz Connections can be summarized as follows: The Allianz Connection Base Contract provides a Traditional Death Benefit or the owner can instead select the Quarterly Value Death Benefit., which locks in the highest Contract Value from any Quarterly Anniversary. The Contract also allows the owner to select the Lifetime Plus II Benefit, which is designed for those who want lifetime income and continued access to Contract Value. Traditional Quarterly Death Value Death Benefit t Benefit - ------------------------------------------------ -------------- -------------- - ------------------------------------------------ -------------- -------------- Base Contract 1.15% 1.45% (xxx) (xxx) Contract with the Lifetime Plus II Benefit 1.95% 2.25% (single Lifetime Plus Payments) (xxx) (xxx) 90 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 Contract with the Lifetime Plus II Benefit 2.10% 2.40% (joint Lifetime Plus Payments) (xxx) (xxx) 91 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 Allianz Valuemark IV contracts; $40 for Allianz Alterity, Allianz Charter, Allianz Dimensions, Allianz High Five, Allianz High Five Bonus, Allianz High Five L and Allianz Rewards contracts; and $50 for Allianz Charter II, Elite, and Vision contracts. Contract maintenance charges paid by the contract owners during the years ended December 31, 2007 and 2006 were $5,229,000 and $4,303,000 respectively. These contract charges are reflected in the Statements of Changes in Net Assets as contract maintenance charges. A contingent deferred sales charge is deducted from the contract value at the time of surrender on Allianz Alterity, Allianz Charter II, Allianz Dimensions, Allianz Elite, Allianz High Five, Allianz High Five Bonus, Allianz High Five L, Allianz Rewards, Allianz Valuemark II, Allianz Valuemark III, Allianz Valuemark IV, and Allianz Vision deferred annuity contracts. Allianz Dimensions includes a nursing home waiver for withdrawal charges. The amount of the contingent deferred sales charge is shown below.
Contingent Deferred Sales Charge Years Allianz Allianz Allianz Allianz Allianz Allianz Allianz Allianz Allianz Allianz Since Alterity Connections High High High Rewards Valuemark Valuemark Valuemark Vision Payment Five Five Five L II III IV Bonus - ------------ -------- ----------- --------- ---------- --------- --------- ----------- ---------- ----------- -------- 0-1 7% 8.50% 8% 8.50% 8% 8.50% 5% 6% 6% 8.50% 1-2 6% 8.50% 8% 8.50% 7% 8.50% 5% 5% 6% 8.50% 2-3 5% 7.50% 7% 8.50% 5% 8.50% 4% 4% 6% 7.50% 3-4 4% 6.50% 6% 8.50% 0% 8.50% 3% 3% 5% 6.50% 4-5 3% 5% 5% 8% 0% 8% 1.50% 1.50% 4% 5% 5-6 2% 4% 4% 7% 0% 7% 0% 0% 3% 4% 6-7 0% 3% 3% 6% 0% 6% 0% 0% 2% 3% 7-8 0% 0% 0% 5% 0% 5% 0% 0% 0% 0% 8-9 0% 0% 0% 4% 0% 4% 0% 0% 0% 0% 9-10 0% 0% 0% 3% 0% 3% 0% 0% 0% 0% 10 + 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Total contingent deferred sales charges paid by the contract owners during the the years ended December 31, 2007 and 2006 were $34,201,903 and $23,383,698, respectively. A systematic withdrawal plan is available to Valuemark II, Valuemark III, Allianz Valuemark IV, Allianz Alterity, Allianz Dimensions, Allianz High Five, Allianz Rewards, Allianz Charter II, Allianz High Five Bonus and Allianz High Five L 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 Dimensions allows 10% of purchase payments to be withdrawn in contract years one to five and 20% of the purchase payments to be withdrawn after contract year five without penalty. Currently, twelve transfers are permitted each contract year. Thereafter, the fee is $25 per transfer for all products, or 2% of the amount transferred, if less, for Valuemark II, Valuemark III, and Allianz Valuemark IV. 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, 2007 and 2006 were $7,035 and $5,375, respectively. Net transfers to/from the Fixed Accounts during the years ended December 31, 2007 and 2006 were $(1,282,366,000) and $(367,573,000), 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. 92 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CAPITALIZATION Allianz Life may provide seed 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, 2007 and 2006.
Capitalization Date of PORTFOLIO AMOUNT CAPITALIZATION AZL Neuberger Berman Regency Fund 5,000,000 5/1/2006 AZL Oppenheimer Developing Markets Fund 10,000,000 5/1/2006 AZL PIMCO Fundamental IndexPLUS Total Return Fund 5,000,000 5/1/2006 AZL Van Kampen Global Real Estate Fund 10,000,000 5/1/2006 AZL First Trust Target Double Play Fund 100,000 12/28/2006 AZL First Trust Target PLUS Equity 250,000 12/28/2006 AZL S&P 500 Index Fund 20,000,000 5/1/2007 AZL Small Cap Stock Index Fund 20,000,000 5/1/2007 AZL NACM International Fund 10,000,000 5/1/2007 AZL Schroder International Small Cap Fund 10,000,000 5/1/2007 AZL TargetPLUS Balanced Fund 4,000,000 5/1/2007 AZL TargetPLUS Moderate Fund 6,000,000 5/1/2007 AZL TargetPLUS Growth Fund 10,000,000 5/1/2007
Allianz Life will generally begin to recapture seed capital after the investment option reaches $3,000,000 in market value, excluding seed money. A specific percentage of daily net premium that exceeds the $3,000,000 will be recaptured, so long as the trade activity for the day is in a buy position. The seed capital recapture activity was as follows during the year ended December 31, 2007 and 2006.
Seed Realized Remaining Capital Gain\Loss on Seed Capital Recaptured Recapture ------------------------------------------ ------------------------------------------ PORTFOLIO AZL Neuberger Berman Regency Fund 5,000,000 (399,601) - AZL Oppenheimer Developing Markets Fund 10,000,000 (1,218,200) - AZL PIMCO Fundamental IndexPLUS Total Return Fund 5,000,000 495,192 - AZL Van Kampen Global Real Estate Fund 10,000,000 (140,132) - AZL First Trust Target Double Play Fund 100,000 1,796 - AZL First Trust Target PLUS Equity 250,000 3,979 - AZL S&P 500 Index Fund 20,000,000 154,680 - AZL Small Cap Stock Index Fund 9,351,103 (23,279) 10,648,897 AZL NACM International Fund 4,934,885 45,614 5,065,115 AZL Schroder International Small Cap Fund 8,463,883 (167,117) 1,563,117 AZL TargetPLUS Balanced Fund 4,000,000 16,737 - AZL TargetPLUS Moderate Fund 6,000,000 84,889 - AZL TargetPLUS Growth Fund 10,000,000 255,346 - ------------------------------------------ ------------------------------------------ Total $93,099,871 ($890,096) 17,250,129 ------------------------------------------
3. FEDERAL INCOME TAXES Operations of the Variable Account form a part of, and are taxed with, operations of Allianz Life. 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. 93 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 4. PURCHASES AND SALES OF INVESTMENTS (IN THOUSANDS) The cost of purchases and proceeds from sales of investments for the year ended December 31, 2007 were as follows:
COST OF PROCEEDS FROM PURCHASES SALES ------------------------------------- AIM V.I. Capital Appreciation Fund 21 3,634 AIM V.I. Core Equity Fund 73 1,937 AIM V.I. International Growth Fund 16 933 Alger American Growth Portfolio 91 2,032 Alger American Leveraged AllCap Portfolio 4 728 Alger American MidCap Growth Portfolio 1,221 2,964 Alger American Small Capitalization Portfolio - 108 AZL AIM Basic Value Fund 34,032 199,988 AZL AIM International Equity Fund 175,535 113,057 AZL Columbia Technology Fund 78,708 36,355 AZL Davis NY Venture Fund 100,079 107,188 AZL Dreyfus Founders Equity Growth Fund 222,044 59,504 AZL Dreyfus Premier Small Cap Value Fund 27,916 31,952 AZL First Trust Target Double Play Fund 114,292 26,606 AZL Franklin Small Cap Value Fund 110,257 127,038 AZL Fusion Balanced Fund 173,193 97,193 AZL Fusion Growth Fund 452,978 261,207 AZL Fusion Moderate Fund 342,093 190,705 AZL Jennison 20/20 Focus Fund 106,508 71,335 AZL Jennison Growth Fund 29,785 22,809 AZL Legg Mason Growth Fund 144,594 59,043 AZL Legg Mason Value Fund 38,813 71,113 AZL LMP Large Cap Growth Fund 16,123 43,630 AZL Money Market Fund 997,539 808,700 AZL NACM International Fund 9,249 2,586 AZL Neuberger Berman Regency Fund 60,183 38,413 AZL OCC Opportunity Fund 77,012 57,638 AZL OCC Renaissance Fund 113,335 391,698 AZL OCC Value Fund 379,976 128,129 AZL Oppenheimer Global Fund 60,795 64,575 AZL Oppenheimer International Growth Fund 153,211 86,109 AZL Oppenheimer Main Street Fund 48,809 35,303 AZL PIMCO Fundamental IndexPLUS Total Return Fund 6,765 4,043 AZL S&P 500 Index Fund 39,773 11,721 AZL Schroder Emerging Markets Equity Fund CL 1 1,051 742 AZL Schroder Emerging Markets Equity Fund CL 2 170,398 65,619 AZL Schroder International Small Cap Fund 15,619 4,548 AZL Small Cap Stock Index Fund 15,576 3,050 AZL TargetPLUS Balanced Fund 13,772 2,829 AZL TargetPLUS Equity Fund 115,975 29,423 AZL TargetPLUS Growth Fund 54,186 15,337 AZL TargetPLUS Moderate Fund 33,363 10,236 AZL Turner Quantitative Small Cap Growth Fund 19,548 22,704 AZL Van Kampen Aggressive Growth Fund 46,910 143,180 AZL Van Kampen Comstock Fund 250,279 173,327 AZL Van Kampen Equity and Income Fund 93,551 71,476 AZL Van Kampen Global Franchise Fund 144,511 153,908 AZL Van Kampen Global Real Estate Fund 101,310 66,690 94 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 4. PURCHASES AND SALES OF INVESTMENTS (IN THOUSANDS) (CONTINUED) The cost of purchases and proceeds from sales of investments for the year ended December 31, 2007 were as follows: COST OF PROCEEDS FROM PURCHASES SALES ------------------------------------- AZL Van Kampen Growth and Income Fund 87,207 118,359 AZL Van Kampen Mid Cap Growth Fund 284,348 101,086 AZL Van Kampen Strategic Growth Fund 35,930 202,736 Davis VA Financial Portfolio 33,927 54,076 Davis VA Real Estate Portfolio 579 556 Davis VA Value Portfolio 10,971 41,449 Dreyfus IP Small Cap Stock Index Portfolio 42,546 90,445 Dreyfus Stock Index Fund 35,419 119,548 Franklin Global Communications Securities Fund 101,057 84,483 Franklin Growth and Income Securities Fund 64,579 125,271 Franklin High Income Securities Fund 90,287 104,454 Franklin Income Securities Fund 464,603 341,892 Franklin Large Cap Growth Securities Fund 26,374 90,797 Franklin Money Market Fund 410 5,016 Franklin Real Estate Fund 62,694 166,619 Franklin Rising Dividends Securities Fund 45,734 179,788 Franklin Small Cap Value Securities Fund 20,415 56,779 Franklin Small-Mid Cap Growth Securities Fund 36,408 73,751 Franklin Templeton VIP Founding Funds Allocation Fund 45,310 2,747 Franklin U.S. Government Fund 109,506 145,805 Franklin Zero Coupon 2010 Fund 29,241 29,936 J.P. Morgan International Opportunities Portfolio 5 77 J.P. Morgan U.S. Large Cap Core Equity Portfolio 7 122 Jennison 20/20 Focus Portfolio 30,319 46,945 Mutual Discovery Securities Fund 287,992 251,221 Mutual Shares Securities Fund 421,274 340,887 OpCap Mid Cap Portfolio 34,055 17,646 Oppenheimer Global Securities Fund/VA 24,799 61,073 Oppenheimer High Income Fund/VA 17,820 23,769 Oppenheimer Main Street Fund/VA 5,134 36,157 PIMCO VIT All Asset Portfolio 43,526 69,516 PIMCO VIT CommodityRealReturn Strategy Portfolio 51,716 37,958 PIMCO VIT Emerging Markets Bond Portfolio 27,955 18,350 PIMCO VIT Global Bond Portfolio (Unhedged) 45,258 21,351 PIMCO VIT High Yield Portfolio 67,787 89,254 PIMCO VIT Real Return Portfolio 70,183 86,566 PIMCO VIT StocksPLUS Growth and Income Portfolio 2,042 4,993 PIMCO VIT Total Return Portfolio 145,158 149,450 Seligman Global Technology Portfolio - 934 Seligman Small-Cap Value Portfolio 16,736 43,697 SP Strategic Partners Focused Growth Portfolio 2,862 10,743 SP International Growth Portfolio 13,812 5,886 Templeton Asset Strategy Fund 6,392 3,509 Templeton Developing Markets Securities Fund 76,942 136,183 Templeton Foreign Securities Fund 65,217 115,778 Templeton Global Income Securities Fund 66,250 13,137 Templeton Growth Securities Fund 305,256 244,978 Van Kampen LIT Enterprise Portfolio 1 58 Van Kampen LIT Growth and Income Portfolio 55 99 Van Kampen LIT Strategic Growth Portfolio - 1,854
95 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows:
AIM V.I. CAPITAL AIM V.I. CORE EQUITY AIM V.I. INTERNATIONAL APPRECIATION FUND FUND GROWTH FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments - - - - - - Transfers between funds (147) 1,032 (19) 680 (22) (19) Surrenders and terminations (287) (225) (139) (70) (51) (31) Rescissions - - - - - - Bonus - - - - - - Other transactions (1) (1) - - - - -------------------------------------------------------------------------- Total Net Contract Transactions (435) 806 (158) 610 (73) (50) -------------------------------------------------------------------------- ALGER AMERICAN GROWTH ALGER AMERICAN ALGER AMERICAN MIDCAP LEVERAGED ALLCAP PORTFOLIO PORTFOLIO GROWTH PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments - - - - - - Transfers between funds (50) (89) (11) (18) (71) (91) Surrenders and terminations (158) (147) (51) (62) (123) (121) Rescissions - - - - - - Bonus - - - - - - Other transactions - - - - - (1) -------------------------------------------------------------------------- Total Net Contract Transactions (208) (236) (62) (80) (194) (213) -------------------------------------------------------------------------- ALGER AMERICAN SMALL AZL AIM BASIC VALUE AZL AIM INTERNATIONAL CAPITALIZATION PORTFOLIO FUND EQUITY FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments - - 594 1,520 2,846 2,753 Transfers between funds (1) (9) (14,535) (1,775) 1,040 2,182 Surrenders and terminations (10) (27) (843) (839) (1,006) (541) Rescissions - - (7) (47) (90) (77) Bonus - - 8 18 54 47 Other transactions - - (2) (4) (2) (2) -------------------------------------------------------------------------- Total Net Contract Transactions (11) (36) (14,785) (1,127) 2,842 4,363 -------------------------------------------------------------------------- 96 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: AZL COLUMBIA AZL DAVIS NY VENTURE AZL DREYFUS FOUNDERS TECHNOLOGY FUND FUND EQUITY GROWTH FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 1,220 971 4,237 6,108 2,054 1,231 Transfers between funds 3,862 (494) (2,482) 1,404 13,868 1,417 Surrenders and terminations (575) (300) (1,866) (1,244) (1,409) (508) Rescissions (43) (36) (86) (107) (38) (39) Bonus 27 20 50 65 30 18 Other transactions (1) (1) (5) (5) (3) (2) -------------------------------------------------------------------------- Total Net Contract Transactions 4,490 160 (152) 6,222 14,502 2,116 -------------------------------------------------------------------------- AZL DREYFUS PREMIER AZL FIRST TRUST AZL FRANKLIN SMALL CAP TARGET DOUBLE PLAY SMALL CAP VALUE FUND FUND VALUE FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 869 1,237 3,911 - 3,171 4,056 Transfers between funds (1,124) (369) 4,523 - (3,489) 390 Surrenders and terminations (287) (160) (140) - (1,038) (675) Rescissions (31) (27) (103) - (67) (100) Bonus 13 20 61 - 43 57 Other transactions (1) (1) - - (3) (3) -------------------------------------------------------------------------- Total Net Contract Transactions (561) 700 8,252 - (1,383) 3,725 -------------------------------------------------------------------------- AZL FUSION BALANCED AZL FUSION GROWTH AZL FUSION MODERATE FUND FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 7,047 10,095 24,989 36,078 17,701 28,103 Transfers between funds 1,008 3,614 (5,546) 7,706 (2,080) 607 Surrenders and terminations (1,809) (905) (4,264) (1,140) (3,439) (1,597) Rescissions (131) (260) (721) (1,132) (374) (885) Bonus 91 238 416 643 179 383 Other transactions (4) (2) (13) (8) (10) (6) -------------------------------------------------------------------------- Total Net Contract Transactions 6,202 12,780 14,861 42,146 11,977 26,606 -------------------------------------------------------------------------- 97 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: AZL JENNISON 20/20 AZL JENNISON GROWTH AZL LEGG MASON GROWTH FOCUS FUND FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 2,831 4,633 929 2,002 2,581 2,185 Transfers between funds 99 708 (81) (840) 4,394 (332) Surrenders and terminations (662) (324) (240) (127) (695) (372) Rescissions (51) (70) (14) (34) (57) (49) Bonus 27 54 12 24 40 29 Other transactions (2) (1) (1) - (2) (2) -------------------------------------------------------------------------- Total Net Contract Transactions 2,242 4,999 605 1,024 6,261 1,459 -------------------------------------------------------------------------- AZL LEGG MASON VALUE AZL LMP LARGE CAP AZL MONEY MARKET FUND FUND GROWTH FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 1,837 3,815 665 1,487 31,970 25,839 Transfers between funds (3,242) (2,312) (1,806) (1,606) 1,287 (11,524) Surrenders and terminations (1,079) (729) (1,034) (849) (16,087) (7,712) Rescissions (37) (90) (16) (32) (987) (799) Bonus 27 38 10 21 340 368 Other transactions (3) (4) (3) (3) (9) (8) -------------------------------------------------------------------------- Total Net Contract Transactions (2,497) 718 (2,184) (982) 16,514 6,164 -------------------------------------------------------------------------- AZL NACM AZL NEUBERGER BERMAN AZL OCC OPPORTUNITY INTERNATIONAL FUND REGENCY FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 300 - 1,382 759 1,043 1,830 Transfers between funds 391 - 856 1,160 (305) (618) Surrenders and terminations (29) - (211) (26) (671) (486) Rescissions (2) - (31) (30) (27) (71) Bonus 4 - 20 13 19 31 Other transactions - - - - (2) (2) -------------------------------------------------------------------------- Total Net Contract Transactions 664 - 2,016 1,876 57 683 -------------------------------------------------------------------------- 98 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: AZL OCC RENAISSANCE AZL OCC VALUE FUND AZL OPPENHEIMER GLOBAL FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 946 1,650 950 1,014 2,188 3,331 Transfers between funds (22,730) (5,299) 15,550 (1,290) (2,021) 205 Surrenders and terminations (1,353) (1,391) (1,618) (789) (657) (437) Rescissions (30) (31) (22) (14) (76) (83) Bonus 9 17 12 12 31 44 Other transactions (4) (6) (4) (3) (2) (2) -------------------------------------------------------------------------- Total Net Contract Transactions (23,162) (5,060) 14,868 (1,070) (537) 3,057 -------------------------------------------------------------------------- AZL OPPENHEIMER AZL OPPENHEIMER MAIN AZL PIMCO FUNDAMENTAL INTERNATIONAL GROWTH INDEXPLUS TOTAL RETURN FUND STREET FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 2,523 2,088 1,581 1,874 226 130 Transfers between funds 1,538 2,162 (366) (93) 20 296 Surrenders and terminations (667) (342) (522) (355) (37) (3) Rescissions (79) (60) (54) (75) (15) (8) Bonus 43 40 28 22 5 2 Other transactions (2) (1) (2) (2) - - -------------------------------------------------------------------------- Total Net Contract Transactions 3,356 3,887 665 1,371 199 416 -------------------------------------------------------------------------- AZL S&P 500 INDEX AZL SCHRODER EMERGING AZL SCHRODER EMERGING MARKETS EQUITY FUND CL FUND 1 MARKETS EQUITY FUND CL 2 -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 1,323 - 6 - 3,181 1,726 Transfers between funds 1,483 - 11 - 5,561 2,798 Surrenders and terminations (41) - (1) - (407) (38) Rescissions (8) - - - (109) (84) Bonus 15 - - - 53 19 Other transactions - - - - (1) - -------------------------------------------------------------------------- Total Net Contract Transactions 2,772 - 16 - 8,278 4,421 -------------------------------------------------------------------------- 99 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: AZL SCHRODER AZL SMALL CAP STOCK AZL TARGETPLUS BALANCED INTERNATIONAL SMALL CAP FUND INDEX FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 701 - 773 - 671 - Transfers between funds 447 - 485 - 402 - Surrenders and terminations (9) - (9) - 1 - Rescissions (15) - (14) - (8) - Bonus 12 - 11 - 5 - Other transactions - - - - - - -------------------------------------------------------------------------- Total Net Contract Transactions 1,136 - 1,246 - 1,071 - -------------------------------------------------------------------------- AZL TARGETPLUS EQUITY AZL TARGETPLUS GROWTH AZL TARGETPLUS MODERATE FUND FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 3,597 - 3,400 - 1,391 - Transfers between funds 4,688 - 486 - 917 - Surrenders and terminations (203) - (35) - (42) - Rescissions (74) - (96) - (57) - Bonus 55 - 55 - 16 - Other transactions - - - - - - -------------------------------------------------------------------------- Total Net Contract Transactions 8,063 - 3,810 - 2,225 - -------------------------------------------------------------------------- AZL TURNER AZL VAN KAMPEN AZL VAN KAMPEN COMSTOCK QUANTITATIVE SMALL CAP GROWTH FUND AGGRESSIVE GROWTH FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 540 1,288 832 1,557 3,557 5,049 Transfers between funds (682) (104) (11,245) (1,675) 5,006 (3,259) Surrenders and terminations (138) (123) (563) (587) (3,594) (2,417) Rescissions (17) (27) (19) (46) (86) (126) Bonus 7 19 15 24 42 53 Other transactions - - (2) (3) (9) (9) -------------------------------------------------------------------------- Total Net Contract Transactions (290) 1,053 (10,982) (730) 4,916 (709) -------------------------------------------------------------------------- 100 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: AZL VAN KAMPEN EQUITY AZL VAN KAMPEN GLOBAL AZL VAN KAMPEN GLOBAL AND INCOME FUND FRANCHISE FUND REAL ESTATE FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 4,285 3,962 4,065 4,376 3,551 1,795 Transfers between funds (1,831) 384 (3,241) 1,317 (502) 3,513 Surrenders and terminations (1,088) (683) (1,255) (744) (362) (47) Rescissions (96) (94) (116) (102) (96) (37) Bonus 48 28 42 53 50 23 Other transactions (3) (2) (3) (3) (1) - -------------------------------------------------------------------------- Total Net Contract Transactions 1,315 3,595 (508) 4,897 2,640 5,248 -------------------------------------------------------------------------- AZL VAN KAMPEN GROWTH AZL VAN KAMPEN MID AZL VAN KAMPEN AND INCOME FUND CAP GROWTH FUND STRATEGIC GROWTH FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 2,622 3,614 3,583 4,556 1,041 2,421 Transfers between funds (3,640) (1,264) 9,235 (1,178) (20,111) (2,178) Surrenders and terminations (2,107) (1,510) (1,428) (919) (1,016) (1,188) Rescissions (64) (77) (91) (102) (22) (43) Bonus 32 39 53 56 15 31 Other transactions (5) (6) (4) (3) (3) (5) -------------------------------------------------------------------------- Total Net Contract Transactions (3,162) 796 11,348 2,410 (20,096) (962) -------------------------------------------------------------------------- DAVIS VA FINANCIAL DAVIS VA REAL ESTATE DAVIS VA VALUE PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 788 839 - - 102 154 Transfers between funds (1,634) 206 (3) (1) (1,211) (1,210) Surrenders and terminations (666) (421) (12) (25) (1,467) (923) Rescissions (15) (14) - - (2) (3) Bonus 11 9 - - 1 1 Other transactions (2) (2) - - (3) (4) -------------------------------------------------------------------------- Total Net Contract Transactions (1,518) 617 (15) (26) (2,580) (1,984) -------------------------------------------------------------------------- 101 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: DREYFUS IP SMALL CAP DREYFUS STOCK INDEX FRANKLIN GLOBAL COMMUNICATIONS STOCK INDEX PORTFOLIO FUND SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 1,004 2,745 1,270 3,263 853 660 Transfers between funds (3,592) (1,655) (5,009) (3,410) 948 813 Surrenders and terminations (1,122) (851) (2,312) (1,716) (950) (946) Rescissions (40) (66) (35) (60) (35) (20) Bonus 10 31 11 23 20 13 Other transactions (3) (4) (6) (7) (4) (5) -------------------------------------------------------------------------- Total Net Contract Transactions (3,743) 200 (6,081) (1,908) 832 515 -------------------------------------------------------------------------- FRANKLIN GROWTH AND FRANKLIN HIGH INCOME FRANKLIN INCOME INCOME SECURITIES FUND SECURITIES FUND SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 423 673 1,195 1,078 5,854 4,175 Transfers between funds (1,116) (557) (1,279) (99) (1,434) 2,061 Surrenders and terminations (1,700) (1,885) (944) (886) (2,258) (1,982) Rescissions (11) (12) (18) (55) (139) (81) Bonus 6 8 16 13 52 38 Other transactions (4) (5) (2) (2) (5) (5) -------------------------------------------------------------------------- Total Net Contract Transactions (2,402) (1,778) (1,032) 49 2,070 4,206 -------------------------------------------------------------------------- FRANKLIN LARGE CAP FRANKLIN MONEY MARKET FRANKLIN REAL ESTATE GROWTH SECURITIES FUND FUND FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 537 1,511 - - 134 801 Transfers between funds (1,990) (1,841) (49) (93) (1,732) (1,423) Surrenders and terminations (1,571) (1,653) (279) (451) (771) (703) Rescissions (14) (46) - - (4) (21) Bonus 6 19 - - 1 10 Other transactions (4) (5) (1) (1) (2) (2) -------------------------------------------------------------------------- Total Net Contract Transactions (3,036) (2,016) (329) (546) (2,374) (1,338) -------------------------------------------------------------------------- 102 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: FRANKLIN RISING FRANKLIN SMALL CAP FRANKLIN SMALL-MID CAP DIVIDENDS SECURITIES FUND VALUE SECURITIES FUND GROWTH SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 373 1,245 121 201 130 670 Transfers between funds (2,570) (1,651) (1,621) (1,692) (949) (1,390) Surrenders and terminations (1,779) (1,819) (1,023) (761) (1,303) (1,327) Rescissions (8) (29) (4) (8) (4) (17) Bonus 1 11 2 1 1 9 Other transactions (4) (5) (2) (3) (3) (4) -------------------------------------------------------------------------- Total Net Contract Transactions (3,987) (2,248) (2,527) (2,262) (2,128) (2,060) -------------------------------------------------------------------------- FRANKLIN TEMPLETON FRANKLIN U.S. FRANKLIN ZERO COUPON VIP FOUNDING FUNDS ALLOCATION FUND GOVERNMENT FUND 2010 FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 1,970 - 1,040 1,390 147 164 Transfers between funds 2,649 - (802) (1,312) 7 (166) Surrenders and terminations (31) - (2,279) (2,041) (232) (248) Rescissions (61) - (12) (46) (5) (2) Bonus 19 - 10 14 2 3 Other transactions - - (5) (6) (1) (1) -------------------------------------------------------------------------- Total Net Contract Transactions 4,546 - (2,048) (2,002) (82) (249) -------------------------------------------------------------------------- J.P. MORGAN J.P. MORGAN U.S. JENNISON 20/20 FOCUS INTERNATIONAL OPPORTUNITIES LARGE CAP CORE EQUITY PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments - - - - 101 231 Transfers between funds (2) (3) (4) (11) (1,105) (842) Surrenders and terminations (4) (14) (8) (20) (524) (415) Rescissions - - - - (3) (6) Bonus - - - - 2 3 Other transactions - - - - (1) (2) -------------------------------------------------------------------------- Total Net Contract Transactions (6) (17) (12) (31) (1,530) (1,030) -------------------------------------------------------------------------- 103 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: MUTUAL DISCOVERY MUTUAL SHARES OPCAP MID CAP PORTFOLIO SECURITIES FUND SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 4,359 4,267 10,659 8,667 1,431 596 Transfers between funds (948) 1,414 (4,695) 3,640 173 869 Surrenders and terminations (2,335) (1,785) (4,174) (3,355) (80) (8) Rescissions (90) (88) (285) (170) (31) (10) Bonus 57 50 107 83 21 6 Other transactions (6) (6) (9) (9) - - -------------------------------------------------------------------------- Total Net Contract Transactions 1,037 3,851 1,603 8,856 1,514 1,452 -------------------------------------------------------------------------- OPPENHEIMER GLOBAL OPPENHEIMER HIGH OPPENHEIMER MAIN STREET SECURITIES FUND/VA INCOME FUND/VA FUND/VA -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 139 240 25 38 149 207 Transfers between funds (1,606) (1,695) (332) (107) (1,231) (1,614) Surrenders and terminations (1,609) (1,173) (300) (244) (1,666) (1,200) Rescissions (4) (2) - - (3) (6) Bonus 2 2 - 1 2 1 Other transactions (3) (4) (1) (1) (4) (6) -------------------------------------------------------------------------- Total Net Contract Transactions (3,081) (2,632) (608) (313) (2,753) (2,617) -------------------------------------------------------------------------- PIMCO VIT ALL ASSET PIMCO VIT PIMCO VIT EMERGING COMMODITYREALRETURN PORTFOLIO STRATEGY PORTFOLIO MARKETS BOND PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 1,220 3,643 1146 2,673 869 1,118 Transfers between funds (2,944) (4,589) 33 1,252 (90) 20 Surrenders and terminations (1,051) (726) (335) (303) (173) (109) Rescissions (43) (106) (29) (64) (27) (25) Bonus 23 64 18 34 15 17 Other transactions (2) (3) (1) (1) - - -------------------------------------------------------------------------- Total Net Contract Transactions (2,797) (1,717) 832 3,592 594 1,020 -------------------------------------------------------------------------- 104 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: PIMCO VIT GLOBAL BOND PIMCO VIT HIGH YIELD PIMCO VIT REAL RETURN PORTFOLIO (UNHEDGED) PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 1,150 1,149 1,175 1,575 1,634 3,103 Transfers between funds 1,404 701 (2,350) (1,505) (2,163) (3,958) Surrenders and terminations (224) (102) (1,161) (1,125) (1,555) (1,349) Rescissions (23) (32) (36) (56) (39) (54) Bonus 21 14 18 20 18 28 Other transactions - - (3) (3) (4) (4) -------------------------------------------------------------------------- Total Net Contract Transactions 2,328 1,730 (2,357) (1,094) (2,109) (2,233) -------------------------------------------------------------------------- -------------------------------------------------------------------------- PIMCO VIT STOCKSPLUS PIMCO VIT TOTAL RETURN SELIGMAN GLOBAL GROWTH AND INCOME PORTFOLIO PORTFOLIO TECHNOLOGY PORTFOLIO -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 17 34 3,769 3,796 - - Transfers between funds (186) (197) (1,614) (653) (28) (32) Surrenders and terminations (212) (177) (3,546) (2,422) (97) (59) Rescissions - - (77) (94) - - Bonus - - 62 37 - - Other transactions (1) (1) (8) (9) - - -------------------------------------------------------------------------- Total Net Contract Transactions (382) (342) (1,414) 654 (125) (91) -------------------------------------------------------------------------- -------------------------------------------------------------------------- SELIGMAN SMALLER-CAP SP STRATEGIC PARTNERS SP INTERNATIONAL FOCUSED GROWTH VALUE PORTFOLIO PORTFOLIO GROWTH PORTFOLIO -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 42 78 52 113 29 50 Transfers between funds (718) (1,017) (668) (1,214) 571 (258) Surrenders and terminations (669) (541) (385) (337) (202) (163) Rescissions (1) (1) - (7) - (2) Bonus 1 - 1 2 - - Other transactions (1) (2) (1) (1) (1) (1) -------------------------------------------------------------------------- Total Net Contract Transactions (1,346) (1,483) (1,001) (1,445) 397 (374) -------------------------------------------------------------------------- 105 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount for the years ended December 31, 2007 and 2006 were as follows: TEMPLETON ASSET TEMPLETON DEVELOPING TEMPLETON FOREIGN MARKETS SECURITIES STRATEGY FUND FUND SECURITIES FUND -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments - - 348 2,187 637 1,425 Transfers between funds (21) (11) (2,727) (3,013) (1,247) (136) Surrenders and terminations (121) (144) (1,370) (1,354) (1,826) (1,913) Rescissions - - (5) (53) (24) (31) Bonus - - 4 33 6 17 Other transactions - - (3) (4) (4) (6) -------------------------------------------------------------------------- Total Net Contract Transactions (142) (155) (3,753) (2,203) (2,458) (645) -------------------------------------------------------------------------- -------------------------------------------------------------------------- TEMPLETON GLOBAL TEMPLETON GROWTH VAN KAMPEN LIT INCOME SECURITIES FUND SECURITIES FUND ENTERPRISE PORTFOLIO -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments 542 - 6,667 5,208 - - Transfers between funds 1,373 (17) (3,187) 622 (3) (1) Surrenders and terminations (147) (166) (2,545) (2,268) (4) (6) Rescissions (11) - (154) (102) - - Bonus 8 - 63 50 - - Other transactions - - (6) (7) - - -------------------------------------------------------------------------- Total Net Contract Transactions 1,766 (183) 838 3,503 (7) (7) -------------------------------------------------------------------------- -------------------------------------------------------------------------- VAN KAMPEN LIT GROWTH VAN KAMPEN LIT TOTAL STRATEGIC GROWTH AND INCOME PORTFOLIO PORTFOLIO -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 -------------------------------------------------------------------------- Contract Transactions Purchase payments - - - - 211,813 235,100 Transfers between funds (1) (6) (93) (90) (70,020) (30,730) Surrenders and terminations (4) (13) (130) (87) (102,511) (71,008) Rescissions - - - - (5,469) (6,283) Bonus - - - - 2,743 3,231 Other transactions - - - - (222) (232) -------------------------------------------------------------------------- Total Net Contract Transactions (5) (19) (223) (177) 36,334 130,078 --------------------------------------------------------------------------
106 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows:
