-----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, PgLDGjM4PeTmtZkaBDlsqOW8I2oXONSd5/Wprg3kSWx23FTvXa+D2bhZJfVBsWVx 0F0pdwSYa92Ykl4YelTtjw== 0000928389-96-000190.txt : 19961216 0000928389-96-000190.hdr.sgml : 19961216 ACCESSION NUMBER: 0000928389-96-000190 CONFORMED SUBMISSION TYPE: N-4 EL/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19961213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANZ LIFE VARIABLE ACCOUNT B CENTRAL INDEX KEY: 0000836346 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 411366075 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4 EL/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-06709 FILM NUMBER: 96680659 FILING VALUES: FORM TYPE: N-4 EL/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-05618 FILM NUMBER: 96680660 BUSINESS ADDRESS: STREET 1: 1750 HENNEPIN AVE CITY: MINNEAPOLIS STATE: MN ZIP: 55403-2195 BUSINESS PHONE: 612-337-6140 MAIL ADDRESS: STREET 1: 1750 HENNEPIN AVENUE CITY: MINNEPOLIS STATE: MN ZIP: 55403 FORMER COMPANY: FORMER CONFORMED NAME: NALAC VARIABLE ACCOUNT B DATE OF NAME CHANGE: 19920703 N-4 EL/A 1 ALLIANZ VM4 N-4 EL/A File Nos. 333-06709 811-05618 ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( ) Pre-Effective Amendment No. 1 (X) Post-Effective Amendment No. ( ) REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( ) Amendment No. 28 (X) (Check appropriate box or boxes.) ALLIANZ LIFE VARIABLE ACCOUNT B ------------------------------- (Exact Name of Registrant) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA ----------------------------------------------- (Name of Depositor) 1750 Hennepin Avenue, Minneapolis, MN 55403 ------------------------------------------- ----- (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code (612) 347-6596 Name and Address of Agent for Service ------------------------------------- Michael T. Westermeyer Allianz Life Insurance Company of North America 1750 Hennepin Avenue Minneapolis, MN 55403 Copies to: Judith A. Hasenauer Blazzard, Grodd & Hasenauer, P.C. P.O. Box 5108 Westport, CT 06881 (203) 226-7866 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Filing. Calculation of Registration Fee under the Securities Act of 1933: $500 - Registrant is registering an indefinite number of securities under the Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2. ============================================================================= The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. CROSS REFERENCE SHEET (Required by Rule 495)
Item No. Location - -------- ----------------------- PART A Item 1. Cover Page . . . . . . . . . . . . . . . . . Cover Page Item 2. Definitions . . . . . . . . . . . . . . . . Index of Terms Item 3. Synopsis or Highlights. . . . . . . . . . . Profile Item 4. Condensed Financial Information. . . . . . . Not Applicable Item 5. General Description of Registrant, Depositor, and Portfolio Companies. . . . . . . . . . . The Separate Account, Allianz Life, Investment Options Item 6. Deductions. . . . . . . . .. . . . . . . . . Expenses Item 7. General Description of Variable Annuity Contracts . . . . . . . . . . . . . . The Valuemark IV Variable Annuity Contract Item 8. Annuity Period. . .. . . . . . . . . . . . . Annuity Payments (The Income Phase) Item 9. Death Benefit. . . . . . . . . . . . . . . . Death Benefit Item 10. Purchases and Contract Value. . . . . . . . Purchase Item 11. Redemptions. . . . . . . . . . . . . . . . . Access to Your Money Item 12. Taxes. . . . . . . . . . . . . . . . . . . . Taxes Item 13. Legal Proceedings. . . . . . . . . . . . . . None Item 14. Table of Contents of the Statement of Additional Information. . . . . . . . . . . Table of Contents of the Statement of Additional Information
CROSS REFERENCE SHEET (cont'd) (Required by Rule 495)
Item No. Location - -------- -------------------- PART B Item 15. Cover Page. . . . . . . . .. . . . . . . . Cover Page Item 16. Table of Contents. . . . . . . . . . . . . Table of Contents Item 17. General Information and History. . . . . . Insurance Company Item 18. Services. . . . . . . . . . . . .. . . . . Not Applicable Item 19. Purchase of Securities Being Offered. . . . Not Applicable Item 20. Underwriters. . . . . . . . . . . . . . . . Distributor Item 21. Calculation of Performance Data. . . . . . Calculation of Performance Data Item 22. Annuity Payments. . . . . . . . . . . . . . Annuity Provisions Item 23. Financial Statements. . . . . . . . . . . Financial Statements
PART C Information required to be included in Part C is set forth under the appropriate Item so numbered, in Part C to this Registration Statement. PART A PROFILE OF THE VALUEMARK IV VARIABLE ANNUITY CONTRACT _____________ , 1996 This Profile is a summary of some of the more important points that you should consider and know before purchasing the Valuemark IV Variable Annuity Contract with a fixed account option. The Contract is more fully described in the prospectus which accompanies this Profile. Please read the prospectus carefully. 1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT. The variable annuity contract with a fixed account option offered by Allianz Life is a contract between you, the owner, and Allianz Life Insurance Company of North America, an insurance company. The Contract provides a means for investing on a tax-deferred basis in 23 funds of Franklin Valuemark Funds, a series fund, and a fixed account of Allianz Life. The Contract is intended for retirement savings or other long-term investment purposes and provides for a death benefit and guaranteed annuity income options. The Contract has 24 investment options. There are 23 funds which are managed by professional money managers. A list of the available funds is contained in Section 4. Depending upon market conditions, you can make or lose money in the funds. The fixed account offers an interest rate that is guaranteed by Allianz Life. The interest rate is set monthly and is guaranteed for 12 months. While your money is in the fixed account, the interest your money will earn as well as your principal is guaranteed by Allianz Life. Allianz Life reserves the right to limit the number of funds which you may invest in at any one time (now or in the future). Currently, you can put your money in 10 investment options (which includes any of the 23 funds listed in Section 4 and the Allianz Life fixed account). Like all deferred annuity contracts, your Contract has two phases: the accumulation phase and the income phase. During the accumulation phase, your earnings accumulate on a tax-deferred basis and are based on the investment performance of the fund(s) you selected and/or the interest rate earned on the money you have in the fixed account. During the accumulation phase, the earnings are taxed as income only when you make a withdrawal. The income phase occurs when you begin receiving regular payments from your Contract. The amount of the payments you may receive during the income phase depends in part upon the amount of money you are able to accumulate in your Contract during the accumulation phase. 2. ANNUITY PAYMENTS (THE INCOME PHASE). You can receive monthly annuity payments from your Contract by selecting one of the following annuity options (all of these options assume you are the owner and the annuitant): (1) payments for your life; (2) payments for your life, but if you die before payments have been made for the guaranteed period you selected, payments will continue for the remainder of the guaranteed period (5,10, 15 or 20 years); (3) payments during the joint lifetime of you and the joint annuitant - when either of you die, payments will continue as long as the survivor lives; (4) payments during the joint lifetime of you and the joint annuitant, but if you or the joint annuitant die before payments have been made for the guaranteed period you selected, payments will continue for the remainder of the guaranteed period (5, 10, 15 or 20 years); and (5) payments during your life ending with the last payment due prior to your death with a guarantee that at your death Allianz Life will make a refund to your beneficiary. Once you begin receiving regular payments, you cannot change your annuity option or surrender your contract. During the income phase, you have the same investment choices you had during the accumulation phase. You can choose to have payments come from the fixed account, the funds or both. If you choose to have any part of your payments come from the funds, the dollar amount of your annuity payments may go up or down, depending on the investment performance. 3. PURCHASE. You can buy the Contract with $5,000 or more under most circumstances. You can add $250 or more any time you like during the accumulation phase. You and the annuitant cannot be older than 85 years old at the time you buy the Contract. 4.INVESTMENT OPTIONS. You may invest in the Allianz Life fixed account or the following funds of Franklin Valuemark Funds: FUND SEEKING STABILITY OF PRINCIPAL AND INCOME: Money Market FUNDS SEEKING CURRENT INCOME: High Income Templeton Global Income Securities The U.S. Government Securities Zero Coupon - 2000, 2005 and 2010 FUNDS SEEKING GROWTH AND INCOME: Growth and Income Income Securities Mutual Shares Securities Real Estate Securities Rising Dividends Templeton Global Asset Allocation Utility Equity FUNDS SEEKING CAPITAL GROWTH: Capital Growth Mutual Discovery Securities Precious Metals Small Cap Templeton Developing Markets Equity Templeton Global Growth Templeton International Equity Templeton International Smaller Companies Templeton Pacific Growth The funds are fully described in the attached prospectus for Franklin Valuemark Funds. You can make or lose money in the funds, depending upon market conditions. 5. EXPENSES. The Contract has insurance features and investment features, and there are costs related to each. The annual insurance charges total 1.49% of the average daily value of your Contract allocated to the funds during the accumulation period (1.40% during the income period). Each year Allianz Life deducts a $30 contract maintenance charge from your Contract. Allianz Life currently waives this charge if the cumulative value of all your Valuemark IV Contracts (registered with the same social security number) are at least $50,000. There are also annual fund charges which range from .40% to 1.41% of the average daily value of the funds depending upon the fund(s) you invest in. You can transfer between accounts up to 12 times a year without charge. After 12 transfers, the charge is $25 or 2% of the amount transferred, whichever is less. If you make a withdrawal from the Contract, Allianz Life may assess a contingent deferred sales charge (withdrawal charge). The amount of the charge depends upon how long Allianz Life has had your payment. The charge is:
Number of complete years from receipt 0 1 2 3 4 5 6 7 or more Contingent Deferred Sales Charge (as a percentage of purchase payments) 6% 6% 6% 5% 4% 3% 2% 0%
Under certain circumstances, after the first year, Allianz Life will permit you to access your money in the Contract without deducting a contingent deferred sales charge: 1) if you become confined to a nursing home; 2) if you become terminally ill; or 3) if you become disabled. Also, if you are unemployed for at least 90 days, you can take up to 50% of your money out without incurring a contingent deferred sales charge. These options may not be available in all states. Allianz Life will assess a state premium tax charge which ranges from 0-3.5% (depending upon the state) when you die, start receiving annuity payments or make a complete withdrawal. We have provided the following chart to help you understand the charges in your Contract. The column "Total Annual Charges" shows the total of the $30 contract maintenance charge (which is represented as .10% below), the 1.49% insurance charges and the total annual fund charges for each fund. The next two columns show you two examples of the charges, in dollars, you would pay under a Contract. The examples assume that you invested $1,000 in a Contract which earns 5% annually and that you withdraw your money: (1) at the end of year 1, and (2) at the end of year 10. For year 1, the Total Annual Charges are assessed as well as the contingent deferred sales charge. For year 10, the Total Annual Charges are assessed but no contingent deferred sales charge is deducted. The premium tax is assumed to be 0% in both examples. These are just examples. Future expenses may be higher or lower than those shown.
EXAMPLES: Total Total Total Expenses Expenses Insurance Annual Fund Annual at end of at end of Fund Charges Charges Charges 1 Year 10 Years - ----------------------------------- ---------- ------------ -------- ---------- ---------- Money Market 1.59% .53% 2.12% $ 82 $ 245 High Income 1.59% .56% 2.15% $ 82 $ 248 Templeton Global Income Securities 1.59% .64% 2.23% $ 83 $ 256 The U.S. Government Securities 1.59% .52% 2.11% $ 81 $ 244 Zero Coupon 2000 1.59% .40% 1.99% $ 80 $ 231 Zero Coupon 2005 1.59% .40% 1.99% $ 80 $ 231 Zero Coupon 2010 1.59% .40% 1.99% $ 80 $ 231 Growth and Income 1.59% .52% 2.11% $ 81 $ 244 Income Securities 1.59% .51% 2.10% $ 81 $ 243 Mutual Shares Securities 1.59% .85% 2.44% $ 85 $ 278 Real Estate Securities 1.59% .59% 2.18% $ 82 $ 251 Rising Dividends 1.59% .78% 2.37 $ 84 $ 271 Templeton Global Asset Allocation 1.59% .90% 2.49% $ 85 $ 283 Utility Equity 1.59% .50% 2.09% $ 81 $ 242 Capital Growth 1.59% .79% 2.38% $ 84 $ 272 Mutual Discovery Securities 1.59% 1.05% 2.64% $ 87 $ 298 Precious Metals 1.59% .66% 2.25% $ 83 $ 258 Small Cap 1.59% .90% 2.49% $ 85 $ 283 Templeton Developing Markets Equity 1.59% 1.41% 3.00% $ 90 $ 332 Templeton Global Growth 1.59% .97% 2.56% $ 86 $ 290 Templeton International Equity 1.59% .92% 2.51% $ 85 $ 285 Templeton International Smaller Companies 1.59% 1.10% 2.69% $ 87 $ 302 Templeton Pacific Growth 1.59% 1.01% 2.60% $ 86 $ 294
The charges for the newly formed funds have been estimated. The charges for some of the funds reflect expense reimbursement and/or fee waiver arrangements. For more detailed information, see the Fee Table in the prospectus for the Contract. 6. TAXES. Your earnings are not taxed until you take them out. In most cases, if you take money out, earnings come out first and are taxed as income. If you are younger than 59 when you take money out, you may be charged a 10% federal tax penalty on the taxable amounts withdrawn. Payments during the income phase are considered partly a return of your original investment. That part of each payment is not taxable as income. If the Contract is tax-qualified, the entire payment may be taxable. 7. ACCESS TO YOUR MONEY. You may make a withdrawal at any time during the accumulation phase. Any partial withdrawal must be for at least $500. You may request a withdrawal or elect the Systematic Withdrawal Program or Minimum Distribution Program which are briefly described in Section 10 of this Profile. After the first year, you can make multiple withdrawals up to a total of 15% of the value of your Contract each year without charge from Allianz Life. Withdrawals in excess of that amount will be subject to a contingent deferred sales charge. After Allianz Life has had a payment for 7 years, there is no charge for withdrawals. Each purchase payment you add to your Contract has its own 7 year charge period. Of course, you may also have to pay income tax and a tax penalty on any money you take out. 8. PERFORMANCE OF THE FUNDS. The value of the Contract will vary up or down depending upon the performance of the fund(s) you choose. From time to time, Allianz Life may advertise total return figures for each fund. As of the date of this prospectus, the sale of the Contracts has not begun. Therefore, no performance is presented here. 9. DEATH BENEFIT. If you die during the accumulation phase, the person you have selected as your beneficiary will receive a death benefit. This death benefit will be the greater of: 1) the current value of your Contract, less any taxes, on the day all claims proofs and payment election forms are received by Allianz Life at the Valuemark Service Center; or 2) (if applicable) the guaranteed minimum death benefit, less any taxes, as of the day you die. During the first year, the guaranteed minimum death benefit is equal to the payments you have made, less any money you have taken out and any charges paid on the money you have taken out. After the first year and before your 76th birthday, the guaranteed minimum death benefit as of the date of death is the greater of: A) payments you have made, less any money you have taken out and charges paid on the money you have taken out, increased by 5% per year on each Contract anniversary; or B) the highest of the Contract values for each six year Contract anniversary determined by the Contract value on such six year anniversary plus any payments made, less any money taken out since that Contract anniversary, and charges paid on the money you have taken out. Different rules will apply after your 76th birthday. 10. OTHER INFORMATION. Free Look. If you cancel the Contract within 10 days after receiving it (or whatever period is required in your state), we will send your money back without assessing a contingent deferred sales charge. You will receive whatever your Contract is worth on the day we receive your request. This may be more or less than your original payment. (Some states require that we return your payment.) No Probate. In most cases, when you die, your beneficiary will receive the death benefit without going through probate. Who should purchase the Contract? The Valuemark IV Variable Annuity Contract is designed for people seeking long-term tax-deferred accumulation of assets, generally for retirement or other long-term purposes. The tax-deferred feature is most attractive to people in high federal and state tax brackets. You should not buy this Contract if you are looking for a short-term investment or if you cannot accept the risk of getting back less money than you put in. Additional Features. The Contract offers additional features which you might be interested in. These include: Automatic Investment Plan - You can automatically add to your Contract on a monthly or quarterly basis for as little as $100 by electronic transfer of funds from your savings or checking account. Dollar Cost Averaging Program - You can arrange to have a regular amount of money automatically transferred to selected funds each month, theoretically giving you a lower average cost per unit over time than a single one time purchase. However, there are no guarantees that this will take place. Flexible Rebalancing - Allianz Life will automatically readjust your money among the funds to maintain your specified allocation mix. This can be done quarterly, semi-annually or annually. Systematic Withdrawal Program - You can elect to receive monthly or quarterly payments from Allianz Life while your Contract is in the accumulation phase. Of course, you may have to pay taxes on the money you receive. Minimum Distribution Program - You can arrange to have money sent to you each month or quarter to meet certain required distribution requirements imposed by the Internal Revenue Code. These features are not available in all states and may not be suitable for your particular situation. 11. INQUIRIES. If you have any questions about your Contract or need more information, please contact us at: Valuemark Service Center 300 Berwyn Park P.O. Box 3031 Berwyn, PA 19312-0031 (800) 624-0197 THE VALUEMARK IV VARIABLE ANNUITY CONTRACT ISSUED BY ALLIANZ LIFE VARIABLE ACCOUNT B AND ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA This prospectus describes the Valuemark IV Variable Annuity Contract with a fixed account option offered by Allianz Life Insurance Company of North America (Allianz Life). The annuity has 24 investment options - the 23 funds of Franklin Valuemark Funds which are listed below and a fixed account option of Allianz Life. You can put your money in 10 investment options (which includes any of the funds listed below and the fixed account). The fixed account may not be available in your state. FUND SEEKING STABILITY OF PRINCIPAL AND INCOME Money Market FUNDS SEEKING CURRENT INCOME High Income Templeton Global Income Securities The U.S. Government Securities Zero Coupon - 2000, 2005 and 2010 FUNDS SEEKING GROWTH AND INCOME Growth and Income Income Securities Mutual Shares Securities Real Estate Securities Rising Dividends Templeton Global Asset Allocation Utility Equity FUNDS SEEKING CAPITAL GROWTH Capital Growth Mutual Discovery Securities Precious Metals Small Cap Templeton Developing Markets Equity Templeton Global Growth Templeton International Equity Templeton International Smaller Companies Templeton Pacific Growth Please read this prospectus before investing and keep it for future reference. It contains important information about the Valuemark IV Variable Annuity Contract with a fixed account option. To learn more about the annuity offered by this prospectus, you can obtain a copy of the Statement of Additional Information (SAI) dated _______, 1996. The SAI has been filed with the Securities and Exchange Commission (SEC) and is incorporated by reference into this prospectus. The Table of Contents of the SAI is on Page __ of this prospectus. For a free copy of the SAI, call us at (800) 342-3863 or write us at: 1750 Hennepin Avenue, Minneapolis, Minnesota 55403-2195. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ________________, 1996 TABLE OF CONTENTS PAGE INDEX OF TERMS FEE TABLE 1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT Contract Owner Joint Owner Annuitant Assignment 2. ANNUITY PAYMENTS (THE INCOME PHASE) ANNUITY OPTIONS 3. PURCHASE Purchase Payments Automatic Investment Plan Allocation of Purchase Payments Free Look Accumulation Units 4. INVESTMENT OPTIONS Transfers Dollar Cost Averaging Program Flexible Rebalancing Voting Rights Substitution 5. EXPENSES Insurance Charges Mortality and Expense Risk Charge Administrative Charge Contract Maintenance Charge Contingent Deferred Sales Charge Waiver of Contingent Deferred Sales Charge Benefits Reduction or Elimination of the Contingent Deferred Sales Charge Transfer Fee Premium Taxes Income Taxes Fund Expenses 6. TAXES Annuity Contracts in General Qualified and Non-Qualified Contracts Withdrawals - Non-Qualified Contracts Withdrawals - Qualified Contracts Withdrawals - Tax-Sheltered Annuities Diversification 7. ACCESS TO YOUR MONEY Systematic Withdrawal Program Minimum Distribution Program Suspension of Payments or Transfers 8. PERFORMANCE 9. DEATH BENEFIT Upon Your Death Death of Annuitant 10. OTHER INFORMATION Allianz Life The Separate Account Distribution Administration Financial Statements APPENDIX TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION INDEX OF TERMS We have tried to make this prospectus as understandable for you as possible. Below is a list of some of the technical terms used in this prospectus. They are identified in the prospectus in italics. The page that is indicated below is where you will find the definition for the word or term. Page Accumulation Phase....................................................... Accumulation Unit........................................................ Annuitant................................................................ Annuity Options.......................................................... Annuity Payments......................................................... Annuity Unit............................................................. Beneficiary.............................................................. Contract Owner........................................................... Fixed Account............................................................ Funds.................................................................... Income Date.............................................................. Income Phase............................................................. Joint Owner.............................................................. Non-Qualified............................................................ Purchase Payment......................................................... Qualified................................................................ Tax Deferral............................................................. FEE TABLE Contract Owner Transaction Fees Contingent Deferred Sales Charge* (as a percentage of purchase payments)
Number of Complete Years From Receipt Charge ---------------------------------------- ------- 0 6% 1 6% 2 6% 3 5% 4 4% 5 3% 6 2% 7 years or more 0% Transfer Fee First 12 transfers in a Contract year are free. Thereafter, the fee is $25 (or 2% of the amount transferred, if less). Dollar Cost Averaging transfers and Flexible Rebalancing transfers are not counted. Contract Maintenance Charge ** 30 per Contract per year Separate Account Annual Expenses (as a percentage of average account value) Mortality and Expense Risk Charge*** 1.34% Administrative Charge .15% ---------------------------------------- Total Separate Account Annual Expenses 1.49% * Each year after the first contract year, you may make multiple partial withdrawals of up to a total of 15% of the value of your contract and no contingent deferred sales charge will be assessed. See Section 7 - Access to Your Money for additional options. ** During the accumulation phase, the charge is waived if the value of your contract is at least $50,000. If you own more than one Valuemark IV Contract (registered with the same social security number), we will determine the total value of all your Contracts. If the total value of all your contracts is at least $50,000, the charge is waived. *** The Mortality and Expense Risk Charge is 1.25% during the income phase.
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES (as a percentage of Franklin Valuemark Funds' average net assets) The Management Fees for each fund are based on a percentage of that fund's assets under management. See the prospectus for Franklin Valuemark Funds for more information. The "Management and Fund Administration Fees" below are the amounts that were paid to the Managers and Fund Administrators for the 1995 calendar year except for funds with fee waivers/expense reductions or newer funds without a full year of operations as of December 31, 1995.
Management Other and Fund Expenses (after Total Administration expense Annual Fees(1/) reductions) Expenses Money Market Fund (2/) .51% .02% .53% High Income Fund .53% .03% .56% Templeton Global Income Securities Fund (3/) .55% .09% .64% The U.S. Government Securities Fund .49% .03% .52% Zero Coupon Fund-2000 (4/) .37% .03% .40% Zero Coupon Fund-2005 (4/) .37% .03% .40% Zero Coupon Fund-2010 (4/) .37% .03% .40% Growth and Income Fund .49% .03% .52% Income Securities Fund .47% .04% .51% Mutual Shares Securities Fund (5/) .75% .10% .85% Real Estate Securities Fund .56% .03% .59% Rising Dividends Fund .75% .03% .78% Templeton Global Asset Allocation Fund (5/) .80% .10% .90% Utility Equity Fund .47% .03% .50% Capital Growth Fund (5/) .75% .04% .79% Mutual Discovery Securities Fund (5/) .95% .10% 1.05% Precious Metals Fund .61% .05% .66% Small Cap Fund (5/) .75% .15% .90% Templeton Developing Markets Equity Fund 1.25% .16% 1.41% Templeton Global Growth Fund .93% .04% .97% Templeton International Equity Fund .83% .09% .92% Templeton International Smaller Companies Fund (5/) 1.00% .10% 1.10% Templeton Pacific Growth Fund .90% .11% 1.01% 1/ The Fund Administration Fee is a direct expense for the Templeton Global Asset Allocation Fund, the Templeton International Smaller Companies Fund, the Mutual Shares Securities Fund and the Mutual Discovery Securities Fund; other funds pay for similar services indirectly through the Management Fee. See the Franklin Valuemark Funds prospectus for further information regarding these fees. 2/ Franklin Advisers, Inc. agreed to waive a portion of its Management Fee and to pay certain expenses of the Money Market Fund during 1995. It is currently continuing this arrangement in 1996. This arrangement may be terminated at any time. With this reduction, the fund's total annual expenses for 1995 were 0.40% of the average daily net assets of the fund. 3/ Prior to May 1, 1996, the Templeton Global Income Securities Fund was known as the Global Income Fund. 4/ Although not obligated to, Franklin Advisers, Inc. has agreed to waive a portion of its Management Fees and to pay certain expenses of the three Zero Coupon Funds through at least December 31, 1996 so that the total expenses of the Zero Coupon Funds will not exceed 0.40% of each fund's net assets. Absent the management fee waivers and expense payments, for the year ended December 31, 1995, the Total Annual Expenses and Management and Fund Administration Fees would have been as follows: Zero Coupon Fund-2000, .63% and .60%; Zero Coupon Fund-2005, .66% and .63%; and Zero Coupon Fund- 2010, .66% and .63%. 5/ The Templeton Global Asset Allocation Fund began operations on May 1, 1995; the Small Cap Fund began operations on November 1, 1995; the Capital Growth and Templeton International Smaller Companies Funds began operations on May 1, 1996; and the Mutual Shares Securities and Mutual Discovery Securities Funds began operations on November 8, 1996. The expenses shown above for these funds are therefore estimated for 1996.