At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** AIM V.I. Capital Appreciation Fund 2007 1,132 $7.69to $8.60 9,390 0.00%1.15%to 2.55% 9.18%to 10.73% 2006 1,568 $7.05to $7.77 11,798 0.05%1.15%to 2.55% 3.63%to 5.09% 2005 762 $6.80to $7.39 5,430 0.05%1.15%to 2.55% 6.10%to 7.59% 2004 971 $6.41to $6.87 6,470 0.00%1.15%to 2.55% 3.93%to 5.40% 2003 1,166 $6.17to $6.51 7,416 0.00%1.15%to 2.55% 26.26%to 28.04% AIM V.I. Core Equity Fund 2007 451$11.37to$11.64 5,199 1.02%1.15%to 2.55% 5.38%to 6.87% 2006 609$10.85to$10.95 6,644 1.59%1.15%to 2.55% 9.03%to 9.56% 2005 1,110 $6.41to $6.97 7,473 0.79%1.15%to 2.55% 3.00%to 4.45% 2004 1,334 $6.23to $6.67 8,648 0.44%1.15%to 2.55% 3.10%to 4.56% 2003 1,615 $6.04to $6.38 10,072 0.29%1.15%to 2.55% 21.93%to 23.65% AIM V.I. International Growth Fund 2007 202$11.76to$12.93 2,493 0.37%1.15%to 2.55% 11.82%to 13.40% 2006 275$10.45to$11.51 3,037 0.98%1.15%to 2.55% 25.01%to 26.77% 2005 326 $8.28to $8.99 2,826 0.65%1.15%to 2.55% 14.97%to 16.58% 2004 365 $7.20to $7.71 2,731 0.65%1.15%to 2.55% 20.87%to 22.58% 2003 407 $5.96to $6.29 2,502 0.47%1.15%to 2.55% 25.81%to 27.59% Alger American Growth Portfolio 2007 644 $9.02to$10.11 6,352 0.35%1.15%to 2.55% 16.91%to 18.57% 2006 852 $7.72to $8.53 7,105 0.13%1.15%to 2.55% 2.51%to 3.95% 2005 1,088 $7.53to $8.20 8,756 0.24%1.15%to 2.35% 9.44%to 10.76% 2004 1,394 $6.96to $7.41 10,168 0.00%1.15%to 2.35% 3.04%to 4.29% 2003 1,661 $6.70to $7.10 11,660 0.00%1.15%to 2.55% 31.76%to 33.61% Alger American Leveraged AllCap Portfolio 2007 318$11.58to$12.11 3,881 0.00%1.15%to 2.55% 30.15%to 32.00% 2006 380 $8.44to $9.33 3,523 0.00%1.15%to 2.55% 16.27%to 17.90% 2005 461 $7.55to $7.81 3,627 0.00%1.35%to 1.90% 12.30%to 12.92% 2004 642 $6.51to $6.92 4,466 0.00%1.35%to 2.55% 5.46%to 6.73% 2003 789 $6.34to $6.48 5,095 0.00%1.35%to 1.90% 32.19%to 32.92% Alger American MidCap Growth Portfolio 2007 537$15.62to$17.45 8,955 0.00%1.15%to 2.55% 28.23%to 30.05% 2006 732$12.18to$13.42 9,429 0.00%1.15%to 2.55% 7.38%to 8.88% 2005 944$11.34to$12.32 11,240 0.00%1.15%to 2.55% 7.07%to 8.57% 2004 1,135$10.59to$11.35 12,515 0.00%1.15%to 2.55% 10.19%to 11.75% 2003 1,431 $9.61to$10.16 14,208 0.00%1.15%to 2.55% 44.07%to 46.10% 107 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** Alger American Small Capitalization Portfolio 2007 117 $8.59to $9.60 1,076 0.00% 1.15%to 2.55% 14.27%to 15.89% 2006 128 $7.52to $8.28 1,018 0.00% 1.15%to 2.55% 17.00%to 18.65% 2005 164 $6.42to $6.98 1,108 0.00% 1.15%to 2.55% 13.95%to 15.55% 2004 188 $5.64to $6.04 1,103 0.00% 1.15%to 2.55% 13.63%to 15.23% 2003 228 $4.96to $5.24 1,169 0.00% 1.15%to 2.55% 38.76%to 40.71% AZL AIM International Equity Fund 2007 15,677 $18.42to $20.11 300,838 0.53% 1.00%to 2.95% 11.27%to 13.48% 2006 12,836 $16.51to $17.88 219,438 0.22% 1.00%to 2.70% 13.31%to 23.67% 2005 8,473 $13.35to $14.13 116,487 0.25% 1.15%to 2.70% 13.27%to 15.04% 2004 4,677 $11.79to $12.29 56,469 0.00% 1.15%to 2.70% 18.86%to 20.73% 2003 2,162 $9.92to $10.18 21,775 0.37% 1.15%to 2.70% 23.76%to 25.69% AZL Columbia Technology Fund 2007 10,566 $9.24to $10.17 101,713 0.00% 1.00%to 2.95% 19.16%to 21.52% 2006 6,075 $7.74to $8.45 48,532 0.00% 1.00%to 2.70% -0.17%to 11.26% 2005 5,916 $7.77to $8.27 47,113 0.00% 1.15%to 2.65% -1.92%to -0.45% 2004 5,891 $7.91to $8.30 47,555 0.00% 1.15%to 2.70% -6.88%to -5.42% 2003 4,592 $8.40to $8.78 39,590 0.00% 1.15%to 2.70% 38.17%to 40.33% AZL Davis NY Venture Fund 2007 30,063 $12.51to $13.77 395,443 0.44% 1.00%to 2.95% 1.11%to 3.11% 2006 30,217 $12.34to $13.47 389,221 0.29% 1.00%to 2.70% 9.24%to 10.88% 2005 23,999 $11.13to $11.87 276,557 0.13% 1.15%to 2.70% 6.77%to 8.43% 2004 13,974 $10.43to $10.95 149,818 0.23% 1.15%to 2.70% 7.60%to 9.29% 2003 4,799 $9.69to $10.02 47,930 0.79% 1.15%to 2.70% 25.98%to 27.95% AZL Dreyfus Founders Equity Growth Fund 2007 25,805 $10.64to $11.71 287,472 0.06% 1.00%to 2.95% 5.57%to 7.67% 2006 11,304 $10.05to $10.97 118,436 0.00% 1.00%to 2.70% 9.93%to 10.63% 2005 9,188 $9.14to $9.75 86,799 0.28% 1.15%to 2.70% 1.78%to 3.37% 2004 8,196 $8.98to $9.43 75,508 0.00% 1.15%to 2.70% 4.84%to 6.48% 2003 5,902 $8.55to $8.86 51,481 0.00% 1.15%to 2.70% 20.94%to 22.83% AZL Dreyfus Premier Small Cap Value Fund 2007 4,688 $11.86to $12.55 57,106 0.25% 1.00%to 2.95% -10.92%to -9.16% 2006 5,250 $13.28to $13.90 71,186 0.07% 1.00%to 2.70% 10.39%to 12.01% 2005 4,551 $12.03to $12.29 55,521 0.00% 1.40%to 2.70% 0.64%to 1.96% 2004(2) 2,551 $11.95to $12.06 30,731 0.20% 1.40%to 2.70% 18.84%to 19.87% 108 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** AZL First Trust Target Double Play Fund 2007? 8,252 $10.48to $10.62 87,109 0.00% 1.00%to 2.95% 3.84%to 5.75% AZL Franklin Small Cap Value Fund 2007 16,613 $16.45to $17.69 282,993 0.50% 1.00%to 2.95% -7.17%to -5.33% 2006 17,997 $17.68to $18.82 327,285 0.28% 1.00%to 2.70% 10.54%to 12.35% 2005 14,272 $15.74to $16.29 229,386 0.54% 1.40%to 2.70% 4.19%to 5.55% 2004 8,311 $15.10to $15.44 127,319 0.00% 1.40%to 2.70% 19.81%to 21.38% 2003 2,023 $12.61to $12.72 25,647 1.09% 1.40%to 2.65% 26.08%to 27.18% AZL Fusion Balanced Fund 2007 29,873 $11.74to $12.20 357,955 1.37% 1.00%to 2.95% 3.98%to 6.04% 2006 23,672 $11.25to $11.55 269,515 0.33% 1.00%to 2.60% 6.68%to 6.82% 2005(3) 10,884 $10.54to $10.63 115,359 0.00% 1.40%to 2.60% 5.47%to 6.31% AZL Fusion Growth Fund 2007 87,486 $12.41to $12.90 1,103,016 0.48% 1.00%to 2.95% 2.66%to 4.70% 2006 72,625 $12.04to $12.37 883,579 0.07% 1.00%to 2.60% 9.33%to 10.05% 2005(3) 30,467 $11.02to $11.11 337,345 0.00% 1.40%to 2.60% 10.18%to 11.06% AZL Fusion Moderate Fund 2007 66,147 $12.00to $12.48 809,286 0.95% 1.00%to 2.95% 3.43%to 5.48% 2006 54,177 $11.57to $11.88 633,894 0.22% 1.00%to 2.60% 7.88%to 8.25% 2005(3) 27,565 $10.72to $10.81 296,907 0.00% 1.40%to 2.60% 7.24%to 8.09% AZL Jennison 20/20 Focus Fund 2007 13,493 $14.36to $14.97 198,067 0.19% 1.00%to 2.95% 7.50%to 9.63% 2006 11,386 $13.35to $13.71 153,824 0.00% 1.00%to 2.60% 9.90%to 10.78% 2005(3) 6,387 $12.15to $12.25 77,994 0.24% 1.40%to 2.60% 21.50%to 22.47% AZL Jennison Growth Fund 2007 4,666 $12.70to $13.16 60,239 0.00% 1.00%to 2.95% 7.68%to 9.81% 2006 4,061 $11.75to $12.07 48,235 0.00% 1.00%to 2.60% -1.03%to 9.57% 2005(3) 3,038 $11.87to $11.97 36,245 0.00% 1.40%to 2.60% 18.74%to 19.68% AZL Legg Mason Growth Fund 2007 14,522 $12.44to $13.54 188,913 0.00% 1.00%to 2.95% 11.66%to 13.87% 2006 8,260 $11.08to $12.00 94,574 0.00% 1.00%to 2.70% -1.98%to 13.92% 2005 6,801 $11.30to $11.97 78,816 0.00% 1.15%to 2.70% 8.11%to 9.79% 2004 4,610 $10.46to $10.90 49,005 0.00% 1.15%to 2.70% 5.19%to 6.84% 2003 3,028 $9.89to $10.20 30,448 0.00% 1.15%to 2.70% 32.85%to 34.92% 109 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** AZL Legg Mason Value Fund 2007 15,368 $10.76to $11.84 173,309 0.00% 1.00%to 2.95% -8.93%to -7.13% 2006 17,865 $11.79to $12.87 220,530 0.00% 1.00%to 2.70% 3.87%to 14.97% 2005 17,146 $11.35to $12.11 202,687 0.00% 1.15%to 2.70% 3.44%to 5.05% 2004 6,954 $10.97to $11.52 78,239 0.40% 1.15%to 2.70% 12.08%to 13.83% 2003 3,216 $9.79to $10.12 32,072 1.41% 1.15%to 2.70% 22.53%to 24.45% AZL LMP Large Cap Growth Fund 2007 13,078 $10.79to $11.78 146,827 0.00% 1.00%to 2.95% 1.64%to 3.66% 2006 15,264 $10.59to $11.46 166,925 0.00% 1.00%to 2.70% 1.46%to 10.61% 2005 16,249 $10.44to $11.05 173,953 0.30% 1.15%to 2.70% 6.79%to 8.45% 2004 13,474 $9.77to $10.19 134,211 0.00% 1.15%to 2.70% 1.59%to 3.18% 2003 6,800 $9.56to $9.87 66,220 0.06% 1.15%to 2.70% 21.07%to 22.96% AZL Money Market Fund 2007 53,522 $10.04to $11.35 576,147 4.71% 1.00%to 2.95% 1.74%to 3.75% 2006 37,014 $9.84to $11.07 387,308 4.42% 1.00%to 2.70% 1.30%to 1.67% 2005 30,862 $9.68to $10.61 314,957 2.56% 1.15%to 2.70% -0.15%to 1.40% 2004 22,705 $9.69to $10.46 229,969 0.70% 1.15%to 2.70% -2.01%to -0.48% 2003 17,621 $9.89to $10.51 180,963 0.34% 1.15%to 2.70% -2.33%to -0.80% AZL NACM International Fund 2007 (5) 665 $9.40to $9.48 6,280 0.41% 1.00%to 2.95% -6.26%to -5.03% AZL Neuberger Berman Regency Fund 2007 3,891 $10.11to $10.36 39,787 0.01% 1.00%to 2.95% 0.82%to 2.82% 2006 (4) 1,876 $10.00to $10.10 18,837 0.61% 1.00%to 2.60% 10.18%to 10.79% AZL OCC Opportunity Fund 2007 10,188 $15.49to $16.91 163,914 0.00% 1.00%to 2.95% 5.70%to 7.80% 2006 10,132 $14.61to $15.82 152,821 0.00% 1.00%to 2.70% 8.71%to 15.05% 2005 9,449 $13.44to $14.23 130,378 0.00% 1.15%to 2.70% 2.29%to 3.88% 2004 9,047 $13.14to $13.70 121,339 0.00% 1.15%to 2.70% 4.89%to 6.53% 2003 5,129 $12.53to $12.86 65,206 0.00% 1.15%to 2.70% 57.71%to 60.18% AZL OCC Value Fund 2007 30,326 $13.70to $15.08 435,237 0.92% 1.00%to 2.95% -8.52%to -6.71% 2006 15,458 $14.94to $16.31 240,414 0.82% 1.00%to 2.70% 13.26%to 16.91% 2005 16,528 $12.78to $13.63 218,377 0.24% 1.15%to 2.70% -0.06%to 1.50% 2004 17,197 $12.79to $13.43 225,711 0.18% 1.15%to 2.70% 13.41%to 15.18% 2003 7,331 $11.28to $11.66 84,335 0.72% 1.15%to 2.70% 41.34%to 43.55% 110 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** AZL Oppenheimer Global Fund 2007 14,204 $14.53to $15.32 211,936 0.50% 1.00%to 2.95% 2.67%to 4.70% 2006 14,742 $14.11to $14.77 212,236 0.06% 1.00%to 2.70% 12.10%to 13.20% 2005 11,685 $12.47to $12.74 147,589 0.00% 1.40%to 2.70% 9.63%to 11.06% 2004(2) 6,766 $11.37to $11.47 77,384 0.00% 1.40%to 2.70% 13.75%to 14.73% AZL Oppenheimer International Growth Fund 2007 12,139 $18.92to $20.82 240,548 0.59% 1.00%to 2.95% 9.01%to 11.17% 2006 8,782 $17.32to $18.90 158,081 0.00% 1.00%to 2.70% 16.85%to 25.56% 2005 4,896 $13.79to $14.71 69,842 0.00% 1.15%to 2.70% 11.14%to 12.88% 2004 2,956 $12.41to $13.03 37,771 0.34% 1.15%to 2.70% 11.43%to 13.17% 2003 1,280 $11.15to $11.52 14,664 0.87% 1.15%to 2.65% 30.28%to 32.24% AZL Oppenheimer Main Street Fund 2007 10,649 $12.34to $13.06 134,696 0.53% 1.00%to 2.95% 0.76%to 2.76% 2006 9,984 $12.21to $12.78 124,274 0.54% 1.00%to 2.70% 8.92%to 11.55% 2005 8,614 $10.95to $11.19 95,465 0.00% 1.40%to 2.70% 2.65%to 3.99% 2004(2) 5,977 $10.67to $10.76 64,069 1.08% 1.40%to 2.70% 6.68%to 7.60% AZL PIMCO Fundamental IndexPLUS Total Return Fund 2007 613 $11.42to $11.68 7,075 9.28% 1.00%to 2.95% 3.55%to 5.60% 2006(4) 415 $10.99to $11.11 4,587 5.34% 1.00%to 2.60% 9.76%to 10.37% AZL S&P 500 Index Fund 2007(5) 2,772 $8.16to $9.90 27,330 2.43% 1.00%to 2.95% -2.20%to -0.91% AZL Schroder Emerging Markets Equity Fund CL 1 2007(5) 24 $13.59to $13.65 335 0.00% 1.40%to 2.20% 20.41%to 21.05% AZL Schroder Emerging Markets Equity Fund CL 2 2007 12,698 $12.00to $13.51 169,313 0.01% 1.00%to 2.95% 15.62%to 29.01% 2006(5) 4,421 $10.39to $10.50 46,128 0.19% 1.00%to 2.60% 17.97%to 18.63% AZL Schroder International Small Cap Fund 2007(4) 1,136 $9.17to $9.26 10,474 0.00% 1.00%to 2.95% -8.52%to -7.32% AZL Small Cap Stock Index Fund 2007(5) 1,245 $9.25to $9.34 11,585 1.09% 1.00%to 2.95% -7.67%to -6.45% AZL TargetPLUS Balanced Fund 2007(5) 1,070 $10.04to $10.13 10,810 3.32% 1.00%to 2.95% 0.23%to 1.54% AZL TargetPLUS Equity Fund 2007(5) 8,062 $10.40to $10.55 84,465 1.03% 1.00%to 2.95% 3.11%to 5.01% 111 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 2007 613 $11.42to $11.68 7,075 9.28% 1.00%to 2.95% 3.55%to 5.60% 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** AZL TargetPLUS Growth Fund 2007(5) 3,811 $9.86to $9.96 37,794 2.12% 1.00%to 2.95% -1.63%to -0.34% AZL TargetPLUS Moderate Fund 2007(5) 2,226 $10.00to $10.10 22,400 2.93% 1.00%to 2.95% -0.24%to 1.07% AZL Turner Quantitative Small Cap Growth Fund 2007 2,653 $12.37to $12.86 33,333 0.00% 1.00%to 2.95% 2.97%to 5.01% 2006 2,943 $11.97to $12.29 35,591 0.00% 1.00%to 2.60% 8.46%to 13.97% 2005(3) 1,890 $11.04to $11.12 20,959 0.00% 1.40%to 2.60% 10.38%to 11.26% AZL Van Kampen Comstock Fund 2007 47,291 $11.36to $12.59 564,367 1.45% 1.00%to 2.95% -5.08%to -3.20% 2006 42,375 $11.93to $13.14 528,044 1.04% 1.00%to 2.70% 9.38%to 12.69% 2005 43,085 $10.59to $11.39 473,191 0.41% 1.15%to 2.70% 1.16%to 2.74% 2004 34,900 $10.47to $11.08 378,088 0.42% 1.15%to 2.70% 13.99%to 15.77% 2003 21,322 $9.18to $9.57 201,488 1.07% 1.15%to 2.70% 27.06%to 29.04% AZL Van Kampen Equity and Income Fund 2007 19,186 $12.23to $12.95 242,363 1.55% 1.00%to 2.95% 0.05%to 2.03% 2006 17,873 $12.20to $12.76 223,287 1.02% 1.00%to 2.70% 7.23%to 9.53% 2005 14,278 $11.14to $11.38 161,504 0.00% 1.40%to 2.70% 3.91%to 5.27% 2004(2) 7,557 $10.72to $10.81 81,460 0.94% 1.40%to 2.70% 7.18%to 8.11% AZL Van Kampen Global Franchise Fund 2007 21,519 $18.22to $19.59 406,292 0.00% 1.00%to 2.95% 6.61%to 8.72% 2006 22,029 $17.05to $18.14 386,210 1.55% 1.00%to 2.70% 7.55%to 18.03% 2005 17,131 $14.44to $14.95 252,646 0.00% 1.40%to 2.70% 8.68%to 10.10% 2004 9,069 $13.29to $13.58 122,121 0.00% 1.40%to 2.70% 9.21%to 10.64% 2003 1,963 $12.17to $12.27 24,028 0.04% 1.40%to 2.70% 21.68%to 22.75% AZL Van Kampen Global Real Estate Fund 2007 7,887 $10.64to $10.90 84,856 0.49% 1.00%to 2.95% -11.35%to -9.59% 2006(4) 5,248 $11.96to $12.08 63,019 1.20% 1.00%to 2.60% 18.32%to 18.98% AZL Van Kampen Growth and Income Fund 2007 23,437 $13.10to $14.53 323,375 1.23% 1.00%to 2.95% -0.36%to 1.62% 2006 26,601 $13.12to $14.44 364,766 0.82% 1.00%to 2.70% 9.56%to 12.82% 2005 25,803 $11.63to $12.50 311,483 0.35% 1.15%to 2.70% 6.33%to 7.99% 2004 20,145 $10.93to $11.58 227,029 0.35% 1.15%to 2.70% 10.78%to 12.51% 2003 14,416 $9.87to $10.29 145,703 1.06% 1.15%to 2.70% 24.06%to 26.00% 112 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** AZL Van Kampen Mid Cap Growth Fund 2007 29,896 $14.85to $16.47 464,770 0.03% 1.00%to 2.95% 18.62%to 20.97% 2006 18,548 $12.49to $13.75 241,109 0.00% 1.00%to 2.70% 6.31%to 13.18% 2005 16,140 $11.74to $12.63 196,210 0.00% 1.15%to 2.70% 14.42%to 16.20% 2004 8,449 $10.26to $10.87 89,260 0.00% 1.15%to 2.70% 18.00%to 19.84% 2003 5,883 $8.69to $9.07 52,273 0.00% 1.15%to 2.70% 25.01%to 26.97% Davis VA Financial Portfolio 2007 6,470 $14.28to $16.15 97,925 0.97% 1.00%to 2.95% -8.79%to -6.99% 2006 7,986 $15.62to $17.57 131,469 0.66% 1.00%to 2.70% 13.42%to 15.36% 2005 7,369 $13.54to $14.84 104,401 0.52% 1.15%to 2.70% 5.50%to 7.15% 2004 6,719 $12.83to $13.85 89,662 0.42% 1.15%to 2.70% 7.37%to 9.05% 2003 4,421 $11.95to $12.70 54,566 0.49% 1.15%to 2.70% 28.63%to 30.64% Davis VA Real Estate Portfolio 2007 55 $27.16to $29.75 1,605 3.41% 1.15%to 2.55% -17.62%to -16.45% 2006 71 $32.97to $36.32 2,483 2.95% 1.15%to 2.55% 31.00%to 32.84% 2005 97 $25.17to $26.94 2,565 3.15% 1.40%to 2.55% 10.29%to 11.56% 2004 120 $22.82to $24.45 2,851 3.14% 1.15%to 2.55% 29.96%to 31.80% 2003 167 $17.56to $18.55 3,025 4.36% 1.15%to 2.55% 33.35%to 35.23% Davis VA Value Portfolio 2007 12,127 $12.86to $14.54 166,627 1.04% 1.15%to 2.70% 1.84%to 3.43% 2006 14,707 $12.63to $14.06 196,912 0.75% 1.15%to 2.70% 11.95%to 13.69% 2005 16,693 $11.28to $12.37 197,991 0.95% 1.15%to 2.70% 6.54%to 8.20% 2004 18,681 $10.59to $11.43 206,291 0.84% 1.15%to 2.70% 9.33%to 11.04% 2003 15,865 $9.69to $10.29 159,028 1.08% 1.15%to 2.70% 26.30%to 28.27% Dreyfus IP Small Cap Stock Index Portfolio 2007 15,892 $13.48to $14.72 223,520 0.41% 1.00%to 2.70% -3.32%to -1.65% 2006 19,635 $13.94to $15.09 283,716 0.40% 1.00%to 2.70% 10.67%to 11.37% 2005 19,435 $12.52to $13.25 250,171 0.00% 1.15%to 2.70% 4.38%to 6.01% 2004 15,361 $11.99to $12.50 187,943 0.52% 1.15%to 2.70% 18.63%to 20.49% 2003 8,390 $10.09to $10.37 85,926 0.29% 1.15%to 2.70% 34.11%to 36.20% 113 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** Dreyfus Stock Index Fund 2007 24,899 $12.61to $13.77 329,493 1.45% 1.00%to 2.70% 2.18%to 3.94% 2006 30,988 $12.34to $13.36 398,216 1.43% 1.00%to 2.70% 9.67%to 12.14% 2005 32,897 $11.01to $11.65 374,037 1.40% 1.15%to 2.70% 1.66%to 3.24% 2004 33,888 $10.83to $11.29 375,897 1.60% 1.15%to 2.70% 7.40%to 9.10% 2003 22,253 $10.08to $10.35 228,025 1.34% 1.15%to 2.70% 24.64%to 26.59% Franklin Global Communications Securities Fund 2007 9,218 $24.56to $32.86 275,000 0.00% 1.00%to 2.95% 19.62%to 23.00% 2006 8,387 $20.31to $26.84 209,108 0.31% 1.00%to 2.70% 18.07%to 21.25% 2005 7,872 $16.75to $21.73 162,884 2.70% 1.15%to 2.70% 12.71%to 14.51% 2004 8,345 $14.86to $18.98 152,822 1.00% 1.15%to 2.70% 11.13%to 13.06% 2003 8,967 $13.38to $16.82 146,612 0.91% 1.15%to 2.70% 36.70%to 38.84% Franklin Growth and Income Securities Fund 2007 12,181 $28.67to $38.36 439,537 2.39% 1.00%to 2.70% -6.29%to -4.67% 2006 14,586 $30.60to $40.54 555,540 2.51% 1.00%to 2.70% 9.40%to 13.65% 2005 16,366 $26.92to $34.92 543,927 2.72% 1.15%to 2.70% 0.76%to 2.33% 2004 17,158 $26.72to $34.12 563,821 2.56% 1.15%to 2.70% 7.66%to 9.36% 2003 16,943 $24.82to $31.20 516,790 3.20% 1.15%to 2.70% 22.35%to 24.31% Franklin High Income Securities Fund 2007 8,121 $19.89to $26.61 194,157 6.81% 1.00%to 2.95% -1.11%to 1.69% 2006 9,155 $19.89to $26.29 217,690 6.24% 1.00%to 2.70% 5.18%to 6.46% 2005 9,108 $18.69to $24.24 203,114 5.98% 1.15%to 2.70% 0.57%to 2.29% 2004 9,464 $18.58to $23.73 209,279 5.95% 1.15%to 2.70% 6.94%to 8.61% 2003 8,768 $17.50to $21.85 182,932 8.92% 1.15%to 2.65% 27.75%to 29.68% Franklin Income Securities Fund 2007 26,714 $37.99to $50.82 1,236,149 3.51% 1.00%to 2.95% -0.11%to 2.72% 2006 24,645 $37.62to $49.71 1,124,778 3.48% 1.00%to 2.70% 7.12%to 15.10% 2005 20,445 $32.68to $42.39 811,292 3.53% 1.15%to 2.70% -1.10%to 0.45% 2004 16,383 $33.05to $42.20 661,455 3.11% 1.15%to 2.70% 10.81%to 12.55% 2003 14,234 $30.04to $37.50 520,291 5.28% 1.15%to 2.65% 28.27%to 30.26% 114 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** Franklin Large Cap Growth Securities Fund 2007 14,370 $18.12to $21.71 293,997 0.81% 1.00%to 2.70% 3.39%to 5.17% 2006 17,410 $17.52to $21.01 341,776 0.81% 1.00%to 2.70% 7.95%to 9.49% 2005 19,427 $16.23to $18.86 350,975 0.64% 1.15%to 2.70% -1.63%to -0.09% 2004 18,002 $16.50to $18.87 330,333 0.51% 1.15%to 2.70% 5.05%to 6.72% 2003 13,752 $15.71to $17.69 241,490 0.73% 1.15%to 2.70% 23.56%to 25.49% Franklin Money Market Fund 2007 1,575 $16.51to $17.19 26,980 4.47% 1.15%to 1.49% 2.85%to 3.06% 2006 1,905 $16.03to $16.68 31,583 4.29% 1.15%to 1.49% 2.84%to 2.93% 2005 2,450 $15.59to $16.21 39,365 2.48% 1.15%to 1.49% 1.04%to 1.13% 2004 3,203 $15.43to $16.03 50,808 0.71% 1.15%to 1.49% -0.76%to -0.67% 2003 4,280 $15.55to $16.14 68,220 0.54% 1.15%to 1.49% -0.96%to -0.87% Franklin Real Estate Fund 2007 6,170 $41.95to $56.12 306,481 2.40% 1.15%to 2.70% -22.98%to -21.76% 2006 8,543 $54.47to $71.74 548,475 1.99% 1.15%to 2.70% 17.38%to 19.21% 2005 9,882 $46.40to $60.18 537,862 1.44% 1.15%to 2.70% 10.46%to 12.18% 2004 8,516 $42.01to $53.65 419,936 1.82% 1.15%to 2.70% 28.28%to 30.34% 2003 5,990 $32.75to $41.18 232,278 2.55% 1.15%to 2.70% 32.13%to 34.20% Franklin Rising Dividends Securities Fund 2007 15,529 $30.16to $38.42 549,522 2.48% 1.15%to 2.70% -5.29%to -3.78% 2006 19,516 $31.84to $39.95 722,650 1.12% 1.15%to 2.70% 14.01%to 15.79% 2005 21,765 $27.93to $34.50 701,663 0.95% 1.15%to 2.70% 0.68%to 2.25% 2004 20,424 $27.74to $33.74 652,269 0.68% 1.15%to 2.70% 8.03%to 9.73% 2003 16,203 $25.68to $30.75 481,645 0.95% 1.15%to 2.70% 21.27%to 23.16% Franklin Small Cap Value Securities Fund 2007 8,622 $15.95to $18.53 149,192 0.70% 1.15%to 2.70% -4.99%to -3.50% 2006 11,149 $16.78to $19.20 201,830 0.65% 1.15%to 2.70% 13.87%to 15.65% 2005 13,411 $14.74to $16.60 211,689 0.81% 1.15%to 2.70% 5.88%to 7.53% 2004 12,800 $13.92to $15.44 189,938 0.19% 1.15%to 2.70% 20.44%to 22.36% 2003 7,900 $11.56to $12.62 97,449 0.26% 1.15%to 2.70% 28.60%to 30.63% Franklin Small-Mid Cap Growth Securities Fund 2007 9,861 $21.62to $26.02 242,499 0.00% 1.15%to 2.70% 8.26%to 9.96% 2006 11,991 $19.97to $23.66 269,950 0.00% 1.15%to 2.70% 5.81%to 7.45% 2005 14,051 $18.87to $22.02 296,641 0.00% 1.15%to 2.70% 2.00%to 3.63% 2004 14,994 $18.50to $21.26 308,650 0.00% 1.15%to 2.70% 8.50%to 10.20% 2003 13,915 $17.05to $19.29 263,494 0.00% 1.15%to 2.70% 33.59%to 35.69% 115 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** Franklin Templeton VIP Founding Funds Allocation Fund 2007(5) 4,548 $9.19 to $9.26 41,977 0.00% 1.00% to 2.95% -8.25% to -7.36% Franklin U.S. Government Fund 2007 17,323$20.48 to $27.40 429,720 4.94% 1.00% to 2.95% 2.32% to 5.54% 2006 19,375$19.74 to $26.07 459,275 4.44% 1.00% to 2.70% 1.25% to 1.85% 2005 21,379$19.49 to $25.28 497,400 4.33% 1.15% to 2.70% -0.32% to 1.24% 2004 21,258$19.55 to $24.97 495,079 5.03% 1.15% to 2.70% 0.71% to 2.29% 2003 20,233$19.42 to $24.41 468,662 5.31% 1.15% to 2.70% -0.51% to 1.04% Franklin Zero Coupon 2010 Fund 2007 2,451$31.32 to $41.90 90,911 4.96% 1.00% to 2.95% 5.45% to 7.54% 2006 2,533$29.63 to $40.08 88,620 3.96% 1.00% to 2.70% -0.02% to 1.26% 2005 2,783$29.63 to $38.43 96,876 4.24% 1.15% to 2.70% -1.16% to 0.38% 2004 2,118$29.98 to $38.29 74,368 4.72% 1.15% to 2.70% 1.92% to 3.52% 2003 1,956$29.41 to $36.98 67,640 4.15% 1.15% to 2.70% 0.83% to 2.41% J.P. Morgan International Opportunities Portfolio 2007 41$11.78 to $12.26 491 1.00% 1.15% to 2.55% 6.56% to 8.08% 2006 47$10.50 to $11.57 523 1.18% 1.15% to 2.55% 18.97% to 20.65% 2005 64 $9.17 to $9.45 593 0.86% 1.40% to 1.90% 8.61% to 9.16% 2004 72 $8.44 to $8.66 615 0.53% 1.40% to 1.90% 16.14% to 16.72% 2003 77 $7.27 to $7.42 563 0.81% 1.40% to 1.90% 29.95% to 30.27% J.P. Morgan U.S. Large Cap Core Equity Portfolio 2007 65 $9.05 to $9.60 596 1.08% 1.15% to 2.55% -0.91% to 0.49% 2006 76 $8.67 to $9.56 705 1.02% 1.15% to 2.55% 13.65% to 15.24% 2005 107 $7.93 to $8.29 861 1.26% 1.15% to 1.90% -0.55% to 0.19% 2004 130 $7.98 to $8.28 1,049 0.75% 1.15% to 1.90% 7.42% to 8.23% 2003 149 $7.42 to $7.65 1,117 0.77% 1.15% to 1.90% 25.73% to 26.67% Jennison 20/20 Focus Portfolio 2007 6,655$16.00 to $17.47 111,090 0.11% 1.15% to 2.70% 7.17% to 8.85% 2006 8,186$14.93 to $16.05 126,736 0.00% 1.15% to 2.70% 10.59% to 12.31% 2005 9,216$13.50 to $14.29 127,963 0.00% 1.15% to 2.70% 18.04% to 19.88% 2004 7,122$11.44 to $11.92 83,106 0.00% 1.15% to 2.70% 12.30% to 14.05% 2003 3,070$10.18 to $10.45 31,676 0.00% 1.15% to 2.70% 25.37% to 27.32% 116 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** Mutual Discovery Securities Fund 2007 31,131$25.83 to $30.67 893,746 1.50% 1.00% to 2.95% 8.58% to 10.73% 2006 30,097$23.70 to $24.92 788,452 1.03% 1.00% to 2.70% 9.77% to 19.79% 2005 26,246$19.81 to $22.76 571,760 1.31% 1.15% to 2.70% 12.89% to 14.66% 2004 20,002$17.55 to $19.85 385,579 1.08% 1.15% to 2.70% 15.04% to 16.90% 2003 15,077$15.25 to $16.99 252,965 1.79% 1.15% to 2.70% 25.55% to 27.51% Mutual Shares Securities Fund 2007 49,588$20.91 to $24.871,160,544 1.51% 1.00% to 2.95% 0.45% to 2.44% 2006 47,987$20.76 to $24.651,107,271 1.30% 1.00% to 2.70% 9.03% to 15.23% 2005 39,133$18.02 to $20.78 781,296 0.94% 1.15% to 2.70% 7.62% to 9.29% 2004 30,814$16.74 to $19.01 571,473 0.82% 1.15% to 2.70% 9.62% to 11.34% 2003 26,227$15.27 to $17.07 442,819 1.10% 1.15% to 2.70% 21.81% to 23.74% OpCap Mid Cap Portfolio 2007 2,964$10.37 to $10.61 31,117 0.15% 1.00% to 2.95% 4.10% to 6.16% 2006(4) 1,451 $9.93 to $10.04 14,483 0.00% 1.00% to 2.60% 10.29% to 10.90% Oppenheimer Global Securities Fund/VA 2007 13,620$14.17 to $16.02 205,533 1.40% 1.15% to 2.70% 3.47% to 5.10% 2006 16,707$13.70 to $15.25 241,736 1.06% 1.15% to 2.70% 14.56% to 16.35% 2005 19,339$11.95 to $13.10 242,446 1.06% 1.15% to 2.70% 11.27% to 13.00% 2004 21,679$10.74 to $11.60 242,223 1.22% 1.15% to 2.70% 15.98% to 17.80% 2003 17,616 $9.26 to $9.84 168,620 0.57% 1.15% to 2.70% 39.21% to 41.38% Oppenheimer High Income Fund/VA 2007 2,370$11.72 to $13.25 29,717 7.52% 1.15% to 2.70% -2.78% to -1.25% 2006 2,977$12.05 to $13.42 38,259 7.81% 1.15% to 2.70% 6.52% to 8.18% 2005 3,291$11.32 to $12.40 39,330 6.94% 1.15% to 2.70% -0.40% to 1.15% 2004 4,150$11.36 to $12.26 49,485 6.60% 1.15% to 2.70% 6.06% to 7.72% 2003 4,885$10.71 to $11.38 54,655 4.50% 1.15% to 2.70% 20.66% to 22.54% Oppenheimer Main Street Fund/VA 2007 13,154 $9.92 to $11.22 139,064 1.04% 1.15% to 2.70% 1.63% to 3.22% 2006 15,908 $9.76 to $10.87 164,300 1.17% 1.15% to 2.70% 11.97% to 13.71% 2005 18,526 $8.72 to $9.56 169,622 1.39% 1.15% to 2.70% 3.16% to 4.77% 2004 21,503 $8.45 to $9.12 189,299 0.82% 1.15% to 2.70% 6.53% to 8.20% 2003 18,350 $7.93 to $8.43 151,190 0.70% 1.15% to 2.70% 23.34% to 25.27% 117 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** PIMCO VIT All Asset Portfolio 2007 13,347 $12.67to $13.84 180,302 7.29% 1.00%to 2.95% 5.16%to 13.40% 2006 16,148 $12.40to $12.98 205,480 5.38% 1.00%to 2.70% 1.59%to 1.88% 2005 17,865 $12.18to $12.44 222,032 4.74% 1.40%to 2.70% 3.41%to 4.76% 2004(2) 7,585 $11.77to $11.88 90,911 5.79% 1.40%to 2.70% 10.27%to 11.23% PIMCO VIT CommodityRealReturn Strategy Portfolio 2007 8,897 $12.41to $12.87 112,433 4.81% 1.00%to 2.95% 19.64%to 22.01% 2006 8,067 $10.34to $10.62 84,388 4.62% 1.00%to 2.60% -5.58%to -5.58% 2005(3) 4,475 $10.95to $11.04 49,229 2.57% 1.40%to 2.60% 9.31%to 10.18% PIMCO VIT Emerging Markets Bond Portfolio 2007 3,644 $11.90to $12.37 44,213 5.82% 1.00%to 2.95% 2.73%to 4.76% 2006 3,050 $11.54to $11.85 35,627 5.36% 1.00%to 2.60% 5.08%to 6.48% 2005(3) 2,030 $10.84to $10.93 22,123 3.65% 1.40%to 2.60% 8.32%to 9.19% PIMCO VIT Global Bond Portfolio(Unhedged) 2007 5,408 $10.11to $10.51 55,781 3.33% 1.00%to 2.95% 6.54%to 8.65% 2006 3,080 $9.46to $9.71 29,522 3.33% 1.00%to 2.60% 1.02%to 1.97% 2005(3) 1,350 $9.27to $9.35 12,591 1.98% 1.40%to 2.60% -7.18%to -6.43% PIMCO VIT High Yield Portfolio 2007 12,978 $12.43to $14.58 173,285 7.03% 1.00%to 2.95% -1.68%to 2.48% 2006 15,336 $12.34to $13.88 201,813 6.93% 1.00%to 2.70% 4.88%to 6.21% 2005 16,429 $11.62to $13.21 202,567 6.57% 1.15%to 2.70% 1.36%to 2.94% 2004 15,047 $11.46to $12.84 182,237 6.55% 1.15%to 2.70% 6.64%to 8.31% 2003 9,969 $10.75to $11.85 112,881 7.09% 1.15%to 2.70% 19.63%to 21.50% PIMCO VIT Real Return Portfolio 2007 20,669 $11.55to $12.41 249,436 4.72% 1.00%to 2.95% 7.43%to 9.56% 2006 22,779 $10.72to $11.46 253,317 4.25% 1.00%to 2.70% -1.96%to -1.53% 2005 25,016 $10.94to $11.37 281,377 2.82% 1.40%to 2.70% -0.61%to 0.68% 2004 18,257 $11.00to $11.29 204,910 1.07% 1.40%to 2.70% 6.01%to 7.40% 2003 5,111 $10.38to $10.52 53,687 0.47% 1.40%to 2.70% 3.88%to 4.79% PIMCO VIT StocksPLUS Growth and Income Portfolio 2007 1,703 $10.12to $11.35 18,349 7.46% 1.15%to 2.70% 4.00%to 5.63% 2006 2,085 $9.66to $10.75 21,404 4.87% 1.15%to 2.70% 11.85%to 13.59% 2005 2,427 $8.68to $9.46 22,100 2.25% 1.15%to 2.60% 0.84%to 2.31% 2004 2,975 $8.61to $9.25 26,672 1.68% 1.15%to 2.60% 7.96%to 9.54% 2003 3,294 $7.98to $8.44 27,133 2.24% 1.15%to 2.60% 27.10%to 28.89% 118 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** PIMCO VIT Total Return Portfolio 2007 35,646 $13.16to $15.29 505,831 4.85% 1.00%to 2.95% 4.38%to 7.67% 2006 37,062 $12.44to $13.99 492,340 4.44% 1.00%to 2.70% 1.09%to 1.62% 2005 36,408 $12.30to $13.85 474,744 3.44% 1.15%to 2.70% -0.27%to 1.29% 2004 31,550 $12.34to $13.67 409,277 1.89% 1.15%to 2.70% 2.09%to 3.69% 2003 25,802 $12.08to $13.19 325,872 2.81% 1.15%to 2.70% 2.25%to 3.84% Seligman Global Technology Portfolio 2007 320 $7.34to $7.76 2,408 0.00% 1.15%to 2.55% 12.52%to 14.12% 2006 446 $6.27to $6.91 2,954 0.00% 1.15%to 2.55% 14.96%to 16.58% 2005 537 $5.52to $5.86 3,070 0.00% 1.35%to 2.35% 5.63%to 6.69% 2004 735 $5.18to $5.55 3,959 0.00% 1.15%to 2.55% 1.35%to 2.79% 2003 865 $5.11to $5.40 4,560 0.00% 1.15%to 2.55% 32.69%to 34.56% Seligman Smaller-Cap Value Portfolio 2007 4,672 $25.49to $28.82 126,765 0.00% 1.15%to 2.70% 1.35%to 2.95% 2006 6,020 $25.15to $28.00 159,979 0.00% 1.15%to 2.70% 18.03%to 19.86% 2005 7,502 $21.31to $23.36 167,646 9.61% 1.15%to 2.70% -6.53%to -5.07% 2004 9,464 $22.80to $24.60 224,465 0.00% 1.15%to 2.70% 16.75%to 18.58% 2003 8,463 $19.53to $20.75 170,777 0.00% 1.15%to 2.70% 45.95%to 48.23% SP Strategic Partners Focused Growth Portfolio 2007 3,429 $7.44to $8.26 26,746 0.00% 1.15%to 2.70% 11.60%to 13.36% 2006 4,431 $6.64to $7.29 30,769 0.00% 1.15%to 2.70% -3.74%to -2.24% 2005 5,876 $6.90to $7.46 42,142 0.00% 1.15%to 2.70% 11.77%to 13.52% 2004 4,978 $6.17to $6.57 31,717 0.00% 1.15%to 2.70% 6.97%to 8.64% 2003 2,377 $5.79to $6.05 14,067 0.00% 1.15%to 2.60% 22.23%to 24.02% SP International Growth Portfolio 2007 3,006 $9.29to $10.37 29,477 0.45% 1.15%to 2.70% 15.93%to 17.76% 2006 2,608 $8.02to $8.80 21,901 1.58% 1.15%to 2.70% 16.98%to 18.80% 2005 2,982 $6.85to $7.41 21,271 0.24% 1.15%to 2.70% 12.72%to 14.47% 2004 3,563 $6.08to $6.47 22,395 0.00% 1.15%to 2.70% 13.02%to 14.79% 2003 3,057 $5.38to $5.64 16,888 0.00% 1.15%to 2.70% 35.43%to 37.55% 119 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** Templeton Asset Strategy Fund 2007 599 $23.23to $28.86 15,017 17.69% 1.15%to 1.49% 8.53%to 8.78% 2006 742 $21.37to $26.53 16,958 7.31% 1.15%to 1.49% 19.60%to 19.73% 2005 897 $17.87to $22.16 17,048 3.91% 1.15%to 1.49% 2.17%to 2.41% 2004 1,066 $17.46to $21.65 19,700 2.98% 1.15%to 1.49% 14.16%to 14.39% 2003 1,279 $15.29to $18.92 20,577 2.78% 1.15%to 1.49% 30.18%to 30.47% Templeton Developing Markets Securities Fund 2007 12,859 $23.60to $29.12 342,414 2.43% 1.15%to 2.70% 25.34%to 27.30% 2006 16,614 $18.83to $22.87 351,001 1.12% 1.15%to 2.70% 24.69%to 26.63% 2005 18,819 $15.10to $18.06 317,296 1.29% 1.15%to 2.70% 24.04%to 25.99% 2004 13,491 $12.17to $14.34 183,668 1.80% 1.15%to 2.70% 21.38%to 23.28% 2003 9,753 $10.03to $11.63 110,280 1.22% 1.15%to 2.70% 48.91%to 51.60% Templeton Foreign Securities Fund 2007 14,100 $26.18to $33.50 443,786 2.13% 1.00%to 2.70% 12.36%to 14.30% 2006 16,562 $23.30to $30.02 459,162 1.33% 1.00%to 2.70% 10.98%to 18.22% 2005 17,208 $19.71to $24.44 402,655 1.25% 1.15%to 2.70% 7.24%to 8.94% 2004 16,757 $18.38to $22.44 365,141 1.14% 1.15%to 2.70% 15.36%to 17.22% 2003 16,262 $16.02to $19.16 306,069 1.87% 1.15%to 2.65% 28.75%to 30.71% Templeton Global Income Securities Fund 2007 2,675 $26.00to $34.15 84,083 1.99% 1.00%to 2.95% 7.83%to 9.96% 2006 909 $29.91to $31.13 27,726 3.17% 1.15%to 1.49% 11.47%to 11.48% 2005 1,092 $26.83to $27.92 29,837 6.41% 1.15%to 1.49% -4.37%to -4.18% 2004 1,345 $28.05to $29.14 38,359 11.07% 1.15%to 1.49% 13.19%to 13.49% 2003 1,586 $24.74to $25.69 39,856 7.75% 1.15%to 1.49% 20.80%to 21.04% Templeton Growth Securities Fund 2007 30,377 $24.71to $30.58 870,214 1.41% 1.00%to 2.95% -0.64%to 1.32% 2006 29,543 $24.80to $30.81 844,951 1.34% 1.00%to 2.70% 11.80%to 18.57% 2005 26,041 $20.92to $25.07 626,812 1.16% 1.15%to 2.70% 5.97%to 7.62% 2004 20,998 $19.74to $23.29 478,645 1.20% 1.15%to 2.70% 12.93%to 14.70% 2003 18,504 $17.65to $20.31 373,933 1.67% 1.15%to 2.60% 28.74%to 30.78% Van Kampen LIT Enterprise Portfolio 2007 20 $7.29to $7.58 149 0.61% 1.15%to 2.55% 9.83%to 11.39% 2006 28 $6.30to $6.94 186 0.52% 1.15%to 2.55% 4.39%to 5.86% 2005 35 $6.27to $6.46 226 0.87% 1.40%to 1.90% 6.12%to 6.65% 2004 45 $5.91to $6.06 269 0.36% 1.40%to 1.90% 2.09%to 2.60% 2003 52 $5.79to $5.91 305 0.65% 1.40%to 1.90% 23.51%to 24.13% 120 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to the Financial Statements (continued) December 31, 2007 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 is as follows: At December 31 For the year ended December 31 -------------------------------------------------------------------------------------- Units Unit Fair Net Assets Investment Expense Ratio Total Return Outstanding Value lowest Income lowest to to highest Ratio* highest** lowest to highest*** Van Kampen LIT Growth and Income Portfolio 2007 59 $16.27to $17.27 975 1.66% 1.15%to 2.55% 0.20%to 1.62% 2006 64 $15.42to $16.99 1,043 1.29% 1.15%to 2.55% 13.32%to 14.91% 2005 82 $14.15to $14.79 1,183 1.14% 1.15%to 1.90% 7.92%to 8.73% 2004 99 $13.11to $13.60 1,313 1.00% 1.15%to 1.90% 12.22%to 13.07% 2003 139 $11.68to $12.03 1,641 1.00% 1.15%to 1.90% 25.62%to 26.57% Van Kampen LIT Strategic Growth Portfolio 2007 462 $8.24to $9.04 4,019 0.00% 1.15%to 2.55% 13.69%to 15.30% 2006 685 $7.25to $7.84 5,196 0.00% 1.15%to 2.55% 0.05%to 1.45% 2005 863 $7.24to $7.73 6,486 0.01% 1.15%to 2.55% 4.93%to 6.41% 2004 1,047 $6.90to $7.27 7,455 0.00% 1.15%to 2.55% 4.08%to 5.55% 2003 1,289 $6.63to $6.88 8,731 0.00% 1.15%to 2.55% 23.84%to 25.58% * These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk and administrative charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. ** These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense risk and administrative charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying funds are excluded. *** These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect contract expenses of the separate account. The total return does not include any expenses assessed through the redemption of units. Inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract returns are not within the ranges presented. 1. Period from May 1, 2003 (fund commencement) to December 31, 2003 2. Period from May 3, 2004 (fund commencement) to December 31, 2004 3. Period from May 2, 2005 (fund commencement) to December 31, 2005 4. Period from May 2, 2006 (fund commencement) to December 31, 2006 5. Period from May 1, 2007 (fund commencement) to December 31, 2007
121 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Financial Statements and Supplemental Schedules December 31, 2007 and 2006 (With Report of Independent Registered Public Accounting Firm Thereon) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholder Allianz Life Insurance Company of North America: We have audited the accompanying consolidated balance sheets of Allianz Life Insurance Company of North America and subsidiaries (the Company) as of December 31, 2007 and 2006, and the related consolidated statements of operations, comprehensive income, stockholder's equity, and cash flows for each of the years in the three-year period ended December 31, 2007. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 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 financial position of Allianz Life Insurance Company of North America and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplementary information included in Schedules I, III, and IV is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole. Minneapolis, Minnesota April 16, 2008
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2007 and 2006 (in thousands, except share data) Assets 2007 2006 - ------------------------------------------------------------------------------------------------------------------ Investments: Fixed-maturity securities, at fair value (amortized cost of $39,319,355 and $35,842,155, respectively) $ 40,418,415 $ 36,211,861 Mortgage loans on real estate, net 4,402,214 3,371,961 Short-term securities 737,039 983,650 Options, non-affiliated 366,922 682,420 Options, affiliated 12,933 30,352 Real estate (net of accumulated depreciation of $30,777 in 2007 and $43,613 in 2006) 327,967 455,983 Loans to affiliates 725,826 218,553 Policy loans 169,058 146,139 Partnerships 20,501 47,716 Equity securities, at fair value (cost of $42,680 and $19,512, respectively) 46,044 28,485 Investment in equity method investees 562 1,398 - ------------------------------------------------------------------------------------------------------------------ Total investments 47,227,481 42,178,518 Cash 92,177 55,876 Accrued investment income 496,523 439,154 Receivables, affiliated - 2,112 Receivables, non-affiliated (net of allowance for uncollectible accounts of $4,819 in 2007 and $0 in 2006) 172,251 272,915 Reinsurance recoverable: Recoverable on policyholder liabilities, affiliated 723 3,446 Recoverable on policyholder liabilities, non-affiliated 4,121,293 4,175,709 Receivable on policyholder liabilities, affiliated 42 2,017 Receivable on policyholder liabilities, non-affiliated 4,218 4,305 Deferred acquisition costs 5,575,492 5,265,226 Deferred sales inducements 767,916 721,322 Goodwill 502,640 495,243 Home office property and equipment (net of accumulated depreciation of $70,030 in 2007 and $56,875 in 2006) 184,398 193,473 Value of business acquired and other intangible assets (net of accumulated amortization of $210,121 in 2007 and $195,102 in 2006) 38,614 64,333 Other assets 352,537 298,020 - ------------------------------------------------------------------------------------------------------------------ Assets, exclusive of separate account assets 59,536,305 54,171,669 Separate account assets 20,541,717 19,837,566 - ------------------------------------------------------------------------------------------------------------------ Total assets $ 80,078,022 $ 74,009,235 - ------------------------------------------------------------------------------------------------------------------ See accompanying notes to consolidated financial statements. 2 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2002 and 2001 (in thousands except share data) Liabilities and Stockholder's Equity 2007 2006 - --------------------------------------------------------------------------------------------------------- Policyholder liabilities: Policy and contract account balances $ 50,806,811 $ 45,859,327 Future policy benefit reserves 3,047,274 2,863,953 Policy and contract claims 318,105 404,802 Unearned premiums 217,407 262,504 Other policyholder funds 214,548 193,514 - --------------------------------------------------------------------------------------------------------- Total policyholder liabilities 54,604,145 49,584,100 Option liability 218,108 324,094 Payables, affiliated, net 11,658 - Accrued expenses 271,126 229,602 Deferred gain on reinsurance 68,773 166,154 Mortgage notes payable 134,123 146,900 Reinsurance payable 74,903 90,538 Commissions due and accrued 75,097 85,077 Other liabilities 227,885 113,122 - --------------------------------------------------------------------------------------------------------- Liabilities, exclusive of separate account liabilities 55,685,818 50,739,587 Separate account liabilities 20,541,717 19,837,566 - --------------------------------------------------------------------------------------------------------- Total liabilities 76,227,535 70,577,153 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Stockholder's equity: Common stock, $1 par value, 40,000,000 shares authorized; 20,000,001 shares issued and outstanding at December 31, 2007 and 2006 20,000 20,000 Class A, Series A Preferred stock, $1 par value, 8,909,195 shares authorized, issued, and outstanding; liquidation preference of $189,366 and $189,366 at December 31, 2007 and 2006, respectively 8,909 8,909 Class A, Series B Preferred stock, $1 par value, 10,000,000 shares authorized; 9,994,289 shares issued and outstanding; liquidation preference of $199,167 and $199,167 at December 31, 2007 and 2006, respectively 9,994 9,994 Loan to affiliate (250,000) (250,000) Additional paid-in capital 2,273,371 2,123,371 Retained earnings 1,439,086 1,384,229 Accumulated other comprehensive income 349,127 135,579 - --------------------------------------------------------------------------------------------------------- Total stockholder's equity 3,850,487 3,432,082 - --------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity $ 80,078,022 $ 74,009,235 - ---------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 3
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 2007, 2006 and 2005 (in thousands) 2007 2006 2005 - ------------------------------------------------------------------------------------------------------------------ Revenue: Annuity considerations and policy fees $ 253,038 $ 279,238 $ 308,493 Life insurance premiums 56,806 52,888 52,557 Accident and health premiums 311,500 545,015 483,510 Other life policy considerations 89,309 79,392 76,556 - ------------------------------------------------------------------------------------------------------------------ Total premiums and considerations 710,653 956,533 921,116 Premiums and annuity considerations, affiliated, ceded 37 387 712 Premiums and annuity considerations, non-affiliated, ceded 255,357 320,209 272,555 - ------------------------------------------------------------------------------------------------------------------ Net premiums and considerations 455,259 635,937 647,849 Net investment income, affiliated 31,935 39,023 39,055 Net investment income, non-affiliated 2,129,625 1,650,665 1,386,893 Realized investment (losses) gains, net (710,978) (579,864) 61,261 Realized gain on sale of interest of equity method investee - 22,451 - Fee and commission revenue 199,356 160,294 101,127 Amortization of deferred gain on reinsurance 99,348 58,970 16,647 Other 34,338 43,761 22,597 - ------------------------------------------------------------------------------------------------------------------ Total revenue 2,238,883 2,031,237 2,275,429 - ------------------------------------------------------------------------------------------------------------------ Benefits and expenses: Annuity benefits 69,277 133,100 272,413 Life insurance benefits 177,968 133,860 124,623 Accident and health insurance benefits 294,393 470,041 422,480 Net interest credited to policyholder account values 1,031,830 725,296 707,796 - ------------------------------------------------------------------------------------------------------------------ Total benefits 1,573,468 1,462,297 1,527,312 Benefit recoveries 429,655 403,779 393,397 - ------------------------------------------------------------------------------------------------------------------ Net benefits 1,143,813 1,058,518 1,133,915 Commissions and other agent compensation 913,444 1,035,765 1,238,623 General and administrative expenses 772,992 625,188 546,218 Change in deferred acquisition costs, net (650,735) (1,049,646) (1,004,879) - ------------------------------------------------------------------------------------------------------------------ Total benefits and expenses 2,179,514 1,669,825 1,913,877 - ------------------------------------------------------------------------------------------------------------------ Income from operations before income taxes and equity earnings 59,369 361,412 361,552 - ------------------------------------------------------------------------------------------------------------------ Income tax expense (benefit): Current 64,494 81,510 54,032 Deferred (60,705) 28,558 (20,076) - ------------------------------------------------------------------------------------------------------------------ Total income tax expense 3,789 110,068 33,956 - ------------------------------------------------------------------------------------------------------------------ Income before equity earnings 55,580 251,344 327,596 Equity in earnings of preferred stock of affiliate, net of tax - - 34,378 Equity in earnings of equity method investees, net of tax (308) 3,180 5,482 - ------------------------------------------------------------------------------------------------------------------ Net income $ 55,272 $ 254,524 $ 367,456 - ------------------------------------------------------------------------------------------------------------------ See accompanying notes to consolidated financial statements. 4 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Years ended December 31, 2007, 2006 and 2005 (in thousands) 2007 2006 2005 - ------------------------------------------------------------------------------------------------------------------------------ Net income $ 55,272 $ 254,524 $ 367,456 - ------------------------------------------------------------------------------------------------------------------------------ Foreign currency translation adjustments, net of tax 6,520 130 1,091 - ------------------------------------------------------------------------------------------------------------------------------ Unrealized gains (losses) on post-retirement obligation: Unrealized net actuarial gains arising during the period, net of tax expense of $0, $0, and $0 in 2007, 2006, and 2005, respectively 78 - - Unrealized prior service cost arising during the period, net of tax benefit of $606, $0, and $0 in 2007, 2006, and 2005, respectively (1,190) - - - ------------------------------------------------------------------------------------------------------------------------------ Total unrealized post-retirement obligation losses (1,112) - - - ------------------------------------------------------------------------------------------------------------------------------ Unrealized losses on fixed-maturity and equity securities: Unrealized holding losses arising during the period, net of effect of shadow adjustments of $361,836, $90,188, and $(285,690) in 2007, 2006, and 2005, respectively, and net of tax (benefit) of $(137,044), $(194,881), and $(81,493) in 2007, 2006, and 2005, respectively (253,995) (362,437) (151,343) Decrease (increase) in unrealized holding losses due to reclassification adjustment for realized (losses) gains included in net income, net of tax (benefit) expense of $(248,842), $(195,095), and $21,441 in 2007, 2006, and 2005, respectively 462,135 362,318 (39,820) - ------------------------------------------------------------------------------------------------------------------------------ Total unrealized holding gains (losses) 208,140 (119) (191,163) - ------------------------------------------------------------------------------------------------------------------------------ Total other comprehensive income (loss) 213,548 11 (190,072) - ------------------------------------------------------------------------------------------------------------------------------ Total comprehensive income $ 268,820 $ 254,535 $ 177,384 - ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 5
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Statements of Stockholder's Equity Years ended December 31, 2007, 2006 and 2005 (in thousands) Accumulated Additional other Total Common Preferred Loan to paid-in Retained comprehensive stockholder's stock stock affiliate capital earnings income equity ---------- ---------- ------------ ------------ ------------- ------------------ ------------------- 2005: Balance, beginning of year $ 20,000 $ 18,903 $ (250,000) $ 2,123,371 $ 997,249 $ 323,218 $ 3,232,741 Comprehensive income: Net income - - - - 367,456 - 367,456 Net unrealized loss on investments, net of shadow adjustments and deferred taxes - - - - - (191,163) (191,163) Net unrealized gain on foreign currency translation, net of deferred taxes - - - - - 1,091 1,091 ------------------- Total comprehensive income 177,384 Dividends paid - - - - (105,000) - (105,000) ---------- ---------- ------------ ------------ ------------- ------------------ ------------------- ------------ Balance, end of year $ 20,000 $ 18,903 $ (250,000) $ 2,123,371 $ 1,259,705 $ 133,146 $ 3,305,125 ====================== ============ ============ ============= ================== =================== 2006: Balance, beginning of year $ 20,000 $ 18,903 $ (250,000) $ 2,123,371 $ 1,259,705 $ 133,146 $ 3,305,125 Comprehensive income: Net income - - - - 254,524 - 254,524 Net unrealized loss on investments, net of shadow adjustments and deferred taxes - - - - - (119) (119) Net unrealized gain on foreign currency translation, net of deferred taxes - - - - - 130 130 ------------------- Total comprehensive income 254,535 Adjustment to initially apply SFAS No. 158, net of tax - - - - - 2,422 2,422 Dividends paid - - - - (130,000) - (130,000) ---------- ---------- ------------ ------------ ------------- ------------------ ------------------- ---------- Balance, end of year $ 20,000 $ 18,903 $ (250,000) $ 2,123,371 $ 1,384,229 $ 135,579 $ 3,432,082 ========== ========== ============ ============ ============= ================== =================== 2007: Balance, beginning of year $ 20,000 $ 18,903 $ (250,000) $ 2,123,371 $ 1,384,229 $ 135,579 $ 3,432,082 Comprehensive income: Net income - - - - 55,272 - 55,272 Net unrealized gain on investments, net of shadow adjustments and deferred taxes - - - - - 208,140 208,140 Net unrealized loss on post-retirement obligation, net of deferred taxes - - - - - (1,112) (1,112) Net unrealized gain on foreign currency translation, net of deferred taxes - - - - - 6,520 6,520 ------------------- Total comprehensive income 268,820 Adjustment to initially apply EITF 06-5 net of tax - - - - (415) - (415) Capital contribution - - - 150,000 - - 150,000 ---------- ------------ ------------ ------------- ------------------ ---------- ------------------- Balance, end of year $ 20,000 $ 18,903 $ (250,000) $ 2,273,371 $ 1,439,086 $ 349,127 $ 3,850,487 ========== ========== ============ ============ ============= ================== ===================
See accompanying notes to consolidated financial statements. 6
2007 2006 2005 - ----------------------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) operating activities: Net income $ 55,272 $ 254,524 $ 367,456 - ----------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Realized investment losses (gains) 701,204 543,260 (65,286) Purchases of trading securities (2,196,297) (1,345,475) (5,852,298) Sale and other redemptions of trading securities 558,380 198,668 2,521,082 Unrealized loss on annuity-related options and gross reserves 347,575 912,662 339,062 Deferred income tax (benefit) expense (60,705) 28,558 (20,076) Charges to policy account balances (73,808) (69,941) (65,114) Gross interest credited to policy account balances 1,041,726 730,546 703,795 Amortization of (discount) premium, net (4,942) 111,697 49,121 Equity in earnings of preferred stock of affiliate - - (34,378) Equity in earnings of equity method investees 111 (1,913) (7,088) Change in: Accrued investment income (57,254) (72,326) (97,452) Receivables 103,102 (106,654) (22,003) Reinsurance recoverable 59,201 (84,138) 307,987 Deferred acquisition costs (650,735) (1,049,646) (1,004,879) Deferred sales inducements (83,170) (139,140) (193,100) Future policy benefit reserves 183,321 139,631 132,727 Policy and contract claims (86,869) 8,944 96,526 Other policyholder funds 21,034 (66,312) (32,754) Unearned premiums (15,566) 20,243 (20,346) Reinsurance payable (15,635) 19,376 (4,657) Deferred gain on reinsurance (97,381) 65,905 (4,381) Current tax recoverable (80,533) (3,977) (93,081) Accrued expenses and other liabilities 163,027 115,034 62,129 Commissions due and accrued (9,980) (7,224) (19,752) Corporate-owned life insurance (6,670) (17,462) (5,241) Mortgage loan allowance 9,884 11,935 4,025 Other, net (83,309) (23,545) (22,012) - ----------------------------------------------------------------------------------------------------------------------------- Total adjustments (334,289) (81,294) (3,347,444) - ----------------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by operating activities $ (279,017)$ 173,230 $ (2,979,988) - ----------------------------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 7 2007 2006 2005 - -------------------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) operating activities $ (279,017)$ 173,230 (2,979,988) - -------------------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) investing activities: Purchase of available-for-sale fixed-maturity securities (5,081,265) (10,363,440) (14,409,048) Purchase of available-for-sale equity securities (80,172) (34,641) (648,695) Purchase of real estate (6,667) (152,003) (53,543) Purchase of options (990,171) (847,025) (594,948) Funding of mortgage loans on real estate (1,296,133) (1,434,435) (1,030,599) Sale and other redemptions of fixed-maturity securities 2,092,453 6,748,812 8,521,269 Matured fixed-maturity securities 434,999 517,786 463,143 Sale of equity securities, tax-free exchanges, and spin-offs 68,230 510,179 1,026,760 Sale of real estate 157,179 57,912 45,442 Exercise and expiration of options 407,686 452,654 200,393 Change in securities held under agreements to repurchase - (559,615) 352,964 Repayment of mortgage loans on real estate 255,996 178,323 91,722 Net change in short-term securities 246,611 (839,436) 656,249 Purchase of home office property and equipment (6,638) (75,775) (40,416) Purchase of interest in equity method investees (12,847) (75,026) (51,958) Sale of interest in equity method investee - 23,588 - Purchase of subsidiary, net of cash acquired (11,655) - (11,868) Sale of preferred stock of affiliate - - 559,408 Change in loan to affiliate (507,273) 11,447 - Options written 603,961 699,877 324,447 Other, net 2,545 (14,964) (12,518) - -------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,723,161) (5,195,782) (4,611,796) - -------------------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) financing activities: Policyholders' deposits to account balances 5,858,335 7,201,051 9,525,780 Policyholders' withdrawals from account balances (3,309,471) (2,563,981) (1,941,842) Policyholders' net transfers between account balances 1,278,775 363,919 48,773 Change in amounts drawn in excess of bank balances 73,617 (23,476) (50,517) Capital contribution from parent company 150,000 - - Change in mortgage notes payable (12,777) 40,236 19,393 - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 4,038,479 5,017,749 7,601,587 - -------------------------------------------------------------------------------------------------------------------------- Net change in cash 36,301 (4,803) 9,803 Cash at beginning of year 55,876 60,679 50,876 - -------------------------------------------------------------------------------------------------------------------------- Cash at end of year $ 92,177 $ 55,876 $ 60,679 - -------------------------------------------------------------------------------------------------------------------------- Supplemental data: Non-cash investing and financing activities: Dividend to parent company $ - $ (130,000) $ (105,000) - ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 8 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) (1) ORGANIZATION Allianz Life Insurance Company of North America (the Company) and subsidiaries is a wholly owned subsidiary of Allianz of America, Inc. (AZOA), a wholly owned subsidiary of Allianz Societas Europaea (Allianz SE), a European company incorporated in Germany. The Company is a life insurance company licensed to sell annuity, group accident and health, and group and individual life policies in the United States, Canada, and several U.S. territories. Based on 2007 statutory net premium written, 97%, 2%, and 1% of the Company's business is annuity, life insurance, and accident and health, respectively. The annuity business is comprised of fixed-indexed, variable, one-year deferred, and five-year deferred annuities representing 61%, 37%, 1%, and 1% of 2007 statutory net premium written, respectively. As a result of the 2006 exiting of certain health business discussed in note 13, going forward accident and health business will be comprised primarily of long-term care. Life business is comprised of both traditional and group life. Life business includes products with guaranteed premiums and benefits and consists principally of whole life and term insurance policies, universal life policies, limited payment contracts, and certain annuity products with life contingencies. The Company's primary distribution channels are through independent agents, broker/dealers, and third-party marketing organizations. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which vary in certain respects from accounting practices prescribed or permitted by state insurance regulatory authorities. The accounts of the Company's primary subsidiary, Allianz Life Insurance Company of New York, and other less significant subsidiaries have been consolidated. All significant intercompany balances and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect reported amounts of 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. Future events, including changes in mortality, morbidity, interest rates, capital markets, and asset valuations could cause actual results to differ from the estimates used in the consolidated financial statements. Such changes in estimates are recorded in the period they are determined. INVESTMENT PRODUCTS AND UNIVERSAL LIFE BUSINESS Investment products consist primarily of fixed-indexed, variable, and deferred annuity products. Premium receipts are reported as deposits to the contractholders' accounts. Annuity considerations and policy fees on the Consolidated Statements of Operations represent asset fees, cost of insurance charges, administrative fees, and surrender charges for investment products. Similar charges for universal life insurance are included in other life policy considerations on the Consolidated Statements of Operations. These fees have been earned and assessed against contractholders on a daily or monthly basis throughout the contract period and are recognized as revenue when assessed and earned. Amounts assessed that represent compensation to the insurance enterprise for services to be provided in future periods are not earned in the period assessed. Such amounts shall be reported as unearned premiums, which includes unearned revenue reserves (URR), and recognized in income over the period benefited using the same assumptions and factors used to amortize capitalized acquisition costs. Surrender charges are recognized upon surrender of a contract in accordance with contractual terms. The change in fair value of embedded derivatives in fixed-indexed and variable products is included in net investment 9 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) income. Benefits consist of interest credited to contractholders' accounts and claims incurred in excess of the contractholders' account balance and are included in net interest credited to policyholder account values and annuity benefits, respectively, on the Consolidated Statements of Operations. LIFE AND ACCIDENT AND HEALTH INSURANCE Premiums on traditional life products are recognized as earned when due. Benefits and expenses are associated with earned premiums so as to result in recognition of profits over the life of the contracts. This association is accomplished by establishing provisions for future policy benefits and deferring and amortizing related acquisition costs. Accident and health premiums are recognized as earned on a pro-rata basis over the risk coverage periods. Benefits and expenses are recognized as incurred. GOODWILL Goodwill is the excess of the amount paid to acquire a company over the fair value of its tangible net assets, value of business acquired (VOBA), other identifiable intangible assets, and valuation adjustments (such as impairments), if any. Goodwill is evaluated annually for impairment at the reporting unit level. Goodwill of a reporting unit is also tested for impairment on an interim basis if an event occurs or circumstances change, which may indicate a reduction of the fair value of a reporting unit below its carrying amount. The process of evaluating goodwill for impairment requires several judgments and assumptions to be made to determine the fair value of the reporting units, including the method used to determine fair value; discount rates; expected levels of cash flows; and revenues and earnings. If impairment is indicated, the carrying value will be reduced to its fair value with a corresponding charge to earnings. VALUE OF BUSINESS ACQUIRED AND OTHER INTANGIBLE ASSETS The value of insurance in-force purchased is recorded as the 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 (DAC). The amortization period is expected to be approximately 20 years from the date the business was acquired; however, the Company continually monitors this assumption. If estimated gross profits differ from expectations, the amortization of VOBA is adjusted on a retrospective or prospective basis, as appropriate. Adjustments to VOBA are made to reflect the corresponding impact on the present value of expected future gross profits from unrealized gains and losses on available-for-sale investments used to support policyholder liabilities (commonly known as shadow VOBA). These adjustments are included in accumulated other comprehensive income and are explained further in the investments section of this note. The recoverability of VOBA is evaluated annually, or earlier if factors warrant, based on estimates of future earnings related to the insurance in-force purchased. If the existing insurance liabilities, together with the present value of future net cash flows from the blocks of business acquired, are not sufficient to recover VOBA, the difference, if any, is charged to expense through accelerated VOBA amortization. Intangible assets are identified by the Company in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, which requires an intangible asset to be recognized apart from goodwill when it arises from contractual or legal rights or it is capable of being separated 10 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) and valued then sold, transferred, licensed, rented, or exchanged. The Company determines the useful life and amortization period for each intangible asset identified. An intangible asset with a determinable life is amortized over that period, while an intangible asset with an indefinite useful life is not amortized. The Company's intangible assets include trademarks, agent lists, and non-compete agreements that were acquired as a result of the Company's ownership in field marketing organizations. These intangible assets were assigned values using the present value of projected future cash flows as a base and are generally amortized over five years using the straight-line method. Also included in the Company's intangible assets is the trade name and service mark of a broker-dealer acquired during 2005, and state insurance licenses acquired in 2007. The trade name, service mark, and state insurance licenses were valued using the present value of future cash flows and were determined to have an indefinite useful life. Recoverability of the value of the amortizing intangible assets is assessed under SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which states that long-lived assets shall be tested for recoverability whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Recoverability of the value of the non-amortizing intangible assets is assessed under SFAS No. 142, which states that non-amortizing intangible assets shall be tested for recoverability annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. 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 to the extent recoverable from future policy revenues and gross profits. For interest-sensitive products and variable annuity contracts, acquisition costs are amortized in relation to the present value of expected future gross profits from investment margins and mortality, morbidity, and expense charges. 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 traditional life and group life products, such costs are amortized over the projected earnings pattern of the related policies using the same actuarial assumptions used in computing future policy benefit reserves. DAC is reviewed for recoverability, at least annually, and adjusted when necessary. Adjustments to DAC are made to reflect the corresponding impact on the present value of expected future gross profits from unrealized gains and losses on available-for-sale investments used to support policyholder liabilities (commonly known as shadow DAC). These adjustments are included in accumulated other comprehensive income and are explained further in the investments section of this note. Changes in assumptions can have an impact on the amount of DAC reported for annuity and life insurance products and their related amortization patterns. In the event experience differs from assumptions or assumptions are revised, the Company is required to record an increase or decrease in DAC amortization expense (DAC unlocking). In general, increases in the estimated investment spreads and fees result in increased expected future profitability and may lower the rate of DAC amortization, while increases in lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of DAC amortization. The Company formally evaluates the appropriateness of the best-estimate assumptions on an annual basis. If the economic environment or policyholder behavior changes quickly and substantially, assumptions will be reviewed more frequently to affirm best estimates. Any resulting DAC unlocking is reflected prospectively in the Consolidated Statements of Operations. 11 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Adjustments may also be made to the estimated gross profits related to DAC that correspond with deferred annuities and universal life products for investment activity, such as bond defaults on fixed-maturity securities, write-downs on other-than-temporarily-impaired fixed-maturity securities, and trading gains and losses. Management action may include assumption changes in the DAC models, such as adjustments to expected future gross profits used, as well as policyholder changes, such as credited rate or cap changes. This approach applies to fixed-maturity securities purchased as investment grade only and not noninvestment grade items that were purchased with other yield considerations. See further discussion of the DAC unlocking in note 9. The Company assesses internal replacements on insurance contracts to determine whether such modifications significantly change the contract terms. An internal replacement represents a modification in product benefits, features, rights or coverages that occurs by the exchange of an insurance contract for a new insurance contract, or by amendment, endorsement or rider to a contract, or by the election of a feature or coverage within a contract. If the modification substantially changes the contract, the remaining DAC on the original contract are immediately expensed and any new DAC on the replacement contract are deferred. If the contract modification does not substantially change the contract, DAC amortization on the original contract continues and any new acquisition costs associated with the modification are immediately expensed. DEFERRED SALES INDUCEMENTS Sales inducements are product features that enhance the investment yield to the contractholder on the contract. The Company offers two types of sales inducements on certain universal life and annuity contracts. The first type, an immediate bonus, increases the account value at inception, and the second type, a persistency bonus, increases the account value at the end of a specified period. Annuity sales inducements are deferred as paid or credited to contractholders and life sales inducements are deferred and recognized as part of the liability for policy benefits. Deferred sales inducements (DSI) are amortized over the expected life of the contract in a manner similar to DAC and are reviewed annually for recoverability. Amortization is recorded in benefits on the Consolidated Statements of Operations. DSI related to a persistency bonus are recorded in life insurance benefits on the Consolidated Statements of Operations. DSI related to an immediate bonus are shown as a reduction of premium within annuity considerations and policy fees on the Consolidated Statements of Operations. Adjustments to DSI are made to reflect the corresponding impact on the present value of expected future gross profits from unrealized gains and losses on available-for-sale investments used to support policyholder liabilities (commonly known as shadow DSI). These adjustments are included in accumulated other comprehensive income and are explained further in the investments section of this note. Adjustments may also be made to DSI related to deferred annuities for investment activity, such as bond defaults on fixed-maturity securities, write-downs on other-than-temporarily-impaired fixed-maturity securities, and trading gains and losses. Management action may include assumption changes in the DSI models, such as adjustments to expected future gross profits used, as well as policyholder changes, such as credited rate changes. This approach applies to fixed-maturity securities purchased as investment grade only and not noninvestment grade items that were purchased with other yield considerations. 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 2.5% to 6.0%. 12 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) POLICY AND CONTRACT ACCOUNT BALANCES Policy and contract account balances for interest-sensitive products, which include universal life and fixed deferred annuities, are generally carried at accumulated contract values. For fixed-indexed annuity products, the policyholder obligation is divided into two parts - one part representing the value of the underlying base contract (host contract) and the second part representing the fair value of the expected index benefit over the life of the contract. The host contract is valued using principles consistent with similar deferred annuity contracts without an index benefit. The index benefit is valued at fair value using current capital market assumptions, along with estimates of future policyholder behavior. The fair value determination of the index benefit is sensitive to the economic market and interest rate environment, as it is discounted at current market interest rates. There is volatility in this liability due to these external market sensitivities. Certain two-tier fixed annuity products provide for benefits payable upon annuitization such as period-certain and life-contingent payout options. An additional annuitization reserve is established using assumptions consistent with those used in estimating gross profits for purposes of amortizing DAC. Policy and contract account balances for variable annuity products are carried at accumulated contract values. Any additional reserves for any death and income benefits that may exceed the accumulated contract values are established using a range of economic scenarios and are accrued for using assumptions consistent with those used in estimating gross profits for purposes of amortizing DAC. Additional reserves for accumulation benefits that may exceed account values are established using capital market assumptions along with estimates of future policyholder behavior. POLICY AND CONTRACT CLAIMS Policy and contract claims include the liability for claims reported but not yet paid, claims incurred but not yet reported (IBNR), and claim settlement expenses as of December 31 on the Company's accident and health business. Development methods are generally used in the determination of IBNR. In cases of limited experience or lack of credible claims data, loss ratios are used to determine an appropriate IBNR. Claim and IBNR liabilities of a short-term nature are not discounted, but those claim liabilities resulting from disability income or long-term care benefits include interest and mortality discounting. REINSURANCE The Company assumes and cedes business with other insurers. Reinsurance premium and benefits paid or provided are accounted for in a manner consistent with the basis used in accounting for original policies issued and the terms of the reinsurance contracts. Insurance liabilities are reported before the effects of reinsurance. Future policy benefit reserves, policy and contract account balances, and unpaid claims covered under reinsurance contracts are recorded as a reinsurance recoverable. Amounts paid or deemed to have been paid for claims covered by reinsurance contracts are recorded as a reinsurance receivable. Reinsurance recoverables are recognized in a manner consistent with the liabilities related to the underlying reinsured contracts. Amounts due to other insurers on assumed business are recorded as a reinsurance payable. The gain recognized when the Company enters into a coinsurance agreement with a third-party reinsurer is deferred and recorded in deferred gain on reinsurance on the Consolidated Balance Sheets. The gains are amortized into operations over either the revenue-producing period or the claims run-off period, as appropriate, of the related reinsured policies. 