The purpose of this Fee Table is to show you the expenses you will incur directly or indirectly with the contract. The Fee Table reflects expenses of the Separate Account as well as the funds. The examples below should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown. The $30 contract maintenance charge is included in the Examples as a prorated charge of $1. Since the average contract account size is greater than $1,000, the contract maintenance charge is reduced accordingly. Premium taxes are not reflected in the tables. Premium taxes may apply. For additional information, see Section 5 - Expenses and the Franklin Valuemark Funds prospectus. EXAMPLES You will pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if you surrender your Contract at the end of each time period:
1 3 5 10 Year Years Years Years Money Market Fund $ 82 $ 117 $ 148 $ 245 High Income Fund $ 82 $ 118 $ 149 $ 248 Templeton Global Income Securities Fund $ 83 $ 121 $ 153 $ 256 The U.S. Government Securities Fund $ 81 $ 117 $ 147 $ 244 Zero Coupon Fund-2000# $ 80 $ 113 $ 141 $ 231 Zero Coupon Fund-2005# $ 80 $ 113 $ 141 $ 231 Zero Coupon Fund-2010# $ 80 $ 113 $ 141 $ 231 Growth and Income Fund $ 81 $ 117 $ 147 $ 244 Income Securities Fund $ 81 $ 117 $ 147 $ 243 Mutual Shares Securities Fund ** $ 85 $ 127 Real Estate Securities Fund $ 82 $ 119 $ 151 $ 251 Rising Dividends Fund $ 84 $ 125 $ 161 $ 271 Templeton Global Asset Allocation Fund** $ 85 $ 129 $ 167 $ 283 Utility Equity Fund $ 81 $ 116 $ 146 $ 242 Capital Growth Fund** $ 84 $ 125 $ 161 $ 272 Mutual Discovery Securities ** $ 87 $ 133 Precious Metals Fund $ 83 $ 121 $ 154 $ 258 Small Cap Fund** $ 85 $ 129 $ 167 $ 283 Templeton Developing Markets Equity Fund $ 90 $ 144 $ 192 $ 332 Templeton Global Growth Fund $ 86 $ 131 $ 170 $ 290 Templeton International Equity Fund $ 85 $ 129 $ 168 $ 285 Templeton International Smaller Companies Fund** $ 87 $ 135 $ 177 $ 302 Templeton Pacific Growth Fund $ 86 $ 132 $ 172 $ 294
** Estimated # Calculated with waiver of fees and reimbursement of expenses You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if your contract is not surrendered or is annuitized:
1 3 5 10 Year Years Years Years Money Market Fund $ 22 $ 66 $ 114 $ 245 High Income Fund $ 22 $ 67 $ 115 $ 248 Templeton Global Income Securities Fund $ 23 $ 70 $ 119 $ 256 The U.S. Government Securities Fund $ 22 $ 66 $ 113 $ 244 Zero Coupon Fund-2000# $ 20 $ 62 $ 107 $ 231 Zero Coupon Fund-2005# $ 20 $ 62 $ 107 $ 231 Zero Coupon Fund-2010# $ 20 $ 62 $ 107 $ 231 Growth and Income Fund $ 21 $ 66 $ 113 $ 244 Income Securities Fund $ 21 $ 66 $ 113 $ 243 Mutual Shares Securities Fund** $ 25 $ 76 Real Estate Securities Fund $ 22 $ 68 $ 117 $ 251 Rising Dividends Fund $ 24 $ 74 $ 127 $ 271 Templeton Global Asset Allocation Fund** $ 25 $ 78 $ 133 $ 283 Utility Equity Fund $ 21 $ 65 $ 112 $ 242 Capital Growth Fund** $ 24 $ 74 $ 127 $ 272 Mutual Discovery Securities Fund** $ 27 $ 82 Precious Metals Fund $ 23 $ 70 $ 120 $ 258 Small Cap Fund** $ 25 $ 78 $ 133 $ 283 Templeton Developing Markets Equity Fund $ 30 $ 93 $ 158 $ 332 Templeton Global Growth Fund $ 26 $ 80 $ 136 $ 290 Templeton International Equity Fund $ 25 $ 78 $ 134 $ 285 Templeton International Smaller Companies Fund** $ 27 $ 84 $ 143 $ 302 Templeton Pacific Growth Fund $ 26 $ 81 $ 138 $ 294
** Estimated # Calculated with waiver of fees and reimbursement of other expenses As of the date of this prospectus, no contracts have been sold. Therefore, Allianz Life has not provided Condensed Financial Information. 1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT This prospectus describes a variable annuity contract with a fixed account option offered by Allianz Life. An annuity is a contract between you, the owner, and an insurance company (in this case Allianz Life), where the insurance company promises to pay you (or someone else you choose) an income, in the form of annuity payments, beginning on a designated date that is at least two years in the future. Until you decide to begin receiving annuity payments, your annuity is in the accumulation phase. Once you begin receiving annuity payments, your contract switches to the income phase. The contract benefits from tax deferral. Tax deferral means that you are not taxed on earnings or appreciation on the assets in your contract until you take money out of your contract. The contract is called a variable annuity because you can choose among 23 funds. Depending upon market conditions, you can make or lose money in any of these funds. If you select the variable annuity portion of the contract, the amount of money you are able to accumulate in your contract during the accumulation phase depends in part upon the investment performance of the fund(s) you select. The amount of the annuity payments you receive during the income phase from the variable annuity portion of the contract also depends upon the investment performance of the funds you select for the income phase. The contract also contains a fixed account. The fixed account offers an interest rate that is guaranteed for all deposits made within the twelve month period by Allianz Life. This interest rate is set monthly and is guaranteed for 12 months. Allianz Life guarantees that the interest credited to the fixed account will not be less than 3% per year. If you select the fixed account, your money will be placed with the other general assets of Allianz Life. If you select the fixed account, the amount of money you are able to accumulate in your contract during the accumulation phase depends upon the total interest credited to your contract. We will not make any changes to your contract without your permission except as may be required by law. CONTRACT OWNER . You, as the contract owner, have all the rights under the contract. The contract owner is as designated at the time the contract is issued, unless changed. You may change contract owners at any time. This may be a taxable event. You should consult with your tax adviser before doing this. JOINT OWNER . The contract can be owned by joint owners. Any joint owner must be the spouse of the other contract owner (except in Pennsylvania and Oregon). Upon the death of either joint owner, the surviving spouse will be the designated beneficiary. Any other beneficiary designation at the time the contract was issued or as may have been later changed will be treated as a contingent beneficiary unless otherwise indicated. ANNUITANT . You name an annuitant. You may change the annuitant at any time before the income date unless the contract is owned by a non-individual (for example, a corporation). BENEFICIARY The beneficiary is the person(s) or entity you name to receive any death benefit. The beneficiary is named at the time the contract is issued unless changed at a later date. Unless an irrevocable beneficiary has been named, you can change the beneficiary or contingent beneficiary. ASSIGNMENT You can assign the contract at any time during your lifetime. Allianz Life will not be bound by the assignment until it receives the written notice of the assignment. Allianz Life will not be liable for any payment or other action we take in accordance with the contract before we receive notice of the assignment. Any assignment made after the death benefit has become payable can only be done with our consent. AN ASSIGNMENT MAY BE A TAXABLE EVENT. If the contract is issued pursuant to a qualified plan, there may be limitations on your ability to assign the contract. 2. ANNUITY PAYMENTS (THE INCOME PHASE) You can receive regular monthly income payments under your contract. You can choose the month and year in which those payments begin. We call that date the income date. Your income date must be the first day of a calendar month and must be at least 2 years after you buy the contract. You can also choose among income plans. We call those annuity options. We ask you to choose your income date when you purchase the contract. You can change it at any time before the income date with 30 days notice to us. Annuity payments must begin by the annuitant's 85th birthday or 10 years from the date the contract was issued, whichever is later. The annuitant is the person whose life we look to when we make annuity payments. You (or someone you designate) will receive the annuity payments. You will receive tax reporting on those payments. If you do not choose an annuity option prior to the income date, we will assume that you selected Option 2 which provides a life annuity with 10 years of guaranteed payments. You may elect to receive your annuity payments as a variable payout, a fixed payout, or a combination of both. Under a fixed payout, all of the annuity payments will be the same dollar amount (equal installments). Under a variable payout, you have the same investment choices from the funds that were available during the accumulation phase. If you do not tell us otherwise, your annuity payments will be based on the investment allocations that were in place on the income date. If you choose to have any portion of your annuity payments come from the fund(s), the dollar amount of your payment will depend upon three things: 1) the value of your contract in the fund(s) on the income date, 2) the 5% assumed investment rate used in the annuity table for the contract, and 3) the performance of the fund(s) you selected. If the actual performance exceeds the 5% assumed rate, your annuity payments will increase. Similarly, if the actual rate is less than 5%, your annuity payments will decrease. ANNUITY OPTIONS You can choose one of the following annuity options or any other annuity option you want and that Allianz Life agrees to provide. After annuity payments begin, you cannot change the annuity option. OPTION 1. LIFE ANNUITY. Under this option, we will make monthly annuity payments so long as the annuitant is alive. After the annuitant dies, we stop making annuity payments. OPTION 2. LIFE ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under this option, we will make monthly annuity payments so long as the annuitant is alive. However, if, when the annuitant dies, we have made annuity payments for less than the selected guaranteed period, we will continue to make annuity payments to you for the rest of the guaranteed period. If you do not want to receive annuity payments, you can ask us for a single lump sum. OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make monthly annuity payments during the joint lifetime of the annuitant and the joint annuitant. When the annuitant dies, if the joint annuitant is still alive, we will continue to make annuity payments, so long as the joint annuitant continues to live. The amount of the annuity payments we will make to the survivor can be equal to 100%, 75% or 50% of the amount that we would have paid if they both were alive. The monthly annuity payments will end when the last surviving annuitant dies. OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under this option, we will make monthly annuity payments during the joint lifetime of the annuitant and the joint annuitant. When the annuitant dies, if the joint annuitant is still alive, we will continue to make annuity payments, so long as the surviving annuitant continues to live, at 100% of the amount that would have been paid if they were both alive. If, when the last death occurs, we have made annuity payments for less than the selected guaranteed period, we will continue to make annuity payments to you or any person you designate for rest of the guaranteed period. If you do not want to receive annuity payments, you can ask us for a single lump sum. OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make monthly annuity payments during the annuitant's lifetime. The last annuity payment will be made before the annuitant dies with a guarantee that Allianz Life will pay you a refund. 3. PURCHASE PURCHASE PAYMENTS A purchase payment is the money you invest in the contract. The minimum payment Allianz Life will accept is $5,000 when the contract is bought as a non-qualified contract. If you enroll in the Automatic Investment Plan (which is described below), your purchase payment can be $2,000. If you are buying the contract as part of an IRA (Individual Retirement Annuity), 401(k) or other qualified plan, the minimum amount we will accept is $2,000. The maximum we will accept without our prior approval is $1 million. You can make additional purchase payments of $250 (or as low as $100 if you have selected the Automatic Investment Plan) or more to either type of contract. At the time you buy the contract, you and the annuitant cannot be older than 85 years old. AUTOMATIC INVESTMENT PLAN The Automatic Investment Plan (AIP) is a program which allows you to make additional purchase payments to your contract on a monthly or quarterly basis by electronic transfer of funds from your savings or checking account. You may participate in this program by completing the appropriate form. We must receive your form by the first of the month in order for AIP to begin that same month. Investments will take place on the 20th of the month, or the next business day. The minimum investment that can be made by AIP is $100. You may stop AIP at any time you want. We need to be notified by the first of the month in order to stop or change AIP that month. If AIP is used for a qualified contract, you should consult your tax adviser for advice regarding maximum contributions. ALLOCATION OF PURCHASE PAYMENTS When you purchase a contract, we will allocate your purchase payment to the fixed account and/or one or more of the funds you have selected. We ask that you allocate your money in either whole percentages or round dollars. The fixed account may not be available in your state (check with your registered representative). You can instruct us how to allocate additional purchase payments you make. If you do not instruct us, we will allocate them in the same way as your previous instructions to us. Allianz Life reserves the right to limit the number of funds that you may invest in at one time. Currently, you may invest in 10 investment options at one time (which includes any of the 23 funds of Franklin Valuemark Funds listed in Section 4 and the Allianz Life fixed account). We may change this in the future. However, we will always allow you to invest in at least five funds. Once we receive your purchase payment, the necessary information and federal funds (federal funds means monies credited to a bank's account with its regional federal reserve bank), we will issue your contract and allocate your first purchase payment within 2 business days. If you do not give us all of the information we need, we will contact you to get it. If for some reason we are unable to complete this process within 5 business days, we will either send back your money or get your permission to keep it until we get all of the necessary information. If you make additional purchase payments, we will credit these amounts to your contract within one business day. Our business day closes when the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern time. FREE LOOK If you change your mind about owning the contract, you can cancel it within 10 days after receiving it (or the period required in your state). When you cancel the contract within this time period, Allianz Life will not assess a contingent deferred sales charge. You will receive back whatever your contract is worth on the day we receive your request. In certain states or if you have purchased the contract as an IRA, we may be required to give you back your purchase payment if you decide to cancel your contract within 10 days after receiving it (or whatever period is required in your state). If that is the case, we reserve the right to put your purchase payment in the Money Market Fund for 15 days after we issue your contract. (In some states, the period may be longer.) At the end of that period, we will re-allocate those funds as you selected. Currently, however, we will directly allocate your money to the funds and/or the fixed account as you have selected. ACCUMULATION UNITS The value of the portion of your contract allocated to the funds will go up or down depending upon the investment performance of the fund(s) you choose. The value of your contract will also depend on the expenses of the contract. In order to keep track of the value of your contract, we use a measurement called an accumulation unit (which is like a share of a mutual fund). During the income phase of the contract we call it an annuity unit. Every business day we determine the value of an accumulation unit for a fund by multiplying the accumulation unit value for the previous period by a factor for each fund for the current period. The factor for each fund is determined by: 1. dividing the value of a fund share at the end of the current period by the value of a fund share for the previous period; and 2. multiplying it by one minus the daily amount of the insurance charges and any charges for taxes. The value of an accumulation unit may go up or down from day to day. When you make a purchase payment, we credit your contract with accumulation units. The number of accumulation units credited is determined by dividing the amount of the purchase payment allocated to a fund by the value of the accumulation unit for that fund. We calculate the value of an accumulation unit for each fund after the New York Stock Exchange closes each day and then credit your contract. EXAMPLE: On Wednesday we receive an additional purchase payment of $3,000 from you. You have told us you want this to go to the Growth and Income Fund. When the New York Stock Exchange closes on that Wednesday, we determine that the value of an accumulation unit for the Growth and Income Fund is $12.50. We then divide $3,000 by $12.50 and credit your contract on Wednesday night with 240 accumulation units for the Growth and Income Fund. 4. INVESTMENT OPTIONS The Contract offers 23 funds of Franklin Valuemark Funds and a fixed account option of Allianz Life. Additional funds may be available in the future. YOU SHOULD READ THE FRANKLIN VALUEMARK FUNDS PROSPECTUS (WHICH IS ATTACHED TO THIS PROSPECTUS) CAREFULLY BEFORE INVESTING. Franklin Valuemark Funds is the mutual fund underlying your contract. Each fund has its own investment objective. Franklin Advisers, Inc. serves as each fund's investment manager (except the Templeton Global Growth Fund, the Templeton Developing Markets Equity Fund, the Templeton Global Asset Allocation Fund, the Templeton International Smaller Companies Fund, the Rising Dividends Fund, the Mutual Shares Securities Fund and the Mutual Discovery Securities Fund). The investment manager for the Templeton Global Growth and the Templeton Global Asset Allocation Funds is Templeton Global Advisors Limited. The investment manager for the Templeton Developing Markets Equity Fund is Templeton Asset Management Ltd. The investment manager for the Templeton International Smaller Companies Fund is Templeton Investment Counsel, Inc. The investment manager for the Rising Dividends Fund is Franklin Advisory Services, Inc.. The investment manager for the Mutual Shares Securities and the Mutual Discovery Securities Funds is Franklin Mutual Advisers, Inc. Certain managers have retained one or more sub-advisers to help them manage the funds. Franklin Valuemark Funds serves as the underlying mutual fund for variable life insurance policies offered by Allianz Life and other variable annuity contracts offered by Allianz Life and its affiliates. Franklin Valuemark Funds does not believe that offering its shares in this manner will be disadvantageous to you. The following is a list of the funds which are available under the contract: FUND SEEKING STABILITY OF PRINCIPAL AND INCOME: Money Market FUNDS SEEKING CURRENT INCOME: High Income Templeton Global Income Securities The U.S. Government Securities Zero Coupon - 2000, 2005 and 2010 FUNDS SEEKING GROWTH AND INCOME: Growth and Income Income Securities Mutual Shares Securities Real Estate Securities Rising Dividends Templeton Global Asset Allocation Utility Equity FUNDS SEEKING CAPITAL GROWTH: Capital Growth Mutual Discovery Securities Precious Metals Small Cap Templeton Developing Markets Equity Templeton Global Growth Templeton International Equity Templeton International Smaller Companies Templeton Pacific Growth TRANSFERS You can transfer money among the 23 funds and/or the fixed account. Allianz Life currently allows you to make as many transfers as you want to each year. Allianz Life may change this practice in the future. However, this product is not designed for professional market timing organizations or other individuals using programmed and frequent transfers. Such activity may be disruptive to a fund. We reserve the right to stop or prohibit these types of transfers if we determine that they could harm a fund. Your contract provides that you can make 3 transfers every year without charge. However, currently Allianz Life permits you to make 12 transfers every year without charge. We measure a year from the anniversary of the day we issued your contract. You can make a transfer to or from the fixed account and to or from any fund. If you make more than 12 transfers in a year, there is a transfer fee deducted. The fee is $25 per transfer or, if less, 2% of the amount transferred. The following applies to any transfer: 1. The minimum amount which you can transfer is $1,000 ($500 in New Jersey) or your entire value in the fund or fixed account. This requirement is waived if the transfer is in connection with the Dollar Cost Averaging or Flexible Rebalancing Programs (which are described below). 2. We may not allow you to make transfers during the free look period. 3. Your request for a transfer must clearly state which fund(s) or the fixed account is involved in the transfer. 4. Your request for a transfer must clearly state how much the transfer is for. 5. You cannot make any transfers within 7 calendar days prior to the date your first annuity payment is due. 6. During the income phase, you may not make a transfer from a fixed annuity option to a variable annuity option. 7. During the income phase, you can make at least one transfer from a variable annuity option to a fixed annuity option. Allianz Life has reserved the right to modify the transfer provisions subject to the guarantees described above. You can make transfers by telephone. We may allow you to authorize someone else to make transfers by telephone on your behalf. If you own the contract with a joint owner, unless Allianz Life is instructed otherwise, Allianz Life will accept instructions from either one of you. Allianz Life will use reasonable procedures to confirm that instructions given us by telephone are genuine. If we do not use such procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. Allianz Life tape records all telephone instructions. DOLLAR COST AVERAGING PROGRAM The Dollar Cost Averaging Program allows you to systematically transfer a set amount of money each month or quarter from any one fund or the fixed account to up to eight of the other funds. By allocating amounts on a regularly scheduled basis, as opposed to allocating the total amount at one particular time, you may be less susceptible to the impact of market fluctuations. You may only participate in this program during the accumulation phase. You must participate in the program for at least six months (or two quarters) and must transfer at least $500 each time (or $1,500 each quarter). Your allocations can be in whole percentages or dollar amounts. The fund(s) you transfer from may not be the fund(s) you transfer to in this program. You may elect this program by properly completing the Dollar Cost Averaging forms provided by Allianz Life. All Dollar Cost Averaging transfers will be made on the 10th day of the month unless that day is not a business day. If it is not, then the transfer will be made the next business day. Your participation in the program will end when any of the following occurs: (1) the number of desired transfers have been made; (2) you do not have enough money in the fund(s) or fixed account to make the transfer (if less money is available, that amount will be dollar cost averaged and the program will end); (3) you request to terminate the program (your request must be received by us by the first of the month to terminate that month); (4) the contract is terminated; or (5) we receive proof of the owner's death. If you participate in the Dollar Cost Averaging Program, the transfers made under the program are not taken into account in determining any transfer fee. You may not participate in the Dollar Cost Averaging Program and Flexible Rebalancing at the same time. FLEXIBLE REBALANCING Once your money has been invested, the performance of the funds and the earnings from the fixed account may cause your allocation to shift. Flexible Rebalancing is designed to help you maintain your specified allocation mix between the different funds. You can direct us to readjust your money on a quarterly, semi-annual or annual basis to return to your original allocations. Flexible Rebalancing transfers will be made on the 20th day of the month unless that day is not a business day. If it is not, then the transfer will be made on the previous day. If you participate in the Flexible Rebalancing Program, the transfers made under the program are not taken into account in determining any transfer fee. The fixed account is not permitted to be part of Flexible Rebalancing. VOTING RIGHTS Allianz Life is the legal owner of the fund shares. However, Allianz Life believes that when a fund solicits proxies in conjunction with a shareholder vote, it is required to obtain from you and other contract owners instructions as to how to vote those shares. When we receive those instructions, we will vote all of the shares we own in proportion to those instructions. This will also include any shares that Allianz Life owns on its own behalf. Should Allianz Life determine that it is no longer required to comply with the above, we will vote the shares in our own right. SUBSTITUTION Allianz Life may be required to substitute one of the funds you have selected with another fund. We would not do this without the prior approval of the Securities and Exchange Commission. We will give you notice of our intention to do this. 5. EXPENSES There are charges and other expenses associated with the contract that will reduce your investment return. These charges and expenses are: INSURANCE CHARGES Each day, Allianz Life makes a deduction for its insurance charges. Allianz Life does this as part of its calculation of the value of the accumulation units and the annuity units. The insurance charge has two parts: 1) the mortality and expense risk charge and 2) the administrative charge. MORTALITY AND EXPENSE RISK CHARGE . During the accumulation phase, this charge is equal, on an annual basis, to 1.34% of the average daily value of the contract invested in a fund, after the deduction of expenses. During the income phase, the charge is equal, on an annual basis, to 1.25% of the average daily value of the contract invested in a fund, after the deduction of expenses. This charge compensates us for all the insurance benefits provided by your contract (for example, the guarantee of annuity rates, the death benefits, certain expenses related to the contract, and for assuming the risk (expense risk) that the current charges will be insufficient in the future to cover the cost of administering the contract). The amount of the mortality and expense risk charge is less during the income phase because Allianz Life does not pay a death benefit if you die during the income phase. If this charge is not sufficient, then Allianz Life will bear the loss. Allianz Life does, however, expect to profit from this charge. The mortality and expense risk charge cannot be increased. Allianz Life may use any profits it makes from this charge to pay for the costs of distributing the contract. ADMINISTRATIVE CHARGE . This charge is equal, on an annual basis, to .15% of the average daily value of the contract invested in a fund, after the deduction of expenses. This charge, together with the contract maintenance charge (which is explained below), is for all the expenses associated with the administration of the contract. Some of these expenses include: preparation of the contract, confirmations, annual reports and statements, maintenance of contract records, personnel costs, legal and accounting fees, filing fees, and computer and systems costs. Because this charge is taken out of every unit value, you may pay more in administrative costs than those that are associated solely with your contract. Allianz Life does not intend to profit from this charge. However, if this charge and the contract maintenance charge are not enough to cover the costs of the contracts in the future, Allianz Life will bear the loss. CONTRACT MAINTENANCE CHARGE Every year on the anniversary of the date when your contract was issued, Allianz Life deducts $30 from your contract as a contract maintenance charge. This charge is for administrative expenses (see above). This charge can not be increased. However, during the accumulation phase, if the value of your contract is at least $50,000 when the deduction for the charge is to be made, Allianz Life will not deduct this charge. If you own more than one Valuemark IV contract, Allianz Life will determine the total value of all your contracts. If the total value of all contracts registered under the same social security number is at least $50,000, Allianz Life will not assess the contract maintenance charge. If the contract is owned by a non-natural person (e.g., a corporation), Allianz Life will look to the annuitant to determine if it will assess the charge. If you make a complete withdrawal from your contract, the contract maintenance charge will also be deducted. During the income phase, the charge will be collected monthly out of each annuity payment. CONTINGENT DEFERRED SALES CHARGE Withdrawals may be subject to a contingent deferred sales charge. During the accumulation phase, you can make withdrawals from your contract. Allianz Life keeps track of each purchase payment you make. The amount of the contingent deferred sales charge depends upon how long Allianz Life has had your payment. The charge is:
Number of complete years from receipt of payment: 0 1 2 3 4 5 6 7 or more Contingent Deferred Sales Charge: 6% 6% 6% 5% 4% 3% 2% 0%