13 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) INVESTMENTS The Company classifies certain fixed-maturity and equity securities as "available-for-sale," and accordingly, the securities are carried at fair value, and related net unrealized gains and losses are credited or charged directly to accumulated other comprehensive income in stockholder's equity, net of tax and related adjustments to DAC, DSI, VOBA, and reserves (commonly referred to as shadow adjustments). The adjustments to DAC, DSI, and VOBA represent the change in amortization that would have been required as a charge or credit to operations had such unrealized amounts been realized. The adjustment to reserves represents the increase or decrease in the reserve balance that would have been required as a charge or credit to operations had such unrealized amounts been realized. During 2005, the Company created a new portfolio of certain fixed-maturity and equity securities classified as "trading," and accordingly, the securities are carried at fair value, and related unrealized gains and losses are reflected as realized investment gains and losses within the Consolidated Statements of Operations. The trading portfolio was established to attempt to economically hedge risk associated with liabilities related to fixed-indexed annuities. By policy, the Company invests primarily in high-grade marketable securities. Dividends are accrued on the date they are declared. Interest is accrued as earned. Securities held under repurchase agreements and forward commitments are also carried at fair value. Mortgage-backed securities and structured securities are amortized using anticipated prepayments and are accounted for using the retrospective method. Prepayment assumptions for loan-backed securities are obtained from various external sources or internal estimates. Premiums or discounts on fixed-maturity securities are amortized using the constant yield method. Short-term securities, which include certificates of deposit, are carried at amortized cost. Policy loans are reflected at unpaid principal balances. For mortgage-backed securities and structured securities, the Company recognizes income using a constant effective yield method based on prepayment assumptions and the estimated economic life of the securities. When estimated prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. Any resulting adjustment is included in net investment income on the Consolidated Statements of Operations. Mortgage loans on real estate are reflected at unpaid principal balances adjusted for an allowance for uncollectible balances. Interest on mortgage loans is accrued on a monthly basis and recorded in net investment income on the Consolidated Statements of Operations. The Company analyzes loan impairment at least once a year when assessing the adequacy of the allowance for uncollectible balances. The Company evaluates the mortgage loan reserve to ensure that the estimate is based on the industry default and loss studies and historical default rates for the Company as compared with default rates for the industry group data obtained from the American Council of Life Insurers. The Company does not accrue interest on impaired loans and accounts for interest income on such loans on a cash basis. The Company's intent is to hold mortgage loans until paid in full. The loans to affiliates are carried at cost. Interest on the loans to affiliates is accrued monthly, with payments received semi-annually. Real estate is carried at cost less accumulated depreciation using the Modified Accelerated Cost Recovery System (MACRS) method over 39 years at acquisition, and improvements and additions are depreciated using the straight-line method over the remaining life of the real estate. At December 31, 2006, some partnerships were accounted for on the equity basis and some were accounted at cost on the Consolidated Balance Sheets. At December 31, 2007, partnerships are recorded at the contracted sale value, which represents fair value of the partnerships. Changes in carrying value are included in net investment income on the Consolidated Statements of Operations. The fair value of fixed-maturity securities, securities held under agreements to repurchase, and equity securities are obtained from third-party pricing sources whenever possible, except for short-term securities that are priced at amortized cost. In certain cases, including private assets as well as certain difficult-to-price securities, internal pricing models may be used that are based on market proxies. The internal pricing models use yield spreads versus U.S. treasury bonds to estimate a market price; approximately 2.5% of the fixed-maturity securities are 14 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) valued using this method. The models also use market yields of corporate securities with credit and maturity characteristics similar to the security being priced to derive a spread to treasuries, approximately 0.4% of the fixed-maturity securities are valued using this method. All prices that are not supplied by pricing vendors are reviewed and approved by the AZOA Head of Fixed Income and further reviewed and approved by the AZOA Chief Operating Officer or AZOA Compliance Officer. The fair value of mortgage loans on real estate has been calculated using discounted cash flows and is based on pertinent information available to management as of year-end. The fair value of the options is derived internally, by calculating their expected discounted cash flows, using a set of calibrated, risk-neutral stochastic scenarios, including a market data monitor, a market data model generator, a stochastic scenario calibrator, and the actual asset pricing calculator. Fair value of loans to affiliates is calculated by management using the market price of a financial instrument with similar characteristics. Short-term securities, which include certificates of deposit, are carried at amortized cost, which approximates fair value. Policy loan balances, which are supported by the underlying cash value of the policies, approximate fair value. Realized gains and losses are computed based on the sale lots with the highest cost basis on the trade date. Those lots are sold first. The Company adjusts DAC, DSI, and VOBA for unrealized gains and losses on available-for-sale investments that support policyholder liabilities. Changes in the fair value of available-for-sale investments are reflected as a direct charge or credit to accumulated other comprehensive income in stockholder's equity, net of related adjustments for DAC, DSI, VOBA, and deferred taxes that would have been recorded if these investments had been sold as of the Balance Sheet date. Changes in the fair value of trading investments are recorded as realized investment gains (losses) on the Consolidated Statements of Operations. The Company reviews the entire available-for-sale investment portfolio each quarter to determine whether or not declines in fair value are other-than-temporary. The Company views equity securities that have a fair value of at least 20% below average cost at the end of a quarter or are in an unrealized loss position for nine consecutive months as other-than-temporarily impaired. However, other factors, including market analysis, current events, and management's judgment, are also used to determine whether equity securities are considered other-than-temporarily impaired and may result in an equity security being impaired. All previously impaired equity securities will also incur additional impairments should the fair value fall below the book value. For the year ended December 31, 2006, the Company adopted Financial Accounting Standard Board (FASB), FASB Staff Position (FSP) FSP FAS 115-1 and FAS 124-1, THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS (FSP FAS 115-1). The Company continues to evaluate factors in addition to average cost and fair value, including credit quality, market analysis, current events, and management's judgment, to determine whether fixed-income securities are considered other-than-temporarily impaired. In addition, FSP FAS 115-1 requires that the Company evaluate other-than-temporary impairments on available-for-sale fixed-maturity securities based on additional factors. Specifically, declines in value resulting from changes in risk-free interest rates must also be considered. If a fixed-maturity security's fair market value is less than its amortized cost value, an impairment loss must be recorded unless management can assert its ability and intent to hold until recovery. The Company's absence of control over the investment manager's decision to sell (or hold) renders the Company unable to assert ability to hold to recovery and will therefore require the Company to classify all impairments as other-than-temporary and recognize an impairment loss in the period of the decline. In periods subsequent to the recognition of an other-than-temporary impairment loss, the impaired fixed-maturity security must be accounted for as if it had been purchased on the date of the impairment. That is, the discount or reduced premium recorded from the fixed-maturity security would be accreted over its remaining life in a prospective manner. Impairments in the value of securities held by the Company, considered to be other-than-temporary, are recorded as a reduction of the cost of the security, and a corresponding realized loss is recognized in the Consolidated Statements of Operations. The Company adjusts DAC, DSI, and VOBA for impairments on fixed-maturity securities, as discussed in their respective sections of this note. 15 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) INVESTMENTS RECORDED USING THE EQUITY METHOD The Company uses the equity method of accounting for various organizations in which the Company holds a minority interest. The Company's proportionate share of gains or losses is reflected in equity in earnings of equity method investees on the Consolidated Statements of Operations. ACCOUNTING FOR OPTION AND FUTURES CONTRACTS The Company provides additional benefits through certain life and annuity products, which may increase the policy annuitization value based on the growth in the Standard and Poor's (S&P) 500 index, the NASDAQ 100 index, the Financial Times Stock Exchange (FTSE) 100, and an index comprised of a blend of the Dow Jones Industrial Average, FTSE 100, Lehman Brothers U.S. Aggregate, and the Russell 2000. In addition, certain variable annuity contracts provide minimum guaranteed benefits that do not fluctuate with interest rates. The Company has analyzed the characteristics of these benefits and have entered into over-the-counter (OTC) option contracts and exchange-traded futures contracts tied to an appropriate underlying index with similar characteristics in order to attempt to economically hedge these risks. The Company began entering into exchange-traded futures contracts in 2005 to attempt to increase the effectiveness of the economic hedge. Management monitors correlation of in-force amounts and option and futures contract values to ensure satisfactory matching. If persistency assumptions were to deviate significantly from anticipated rates, management would purchase or sell option and futures contracts as deemed appropriate or take other actions. For products based on the growth of the S&P 500 index, the NASDAQ 100 index, and the FTSE 100, the Company transacts in European-Asian call-option contracts. The strike price depends on the product, index period, cap, and credited rate. Four types of options are purchased: five-year options with daily averaging of the index during the last year of the contract, one-year call spread with monthly averaging of the index, 1 and 3 year monthly sum Cliquet options, and 1-year forward/1-month call options. In addition, the Company employed derivative strategies of transacting in combinations of call options, put spread options, and exchange-traded futures contracts. These derivatives are based on the representative index, can be one month to one year in length, and are point to point. For variable annuity products that provide minimum guaranteed benefits, the Company's derivative strategy entails using a combination of buying one-year put options and writing one-year call options and transacting in futures contracts tied to a representative index with similar characteristics to attempt to economically hedge these risks, and are point to point. The OTC option contracts are reported at fair value on the Consolidated Balance Sheets. The fair value of the options are derived internally and deemed by management to be reasonable. The process of deriving internal derivative prices requires the Company to calibrate Monte Carlo scenarios to actual market information. The calibrated scenarios are applied to derivative cash flow models to calculate fair value prices for the derivatives. The liability for the benefits is reported in policy and contract account balances on the Consolidated Balance Sheets. Changes in unrealized gains and losses on the option contracts are recorded net of changes in the related policyholder balances for benefits and are included in net investment income on the Consolidated Statements of Operations. Incremental gains and losses from expiring options are included in net investment income on the Consolidated Statements of Operations. Futures contracts do not require an initial cash outlay and the Company has agreed to daily net settlement based on movements of the representative index. Therefore, no asset or liability is recorded on the Consolidated Balance Sheets. Gains and/or losses on futures contracts are included in net investment income on the Consolidated Statements of Operations. The Company is required to post collateral for futures contracts by the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), and London International Financial Futures Exchange (LIFFE). The Company retains ownership of the collateral but the collateral resides in an account designated by the exchange and the collateral is subject to specific exchange rules regarding 16 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) rehypothecation. Collateral posted at December 31, 2007 and 2006 had a fair value of $668,385 and $602,166, respectively, and is included in fixed-maturity securities on the Consolidated Balance Sheets. Realized (losses) gains from option contracts used to attempt to economically hedge certain life and annuity products tied to the S&P 500 index or NASDAQ 100 index were $(211,217), $127,367, and $(21,346) for the years ended December 31, 2007, 2006, and 2005, respectively. Realized gains (losses) on the exercise of options were $10,743, $80,182, and $(99,501) in 2007, 2006, and 2005, respectively. Net realized (losses) gains on futures were $(46,340), $459,046, and $84,970 in 2007, 2006, and 2005, respectively. Increases in the policy and contract account balance liability for the index benefit of certain annuity products were $152,379, $1,096,386, and $209,419 in 2007, 2006, and 2005, respectively. Realized gains (losses) from option contracts used to attempt to economically hedge certain guaranteed benefits were $15,502, $(2,976), and $(1,454) for the years ended December 31, 2007, 2006, and 2005, respectively. Realized losses on the exercise of options were $(24,484), $(20,388), and $(9,642) in 2007, 2006, and 2005, respectively. Increases in the policy and contract account balance liability for the guaranteed benefit of certain variable annuity products were $62,135, $5,116, and $3,488 in 2007, 2006, and 2005, respectively. In 2007, the Company began to utilize derivatives within certain actively managed investment portfolios that were a net liability of $11,806 at December 31, 2007. Within these portfolios, derivatives can be used for hedging, replication, and income generation only. The Company also enters into contracts with Allianz SE to attempt to economically hedge risk associated with Allianz SE's stock-based compensation plan. The contracts are recorded at fair value on the Consolidated Balance Sheets with the change in fair value recorded in net investment income on the Consolidated Statements of Operations. (Decreases) increases in fair value of these contracts were $(9,746), $8,788, and $4,389 for the years ended December 31, 2007, 2006, and 2005, respectively. As of December 31, 2007 and 2006, the Company owned 113,830 and 247,986 contracts with a cost of $9,019 and $16,864, respectively, and a fair value of $11,161 and $28,752, respectively. The Company will only enter into option contracts with counterparties rated A- or better and the option contracts are not used for speculative or income-generating purposes. At December 31, 2007 and 2006, 117.3% and 90.0%, respectively, of contractual net exposure was held with five non-affiliated counterparties. Dresdner Bank Aktiengesellschaft, a related party, accounted for 1.1% and 0.4% of contractual net exposure held at December 31, 2007 and 2006, respectively. Management believes that no significant credit risk exists. SECURITIES LENDING The Company accounts for its securities lending transactions as secured borrowings, in which the collateral received and the related obligation to return the collateral are recorded on the Consolidated Balance Sheets as securities held as collateral and securities lending collateral, respectively. Securities on loan remain on the Company's Consolidated Balance Sheets and interest and dividend income earned by the Company on loaned securities is recognized in net investment income on the Consolidated Statements of Operations. The Company participates in restricted securities lending arrangements whereby specific securities are loaned to other institutions for short periods of time. U.S. Treasury Note securities were lent under a triparty agreement between the Company, broker-dealers (Goldman Sachs, Morgan Stanley), and the Bank of New York. The collateral is defined by the agreement to be at least equal to U.S. Government, U.S. Government Agency, or U.S. Government Agency Mortgage-Backed Securities. Beginning in 2005, the Company began participating in unrestricted arrangements whereby the Company may use collateral for general purposes. See note 15 for further discussion of this affiliated securities lending. 17 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) RECEIVABLES Receivable balances (contractual amount less allowance for doubtful accounts) approximate estimated fair values. This is based on pertinent information available to management as of year-end, including the financial condition and creditworthiness of the parties underlying the receivables. Receivable balances are monitored and allowances for doubtful accounts are maintained based on the nature of the receivable. HOME OFFICE PROPERTY AND EQUIPMENT Property and equipment consists of furniture, office equipment, leasehold improvements, and computer hardware. Major upgrades and improvements are capitalized, while maintenance and repairs are expensed when incurred. Depreciation is computed over the estimated useful lives (3-7 years, depending on the asset) of depreciable assets using the straight-line method. The cost and accumulated depreciation for home office property and equipment sold, retired, or otherwise disposed of are relieved from the accounts, and resulting gains or losses are reflected in general and administrative expenses on the Consolidated Statements of Operations. Pre-operating and start-up costs incurred in connection with the construction of the Company's headquarters were capitalized until the facility became operational. Interest was also capitalized in connection with the construction and recorded as part of the asset. These costs are being amortized, using the straight-line method, over a 39-year period. The amount of capitalized costs amortized, including interest, during 2007, 2006, and 2005 was $2,274, $2,268, and $2,259, respectively. An addition to the Company's headquarters was put into operation on November 1, 2006. Total amortization related to this addition was $2,016 and $351 for the periods ended December 31, 2007, and 2006, respectively. INCOME TAXES The Company and its subsidiaries, with the exception of Allianz Life and Annuity Company (ALAC), file 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 certain tax allocation elections under the Internal Revenue Code and its related regulations and then reimbursement will be in accordance with an intercompany tax reimbursement arrangement. The Company, each of its insurance subsidiaries except ALAC, and Questar Capital Corporation (formerly USAllianz Securities, Inc. and Questar Capital Corporation) 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 tax liability. The Company provides for federal income taxes based on amounts the Company believes it ultimately will owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain items and the realization of certain tax credits. In the event the ultimate deductibility of certain items or the realization of certain tax credits differs from estimates, the Company may be required to significantly change the provision for federal income taxes recorded on the Consolidated Balance Sheets. Any such change could significantly affect the amounts reported on the Consolidated Statements of Operations. Management uses best estimates to establish reserves based on current facts and circumstances regarding tax exposure items where the ultimate deductibility is open to interpretation. Quarterly, management evaluates the appropriateness of such reserves based on any new developments specific to their fact patterns. Information considered includes results of completed tax examinations, Technical Advice Memorandums, and other rulings issued by the Internal Revenue Service (IRS) or the tax courts. The Company utilizes the asset and liability method of accounting for income tax. 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 18 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) 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 operations in the period that includes the enactment date. Valuation allowances are established when it is determined that it is more likely than not that the deferred tax asset will not be fully realized (see further discussion in note 14). STOCKHOLDER'S EQUITY, LOAN TO AFFILIATE The Company entered into an agreement during 2002 to lend AZOA $250,000 (see further discussion in note 15). This agreement was executed in close proximity to a capital contribution from AZOA of $650,000 in the form of preferred stock of an affiliate (see further discussion in note 15). This loan is recorded as contra-equity in accordance with the FASB Emerging Issues Task Force (EITF) 85-1, CLASSIFYING NOTES RECEIVED FOR CAPITAL STOCK. STOCKHOLDER'S EQUITY, ACCUMULATED UNREALIZED FOREIGN CURRENCY Foreign currency translation adjustments are related to the conversion of foreign currency upon the consolidation of a foreign subsidiary (see further discussion in note 20). 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. SEPARATE ACCOUNTS The Company issues variable annuity and life contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company recognizes gains or losses on transfers from the general account to the separate accounts at fair value to the extent of contractholder interests in separate accounts, which are offset by changes in contractholder liabilities. The Company also issues variable annuity and life contracts through its separate accounts where the Company provides certain contractual guarantees to the contractholder. These guarantees are in the form of a guaranteed minimum death benefit (GMDB), a guaranteed minimum income benefit (GMIB), a guaranteed minimum accumulation benefit (GMAB), and a guaranteed minimum withdrawal benefit (GMWB). These guarantees provide for benefits that are payable to the contractholder in the event of death, annuitization, or at specified dates during the accumulation period. Separate account assets supporting variable annuity contracts represent funds for which investment income and investment gains and losses accrue directly to contractholders. Each fund 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. Separate account assets and liabilities are reported as summary totals on the Consolidated Balance Sheets. Amounts charged to the contractholders for mortality and contract maintenance are included in annuity considerations and policy fees on the Consolidated Statements of Operations. Administrative and other services are included in fee and commission revenue on the Consolidated Statements of Operations. These fees have been earned and assessed against contractholders on a daily or monthly basis throughout the contract period and are recognized as revenue when assessed and earned. Changes in the liabilities for minimum guarantees are included in annuity benefits on the Consolidated Statements of Operations. The GMDB net amount at risk is defined as the guaranteed amount that would be paid upon death, less the current accumulated policyholder account value. The GMIB net amount at risk is defined as the current amount that would be needed to fund expected future guaranteed payments less the current policyholder account value, assuming that all benefit selections occur as of the valuation date. The GMAB net amount at risk is defined as the current amount that would be added to the contracts less the current policyholder account value. 19 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The GMDB provides a specified minimum return upon death. The survivor has the option to terminate the contract or continue it and have the death benefit paid into the contract. The Company's GMDB options have the following definitions: o RETURN OF PREMIUM: Provides the greater of account value or total deposits made to the contract, less any partial withdrawals and assessments. o RESET: Provides the greater of a return of premium death benefit or the most recent five-year anniversary (prior to age 81) account value adjusted for withdrawals. o RATCHET: Provides the greater of a return of premium death benefit or the highest specified "anniversary" account value (prior to age 81), adjusted for withdrawals. Currently, there are three versions of ratchet, with the difference based on the definition of anniversary: quarterly - evaluated quarterly, annual - evaluated annually, and six-year - evaluated every sixth year. o ROLLUP: Provides the greater of a return of premium death benefit or premiums adjusted for withdrawals accumulated with a compound interest rate. There are two variations of rollup interest rates: 5% with no cap and 3% with a cap of 150% of premium. This GMDB locks in at age 81. o EARNINGS PROTECTION RIDER: Provides a death benefit equal to the contract value plus a specified percentage of the earnings on the contract at the date of death. The GMIB is a living benefit that provides the contractholder with a guaranteed annuitization value. The GMIB types are: o RETURN OF PREMIUM: Provides the greater of account value or total deposits made to the contract less any partial withdrawals and assessments. o RATCHET: Provides an annuitization value equal to the greater of account value, net premiums, or the highest one-year anniversary account value (prior to age 81), adjusted for withdrawals. o ROLLUP: Provides an annuitization value equal to the greater of account value and premiums adjusted for withdrawals accumulated with a compound interest rate. The GMAB is a living benefit that provides the contractholder with a guaranteed value that was established at least 5 years prior at each contract anniversary. This benefit is first available at the fifth contract anniversary. Depending on the contractholder's selection at issue, this value may be either a return of premium or may reflect market gains, adjusted at least proportionately for withdrawals. The contractholder also has the option to reset this benefit. The GMWB is a living benefit that provides the contractholder with a guaranteed amount of income in the form of partial withdrawals. The benefit is payable provided the covered person is between the ages of 50 and 90. The benefit is a fixed rate (depending on the age of the covered person) multiplied by the benefit base in the first year the benefit is taken and contract value in following years. The benefit does not decrease if the contract value decreases due to market losses. The benefit can decrease if the contract value is reduced by withdrawals. The benefit base used to calculate the initial benefit is the maximum of: the contract value, the quarterly anniversary value, or the 5% annual increase of purchase payments (capped at twice the total purchase payments). 20 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Guaranteed minimums for the respective years ended December 31 are summarized as follows (note that the amounts listed are not mutually exclusive, as many products contain multiple guarantees):
December 31, 2007 December 31, 2006 ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ Guaranteed Minimum Death Account Net amount Weighted Account Net amount Weighted Benefits (GMDB) value at risk age (years) value at risk age (years) - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- Return of premium $ 10,990,304 $ 9,710 62.0 $ 9,320,492 $ 1,770 61.0 Ratchet & return of premium 3,384,951 45,106 63.6 3,149,129 2,597 62.3 Ratchet & rollup 7,654,982 239,775 65.3 8,039,190 175,545 64.0 Ratchet & earnings protection rider 7,594 3,709 70.9 7,913 2,860 69.5 Reset - - n/a 216,451 968 69.9 Earnings protection rider 473,903 37,050 61.8 465,723 37,486 60.6 -------------- ------------ -------------- ------------ -------------- ------------ -------------- ------------ Total $ 22,511,734 $ 335,350 $ 21,198,898 $ 221,226 ============== ============ ============== ============ ============== ============ ============== ============ Guaranteed Minimum Income Account Net amount Weighted Account Net amount Weighted Benefits (GMIB) value at risk age value at risk age - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- Return of premium $ 3,473,115 $ 215 62.6 $ 387,572 $ 698 66.8 Ratchet & return of premium 143,597 1,402 63.2 6,914,101 2,039 61.5 Ratchet & rollup 10,901,098 18,625 64.7 8,765,367 12,392 60.0 -------------- ------------ -------------- ------------ -------------- ------------ -------------- ------------ Total $ 14,517,810 $ 20,242 $ 16,067,040 $ 15,129 ============== ============ ============== ============ ============== ============ ============== ============ Guaranteed Minimum Accumulation Account Net amount Weighted Account Net amount Weighted Benefits (GMAB) value at risk age value at risk age - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- Five years $ 8,930,675 $ 73,131 n/a $ 7,492,740 $ 1,103 n/a Ten years 9,030 1 n/a 9,537 2 n/a -------------- ------------ -------------- ------------ -------------- ------------ -------------- ------------ Total $ 8,939,705 $ 73,132 $ 7,502,277 $ 1,105 ============== ============ ============== ============ ============== ============ ============== ============ Guaranteed Minimum Withdrawal Account Net amount Weighted Account Net amount Weighted Benefits (GMWB) value at risk age value at risk age - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- - --------------------------------------- -------------- ------------ ----------- -------------- ------------ ----------- No living benefit $ 32,212 $ - n/a $ - $ - n/a Life benefit with optional reset 545,563 - n/a - - n/a Life benefit with automatic reset 66,839 - n/a - - n/a -------------- ------------ -------------- ------------ -------------- ------------ -------------- ------------ Total $ 644,614 $ - $ - $ - ============== ============ ============== ============ ============== ============ ============== ============
At December 31, 2007 and 2006, variable annuity account balances were invested in separate account funds with the following investment objectives. Balances are presented at fair value: Investment type 2007 2006 ------------------------------- ---------------- --------------- Mutual funds: Bond $ 1,828,328 $ 1,876,101 Domestic equity 8,408,134 8,922,135 International equity 3,694,314 3,420,021 Specialty 5,797,564 4,987,263 ---------------- --------------- Total mutual funds 19,728,340 19,205,520 Money market funds 627,393 440,739 Other 20,355,733 19,646,259 ---------------- --------------- Total $ 20,541,717 $ 19,837,566 ================ =============== 21 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The following table summarizes the liabilities for variable contract guarantees that are reflected in the general account and shown in future policy benefit reserves on the Consolidated Balance Sheets:
GMDB GMIB GMAB Totals - ------------------------------------------------------------------------------------------------------------------ Balance as of December 31, 2005 $ 31,980 $ 18,278 $ 17,441 $ 67,699 Incurred guaranteed benefits 7,741 10,002 (8,126) 9,617 Paid guaranteed benefits (4,415) - - (4,415) ----------------------------------------------------------------------- Balance as of December 31, 2006 35,306 28,280 9,315 72,901 ----------------------------------------------------------------------- Incurred guaranteed benefits 7,481 12,893 (3,522) 16,852 Paid guaranteed benefits (4,802) - - (4,802) ----------------------------------------------------------------------- Balance as of December 31, 2007 $ 37,985 $ 41,173 $ 5,793 $ 84,951 =======================================================================