However, after Allianz Life has had a purchase payment for 7 years, there is no charge when you withdraw that purchase payment. For purposes of the contingent deferred sales charge, Allianz Life treats withdrawals as coming from the oldest purchase payments first. Allianz Life does not assess the contingent deferred sales charge on any payments paid out as annuity payments or as death benefits. NOTE: For tax purposes, withdrawals are considered to have come from the last money you put into the contract. Thus, for tax purposes, earnings are considered to come out first. Free Withdrawal Amount - Each year after the first contract year, you can make multiple withdrawals up to 15% of the value of your contract and no contingent deferred sales charge will be deducted from the 15% you take out. Withdrawals in excess of that free amount will be subject to the contingent deferred sales charge. You may also select to participate in the Systematic Withdrawal Program or the Minimum Distribution Program which allow you to withdraw money without the deduction of the contingent deferred sales charge under certain circumstances. See Section 7 - Access to Your Money for a description of the Systematic Withdrawal Plan and the Minimum Distribution Program. WAIVER OF CONTINGENT DEFERRED SALES CHARGE BENEFITS Under certain circumstances, after the first year, Allianz Life will permit you to take your money out of the contract without deducting a contingent deferred sales charge: 1) if you become confined to a nursing home; 2) if you become terminally ill, which is defined as life expectancy of 12 months or less (a full surrender of the contract will be required); or 3) if you become totally disabled for at least 90 days. Also, after the first year, if you become unemployed for at least 90 days, you can take up to 50% of your money out without incurring a contingent deferred sales charge. This benefit is available only once during the life of the contract and you may not use both this benefit and the 15% free withdrawal amount in the same contract year. These benefits may not be available in your state. REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE Allianz Life will reduce or eliminate the amount of the contingent deferred sales charge when the contract is sold under circumstances which reduce its sales expenses. Some examples are: if there is a large group of individuals that will be purchasing the contract or a prospective purchaser already had a relationship with Allianz Life. Allianz Life will not deduct a contingent deferred sales charge under a contract issued to an officer, director or employee of Allianz Life or any of its affiliates. Also, Allianz Life will not deduct a contingent deferred sales charge when a contract is sold by an agent of Allianz Life to any members of his or her immediate family and the commission is reduced. Any circumstances resulting in reduction or elimination of the contingent deferred sales charge requires prior approval of Allianz Life. TRANSFER FEE You can make 12 free transfers every year. We measure a year from the day we issue your contract. If you make more than 12 transfers a year, we will deduct a transfer fee of $25 or 2% of the amount that is transferred, whichever is less, for each additional transfer. If the transfer is part of the Dollar Cost Averaging Program or Flexible Rebalancing, it will not count in determining the transfer fee. PREMIUM TAXES Some states and other governmental entities (e.g., municipalities) charge premium taxes or similar taxes. Allianz Life is responsible for the payment of these taxes and will make a deduction from the value of the contract for them. Some of these taxes are due when the contract is issued, others are due when annuity payments begin. It is Allianz Life's current practice to not charge you for these taxes until you die, annuity payments begin or a complete withdrawal is made. Allianz Life may some time in the future discontinue this practice and assess the charge when the tax is due. Premium taxes generally range from 0% to 3.5%, depending on the state. INCOME TAXES Allianz Life will deduct from the contract for any income taxes which it may incur because of the contract. Currently, Allianz Life is not making any such deductions. FUND EXPENSES There are deductions from and expenses paid out of the assets of the various funds which are described in the attached prospectus for Franklin Valuemark Funds. 6. TAXES NOTE: Allianz Life has prepared the following information on taxes as a general discussion of the subject. It is not intended as tax advice. You should consult your own tax adviser about your own circumstances. Allianz Life has included additional information regarding taxes in the Statement of Additional Information. ANNUITY CONTRACTS IN GENERAL Annuity contracts are a means of setting aside money for future needs - usually retirement. Congress recognized how important saving for retirement was and provided special rules in the Internal Revenue Code (Code) for annuities. Basically, these rules provide that you will not be taxed on the earnings on the money held in your annuity contract until you take the money out. This is referred to as tax deferral. There are different rules regarding how you will be taxed depending upon how you take the money out and the type of contract - qualified or non-qualified (see following sections). You, as the owner, will not be taxed on increases in the value of your contract until a distribution occurs - either as a withdrawal or as annuity payments. When you make a withdrawal you are taxed on the amount of the withdrawal that is earnings. For annuity payments, different rules apply. A portion of each annuity payment you receive will be treated as a partial return of your purchase payments and will not be taxed. The remaining portion of the annuity payment will be treated as ordinary income. How the annuity payment is divided between taxable and non-taxable portions depends upon the period over which the annuity payments are expected to be made. Annuity payments received after you have received all of your purchase payments are fully includible in income. When a non-qualified contract is owned by a non-natural person (e.g., a corporation or certain other entities other than tax-qualified trusts), the contract will generally not be treated as an annuity for tax purposes. This means that the contract may not receive the benefits of tax-deferral. Income may be taxed as ordinary income every year. QUALIFIED AND NON-QUALIFIED CONTRACTS If you purchase the contract under a qualified plan, your contract is referred to as a qualified contract. Examples of qualified plans are: Individual Retirement Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts), H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension and profit-sharing plans, which include 401(k) plans. If you do not purchase the contract under a qualified plan, your contract is referred to as a non-qualified contract. WITHDRAWALS - NON-QUALIFIED CONTRACTS If you make a withdrawal from your contract, the Code treats such a withdrawal as first coming from earnings and then from your purchase payments. In most cases, such withdrawn earnings are includible in income. The Code also provides that any amount received under an annuity contract which is included in income may be subject to a tax penalty. The amount of the penalty is equal to 10% of the amount that is includible in income. Some withdrawals will be exempt from the penalty. They include any amounts: (1) paid on or after the taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer becomes totally disabled (as that term is defined in the Code); (4) paid in a series of substantially equal payments made annually (or more frequently) for the life or life expectancy of the taxpayer; (5) paid under an immediate annuity; or (6) which come from purchase payments made prior to August 14, 1982. WITHDRAWALS - QUALIFIED CONTRACTS The above information describing the taxation of non-qualified contracts does not apply to qualified contracts. There are special rules that govern qualified contracts. A more complete discussion of withdrawals from qualified contracts is contained in the Statement of Additional Information. WITHDRAWALS - TAX-SHELTERED ANNUITIES The Code limits the withdrawal of purchase payments made by owners from certain Tax-Sheltered Annuities. Withdrawals can only be made when an owner: (1) reaches age 59-1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled (as that term is defined in the Code); or (5) in the case of hardship. However, in the case of hardship, the owner can only withdraw the purchase payments and not any earnings. DIVERSIFICATION The Code provides that the underlying investments for a variable annuity must satisfy certain diversification requirements in order to be treated as an annuity contract. Allianz Life believes that the funds are being managed so as to comply with the requirements. Neither the Code nor the Internal Revenue Service Regulations issued to date provide guidance as to the circumstances under which you, because of the degree of control you exercise over the underlying investments, and not Allianz Life would be considered the owner of the shares of the funds. If this occurs, it will result in the loss of the favorable tax treatment for the contract. It is unknown to what extent under federal tax law contract owners are permitted to select funds, to make transfers among the funds or the number and type of funds owners may select from. If any guidance is provided which is considered a new position, then the guidance would generally be applied prospectively. However, if such guidance is considered not to be a new position, it may be applied retroactively. This would mean that you, as the owner of the contract, could be treated as the owner of the funds. Due to the uncertainty in this area, Allianz Life reserves the right to modify the contract in an attempt to maintain favorable tax treatment. 7. ACCESS TO YOUR MONEY You can have access to the money in your contract: (1) by making a withdrawal (either a partial or a total withdrawal); (2) by receiving annuity payments; or (3) when a death benefit is paid to your beneficiary. Withdrawals can only be made during the accumulation phase. When you make a complete withdrawal you will receive the value of the contract on the day you made the withdrawal less any applicable contingent deferred sales charge, less any premium tax and less any contract maintenance charge. (See Section 5 - Expenses for a discussion of the charges.) Any partial withdrawal must be for at least $500 and, unless you instruct Allianz Life otherwise, and will be made pro-rata from all the funds and the fixed account you selected. Allianz Life requires that after you make a partial withdrawal the value of your contract must be at least $2,000. INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE. There are limits to the amount you can withdraw from a qualified plan referred to as a 403(b) plan. For a more complete explanation see Section 6 - Taxes and the discussion in the SAI. SYSTEMATIC WITHDRAWAL PROGRAM If the value of your contract is at least $25,000, Allianz Life offers a plan which provides automatic monthly or quarterly payments to you each year. The total systematic withdrawals which you can make each year without Allianz Life deducting a contingent deferred sales charge is limited to 15% of the value of your contract on the day the request is received. You may withdraw any amount you want under this program if your payments are no longer subject to the contingent deferred sales charge. You may not participate in this plan if you own a non-qualified contract and are under age 59 1/2. If you make withdrawals under this plan, you may not also use the 15% free withdrawal amount that year. For a discussion of the contingent deferred sales charge and the 15% free withdrawal amount, see Section 5 - Expenses. All Systematic Withdrawals will be made on the 9th day of the month unless that day is not a business day. If it is not, then the withdrawal will be made the previous business day. INCOME TAXES MAY APPLY TO SYSTEMATIC WITHDRAWALS. MINIMUM DISTRIBUTION PROGRAM If you own a contract that is an Individual Retirement Annuity (IRA), you may select the Minimum Distribution Program. Under this program, Allianz Life will make payments to you that are designed to meet the applicable minimum distribution requirements imposed by the Internal Revenue Code for IRAs. If the value of your contract is at least $25,000, Allianz Life will make payments to you on a monthly or quarterly basis. The payments will not be subject to the contingent deferred sales charge and will be instead of the 15% free withdrawal amount. SUSPENSION OF PAYMENTS OR TRANSFERS Allianz Life may be required to suspend or postpone payments for withdrawals or transfers for any period when: 1. the New York Stock Exchange is closed (other than customary weekend and holiday closings); 2. trading on the New York Stock Exchange is restricted; 3. an emergency exists as a result of which disposal of the fund shares is not reasonably practicable or Allianz Life cannot reasonably value the fund shares; 4. during any other period when the Securities and Exchange Commission, by order, so permits for the protection of owners. Allianz Life has reserved the right to defer payment for a withdrawal or transfer from the fixed account for the period permitted by law but not for more than six months. 8. PERFORMANCE Allianz Life periodically advertises performance of the various funds. Allianz Life will calculate performance by determining the percentage change in the value of an accumulation unit by dividing the increase (decrease) for that unit by the value of the accumulation unit at the beginning of the period. This performance number reflects the deduction of the insurance charges. It does not reflect the deduction of any applicable contingent deferred sales charge and contract maintenance charge. The deduction of any applicable contract maintenance charge and contingent deferred sales charges would reduce the percentage increase or make greater any percentage decrease. Any advertisement will also include average annual total return figures which reflect the deduction of the insurance charges, contract maintenance charge, contingent deferred sales charges and the expenses of the funds. Allianz Life may also advertise aggregate total return information. Aggregate total return is determined the same way except that the results are not annualized. Certain funds have been in existence for some time and have investment performance history. However, the contracts are new. In order to demonstrate how the actual investment experience of the funds may affect your accumulation unit values, Allianz Life has prepared hypothetical performance information (Part A of the Appendix to this prospectus). The performance is based on the performance of the funds, modified to reflect the charges and expenses of your contract as if it had been in existence for the time periods shown. The information is based upon the historical experience of the funds and does not necessarily represent what your investment would earn in those funds. The Mutual Shares Securities Fund and the Mutual Discovery Securities Fund (New Valuemark funds) are newly created and therefore also do not yet have any meaningful performance history. However, they have the same investment objectives and portfolio managers and substantially the same investment policies as two corresponding series of Franklin Mutual Series Fund Inc. (formerly, Mutual Series Fund Inc.) which have been sold to the public (Public Funds). In order to show how the performance of the Public Funds would have affected accumulation unit values, hypothetical performance information was developed. Part B of the Appendix to this prospectus shows the historical performance of the Public Funds which reflects the deduction of the historical fees and expenses paid by the Public Funds and not those paid by the New Valuemark funds. There are hypothetical performance figures for the accumulation units which assume the deduction of the Mortality and Expense Risk Charge, the Administrative Charge and the fees and expenses that the Public Funds paid. There are also hypothetical performance figures for the accumulation units which reflect the deduction of the Mortality and Expense Risk Charge, the Administrative Charge, the Contingent Deferred Sales Charge and the fees and expenses that the Public Funds paid. The hypothetical performance figures for the accumulation units have not been restated to reflect the higher fees for the New Valuemark funds. If the higher fees were used, the hypothetical performance shown would be lower. Future performance may vary and the results shown are not necessarily representative of future results. Allianz Life may in the future also advertise yield information for one or more of the funds. If it does, it will provide you with information regarding how yield is calculated. More detailed information regarding how performance is calculated is found in the SAI. Any performance advertised will be based on historical data and does not guarantee future results of the funds. 9. DEATH BENEFIT UPON YOUR DEATH If you die during the accumulation phase, Allianz Life will pay a death benefit to your beneficiary (see below). No death benefit is paid during the income phase. If you have a joint owner, and the joint owner dies, the surviving owner will be considered the beneficiary. Joint owners must be spouses (except in Pennsylvania and Oregon). The death benefit will be the greater of: 1) the current value of your contract, less any taxes on the day all claim proofs and payment election forms are received by Allianz Life at the Valuemark Service Center; or 2) as set forth in the enhanced death benefit endorsement to the contract, the guaranteed minimum death benefit, less any taxes, as of the day you die. Certain owners will not receive an enhanced death benefit endorsement. For these owners, the death benefit is as set forth in Item No. 1 above. During the first year, the guaranteed minimum death benefit is equal to the payments you have made, less any money you have taken out and any charges paid on the money you have taken out. After the first year and before your 76th birthday, the guaranteed minimum death benefit is the greater of: A) payments you have made, less any money you have taken out and charges paid on the money you have taken out, increased by 5% per year on each contract anniversary; or B) the highest of the contract values for each six year contract anniversary determined by the contract value on such six year anniversary plus any payments made, less any money taken out since that contract anniversary, and charges paid on the money you have taken out. After your 76th birthday, the guaranteed minimum death benefit will only be increased by any payments you have made since the last contract anniversary before your 76th birthday less any money you have taken out and any charges paid on the money you have taken out since such contract anniversary. If you have a joint owner, the age of the oldest owner will be used to determine the guaranteed minimum death benefit. The guaranteed minimum death benefit will be reduced by any amounts withdrawn after the date of death. If the contract is owned by a non-natural person, then all references to you mean the annuitant. The death benefit provision described above may not be available in your state. If it is not available, the death benefit will be equal to the value of your contract (less any premium taxes) on the business day that Allianz Life receives proof of the death and payment instructions. A beneficiary may request that the death benefit be paid in one of the following ways: (1) payment of the entire death benefit within 5 years of the date of death; or (2) payment of the death benefit under an annuity option. The death benefit payable under an annuity option must be paid over the beneficiary's lifetime or for a period not extending beyond the beneficiary's life expectancy. Payment must begin within one year of the date of death. If the beneficiary is the spouse of the contract owner, he/she can choose to continue the contract in his/her own name at the then current value, or if greater, the death benefit value. If a lump sum payment is elected and all the necessary requirements are met, the payment will be made within 7 days. If you (or any joint owner) die during the income phase and you are not the annuitant, any payments which are remaining under the annuity option selected will continue at least as rapidly as they were being paid at your death. If you die during the income phase, the beneficiary becomes the contract owner. DEATH OF ANNUITANT If the annuitant, who is not a contract owner or joint owner, dies during the accumulation phase, you can name a new annuitant. If a new annuitant is not named within 30 days of the death of the annuitant, you will become the annuitant. However, if the contract owner is a non-natural person (e.g., a corporation), then the death of the annuitant will be treated as the death of the contract owner, and a new annuitant may not be named. If the annuitant dies after annuity payments have begun, the remaining amounts payable, if any, will be as provided for in the annuity option selected. The remaining amounts payable will be paid to the contract owner at least as rapidly as they were being paid at the annuitant's death. 10. OTHER INFORMATION ALLIANZ LIFE Allianz Life Insurance Company of North America (Allianz Life), 1750 Hennepin Avenue, Minneapolis, Minnesota 55403, was organized under the laws of the state of Minnesota in 1896. Allianz Life offers fixed and variable life insurance and annuities and group life, accident and health insurance. Allianz Life is licensed to do business in 49 states and the District of Columbia. Allianz Life is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding. THE SEPARATE ACCOUNT Allianz Life established a separate account, Allianz Life Variable Account B (Separate Account), to hold the assets that underlie the contracts. The Board of Directors of Allianz Life adopted a resolution to establish the Separate Account under Minnesota insurance law on May 31, 1985. Allianz Life has registered the Separate Account with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. The Separate Account is divided into sub-accounts. Each sub-account invests in a fund. The assets of the Separate Account are held in Allianz Life's name on behalf of the Separate Account and legally belong to Allianz Life. However, those assets that underlie the contracts, are not chargeable with liabilities arising out of any other business Allianz Life may conduct. All the income, gains and losses (realized or unrealized) resulting from these assets are credited to or charged against the contracts and not against any other contracts Allianz Life may issue. DISTRIBUTION NALAC Financial Plans LLC (NFP) 1750 Hennepin Avenue, Minneapolis, MN 55403, acts as the distributor of the contracts. NFP is a wholly-owned subsidiary of Allianz Life. Commissions will be paid to broker-dealers who sell the contracts. Broker-dealers will be paid commissions up to 6.0% of purchase payments. Sometimes, Allianz Life enters into an agreement with the broker-dealer to pay the broker-dealer commissions as a combination of a certain amount of the commission at the time of sale and a trail commission (which when totaled could exceed 6% of purchase payments). In addition, Allianz Life and Franklin Advisers, Inc. and/or its affiliates may pay certain sellers for other services not directly related to the sale of the contracts (such as special marketing support allowances). To the extent that the contingent deferred sales charge is insufficient to cover the actual cost of distribution, Allianz Life may use any of its corporate assets, including any profit from the mortality and expense risk charge, to make up any difference. ADMINISTRATION Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300 Berwyn Park, Berwyn, Pennsylvania, to perform administrative services regarding the contracts. The administrative services include issuance of the contracts and maintenance of contract owner's records. FINANCIAL STATEMENTS The consolidated financial statements of Allianz Life and the Separate Account have been included in the Statement of Additional Information. APPENDIX PERFORMANCE INFORMATION The following information is based on the historical investment performance of the funds. The results shown are not necessarily representative of future performance. PART A - FRANKLIN VALUEMARK FUNDS - EXISTING FUNDS The funds of Franklin Valuemark Funds have been in existence for some time and have investment performance history (except the Small Cap, Capital Growth, Templeton International Smaller Companies, Mutual Shares Securities and Mutual Discovery Securities Funds). In order to show you how investment performance of the funds affects accumulation unit values, we have developed the following hypothetical performance information. The chart below shows the actual historical investment performance of the funds and hypothetical accumulation unit performance. The hypothetical accumulation unit performance assumes that the accumulation units were invested in each of the funds for the same periods. The performance figures in Column I reflect the deduction of the actual fees and expenses paid by the funds. Column II represents hypothetical performance figures for the accumulation units which reflects the deduction of the insurance charges and the fees and expenses of the funds. Column III represents hypothetical performance figures for the accumulation units which reflects the insurance charges, the contract maintenance charge, the fees and expenses of the funds and assumes that you make a withdrawal at the end of the period (therefore the contingent deferred sales charge is reflected). Total Return for the periods ended 9/30/96
Column I Column II Column III Fund Performance Hypothetical Accumulation Unit Performance ------------------------- -------------------------- ------------------------- Inception Since Since Since --------- ------------------------- -------------------------- ------------------------- FUND Date 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception - ----------------------------------- --------- ------------------------- -------------------------- ------------------------- Money Market 1/24/89 5.27% 4.03% 5.14% 3.71% 2.50% 3.63% -2.39% 1.77% 3.53% High Income 1/24/89 12.29% 12.48% 9.96% 10.61% 10.79% 8.35% 4.51% 10.79% 8.26% Templeton Global Income Securities 1/24/89 9.29% 6.39% 7.71% 7.65% 5.01% 6.26% 1.55% 4.35% 6.18% The U.S. Government Securities 3/14/89 4.65% 7.23% 8.04% 3.09% 5.75% 6.51% -3.01% 5.11% 6.43% Zero Coupon - 2000 3/14/89 4.44% 8.87% 9.61% 2.89% 7.31% 8.03% -3.21% 6.71% 7.95% Zero Coupon - 2005 3/14/89 2.80% 10.27% 10.79% 1.27% 8.82% 9.26% -4.83% 8.24% 9.18% Zero Coupon - 2010 3/14/89 1.87% 10.92% 10.96% 0.35% 9.73% 9.61% -5.75% 9.18% 9.53% Growth and Income 1/24/89 13.70% 11.47% 9.34% 12.00% 10.12% 7.94% 5.90% 9.57% 7.85% Income Securities 1/24/89 10.35% 11.29% 11.42% 8.70% 9.70% 9.83% 2.60% 9.14% 9.76% Real Estate Securities 1/24/89 20.87% 14.94% 11.38% 19.06% 13.17% 9.73% 12.96% 12.67% 9.64% Rising Dividends 1/27/92 18.73% -- 8.64% 16.95% -- 7.05% 10.85% -- 6.37% Utility Equity 1/24/89 10.82% 8.78% 10.58% 9.27% 7.38% 9.12% 3.17% 6.78% 9.04% Precious Metals 1/24/89 2.55% 8.36% 6.47% 1.02% 6.74% 4.90% -5.08% 6.12% 4.81% Templeton Developing Markets Equity 3/15/94 10.88% -- 4.53% 9.22% -- 2.98% 3.12% -- 0.91% Templeton Global Growth 3/15/94 11.81% -- 10.81% 10.14% -- 9.17% 4.04% -- 7.28% Templeton International Equity 1/27/92 11.60% -- 10.35% 9.93% -- 8.74% 3.83% -- 8.11% Templeton Pacific Growth 1/27/92 11.24% -- 10.37% 9.58% -- 8.76% 3.48% -- 8.12% Templeton Global Asset Allocation 5/1/96 14.80% -- 13.23% 13.09% -- 11.46% 6.99% -- 7.87%
PART B - PUBLIC FUNDS The Mutual Shares Securities Fund and Mutual Discovery Securities Fund ("New Valuemark funds") are newly created series of Franklin Valuemark Funds and do not yet have any meaningful performance history. The New Valuemark funds do, however, have the same investment objective and portfolio managers,(1) and substantially the same investment policies, as two corresponding series of Franklin Mutual Series Fund Inc. (formerly "Mutual Series Fund Inc.") which have been sold directly to the public ("Public Funds"). Chart 1 below shows the past performance of the Public Funds, in terms of average annual total return over the periods indicated. Average annual total return represents the average annual change in value of an investment over the stated periods, assuming reinvestment of dividends and capital gains at net asset value. These figures reflect the deduction of the historical fees and expenses paid by the Public Funds, which have been sold without sales charges. Chart 2 below shows hypothetical performance of accumulation units of the New Valuemark funds, based on the past average annual total return of the Public Funds and the deduction of all current recurring expenses of the Separate Account. These figures do not reflect any Contingent Deferred Sales Charge and have not been restated to reflect the higher expenses of the New Valuemark funds; all of which would lower the hypothetical performance shown. Chart 3 below shows hypothetical performance of accumulation units of the New Valuemark funds, based on the past average annual total return of the Public Funds and the deduction of all current recurring expenses of the Separate Account, as well as deduction of the applicable Contingent Deferred Sales Charge. These figures have not been restated to reflect the higher expenses of the New Valuemark funds which would lower the hypothetical performance shown. Past performance cannot predict or guarantee future results of the New Valuemark funds. In addition, the investment performance of the New Valuemark funds will differ from the performance of the Public Funds because of product and portfolio differences, including differences in portfolio size, the investments held, the timing of purchases of similar investments, cash flows, minor differences in certain investment policies, insurance product related tax diversification requirements, state insurance regulations, and additional administrative and insurance costs associated with insurance company separate accounts. These figures are not adjusted for tax consequences. _______________________ (1) In November 1996, Franklin Resources, Inc., parent company of the investment managers of the Franklin Valuemark Funds, completed the acquisition of Heine Securities Corporation, the investment manager of Mutual Series Fund Inc. This transaction did not, however, change the individuals responsible for the day-to-day operations of Franklin Mutual Series Fund Inc., who are also responsible for the day-to-day operations of the New Valuemark funds.