The GMDB and GMIB liabilities are determined each period by estimating the expected future claims in excess of the associated account balances. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to annuity benefits on the Consolidated Statements of Operations, if actual experience or other evidence suggests that earlier assumptions should be revised. The GMAB and GMWB liabilities are determined each period by estimating the expected future claims and the expected future profits and taking the difference. One result of this calculation is that these liabilities can be negative (contra-liability). The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to annuity benefits on the Consolidated Statements of Operations, if actual experience or other evidence suggests that earlier assumptions should be revised. Products featuring GMWB benefits were first issued in 2007. In the calendar year that a product launches, the reserves are set to zero, until the policy's first anniversary date. Thus, at December 31, 2007, there were no reserves established for products with GMWB benefits. The following assumptions were used to determine the GMDB and GMIB liabilities as of December 31, 2007 and 2006: o 100 stochastically generated investment performance scenarios. o Mean investment performance assumption was 7.96%. o Volatility assumption was 13.69%. o Mortality is assumed to be 60% of the 1994 MGDB Mortality Table as of December 31, 2007 and 2006, respectively. o Lapse rates vary by contract type and duration. As of December 31, 2007, spike rates could approach 45%, with an ultimate rate around 20%. As of December 31, 2006, spike rates could approach 40%, with an ultimate rate around 15%. o GMIB contracts have dynamic lapse and benefit utilization assumptions. For example, if the contract is projected to have a large additional benefit, then it becomes more likely to elect the GMIB benefit and less likely to lapse. o Discount rates vary by contract type and are equal to an assumed long-term investment return (8.6%) less the applicable mortality and expense rate. GMAB liabilities are considered to be derivatives under SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, and are recognized at fair value in future policy benefit reserves on the Consolidated Balance Sheets, with changes in fair value included in net investment income on the Consolidated Statements of Operations. 22 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) 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. Prescribed statutory accounting practices include state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (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 currently does not have any permitted practices. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - ADOPTED In September 2006, the FASB issued EITF Issue 06-5, ACCOUNTING FOR PURCHASES OF LIFE INSURANCE - DETERMINING THE AMOUNT THAT COULD BE REALIZED IN ACCORDANCE WITH FASB TECHNICAL BULLETIN NO. 85-4, ACCOUNTING FOR PURCHASES OF LIFE INSURANCE (EITF 06-5). EITF 06-5 requires that the Company consider contractual terms in determining the amount that can be realized under a corporate-owned life insurance policy. In addition, a policyholder should determine the amount that could be realized under the insurance contract assuming the surrender certificate by certificate in a group policy. EITF 06-5 was effective for fiscal years beginning after December 15, 2006. The Company adopted EITF 06-5 on January 1, 2007. Adoption of EITF 06-5 resulted in a cumulative effect adjustment of $415 (net of income tax of $223) to retained earnings as of January 1, 2007. In June 2006, the FASB issued FASB Interpretation (FIN) No. 48 (FIN 48), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES, AN INTERPRETATION OF FASB STATEMENT NO. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, ACCOUNTING FOR INCOME TAXES. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and additional disclosure. Upon adoption, the cumulative effect of applying FIN 48 is reported as an adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the balance sheet). This pronouncement was adopted January 1, 2007 and did not have a material impact on the Consolidated Financial Statements. In May 2007, the FASB issued FASB Staff Position (FSP) FIN 48-1 (FSP FIN 48-1), DEFINITION OF SETTLEMENT IN FASB INTERPRETATION NO. 48. The FSP addresses whether it is appropriate for a company to recognize a previously unrecognized tax benefit when the only factor that has changed, since determining that a benefit should not be recognized, was the completion of an examination or audit by a taxing authority. The FSP is effective January 1, 2007, the date of the Company's initial adoption of FIN 48. The adoption of this interpretation did not have a material impact on the Consolidated Financial Statements. In March 2006, the FASB issued SFAS No. 156, ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS (SFAS NO. 156), AN AMENDMENT TO SFAS NO. 140. SFAS No. 156 requires that servicing assets or liabilities be initially measured at fair value, with subsequent changes in value reported based on either a fair value or amortized cost approach for each class of servicing asset or liabilities. Under previous guidance, such servicing assets or liabilities were initially measured at historical cost and the amortized cost method was required for subsequent reporting. The Company adopted this guidance effective January 1, 2007. The adoption of this interpretation did not have a material impact on the Consolidated Financial Statements. In February 2006, the FASB issued SFAS No. 155, ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS, WHICH AMENDS FASB STATEMENTS NO. 133 AND NO. 140. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, RECOGNITION AND MEASUREMENT OF DERIVATIVES: APPLICATION OF STATEMENT 133 TO BENEFICIAL INTERESTS IN SECURITIZED FINANCIAL ASSETS. This Statement is effective for all financial instruments 23 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company adopted this guidance effective January 1, 2007. The adoption of this interpretation did not have a material impact on the Consolidated Financial Statements. In September 2005, the AcSEC issued SOP 05-1, DEFERRED ACQUISITION COSTS (DAC) ON INTERNAL REPLACEMENTS, which expands the definition of internal replacements and changes the accounting for DAC on replacements in connection with modifications or exchanges of insurance contracts. An internal replacement, as defined in the guidance, is a policy revision that changes the nature of the investment rights or insurance risk between the Company and the contractholder. The result of the SOP 05-1 methodology change for contracts that are substantially different would result in writing-off the existing DAC balance. This Statement was effective for fiscal years beginning after December 15, 2006. The Company adopted SOP 05-1 on January 1, 2007 and the adoption did not have a material impact on the Consolidated Financial Statements. In September 2006, the Securities and Exchange Commission (SEC) published Staff Accounting Bulletin (SAB) No. 108, CONSIDERING THE EFFECTS OF PRIOR YEAR MISSTATEMENTS WHEN QUANTIFYING MISSTATEMENTS IN CURRENT YEAR FINANCIAL STATEMENTS. This Bulletin addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. This Bulletin is effective for fiscal years ending after November 15, 2006. The adoption of this SAB did not have a material impact on the Consolidated Financial Statements. In September 2006, the FASB issued SFAS No. 158, EMPLOYERS' ACCOUNTING FOR DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS - AN AMENDMENT OF FASB STATEMENTS NO. 87, 88, 106, AND 132(R), which improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. This was effective for public companies with fiscal years ending after December 15, 2006. The Company did have an impact from the adoption as disclosed in note 16. The Statement also requires that an employer measure the funded status of a plan as of the date of its year-end. This is effective for fiscal years ending after December 15, 2008. The Company expects to adopt this guidance on December 31, 2008 and is currently assessing the impact that changing from a September 30 measurement date to a December 31 measurement date will have on the Company's Consolidated Financial Statements. In November 2005, the FASB issued FSP FAS 115-1 and FSP FAS 124-1 effective for reporting periods beginning after December 15, 2005. The FSP provides guidance on when an investment is considered impaired, whether that impairment is other than temporary, subsequent recognition of other-than-temporary impairment, and disclosures about unrealized losses. The Company adopted the FSP effective December 31, 2006, which resulted in realizing $612,635 of additional losses from interest-related impairments on investments managed by a third party where the investment manager has the discretion to sell securities in a loss position. The realized investment losses impact the current and estimated future gross profits and assessments used in determining the amortization of DAC, DSI, VOBA, URR and the AAR. The investment losses were offset by increases of $322,676 in DAC, $34,424 in DSI, $7,472 in VOBA, $39,323 in URR, and a reduction of $19,715 in the AAR. In May 2005, the FASB issued SFAS No. 154, ACCOUNTING CHANGES AND ERROR CORRECTIONS - A REPLACEMENT OF APB OPINION NO. 20 AND SFAS NO. 3. This standard was effective for fiscal years beginning after December 15, 2005 and applies to voluntary accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. It also applies to changes required by new accounting pronouncements if the pronouncement does not include specific transition provisions. The standard requires retrospective application of changes in accounting principle, unless it is impracticable to determine either the period-specific effect of an accounting change or the cumulative effect of the change. Adoption of this Statement did not have a material impact on the Consolidated Financial Statements. 24 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) In January 2005, the FASB issued SFAS No. 123 (Revised), SHARE-BASED PAYMENT, which requires non-public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award at the grant date. This Statement also requires the cost of the reward to be recognized over the period in which the employee provided related services. This Statement is effective for years beginning after December 15, 2005; however, the Company chose to adopt early. Adoption of this Statement did not have a material impact on the Consolidated Financial Statements. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - TO BE ADOPTED In March 2008, the FASB issued SFAS No. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - AN AMENDMENT OF FASB STATEMENT NO. 133. This statement requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. The Company plans to adopt this guidance effective January 1, 2009. In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141(R)), BUSINESS COMBINATIONS. This statement creates greater consistency in the accounting and financial reporting of business combinations. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. This statement is to be applied prospectively to business combinations for which the acquisition date is on or after the first annual period beginning after December 15, 2008. The Company will apply SFAS No. 141(R) to business combinations with acquisition dates on or after January 1, 2009. In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS - AN AMENDMENT OF ARB 51 (SFAS 160). This statement provides requirements for accounting for noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 also requires that accounting for transactions between an entity and noncontrolling interests be treated as equity transactions. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. This Statement is to be applied prospectively, except for the presentation and disclosure requirements. The presentation and disclosure requirements are to be applied retrospectively for all periods presented. The Company does not expect SFAS No. 160 to have a material financial impact upon adoption. In February 2007, the FASB issued SFAS No. 159, THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES. This statement provides companies with an option to report selected financial assets and liabilities at fair value, with the associated changes in fair value reflected in the Consolidated Statements of Operations. This statement is effective for fiscal years beginning after November 15, 2007 with early adoption permitted. The Company is currently evaluating the effect of this statement on its Consolidated Financial Statements. In September 2006, the FASB issued SFAS No. 157, FAIR VALUE MEASUREMENTS (SFAS No. 157). For financial statement elements currently required to be measured at fair value, this statement defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). SFAS No. 157 provides guidance on how to measure fair value when required under existing accounting standards. In February 2008, the FASB issued FSP FAS 157-1, APPLICATION OF FASB STATEMENT NO. 157 TO FASB STATEMENT NO. 13 AND OTHER ACCOUNTING PRONOUNCEMENTS THAT ADDRESS FAIR VALUE MEASUREMENTS FOR PURPOSES OF LEASE CLASSIFICATION OR MEASUREMENT UNDER STATEMENT 13 and FSP FAS 157-2 EFFECTIVE DATE OF FASB STATEMENT NO. 157. FSP FAS 157-1 amends SFAS 157 to exclude SFAS No. 13, ACCOUNTING FOR LEASES 25 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) (SFAS 13), and other accounting pronouncements that address fair value measurements under SFAS No. 13. FSP FAS 157-2 delays the effective date of SFAS No. 157 for certain nonfinancial assets and nonfinancial liabilities. The two FSPs will not have an impact on the Company's adoption of SFAS No. 157. This statement is effective for fiscal years beginning after November 15, 2007 with early adoption permitted. The Company is currently evaluating the effect of this statement on its Consolidated Financial Statements. RECLASSIFICATIONS AND IMMATERIAL CORRECTIONS Certain prior year balances have been reclassified to conform to the current year presentation. During 2007, the Company reclassified certain investment expenses from affiliated net investment income to non-affiliated net investment income. The reclassification resulted in adjustments to the Consolidated Statements of Operations as presented in the table below:
2006 2005 -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- As originally Adjustment As adjusted As originally Adjustment As adjusted reported reported - -------------------------------------------------------------------------------- -------------------------------------- - -------------------------------------------------------------------------------- -------------------------------------- Revenue Net investment income, affiliated $ 15,942 $ 23,081 $ 39,023 $ 18,955 $ 20,100 $ 39,055 Net investment income, non-affiliated 1,673,746 (23,081) 1,650,665 1,406,993 (20,100) 1,386,893 - -------------------------------------------------------------------------------- -------------------------------------- - -------------------------------------------------------------------------------- -------------------------------------- Total revenue $ 1,997,849 $ - $ 1,997,849 $ 2,253,679 $ - $ 2,253,679 - -------------------------------------------------------------------------------- -------------------------------------- - -------------------------------------------------------------------------------- --------------------------------------
During 2007, following the issuance of the 2006 and 2005 Consolidated Financial Statements and Supplemental Schedules, the Company identified two reclassification errors. One of the reclassifications impacted the Consolidated Statements of Cash Flows only, and the other reclassification impacted both the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows. The reclassification amounts, and reporting implications, are detailed below: The first reclassification (Adjustment 1) related to the presentation of the sale of an interest in an equity method investee. In 2006, Allianz Individual Insurance Group, LLC (AZIIG), a wholly owned subsidiary of the Company, sold its 50% membership interest in Life Sales LLC (Life Sales) for $23,587. The Company's investment interest in Life Sales amounted to $1,136, which resulted in a gain of $22,451 on the sale. The gain was incorrectly reported as a cash outflow in the investing activities section of the 2006 Consolidated Statement of Cash Flows with an offsetting amount recorded in operating activities. Adjustment 1 also caused a misstatement of the net cash provided by operating activities. The Company has adjusted certain amounts in the 2006 Consolidated Statement of Cash Flows, to present the gain from the sale as a cash inflow from investing activities. This adjustment did not affect the Company's previously reported revenue, net income, stockholder's equity, total cash flows, or cash balances. The second reclassification (Adjustment 2) is related to the classification of negative cash balances, where the right of set off exists. Additional analysis of the cash accounts during 2007 resulted in the determination that certain negative cash accounts met the conditions of the right of set off, and therefore, $126,746 and $77,154 were reclassified from other liabilities to cash for 2006 and 2005, respectively. As a result of the reclassification of Adjustment 1 and Adjustment 2, the Company has adjusted certain items within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows. The adjusted items are presented in the tables below: 26 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Balance Sheet As of December 31, 2006
As originally reported Adjustment 2 As adjusted - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Assets Cash $ 182,622 $ (126,746) $ 55,876 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Total assets 74,135,981 (126,746) 74,009,235 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholder's Equity Other liabilities 239,868 (126,746) 113,122 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Total liabilities 70,703,899 (126,746) 70,577,153 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity $74,135,981 $ (126,746) $74,009,235 - --------------------------------------------------------------------------------------------------------------------------
Statement of Cash Flow For the year ended December 31, 2006
As originally reported Adjustment 1 Adjustment 2 As adjusted - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by (used in) operating activities Realized investment losses (gains) $ 565,711 $ (22,451) $ - $ 543,260 Change in: Accrued expenses and other liabilities 137,485 (22,451) - 115,034 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Total adjustments to reconcile net income to net cash provided by (used in) operating activities (36,392) (44,902) - (81,294) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 218,132 (44,902) - 173,230 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) investing activities Sale of interest in equity method investees (22,451) 46,039 - 23,588 Other, net (13,827) (1,137) - (14,964) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by investing actvities (5,240,684) 44,902 - (5,195,782) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) financing activities Change in amounts drawn in excess of bank balances 26,116 - (49,592) (23,476) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing actvities 5,067,341 - (49,592) 5,017,749 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Net change in cash 44,789 - (49,592) (4,803) Cash at beginning of year 137,833 - (77,154) 60,679 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Cash at end of year $ 182,622 $ - $ (126,746) $ 55,876 - --------------------------------------------------------------------------------------------------------------------------------
27 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Statement of Cash Flow For the year ended December 31, 2005
As originally reported Adjustment 2 As adjusted - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) financing activities Change in amounts drawn in excess of bank balances $ 14,672 $ (65,189) $ (50,517) - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing actvities 7,666,776 (65,189) 7,601,587 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Net change in cash 74,992 (65,189) 9,803 Cash at beginning of year 62,841 (11,965) 50,876 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Cash at end of year $ 137,833 $ (77,154) $ 60,679 - ----------------------------------------------------------------------------------------------------------------------
(3) RISK DISCLOSURES The following is a description of the significant risks facing the Company and how it attempts to mitigate those risks: CREDIT RISK: The risk that issuers of fixed- rate and variable-rate income securities, mortgages on commercial real estate, or transactions with other parties, such as reinsurers and derivative counterparties, default on their contractual obligations. The Company attempts to mitigate this risk by adhering to investment policies that provide portfolio diversification on an asset class, creditor, and industry basis, and by complying with investment limitations governed by state insurance laws and regulations, as applicable. The Company actively monitors and manages exposures, and determines whether any securities are impaired. The aggregate credit risk taken in the investment portfolio is influenced by management's risk/return preferences, the economic and credit environment, and the relationship of credit risk in the asset portfolio to liabilities. For derivative counterparties, the Company attempts to minimize credit risk by establishing relationships with counterparties rated A- and higher. The Company has executed Credit Support Annexes (CSA) with all active counterparties and requires a CSA from all new counterparties added to the counterparty pool. The CSA agreement further limits credit risk by requiring counterparties to post collateral to a trust account based on their current credit rating. The Company reviews the credit rating of the counterparties at least quarterly. CREDIT CONCENTRATION RISK: The risk of increased exposure to major asset defaults (of a single security issuer or class of security issuers); economic conditions (if business is concentrated in a certain industry sector or geographic area); or adverse regulatory or court decisions (if concentrated in a single jurisdiction) affecting credit. The Company's Asset Liability Management Committee (ALM) specifies the asset allocation among major asset classes and a benchmark for each asset class. ALM provides investment guidelines that document the constraints and limits under which the asset manager must operate, including limits in regard to credit concentration. These internal guidelines comply, at a minimum, with state statute. ALM is also responsible for implementing internal controls and procedures to ensure compliance with these investment guidelines. Deviations from these guidelines are monitored and addressed. ALM, and subsequently the Board of Directors, review and approve the mandated investment guidelines at least annually. Mitigation controls include a monthly report from the asset manager that shows the fixed-income risk profile, including sector allocation, credit rating distribution, and other credit statistics. The Company performs a quarterly calculation to ensure compliance with the State of Minnesota basket clause. 28 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) LIQUIDITY RISK: The risk that unexpected timing or amounts of cash needed will require liquidation of assets in a market that will result in loss of realized value or an inability to sell certain classes of assets such that an insurer will be unable to meet its obligations and contractual guarantees. Market or Company conditions may preclude access to, or cause disruption of, outside sources of liquidity (e.g., through borrowing, affiliate advances, reinsurance, or securitization) upon which an insurance company typically relies in the normal course of business. Additionally, the Company may not be able to sell large blocks of assets at current market prices. Liquidity risk also arises from uncertain or unusual cash demands from catastrophic events. In the Company's efforts to manage the potentially increased liquidity needs due to product hedging strategies, the Company has a multi-tiered plan to meet projected cash needs even in unlikely scenarios. In addition, the Company has a substantial portfolio of deferred annuity products designed around a two-tiered structure. Two-tier annuities provide two distinct values to the policyholder for settlement of their annuity proceeds. One value is established for policyholders choosing a cash surrender option and an additional value is established for those choosing an annuitization payment option. The annuitization value is greater than the surrender value and typically includes higher excess interest and index credits and premium bonuses. Since the predominant way policyholders receive their benefits from the annuity is through annuitization of the policy's value, this limits the disintermediation risk to the Company. Benefits are received over a period of years as opposed to total lump-sum surrender of the policy's cash value. INTEREST RATE RISK: The risk that interest rates will change and cause a decrease in the value of an insurer's investments relative to the value of its liabilities and/or an unfavorable change in prepayment activity, resulting in compressed interest margins. The Company attempts to mitigate this risk by offering products that transfer interest rate risk to the policyholder and by attempting to approximately match the maturity schedule of its assets with the expected payouts of its liabilities, both at inception and on an ongoing basis. Asset and liability matching models are used by the Company to mitigate interest rate risk due to the close relationship between its interest rate sensitive assets and liabilities. The Company considers both the maturity and duration of the asset portfolio as compared with the expected duration of the liability reserves. The Company also attempts to mitigate interest rate risk through asset/liability risk controls, including product development and pricing, product management, and investment asset management. The two-tier design discussed above further reduces interest rate risk during annuitization, as the Company has the management option to increase or decrease policyholder participation rates and caps used to calculate policyholder credits to offset changes in expected investment performance. In certain situations, the Company accepts some interest rate risk in exchange for a higher yield on the investment. EQUITY MARKET RISK: The risk that movements in the equity markets will result in losses to assets held within the Company's surplus portfolio or that product features tied to equity markets will increase in value by more than held assets. Fixed indexed annuity (FIA) products increase the policy value based on the growth of market indexes (S&P 500 and NASDAQ 100). The Company attempts to hedge this exposure with a combination of OTC and exchange-traded derivatives tailored to FIA product structures to manage potential policyholder benefit obligations. An additional risk is that some variable annuity products have guarantees, GMWB, GMIB, and GMDB, which provide a guaranteed level of payments irrespective of market movements. The risk here is of a market downturn. The Company has adopted an economic hedging program using derivative instruments (S&P 500 index futures) to attempt to manage this risk and provide for these excess guarantee payments in those situations when the separate account assets are not sufficient to provide for them. For products with GMAB, policyholder contracts allow the Company to employ an automatic investment allocation process to move policyholder funds into fixed accounts during a market downturn to help mitigate this risk. 29 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory environment in which the Company operates may result in reduced demand for its products or additional expenses not assumed in product pricing. Additionally, the Company is exposed to risk related to how the Company conducts itself in the market and the suitability of its product sales to contractholders. The Company attempts to mitigate this risk by offering a broad range of annuity products and by operating throughout the U.S. The Company actively monitors all market-related exposure and has members that participate in national and international discussions relating to legal, regulatory, and accounting changes that may impact the business. The Company has defined suitability standards that are at least as rigorous, and usually exceeding, the requirements of regulators. RATINGS RISK: The risk that rating agencies change their outlook or rating of the Company or a subsidiary of the Company's. The rating agencies generally utilize proprietary capital adequacy models in the process of establishing ratings for the Company. The Company is at risk to changes in these models and the impact that changes in the underlying business that it is engaged in can have on such models. In an attempt to mitigate this risk, the Company maintains regular communications with the rating agencies and evaluates the impact of significant transactions on such capital adequacy models and considers the same in the design of transactions to minimize the adverse impact of this risk. Stress tests are performed on a quarterly basis to assess how rating agency capital adequacy models would be impacted by severe economic events. (4) ACQUISITION OF BUSINESS On April 1, 2007, the Company purchased 100% of all issued and outstanding shares of common stock of Templeton Funds Annuity Company (TFAC) from Franklin Agency, Inc., a wholly owned subsidiary of Franklin Resources, Inc. (FRI). TFAC was subsequently renamed Allianz Life and Annuity Company (ALAC). The results of operations and financial condition of ALAC, which are not material, have been included in the consolidated financial statements since April 1, 2007. ALAC is a life insurance company licensed in forty-five states and the District of Columbia. It has existing variable annuity insurance contracts and is not actively selling or marketing any of the existing products. The primary reason for this acquisition was to obtain the variable annuity licenses, which will be used to issue new products in the future. The Company completed the acquisition on April 1, 2007 for a purchase price of $14,542. The purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The Company has assigned $11,276 to tangible net assets, and $2,050 to identifiable intangible assets consisting of insurance licenses. These intangible assets have indefinite lives and are not amortized but are instead subject to impairment tests. The excess of the purchase price over the estimated fair values of net assets acquired was recorded as goodwill in the amount of $1,216. The goodwill and intangible assets are nondeductible for tax purposes. This acquisition was accounted for using the purchase method. 30 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of April 1, 2007: Cash $ 2,887 Other current assets 9,700 Intangible assets 2,050 Goodwill 1,216 Separate account assets 9,338 ------------ Total assets acquired 25,191 ------------ Current liabilities 1,311 Separate account liabilities 9,338 ------------ ------------ Total liabilities assumed 10,649 ------------ Net assets acquired $ 14,542 ============ In November 2005, the Company purchased Yorktown Financial Companies, Inc., for a purchase price, net of cash acquired, of $20,268, and recorded goodwill of $18,167. The transaction was recorded using the purchase method of accounting. 31 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) (5) INVESTMENTS At December 31, 2007 and 2006, the amortized cost or cost, gross unrealized gains, gross unrealized losses, and estimated fair values of available-for-sale securities are as shown in the following table:
Amortized Gross Gross Estimated cost unrealized unrealized fair or cost gains losses value - ------------------------------------------------------------------------------------------------------------------------------- 2007: Fixed-maturity securities: U.S. government $ 1,929,269 $ 168,500 $ - $ 2,097,769 Agencies not backed by the full faith and credit of the U.S. government 33,726 2,404 - 36,130 States and political subdivisions 289,978 17,711 - 307,689 Foreign government 215,739 13,756 - 229,495 Public utilities 1,451,535 38,805 - 1,490,340 Corporate securities 19,015,811 547,864 - 19,563,675 Mortgage-backed securities 10,276,194 342,603 - 10,618,797 Collateralized mortgage obligations 45,180 2,247 - 47,427 - ------------------------------------------------------------------------------------------------------------------------------- Total fixed-maturity securities 33,257,432 1,133,890 - 34,391,322 Equity securities 17,601 222 1,104 16,719 - ------------------------------------------------------------------------------------------------------------------------------- Total available-for-sale securities $33,275,033 $ 1,134,112 $ 1,104 $ 34,408,041 - ------------------------------------------------------------------------------------------------------------------------------- 2006: Fixed-maturity securities: U.S. government $ 2,030,504 $ 852 $ - $ 2,031,356 Agencies not backed by the full faith and credit of the U.S. government 61,700 837 - 62,537 States and political subdivisions 308,140 8,173 - 316,313 Foreign government 185,094 5,724 - 190,818 Public utilities 1,380,157 27,335 - 1,407,492 Corporate securities 17,429,070 388,860 - 17,817,930 Mortgage-backed securities 9,949,161 17,273 - 9,966,434 Collateralized mortgage obligations 55,474 1,833 - 57,307 - ------------------------------------------------------------------------------------------------------------------------------- Total fixed-maturity securities 31,399,300 450,887 - 31,850,187 Equity securities 4,940 349 2 5,287 - ------------------------------------------------------------------------------------------------------------------------------- Total available-for-sale securities $31,404,240 $ 451,236 $ 2 $ 31,855,474 - -------------------------------------------------------------------------------------------------------------------------------
32 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The net unrealized gains (losses) on available-for-sale securities consist of the following at December 31:
2007 2006 2005 - --------------------------------------------------------------------------------------------------------------- Available-for-sale: Fixed maturities $ 1,133,890 $ 450,887 $ 287,425 Securities held under agreements to repurchase - - (21,989) Equities (882) 347 95,514 Adjustments for: DAC (599,149) (258,680) (147,489) VOBA (23,332) (9,013) (4,508) DSI (60,981) (24,405) (16,050) URR 63,392 33,862 - Deferred taxes (179,529) (67,729) (67,515) - --------------------------------------------------------------------------------------------------------------- Net unrealized gains $ 333,409 $ 125,269 $ 125,388 - ---------------------------------------------------------------------------------------------------------------
The changes in net unrealized gains (losses) on available-for-sale fixed-maturity securities and securities held under agreements to repurchase, before adjustments for deferred taxes, DAC, VOBA, DSI, and URR were $683,003, $185,451, and $(554,355) for the years ended December 31, 2007, 2006, and 2005, respectively. The changes in net unrealized (losses) on available-for-sale equity investments, before deferred taxes, which include common stocks and nonredeemable preferred stocks, were $(1,229), $(95,167), and $(18,711) for the years ended December 31, 2007, 2006, and 2005, respectively. The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at December 31, 2007, 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. The amortized cost of fixed-maturity securities with rights to call or prepay without penalty is $10,574,954 as of December 31, 2007.
Amortized Estimated cost fair value - --------------------------------------------------------------------------------------------------------------- Available-for-sale: Due in one year or less $ 239,019 $ 240,836 Due after one year through five years 2,786,120 2,876,150 Due after five years through ten years 8,937,440 9,154,078 Due after ten years 10,973,479 11,454,034 Mortgage-backed securities and collateralized mortgage obligations 10,321,374 10,666,224 - --------------------------------------------------------------------------------------------------------------- Total available-for-sale fixed-maturity securities $33,257,432 $34,391,322 - ---------------------------------------------------------------------------------------------------------------
33 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Proceeds from sales of available-for-sale fixed-maturity securities investments were $1,118,979, $5,636,908, and $6,581,975 during 2007, 2006, and 2005, respectively. Proceeds from tax-free and taxable exchanges for available-for-sale fixed-maturity securities were $0, $1,160, and $32,136 during 2007, 2006, and 2005, respectively. Gross gains of $43,633, $44,105, and $93,165 and gross losses of $42,273, $55,714, and $35,948 were realized on those sales and tax-free and taxable exchanges of securities in 2007, 2006, and 2005, respectively. In 2007, 2006, and 2005, losses of $773,279, $612,766, and $1,949, respectively, were recognized on available-for-sale fixed-maturity securities for other-than-temporary impairment. As discussed in note 2, the Company established a trading portfolio during 2005. Proceeds from sales of trading fixed-maturity securities investments were $556,061, $172,653, and $317,482 during 2007, 2006, and 2005, respectively. Proceeds from tax-free exchanges from trading fixed-maturity securities were $0, $5,240, and $0 during 2007, 2006, and 2005, respectively. Gross gains of $4,039, $4, and $3,172 and gross losses of $7,243, $1,326, and $2,961 were realized on those sales of trading fixed-maturity securities in 2007, 2006, and 2005, respectively. Proceeds from sales of trading equity securities investments were $3,560, $5,894, and $7,397. Gross gains of $223, $6, and $0 and gross losses of $3, $248, and $184 were realized on those sales during 2007, 2006, and 2005, respectively. Trading securities had realized gross gains of $53,246, $17,319, and $25,098 and realized gross losses of $5,820, $74,512, and $45,915 in realized investment gains on the Consolidated Statements of Operations for 2007, 2006, and 2005, respectively. Trading forward commitments of $0, $0, and $644,299 were purchased and $0, $0, and $645,510 were sold by the Company, generating realized gross gains of $0, $0, and $1,211 on sales during 2007, 2006, and 2005, respectively. There were no losses realized in 2007, 2006, or 2005. Proceeds from the sale of available-for-sale equity securities were $68,229, $506,311, and $1,014,145 during 2007, 2006, and 2005, respectively. Proceeds from tax-free exchanges, redemptions, and spin-offs from available-for-sale equity securities were $0, $3,868, and $12,615 during 2007, 2006, and 2005, respectively. Gross gains of $1,410, $102,652, and $55,595 and gross losses of $617, $6,875, and $22,696 were realized on those sales in 2007, 2006, and 2005, respectively. In 2007, 2006, and 2005, losses of $76, $29, and $12,122, respectively, were recognized on available-for-sale equity securities for other-than-temporary impairment. On March 18, 2008, the Company purchased $638,000 of investment-grade fixed maturity securities at fair value from a related party. As of December 31, 2007 and 2006, investments with a carrying value of $91,063 and $68,347, respectively, were held on deposit with various insurance departments and in other trusts as required by statutory regulations. As of December 31, 2007 and 2006, the Company held options purchased (asset) with an amortized cost of $482,639 and $577,906, respectively, and fair value of $379,855 and $712,772, respectively. The notional amounts of the option contracts purchased were $21,245,193 and $32,277,493 at December 31, 2007 and 2006, respectively. As of December 31, 2007 and 2006, the Company held options sold (liability) with a basis of $304,351 and $378,469 and fair value of $218,108 and $324,094, respectively. The notional amounts of the option contracts sold were $18,497,585 and $29,689,655 at December 31, 2007 and 2006, respectively. As of December 31, 2007 and 2006, the Company held futures contracts, which do not require an initial investment; therefore, no asset or liability is recorded. The Company is required to settle cash daily based on movements of the representative index. In 2006, the Company sold its interest in Life Sales, a third-party marketing organization. This resulted in a pre-tax gain of $22,451, which is included in the realized investment gains on the Consolidated Statements of Operations. 34 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Net realized investment gains (losses) for the years ended December 31, 2007, 2006, and 2005 are summarized as follows:
2007 2006 2005 - -------------------------------------------------------------------------------------------------------------------------------- Available-for-sale: Fixed-maturity securities - sales $ 1,360 $ (11,609) $ 57,217 Fixed-maturity securities - other-than-temporary impairments (773,279) (612,766) (1,949) Equity securities 717 95,748 20,777 Mortgage loans on real estate (9,884) (11,935) (4,025) Real estate 33,320 21,451 8,922 Gain on sale of Life Sales - 22,451 - Other (7,654) (1,996) (102) - -------------------------------------------------------------------------------------------------------------------------------- Subtotal (755,420) (498,656) 80,840 Trading gains (losses), net 44,442 (58,757) (19,579) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Net (losses) gains $(710,978) $(557,413) $ 61,261 - -------------------------------------------------------------------------------------------------------------------------------- The increase in other-than-temporary impairments beginning in 2006 related to the adoption of FSP FAS 115-1 and FAS 124-1 is discussed further in the Recently Issued Accounting Pronouncements section in note 2. The Company's investment in mortgage loans on real estate at December 31, 2007 and 2006 is summarized as follows: 2007 2006 - ------------------------------------------------------------------------------ Mortgage loans on real estate: Commerical $4,442,855 $ 3,402,303 Residential 1,573 1,988 Valuation allowances (42,214) (32,330) - ------------------------------------------------------------------------------ Total mortgage loans on real estate $4,402,214 $ 3,371,961 - ------------------------------------------------------------------------------ At December 31, 2007, mortgage loans on real estate in CA and TX exceeded the 10% concentration level by state with concentrations of 41.0% or $1,823,506, and 11.8% or $523,516, respectively. At December 31, 2006, mortgage loans on real estate in California and Texas exceeded the 10% concentration level by state with concentrations of 34.4% or $1,170,186, and 15.7% or $534,793, respectively. Interest rates on investments in new mortgage loans ranged from a minimum of 5.54% to a maximum of 6.55%. The maximum percentage of the loan to the value of the security of any one loan was 80%. The valuation allowances on mortgage loans on real estate at December 31, 2007, 2006, and 2005 and the changes in the allowance for the years then ended are summarized as follows: 2007 2006 2005 - ----------------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 32,330 $ 20,395 $ 16,370 Charged to operations 9,884 11,935 4,025 - ----------------------------------------------------------------------------------------------------------------------- Balance, end of year $ 42,214 $ 32,330 $ 20,395 - ----------------------------------------------------------------------------------------------------------------------- 35 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Major categories of net investment income for the respective years ended December 31 are shown below. Net investment income related to securities held under repurchase agreements is shown with fixed-maturity securities, and was $0, $5,512, and $46,330 in 2007, 2006, and 2005, respectively. 2007 2006 2005 - ----------------------------------------------------------------------------------------------------------------- Interest: Available-for-sale fixed-maturity securities $ 1,912,421 $ 1,657,920 $ 1,361,508 Mortgage loans on real estate 239,081 176,235 102,797 Policy loans 11,384 9,182 7,404 Short-term securities 44,910 76,047 55,713 Dividends from available-for-sale common stock 173 335 17,287 Change in fair value of equity-indexed annuity-related reserves (152,379) (1,096,386) (209,419) Change in fair value of equity-indexed annuity and guaranteed benefit-related options (195,715) 124,391 (22,799) (Loss) gain on exercise of equity-indexed annuity and guaranteed benefit-related options (13,741) 59,794 (109,142) (Loss) gain on exercise of equity-indexed annuity and guaranteed benefit-related futures (43,820) 459,046 84,970 Change in fair value and (loss) gain on exercise of other options (272) - - Interest on assets held by reinsurers 3,817 4,054 4,424 Rental income on real estate 34,116 36,780 33,785 Interest on loans to affiliates 27,871 35,030 35,648 Other invested assets 44,686 20,227 11,045 Investment income on trading securities 298,908 188,468 105,145 - ----------------------------------------------------------------------------------------------------------------- Total investment income 2,211,440 1,751,123 1,478,366 Investment expenses 49,880 61,435 52,418 - ----------------------------------------------------------------------------------------------------------------- Net investment income $ 2,161,560 $ 1,689,688 $ 1,425,948 - -----------------------------------------------------------------------------------------------------------------
36 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Unrealized losses on available-for-sale securities and the related fair value for the respective years ended December 31 are shown below:
12 months or less Greater than 12 months Total ---------------------------- ----------------------------- ----------------------------- -------------------------------------------------------------------------------------------- Fair value Unrealized losseFair value Unrealized losseFair value Unrealized losses -------------------------------------------------------------------------------------------- ---------------------------- ----------------------------- ----------------------------- 2007: Equity securities $ 16,174 $ 1,104 $ - $ - $ 16,174 $ 1,104 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Total temporarily impaired available-for-sale securities $ 16,174 $ 1,104 $ - $ - $ 16,174 $ 1,104 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- 2006: Equity securities $ 348 $ 2 $ - $ - $ 348 $ 2 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Total temporarily impaired available-for-sale securities $ 348 $ 2 $ - $ - $ 348 $ 2 - ----------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2007 and 2006, there were no available-for-sale investment holdings that were in an unrealized loss position for fixed-maturity securities, and 3 and 4, respectively, for equity securities. The Company's investment portfolio includes mortgage-backed securities and collateralized mortgage obligations. Due to the high quality of these investments and the lack of sub-prime loans within the securities, the Company does not have a material exposure to sub-prime mortgages. 37 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities)
(6) SUMMARY TABLE OF FAIR VALUE DISCLOSURES 2007 2006 - ------------------------------------------------------------------------------------------------------------------------ Carrying Fair Carrying Fair amount value amount value -------------- --------------- -------------- --------------- Financial assets: Available for sale: Fixed-maturity securities: U.S. government $ 2,097,769 $ 2,097,769 $ 2,031,356 $ 2,031,356 Agencies not backed by the full faith and credit of the U.S. government 36,130 36,130 62,537 62,537 States and political subdivisions 307,689 307,689 316,313 316,313 Foreign governments 229,495 229,495 190,818 190,818 Public utilities 1,490,340 1,490,340 1,407,492 1,407,492 Corporate securities 19,563,675 19,563,675 17,817,930 17,817,930 Mortgage-backed securities 10,618,797 10,618,797 9,966,434 9,966,434 Collateralized mortgage obligations 47,427 47,427 57,307 57,307 Equity securities 16,719 16,719 5,287 5,287 Trading: Fixed-maturity securities: U.S. government 1,208,702 1,208,702 1,203,299 1,203,299 Agencies not backed by the full faith and credit of the U.S. government 21,169 21,169 20,355 20,355 States and political subdivisions 57,363 57,363 55,758 55,758 Foreign governments 41,508 41,508 36,704 36,704 Public utilities 299,256 299,256 175,246 175,246 Corporate securities 3,460,176 3,460,176 2,146,631 2,146,631 Mortgage-backed securities 897,377 897,377 723,681 723,681 Collateralized mortgage obligations 41,542 41,542 - - Equity securities 29,325 29,325 23,198 23,198 Mortgage loans on real estate 4,402,214 4,384,442 3,371,961 3,378,766 Short-term securities 737,039 737,039 983,650 983,650 Options 379,855 379,855 712,772 712,772 Loans to affiliates 725,826 731,283 218,553 221,901 Policy loans 169,058 169,058 146,139 146,139 Cash 92,177 92,177 55,876 55,876 Separate account assets 20,541,717 20,541,717 19,837,566 19,837,566 Financial liabilities: Investment contracts 44,922,911 39,037,986 41,957,947 36,338,059 Option liability 218,108 218,108 324,094 324,094 Mortgage notes payable 134,123 141,958 146,900 156,059 Separate account liabilities 20,541,717 19,673,882 19,837,566 18,957,500 - ------------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------------------------
Investment contracts include certain reserves related to deferred annuity and equity indexed universal life products. These reserves are included in the future policy benefit reserves and the policy and contract claims balances on the Consolidated Balance Sheets. The fair values of separate account assets were determined using the fair value of the underlying investments held in segregated mutual funds. Fair values of separate account liabilities were determined using the cash surrender values of the contractholders' accounts. 38 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Fair values of investment contracts, which include deferred annuities and other annuities without significant mortality risk, are determined by testing amounts payable on demand against discounted cash flows using market interest rates commensurate with the risks involved. Fair value of mortgage notes payable is the present value pay-off amount, calculated using current market interest rates, including unpaid principal balance and any applicable prepayment fees. The fair value of the option liability is derived internally. Changes in market conditions subsequent to year-end may cause fair values calculated subsequent to year-end to differ from the amounts presented herein. (7) GOODWILL Goodwill at December 31, 2007, 2006, and 2005, and the changes in the balance for the years then ended are as follows:
2007 2006 2005 - -------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 495,243 $ 428,323 $ 358,198 Increased ownership in partially owned field marketing organizations 6,181 66,920 51,958 Acquisition of broker-dealer - - 18,167 Acquisition of TFAC 1,216 - - ----------------------------------------------- -------------------------------------------------- Balance, end of year $ 502,640 $ 495,243 $ 428,323 -------------------------------------------------- Increase in goodwill is the result of the exercise of put options by minority-owned field marketing organizations in 2007 and 2006 requiring the Company to purchase part or all of the stock or member interests of the organizations, and the 2007 acquisition of TFAC. See notes 4 and 18 for further information. There was no goodwill impairment in 2007, 2006, or 2005. (8) VALUE OF BUSINESS ACQUIRED AND OTHER INTANGIBLE ASSETS VOBA at December 31, 2007, 2006, and 2005, and the changes in the balance for the years then ended are as follows: 2007 2006 2005 - ----------------------------------------------------------------------------------------------------- Balance, beginning of year $ 53,844 $ 66,373 $ 48,517 Interest 1,137 1,313 2,810 Amortization (12,350) (9,338) (1,417) Change in shadow VOBA (14,319) (4,504) 16,463 ----------------------------------------- Balance, end of year $ 28,312 $ 53,844 $ 66,373 ----------------------------------------- The net amortization of the VOBA in each of the next five years is expected to be: 2008 $ 6,642 2009 6,931 2010 4,465 2011 4,013 2012 3,700 39 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Intangible assets at December 31, 2007, 2006, and 2005 and the changes in the balance for the years then ended are as follows: 2007 2006 2005 - -------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 10,489 $ 39,519 $ 34,844 - Addition 2,482 5,390 10,140 Amortization (2,669) (4,770) (5,465) Impairment - (29,650) - ----------------------------------------------- -------------------------------------------------- Balance, end of year $ 10,302 $ 10,489 $ 39,519 -------------------------------------------------- Amortization of intangible assets in each of the next five years is expected to be: 2008 $ 2,615 2009 2,352 2010 1,587 2011 630 2012 43 During 2006, an impairment of the Contractual Right Intangible Asset totaling $29,650 was recorded associated with the anticipated sale of a subsidiary that served as the administrator of the Company's variable annuity business. The impairment was determined based on the offers received from potential buyers for the subsidiary. The Company is continuing to evaluate future business operations for this subsidiary. The impairment is included in general and administrative expenses on the 2006 Consolidated Statement of Operations. During 2007 and 2006, there were no other events or changes, other than as described above, in circumstances that warranted recoverability testing for intangible assets. (9) DEFERRED ACQUISITION COSTS DAC at December 31, 2007, 2006 and 2005 and the changes in the balance for the years then ended are as follows: 2007 2006 2005 - -------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 5,265,226 $ 4,326,771 $ 3,077,824 - Capitalization 919,445 1,166,321 1,411,789 Interest 177,153 161,169 139,492 Amortization (445,863) (277,844) (546,402) Change in shadow DAC (340,469) (111,191) 244,068 ----------------------------------------------- -------------------------------------------------- Balance, end of year $ 5,575,492 $ 5,265,226 $ 4,326,771 --------------------------------------------------
40 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The Company reviews its best estimate assumptions each year and typically records "unlocking" as appropriate. During 2007, the Company completed a comprehensive study of assumptions underlying estimated gross profits (EGP), resulting in an "unlocking". This study was based on recent changes in the organization and businesses of the Company and actual and expected performance of in-force policies. The study included all assumptions, including mortality, lapses, expenses, and separate account returns. The revised best estimate assumptions were applied to the current in-force policies to project future gross profits. The pre-tax impact on the Company's assets and liabilities as a result of the unlocking during 2007 was as follows: Assets DAC $ (185,748) DSI (20,290) ----------------- Total asset decrease (206,038) Liabilities Policy and contract account balances (478,733) Future policy benefit reserves (7,810) ----------------- Total liabilities decrease (486,543) ----------------- Net increase to income before taxes 280,505 Deferred income tax expense 98,177 ----------------- Net increase to net income $ 182,328 ================= (10) DEFERRED SALES INDUCEMENTS DSI at December 31, 2007, 2006, and 2005 and the changes in the balance for years then ended are as follows:
2007 2006 2005 - -------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 721,322 $ 590,537 $ 372,278 Capitalization 118,863 152,416 235,200 Amortization (64,013) (36,343) (61,132) Interest 28,320 23,067 19,032 Change in shadow DSI (36,576) (8,355) 25,159 -------------- ------------- ------------- -------------------------------------------------- Balance, end of year $ 767,916 $ 721,322 $ 590,537 --------------------------------------------------
(11) MORTGAGE NOTES PAYABLE In April 2005, the Company entered into a loan agreement with Wells Fargo National Bank (Wells Fargo), not to exceed $95,000, as short-term financing for the construction of an addition to the Company's headquarters. In June 2006, the loan was paid in full. In July 2004, the Company obtained an $80,000 mortgage loan from Northwestern Mutual Life Insurance Company for the Company's headquarters. In 2005, the Company agreed to enter into a separate loan agreement with Northwestern Mutual Life Insurance Company in conjunction with the construction of an addition to the Company's headquarters of $65,000. This loan was funded in June 2006 and combined with the existing mortgage. As of December 31, 2007 and 2006, the combined loan had a balance of $134,123 and 41 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) $138,900, respectively. This 20-year, fully amortizing loan has an interest rate of 5.52%, with a maturity date of August 1, 2024. The level principal and interest payments are made monthly. The loan allows for prepayment; however, it is accompanied by a make-whole provision. The proceeds of this mortgage were used to pay off a floating rate construction loan from Wells Fargo that the Company used to finance the acquisition of property for, and construction of, the Company's headquarters. The Company has long-term debt in the form of a mortgage on an investment in real estate in the amount of $0 and $8,000 as of December 31, 2007 and 2006, respectively. The interest on the loan was paid each month at 7.22% annually. The loan was paid in full in August 2007. Interest expense for all loans was $7,942, $5,352, and $5,217 in 2007, 2006, and 2005, respectively, and is presented in general and administrative expenses in the Consolidated Statements of Operations. The future principal payments required under the Northwestern Mutual Life Insurance Company's loan are as follows: 2008 $ 5,048 2009 5,334 2010 5,636 2011 5,955 2012 and beyond 112,150 - ------------------------------------------------------------- Total $ 134,123 - ------------------------------------------------------------- (12) ACCIDENT AND HEALTH CLAIM RESERVES Accident and health claim 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, 2007 are appropriate, 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 the Company's future reported earnings. 42 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Activity in the accident and health claim reserves is summarized as follows:
2007 2006 2005 - ------------------------------------------------------------------------------------------------------------------- Balance at January 1, net of reinsurance recoverables of $329,398, $215,327, and $195,333, respectively $ 60,189 $ 155,552 $ 133,523 Adjustment primarily related to commutation and assumption reinsurance on blocks of business (98) (18,564) (1,809) Incurred related to: Current year 10,998 80,336 173,406 Prior years 3,925 (3,962) 10,148 - ------------------------------------------------------------------------------------------------------------------- Total incurred 14,923 76,374 183,554 - ------------------------------------------------------------------------------------------------------------------- Paid related to: Current year 1,690 33,308 56,768 Prior years 9,911 119,865 102,948 - ------------------------------------------------------------------------------------------------------------------- Total paid 11,601 153,173 159,716 - ------------------------------------------------------------------------------------------------------------------- Balance at December 31, net of reinsurance recoverables of $234,740, $329,398, and $215,327, respectively $ 63,413 $ 60,189 $ 155,552 - -------------------------------------------------------------------------------------------------------------------
Prior year incurreds for 2007 reflect unanticipated adverse claim development with reinsurance assumed and LTC-Retropool business. Prior year incurreds in 2006 reflect the commutation activity on the reinsurance assumed business and the release of the Health claim handling reserve. Prior-year incurreds for 2005 reflect unanticipated adverse claim development on prior policy years for both stop loss and reinsurance assumed business. The significant decrease in total incurred and total paid claims from 2006 to 2007 is a result of the exiting of the Health Products business on October 1, 2006 as discussed in note 13. (13) REINSURANCE The Company primarily enters into reinsurance agreements to manage risk resulting from its life and accident and health businesses, as well as businesses the Company has chosen to exit. 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 yearly renewal term (YRT) coverage and first dollar quota share coinsurance and YRT contracts. The Company retains a maximum of $10,000 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. A contingent liability exists to the extent that the Company's reinsurers are unable to meet their contractual obligations under reinsurance contracts. Management is of the opinion that no liability will accrue to the Company with respect to this contingency. Included in reinsurance recoverables at December 31, 2007 are $1,476,367, $1,002,726, $445,223, $355,299, and $306,754 of claim-related recoverables from five insurers who, as of December 31, 2007, were rated A- or higher by A.M. Best's Insurance Reports. The Company mitigates risk by arranging trust accounts or letters of credit with certain insurers. Insurers with ratings lower than A-, and without a trust account or letter of credit, account for less than 5% of the total Reinsurance recoverable as of December 31, 2007. 43 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Effective June 30, 2005, the Company recaptured certain life and annuity business previously ceded to SCOR Life Re. Related to this transaction, the Company paid a ceding commission of $8,500 for the recapture of $311,712 in reserves and $5,956 of policyholder loans. Of the amounts ceded to others, the Company ceded accident and health premiums earned to the Company's ultimate parent, Allianz SE of $37, $387, and $712 in 2007, 2006, and 2005, respectively. Effective June 30, 2006, the Company recaptured certain health business previously ceded to R.W. Morey. Related to this transaction, the Company paid a ceding commission of $14,800 for the recapture of $37,873 in reserves. During 2006, the Company made the decision to exit the health products business. On October 1, 2006, the Company entered into a 100% quota share agreement with an unrelated insurance company, Houston Casualty Company (HCC) to reinsure the health block of business. Related to this transaction, the Company received a ceding commission of $140,000 for the recapture of $151,507 in reserves. In addition, the Company recorded a deferred gain of $136,803, which is being amortized into operations through 2009. The Company amortized $84,039 and $44,857 for 2007 and 2006, respectively, which is included on the Consolidated Statements of Operations. The remaining deferred gain was $7,906 and $91,946 as of December 31, 2007 and 2006, respectively. Offsetting the deferred gain, total incremental expenses of $24,859 were incurred in 2006 including $14,898 for commutation of certain reinsurance agreements in contemplation of the agreement with HCC, $7,565 for employee-related termination benefits, and $2,396 for write-off of capitalized software costs. The commutation of reinsurance agreements expense is included in benefit recoveries and the other incremental expenses are included in general and administrative expenses on the Consolidated Statements of Operations. As of December 31, 2006, all of these incremental costs were paid except for a $124 liability for termination benefits, which was paid in 2007. Throughout 2007, 2006, and 2005, the Company entered into numerous reinsurance arrangements with unrelated insurance companies to reinsure additional accident and health business, as well as group life and accident and health business that the Company decided to exit. In connection with these agreements, the Company had ceded premiums of $71,549, $75,981, and $2,158 in 2007, 2006, and 2005, respectively, and received expense allowances of $3,505, $3,539, and $163 in 2007, 2006, and 2005, respectively. Prior to 2000, the Company entered into various 100% coinsurance agreements with unrelated insurance companies to coinsure certain blocks of life and annuity business. Deferred gain on reinsurance resulting from these transactions is being amortized over the projected earnings patterns of the related reinsured policies. During 2007, 2006, and 2005, $11,652, $12,659, and $13,807, respectively, were amortized and included in other revenue on the Consolidated Statements of Operations. Deferred gain on reinsurance remaining as of December 31, 2007 and 2006 was $54,026 and $65,677, respectively. During 1999, the Company acquired all of the outstanding stock of LifeUSA Holding, Inc. (LifeUSA). As a result of the merger, the Company became party to reinsurance agreements entered into to limit exposure to loss and preserve surplus in a high-growth environment. Reinsurance recoverables of $2,346,440 and $2,364,625 were recorded as of December 31, 2007 and 2006, respectively, in connection with these agreements. During 2003, the Company exited the traditional life reinsurance business via a 100% coinsurance agreement with an unrelated insurance company, Reinsurance Group of America, Inc. (RGA). In 2004, the majority of the in-force business that was coinsured with RGA was novated. At December 31, 2007 and 2006, the remaining deferred gain after the novation was $6,841 and $8,531, respectively, and was included in deferred income on reinsurance on the Consolidated Balance Sheets. Deferred gain amortization was $1,689, $1,890 and $2,066 during 2007, 2006, and 2005, respectively, and was included in deferred gain on reinsurance in the Consolidated Statements of Operations. 44 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) (14) INCOME TAXES INCOME TAX EXPENSE Total income tax expense for the years ended December 31 is as follows:
2007 2006 2005 - --------------------------------------------------------------------------------------------------------------- Income tax expense attributable to operations: Current tax expense $ 64,494 $ 81,510 $ 54,032 Deferred tax (benefit) expense (60,705) 28,558 (20,076) - --------------------------------------------------------------------------------------------------------------- Total income tax expense attributable to operations 3,789 110,068 33,956 Tax expense (benefit) attributable to equity earnings of equity method investees 197 (1,266) 1,606 - --------------------------------------------------------------------------------------------------------------- Total income tax expense attributable to net income 3,986 108,802 35,562 Income tax effect on equity: Income tax expense (benefit) allocated to stockholder's equity: Attributable to unrealized gains and (losses) on investments 111,800 213 (102,934) Attributable to unrealized gains and (losses) on post-retirement obligation (564) 1,304 - Attributable to unrealized gains and on foreign exchange 3,513 68 587 - --------------------------------------------------------------------------------------------------------------- Total income tax effect on equity $ 118,735 $ 110,387 $ (66,785) - --------------------------------------------------------------------------------------------------------------- COMPONENTS OF INCOME TAX EXPENSE Income tax expense computed at the statutory rate of 35% varies from income tax expense reported in the Consolidated Statements of Operations for the respective years ended December 31 as follows: 2007 2006 2005 - -------------------------------------------------------------------------------------------------------------- Income tax expense computed at the statutory rate $ 20,779 $ 126,494 $ 126,544 Dividends-received deductions and tax-exempt interest (18,259) (19,798) (14,473) Accrual (release) of tax contingency reserve (2,361) 4,400 (2,929) IRS settlement - - (81,199) Foreign tax, net 688 389 4,848 Other 2,942 (1,417) 1,165 - -------------------------------------------------------------------------------------------------------------- Income tax expense as reported $ 3,789 $ 110,068 $ 33,956 - --------------------------------------------------------------------------------------------------------------
45 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The Company was under audit by the IRS for the years ended December 31, 1991 through December 31, 2002. In June 2005, the joint Committee on Taxation approved the settlement of a refund claim filed by the Company that related to years under audit. This refund claim resulted in a net benefit, including tax and interest, of approximately $81,199. The benefit is reflected in income tax expense attributable to operations in the 2005 Consolidated Statement of Operations. During 2005, the Company also recorded a release of tax contingency reserve as a result of the IRS finalizing their audit of years 1991 through 2002. COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES ON THE CONSOLIDATED BALANCE SHEET Tax effects of temporary differences giving rise to the significant components of the net deferred tax liability, which is included in other liabilities on the consolidated balance sheets, at December 31 are as follows:
2007 2006 - ------------------------------------------------------------------------------------------------------------- Deferred tax assets: Policy reserves $ 1,710,145 $ 1,701,390 Coinsurance deferred income 28,424 63,195 Expense accruals 84,972 33,787 Other-than-temporarily impaired assets 466,525 227,030 Provision for post-retirement benefits 2,442 2,280 Other 154 1,981 - ------------------------------------------------------------------------------------------------------------- Total deferred tax assets 2,292,662 2,029,663 - ------------------------------------------------------------------------------------------------------------- Deferred tax liabilities: Deferred acquisition costs 1,778,976 1,675,840 Investment income 103,761 140,383 Depreciation/amortization 24,276 23,907 Value of business acquired 9,924 18,846 Deferred intercompany gain 7,858 7,421 Net unrealized gain on investments and foreign exchange 404,312 162,358 Other 4,599 8,242 - ------------------------------------------------------------------------------------------------------------- Total deferred tax liabilities 2,333,706 2,036,997 - ------------------------------------------------------------------------------------------------------------- Net deferred tax liability $ 41,044 $ 7,334 - -------------------------------------------------------------------------------------------------------------