1. Public Funds' Historical Performance Since Inception Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date ---------------------- ------- ---------- --------- --------- --------- Mutual Discovery Fund................. 18.52% -- -- 21.90% 12/31/92 Mutual Shares Fund.................... 13.59% 17.47% 14.87% -- 7/1/49
2. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account) Since Inception Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date ---------------------- -------- ---------- --------- --------- --------- Mutual Discovery Securities Sub-Account ......................... 16.71% -- -- 20.03%% 12/31/92 Mutual Shares Securities Sub-Account ......................... 11.82% 15.64% 13.09% -- 7/1/49
3. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account and deduction of the Contingent Deferred Sales Charge) Since Inception Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date ---------------------- -------- ---------- --------- --------- --------- Mutual Discovery Securities Sub-Account.......................... 10.61% -- -- 19.31% 12/31/92 Mutual Shares Securities Sub-Account.......................... 5.72% 15.18% 13.08% -- 7/1/49
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Insurance Company Experts Legal Opinions Distributor Reduction or Elimination of the Contingent Deferred Sales Charge Calculation of Performance Data Annuity Provisions Tax Status Mortality and Expense Guarantee Financial Statements PART B STATEMENT OF ADDITIONAL INFORMATION INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS ISSUED BY ALLIANZ LIFE VARIABLE ACCOUNT B AND ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA ____________________, 1996 THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN. THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE INSURANCE COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195,(800) 542-5427. THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED ____________, 1996, AND AS MAY BE AMENDED FROM TIME TO TIME. TABLE OF CONTENTS PAGE INSURANCE COMPANY EXPERTS LEGAL OPINIONS DISTRIBUTOR REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE CALCULATION OF PERFORMANCE DATA TAX STATUS ANNUITY PROVISIONS MORTALITY AND EXPENSE RISK GUARANTEE FINANCIAL STATEMENTS INSURANCE COMPANY Allianz Life Insurance Company of North America (the "Insurance Company") is a stock life insurance company organized under the laws of the state of Minnesota in 1896. The Insurance Company is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding ("Allianz"). Allianz is headquartered in Munich, Germany, and has sales outlets throughout the world. The insurance company offers fixed and variable life insurance and annuities, and group life, accident and health insurance. On April 1, 1993, the Insurance Company changed its name from North American Life and Casualty Company to its present name. The Insurance Company is rated A+ (Superior) by A.M. BEST, an independent analyst of the insurance industry. The financial strength of an insurance company may be relevant insofar as the ability of a company to make fixed annuity payments from its general account. EXPERTS The financial statements of Allianz Life Variable Account B and the consolidated financial statements of Allianz Life Insurance Company of North America as of and for the year ended December 31, 1995, included in this Statement of Additional Information have been audited by KPMG Peat Marwick LLP, independent auditors, as indicated in their reports included in this Statement of Additional Information and are included herein in reliance upon such reports and upon the authority of said firm as experts in accounting and auditing. LEGAL OPINIONS Legal matters in connection with the Contracts described herein are being passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut. DISTRIBUTOR NALAC Financial Plans LLC, a wholly owned subsidiary of the Insurance Company, acts as the distributor. The offering is on a continuous basis. REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE The amount of the Contingent Deferred Sales Charge on the Contracts may be reduced or eliminated when sales of the Contracts are made to individuals or to a group of individuals in a manner that results in savings of sales expenses. The entitlement to a reduction of the Contingent Deferred Sales Charge will be determined by the Insurance Company after examination of the following factors: 1) the size of the group; 2) the total amount of purchase payments expected to be received from the group; 3) the nature of the group for which the Contracts are purchased, and the persistency expected in that group; 4) the purpose for which the Contracts are purchased and whether that purpose makes it likely that expenses will be reduced; and 5) any other circumstances which the Insurance Company believes to be relevant to determining whether reduced sales or administrative expenses may be expected. None of the reductions in charges for sales is contractually guaranteed. The Contingent Deferred Sales Charge will be eliminated when the Contracts are issued to an officer, director or employee of the Insurance Company or any of its affiliates. The Contingent Deferred Sales Charge will also be eliminated when the Contract is sold by an agent of the Insurance Company to any members of his or her immediate family and the commission is reduced. In no event will any reduction or elimination of the Contingent Deferred Sales Charge be permitted where the reduction or elimination will be unfairly discriminatory to any person. CALCULATION OF PERFORMANCE DATA TOTAL RETURN From time to time, the Insurance Company may advertise the performance data for the Funds in advertisements and Contract Owner communications. Such data will show the percentage change in the value of an accumulation unit based on the performance of a fund over a stated period of time, usually a calendar year, which is determined by dividing the increase (or decrease) in value for that unit by the accumulation unit value at the beginning of the period. Any such advertisement will include total return figures for the time periods indicated in the advertisement. Such total return figures will reflect the deduction of a 1.34% Mortality and Expense Risk Charge, a .15% Administrative Charge, the fees of the fund being advertised and any applicable Contract Maintenance Charge and Contingent Deferred Sales Charges. The hypothetical value of a Contract purchased for the time periods described in the advertisement will be determined by using the actual accumulation unit values for an initial $1,000 purchase payment, and deducting any applicable Contract Maintenance Charges and any applicable Contingent Deferred Sales Charge to arrive at the ending hypothetical value. The average annual total return is then determined by computing the fixed interest rate that a $1,000 purchase payment would have to earn annually, compounded annually, to grow to the hypothetical value at the end of the time periods described. The formula used in these calculations is: n P (1 + T) = ERV
P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the time periods used at the end of such time periods (or fractional portion thereof).
The Insurance Company may also advertise performance data which will be calculated in the same manner as described above but which will not reflect the deduction of the Contingent Deferred Sales Charge and the Contract Maintenance Charge. The Company may also advertise aggregate and average total return information over different periods of time. Aggregate total return is calculated in a similar manner, except that the results are not annualized. Each calculation assumes that no sales load is deducted from the initial $1,000 payment at the time it is allocated to the funds and assumes that the income earned by the investment in the fund is reinvested. Contract Owners should note that investment results will fluctuate over time, and any presentation of total return for any period should not be considered as a representation of what an investment may earn or what a Contract Owner's total return may be in any future period. YIELD THE MONEY MARKET FUND. The Insurance Company may advertise yield information for the Money Market Fund. The Money Market Fund's current yield may vary each day, depending upon, among other things, the average maturity of the underlying Fund's investment securities and changes in interest rates, operating expenses, the deduction of the Mortality and Expense Risk Charge, the Administrative Charge and the Contract Maintenance Charge and, in certain instances, the value of the underlying Fund's investment securities. The fact that the Fund's current yield will fluctuate and that the principal is not guaranteed should be taken into consideration when using the Fund's current yield as a basis for comparison with savings accounts or other fixed- yield investments. The yield at any particular time is not indicative of what the yield may be at any other time. The Insurance Company does not currently advertise any yield information for the Money Market Fund. The Money Market Fund's current yield is computed on a base period return of a hypothetical Contract having a beginning balance of one accumulation unit for a particular period of time (generally seven days). The return is determined by dividing the net change (exclusive of any capital changes) in such accumulation unit by its beginning value, and then multiplying it by 365/7 to get the annualized current yield. The calculation of net change reflects the value of additional shares purchased with the dividends paid by the Fund, and the deduction of the Mortality and Expense Risk Charge, the Administrative Charge and Contract Maintenance Charge. The effective yield reflects the effects of compounding and represents an annualization of the current return with all dividends reinvested. (Effective yield = [(Base Period Return + 1)365/7]-1.) OTHER FUNDS. The Insurance Company may also quote current yield in advertisements and Contract Owner communications for the other Funds. Each Fund (other than the Money Market Fund) will publish standardized total return information with any quotation of current yield. The yield computation is determined by dividing the net investment income per accumulation unit earned during the period (minus the deduction for the Mortality and Expense Risk Charge, Administrative Charge and the Contract Maintenance Charge) by the accumulation unit value on the last day of the period and annualizing the resulting figure, according to the following formula: 6 Yield = 2 [[(a-b) + 1] - 1] _____ cd Where:
a = net investment income earned during the period by the Fund attributable to shares owned by the Fund. b = expenses accrued for the period (net of reimbursements). c = the average daily number of accumulation units outstanding during the period. d = the maximum offering price per accumulation unit on the last day of the period.
The above formula will be used in calculating quotations of yield, based on specified 30-day periods identified in the advertisement or communication. Yield calculations assume no sales load. The Insurance Company does not currently advertise any yield information for any Fund. PERFORMANCE RANKING Total return may be compared to relevant indices, including U. S. domestic and international taxable bond indices and data from Lipper Analytical Services, Inc., Standard & Poor's Indices, or VARDS. From time to time, evaluation of performance by independent sources may also be used in advertisements and in information furnished to present or prospective contract owners. TAX STATUS NOTE: The following description is based upon the Insurance Company's understanding of current federal income tax law applicable to annuities in general. The Insurance Company cannot predict the probability that any changes in such laws will be made. Purchasers are cautioned to seek competent tax advice regarding the possibility of such changes. The Insurance Company does not guarantee the tax status of the Contracts. Purchasers bear the complete risk that the Contracts may not be treated as "annuity contracts" under federal income tax laws. It should be further understood that the following discussion is not exhaustive and that special rules not described in herein may be applicable in certain situations. Moreover, no attempt has been made to consider any applicable state or other tax laws. GENERAL Section 72 of the Code governs taxation of annuities in general. A Contract Owner is not taxed on increases in the value of a Contract until distribution occurs, either in the form of a lump sum payment or as annuity payments under the Annuity Option elected. For a lump sum payment received as a total surrender (total redemption) or death benefit, the recipient is taxed on the portion of the payment that exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is generally the purchase payments, while for Qualified Contracts there may be no cost basis. The taxable portion of the lump sum payment is taxed at ordinary income tax rates. For annuity payments, a portion of each payment in excess of an exclusion amount is includable in taxable income. The exclusion amount for payments based on a fixed annuity option is determined by multiplying the payment by the ratio that the cost basis of the Contract (adjusted for any period certain or refund feature) bears to the expected return under the Contract. The exclusion amount for payments based on a variable annuity option is determined by dividing the cost basis of the Contract (adjusted for any period certain or refund guarantee) by the number of years over which the annuity is expected to be paid. Payments received after the investment in the Contract has been recovered (i.e. when the total of the excludable amounts equal the investment in the Contract) are fully taxable. The taxable portion is taxed at ordinary income rates. For certain types of Qualified Plans there may be no cost basis in the Contract within the meaning of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries under the Contracts should seek competent financial advice about the tax consequences of any distributions. The Insurance Company is taxed as a life insurance company under the Code. For federal income tax purposes, the Separate Account is not a separate entity from the Insurance Company, and its operations form a part of the Insurance Company. DIVERSIFICATION Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable annuity contracts. The Code provides that a variable annuity contract will not be treated as an annuity contract for any period (and any subsequent period) for which the investments are not adequately diversified in accordance with regulations prescribed by the United States Treasury Department ("Treasury Department"). Disqualification of the Contract as an annuity contract would result in imposition of federal income tax to the Contract Owner with respect to earnings allocable to the Contract prior to the receipt of payments under the Contract. The Code contains a safe harbor provision which provides that annuity contracts such as the Contracts meet the diversification requirements if, as of the end of each quarter, the underlying assets meet the diversification standards for a regulated investment company and no more than fifty-five percent (55%) of the total assets consist of cash, cash items, U.S. government securities and securities of other regulated investment companies. On March 2, 1989, the Treasury Department issued regulations (Treas. Reg. 1.817-5) which established diversification requirements for the investment portfolios underlying variable contracts such as the Contracts. The regulations amplify the diversification requirements for variable contracts set forth in the Code and provide an alternative to the safe harbor provision described above. Under the regulations, an investment portfolio will be deemed adequately diversified if: (1) no more than 55% of the value of the total assets of the portfolio is represented by any one investment; (2) no more than 70% of the value of the total assets of the portfolio is represented by any two investments; (3) no more than 80% of the value of the total assets of the portfolio is represented by any three investments; and (4) no more than 90% of the value of the total assets of the portfolio is represented by any four investments. The Code provides that for purposes of determining whether or not the diversification standards imposed on the underlying assets of variable contracts by Section 817(h) of the Code have been met, "each United States government agency or instrumentality shall be treated as a separate issuer." The Insurance Company intends that all Funds of Franklin Valuemark Funds underlying the Contracts will be managed by the Managers for Franklin Valuemark Funds in such a manner as to comply with these diversification requirements. The Treasury Department has indicated that the diversification Regulations do not provide guidance regarding the circumstances in which Contract Owner control of the investments of the Separate Account will cause the Contract Owner to be treated as the owner of the assets of the Separate Account, thereby resulting in the loss of favorable tax treatment for the Contract. At this time it cannot be determined whether additional guidance will be provided and what standards may be contained in such guidance. The amount of Contract Owner control which may be exercised under the Contract is different in some respects from the situations addressed in published rulings issued by the Internal Revenue Service in which it was held that the policy owner was not the owner of the assets of the separate account. It is unknown whether these differences, such as the Contract Owner's ability to transfer among investment choices or the number and type of investment choices available, would cause the Contract Owner to be considered as the owner of the assets of the Separate Account resulting in the imposition of federal income tax to the Contract Owner with respect to earnings allocable to the Contract prior to receipt of payments under the Contract. In the event any forthcoming guidance or ruling is considered to set forth a new position, such guidance or ruling will generally be applied only prospectively. However, if such ruling or guidance was not considered to set forth a new position, it may be applied retroactively resulting in the Contract Owner being retroactively determined to be the owner of the assets of the Separate Account. Due to the uncertainty in this area, the Insurance Company reserves the right to modify the Contract in an attempt to maintain favorable tax treatment. MULTIPLE CONTRACTS The Code provides that multiple non-qualified annuity contracts which are issued within a calendar year period to the same contract owner by one company or its affiliates are treated as one annuity contract for purposes of determining the tax consequences of any distribution. Such treatment may result in adverse tax consequences, including more rapid taxation of the distributed amounts from such combination of contracts. Contract Owners should consult a tax adviser prior to purchasing more than one non-qualified annuity contract in any calendar year period. CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS Under Section 72(u) of the Code, the investment earnings on purchase payments for the Contracts will be taxed currently to the Contract Owner if the Owner is a non-natural person, e.g., a corporation or certain other entities. Such Contracts generally will not be treated as annuities for federal income tax purposes. However, this treatment is not applied to Contracts held by a trust or other entity as an agent for a natural person nor to Contracts held by qualified plans. Purchasers should consult their own tax counsel or other tax adviser before purchasing a Contract to be owned by a non-natural person. TAX TREATMENT OF ASSIGNMENTS An assignment or pledge of a Contract may be a taxable event. Contract Owners should therefore consult competent tax advisers should they wish to assign or pledge their Contracts. INCOME TAX WITHHOLDING All distributions or the portion thereof which is includible in the gross income of the Contract Owner are subject to federal income tax withholding. Generally, amounts are withheld from periodic payments at the same rate as wages and at the rate of 10% from non-periodic payments. However, the Contract Owner, in most cases, may elect not to have taxes withheld or to have withholding done at a different rate. Effective January 1, 1993, certain distributions from retirement plans qualified under Section 401 or Section 403(b) of the Code, which are not directly rolled over to another eligible retirement plan or individual retirement account or individual retirement annuity, are subject to a mandatory 20% withholding for federal income tax. The 20% withholding requirement generally does not apply to: a) a series of substantially equal payments made at least annually for the life or life expectancy of the participant or joint and last survivor expectancy of the participant and a designated beneficiary, or for a specified period of 10 years or more; or b) distributions which are required minimum distributions; or (c) the portion of the distributions not includible in gross income (i.e. returns of after-tax contributions). Participants should consult their own tax counsel or other tax adviser regarding withholding requirements. TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS Section 72 of the Code governs treatment of distributions from annuity contracts. It provides that if the contract value exceeds the aggregate purchase payments made, any amount withdrawn will be treated as coming first from the earnings and then, only after the income portion is exhausted, as coming from the principal. Withdrawn earnings are includible in gross income. It further provides that a ten percent (10%) penalty will apply to the income portion of any distribution. However, the penalty is not imposed on amounts received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the Contract Owner; (c) if the taxpayer is totally disabled (for this purpose disability is as defined in Section 72(m)(7) of the Code); (d) in a series of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the taxpayer or for the joint lives (or joint life expectancies) of the taxpayer and his Beneficiary; (e) under an immediate annuity; or (f) which are allocable to purchase payments made prior to August 14, 1982. The above information does not apply to Qualified Contracts. However, separate tax withdrawal penalties and restrictions may apply to such Qualified Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts.") QUALIFIED PLANS The Contracts offered by this Prospectus are designed to be suitable for use under various types of Qualified Plans. Because of the minimum purchase payment requirements, these Contracts may not be appropriate for some periodic payment retirement plans. Taxation of participants in each Qualified Plan varies with the type of plan and terms and conditions of each specific plan. Contract Owners, Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan may be subject to the terms and conditions of the plan regardless of the terms and conditions of the Contracts issued pursuant to the plan. Some retirement plans are subject to distribution and other requirements that are not incorporated into the Insurance Company's administrative procedures. Contract Owners, participants and Beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contracts comply with applicable law. Following are general descriptions of the types of Qualified Plans with which the Contracts may be used. Such descriptions are not exhaustive and are for general informational purposes only. The tax rules regarding Qualified Plans are very complex and will have differing applications, depending on individual facts and circumstances. Each purchaser should obtain competent tax advice prior to purchasing a Contract issued under a Qualified Plan. On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V. NORRIS that optional annuity benefits provided under an employer's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. The Contracts sold by the Insurance Company in connection with Qualified Plans will utilize annuity tables which do not differentiate on the basis of sex. Such annuity tables will also be available for use in connection with certain non-qualified deferred compensation plans. Contracts issued pursuant to Qualified Plans include special provisions restricting Contract provisions that may otherwise be available and described in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not transferable except upon surrender or annuitization. Various penalty and excise taxes may apply to contributions or distributions made in violation of applicable limitations. Furthermore, certain withdrawal penalties and restrictions may apply to surrenders from Qualified Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts.") a. H.R. 10 Plans Section 401 of the Code permits self-employed individuals to establish Qualified Plans for themselves and their employees, commonly referred to as "H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit of the employees will not be included in the gross income of the employees until distributed from the Plan. The tax consequences to participants may vary, depending upon the particular Plan design. However, the Code places limitations and restrictions on all Plans, including on such items as: amounts of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals - - Qualified Contracts.") Purchasers of Contracts for use with an H.R. 10 Plan should obtain competent tax advice as to the tax treatment and suitability of such an investment. b. Tax-Sheltered Annuities Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by public schools and certain charitable, educational and scientific organizations described in Section 501(c)(3) of the Code. These qualifying employers may make contributions to the Contracts for the benefit of their employees. Such contributions are not includable in the gross income of the employee until the employee receives distributions from the Contract. The amount of contributions to the tax-sheltered annuity is limited to certain maximums imposed by the Code. Furthermore, the Code sets forth additional restrictions governing such items as transferability, distributions, nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals Qualified Contracts" and "Tax-Sheltered Annuities - Withdrawal Limitations.") Employee loans are not allowed under these Contracts. Any employee should obtain competent tax advice as to the tax treatment and suitability of such an investment. c. Individual Retirement Annuities Section 408(b) of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" ("IRA"). Under applicable limitations, certain amounts may be contributed to an IRA which may be deductible from the individual's gross income. These IRAs are subject to limitations on eligibility, contributions, transferability and distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts.") Under certain conditions, distributions from other IRAs and other Qualified Plans may be rolled over or transferred on a tax-deferred basis into an IRA. Sales of Contracts for use with IRAs are subject to special requirements imposed by the Code, including the requirement that certain informational disclosure be given to persons desiring to establish an IRA. Purchasers of Contracts to be qualified as Individual Retirement Annuities should obtain competent tax advice as to the tax treatment and suitability of such an investment. d. Corporate Pension and Profit-Sharing Plans Sections 401(a) and 401(k) of the Code permit corporate employers to establish various types of retirement plans for employees. These retirement plans may permit the purchase of the Contracts to provide benefits under the Plan. Contributions to the Plan for the benefit of employees will not be includable in the gross income of the employee until distributed from the Plan. The tax consequences to participants may vary, depending upon the particular Plan design. However, the Code places limitations and restrictions on all Plans, including on such items as: amount of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. Participant loans are not allowed under the Contracts purchased in