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. Income taxes paid by the Company were $143,000, $83,896, and $239,034 in 2007, 2006, and 2005, respectively. At December 31, 2007 and 2006, respectively, the Company had a tax receivable from AZOA of $103,550 and $45,387, reported in other assets on the Consolidated Balance Sheets. At December 31, 2007 and 2006, the Company had a tax payable separate from the agreement with AZOA in the amount of $236 and $1,028, respectively. These amounts are for foreign taxes and taxes on a majority owned subsidiary. 46 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The Company and its subsidiaries, except Allianz Life and Annuity Company, file a consolidated federal income tax return with AZOA and all of its wholly owned subsidiaries. With few exceptions, the Company is no longer subject to U.S. Federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2003. The Company's parent AZOA had net operating losses in 2000 through 2003 that were carried forward and used to offset taxable income in 2005 through 2007. Although the statute has closed for these years, they remain open to the extent that net operating losses utilized in future years can be adjusted. The years in which the net operating losses were used to offset taxable income will be open for examination for three years after the tax return for the given year was filed. 2005 through 2007 will close in 2009 through 2011, respectively. The tax year 2004 will close in 2008. The IRS has notified AZOA of its intent to initiate an audit of tax year 2006 during the calendar year 2008. At this time the Company is not aware of any adjustments that may be proposed by the IRS. The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $21,578 increase in the liability for unrecognized tax benefits, which was accounted for as an increased current tax liability and an increased deferred tax asset as of January 1, 2007. It is reasonably expected that the amount of unrecognized tax benefits will increase in 2008 by approximately the same amount as it did in year 2007. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Balance at January 1, 2007 $ 21,578 Additions based on tax positions related to the current year 1,383 ------------- ------------- Balance at December 31, 2007 $ 22,961 ============= Included in the balance at December 31, 2007 are $22,961 of tax positions for which the deductibility is more likely than not; however, there is uncertainty with respect to the timing of the deduction. Because of the impact of deferred tax accounting, other than interest and penalty, the disallowance would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in Federal Income Tax Expense. During the years ended December 31, 2007, 2006, and 2005, the Company recognized (benefits) expense of approximately $(3,632), $6,769, and $0, respectively, in interest and penalties. The Company had approximately $3,137, and $6,769 for the payment of interest and penalties accrued at December 31, 2007 and 2006, respectively. (15) RELATED-PARTY TRANSACTIONS Allianz Individual Insurance Group, LLC (AZIIG), a wholly owned subsidiary of the Company, sold its 50% membership interest in Life Sales LLC (Life Sales) on February 1, 2006 for $23,587. AZIIG transferred its interest in Life Sales to a related party, Fireman's Fund Insurance Company, a sister company wholly owned by the same parent company, Allianz of America, Inc. As a result of this sale, the Company recognized a gain on the sale net of tax of $14,593. The Company held related-party invested assets of $725,826 and $218,553 at December 31, 2007 and 2006, respectively, representing 1.5% and 1% of total invested assets and 18.7% and 6.5% of capital for the respective years. The Company does not foresee a credit risk with these investments given the financial strength of Allianz SE, which currently has an A.M. Best rating of A+. 47 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) In December 2003, the Company entered into an agreement to lend Allianz SE $350,000. On November 30, 2004, the Company transferred, in the form of a dividend, a portion of the loan to AZOA with a carrying value of $90,000. On December 27, 2006, the Company transferred, in the form of a dividend, an additional portion of the loan to AZOA with a carrying amount of $130,000. The remaining loan balance was $130,000 at December 31, 2007 and will be repaid, plus interest over ten years; semi-annual interest payments for the first five years and amortized semi-annual payments of principal and accrued interest over the last five years. The interest rate is 5.18%. Interest of $6,734, $13,056, and $13,468 was earned during 2007, 2006, and 2005, respectively, and is included in the affiliated net investment income on the Consolidated Statements of Operations. The loan was collateralized by a (euro)100,000 Buoni Poliennali Del Tes Government Bond with a fair value of $151,980 at December 31, 2007. Effective January 26, 2001, the Company entered into an agreement to lend AZOA $100,000. The loan plus interest will be repaid over twelve years, semi-annual interest payments for the first five years and level semi-annual payments of principal and accrued interest over the last seven years. Repayment of this loan started in 2006 with year-to-date principal payments received through December 31, 2007 and 2006, in the amount of $12,283, and $11,447, respectively. The interest rate is a fixed rate of 7.18%. AZOA pledged as collateral a security interest in shares of the common stock outstanding of Allianz Global Risks US Insurance Company (AGR), which had a statutory book value as of the date of the loan equal to 125% of the loan. Interest of $6,137, $6,974, and $7,180 was earned during 2007, 2006, and 2005, respectively, and is included in the affiliated net investment income on the Consolidated Statements of Operations. In September 2005, the Company purchased corporate bonds with a carrying value of $98,081 from Fireman's Fund Insurance Company. This transaction included $1,560 of accrued interest and resulted in no gain or loss being recorded by either party. Beginning in 2005, the Company began participating in securities lending arrangements whereby specific securities are loaned to other institutions for short periods of time. The agent for the Company is an affiliate, Dresdner Klienwort Wasserstein. The Company had $177 and $150 in fair value of loaned securities outstanding as of December 31, 2007 and 2006, respectively. The fair value of collateral accepted that can be sold or repledged amounted to $199 and $151, of which none was sold or repledged as of December 31, 2007 or 2006, respectively. The Company earned fee revenue of $5,190, $4,451, and $4,025 for the years ended December 31, 2007, 2006, and 2005, respectively, in connection with these arrangements, which is reported in non-affiliated net investment income on the Consolidated Statements of Operations. See further discussion in note 2. In December 2002, the Company entered into an agreement to lend AZOA $250,000. The loan plus interest will be repaid over ten years, semi-annual interest payments for the first five years and level semi-annual payments of principal and accrued interest over the last five years. The interest rate is a fixed rate of 6%. The loan is not collateralized. The fair value of the loan was $256,950 and $254,558 at December 31, 2007 and 2006, respectively. The outstanding loan balance is included as a component of stockholder's equity on the Consolidated Balance Sheets. Interest of $15,000 was earned during 2007, 2006, and 2005 and is included in non-affiliated net investment income on the Consolidated Statements of Operations. The Company purchases and writes option contracts with Dresdner Bank Aktiengesellschaft, a subsidiary of Allianz SE, as part of a derivative hedging strategy (see further discussion in note 2). At December 31, 2007 and 2006, options purchased were $1,772 and $1,600, respectively. The Company has real estate investment properties leased to affiliates. The Company reported $4,064, $3,993, and $3,407 in 2007, 2006, and 2005, respectively, for rental income included in the affiliated net investment income on the Consolidated Statements of Operations. The Company has an agreement to sublease office space to Fireman's Fund Insurance Company (FFIC). The Company received rental income of $86, $24, and $22 in 2007, 2006, and 2005, respectively. In addition, the Company leases office space from FFIC pursuant to a 48 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) sublease agreement. In connection with this subleasing arrangement, the Company has incurred rent expense of $157, $150, and $64 in 2007, 2006, and 2005, respectively, which is included in general and administrative expenses on the Consolidated Statements of Operations. The Company incurred fees for services provided by affiliated companies. The Company incurred fees of $50,929, $19,779, and $16,736 in 2007, 2006, and 2005, respectively. The Company's liability for these expenses was $11,906 and $100 at December 31, 2007 and 2006, respectively, and is included in accrued expenses on the Consolidated Balance Sheets. On a quarterly basis, the Company pays the amount due through cash settlement. The Company provides various services to affiliated companies. The Company earned $5,330, $1,779, and $815 in 2007, 2006, and 2005, respectively, for related administrative expenses incurred. The receivable for these expenses was $1,261 and $405 for 2007 and 2006, respectively. On a quarterly basis, the Company receives payment through cash settlement. The Company has agreements with Pacific Investment Management Company (PIMCO) and Oppenheimer Capital, affiliates of the Company's, related to its separate accounts, where the policyholders of variable annuity products may choose to invest in specific investment options managed by these affiliates. Income recognized by the Company from these affiliates for distribution and in-force related costs as a result of providing investment options to the policyholders was $3,874, $2,699, and $2,322 during 2007, 2006, and 2005, respectively, which is included in other revenue on the Consolidated Statements of Operations. The receivable for these fees at December 31, 2007 and 2006 was $669 and $725, respectively, which is included in non-affiliated receivables on the Consolidated Balance Sheets. Expenses incurred to these affiliates for management of sub-advised investment options were $4,097, $3,347, and $3,387 during 2007, 2006, and 2005, respectively, which are included in general and administrative expenses on the Consolidated Statements of Operations. The related payable to these affiliates was $315 and $351 at December 31, 2007 and 2006, respectively, included in accrued expenses on the Consolidated Balance Sheets. In January 2007, the Company, in an effort to optimize investment returns, entered into an agreement with Dresdner Kleinwort Pfandbriefe Investments (DKPII), a wholly owned subsidiary of Allianz SE, to manage a portfolio of German Pfandbriefe (PFs) or other European covered bonds with a credit rating of at least "AA" by S&P or Moody's. Through this agreement, AZL PF Investments, Inc. (AZLPF), a wholly owned subsidiary of the Company's, entered into a $500,000 prepaid forward agreement to purchase common stock of DKPII in five years from a wholly owned subsidiary of Dresdner Bank, Dresdner Bank Luxembourg. The effect of the agreement will result in a Reference Portfolio whereby DKPII will designate a portfolio of assets in accordance with pre-established investment guidelines. As of December 31, 2007, the value of this forward agreement is $519,556 and is included in loans to affiliates on the Consolidated Balance Sheets. Income earned in 2007 was $19,556 and is included in the non-affiliated net investment income on the Consolidated Statements of Operations. AZLPF is contractually protected from counterparty exposure to Dresdner Bank. Dresdner Bank pledges high-quality fixed income securities as collateral, based on 101% of the current market value of the AZLPF position in the investment. In September 2007, the Company received a capital contribution of $150,000 from AZOA. (16) EMPLOYEE BENEFIT PLANS The Company participates in the Allianz Asset Accumulation Plan (AAAP), a defined contribution plan sponsored by AZOA. Eligible employees are immediately enrolled in the AAAP upon their first day of employment. The AAAP will accept participants' pre-tax or after-tax contributions up to 80% of the participants' eligible compensation, although contributions remain subject to annual limitations set by the 49 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Employee Retirement Income Security Act (ERISA). Under the eligible employees' provisions, the Company will match 100% of contributions up to a maximum of 6%. Participants are 100% vested in the Company's matching contribution after three years of service. The Company may decide to declare a profit-sharing contribution under the AAAP based on the discretion of Company management. The Company has not yet determined if there will be a profit-sharing contribution under the AAAP for the plan year ended December 31, 2007. The Company declared a profit-sharing contribution of 1.5% of employees' salaries for the plan year ended December 31, 2006 and 2.5% of employees' salaries for the plan year ended December 31, 2005, reported in general and administrative expenses on the Consolidated Statements of Operations and funded in 2007 and 2006, respectively. Employees are not required to participate in the AAAP to be eligible for the profit-sharing contribution. The expenses of administration of the AAAP and the trust fund, including all fees of the trustee, investment manager, and auditors, are payable from the trust fund but may, at the Company's discretion, be paid by the Company. Any counsel fees are not paid from the trust fund, but are instead paid by the Company. It is the Company's policy to fund the AAAP costs as incurred. The Company has expensed $9,960, $12,679, and $10,751 in 2007, 2006, and 2005, respectively, toward the AAAP matching contributions and administration expenses. The Company sponsors a deferred compensation plan for a defined group of highly compensated employees, with a minimum base salary of $125, for the purpose of providing tax planning opportunities, as well as supplemental funds upon retirement. The plan is unfunded, meaning no assets of the Company have been segregated or defined to represent the liability for accrued assets under the plan. Employees are 100% vested upon enrollment in the plan and funds are invested the first day of each month, with the Company paying any fee expense. The accrued liability of $14,776 and $17,860 as of December 31, 2007 and 2006, respectively, is recorded in other liabilities on the Consolidated Balance Sheets. The Company sponsors a nonqualified deferred compensation plan for a defined group of agents. The Company may decide to make discretionary contributions to the plan in the form and manner the Company determines. Discretionary contributions are currently determined based on production. The accrued liability of $11,067 and $3,239 as of December 31, 2007 and 2006, respectively, is recorded in other liabilities on the Consolidated Balance Sheets. The Company participates in a stock-based compensation plan sponsored by Allianz SE, which awards certain employees Stock Appreciation Rights (SARs) and Restricted Stock Units (RSUs) that are tied to Allianz SE stock. Allianz SE determines the number of SARs and RSUs granted to each participant. The Company records expense equal to the change in fair value of the units during the reporting period. Expense of $4,326, $10,980, and $6,660 was recorded in 2007, 2006, and 2005, respectively, and is included in general and administrative expenses on the Consolidated Statements of Operations. The related liability of $6,192 and $14,860 as of December 31, 2007 and 2006, respectively, is recorded in accrued expenses on the Consolidated Balance Sheets. See further discussion in note 2. The Company is participating in an Employee Stock Purchase Plan sponsored by AZOA that is designed to provide eligible employees with an opportunity to purchase American Depository Shares of Allianz SE at a discounted price. An aggregate amount of 250,000 American Depository Shares are reserved for this plan. Allianz SE determines the purchase price of the share based on the closing price of an Ordinary Share of Allianz SE on the Frankfurt stock exchange on the date of each purchase. Employees are given the opportunity to purchase these shares annually on a predetermined date set by Allianz SE. Employees are not allowed to sell or transfer the shares for a one-year period following the purchase date. The difference between the market price and the discount price, or the discount, is paid by the Company and amounted to $457, $281, and $297 in 2007, 2006, and 2005, respectively. 50 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) In 2005, the Company started an Employee Severance Pay Plan for the benefit of eligible employees. The plan may provide severance benefits on account of an employee's termination of employment from the Company. To become a participant in the plan, an employee must be involuntarily terminated. In addition, the Company must determine that it wishes to provide the employee with a severance payment and must issue a written Severance Pay Award. The plan is unfunded, meaning no assets of the Company have been segregated or defined to represent the liability for payments under the plan. The Company expensed $5,712, $5,135 and $408 in 2007, 2006, and 2005, respectively, toward severance payments. The Company offers certain benefits to eligible employees, including a comprehensive medical, dental, and vision plan and a flexible spending plan. Associated with these plans, the Company provides certain post-retirement 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. Employees of the Company hired or rehired after December 31, 1988 or who became employees of the Company as a result of a merger or acquisition after January 1, 1989 are not eligible for retiree medical or life insurance coverage. The Company's plan obligation at December 31, 2007 and 2006 was $6,978 and $6,514, respectively. This liability is included in other liabilities on the Consolidated Balance Sheets. During 2005, for tax advantages, the Company pre-funded its post-retirement liability. The Company plans to continue pre-funding in the future. The Company's plan assets at December 31, 2007 and 2006 were $14,503 and $13,500, respectively. In 2006, the Company adopted SFAS No. 158, EMPLOYERS' ACCOUNTING FOR DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS. The amounts recognized in accumulated other comprehensive income consist of: 2007 2006 2005 ------------------------------------------------------------------------- Net actuarial gain (loss) $ 78 $ (2,763) $ - Prior service (cost) credit (1,190) 5,185 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total $ (1,112) $ 2,422 $ - ------------------------------------------------------------------------- Over the next fiscal year, the estimated actuarial loss and estimated prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost are $297 and $(1,188), respectively. No plan assets are expected to be returned to the Company during the next 12-month period. (17) STATUTORY FINANCIAL DATA AND DIVIDEND RESTRICTIONS Statutory accounting practices prescribed or permitted by the Company's state of domicile are directed toward insurer solvency and protection of policyholders. Accordingly, certain items recorded in financial statements prepared under GAAP are excluded or vary in calculation in determining statutory policyholders' surplus and gain from operations. Currently, these items include, among others, DAC, furniture and fixtures, deferred taxes, and accident and health premiums receivable which are more than 90 days past due, reinsurance, certain investments, and undeclared dividends to policyholders. Additionally, future policy benefit reserves and policy and contract account balances calculated for statutory reporting do not include provisions for withdrawals. The statutory capital and surplus of the Company reported in the statutory annual statement filed with the Sate of Minnesota as of December 31, 2007 and 2006 was $2,441,338 and $2,447,865, respectively. The statutory net income of the Company for the years ended December 31, 2007, 2006, and 2005 was $78,077, $318,528, and $468,803, respectively. The Company is required to meet minimum statutory capital and surplus requirements. The Company's statutory capital and surplus as of December 31, 2007 and 2006 were in compliance with these requirements. 51 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) 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. 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, 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. Ordinary dividends of $244,134 can be paid in 2008 without prior approval of the Commissioner of Commerce. REGULATORY RISK-BASED CAPITAL An insurance enterprise's state of domicile imposes minimum risk-based capital requirements that were developed by the 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. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. This ratio for the Company was 555% and 594% as of December 31, 2007 and 2006, respectively. Regulatory action level against a company may begin when this ratio falls below 200%. (18) COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are involved in various pending or threatened legal proceedings. This includes putative and certified class action proceedings arising from the conduct of the Company's business relating to sales practices of fixed annuities. In November 2007, the Company settled one of the pending class action lawsuits. The Company also owns a registered retail broker-dealer that is subject to a putative class action proceeding. For each of the above-mentioned lawsuits, the Company cannot predict the potential outcome at this stage of the proceedings. The Company recognizes legal costs for defending itself as incurred. 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. The financial services industry, including mutual fund, variable and fixed annuity, life insurance, and distribution companies, has been the subject of increasing scrutiny by regulators, legislators, and the media over the past few years. Many regulators, including the U.S. SEC, the Financial Industry Regulatory Authority (FINRA) (formerly known as National Association of Securities Dealers), and state Attorneys General, commenced industry-wide investigations regarding late trading and market timing in connection with mutual funds and variable insurance contracts, and commenced enforcement actions against some mutual fund and life insurance companies on those issues. Like others in the industry, the Company has been contacted by the SEC, which is investigating market timing in certain mutual funds or in variable insurance products. The Company has responded to these requests, and no further information requests have been received with respect to these matters. In addition, state and federal regulators have commenced investigations or other proceedings relating to compensation and bidding arrangements and possible anti-competitive activities between insurance producers and brokers and issuers of insurance products. Also under investigation are compensation and revenue-sharing arrangements between the issuers of variable insurance contracts and mutual funds or their affiliates, the use of side agreements and finite reinsurance agreements, and funding agreements. Related investigations and proceedings may be commenced in the future. Like others in the industry, the Company and/or its affiliates have 52 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) been contacted by state and federal regulatory agencies for information relating to certain of these investigations. The Company is cooperating with regulators in responding to these requests. Federal and state regulators are also investigating various selling practices in the annuity industry, including suitability reviews, product exchanges, and sales to seniors. In certain instances, these investigations have led to regulatory enforcement proceedings. Included in these proceedings are several lawsuits brought by the Minnesota Attorney General's Office against insurance companies that offer annuities. One of these lawsuits was filed against the Company in January 2007 alleging unsuitable sales of fixed annuities to seniors. That lawsuit was settled in October 2007. While the Company expressly denied the allegations, the Company agreed to adopt certain modifications to the Company's suitability review process and to offer a review process to Minnesota seniors who had purchased deferred fixed annuities since 2001. The Company is also subject to ongoing market conduct examinations by state insurance regulators. In some instances, these examinations may lead to enforcement proceedings. In February 2008, the Company agreed to a settlement with the California Department of Insurance arising out of a market conduct examination report and related enforcement proceeding issued in 2006. While denying the Department's allegations, the Company agreed to adopt additional modifications to the Company's suitability review process, to certain enhancements to the Company's existing processes and to payment of certain penalties, contributions and costs. The impact of these settlements was not material to the Consolidated Financial Statements. A model regulation has been approved by the NAIC regarding the suitability of sales to seniors, and now has been expanded to include purchasers of all ages. In addition, the SEC has recently approved a proposed FINRA regulation governing the suitability of sales of variable annuities. It can be expected that annuity sales practices will be an ongoing source of litigation and rulemaking. Similarly, private litigation regarding sales practices is ongoing against a number of insurance companies. In addition, federal regulators have commenced a number of inquiries into the FIA industry and have issued various regulatory pronouncements. Among these are inquiries by the SEC and FINRA and a regulatory pronouncement by FINRA. In the SEC inquiry, the staff of the SEC inquired of a number of issuers of unregistered FIAs as to how modern FIA products are structured; how the products are distributed; and whether certain FIAs should be required to register as securities. Like other FIA issuers, the Company was contacted regarding this matter. The Company responded, and there has been no further public action by the SEC. The North American Securities Administrators Association (NASAA) has identified attempting to get FIA's classified as securities as one of its top legislative priorities for 2008. In addition, FINRA has initiated various inquiries regarding transactions that involve exchanges from variable annuities into FIAs. Like other FIA issuers, the Company was contacted regarding this matter, and is responding. In addition, FINRA in 2005 issued a regulatory Notice to Members advising member firms of the unique issues raised by FIAs, and suggesting that broker-dealers consider taking various actions when their registered representatives sell FIAs as an outside business activity. As a result of this Notice to Members, certain firms have instituted enhanced procedures regarding FIA sales by the representatives, and some firms have placed restrictions on these sales. These proceedings are expected to continue in the future and could result in legal precedents and new industry-wide legislation, rules, and regulations that could significantly affect the financial services industry, including life insurance and annuity companies. It is unclear at this time whether any such litigation or regulatory actions will have a material adverse effect on the Company in the future. The Company has acquired minority equity interests in certain field marketing organizations. Certain provisions within stockholders' agreements, member agreements, and first refusal and put agreements require the Company to purchase part or all of the stock or member interests in the entities to which these agreements pertain, if and when principals of the field marketing organizations choose to exercise certain available options. The exercise period for the various put options ranges from five to ten years, the latest of which expires in 2016. 53 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) If all put options were exercised, requiring the Company to purchase all of the stock or member interests in the entities, the total purchase price that would be paid by the Company based on current calculations would be $28,436. The Company has limited partnership investments that require the commitment of capital over a period of up to ten years. The Company had capital commitments of $68,818 and $98,568, of which $53,394 and $82,176 has been funded, at December 31, 2007 and 2006, respectively. Beginning in 2005, the Company has private placement investments that require commitments of capital within the next year. The Company had capital commitments of $33,000 and $22,500 at December 31, 2007 and 2006, respectively, related to private placements. Funding of the private placements occurred in January 2008. The Company has commercial mortgage loan investments that require commitments of capital within the next year. The Company had capital commitments of $182,360 and $260,837 at December 31, 2007 and 2006, respectively. These commercial mortgage loan commitments are expected to be fully funded by August 31, 2008. The Company leases office space and certain furniture and equipment pursuant to operating leases. Expense for all operating leases was $5,454, $9,739, and $8,603 in 2007, 2006, and 2005, respectively. A partial buyout of an operating lease during 2006 and the subsequent refinancing as a capital lease, reduced future minimum lease payments required under these leases. The future minimum lease payments required under operating leases are as follows: 2008 $ 4,556 2009 2,889 2010 1,782 2011 1,163 2012 and beyond 3,072 - ------------------------------------------------------------- Total $ 13,462 - ------------------------------------------------------------- During 2006, the Company entered into capital leases to finance furniture and equipment for the addition to the Company's headquarters. Expense for all capital leases was $3,120 and $64 for the years ended December 31, 2007 and 2006, respectively. The future minimum lease payments and present value of the net minimum lease payments are as follows: 2008 $ 2,898 2009 2,731 2010 886 2011 886 2012 and beyond 1,717 - ------------------------------------------------------------------------ Total minimum lease payments 9,118 Less: Executory costs (estimated) 572 - ------------------------------------------------------------------------ Net minimum lease payments 8,546 Less: Imputed interest 598 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Present value of net minimum lease payments $ 7,948 - ------------------------------------------------------------------------ 54 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) The Company owns numerous commercial and real estate investment properties leased to various tenants. The typical lease period is five to ten years, with some leases containing renewal options. Under net leases, in addition to their base rent, the tenants are directly responsible for the payment of property taxes, insurance, and maintenance costs relating to the leased property. Under gross leases, the tenants pay a rent amount grossed up to include the cost of taxes, insurance, and maintenance. Future minimum lease receipts under noncancelable leasing arrangements as of December 31, 2007 are as follows: 2008 $ 17,868 2009 15,911 2010 12,794 2011 11,197 2012 and beyond 28,442 - ------------------------------------------------------------- Total $ 86,212 - ------------------------------------------------------------- (19) CAPITAL STRUCTURE The Company is authorized to issue three types of capital stock, as outlined in the table below:
Authorized, Par value, Voluntary or involuntary Issued, per share liquidation rights Outstanding Redemption rights ----------------------------------------------------------------------------------------- Common Stock 40,000,000 $ 1.00 None None 20,000,001 20,000,001 - ---------------------------------------------------------------------------------------------------------------------- Preferred Stock: Class A 200,000,000 18,903,484 1.00 Designated by Board for Designated by Board for 18,903,484 each series issued each series issued - ---------------------------------------------------------------------------------------------------------------------- Class A, Series A 8,909,195 $35.02 per share plus an $35.02 per share plus an 8,909,195 amount to yeld a amount to yeld a 8,909 1.00 compounded annual return compounded annual return of 6%, after actual of 6%, after actual dividends paid dividends paid - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Class A, Series B 10,000,000 1.00 $35.02 per share plus an $35.02 per share plus an 9,994,289 amount to yeld a amount to yeld a 9,99 compounded annual return compounded annual return of 6%, after actual of 6%, after actual dividends paid dividends paid - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Class B 400,000,000 1.00 Designated by Board for Designated by Board for 0 each series issued each series issued 0 - ----------------------------------------------------------------------------------------------------------------------
Holders of Class A preferred stock and of common stock are entitled to one vote per share with respect to all matters presented to or subject to the vote of shareholders. Holders of Class B preferred stock have no voting rights. All issued and outstanding shares are owned by AZOA. See note 1 for further discussion. 55 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2007, 2006, and 2005 (In thousands, except share data and security holdings quantities) Each share of Class A preferred stock is convertible into one share of the Company's common stock. The Company may redeem any or all of the Class A preferred stock at any time. Dividends will be paid to each class of stock only when declared by the Board of Directors. In the event a dividend is declared, dividends must be paid to holders of Class A preferred stock, Class B preferred stock, and common stock, each in that order. As discussed in notes 2 and 15 to these consolidated financial statements, the Company carried out various capital transactions with related parties during 2007, 2006, and 2005. (20) FOREIGN CURRENCY TRANSLATION An analysis of foreign currency translation (as described in note 2) for the respective years ended December 31 follows:
2007 2006 2005 - ---------------------------------------------------------------------------------------------------------------------- Beginning amount of cumulative translation adjustments $ 7,889 $ 7,759 $ 6,668 - ---------------------------------------------------------------------------------------------------------------------- Aggregate adjustment for the period resulting from translation adjustments 10,032 198 1,678 Amount of income tax expense for the period related to aggregate adjustment (3,512) (68) (587) - ---------------------------------------------------------------------------------------------------------------------- Net aggregate translation included in equity 6,520 130 1,091 - ---------------------------------------------------------------------------------------------------------------------- Ending amount of cumulative translation adjustments $ 14,409 $ 7,889 $ 7,759 - ---------------------------------------------------------------------------------------------------------------------- Canadian foreign exchange rate at end of year 1.01322 0.85933 0.85605 - ----------------------------------------------------------------------------------------------------------------------
56 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES DECEMBER 31, 2007
Type of Investment Cost (1) Fair Value Amount at which shown in the Consolidated Balance Sheet - ------------------------------------------------------------- ---------------- ---------------- ------------------------- - ------------------------------------------------------------- ---------------- ---------------- ------------------------- Fixed-maturity securities: Available-for-sale fixed-maturity securities: U.S. government $ 1,929,269 $2,097,769 $2,097,769 Agencies not backed by the full faith and credit of the U.S. government 33,726 36,130 36,130 States and political subdivisions 289,978 307,689 307,689 Foreign government 215,739 229,495 229,495 Public utilities 1,451,535 1,490,340 1,490,340 Corporate securities 19,015,811 19,563,675 19,563,675 Mortgage-backed securities 10,276,194 10,618,797 10,618,797 Collateralized mortgage obligations 45,180 47,427 47,427 - ------------------------------------------------------------- ---------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ---------------- ----------------- Total available-for-sale fixed-maturity securities 33,257,432 34,391,322 34,391,322 - ------------------------------------------------------------- ---------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ---------------- ----------------- Trading fixed-maturity securities: U.S. government 1,171,353 1,208,702 1,208,702 Agencies not backed by the full faith and credit of the U.S. government 20,643 21,169 21,169 States and political subdivisions 57,957 57,363 57,363 Foreign government 40,953 41,508 41,508 Public utilities 303,902 299,256 299,256 Corporate securities 3,526,505 3,460,176 3,460,176 Mortgage-backed securities 899,532 897,377 897,377 Collateralized mortgage obligations 41,078 41,542 41,542 - ------------------------------------------------------------- ---------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ---------------- ----------------- Total trading fixed-maturity securities 6,061,923 6,027,093 6,027,093 - ------------------------------------------------------------- ---------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ---------------- ----------------- Total fixed-maturity securities 39,319,355 $40,418,415 40,418,415 - ------------------------------------------------------------- ---------------- ================ ----------------- - ------------------------------------------------------------- ---------------- ================ ----------------- Equity securities: Available-for-sale equity securities: Common stocks: Industrial and miscellaneous 17,361 $ 16,268 16,268 Preferred stocks 240 451 451 - ------------------------------------------------------------- ---------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ---------------- ----------------- Total available-for-sale equity securities 17,601 16,719 16,719 - ------------------------------------------------------------- ---------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ---------------- ----------------- Trading equity securities: Common stocks: Industrial and miscellaneous 25,079 29,325 29,325 - ------------------------------------------------------------- ---------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ---------------- ----------------- Total equity securities 42,680 $ 46,044 46,044 - ------------------------------------------------------------- ---------------- ================ ----------------- - ------------------------------------------------------------- ---------------- ================ ----------------- Other investments: Mortgage loans on real estate 4,402,214 4,402,214 Short-term securities 737,039 737,039 Options 379,855 379,855 Real estate 327,967 327,967 Loans to affiliates 725,826 725,826 Policy loans 169,058 169,058 Partnerships 20,501 20,501 Investment in equity-method investees 562 562 - ------------------------------------------------------------- ---------------- ----------------- - ------------------------------------------------------------- ---------------- ----------------- Total other investments 6,763,022 6,763,022 ---------------- ----------------- ---------------- ----------------- Total investments $ 46,125,057 $47,227,481 ================ ================= ================ =================
(1) Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual discounts. See accompanying report of independent registered public accounting firm. 57 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
As of December 31, For the year ended December 31, -------------------------------------------------------------------- --------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------- Future Net premium Net change Net change benefit reserves Policy revenue in in Deferred Deferred and policy and and and other Net deferred policy Other acquisition sales contract account Unearned contract contract investment Net sales acquisition operating costs inducements balances premiums claims considerations income benefits inducements* costs** expenses - ------------------------------------------------------------------------------------------------------------------------------------ 2007: Life $ 188,301 $ (264 $ 2,055,549 $ 186 $ 19,952 $ 70,955 $ 43,857 $ 61,244 $ 8,046 $ (23,490) $ 83,638 Annuities 5,283,977 768,180 50,737,462 149,998 - 255,719 2,097,837 1,082,802 (91,216) (609,862) 1,532,096 Accident and health 103,214 - 1,061,074 67,223 298,153 128,585 19,866 82,937 - (17,383 70,702 --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- 5,575,492 $ 767,916 $ 53,854,085 $ 217,407 $ 318,105 $ 455,259 $ 2,161,560 $ 1,226,983 $ (83,170) $ (650,735 $1,686,436 --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- 2006: Life $ 170,869 $ 8,393 $ 1,934,148 $ 190 $ 15,215 $ 61,008 $ 38,414 $ 46,474 $ (5,930) $ (24,179) $ 72,942 Annuities 5,008,526 712,929 45,909,869 201,549 - 281,255 1,634,027 905,150 (133,209) (998,281) 1,467,394 Accident and health 85,831 - 879,263 60,765 389,587 293,674 17,247 246,033 - (27,186) 120,617 --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- 5,265,226 $ 721,322 $ 48,723,280 $ 262,504 $ 404,802 $ 635,937 $ 1,689,688 $ 1,197,657 $ (139,139) $(1,049,646)$1,660,953 --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- 2005: Life $ 148,320 $ 2,536 $ 1,867,883 $ 236 $ 24,978 $ 54,415 $ 27,533 $ 46,821 $ (2,736) $ (22,032) $ 34,614 Annuities 4,119,805 588,001 39,243,997 222,636 - 308,022 1,385,131 1,057,950 (190,365) (961,894) 1,652,776 Accident and health 58,646 - 713,352 53,250 370,880 285,412 13,284 222,245 - (20,953) 97,451 --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- --------- --------- ------------ --------- --------- --------- ----------- ----------- ----------- ------------ --------- $4,326,771 $ 590,537 $ 41,825,232 $ 276,122 $ 395,858 $ 647,849 $ 1,425,948 $ 1,327,016 $ (193,101) $(1,004,879)$1,784,841 ----------- --------- ------------- --------- --------- --------- ----------- ----------- ----------- ------------ -------- ----------- --------- ------------- --------- --------- --------- ----------- ----------- ----------- ------------ -------- * See note 10 for aggregate gross amortization of deferred sales inducements. ** See note 9 for aggregate gross amortization of deferred acquisition costs.