connection with these Plans. (See "Tax Treatment of Withdrawals Qualified Contracts.") Purchasers of Contracts for use with Corporate Pension or Profit- Sharing Plans should obtain competent tax advice as to the tax treatment and suitability of such an investment. TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS In the case of a withdrawal under a Qualified Contract, a ratable portion of the amount received is taxable, generally based on the ratio of the individual's cost basis to the individual's total accrued benefit under the retirement plan. Special tax rules may be available for certain distributions from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of any distribution from qualified retirement plans, including Contracts issued and qualified under Code Sections 401 (H.R. 10 and Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities) and 408(b) (Individual Retirement Annuities). To the extent amounts are not includible in gross income because they have been properly rolled over to an IRA or to another eligible Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply to the following distributions: (a) if distribution is made on or after the date on which the Contract Owner or Annuitant (as applicable) reaches age 59 ; (b) distributions following the death or disability of the Contract Owner or Annuitant (as applicable) (for this purpose disability is as defined in Section 72(m)(7) of the Code); (c) after separation from service, distributions that are part of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the Contract Owner or Annuitant (as applicable) or the joint lives (or joint life expectancies) of such Contract Owner or Annuitant (as applicable) and his designated beneficiary; (d) distributions to a Contract Owner or Annuitant (as applicable) who has separated from service after he has attained age 55; (e) distributions made to the Contract Owner or Annuitant (as applicable) to the extent such distributions do not exceed the amount allowable as a deduction under Code Section 213 to the Contract Owner or Annuitant (as applicable) for amounts paid during the taxable year for medical care; (f) distributions made to an alternate payee pursuant to a qualified domestic relations order; and (g) distributions from an Individual Retirement Annuity for the purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code) for the Contract Owner and his or her spouse and dependents if the Contract Owner has received unemployment compensation for at least 12 weeks. This exception no longer applies after the Contract Owner has been re-employed for at least 60 days. The exceptions stated in items (d) and (f) above do not apply in the case of an Individual Retirement Annuity. The exception stated in item (c) applies to an Individual Retirement Annuity without the requirement that there be a separation from service. Generally, distributions from a Qualified Plan must commence no later than April 1 of the calendar year following the later of: (a) the year in which the employee attains age 70 1/2 or (b) the calendar year in which the employee retires. The date set forth in (b) does not apply to an Individual Retirement Annuity. Required distributions must be over a period not exceeding the life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated beneficiary. If the required minimum distributions are not made, a 50% penalty tax is imposed as to the amount not distributed. TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS The Code limits the withdrawal of amounts attributable to contributions made pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of the Code) to circumstances only when the Contract Owner: (1) attains age 59 ; (2) separates from service; (3) dies; (4) becomes disabled (within the meaning of Section 72(m)(7) of the Code); or (5) in the case of hardship. However, withdrawals for hardship are restricted to the portion of the Contract Owner's Contract Value which represents contributions by the Contract Owner and does not include any investment results. The limitations on withdrawals became effective on January 1, 1989 and apply only to salary reduction contributions made after December 31, 1988, and to income attributable to such contributions and to income attributable to amounts held as of December 31, 1988. The limitations on withdrawals do not affect rollovers and transfers between certain Qualified Plans. Contract Owners should consult their own tax counsel or other tax adviser regarding any distributions. ANNUITY PROVISIONS FIXED ANNUITY PAYOUT A fixed annuity is an annuity with payments which are guaranteed as to dollar amount by the Insurance Company and do not vary with the investment experience of the Fund. The Fixed Account value on the day immediately preceding the Income Date will be used to determine the Fixed Annuity monthly payment. The monthly Annuity Payment will be based upon the Contract Value at the time of annuitization, the Annuity Option selected, the age of the annuitant and any joint annuitant and the sex of the annuitant and joint annuitant where allowed. VARIABLE ANNUITY PAYOUT A variable annuity is an annuity with payments which: (1) are not predetermined as to dollar amount; and (2) will vary in amount with the net investment results of the applicable Fund(s). ANNUITY UNIT VALUE: On the Income Date, a fixed number of Annuity Units will be purchased as follows: The first Annuity Payment is equal to the Adjusted Contract Value, divided first by $1,000 and then multiplied by the appropriate Annuity Payment amount for each $1,000 of value for the Annuity Option selected. In each Fund the fixed number of Annuity Units is determined by dividing the amount of the initial Annuity Payment determined for each Fund by the Annuity Unit value on the Income Date. Thereafter, the number of Annuity Units in each Fund remains unchanged unless the Contract Owner elects to transfer between Funds. All calculations will appropriately reflect the Annuity Payment frequency selected. On each subsequent Annuity Payment date, the total Annuity Payment is the sum of the Annuity Payments for each Fund. The Annuity Payment in each Fund is determined by multiplying the number of Annuity Units then allocated to such Fund by the Annuity Unit value for that Fund. On each subsequent Valuation Date, the value of an Annuity Unit is determined in the following way: First: The Net Investment Factor is determined as described in the Prospectus under "Purchase - Accumulation Units." Second: The value of an Annuity Unit for a Valuation Period is equal to: a. the value of the Annuity Unit for the immediately preceding Valuation Period. b. multiplied by the Net Investment Factor for the current Valuation Period; c. divided by the Assumed Net Investment Factor (see below) for the Valuation Period. The Assumed Net Investment Factor is equal to one plus the Assumed Investment Return which is used in determining the basis for the purchase of an Annuity, adjusted to reflect the particular Valuation Period. The Assumed Investment Return that the Insurance Company will use is 5%. However, the Insurance Company may agree to use a different value. MORTALITY AND EXPENSE RISK GUARANTEE The Insurance Company guarantees that the dollar amount of each annuity payment after the first annuity payment will not be affected by variations in mortality and expense experience. FINANCIAL STATEMENTS The audited consolidated financial statements of the Insurance Company as of and for the year ended December 31, 1995, included herein should be considered only as bearing upon the ability of the Insurance Company to meet its obligations under the Contracts. The audited financial statements of the Separate Account as of and for the year ended December 31, 1995 are also included herein. In addition, unaudited financial statements of the Separate Account as of and for the six-month period ended September 30, 1996 are included herein.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements Statements of Assets and Liabilities September 30, 1996 (unaudited) (In thousands except per unit data) U.S. Money Growth and Precious High Real Estate Government Market Income Metals Income Securities Securities Fund Fund Fund Fund Fund Fund ------- ------- ------ ------ ------- -------- Investments at net asset value: Franklin Valuemark Funds: Money Market Fund, 384,726 shares, cost $384,726.......................................... $384,726 - - - - - Growth and Income Fund, 56,037 shares, cost $795,302........................... - 911,161 - - - - Precious Metals Fund, 7,345 shares, cost $107,715............................ - - 105,181 - - - High Income Fund, 28,027 shares, cost $358,603.................................. - - - 380,601 - - Real Estate Securities Fund, 12,625 shares, cost $195,907........................... - - - - 242,017 - U.S. Government Securities Fund, 37,983 shares, cost $491,321........................... - - - - - 496,440 -------- ------- ------- ------- ------- ------- Total assets......................................... 384,726 911,161 105,181 380,601 242,017 496,440 -------- ------- ------- ------- ------- ------- Liabilities: Accrued mortality and expense risk charges............... 76 88 15 44 30 56 Accrued administrative charges........................... 9 11 2 5 4 7 -------- ------- ------- ------- ------- ------- Total liabilities.................................... 85 99 17 49 34 63 -------- ------- ------- ------- ------- ------- Net assets........................................... $384,641 911,062 105,164 380,552 241,983 496,377 ======== ======= ======= ======= ======= ======= Contract owners' equity: Contracts in accumulation period (note 6)................ $384,494 909,226 105,164 380,527 241,945 496,374 Contracts in annuity payment period (note 2)............. 147 1,836 - 25 38 3 -------- ------- ------- ------- ------- ------- Total contract owners' equity........................ $384,641 911,062 105,164 380,552 241,983 496,377 ======== ======= ======= ======= ======= ======= Accumulation units outstanding........................... 29,044 50,176 7,228 20,407 11,770 30,616 ======== ======= ======= ======= ======= ======= Accumulation unit value per unit......................... $13.238 18.121 14.549 18.647 20.556 16.213 ======== ======= ======= ======= ======= ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Assets and Liabilities (cont.) September 30, 1996 (unaudited) (In thousands except per unit data) Templeton Investment Utility Zero Zero Zero Global Income Grade Equity Coupon Coupon Coupon Securities Intermediate Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Bond Fund -------- ------- -------- ------- --------- --------- Investments at net asset value: Franklin Valuemark Funds: Utility Equity Fund, 64,843 shares, cost $1,018,812................ $1,119,185 - - - - - Zero Coupon Fund - 2000, 7,189 shares, cost $100,581................... - 106,256 - - - - Zero Coupon Fund - 2005, 4,565 shares, cost $66,999.................... - - 71,254 - - - Zero Coupon Fund - 2010, 4,712 shares, cost $71,127.................... - - - 71,573 - - Templeton Global Income Securities Fund, 15,390 shares, cost $195,628............ - - - - 199,913 - Investment Grade Intermediate Bond Fund, 10,083 shares, cost $133,589............ - - - - - 137,027 ---------- ------- ------ ------ ------- ------- Total assets............................... 1,119,185 106,256 71,254 71,573 199,913 137,027 ---------- ------- ------ ------ ------- ------- Liabilities: Accrued mortality and expense risk charges...... 118 16 12 13 25 19 Accrued administrative charges.................. 14 2 1 1 3 2 ---------- ------- ------ ------ ------- ------- Total liabilities.......................... 132 18 13 14 28 21 ---------- ------- ------ ------ ------- ------- Net assets................................. $1,119,053 106,238 71,241 71,559 199,885 137,006 ========== ======= ====== ====== ======= ======= Contract owners' equity: Contracts in accumulation period (note 6)....... $1,117,882 106,238 71,241 71,559 199,885 136,997 Contracts in annuity payment period (note 2).... 1,171 - - - - 9 ---------- ------- ------ ------ ------- ------- Total contract owners' equity.............. $1,119,053 106,238 71,241 71,559 199,885 137,006 Accumulation units outstanding.................. 56,807 5,889 3,624 3,553 12,445 8,761 ========== ======= ====== ====== ======= ======= Accumulation unit value per unit................ $19.679 18.040 19.657 20.140 16.061 15.638 ========== ======= ====== ====== ======= ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Assets and Liabilities (cont.) September 30, 1996 (unaudited) (In thousands except per unit data) Adjustable Templeton Templeton Templeton Income U.S. Pacific Rising International Developing Securities Government Growth Dividends Equity Markets Equity Fund Fund Fund Fund Fund Fund -------- -------- ------- ------ -------- ---------- Investments at net asset value: Franklin Valuemark Funds: Income Securities Fund, 74,728 shares, cost $1,110,537......................... $1,222,546 - - - - - Adjustable U.S. Government Fund, 14,034 shares, cost $151,255.................... - 145,392 - - - - Templeton Pacific Growth Fund, 23,962 shares, cost $328,062.................... - - 351,046 - - - Rising Dividends Fund, 34,496 shares, cost $377,287........................... - - - 477,765 - - Templeton International Equity Fund, 67,163 shares, cost $851,471.................... - - - - 955,733 - Templeton Developing Markets Equity Fund, 21,764 shares, cost $224,775.............. - - - - - 236,353 ---------- ------- ------- ------- ------- ------- Total assets................................. 1,222,546 145,392 351,046 477,765 955,733 236,353 ---------- ------- ------- ------- ------- ------- Liabilities: Accrued mortality and expense risk charges........ 114 20 25 48 129 28 Accrued administrative charges.................... 14 2 3 6 15 3 ---------- ------- ------- ------- ------- ------- Total liabilities............................ 128 22 28 54 144 31 ---------- ------- ------- ------- ------- ------- Net assets................................... $1,222,418 145,370 351,018 477,711 955,589 236,322 ========== ======= ======= ======= ======= ======= Contract owners' equity: Contracts in accumulation period (note 6)......... $1,219,705 145,365 350,432 477,086 954,531 234,916 Contracts in annuity payment period (note 2)...... 2,713 5 586 625 1,058 1,406 ---------- ------- ------- ------- ------- ------- Total contract owners' equity................ $1,222,418 145,370 351,018 477,711 955,589 236,322 ========== ======= ======= ======= ======= ======= Accumulation units outstanding.................... 58,897 11,794 23,562 34,543 64,218 21,748 ========== ======= ======= ======= ======= ======= Accumulation unit value per unit.................. $20.709 12.326 14.873 13.811 14.864 10.802 ========== ======= ======= ======= ======= ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Assets and Liabilities (cont.) September 30, 1996 (unaudited) (In thousands except per unit data) Templeton Templeton Templeton International Global Global Asset Small Capital Smaller Total Growth Allocation Cap Growth Companies All Fund Fund Fund Fund Fund Funds ------- -------- ----- ----- -------- ------- Investments at net asset value: Franklin Valuemark Funds: Templeton Global Growth Fund, 37,938 shares, cost $428,552............................ $482,189 - - - - Templeton Global Asset Allocation Fund, 3,363 shares, cost $36,478........................ - 39,386 - - - Small Cap Fund, 10,862 shares, cost $125,977........................................... - - 137,400 - - Capital Growth Fund, 1,819 shares, cost $18,806............................................ - - - 19,844 - Templeton International Smaller Companies Fund, 900 shares, cost $9,190........................... - - - - 9,366 -------- ------ ------- ------ ------ Total assets......................................... 482,189 39,386 137,400 19,844 9,366 8,302,354 -------- ------ ------- ------ ------ --------- Liabilities: Accrued mortality and expense risk charges................. 57 9 20 60 36 1,058 Accrued administrative charges............................. 7 1 2 7 4 125 ------- ------ ------- ------ ------ --------- Total liabilities.................................... 64 10 22 67 40 1,183 ------- ------ ------- ------ ------ --------- Net assets.. ........................................ $482,125 39,376 137,378 19,777 9,326 8,301,171 ======== ====== ======= ====== ====== ========= Contract owners' equity: Contracts in accumulation period (note 6).................. $479,586 38,980 137,020 19,622 9,320 8,288,095 Contracts in annuity payment period (note 2)............... 2,539 396 358 155 6 13,076 -------- ------ ------- ------ ------ --------- Total contract owners' equity........................ $482,125 39,376 137,378 19,777 9,326 8,301,171 ======== ====== ======= ====== ====== ========= Accumulation units outstanding............................ 38,267 3,337 11,034 1,809 901 510,430 ======== ====== ======= ====== ====== ========= Accumulation unit value per unit.......................... $12.533 11.681 12.418 10.847 10.349 ======== ====== ======= ====== ====== See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Operations For the period ended September 30, 1996 (unaudited) (In thousands) U.S. Money Growth and Precious High Real Estate Government Market Income Metals Income Securities Securities Fund Fund Fund Fund Fund Fund -------- ------- ------ ------ ------- -------- Investment income: Dividends reinvested in fund shares.................... $ 15,374 20,139 1,477 27,936 9,054 36,122 -------- ------ ------ ------ ------ ------ Expenses: Mortality and expense risk charges..................... 3,863 8,131 1,132 3,172 1,993 4,930 Administrative charges................................. 464 976 136 381 239 592 -------- ------ ------ ------ ------ ------ Total expenses.................................... 4,327 9,107 1,268 3,553 2,232 5,522 -------- ------ ------ ------ ------ ------ Investment income (loss), net..................... 11,047 11,032 209 24,383 6,822 30,600 Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds... - 71,329 1,354 1,483 - - -------- ------ ------ ------ ------ ------ Realized gains (losses) on sales of investments: Proceeds from sales.................................. 335,551 62,579 57,368 63,617 13,313 70,295 Cost of investments sold............................. (335,551) (51,786) (52,908) (58,166) (11,333) (67,961) -------- ------ ------ ------ ------ ------ Total realized gains (losses) on sales of investments, net........................ - 10,793 4,460 5,451 1,980 2,334 -------- ------ ------ ------ ------ ------- Realized gains (losses) on investments, net....... - 82,122 5,814 6,934 1,980 2,334 Net change in unrealized appreciation (depreciation) on investments........................ - (54,823) (5,112) (4,282) 19,279 (36,715) -------- ------ ------ ------ ------ ------- Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net.. - 27,299 702 2,652 21,259 (34,381) -------- ------ ------ ------ ------ ------ Net increase (decrease) in net assets from operations... $ 11,047 38,331 911 27,035 28,081 (3,781) ======== ====== ====== ====== ====== ====== See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Operations (cont.) For the period ended September 30, 1996 (unaudited) (In thousands) Templeton Investment Utility Zero Zero Zero Global Income Grade Equity Coupon Coupon Coupon Securities Intermediate Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Bond Fund -------- ------- -------- ------- --------- --------- Investment income: Dividends reinvested in fund shares............. $ 59,963 5,915 3,734 3,687 15,325 7,793 -------- ------ ----- ------ ------ ------ Expenses: Mortality and expense risk charges.............. 11,428 1,014 665 661 1,947 1,382 Administrative charges......................... 1,371 122 80 79 234 166 -------- ------ ----- ------ ------ ------ Total expenses.............................. 12,799 1,136 745 740 2,181 1,548 -------- ------ ----- ------ ------ ------ Investment income (loss), net............... 47,164 4,779 2,989 2,947 13,144 6,245 Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds............................... - 58 - 999 - - -------- ------ ----- ------ ------ ------ Realized gains (losses) on sales of investments: Proceeds from sales........................... 218,254 13,592 6,459 23,193 34,744 23,668 Cost of investments sold...................... (194,545) (12,495) (5,904) (21,389) (33,691) (22,851) -------- ------ ----- ------ ------ ------ Total realized gains (losses) on sales of investments, net....................... 23,709 1,097 555 1,804 1,053 817 -------- ------ ----- ------ ------ ------ Realized gains (losses) on investments, net 23,709 1,155 555 2,803 1,053 817 Net change in unrealized appreciation (depreciation) on investments................. (65,744) (7,501) (7,919) (13,440) (7,571) (5,448) -------- ------ ----- ------ ------ ------ Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net....................... (42,035) (6,346) (7,364) (10,637) (6,518) (4,631) -------- ------ ----- ------ ------ ------ Net increase (decrease) in net assets from operations................................. $ 5,129 (1,567) (4,375) (7,690) 6,626 1,614 ======== ====== ===== ====== ====== ====== See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Operations (cont.) For the period ended September 30, 1996 (unaudited) (In thousands) Adjustable Templeton Templeton Templeton Income U.S. Pacific Rising International Developing Securities Government Growth Dividends Equity Markets Equity Fund Fund Fund Fund Fund Fund ------- -------- ------- ------ -------- ---------- Investment income: Dividends reinvested in fund shares............... $62,078 12,299 10,182 9,452 23,741 2,088 ------- ------ ------ ------ ------ ------ Expenses: Mortality and expense risk charges................ 11,329 1,537 3,284 4,170 8,392 2,003 Administrative charges............................ 1,360 184 394 500 1,007 240 ------- ------ ------ ------ ------ ------ Total expenses............................... 12,689 1,721 3,678 4,670 9,399 2,243 ------- ------ ------ ------ ------ ------ Investment income (loss), net................ 49,389 10,578 6,504 4,782 14,342 (155) Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds.................................... 10,324 - 5,901 - 29,052 3,862 ------- ------ ------ ------ ------ ------ Realized gains (losses) on sales of investments: Proceeds from sales............................. 71,179 49,379 80,140 37,138 44,178 25,313 Cost of investments sold........................ (64,242) (50,307) (73,039) (30,763) (39,696) (24,333) ------- ------ ------ ------ ------ ------ Total realized gains (losses) on sales of investments, net......................... 6,937 (928) 7,101 6,375 4,482 980 ------- ------ ------ ------ ------ ------ Realized gains (losses) on investments, net.. 17,261 (928) 13,002 6,375 33,534 4,842 Net change in unrealized appreciation (depreciation) on investments................... (11,955) (4,657) 9,400 33,282 50,075 14,816 ------- ------ ------ ------ ------ ------ Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net......................... 5,306 (5,585) 22,402 39,657 83,609 19,658 ------- ------ ------ ------ ------ ------ Net increase (decrease) in net assets from operations $54,695 4,993 28,906 44,439 97,951 19,503 ======= ====== ====== ====== ====== ====== See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Operations (cont.) For the period ended September 30, 1996 (unaudited) (In thousands) Templeton Templeton Templeton International Global Global Asset Small Capital Smaller Total Growth Allocation Cap Growth Companies All Fund Fund Fund Fund Fund Funds ------- -------- ------ ----- --------- ------- Investment income: Dividends reinvested in fund shares...................... $ 6,984 14 34 - - 333,391 ------- ----- ------ ----- ----- --------- Expenses: Mortality and expense risk charges....................... 3,875 257 751 60 36 76,012 Administrative charges.................................. 465 31 90 7 4 9,122 ------- ----- ------ ----- ----- --------- Total expenses...................................... 4,340 288 841 67 40 85,134 ------- ----- ------ ----- ----- --------- Investment income (loss), net....................... 2,644 (274) (807) (67) (40) 248,257 Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds..... 6,984 27 3 - - 131,376 ------- ----- ------ ----- ----- --------- Realized gains (losses) on sales of investments: Proceeds from sales.................................... 11,298 2,331 36,507 2,088 2,068 1,284,252 Cost of investments sold............................... (10,384) (2,218) (36,457) (2,130) (2,040) (1,204,189) ------- ----- ------ ----- ----- --------- Total realized gains (losses) on sales of investments, net................................ 914 113 50 (42) 28 80,063 ------- ----- ------ ----- ----- --------- Realized gains (losses) on investments, net......... 7,898 140 53 (42) 28 211,439 Net change in unrealized appreciation (depreciation) on investments......................................... 26,852 2,585 11,240 1,039 175 (56,424) ------- ----- ------ ----- ----- --------- Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net.... 34,750 2,725 11,293 997 203 155,015 ------- ----- ------ ----- ----- --------- Net increase (decrease) in net assets from operations..... $37,394 2,451 10,486 930 163 403,272 ======= ===== ====== ===== ===== ========= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Changes in Net Assets For the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 (In thousands) Growth and Money Market Fund Income Fund Precious Metals Fund High Income Fund ---------------- --------------- ---------------- ---------------- 1996 1995 1996 1995 1996 1995 1996 1995 ------- ------- ------- ------ ------ ------ ------ ------- Increase (decrease) in net assets: Operations: Investment income (loss), net....... $ 11,047 17,718 11,032 (1,279) 209 52 24,383 15,167 Realized gains (losses) on investments, net................... - - 82,122 21,076 5,814 2,150 6,934 3,298 Net change in unrealized appreciation (depreciation) on investments...... - - (54,823) 147,406 (5,112) (2,147) (4,282) 27,669 -------- ------- ------- ------- ------- ------ ------- ------- Net increase (decrease) in net assets from operations..... 11,047 17,718 38,331 167,203 911 55 27,035 46,134 -------- ------- ------- ------- ------- ------ ------- ------- Contract transactions (note 6): Purchase payments................... 130,546 190,018 108,174 98,725 19,165 11,049 38,662 47,086 Transfers between funds............. (67,884) (169,358) 32,137 150,088 (4,175) (17,212) 21,744 46,491 Surrenders and terminations......... (86,762) (120,722) (78,028) (73,514) (8,107) (11,728) (30,002) (43,591) Rescissions......................... (2,174) (5,198) (2,759) (1,783) (309) (326) (515) (1,643) Other transactions (note 2)......... (67) 238 475 240 49 (36) 48 77 -------- ------- ------- ------- ------- ------ ------- ------- Net increase (decrease) in net assets resulting from contract transactions.......... (26,341) (105,022) 59,999 173,756 6,623 (18,253) 29,937 48,420 -------- ------- ------- ------- ------- ------ ------- ------- Increase (decrease) in net assets..... (15,294) 87,304) 98,330 340,959 7,534 (18,198) 56,972 94,554 -------- ------- ------- ------- ------- ------ ------- ------- Net assets at beginning of period..... 399,935 487,239 812,732 471,773 97,630 115,828 323,580 229,026 -------- ------- ------- ------- ------- ------ ------- ------- Net assets at end of period........... $384,641 399,935 911,062 812,732 105,164 97,630 380,552 323,580 ======== ======= ======= ======= ======= ====== ======= ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Changes in Net Assets (cont.) For the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 (In thousands) Real Estate U.S. Government Zero Coupon Securities Fund Securities Fund Utility Equity Fund Fund - 1995 --------------- --------------- ----------------- ------------ 1996 1995 1996 1995 1996 1995 1996 1995 ------ ------ ------ ------ ------ ------ ------ ------ Increase (decrease) in net assets: Operations: Investment income (loss), net....... $ 6,822 3,361 30,600 30,379 47,164 48,876 - 2,395 Realized gains (losses) on investments, net................... 1,980 1,477 2,334 2,695 23,709 1,589 - 600 Net change in unrealized appreciation (depreciation) on investments...... 19,279 22,517 (36,715) 54,968 (65,744) 255,500 - (597) -------- ------- ------- ------- --------- --------- --- ------- Net increase (decrease) in net assets from operations..... 28,081 27,355 (3,781) 88,042 5,129 305,965 - 2,398 -------- ------- ------- ------- --------- --------- --- ------- Contract transactions (note 6): Purchase payments................... 20,616 19,829 30,654 47,766 47,586 73,558 - 1,557 Transfers between funds............. 10,018 (12,435) (37,143) (5,307) (111,925) 10,721 - (36,522) Surrenders and terminations......... (15,316) (17,397) (52,362) (74,423) (126,645) (141,926) - (13,413) Rescissions......................... (184) (277) (616) (1,813) (704) (1,891) - (49) Other transactions (note 2)......... (5) 99 391 132 117 537 - 88 -------- ------- ------- ------- --------- --------- --- ------- Net increase (decrease) in net assets resulting from contract transactions......... 15,129 (10,181) (59,076) (33,645) (191,571) (59,001) - (48,339) -------- ------- ------- ------- --------- --------- --- ------- Increase (decrease) in net assets..... 43,210 17,174 (62,857) 54,397 (186,442) 246,964 - (45,941) -------- ------- ------- ------- --------- --------- --- ------- Net assets at beginning of period..... 198,773 181,599 559,234 504,837 1,305,495 1,058,531 - 45,941 -------- ------- ------- ------- --------- --------- --- ------- Net assets at end of period........... $241,983 198,773 496,377 559,234 1,119,053 1,305,495 - - ======== ======= ======= ======= ========= ========= === ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Changes in Net Assets (cont.) For the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 (In thousands) Zero Coupon Zero Coupon Zero Coupon Templeton Global Fund - 2000 Fund - 2005 Fund - 2010 Income Securities Fund --------------- ------------- ------------- ---------------- 1996 1995 1996 1995 1996 1995 1996 1995 ------ ------ ------ ------ ------ ----- ------ ------ Increase (decrease) in net assets: Operations: Investment income (loss), net........... $ 4,779 2,895 2,989 1,752 2,947 1,068 13,144 5,291 Realized gains (losses) on investments, net....................... 1,155 1,081 555 753 2,803 2,987 1,053 (206) Net change in unrealized appreciation (depreciation) on investments.......... (7,501) 12,514 (7,919) 13,063 (13,440) 15,696 (7,571) 22,286 -------- ------- ------ ------ ------ ------ ------- ------- Net increase (decrease) in net assets from operations......... (1,567) 16,490 (4,375) 15,568 (7,690) 19,751 6,626 27,371 -------- ------- ------ ------ ------ ------ ------- ------- Contract transactions (note 6): Purchase payments....................... 10,674 16,203 8,946 13,119 9,868 12,239 9,277 13,098 Transfers between funds................. (3,006) 13,339 (1,863) 4,711 (2,662) 9,807 (15,268) (21,421) Surrenders and terminations............. (10,625) (10,927) (4,609) (4,654) (4,843) (5,624) (20,813) (29,898) Rescissions............................. (210) (263) (144) (185) (244) (469) (159) (400) Other transactions (note 2)............. 7 (17) (6) (23) (6) 177 79 25 -------- ------- ------ ------ ------ ------ ------- ------- Net increase (decrease) in net assets resulting from contract transactions.............. (3,160) 18,335 2,324 12,968 2,113 16,130 (26,884) (38,596) -------- ------- ------ ------ ------ ------ ------- ------- Increase (decrease) in net assets......... (4,727) 34,825 (2,051) 28,536 (5,577) 35,881 (20,258) (11,225) -------- ------- ------ ------ ------ ------ ------- ------- Net assets at beginning of period......... 110,965 76,140 73,292 44,756 77,136 41,255 220,143 231,368 -------- ------- ------ ------ ------ ------ ------- ------- Net assets at end of period............... $106,238 110,965 71,241 73,292 71,559 77,136 199,885 220,143 ======== ======= ====== ====== ====== ====== ======= ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Changes in Net Assets (cont.) For the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 (In thousands) Investment Grade Adjustable U.S. Templeton Intermediate Bond Fund Income Securities Fund Government Fund Pacific Growth Fund ---------------- ----------------- -------------- --------------- 1996 1995 1996 1995 1996 1995 1996 1995 ------ ------ ------ ------ ------ ------ ------ ------ Increase (decrease) in net assets: Operations: Investment income (loss), net.... $ 6,245 3,922 49,389 44,301 10,578 9,723 6,504 1,633 Realized gains (losses) on investments, net............. 817 624 17,261 7,100 (928) (1,327) 13,002 3,150 Net change in unrealized appreciation (depreciation) on investments... (5,448) 7,237 (11,955) 145,457 (4,657) 6,258 9,400 14,929 -------- ------- --------- --------- ------- ------- ------- ------- Net increase (decrease) in net assets from operations.. 1,614 11,783 54,695 196,858 4,993 14,654 28,906 19,712 -------- ------- --------- --------- ------- ------- ------- ------- Contract transactions (note 6): Purchase payments................ 10,867 15,136 123,761 145,910 26,484 43,555 27,216 27,022 Transfers between funds.......... (12,899) 364 (21,216) 33,034 (41,567) (75,287) 14,650 (52,319) Surrenders and terminations...... (12,222) (16,323) (107,757) (125,202) (18,519) (27,666) (26,399) (35,125) Rescissions...................... (243) (379) (2,683) (3,470) (559) (1,087) (323) (1,057) Other transactions (note 2)...... 7 (24) 475 670 31 296 125 (45) -------- ------- --------- --------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from contract transactions....... (14,490) (1,226) (7,420) 50,942 (34,130) (60,189) 15,269 (61,524) -------- ------- --------- --------- ------- ------- ------- ------- Increase (decrease) in net assets.. (12,876) 10,557 47,275 247,800 (29,137) (45,535) 44,175 (41,812) -------- ------- --------- --------- ------- ------- ------- ------- Net assets at beginning of period.. 149,882 139,325 1,175,143 927,343 174,507 220,042 306,843 348,655 -------- ------- --------- --------- ------- ------- ------- ------- Net assets at end of period........ $137,006 149,882 1,222,418 1,175,143 145,370 174,507 351,018 306,843 ======== ======= ========= ========= ======= ======= ======= ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Changes in Net Assets (cont.) For the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 (In thousands) Templeton Rising Templeton International Developing Markets Templeton Dividends Fund Equity Fund Equity Fund Global Growth Fund ---------------- --------------- --------------- -------------- 1996 1995 1996 1995 1996 1995 1996 1995 ------- ------ ------- ------ ------ ------ ------ ------ Increase (decrease) in net assets: Operations: Investment income (loss), net....... $ 4,782 2,452 14,342 1,998 (155) (1,241) 2,644 (2,008) Realized gains (losses)) on investments, net................ 6,375 1,323 33,534 20,155 4,842 (277) 7,898 303 Net change in unrealized appreciation (depreciation) on investments...... 33,282 81,539 50,075 42,587 14,816 3,149 26,852 26,429 -------- ------- ------- ------- ------- ------- ------- ------- Net increase (decrease) in net assets from operations..... 44,439 85,314 97,951 64,740 19,503 1,631 37,394 24,724 -------- ------- ------- ------- ------- ------- ------- ------- Contract transactions (note 6): Purchase payments................... 39,976 42,756 82,272 99,403 44,265 42,027 108,253 119,490 Transfers between funds............. 4,268 50,303 43,384 (30,418) 34,064 22,865 36,808 46,237 Surrenders and terminations......... (33,266) (35,907) (61,709) (72,338) (11,567) (7,387) (21,325) (15,658) Rescissions......................... (827) (750) (1,331) (2,115) (469) (1,069) (1,349) (1,966) Other transactions (note 2)......... 129 131 352 59 45 (55) 60 64 -------- ------- ------- ------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from contract transactions.......... 10,280 56,533 62,968 (5,409) 66,338 56,381 122,447 148,167 -------- ------- ------- ------- ------- ------- ------- ------- Increase (decrease) in net assets..... 54,719 141,847 160,919 59,331 85,841 58,012 159,841 172,891 -------- ------- ------- ------- ------- ------- ------- ------- Net assets at beginning of period..... 422,992 281,145 794,670 735,339 150,481 92,469 322,284 149,393 -------- ------- ------- ------- ------- ------- ------- ------- Net assets at end of period........... $477,711 422,992 955,589 794,670 236,322 150,481 482,125 322,284 ======== ======= ======= ======= ======= ======= ======= ======= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Changes in Net Assets (cont.) For the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 (In thousands) Templeton Templeton Global Asset International Smaller Allocation Fund Small Cap Fund Capital Growth Fund Companies Fund -------------- ------------- ------------- -------------- 1996 1995 1996 1995 1996 1995 1996 1995 ------ ------ ------ ------ ------ ------ ------ ------ Increase (decrease) in net assets: Operations: Investment income (loss), net................ $ (274) 127 (807) (25) (67) - (40) - Realized gains (losses) on investments, net.. 140 71 53 - (42) - 28 - Net change in unrealized appreciation (depreciation) on investments............... 2,585 323 11,240 183 1,039 - 175 - ------- ------ ------- ----- ------ ----- ----- ---- Net increase (decrease) in net assets from operations......................... 2,451 521 10,486 158 930 - 163 - ------- ------ ------- ----- ------ ----- ----- ---- Contract transactions (note 6): Purchase payments............................ 13,714 5,580 36,808 2,140 6,645 - 3,208 - Transfers between funds...................... 10,350 9,316 83,168 11,013 12,393 - 6,128 - Surrenders and terminations.................. (1,316) (1,163) (6,263) (36) (156) - (127) - Rescissions.................................. (80) (27) (278) (19) (45) - (36) - Other transactions (note 2).................. 23 7 197 4 10 - (10) - ------- ------ ------- ------ ------ ----- ----- ---- Net increase (decrease) in net assets resulting from contract transactions.... 22,691 13,713 113,632 13,102 18,847 - 9,163 - ------- ------ ------- ------ ------ ----- ----- ---- Increase (decrease) in net assets.............. 25,142 14,234 124,118 13,260 19,777 - 9,326 - ------- ------ ------- ------ ------ ----- ----- ---- Net assets at beginning of period.............. 14,234 - 13,260 - - - - - ------- ------ ------- ------ ------ ----- ----- ---- Net assets at end of period.................... $39,376 14,234 137,378 13,260 19,777 - 9,326 - ======= ====== ======= ====== ====== ===== ===== ==== See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA =========================================================================================================================== Financial Statements (cont.) Statements of Changes in Net Assets (cont.) For the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 (In thousands) Total All Funds ------------------- 1996 1995 ------ ------ Increase (decrease) in net assets: Operations: Investment income (loss), net...................................................................... $ 248,257 188,557 Realized gains (losses) on investments, net........................................................ 211,439 68,622 Net change in unrealized appreciation (depreciation) on investments................................ (56,424) 896,966 ---------- --------- Net increase (decrease) in net assets from operations.......................................... 403,272 1,154,145 ---------- --------- Contract transactions (note 6): Purchase payments.................................................................................. 957,637 1,087,266 Transfers between funds............................................................................ (10,496) (11,990) Surrenders and terminations........................................................................ (738,738) (884,622) Rescissions........................................................................................ (16,241) (26,236) Other transactions (note 2)........................................................................ 2,526 2,644 ---------- --------- Net increase (decrease) in net assets resulting from contract transactions..................... 194,688 167,062 ---------- --------- Increase (decrease) in net assets.................................................................... 597,960 1,321,207 ---------- --------- Net assets at beginning of period.................................................................... 7,703,211 6,382,004 ---------- --------- Net assets at end of period.......................................................................... $8,301,171 7,703,211 ========== ========= See accompanying notes to unaudited financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA ================================================================================ Notes to Financial Statements September 30, 1996 (unaudited) 1. Organization Allianz Life Variable Account B (Variable Account) is a segregated investment account of Allianz Life Insurance Company of North America (Allianz Life) and is registered with the Securities and Exchange Commission as a unit investment trust pursuant to the provisions of the Investment Company Act of 1940 (as amended). The Variable Account was established on May 31, 1985 and commenced operations January 24, 1989. Accordingly, it is an accounting entity wherein all segregated account transactions are reflected. The Variable Account's assets are the property of Allianz Life and are held for the benefit of the owners and other persons entitled to payments under variable annuity contracts issued through the Variable Account and underwritten by Allianz Life. The assets of the Variable Account, equal to the reserves and other liabilities of the Variable Account, are not chargeable with liabilities that arise from any other business which Allianz Life may conduct. The Variable Account's sub-accounts may invest, at net asset values, in one or more of the funds of the Franklin Valuemark Funds (FVF), managed by Franklin Advisers, Inc., in accordance with the selection made by the contract owner. Not all funds are available as investment options for the products which comprise the Variable Account. Certain officers and trustees of the FVF are also officers and/or directors of Franklin Advisers, Inc. and/or Allianz Life. 2. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments Investments of the Variable Account are valued daily at market value using net asset values provided by Franklin Advisers, Inc. Realized investment gains include realized gain distributions received from the respective funds and gains on the sale of fund shares as determined by the average cost method. Realized gain distributions are reinvested in the respective funds. Dividend distributions received from the FVF are reinvested in additional shares of the FVF and are recorded as income to the Variable Account on the ex-dividend date. A Fixed Account investment option is available to deferred annuity contract owners. This account is comprised of equity and fixed income investments which are part of the general assets of Allianz Life. The liabilities of the Fixed Account are part of the general obligations of Allianz Life and are not included in the Variable Account. The guaranteed minimum rate of return on the Fixed Account is 3%. The Templeton Global Asset Allocation Fund, Fixed Account and Small Cap Fund were added as available investment options on May 1, 1995, October 1, 1995 and November 1, 1995, respectively. The Zero Coupon - 1995 Fund matured and was closed on December 15, 1995. The Capital Growth Fund and Templeton International Smaller Companies Fund were added as available investment options on May 1, 1996. On May 1, 1995, the Equity Growth Fund name was changed to Growth and Income Fund. The Global Income Fund name was changed to Templeton Global Income Securities Fund on May 1, 1996. Contracts in Annuity Payment Period Annuity reserves are computed for currently payable contracts according to the 1983 Individual Annuity Mortality Table, using an assumed investment return (AIR) equal to the AIR of the specific contracts, either 3% or 5%. Charges to annuity reserves for mortality and risk expense are reimbursed to Allianz Life if the reserves required are less than originally estimated. If additional reserves are required, Allianz Life reimburses the account. Expenses Asset Based Expenses A mortality and expense risk charge is deducted from the Variable Account on a daily basis equal, on an annual basis, to 1.25% of the daily net assets of the Variable Account. An administrative charge is deducted from the Variable Account on a daily basis equal, on an annual basis, to 0.15% of the daily net assets of the Variable Account. ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA ================================================================================ Notes to Financial Statements (cont.) September 30, 1996 (unaudited) 2. Significant Accounting Policies (cont.) Expenses (cont.) Contract Based Expenses A contract maintenance charge is paid by the contract owner annually from each deferred annuity contract by liquidating contract units at the end of the contract year and at the time of full surrender. The amount of the charge is $30 each year. Contract maintenance charges paid by the contract owners during the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 were $3,358,013 and $4,294,361, respectively. These contract charges are reflected in the Statements of Changes in Net Assets as other transactions. A contingent deferred sales charge is deducted from the contract value at the time of a surrender. This charge applies only to a surrender of purchase payments received within five years of the date of surrender. For this purpose, purchase payments are allocated on a first-in, first-out basis. The amount of the contingent deferred sales charge is calculated by: (a) allocating purchase payments to the amount surrendered; and (b) multiplying each allocated purchase payment that has been held under the contract for the period shown below by the charge shown below:
Valuemark II Valuemark III --------------------------- ---------------------------- Years Since Payment Charge Years Since Payment Charge ------------------- ------ ------------------- ------ 0-1 5% 0-1 6% 1-2 5% 1-2 5% 2-3 4% 2-3 4% 3-4 3% 3-4 3% 4-5 1.5% 4-5 1.5% 5+ 0% 5+ 0% and (c) adding the products of each multiplication in (b) above.
A deferred annuity contract owner may, not more frequently than once annually on a cumulative basis, make a surrender each contract year of fifteen percent (15%) of purchase payments paid, less any prior surrenders, without incurring a contingent deferred sales charge. For a partial surrender, the contingent deferred sales charge will be deducted from the remaining contract value, if sufficient; otherwise it will be deducted from the amount surrendered. Total contingent deferred sales charges paid by the contract owners for the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 were $7,893,373 and $12,373,225, respectively. Currently, twelve transfers are permitted each contract year. Thereafter, the fee is $25 per transfer, or 2% of the amount transferred, if less. Currently, transfers associated with the dollar cost averaging program are not counted. Total transfer charges paid by the contract owners for the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 were $66,609 and $119,180, respectively. Transfer charges are reflected in the Statements of Changes in Net Assets as other transactions. Transfers to the Fixed Account for the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 were $10,495,680 and $11,989,631, respectively. Premium taxes or other taxes payable to a state or other governmental entity will be charged against the contract values. Allianz Life may, in its sole discretion, pay taxes when due and deduct that amount from the contract value at a later date. Payment at an earlier date does not waive any right Allianz Life may have to deduct such amounts at a later date. On certain contracts, a systematic withdrawal plan is available which allows an owner to withdraw up to 9% of purchase payments less prior surrenders annually, paid monthly or quarterly, without incurring a contingent deferred sales charge. The exercise of the systematic withdrawal plan in any contract year replaces the 15% penalty free privilege for that year. A rescission is defined as a contract that is returned to the Company by the Contract Owner and canceled within the free-look period, generally within 10 days. ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA ================================================================================ Notes to Financial Statements (cont.) September 30, 1996 (unaudited) 3. Capitalization Allianz Life provides capital for the establishment of new funds as investment options of the Variable Account. The capitalization transactions were as follows during the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995:
Capitalization Date of Market Value Date of Current Fund Amount Capitalization at Withdrawal Withdrawal Market Value - ------------------------------------------------- -------- -------- -------- ------- -------- Templeton Global Asset Allocation Fund........... $500,000 4/18/95 $525,500 12/21/95 - Small Cap Fund................................... 250,000 9/18/95 313,250 5/29/96 - Capital Growth Fund.............................. 250,000 4/30/96 - - $272,750 Templeton International Smaller Companies Fund... 250,000 4/30/96 - - 260,250
4. Investment Transactions The sub-account purchases of fund shares, including reinvestment of dividend distributions, were as follows during the period ended September 30, 1996 (unaudited) (in thousands):
Money Market Fund................................. $320,036 Growth and Income Fund............................ 204,624 Precious Metals Fund.............................. 65,513 High Income Fund.................................. 119,282 Real Estate Securities Fund....................... 35,156 U.S. Government Securities Fund................... 41,577 Utility Equity Fund............................... 73,259 Zero Coupon Fund - 2000........................... 15,222 Zero Coupon Fund - 2005........................... 11,740 Zero Coupon Fund - 2010........................... 29,221 Templeton Global Income Securities Fund........... 20,909 Investment Grade Intermediate Bond Fund........... 15,348 Income Securities Fund............................ 122,983 Adjustable U.S. Government Fund................... 25,745 Templeton Pacific Growth Fund..................... 107,678 Rising Dividends Fund............................. 51,990 Templeton International Equity Fund............... 150,165 Templeton Developing Markets Equity Fund.......... 95,316 Templeton Global Growth Fund...................... 143,279 Templeton Global Asset Allocation Fund............ 24,673 Small Cap Fund.................................... 149,330 Capital Growth Fund............................... 20,935 Templeton International Smaller Companies Fund.... 11,230
5. Federal Income Taxes Operations of the Variable Account form a part of, and are taxed with, operations of Allianz Life, which is taxed as a life insurance company under the Internal Revenue Code. Allianz Life does not expect to incur any federal income taxes in the operation of the Variable Account. If, in the future, Allianz Life determines that the Variable Account may incur federal income taxes, it may then assess a charge against the Variable Account for such taxes. ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA ================================================================================ Notes to Financial Statements (cont.) September 30, 1996 (unaudited) 6. Contract Transactions - Accumulation Unit Activity (In thousands) Transactions in units for each fund for the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995 were as follows:
Growth Real U.S. Zero Money and Precious High Estate Government Utility Coupon Market Income Metals Income Securities Securities Equity Fund - Fund Fund Fund Fund Fund Fund Fund 1995 ------ ----- ------ ----- ------ ------- ------ ----- Accumulation units outstanding at December 31, 1994.......................... 39,437 35,695 8,285 15,679 11,645 36,490 70,082 3,195 Contract transactions: Purchase payments.......................... 15,069 6,403 796 2,877 1,233 3,115 4,303 106 Transfers between funds.................... (13,495) 9,757 (1,290) 2,959 (792) (266) 736 (2,398) Surrenders and terminations................ (9,580) (4,859) (846) (2,661) (1,077) (4,916) (8,372) (905) Rescissions................................ (410) (118) (24) (102) (17) (118) (113) (3) Other transactions......................... 19 15 (2) 4 6 8 33 5 ------ ------ ------ ------ ------ ------ ------ ----- Net increase (decrease) in accumulation units resulting from contract transactions........... (8,397) 11,198 (1,366) 3,077 (647) (2,177) (3,413) (3,195) ------ ------ ------ ------ ------ ------ ------ ----- Accumulation units outstanding at December 31, 1995.......................... 31,040 46,893 6,919 18,756 10,998 34,313 66,669 - ====== ====== ====== ====== ====== ====== ====== ===== Contract transactions (unaudited): Purchase payments.......................... 9,952 6,062 1,181 2,176 1,082 1,913 2,428 - Transfers between funds.................... (5,155) 1,748 (349) 1,186 509 (2,323) (5,781) - Surrenders and terminations................ (6,622) (4,399) (507) (1,685) (809) (3,273) (6,479) - Rescissions................................ (166) (155) (19) (29) (10) (38) (36) - Other transactions......................... (5) 27 3 3 - 24 6 - ------ ------ ----- ------ ------ ------ ------ ----- Net increase (decrease) in accumulation units resulting from contract transactions........... (1,996) 3,283 309 1,651 772 (3,697) (9,862) - ------ ------ ----- ------ ------ ------ ------ ----- Accumulation units outstanding at September 30, 1996 (unaudited)............. 29,044 50,176 7,228 20,407 11,770 30,616 56,807 - ====== ====== ===== ====== ====== ====== ====== =====
Zero Zero Zero Templeton Investment Adjustable Templeton Coupon Coupon Coupon Global Income Grade Income U.S. Pacific Fund - Fund - Fund - Securities Intermediate Securities Government Growth 2000 2005 2010 Fund Bond Fund Fund Fund Fund ----- ----- ----- --------- -------- ------- -------- ------- Accumulation units outstanding at December 31, 1994................... 4,953 2,780 2,589 16,855 9,772 56,569 19,865 27,231 Contract transactions: Purchase payments................... 966 715 652 904 1,016 7,979 3,753 2,065 Transfers between funds............. 800 269 511 (1,494) 30 1,879 (6,551) (4,013) Surrenders and terminations......... (636) (249) (297) (2,058) (1,099) (6,965) (2,397) (2,714) Rescissions......................... (16) (10) (27) (28) (25) (192) (95) (82) Other transactions.................. (1) (1) 9 2 (2) 39 25 (4) ----- ----- ----- ------ ----- ------ ------ ------ Net increase (decrease) in accumulation units resulting from contract transactions.... 1,113 724 848 (2,674) (80) 2,740 (5,265) (4,748) ----- ----- ----- ------ ----- ------ ------ ------ Accumulation units outstanding at December 31, 1995................... 6,066 3,504 3,437 14,181 9,692 59,309 14,600 22,483 ===== ===== ===== ====== ===== ====== ====== ====== Contract transactions (unaudited): Purchase payments................... 596 456 488 599 703 6,109 2,190 1,835 Transfers between funds............. (169) (94) (121) (987) (829) (1,064) (3,429) 1,042 Surrenders and terminations......... (592) (235) (239) (1,343) (790) (5,348) (1,524) (1,785) Rescissions......................... (12) (7) (12) (10) (16) (133) (46) (22) Other transactions.................. - - - 5 1 24 3 9 ----- ----- ----- ------ ----- ------ ------ ------ Net increase (decrease) in accumulation units resulting from contract transactions.... (177) 120 116 (1,736) (931) (412) (2,806) 1,079 ----- ----- ----- ------ ----- ------ ------ ------ Accumulation units outstanding at September 30, 1996 (unaudited)...... 5,889 3,624 3,553 12,445 8,761 58,897 11,794 23,562 ===== ===== ===== ====== ===== ====== ====== ======
ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA ================================================================================ Notes to Financial Statements (cont.) September 30, 1996 (unaudited) 6. Contract Transactions - Accumulation Unit Activity (In thousands) (cont.)