See accompanying report of independent registered public accounting firm. 58
Percentage Ceded Assumed of amount Direct to other from other Net assumed Year ended amount companies companies amount to net - --------------------------------- ---------------- --------------- ---------------- ---------------- --------------- December 31, 2007: Life insurance in force $ 21,558,390 $ 21,380,158 $ 9,487,390 $ 9,665,622 98.2% ---------------- --------------- ---------------- ---------------- --------------- Premiums: Life $ 121,600 $ 75,160 $ 24,515 $ 70,955 34.6% Annuities 253,812 (2,680) (774) 255,718 -0.3% Accident and health 259,045 182,914 52,455 128,586 40.8% ---------------- --------------- ---------------- ---------------- --------------- Total premiums $ 634,457 $ 255,394 $ 76,196 $ 455,259 16.7% - --------------------------------- ---------------- --------------- ---------------- ---------------- --------------- December 31, 2006: Life insurance in force $ 19,670,790 $ 21,512,211 $ 10,097,563 $ 8,256,142 122.3% ---------------- --------------- ---------------- ---------------- --------------- Premiums: Life $ 110,030 $ 71,272 $ 22,250 $ 61,008 36.5% Annuities 280,396 (2,017) (1,158) 281,255 -0.4% Accident and health 404,556 251,341 140,459 293,674 47.8% ---------------- --------------- ---------------- ---------------- --------------- Total premiums $ 794,982 $ 320,596 $ 161,551 $ 635,937 25.4% - --------------------------------- ---------------- --------------- ---------------- ---------------- --------------- December 31, 2005: Life insurance in force $ 18,735,647 $ 21,663,520 $ 10,980,508 $ 8,052,635 136.4% ---------------- --------------- ---------------- ---------------- --------------- Premiums: Life $ 109,632 $ 74,698 $ 19,481 $ 54,415 35.8% Annuities 309,755 472 (1,262) 308,021 -0.4% Accident and health 369,401 198,097 114,109 285,413 40.0% ---------------- --------------- ---------------- ---------------- --------------- Total premiums $ 788,788 $ 273,267 $ 132,328 $ 647,849 20.4% - --------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
10 PART C - OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements
The following financial statements of the Company are included in Part B hereof: 1. Report of Independent Registered Public Accounting Firm. 2. Consolidated Balance Sheets as of December 31, 2007 and 2006. 3. Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005. 4. Consolidated Statements of Comprehensive Income for the years ended December 31, 2007, 2006 and 2005. 5. Consolidated Statements of Stockholder's Equity for the years ended December 31, 2007, 2006 and 2005. 6. Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005. 7. Notes to Consolidated Financial Statements - December 31, 2007, 2006 and 2005. 8. Supplemental Schedules: - Schedule I - Summary of Investments - Other Than Investments in Related Parties. - Schedule III - Supplemental Insurance Information. - Schedule IV - Reinsurance The following financial statements of the Variable Account are included in Part B hereof: 1. Report of Independent Registered Public Accounting Firm. 2. Statements of Assets and Liabilities as of December 31, 2007. 3. Statements of Operations for the year or period ended December 31, 2007. 4. Statements of Changes in Net Assets for the years or periods ended December 31, 2007 and 2006. 5. Notes to Financial Statements - December 31, 2007. b. Exhibits 1. Resolution of Board of Directors of the Company authorizing the establishment of the Separate Account, dated May 31, 1985(1)incorporated by reference as exhibit EX-99.B1. 2. Not Applicable 3.a. Principal Underwriter Agreement by and between North American Life and Casualty Company on behalf of NALAC Financial Plans, Inc. dated September 14, 1988.(2) incorporated by reference as exhibit EX-99.B3.a.(North American Life and Casualty Company is the predecessor to Allianz Life Insurance Company of North America. NALAC Financial Plans, Inc., is the predecessor to USAllianz Investor Services, LLC, which is the predecessor to Allianz Life Financial Services, LLC.) b. Copy of Broker-Dealer Agreement between North American Life and Casualty Company and NALAC Financial Plans, Inc. dated November 19, 1987; Amendment #1 dated April 12, 2000; Amendment #2 dated September 30, 2002; Amendment #3 dated October 1, 2003.(15) incorporated by reference as exhibit EX-99.B3.b.(North American Life and Casualty Company is the predecessor to Allianz Life Insurance Company of North America. NALAC Financial Plans, Inc, is the predecessor to USAllianz Investor Services, LLC, which is the predecessor to Allianz Life Financial Services, LLC.) c. Form of General Agency Agreement with Allianz Life Financial Services, LLC. (13) incorporated by reference as exhibit EX-99.B3.b. 4.a. Individual Variable Annuity Original Contract and Schedule Page - L40236(6-00)(4)incorporated by reference as exhibit EX-99.B4. b. Individual Variable Annuity-May 2003 Contract - L40236(5-03)(8) incorporated by reference as exhibit EX-99.B4.b. c. Contract Schedule Page-September 2002 Contract - S40098(6-00)(7) incorporated by reference as exhibit EX-99.B4.l. d. Contract Schedule Page-May 2003 Contracts - S40098(5-03)(8) incorporated by reference as exhibit EX-99.B4.d. e. Contract Schedule Page-PRIME Plus - S40098(1-06)(12) incorporated by reference as exhibit EX-99.B4.e. f. Contract Schedule Addendum-add, reset-PRIME Plus - S40728-A-R(12) incorporated by reference as exhibit EX-99.B4.f. g. Contract Schedule Addendum-drop-PRIME Plus - S40728-D(12) incorporated by reference as exhibit EX-99.B4.g. h. Asset Allocation Rider-PRIME Plus - S40721-REW(12) incorporated by reference as exhibit EX-99.B4.h. i. PRIME Plus Benefit Rider - S40722(12) incorporated by reference as exhibit EX-99.B4.i. j. Annuity Option 6 Amendment Endorsement - S40397(8) incorporated by reference as exhibit EX-99.B4.e. k. Waiver of CDSC Endorsement - S40104(4) incorporated by reference as exhibit EX-99.B4.a. l. Traditional GMDB Endorsement - S40105(4)incorporated by reference as exhibit EX-99.B4.b. m. Traditional GMDB Rider II-PRIME Plus - S40727(12) incorporated by reference as exhibit EX-99.B4.m. n. Enhanced GMDB Endorsement-Original Contracts - S40107(4) incorporated by reference as exhibit EX-99.B4.c. o. Enhanced GMDB Endorsement-September 2002 Contracts - S40242(7) incorporated by reference as exhibit EX-99.B4.k. p. Enhanced GMDB Endorsement-May 2003 Contracts - S40390(8) incorporated by reference as exhibit EX-99.B4.j. q. Enhanced GMDB Rider II-PRIME Plus - S40726 (12) incorporated by reference as exhibit EX-99.B4.q. r. IRA Endorsement(4) incorporated by reference as exhibit EX-99.B4.d. s. Unisex Endorsement(4) incorporated by reference as exhibit EX-99.B4.e. t. Pension Plan and Profit Sharing Plan Endorsement(4) incorporated by reference as exhibit EX-99.B4.f. u. Group Pension Plan Death Benefit Endorsement(4) incorporated by reference as exhibit EX-99.B4.g. v. 403(b) Annuity Endorsement(4) incorporated by reference as exhibit EX-99.B4.h. w. Roth IRA Endorsement(4) incorporated by reference as exhibit EX-99.B4.i. x. Traditional GMIB-Original and May 2003 Contracts - S40389(8) incorporated by reference as exhibit EX-99.B4.q. y. Enhanced GMIB Endorsement-September 2002 Contracts - S40241(7) incorporated by reference as exhibit EX-99.B4.j. z. Enhanced GMIB Endorsement-Original and May 2003 Contracts - S40391(8)incorporated by reference as exhibit EX-99.B4.s. aa. Traditional GPWB Endorsement - S40392(8) incorporated by reference as exhibit EX-99.B4.t. ab. Enhanced GPWB Endorsement - S40393(8) incorporated by reference as exhibit EX-99.B4.u. ac. Inherited IRA/Roth IRA Endorsement(11) incorporated by reference as exhibit EX-99.B4.v. 5.a. Application for Individual Variable Ann-Original Contract - F40327(4) incorporated by reference as exhibit EX-99.B5. b. Application for Individual Variable Ann-September 2002 Contract - F40327(06-02)(7) incorporated by reference as exhibit EX-99.B5.b. c. Application for Individual Variable Ann-May 2003 Contract - F40327(05-03)(8) incorporated by reference as exhibit EX-99.B5.c. d. Application for Individual Variable Ann-PRIME Plus Contract - F40327(1-06)(12)incorporated by reference as exhibit EX-99.B5.d. 6.(i)Copy of Certificate of the Amendment of Charter of the Company dated October 5, 1988 and the Declaration of Intention and Charter dated August 26, 1996(13)incorporated by reference as exhibit EX-99.B6.(i). (ii)Copy of the Restated Bylaws of the Company (as amended October 2, 1996)(13) incorporated by reference as exhibit EX-99.B6.(ii). 7. Not Applicable 8.a. 22c-2 Agreements (16)incorporated by reference as exhibit EX-99.B8.a. b. Form of Participation Agreement between BlackRock Series Fund, Inc., BlackRock Distributors, Inc., Allianz Life Insurance Co. of North America, and Allianz Life Financial Services, LLC (16)incorporated by reference as exhibit EX-99.B8.b. c. Form of Adminstrative Service Agreement between BlackRock Advisors, LLC and Allianz Life (16)incorporated by reference as exhibit EX-99.B8.c. d. Copy of Participation Agreement between Davis Variable Account Fund, Inc., Davis Distributors, LLC and Allianz Life Insurance Company of North America, dated 11/1/1999(3)incorporated by reference as exhibit EX-99.B8.e. e. Copy of Amendments to Participation Agreement between Davis Variable Account Fund, Inc., Davis Distributors, LLC and Allianz Life Insurance Company of North America dated 5/1/07(16) incorporated by reference as exhibit EX-99.B8.e. f. Copy of Administrative Services Agreement between The Dreyfus Corporation and Allianz Life Insurance Company of North America, dated 5/1/2002(15)incorporated by reference as exhibit EX-99.B8.f. g. Copy of Amendments to Administrative Services Agreement between The Dreyfus Corporation and Allianz Life Insurance Company of North America, dated 8/7/02, 10/16/06(15)incorporated by reference as exhibit EX-99.B8.g. h. Copy of Disribution/12 b-1 Letter Agreement between Dreyfus Service Corporation and USAllianz Investor Services, LLC (predecessor to Allianz Life Financial Services, LLC.), dated 5/1/2002(15)incorporated by reference as exhibit EX-99.B8.h. i. Copy of Fund Participation Agreement between Allianz Life Insurance Company of North America, Dreyfus Investment Portfolios and The Dreyfus Life and Annuity Index Fund, dated 5/1/2002(8)incorporated by reference as exhibit EX-99.B8.h. j. Copy of Amendment to Fund Participation Agreement between Allianz Life Insurance Company of North America, Dreyfus Investment Portfolios and the Dreyfus Stock Index Fund, Inc., dated 5/1/2007(16) incorporated by reference as exhibit EX-99.B8.j. k. Copy of Administrative Services Agreement between Franklin Templeton Services LLC and Allianz Life Insurance Company of North America, dated 10/1/2003(10)incorporated by reference as exhibit EX-99.B8.ac. l. Copy of Amendments to Administrative Services Agreement between Franklin Templeton Services LLC and Allianz Life Insurance Company of North America, dated 7-31-2007(16) incorporated by reference as exhibit EX-99.B8.l. m. Copy of Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Allianz Life Insurance Company of North America and USAllianz Investor Services, LLC (the predecessor to Allianz Life Financial Services, LLC.), and dated 10/1/2003(10)incorporated by reference as exhibit EX-99.B8.h. n. Copy of Amendments to Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Allianz Life Insurance Company of North America and USAllianz Investor Services, LLC (the predecessor to Allianz Life Financial Services, LLC.), dated 5/1/07 & 12/11/2007(16) incorporated by reference as exhibit EX-99.B8.n. o. Copy of Participation Agreement between Premier VIT, Allianz Life Insurance Company of North America and Allianz Global Investors Distributors LLC, dated 5/1/2006(14)incorporated by reference as exhibit EX-99.B8.ai. p. Copy of Administrative Service Agreement between OpCap Advisors LLC and Allianz Life Insurance Company of North America, dated 5/1/2006(14)incorporated by reference as exhibit EX-99.B8.aj. q. Copy of Administrative Support Service Agreement between OppenheimerFunds, Inc. and Allianz Life Insurance Company of North America, dated 12/1/1999(9)incorporated by reference as exhibit EX-99.B8.u. r. Copy of Amendment to Administrative Support Service Agreement between OppenheimerFunds, Inc. and Allianz Life Insurance Company of North America, dated 2/1/00(15)incorporated by reference as exhibit EX-99.B8.r. s. Copy of Participation Agreement between Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and Allianz Life Insurance Company of North America, dated 12/1/1999(3)incorporated by reference as exhibit EX-99.B8.h. t. Copy of Amendments to Participation Agreement between Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and Allianz Life Insurance Company of North America, dated 2/1/00, 5/1/02, 4/30/04, 4/29/05, 5/1/06(15)incorporated by reference as exhibit EX-99.B8.t. u. Copy of Amended and Restated Services Agreement between Pacific Investment Management Company LLC and Allianz Life Insurance Company of North America, dated 01/01/2007(15)incorporated by reference as exhibit EX-99.B8.u. v. Copy of Participation Agreement between Allianz Life Insurance Company of North America, PIMCO Variable Insurance Trust, and PIMCO Funds Distributors LLC, dated 12/1/1999(3)incorporated by reference as exhibit EX-99.B8.i. w. Copy of Amendments to Participation Agreement between Allianz Life Insurance Company of North America, PIMCO Variable Insurance Trust, and PIMCO Funds Distributors LLC, dated 4/1/00, 11/5/01, 5/1/02, 5/1/03, 4/30/04, 4/29/05(15)incorporated by reference as exhibit EX-99.B8.w. x. Copy of Distribution Services Agreement between Allianz Life Insurance Company of North America and Allianz Global Investors Distributors, LLC, dated 01/01/2007(15)incorporated by reference as exhibit EX-99.B8.x. y. Copy of Services Agreement between Prudential Investment Management Services LLC and Allianz Life Insurance Company of North America, dated 12/15/2000(9)incorporated by reference as exhibit EX-99.B8.y. z. Copy of Amendment to Services Agreement between Prudential Investment Management Services LLC and Allianz Life Insurance Company of North America, dated 9/9/2002(15)incorporated by reference as exhibit EX-99.B8.z. aa. Copy of Fund Participation Agreement between Allianz Life Insurance Company of North America, The Prudential Series Fund, Inc., Prudential Investments Fund Management LLC, and Prudential Investment Management Services, LLC, dated 12/15/2000(5)incorporated by reference as exhibit EX-99.B8.k. ab. Copy of Service Agreement between J.&W. Seligman & Co. Incorporated and Allianz Life Insurance Company of North America, dated 12/16/1999(9)incorporated by reference as exhibit EX-99.B8.x. ac. Copy of Fund Participation Agreement between Seligman Portfolios, Inc. and Allianz Life Insurance Company of North America, dated 12/1/1999(3)incorporated by reference as exhibit EX-99.B8.j. ad. Copy of Amendments to Participation Agreement between Seligman Portfolios, Inc. and Allianz Life Insurance Company of North America, dated 2/1/00, 5/1/02, 5/1/03, 4/30/04, 5/1/06(15)incorporated by reference as exhibit EX-99.B8.ad. 9. Opinion and Consent of Counsel* 10. Consent of Independent Registered Public Accounting Firm* 11. Not Applicable 12. Not Applicable 13. Power of Attorney(16)incorporated by reference as exhibit EX-99.B13. * Filed herewith (1) Incorporated by reference from Registrant's Form N-4 (File Nos. 333-06709 and 811-05618) electronically filed on June 25, 1996. (2) Incorporated by reference from 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 from Pre-Effective Amendment No. 1 to Registrant's Form N-4 (File Nos.333-82329 and 811-05618) electronically filed December 30, 1999. (4) Incorporated by reference from Registrant's Form N-4 (File Nos. 333-95729 and 811-05618) electronically filed on January 31, 2000. (5) Incorporated by reference from Post-Effective Amendment No.2 to Registrant's Form N-4 (File Nos. 333-82329 and 811-05618) electronically filed on December 15, 2000. (6) Incorporated by reference from Post-Effective Amendment No. 3 to Allianz Life Variable Account A's Form N-6 (File Nos. 333-60206 and 811-04965) electronically filed on January 6, 2003. (7) Incorporated by reference from Post-Effective Amendment No. 5 to Registrant's Form N-4 (File Nos. 333-95729 and 811-05618) electronically filed on June 21, 2002. (8) Incorporated by reference from Post-Effective Amendment No. 11 to Registrant's Form N-4 (File Nos. 333-95729 and 811-05618) electronically filed on April 25, 2003. (9) Incorporated by reference from Post-Effective Amendment No. 12 to Registrant's Form N-4 (File Nos. 333-95729 and 811-05618) electronically filed on April 26, 2004. (10)Incorporated by reference from Pre-Effective Amendment No.2 to Registrant's Form N-4 (File Nos. 333-120181 and 811-05618) electronically filed on March 30, 2005. (11)Incorporated by reference from Post-Effective Amendment No. 13 to Registrant's Form N-4 (File Nos. 333-95729 and 811-05618) electronically filed on April 26, 2005. (12)Incorporated by reference from Post-Effective Amendment No. 14 to Registrant's Form N-4 (File Nos. 333-95729 and 811-05618) electronically filed on April 27, 2006. (13)Incorporated by reference from the Initial Registration Statement to Registrant's Form N-4 (file Nos. 333-134267 and 811-05618 electronically filed on May 19, 2006. (14)Incorporated by reference from Pre-Effective Amendment No.1 to Registrant's Form N-4 (File Nos. 333-134267 and 811-05618) electronically filed on September 25, 2006. (15) Incorporated by reference from Post-Effective Amendment No. 18 to Registrant's Form N-4 (File Nos. 333-82329 and 811-05618) electronically filed on April 23, 2007. (16)Incorporated by reference from Post-Effective Amendment No. 20 to Registrant's Form N-4 (File Nos. 333-82329 and 811-05618) electronically filed on April 24, 2008.
ITEM 25. OFFICERS AND DIRECTORS OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA. Unless noted otherwise, all officers and directors have the following principal business address: 5701 Golden Hills Drive Minneapolis, MN 55416-1297
The following are the Officers and Directors of the Company: -------------------------------------------------- ------------------------------------------------------ NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR -------------------------------------------------- ------------------------------------------------------ Charles M. Kavitsky Director -------------------------------------------------- ------------------------------------------------------ Jill E. Paterson Director, Executive Vice President and Chief Financial Officer -------------------------------------------------- ------------------------------------------------------ Gary C. Bhojwani Director, President and Chief Executive Officer -------------------------------------------------- ------------------------------------------------------ Neil H. McKay Senior Vice President and Chief Actuary -------------------------------------------------- ------------------------------------------------------ Volker Stueven Senior Vice President, Chief Investment Officer -------------------------------------------------- ------------------------------------------------------ Thomas P. Burns Senior Vice President, Chief Distribution Officer -------------------------------------------------- ------------------------------------------------------ Juli M. Wall Senior Vice President, Corporate Marketing & Communications -------------------------------------------------- ------------------------------------------------------ Linda E. Wright Senior Vice President, Treasurer -------------------------------------------------- ------------------------------------------------------ Cynthia L. Pevehouse Senior Vice President, Secretary -------------------------------------------------- ------------------------------------------------------ Jan R. Carendi Director and Chairman of the Board Allianz AG Koenigin Strasse 28 D-80802 Munich, Germany -------------------------------------------------- ------------------------------------------------------ Dr. Helmut Perlet Director Allianz AG (Holding) Koniginstr 28 80802 Munchen Germany -------------------------------------------------- ------------------------------------------------------ Peter Huehne Director Fireman's Fund Insurance Co. 777 San Marin Drive Novato, CA 94998 -------------------------------------------------- ------------------------------------------------------ Clement Booth Director Koniginstr 28 80802 Munchen Germany -------------------------------------------------- ------------------------------------------------------ Brigitte Bovermann Director Koniginstr 28 80802 Munchen Germany -------------------------------------------------- ------------------------------------------------------
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Insurance Company organizational chart is incorporated by reference from Post-Effective Amendment No. 20 to Registrant's Form N-4 (File Nos. 333-82329 and 811-05618) electronically filed on April 24, 2008. ITEM 27. NUMBER OF CONTRACT OWNERS As of March 31, 2008 there were 17,788 qualified Contract Owners and 9,814 non-qualified Contract Owners with Contracts in the separate account. ITEM 28. INDEMNIFICATION The Bylaws of the Insurance Company provide: ARTICLE XI. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES SECTION 1. RIGHT TO INDEMNIFICATION: (a)Subject to the conditions of this Article and any conditions or limitations imposed by applicable law, the Corporation shall indemnify any employee, director or officer of the Corporation (an "Indemnified Person") who was, is, or in the sole opinion of the Corporation, may reasonably become a party to or otherwise involved in any Proceeding by reason of the fact that such Indemnified Person is or was: (i) a director of the Corporation; or (ii) acting in the course and scope of his or her duties as an officer or employee of the Corporation; or (iii) rendering Professional Services at the request of and for the benefit of the Corporation; or (iv) serving at the request of the Corporation as an officer, director, fiduciary or member of another corporation, association, committee, partnership, joint venture, trust, employee benefit plan or other enterprise (an "Outside Organization"). (b)Notwithstanding the foregoing, no officer, director or employee shall be indemnified pursuant to these bylaws under the following circumstances: (i) in connection with a Proceeding initiated by such person, in his or her own personal capacity, unless such initiation was authorized by the Board of Directors; (ii) if a court of competent jurisdiction finally determines that any indemnification hereunder is unlawful; (iii) for acts or omissions involving intentional misconduct or knowing and culpable violation of law; (iv) for acts or omissions that the Indemnified Person believes to be contrary to the best interests of the Corporation or its shareholders or that involve the absence of good faith on the part of the Indemnified Person; (v) for any transaction for which the Indemnified Person derived an improper personal benefit; (vi) for acts or omissions that show a reckless disregard for the Indemnified Person's duty to the Corporation or its shareholders in circumstances in which the Indemnified Person was aware or should have been aware, in the ordinary course of performing the Indemnified Person's duties, of the risk of serious injury to the Corporation or its shareholders; (vii) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the Indemnified Person's duties to the Corporation or its shareholders; (viii) in circumstances where indemnification is prohibited by applicable law; (ix) in the case of service as an officer, director, fiduciary or member of an Outside Organization, where the Indemnified Person was aware or should have been aware that the conduct in question was outside the scope of the assignment as contemplated by the Corporation. SECTION 2. SCOPE OF INDEMNIFICATION: (a)Indemnification provided pursuant to Section 1(a)(iv) shall be secondary and subordinate to indemnification or insurance provided to an Indemnified Person by an Outside Organization or other source, if any. (b)Indemnification shall apply to all reasonable expenses, liability and losses, actually incurred or suffered by an Indemnified Person in connection with a Proceeding, including without limitation, attorneys' fees and any expenses of establishing a right to indemnification or advancement under this article, judgments, fines, ERISA excise taxes or penalties, amounts paid or to be paid in settlement and all interest, assessments and other charges paid or payable in connection with or in respect of such expense, liability and loss. (c)Such indemnification shall continue as to any Indemnified Person who has ceased to be an employee, director or officer of the Corporation and shall inure to the benefit of his or her heirs, estate, executors and administrators. SECTION 3. DEFINITIONS: (a)"Corporation" for the purpose of Article XI shall mean Allianz Life Insurance Company of North America and all of its subsidiaries. (b)"Proceeding" shall mean any threatened, pending, or completed action, suit or proceeding whether civil, criminal, administrative, investigative or otherwise, including actions by or in the right of the Corporation to procure a judgment in its favor. (c)"Professional Services" shall mean services rendered pursuant to (i) a professional actuarial designation, (ii) a license to engage in the practice of law issued by a State Bar Institution or (iii) a Certified Public Accountant designation issued by the American Institute of Certified Public Accountants. 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. Allianz Life Financial Services, LLC (previously USAllianz Investor Services, LLC) is the principal underwriter for the Contracts. It also is the principal underwriter for: Allianz Life Variable Account A Allianz Life of NY Variable Account C b. The following are the officers (managers) and directors (Board of Governors) of Allianz Life Financial Services, LLC. All officers and directors have the following principal business address: 5701 Golden Hills Drive Minneapolis, MN 55416-1297
Name Positions and Offices with Underwriter - ---------------------- ----------------------------------------------------------------------- Robert DeChellis Chief Manager, Chief Executive Officer, President and Governor Thomas Burns Governor Angela Wilson Chief Financial Officer and Vice President Catherine Q. Farley Senior Vice President Corey J. Walther Senior Vice President Jeffrey W. Kletti Senior Vice President Wayne Peterson Vice President and Chief Compliance Officer Stewart D. Gregg Vice President and Secretary Carol Dunn Assistant Secretary
c. For the period 1-1-2007 to 12-31-2007: - ------------------------------------ --------------------- --------------------- --------------------- --------------------- NAME OF PRINCIPAL UNDERWRITER NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION DISCOUNTS AND COMMISSIONS REDEMPTION COMMISSIONS - ------------------------------------ --------------------- --------------------- --------------------- --------------------- - ------------------------------------ --------------------- --------------------- --------------------- --------------------- Allianz Life Financial Services,LLC $218,444,880.80 $0 $0 $0 - ------------------------------------ --------------------- --------------------- --------------------- ---------------------
The $218,444,880.80 that Allianz Life Financial Services, LLC received from Allianz Life as commissions on the sale of Contracts issued under Allianz Life Variable Account B was subsequently paid entirely to the third party broker/dealers that perform the retail distribution of the Contracts and, therefore, no commission or compensation was retained by Allianz Life Financial Services, LLC. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS 5701 Golden Hills Drive, Minneapolis, Minnesota 55416 and Delaware Valley Financial Services, Allianz 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. REPRESENTATIONS Allianz Life Insurance Company of North America ("Company") hereby represents that the fees and charges deducted under the Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by the Company. The Company hereby represents that it is relying upon a No Action Letter issued to the American Council of Life Insurance, dated November 28, 1988 (Commission ref. IP-6-88), and that the following provisions have been complied with: 1. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in each registration statement, including the prospectus, used in connection with the offer of the contract; 2. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in any sales literature used in connection with the offer of the contract; 3. Instruct sales representatives who solicit participants to purchase the contract specifically to bring the redemption restrictions imposed by Section 403(b)(11) to the attention of the potential participants; 4. Obtain from each plan participant who purchases a Section 403(b) annuity contract, prior to or at the time of such purchase, a signed statement acknowledging the participant's understanding of (1) the restrictions on redemption imposed by Section 403(b)(11), and (2) other investment alternatives available under the employer's Section 403(b) arrangement to which the participant may elect to transfer his contract value. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, as amended, Allianz Life Insurance Company of North America on behalf of the Registrant certifies that it meets the requirements of the Securities Act Rule 485(b) for effectiveness of this Registration Statement and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized in the City of Minneapolis and State of Minnesota, on this 24th day of April, 2008. ALLIANZ LIFE VARIABLE ACCOUNT B (Registrant) By: ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA (Depositor) By: /S/ STEWART D. GREGG -------------------------------- Stewart D. Gregg Senior Securities Counsel ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA (Depositor) By: GARY C. BHOJWANI* ------------------------------ Gary C. Bhojwani President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on this 24th day of April, 2008. Signature and Title Jan R. Carendi* Director and Chairman of the Board Jan R. Carendi Gary C. Bhojwani* Director, President and Chief Executive Officer Gary C. Bhojwani Jill E. Paterson* Director, Executive Vice President and Jill E. Paterson Chief Financial Officer Peter Huehne* Director Peter Huehne Dr. Helmut Perlet* Director Dr. Helmut Perlet Charles Kavitsky* Director Charles Kavitsky Clement Booth* Director Clement Booth Dr. Brigitte Bovermann* Director Dr. Brigitte Bovermann *By Power of Attorney filed as Exhibit 13 to this Registration Statement By: /S/ STEWART D. GREGG -------------------- Stewart D. Gregg Senior Securities Counsel EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 18 TO FORM N-4 (FILE NOS. 333-95729 AND 811-05618) ALLIANZ LIFE VARIABLE ACCOUNT B ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA INDEX TO EXHIBITS EX-99.B9 Opinion and Consent of Counsel EX-99.B10 Consent of Independent Registered Public Accounting Firm EX-99.B9. 3 file002.txt OPINION AND CONSENT OF COUNSEL Stewart D. Gregg, Senior Securities Counsel Allianz Life Insurance Company of North America 5701 Golden Hills Drive Minneapolis, MN 55416 (763) 765-2913 April 24, 2008 Board of Directors Allianz Life Insurance Company of North America 5701 Golden Hills Drive Minneapolis, MN 55416 Re: Opinion and Consent of Counsel Allianz Life Variable Account B Dear Sir or Madam: You have requested my Opinion of Counsel in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, of Post-Effective Amendment No. 18 to the Registration Statement on Form N-4 for the Individual Deferred Variable Annuity Contracts to be issued by Allianz Life Insurance Company of North America and its separate account, Allianz Life Variable Account B File No. 333-95729. I am of the following opinions: 1. Allianz Life Variable Account B is a unit investment trust as that term is defined in Section 4(2) of the Investment Company Act of 1940 (the Act), and is currently registered with the Securities and Exchange Commission, pursuant to Section 8(a) of the Act. 2. Upon the acceptance of purchase payments made by a Contract Owner pursuant to a Contract issued in accordance with the Prospectus contained in the Registration Statement and upon compliance with applicable law, such a Contract Owner will have a legally-issued, fully-paid, non-assessable contractual interest under such Contract. You may use this opinion letter, or copy hereof, as an exhibit to the Registration Statement. I consent to the reference to me and to this opinion under the caption "Legal Opinions" contained in the Statement of Additional Information which form a part of the Registration Statement. Sincerely, ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA BY: /S/ STEWART D. GREGG Stewart D. Gregg EX-99.B10. 4 file003.txt CONSENT OF IND. REG. PUBLIC ACCOUNTING FIRM KPMG LLP 4200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402 Consent of Independent Registered Public Accounting Firm 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 April 15, 2008 on the financial statements of Allianz Life Variable Account B and our report dated April 16, 2008 on the consolidated financial statements and supplemental schedules of Allianz Life Insurance Company of North America and subsidiaries included herein and to the reference to our Firm under the heading "EXPERTS" in the Statement of Additional Information. /s/ KPMG LLP Minneapolis, Minnesota April 24, 2008 -----END PRIVACY-ENHANCED MESSAGE-----