Templeton Templeton Templeton Templeton Developing Templeton Global International Rising International Markets Global Asset Small Capital Smaller Total Dividends Equity Equity Growth Allocation Cap Growth Companies All Fund Fund Fund Fund Fund Fund Fund Fund Funds ------ -------- ------- ------- ------- ----- ----- -------- ------ Accumulation units outstanding at December 31, 1994......... 28,778 60,464 9,774 14,637 - - - - 474,775 Contract transactions: Purchase payments............ 3,782 7,774 4,364 10,991 538 212 - - 79,613 Transfers between funds...... 4,493 (2,530) 2,372 4,306 916 1,096 - - (2,705) Surrenders and terminations................ (3,208) (5,662) (773) (1,448) (114) (4) - - (60,840) Rescissions.................. (68) (168) (112) (183) (3) (2) - - (1,916) Other transactions........... 12 5 (7) 6 1 - - - 172 ------ ------ ------ ------ ----- ----- ----- --- ------- Net increase (decrease) in accumulation units resulting from contract transactions.. 5,011 (581) 5,844 13,672 1,338 1,302 - - 14,324 ------ ------ ------ ------ ----- ----- ----- --- ------- Accumulation units outstanding at December 31, 1995......... 33,789 59,883 15,618 28,309 1,338 1,302 - - 489,099 ====== ====== ====== ====== ===== ===== ===== === ======= Contract transactions (unaudited): Purchase payments............ 3,070 5,713 4,103 8,833 1,201 3,166 638 313 64,807 Transfers between funds...... 290 2,992 3,145 2,981 920 7,128 1,189 605 3,434 Surrenders and terminations.. (2,552) (4,302) (1,078) (1,750) (117) (555) (15) (12) (46,011) Rescissions.................. (64) (93) (44) (111) (7) (24) (4) (4) (1,062) Other transactions........... 10 25 4 5 2 17 1 (1) 163 ------ ------ ------ ------ ----- ----- ----- --- ------- Net increase (decrease) in accumulation units resulting from contract transactions.. 754 4,335 6,130 9,958 1,999 9,732 1,809 901 21,331 ------ ------ ------ ------ ----- ----- ----- --- ------- Accumulation units outstanding at September 30, 1996 (unaudited) 34,543 64,218 21,748 38,267 3,337 11,034 1,809 901 510,430 ====== ====== ====== ====== ===== ===== ===== === =======
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Financial Statements December 31, 1995 ALLIANZ LIFE VARIABLE ACCOUNT B OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA INDEPENDENT AUDITORS' REPORT The Board of Directors of Allianz Life Insurance Company of North America and Contract Owners of Allianz Life Variable Account B: We have audited the accompanying statements of assets and liabilities of the sub-accounts of Allianz Life Variable Account B as of December 31, 1995, the related statements of operations for the year then ended and the statements of changes in net assets for each of the years in the two-years then ended. These financial statements are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Investment securities held in custody for the benefit of the Variable Account were confirmed to us by the Franklin Valuemark Funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets and liabilities of the sub-accounts of Allianz Life Variable Account B at December 31, 1995, the results of their operations for the year then ended and the changes in their net assets for each of the years in the two-years then ended, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Minneapolis, Minnesota January 22, 1996
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Assets and Liabilities December 31, 1995 (In thousands) Growth Real U.S. Money and Precious High Estate Government Market Income Metals Income Securities Securities Fund Fund Fund Fund Fund Fund -------- ------- -------- ------- ---------- ---------- Investments at net asset value: Franklin Valuemark Funds: Money Market Fund, 400,242 shares, cost $400,242 $400,242 - - - - - Growth and Income Fund, 47,441 shares, cost $642,464 - 813,146 - - - - Precious Metals Fund, 6,938 shares, cost $95,110 - - 97,687 - - - High Income Fund, 23,702 shares, cost $297,487 - - - 323,767 - - Real Estate Securities Fund, 11,432 shares, cost $172,084 - - - - 198,914 - U.S. Government Securities Fund, 39,967 shares, cost $517,705 - - - - - 559,540 -------- ------- -------- ------- ---------- ---------- Total assets 400,242 813,146 97,687 323,767 198,914 559,540 -------- ------- -------- ------- ---------- ---------- Liabilities: Accrued mortality and expense risk charges 274 370 51 167 126 273 Accrued administrative charges 33 44 6 20 15 33 -------- ------- -------- ------- ---------- ---------- Total liabilities 307 414 57 187 141 306 -------- ------- -------- ------- ---------- ---------- Net assets $399,935 812,732 97,630 323,580 198,773 559,234 ======== ======= ======== ======= ========== ========== Contract owners' equity: Contracts in accumulation period (note 6) $399,901 811,706 97,630 323,580 198,773 559,234 Contracts in annuity payment period (note 2) 34 1,026 - - - - -------- ------- -------- ------- ---------- ---------- Total contract owners' equity $399,935 812,732 97,630 323,580 198,773 559,234 ======== ======= ======== ======= ========== ==========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Assets and Liabilities (Continued) December 31, 1995 (In thousands) Zero Zero Zero Utility Coupon Coupon Coupon Global Equity Fund - Fund - Fund - Income Fund 2000 2005 2010 Fund ---------- ------- ------ ------ ------- Investments at net asset value: Franklin Valuemark Funds: Utility Equity Fund, 72,973 shares, cost $1,140,098 $1,306,215 - - - - Zero Coupon Fund - 2000, 7,059 shares, cost $97,854 - 111,030 - - - Zero Coupon Fund - 2005, 4,220 shares, cost $61,163 - - 73,337 - - Zero Coupon Fund - 2010, 4,278 shares, cost $63,295 - - - 77,181 - Global Income Fund, 16,365 shares, cost $208,411 - - - - 220,267 ---------- ------- ------ ------ ------- Total assets 1,306,215 111,030 73,337 77,181 220,267 ---------- ------- ------ ------ ------- Liabilities: Accrued mortality and expense risk charges 643 58 40 40 111 Accrued administrative charges 77 7 5 5 13 ---------- ------- ------ ------ ------- Total liabilities 720 65 45 45 124 ---------- ------- ------ ------ ------- Net assets $1,305,495 110,965 73,292 77,136 220,143 ========== ======= ====== ====== ======= Contract owners' equity: Contracts in accumulation period (note 6) $1,304,348 110,965 73,292 77,136 220,143 Contracts in annuity payment period (note 2) 1,147 - - - - ---------- ------- ------ ------ ------- Total contract owners' equity $1,305,495 110,965 73,292 77,136 220,143 ========== ======= ====== ====== =======
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Assets and Liabilities (Continued) December 31, 1995 (In thousands) Investment Adjustable Templeton Templeton Grade Income U.S. Pacific Rising International Intermediate Securities Government Growth Dividends Equity Bond Fund Fund Fund Fund Fund Fund ------------- ---------- ---------- --------- --------- ------------- Investments at net asset value: Franklin Valuemark Funds: Investment Grade Intermediate Bond Fund, 10,675 shares, cost $141,092 $ 149,978 - - - - - Income Securities Fund, 71,388 shares, cost $1,051,796 - 1,175,760 - - - - Adjustable U.S. Government Fund, 16,228 shares, cost $175,816 - - 174,610 - - - Templeton Pacific Growth Fund, 22,071 shares, cost $293,424 - - - 307,008 - - Rising Dividends Fund, 33,432 shares, cost $356,060 - - - - 423,255 - Templeton International Equity Fund, 59,699 shares, cost $741,003 - - - - - 795,190 ------------- ---------- ---------- --------- --------- ------------- Total assets 149,978 1,175,760 174,610 307,008 423,255 795,190 ------------- ---------- ---------- --------- --------- ------------- Liabilities: Accrued mortality and expense risk charges 86 551 92 147 235 464 Accrued administrative charges 10 66 11 18 28 56 ------------- ---------- ---------- --------- --------- ------------- Total liabilities 96 617 103 165 263 520 ------------- ---------- ---------- --------- --------- ------------- Net assets $ 149,882 1,175,143 174,507 306,843 422,992 794,670 ============= ========== ========== ========= ========= ============= Contract owners' equity: Contracts in accumulation period (note 6) $ 149,882 1,173,447 174,507 306,448 422,318 794,226 Contracts in annuity payment period (note 2) - 1,696 - 395 674 444 ------------- ---------- ---------- --------- --------- ------------- Total contract owners' equity $ 149,882 1,175,143 174,507 306,843 422,992 794,670 ============= ========== ========== ========= ========= =============
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Assets and Liabilities (Continued) December 31, 1995 (In thousands) Templeton Templeton Developing Templeton Global Markets Global Asset Small Total Equity Growth Allocation Cap All Fund Fund Fund Fund Funds ----------- --------- ---------- ------ --------- Investments at net asset value: Franklin Valuemark Funds: Templeton Developing Markets Equity Fund, 15,394 shares, cost $153,792 $ 150,553 - - - Templeton Global Growth Fund, 27,442 shares, cost $295,657 - 322,442 - - Templeton Global Asset Allocation Fund, 1,364 shares, cost $14,024 - - 14,347 - Small Cap Fund, 1,299 shares, cost $13,104 - - - 13,287 ----------- --------- ---------- ------ Total assets 150,553 322,442 14,347 13,287 7,707,756 ----------- --------- ---------- ------ --------- Liabilities: Accrued mortality and expense risk charges 64 141 101 24 4,058 Accrued administrative charges 8 17 12 3 487 ----------- --------- ---------- ------ --------- Total liabilities 72 158 113 27 4,545 ----------- --------- ---------- ------ --------- Net assets $ 150,481 322,284 14,234 13,260 7,703,211 =========== ========= ========== ====== ========= Contract owners' equity: Contracts in accumulation period (note 6) $ 149,649 320,997 14,167 13,211 7,695,560 Contracts in annuity payment period (note 2) 832 1,287 67 49 7,651 ----------- --------- ---------- ------ --------- Total contract owners' equity $ 150,481 322,284 14,234 13,260 7,703,211 =========== ========= ========== ====== =========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Operations For the year ended December 31, 1995 (In thousands) Growth Real U.S. Money and Precious High Estate Government Market Income Metals Income Securities Securities Fund Fund Fund Fund Fund Fund ---------- -------- --------- -------- ----------- ----------- Investment income: Dividends reinvested in fund shares $ 23,692 7,314 1,546 19,247 5,958 37,956 ---------- -------- --------- -------- ----------- ----------- Expenses: Mortality and expense risk charges 5,334 7,672 1,334 3,643 2,319 6,765 Administrative charges 640 921 160 437 278 812 ---------- -------- --------- -------- ----------- ----------- Total expenses 5,974 8,593 1,494 4,080 2,597 7,577 ---------- -------- --------- -------- ----------- ----------- Investment income (loss), net 17,718 (1,279) 52 15,167 3,361 30,379 Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds - 15,921 1,145 - - - ---------- -------- --------- -------- ----------- ----------- Realized gains (losses) on sales of investments: Proceeds from sales 421,429 39,408 64,829 49,344 34,264 84,760 Cost of investments sold (421,429) (34,253) (63,824) (46,046) (32,787) (82,065) ---------- -------- --------- -------- ----------- ----------- Total realized gains (losses) on sales of investments, net - 5,155 1,005 3,298 1,477 2,695 ---------- -------- --------- -------- ----------- ----------- Realized gains (losses) on investments, net - 21,076 2,150 3,298 1,477 2,695 Net change in unrealized appreciation (depreciation) on investments - 147,406 (2,147) 27,669 22,517 54,968 ---------- -------- --------- -------- ----------- ----------- Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net - 168,482 3 30,967 23,994 57,663 ---------- -------- --------- -------- ----------- ----------- Net increase (decrease) in net assets from operations $ 17,718 167,203 55 46,134 27,355 88,042 ========== ======== ========= ======== =========== ===========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Operations (Continued) For the year ended December 31, 1995 (In thousands) Zero Zero Zero Zero Utility Coupon Coupon Coupon Coupon Global Equity Fund - Fund - Fund - Fund - Income Fund 1995 2000 2005 2010 Fund ---------- -------- -------- ------- -------- -------- Investment income: Dividends reinvested in fund shares $ 65,100 2,930 4,248 2,593 1,881 8,424 ---------- -------- -------- ------- -------- -------- Expenses: Mortality and expense risk charges 14,486 478 1,208 751 726 2,797 Administrative charges 1,738 57 145 90 87 336 ---------- -------- -------- ------- -------- -------- Total expenses 16,224 535 1,353 841 813 3,133 ---------- -------- -------- ------- -------- -------- Investment income (loss), net 48,876 2,395 2,895 1,752 1,068 5,291 Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds - 14 - - - - ---------- -------- -------- ------- -------- -------- Realized gains (losses) on sales of investments: Proceeds from sales 134,789 53,632 11,775 8,345 34,323 54,834 Cost of investments sold (133,200) (53,046) (10,694) (7,592) (31,336) (55,040) ---------- -------- -------- ------- -------- -------- Total realized gains (losses) on sales of investments, net 1,589 586 1,081 753 2,987 (206) ---------- -------- -------- ------- -------- -------- Realized gains (losses) on investments, net 1,589 600 1,081 753 2,987 (206) Net change in unrealized appreciation (depreciation) on investments 255,500 (597) 12,514 13,063 15,696 22,286 ---------- -------- -------- ------- -------- -------- Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net 257,089 3 13,595 13,816 18,683 22,080 ---------- -------- -------- ------- -------- -------- Net increase (decrease) in net assets from operations $ 305,965 2,398 16,490 15,568 19,751 27,371 ========== ======== ======== ======= ======== ========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Operations (Continued) For the year ended December 31, 1995 (In thousands) Investment Adjustable Templeton Templeton Grade Income U.S. Pacific Rising International Intermediate Securities Government Growth Dividends Equity Bond Fund Fund Fund Fund Fund Fund -------------- ----------- ----------- ---------- ---------- -------------- Investment income: Dividends reinvested in fund shares $ 5,974 58,967 12,390 6,144 7,357 12,759 -------------- ----------- ----------- ---------- ---------- -------------- Expenses: Mortality and expense risk charges 1,832 13,095 2,381 4,028 4,379 9,608 Administrative charges 220 1,571 286 483 526 1,153 -------------- ----------- ----------- ---------- ---------- -------------- Total expenses 2,052 14,666 2,667 4,511 4,905 10,761 -------------- ----------- ----------- ---------- ---------- -------------- Investment income (loss), net 3,922 44,301 9,723 1,633 2,452 1,998 Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds - 4,746 - 2,555 - 15,808 -------------- ----------- ----------- ---------- ---------- -------------- Realized gains (losses) on sales of investments: Proceeds from sales 16,878 62,553 87,316 142,977 21,235 99,450 Cost of investments sold (16,254) (60,199) (88,643) (142,382) (19,912) (95,103) -------------- ----------- ----------- ---------- ---------- -------------- Total realized gains (losses) on sales of investments, net 624 2,354 (1,327) 595 1,323 4,347 -------------- ----------- ----------- ---------- ---------- -------------- Realized gains (losses) on investments, net 624 7,100 (1,327) 3,150 1,323 20,155 Net change in unrealized appreciation (depreciation) on investments 7,237 145,457 6,258 14,929 81,539 42,587 -------------- ----------- ----------- ---------- ---------- -------------- Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net 7,861 152,557 4,931 18,079 82,862 62,742 -------------- ----------- ----------- ---------- ---------- -------------- Net increase (decrease) in net assets from operations $ 11,783 196,858 14,654 19,712 85,314 64,740 ============== =========== =========== ========== ========== ==============
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Operations (Continued) For the year ended December 31, 1995 (In thousands) Templeton Templeton Templeton Developing Global Global Asset Small Total Markets Growth Allocation Cap All Equity Fund Fund Fund Fund Funds ------------- ---------- ------------- ------ ----------- Investment income: Dividends reinvested in fund shares $ 465 1,261 240 - 286,446 ------------- ---------- ------------- ------ ----------- Expenses: Mortality and expense risk charges 1,523 2,919 101 22 87,401 Administrative charges 183 350 12 3 10,488 ------------- ---------- ------------- ------ ----------- Total expenses 1,706 3,269 113 25 97,889 ------------- ---------- ------------- ------ ----------- Investment income (loss), net (1,241) (2,008) 127 (25) 188,557 Realized gains (losses) and unrealized appreciation (depreciation) on investments: Realized capital gain distributions on mutual funds 109 - - - 40,298 ------------- ---------- ------------- ------ ----------- Realized gains (losses) on sales of investments: Proceeds from sales 19,245 6,235 4,619 1 1,452,241 Cost of investments sold (19,631) (5,932) (4,548) (1) (1,423,917) ------------- ---------- ------------- ------ ----------- Total realized gains (losses) on sales of investments, net (386) 303 71 - 28,324 ------------- ---------- ------------- ------ ----------- Realized gains (losses) on investments, net (277) 303 71 - 68,622 Net change in unrealized appreciation (depreciation) on investments 3,149 26,429 323 183 896,966 ------------- ---------- ------------- ------ ----------- Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net 2,872 26,732 394 183 965,588 ------------- ---------- ------------- ------ ----------- Net increase (decrease) in net assets from operations $ 1,631 24,724 521 158 1,154,145 ============= ========== ============= ====== ===========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets For the years ended December 31, 1995 and 1994 (In thousands) Growth Growth Money Money and and Precious Precious Market Market Income Income Metals Metals Fund Fund Fund Fund Fund Fund ---------- -------- -------- -------- --------- --------- 1995 1994 1995 1994 1995 1994 ---------- -------- -------- -------- --------- --------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ 17,718 9,560 (1,279) (2,959) 52 (793) Realized gains (losses) on investments, net - - 21,076 8,145 2,150 3,017 Net change in unrealized appreciation (depreciation) on investments - - 147,406 (21,586) (2,147) (5,762) ---------- -------- -------- -------- --------- --------- Net increase (decrease) in net assets from operations 17,718 9,560 167,203 (16,400) 55 (3,538) ---------- -------- -------- -------- --------- --------- Contract transactions (note 6): Purchase payments 190,018 402,816 98,725 124,695 11,049 38,433 Transfers between funds (169,358) 34,121 150,088 59,547 (17,212) 19,303 Surrenders and terminations (120,722) (73,487) (73,514) (32,245) (11,728) (5,784) Rescissions (5,198) (9,660) (1,783) (1,852) (326) (354) Other transactions (note 2) 238 250 240 (54) (36) (2) ---------- -------- -------- -------- --------- --------- Net increase (decrease) in net assets resulting from contract transactions (105,022) 354,040 173,756 150,091 (18,253) 51,596 ---------- -------- -------- -------- --------- --------- Increase (decrease) in net assets (87,304) 363,600 340,959 133,691 (18,198) 48,058 ---------- -------- -------- -------- --------- --------- Net assets at beginning of year 487,239 123,639 471,773 338,082 115,828 67,770 ---------- -------- -------- -------- --------- --------- Net assets at end of year $ 399,935 487,239 812,732 471,773 97,630 115,828 ========== ======== ======== ======== ========= =========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets (Continued) For the years ended December 31, 1995 and 1994 (In thousands) Real Real U.S. U.S. High High Estate Estate Government Government Income Income Securities Securities Securities Securities Fund Fund Fund Fund Fund Fund --------- -------- ----------- ----------- ----------- ----------- 1995 1994 1995 1994 1995 1994 --------- -------- ----------- ----------- ----------- ----------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ 15,167 6,592 3,361 (357) 30,379 20,347 Realized gains (losses) on investments, net 3,298 2,133 1,477 79 2,695 1,513 Net change in unrealized appreciation (depreciation) on investments 27,669 (15,346) 22,517 (466) 54,968 (57,407) --------- -------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations 46,134 (6,621) 27,355 (744) 88,042 (35,547) --------- -------- ----------- ----------- ----------- ----------- Contract transactions (note 6): Purchase payments 47,086 73,592 19,829 69,260 47,766 105,968 Transfers between funds 46,491 5,342 (12,435) 35,863 (5,307) (93,935) Surrenders and terminations (43,591) (20,894) (17,397) (8,032) (74,423) (62,167) Rescissions (1,643) (1,104) (277) (635) (1,813) (3,388) Other transactions (note 2) 77 84 99 (9) 132 64 --------- -------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions 48,420 57,020 (10,181) 96,447 (33,645) (53,458) --------- -------- ----------- ----------- ----------- ----------- Increase (decrease) in net assets 94,554 50,399 17,174 95,703 54,397 (89,005) --------- -------- ----------- ----------- ----------- ----------- Net assets at beginning of year 229,026 178,627 181,599 85,896 504,837 593,842 --------- -------- ----------- ----------- ----------- ----------- Net assets at end of year $323,580 229,026 198,773 181,599 559,234 504,837 ========= ======== =========== =========== =========== ===========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets (Continued) For the years ended December 31, 1995 and 1994 (In thousands) Zero Zero Zero Zero Utility Utility Coupon Coupon Coupon Coupon Equity Equity Fund - Fund - Fund - Fund - Fund Fund 1995 1995 2000 2000 ----------- ---------- -------- ------- -------- ------- 1995 1994 1995 1994 1995 1994 ----------- ---------- -------- ------- -------- ------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ 48,876 31,566 2,395 2,048 2,895 2,226 Realized gains (losses) on investments, net 1,589 (4,505) 600 613 1,081 795 Net change in unrealized appreciation (depreciation) on investments 255,500 (209,171) (597) (2,957) 12,514 (8,436) ----------- ---------- -------- ------- -------- ------- Net increase (decrease) in net assets from operations 305,965 (182,110) 2,398 (296) 16,490 (5,415) ----------- ---------- -------- ------- -------- ------- Contract transactions (note 6): Purchase payments 73,558 196,908 1,557 4,941 16,203 22,614 Transfers between funds 10,721 (313,095) (36,522) 3,202 13,339 1,608 Surrenders and terminations (141,926) (97,394) (13,413) (6,634) (10,927) (5,586) Rescissions (1,891) (4,132) (49) (35) (263) (371) Other transactions (note 2) 537 (179) 88 (8) (17) (11) ----------- ---------- -------- ------- -------- ------- Net increase (decrease) in net assets resulting from contract transactions (59,001) (217,892) (48,339) 1,466 18,335 18,254 ----------- ---------- -------- ------- -------- ------- Increase (decrease) in net assets 246,964 (400,002) (45,941) 1,170 34,825 12,839 ----------- ---------- -------- ------- -------- ------- Net assets at beginning of year 1,058,531 1,458,533 45,941 44,771 76,140 63,301 ----------- ---------- -------- ------- -------- ------- Net assets at end of year $1,305,495 1,058,531 - 45,941 110,965 76,140 =========== ========== ======== ======= ======== =======
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets (Continued) For the years ended December 31, 1995 and 1994 (In thousands) Zero Zero Zero Zero Coupon Coupon Coupon Coupon Global Global Fund - Fund - Fund - Fund - Income Income 2005 2005 2010 2010 Fund Fund -------- ------- ------- ------- -------- -------- 1995 1994 1995 1994 1995 1994 -------- ------- ------- ------- -------- -------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ 1,752 1,027 1,068 736 5,291 3,045 Realized gains (losses) on investments, net 753 626 2,987 135 (206) 1,653 Net change in unrealized appreciation (depreciation) on investments 13,063 (5,757) 15,696 (3,733) 22,286 (20,889) -------- ------- ------- ------- -------- -------- Net increase (decrease) in net assets from operations 15,568 (4,104) 19,751 (2,862) 27,371 (16,191) -------- ------- ------- ------- -------- -------- Contract transactions (note 6): Purchase payments 13,119 15,613 12,239 8,813 13,098 78,997 Transfers between funds 4,711 (294) 9,807 13,300 (21,421) (5,062) Surrenders and terminations (4,654) (2,526) (5,624) (3,226) (29,898) (16,449) Rescissions (185) (306) (469) (265) (400) (1,310) Other transactions (note 2) (23) (96) 177 6 25 137 -------- ------- ------- ------- -------- -------- Net increase (decrease) in net assets resulting from contract transactions 12,968 12,391 16,130 18,628 (38,596) 56,313 -------- ------- ------- ------- -------- -------- Increase (decrease) in net assets 28,536 8,287 35,881 15,766 (11,225) 40,122 -------- ------- ------- ------- -------- -------- Net assets at beginning of year 44,756 36,469 41,255 25,489 231,368 191,246 -------- ------- ------- ------- -------- -------- Net assets at end of year $73,292 44,756 77,136 41,255 220,143 231,368 ======== ======= ======= ======= ======== ========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets (Continued) For the years ended December 31, 1995 and 1994 (In thousands) Investment Investment Adjustable Adjustable Grade Grade Income Income U.S. U.S. Intermediate Intermediate Securities Securities Government Government Bond Fund Bond Fund Fund Fund Fund Fund -------------- ------------- ----------- ----------- ----------- ----------- 1995 1994 1995 1994 1995 1994 -------------- ------------- ----------- ----------- ----------- ----------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ 3,922 1,833 44,301 14,009 9,723 8,204 Realized gains (losses) on investments, net 624 677 7,100 4,517 (1,327) (2,310) Net change in unrealized appreciation (depreciation) on investments 7,237 (3,562) 145,457 (86,577) 6,258 (10,031) -------------- ------------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations 11,783 (1,052) 196,858 (68,051) 14,654 (4,137) -------------- ------------- ----------- ----------- ----------- ----------- Contract transactions (note 6): Purchase payments 15,136 39,681 145,910 334,009 43,555 119,427 Transfers between funds 364 (430) 33,034 44,929 (75,287) (144,039) Surrenders and terminations (16,323) (8,811) (125,202) (68,497) (27,666) (30,329) Rescissions (379) (527) (3,470) (6,184) (1,087) (2,051) Other transactions (note 2) (24) (2) 670 81 296 110 -------------- ------------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions (1,226) 29,911 50,942 304,338 (60,189) (56,882) -------------- ------------- ----------- ----------- ----------- ----------- Increase (decrease) in net assets 10,557 28,859 247,800 236,287 (45,535) (61,019) -------------- ------------- ----------- ----------- ----------- ----------- Net assets at beginning of year 139,325 110,466 927,343 691,056 220,042 281,061 -------------- ------------- ----------- ----------- ----------- ----------- Net assets at end of year $ 149,882 139,325 1,175,143 927,343 174,507 220,042 ============== ============= =========== =========== =========== ===========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets (Continued) For the years ended December 31, 1995 and 1994 (In thousands) Templeton Templeton Templeton Templeton Pacific Pacific Rising Rising International International Growth Growth Dividends Dividends Equity Equity Fund Fund Fund Fund Fund Fund ----------- ---------- ---------- ---------- -------------- -------------- 1995 1994 1995 1994 1995 1994 ----------- ---------- ---------- ---------- -------------- -------------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ 1,633 (3,669) 2,452 746 1,998 (6,764) Realized gains (losses) on investments, net 3,150 2,541 1,323 (1,037) 20,155 6,161 Net change in unrealized appreciation (depreciation) on investments 14,929 (32,730) 81,539 (14,714) 42,587 (22,558) ----------- ---------- ---------- ---------- -------------- -------------- Net increase (decrease) in net assets from operations 19,712 (33,858) 85,314 (15,005) 64,740 (23,161) ----------- ---------- ---------- ---------- -------------- -------------- Contract transactions (note 6): Purchase payments 27,022 145,620 42,756 62,677 99,403 301,166 Transfers between funds (52,319) 54,656 50,303 (19,751) (30,418) 196,400 Surrenders and terminations (35,125) (18,242) (35,907) (17,224) (72,338) (29,507) Rescissions (1,057) (2,213) (750) (821) (2,115) (3,386) Other transactions (note 2) (45) 16 131 122 59 87 ----------- ---------- ---------- ---------- -------------- -------------- Net increase (decrease) in net assets resulting from contract transactions (61,524) 179,837 56,533 25,003 (5,409) 464,760 ----------- ---------- ---------- ---------- -------------- -------------- Increase (decrease) in net assets (41,812) 145,979 141,847 9,998 59,331 441,599 ----------- ---------- ---------- ---------- -------------- -------------- Net assets at beginning of year 348,655 202,676 281,145 271,147 735,339 293,740 ----------- ---------- ---------- ---------- -------------- -------------- Net assets at end of year $ 306,843 348,655 422,992 281,145 794,670 735,339 =========== ========== ========== ========== ============== ==============
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets (Continued) For the years ended December 31, 1995 and 1994 (In thousands) Templeton Templeton Templeton Templeton Developing Developing Templeton Templeton Global Global Markets Markets Global Global Asset Asset Equity Equity Growth Growth Allocation Allocation Fund Fund Fund Fund Fund Fund ------------ ----------- ---------- ---------- ----------- ---------- 1995 1994 1995 1994 1995 1994 ------------ ----------- ---------- ---------- ----------- ---------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ (1,241) (542) (2,008) (812) 127 - Realized gains (losses) on investments, net (277) (77) 303 15 71 - Net change in unrealized appreciation (depreciation) on investments 3,149 (6,388) 26,429 356 323 - ------------ ----------- ---------- ---------- ----------- ---------- Net increase (decrease) in net assets from operations 1,631 (7,007) 24,724 (441) 521 - ------------ ----------- ---------- ---------- ----------- ---------- Contract transactions (note 6): Purchase payments 42,027 57,484 119,490 89,328 5,580 - Transfers between funds 22,865 43,967 46,237 64,368 9,316 - Surrenders and terminations (7,387) (1,472) (15,658) (2,702) (1,163) - Rescissions (1,069) (501) (1,966) (1,166) (27) - Other transactions (note 2) (55) (2) 64 6 7 - ------------ ----------- ---------- ---------- ----------- ---------- Net increase (decrease) in net assets resulting from contract transactions 56,381 99,476 148,167 149,834 13,713 - ------------ ----------- ---------- ---------- ----------- ---------- Increase (decrease) in net assets 58,012 92,469 172,891 149,393 14,234 - ------------ ----------- ---------- ---------- ----------- ---------- Net assets at beginning of year 92,469 - 149,393 - - - ------------ ----------- ---------- ---------- ----------- ---------- Net assets at end of year $ 150,481 92,469 322,284 149,393 14,234 - ============ =========== ========== ========== =========== ==========
See accompanying notes to financial statements.
ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Statements of Changes in Net Assets (Continued) For the years ended December 31, 1995 and 1994 (In thousands) Small Small Total Total Cap Cap All All Fund Fund Funds Funds -------- ----- ---------- ---------- 1995 1994 1995 1994 -------- ----- ---------- ---------- Increase (decrease) in net assets: Operations: Investment income (loss), net $ (25) - 188,557 86,043 Realized gains (losses) on investments, net - - 68,622 24,691 Net change in unrealized appreciation (depreciation) on investments 183 - 896,966 (527,714) -------- ----- ---------- ---------- Net increase (decrease) in net assets from operations 158 - 1,154,145 (416,980) -------- ----- ---------- ---------- Contract transactions (note 6): Purchase payments 2,140 - 1,087,266 2,292,042 Transfers between funds 11,013 - (11,990) - Surrenders and terminations (36) - (884,622) (511,208) Rescissions (19) - (26,236) (40,261) Other transactions (note 2) 4 - 2,644 600 -------- ----- ---------- ---------- Net increase (decrease) in net assets resulting from contract transactions 13,102 - 167,062 1,741,173 -------- ----- ---------- ---------- Increase (decrease) in net assets 13,260 - 1,321,207 1,324,193 -------- ----- ---------- ---------- Net assets at beginning of year - - 6,382,004 5,057,811 -------- ----- ---------- ---------- Net assets at end of year $13,260 - 7,703,211 6,382,004 ======== ===== ========== ==========
See accompanying notes to financial statements. ALLIANZ LIFE VARIABLE ACCOUNT B of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA Notes to Financial Statements December 31, 1995 1. ORGANIZATION Allianz Life Variable Account B (Variable Account) is a segregated investment account of Allianz Life Insurance Company of North America (Allianz Life) and is registered with the Securities and Exchange Commission as a unit investment trust pursuant to the provisions of the Investment Company Act of 1940 (as amended). The Variable Account was established on May 31, 1985 and commenced operations January 24, 1989. Accordingly, it is an accounting entity wherein all segregated account transactions are reflected. The Variable Account's assets are the property of Allianz Life and are held for the benefit of the owners and other persons entitled to payments under variable annuity contracts issued through the Variable Account and underwritten by Allianz Life. The assets of the Variable Account, equal to the reserves and other liabilities of the Variable Account, are not chargeable with liabilities that arise from any other business which Allianz Life may conduct. The Variable Account's sub-accounts may invest, at net asset values, in one or more of the funds of the Franklin Valuemark Funds (FVF), managed by Franklin Advisers, Inc., in accordance with the selection made by the contract owner. Not all funds are available as investment options for the products which comprise the Variable Account. Certain officers and trustees of the FVF are also officers and/or directors of Franklin Advisers, Inc. and/or Allianz Life. 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENTS Investments of the Variable Account are valued daily at market value using net asset values provided by Franklin Advisers, Inc. Realized investment gains include realized gain distributions received from the respective funds and gains on the sale of fund shares as determined by the average cost method. Realized gain distributions are reinvested in the respective funds. Dividend distributions received from the FVF are reinvested in additional shares of the FVF and are recorded as income to the Variable Account on the ex-dividend date. A Fixed Account investment option is available to deferred annuity contract owners. This account is comprised of equity and fixed income investments which are part of the general assets of Allianz Life. The liabilities of the Fixed Account are part of the general obligations of Allianz Life and are not included in the Variable Account. The guaranteed minimum rate of return on the Fixed Account is 3%. The Templeton Developing Markets Equity Fund and Templeton Global Growth Fund were added as available investment options on March 15, 1994. The Templeton Global Asset Allocation Fund, Fixed Account and Small Cap Fund were added as available investment options on May 1, 1995, October 1, 1995 and November 1, 1995, respectively. The Zero Coupon - 1995 Fund matured and was closed on December 15, 1995. In April 1995, the Equity Growth Fund name was changed to Growth and Income Fund. CONTRACTS IN ANNUITY PAYMENT PERIOD Annuity reserves are computed for currently payable contracts according to the 1983 Individual Annuity Mortality Table, using an assumed investment return (AIR) equal to the AIR of the specific contracts, either 3% or 5%. Charges to annuity reserves for mortality and risk expense are reimbursed to Allianz Life if the reserves required are less than originally estimated. If additional reserves are required, Allianz Life reimburses the account. EXPENSES ASSET BASED EXPENSES A mortality and expense risk charge is deducted from the Variable Account on a daily basis equal, on an annual basis, to 1.25% of the daily net assets of the Variable Account. An administrative charge is deducted from the Variable Account on a daily basis equal, on an annual basis, to 0.15% of the daily net assets of the Variable Account. CONTRACT BASED EXPENSES A contract maintenance charge is paid by the contract owner annually from each deferred annuity contract by liquidating contract units at the end of the contract year and at the time of full surrender. The amount of the charge is $30 each year. Contract maintenance charges paid by the contract owners during the years ended December 31, 1995 and 1994 were $4,294,361 and $3,070,519, respectively. These contract charges are reflected in the Statements of Changes in Net Assets as other transactions. A contingent deferred sales charge is deducted from the contract value at the time of a surrender. This charge applies only to a surrender of purchase payments received within five years of the date of surrender. For this purpose, purchase payments are allocated on a first-in, first-out basis. The amount of the contingent deferred sales charge is calculated by: (a) allocating purchase payments to the amount surrendered; and (b) multiplying each allocated purchase payment that has been held under the contract for the period shown below by the charge shown below:
VALUEMARK II VALUEMARK III - ------------------- ------------------- Years Since Payment Charge Years Since Payment Charge - ------------------- ------- ------------------- ------- 0-1 5% 0-1 6% 1-2 5% 1-2 5% 2-3 4% 2-3 4% 3-4 3% 3-4 3% 4-5 1.5% 4-5 1.5% 5+ 0% 5+ 0%
and (c) adding the products of each multiplication in (b) above. A deferred annuity contract owner may, not more frequently than once annually on a cumulative basis, make a surrender each contract year of fifteen percent (15%) of purchase payments paid, less any prior surrenders, without incurring a contingent deferred sales charge. For a partial surrender, the contingent deferred sales charge will be deducted from the remaining contract value, if sufficient; otherwise it will be deducted from the amount surrendered. Total contingent deferred sales charges paid by the contract owners for the years ended December 31, 1995 and 1994 were $12,373,225 and $8,600,401, respectively. Currently, twelve transfers are permitted each contract year. Thereafter, the fee is $25 per transfer, or 2% of the amount transferred, if less. Currently, transfers associated with the dollar cost averaging program are not counted. Total transfer charges paid by the contract owners for the years ended December 31, 1995 and 1994 were $119,180 and $88,989, respectively. Transfer charges are reflected in the financial statements as other transactions. Transfers to the Fixed Account were $11,989,631 during the year ended December 31, 1995. Premium taxes or other taxes payable to a state or other governmental entity will be charged against the contract values. Allianz Life may, in its sole discretion, pay taxes when due and deduct that amount from the contract value at a later date. Payment at an earlier date does not waive any right Allianz Life may have to deduct such amounts at a later date. On certain contracts, a systematic withdrawal plan is available which allows an owner to withdraw up to 9% of purchase payments less prior surrenders annually, paid monthly or quarterly, without incurring a contingent deferred sales charge. The exercise of the systematic withdrawal plan in any contract year replaces the 15% penalty free privilege for that year. A rescission is defined as a contract that is returned to the Company by the Contract Owner and canceled within the free-look period, generally within 10 days. 3. CAPITALIZATION On January 5, 1994, $100 and $500,100 was provided by Allianz Life for the establishment of the Templeton Developing Markets Equity Fund and Templeton Global Growth Fund, respectively. All investments were withdrawn by Allianz Life on August 29, 1994 at the then-current market value of $535,212. On April 18, 1995, $500,000 was provided by Allianz Life for the establishment of the Templeton Global Asset Allocation Fund. All investments were withdrawn by Allianz Life on December 21, 1995 at the then-current market value of $525,500. On September 18, 1995, $250,000 was provided by Allianz Life for the establishment of the Small Cap Fund. On December 31, 1995, the market value of this investment was $255,750. 4. INVESTMENT TRANSACTIONS The sub-account purchases of fund shares, including reinvestment of dividend distributions, were as follows during the year ended December 31, 1995 (in thousands):
Money Market Fund $334,323 Growth and Income Fund 228,178 Precious Metals Fund 47,816 High Income Fund 113,096 Real Estate Securities Fund 27,566 U.S. Government Securities Fund 81,756 Utility Equity Fund 125,296 Zero Coupon Fund - 1995 7,693 Zero Coupon Fund - 2000 33,059 Zero Coupon Fund - 2005 23,101 Zero Coupon Fund - 2010 51,558 Global Income Fund 21,630 Investment Grade Intermediate Bond Fund 19,654 Income Securities Fund 163,073 Adjustable U.S. Government Fund 36,931 Templeton Pacific Growth Fund 85,778 Rising Dividends Fund 80,456 Templeton International Equity Fund 112,294 Templeton Developing Markets Equity Fund 74,549 Templeton Global Growth Fund 152,536 Templeton Global Asset Allocation Fund 18,572 Small Cap Fund 13,104
5. FEDERAL INCOME TAXES Operations of the Variable Account form a part of, and are taxed with, operations of Allianz Life, which is taxed as a life insurance company under the Internal Revenue Code. Allianz Life does not expect to incur any federal income taxes in the operation of the Variable Account. If in the future Allianz Life determines that the Variable Account may incur federal income taxes, it may then assess a charge against the Variable Account for such taxes. 6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT PER UNIT DATA) Transactions in units for each fund for the years ended December 31, 1995 and 1994 were as follows:
Growth Real U.S. Money and Precious High Estate Government Market Income Metals Income Securities Securities Fund Fund Fund Fund Fund Fund --------- -------- --------- -------- ----------- ----------- Accumulation units outstanding at December 31, 1993 10,247 24,719 4,685 11,787 5,589 40,402 Contract transactions: Purchase payments 33,071 9,135 2,732 4,967 4,417 7,429 Transfers between funds 2,902 4,379 1,303 422 2,206 (6,649) Surrenders and terminations (6,011) (2,397) (409) (1,428) (525) (4,458) Rescissions (792) (137) (26) (75) (41) (239) Other transactions 20 (4) - 6 (1) 5 --------- -------- --------- -------- ----------- ----------- Net increase (decrease) in accumulation units resulting from contract transactions 29,190 10,976 3,600 3,892 6,056 (3,912) --------- -------- --------- -------- ----------- ----------- Accumulation units outstanding at December 31, 1994 39,437 35,695 8,285 15,679 11,645 36,490 ========= ======== ========= ======== =========== =========== Accumulation unit value per unit at December 31, 1994 $ 12.354 13.215 13.979 14.608 15.594 13.835 ========= ======== ========= ======== =========== =========== Contract transactions: Purchase payments 15,069 6,403 796 2,877 1,233 3,115 Transfers between funds (13,495) 9,757 (1,290) 2,959 (792) (266) Surrenders and terminations (9,580) (4,859) (846) (2,661) (1,077) (4,916) Rescissions (410) (118) (24) (102) (17) (118) Other transactions 19 15 (2) 4 6 8 --------- -------- --------- -------- ----------- ----------- Net increase (decrease) in accumulation units resulting from contract transactions (8,397) 11,198 (1,366) 3,077 (647) (2,177) --------- -------- --------- -------- ----------- ----------- Accumulation units outstanding at December 31, 1995 31,040 46,893 6,919 18,756 10,998 34,313 ========= ======== ========= ======== =========== =========== Accumulation unit value per unit at December 31, 1995 $ 12.883 17.310 14.109 17.252 18.073 16.298 ========= ======== ========= ======== =========== =========== Accumulation net assets at December 31, 1995 $399,901 811,706 97,630 323,580 198,773 559,234 ========= ======== ========= ======== =========== ===========
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT PER UNIT DATA) (CONTINUED)
Zero Zero Zero Zero Utility Coupon Coupon Coupon Coupon Global Equity Fund - Fund - Fund - Fund - Income Fund 1995 2000 2005 2010 Fund ----------- ------- -------- ------- ------- -------- Accumulation units outstanding at December 31, 1993 84,217 3,092 3,787 2,020 1,405 13,054 Contract transactions: Purchase payments 12,472 344 1,434 942 541 5,526 Transfers between funds (19,941) 224 114 (4) 864 (465) Surrenders and terminations (6,391) (462) (357) (154) (204) (1,178) Rescissions (264) (2) (24) (18) (17) (92) Other transactions (11) (1) (1) (6) - 10 ----------- ------- -------- ------- ------- -------- Net increase (decrease) in accumulation units resulting from contract transactions (14,135) 103 1,166 760 1,184 3,801 ----------- ------- -------- ------- ------- -------- Accumulation units outstanding at December 31, 1994 70,082 3,195 4,953 2,780 2,589 16,855 =========== ======= ======== ======= ======= ======== Accumulation unit value per unit at December 31, 1994 $ 15.104 14.380 15.373 16.096 15.930 13.726 =========== ======= ======== ======= ======= ======== Contract transactions: Purchase payments 4,303 106 966 715 652 904 Transfers between funds 736 (2,398) 800 269 511 (1,494) Surrenders and terminations (8,372) (905) (636) (249) (297) (2,058) Rescissions (113) (3) (16) (10) (27) (28) Other transactions 33 5 (1) (1) 9 2 ----------- ------- -------- ------- ------- -------- Net increase (decrease) in accumulation units resulting from contract transactions (3,413) (3,195) 1,113 724 848 (2,674) ----------- ------- -------- ------- ------- -------- Accumulation units outstanding at December 31, 1995 66,669 - 6,066 3,504 3,437 14,181 =========== ======= ======== ======= ======= ======== Accumulation unit value per unit at December 31, 1995 $ 19.565 - 18.294 20.914 22.431 15.522 =========== ======= ======== ======= ======= ======== Accumulation net assets at December 31, 1995 $1,304,348 - 110,965 73,292 77,136 220,143 =========== ======= ======== ======= ======= ========
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT PER UNIT DATA) (CONTINUED)
Investment Adjustable Templeton Grade Income U.S. Pacific Rising Intermediate Securities Government Growth Dividends Bond Fund Fund Fund Fund Fund -------------- ----------- ----------- ---------- ---------- Accumulation units outstanding at December 31, 1993 7,677 38,967 24,975 14,240 26,256 Contract transactions: Purchase payments 2,779 19,487 10,678 10,676 6,295 Transfers between funds (28) 2,539 (12,898) 3,849 (1,955) Surrenders and terminations (619) (4,065) (2,716) (1,371) (1,748) Rescissions (37) (364) (184) (164) (83) Other transactions - 5 10 1 13 -------------- ----------- ----------- ---------- ---------- Net increase (decrease) in accumulation units resulting from contract transactions 2,095 17,602 (5,110) 12,991 2,522 -------------- ----------- ----------- ---------- ---------- Accumulation units outstanding at December 31, 1994 9,772 56,569 19,865 27,231 28,778 ============== =========== =========== ========== ========== Accumulation unit value per unit at December 31, 1994 $ 14.257 16.392 11.077 12.802 9.769 ============== =========== =========== ========== ========== Contract transactions: Purchase payments 1,016 7,979 3,753 2,065 3,782 Transfers between funds 30 1,879 (6,551) (4,013) 4,493 Surrenders and terminations (1,099) (6,965) (2,397) (2,714) (3,208) Rescissions (25) (192) (95) (82) (68) Other transactions (2) 39 25 (4) 12 -------------- ----------- ----------- ---------- ---------- Net increase (decrease) in accumulation units resulting from contract transactions (80) 2,740 (5,265) (4,748) 5,011 -------------- ----------- ----------- ---------- ---------- Accumulation units outstanding at December 31, 1995 9,692 59,309 14,600 22,483 33,789 ============== =========== =========== ========== ========== Accumulation unit value per unit at December 31, 1995 $ 15.463 19.785 11.951 13.630 12.498 ============== =========== =========== ========== ========== Accumulation net assets at December 31, 1995 $ 149,882 1,173,447 174,507 306,448 422,318 ============== =========== =========== ========== ==========
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT PER UNIT DATA) (CONTINUED)
Templeton Templeton Templeton Developing Templeton Global International Markets Global Asset Small Total Equity Equity Growth Allocation Cap All Fund Fund Fund Fund Fund Funds --------------- ----------- ---------- ----------- ------- ---------- Accumulation units outstanding at December 31, 1993 24,026 - - - - 341,145 Contract transactions: Purchase payments 23,800 5,673 8,715 - - 171,113 Transfers between funds 15,240 4,296 6,300 - - 2,698 Surrenders and terminations (2,341) (146) (265) - - (37,245) Rescissions (268) (49) (114) - - (2,990) Other transactions 7 - 1 - - 54 --------------- ----------- ---------- ----------- ------- ---------- Net increase (decrease) in accumulation units resulting from contract transactions 36,438 9,774 14,637 - - 133,630 --------------- ----------- ---------- ----------- ------- ---------- Accumulation units outstanding at December 31, 1994 60,464 9,774 14,637 - - 474,775 =============== =========== ========== =========== ======= ========== Accumulation unit value per unit at December 31, 1994 $ 12.161 9.454 10.201 - - =============== =========== ========== =========== ======= Contract transactions: Purchase payments 7,774 4,364 10,991 538 212 79,613 Transfers between funds (2,530) 2,372 4,306 916 1,096 (2,705) Surrenders and terminations (5,662) (773) (1,448) (114) (4) (60,840) Rescissions (168) (112) (183) (3) (2) (1,916) Other transactions 5 (7) 6 1 - 172 --------------- ----------- ---------- ----------- ------- ---------- Net increase (decrease) in accumulation units resulting from contract transactions (581) 5,844 13,672 1,338 1,302 14,324 --------------- ----------- ---------- ----------- ------- ---------- Accumulation units outstanding at December 31, 1995 59,883 15,618 28,309 1,338 1,302 489,099 =============== =========== ========== =========== ======= ========== Accumulation unit value per unit at December 31, 1995 $ 13.263 9.582 11.339 10.591 10.146 =============== =========== ========== =========== ======= Accumulation net assets at December 31, 1995 $ 794,226 149,649 320,997 14,167 13,211 7,695,560 =============== =========== ========== =========== ======= ==========
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Financial Statements December 31, 1995 and 1994 KPMG Peat Marwick LLP 4200 Norwest Center 90 South Seventh Street Minneapolis, MN 55402 INDEPENDENT AUDITORS' REPORT The Board of Directors Allianz Life Insurance Company of North America: We have audited the accompanying consolidated balance sheets of Allianz Life Insurance Company of North America (a wholly owned subsidiary of Allianz of America, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholder's equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Allianz Life Insurance Company of North America and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and changes in stockholder's equity and cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. In 1994, as discussed in note 1 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. In 1993, as discussed in notes 1, 8 and 10 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statements of Financial Accounting Standards No. 106, Accounting for Postretirement Benefits Other Than Pensions and No. 109, Accounting for Income Taxes. KPMG Peat Marwick LLP February 6, 1996
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1995 and 1994 (in thousands except share data) Assets 1995 1994 - ---------------------------------------------------------- ----------- ---------- Investments: Fixed maturities, at amortized cost $ 0 90,615 Fixed maturities, at market 2,549,598 1,906,208 Equity securities, at market 254,458 131,712 Mortgage loans on real estate 203,128 163,099 Real estate, at cost 8,806 4,685 Investment in real estate partnerships, at equity 11,975 12,551 Certificates of deposit and short-term securities 31,501 155,307 Policy loans 104,184 101,899 Other long-term investments 650 1,117 ----------- ---------- Total investments 3,164,300 2,567,193 Cash 10,936 63,883 Accrued investment income 36,858 34,786 Receivables (net of allowance for uncollectible accounts of $7,697 in 1995 and $9,607 in 1994) 124,700 111,400 Reinsurance receivable: Funds held on deposit 1,060,566 927,353 Recoverable on future policy benefit reserves 43,248 35,387 Recoverable on unpaid claims 109,075 105,603 Receivable on paid claims 22,172 26,736 Prepaid insurance premiums 4,078 4,317 Home office property and equipment (net of accumulated depreciation of $21,256 in 1995 and $28,547 in 1994) 8,790 11,612 Deferred acquisition costs 826,994 798,442 Federal income tax recoverable 3,947 3,794 Other assets 11,048 9,818 ----------- ---------- Assets, exclusive of separate account assets 5,426,712 4,700,324 Separate account assets 8,402,003 6,965,755 ----------- ---------- Total assets $13,828,715 11,666,079 =========== ==========
See accompanying notes to consolidated financial statements.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Balance Sheets, continued December 31, 1995 and 1994 (in thousands except share data) Liabilities and Stockholder's Equity 1995 1994 - --------------------------------------------------------------------- ------------ ----------- Liabilities: Future policy benefit reserves: Life $ 1,088,964 1,022,537 Annuity 2,601,943 2,304,560 Policy and contract claims 371,898 355,411 Unearned premiums 34,181 40,376 Reinsurance payable 72,838 81,507 Deferred income taxes 140,174 5,807 Accrued expenses 41,266 29,006 Commissions due and accrued 22,979 24,190 Other policyholder funds 82,138 73,509 Other liabilities 19,137 76,314 ------------ ----------- Liabilities, exclusive of separate account liabilities 4,475,518 4,013,217 Separate account liabilities 8,402,003 6,965,755 ------------ ----------- Total liabilities 12,877,521 10,978,972 ------------ ----------- Minority interest in subsidiary 0 7,662 ------------ ----------- Stockholder's equity: Common stock, $1 par value, 20,000,000 shares authorized, issued and outstanding 20,000 20,000 Preferred stock, $1 par value, cumulative, 200 million shares authorized, 25 million shares issued and outstanding in 1995 and 40 million shares issued and outstanding in 1994 25,000 40,000 Additional paid-in capital 407,088 406,494 Net unrealized holding gain (loss) on securities available-for-sale, net of deferred federal income taxes 139,204 (62,073) Net unrealized Canadian currency loss (3,455) (3,787) Retained earnings 363,357 278,811 ------------ ----------- Total stockholder's equity 951,194 679,445 ------------ ----------- Commitments and contingencies (notes 7 and 12) Total liabilities and stockholder's equity $13,828,715 11,666,079 ============ ===========
See accompanying notes to consolidated financial statements.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Statements of Income Years Ended December 31, 1995, 1994 and 1993 (in thousands) 1995 1994 1993 ----------- --------- --------- Revenue: Life insurance premiums $ 257,647 234,295 217,717 Other life policy considerations 93,158 92,254 88,003 Annuity considerations 147,112 120,240 69,583 Accident and health premiums 527,059 547,508 508,785 ----------- --------- --------- Total premiums and considerations 1,024,976 994,297 884,088 Premiums ceded 223,226 244,208 202,904 ----------- --------- --------- Net premiums and considerations 801,750 750,089 681,184 Investment income, net 201,158 181,291 174,831 Realized investment gains, net 29,202 829 28,318 Other 10,140 12,703 9,347 ----------- --------- --------- Total revenue 1,042,250 944,912 893,680 ----------- --------- --------- Benefits and expenses: Life insurance benefits 268,163 254,326 233,694 Annuity benefits 145,636 131,793 113,500 Accident and health insurance benefits 374,743 379,122 341,676 ----------- --------- --------- Total benefits 788,542 765,241 688,870 Benefit recoveries 210,702 212,144 155,043 ----------- --------- --------- Net benefits 577,840 553,097 533,827 Commissions and other agent compensation 233,939 313,715 398,161 General and administrative expenses 115,419 111,116 109,333 Taxes, licenses and fees 17,672 22,514 25,239 Increase in deferred acquisition costs, net (28,552) (132,090) (253,234) Minority interest in income of consolidated subsidiary (30) (66) 0 ----------- --------- --------- Total benefits and expenses 916,288 868,286 813,326 ----------- --------- --------- Income from operations before income taxes 125,962 76,626 80,354 ----------- --------- --------- Income tax expense (benefit): Current 12,993 5,098 30,215 Deferred 25,772 16,053 (6,496) ----------- --------- --------- Total income tax expense 38,765 21,151 23,719 ----------- --------- --------- Income before cumulative effect of changes in accounting 87,197 55,475 56,635 Cumulative effect of changes in accounting 0 0 26,875 ----------- --------- --------- Net income $ 87,197 55,475 83,510 =========== ========= =========
See accompanying notes to consolidated financial statements.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Statements of Stockholder's Equity Years Ended December 31, 1995, 1994 and 1993 (in thousands) 1995 1994 1993 --------- --------- -------- Common stock: Balance at beginning and end of year $ 20,000 20,000 20,000 --------- --------- -------- Preferred Stock: Balance at beginning of year 40,000 0 0 Issuance of stock during the year 0 40,000 0 Redemption of stock during the year (15,000) 0 0 --------- --------- -------- Balance at end of year 25,000 40,000 0 --------- --------- -------- Additional paid-in capital: Balance at beginning of year 406,494 401,304 401,304 Additional contribution from parent 594 5,190 0 --------- --------- -------- Balance at end of year 407,088 406,494 401,304 --------- --------- -------- Net unrealized gain (loss) on investments: Balance at beginning of year (62,073) 9,071 12,071 Cumulative effect of implementation of Statement No. 115, net of deferred federal income taxes 0 74,866 0 Net unrealized gain on securities transferred from held-to-maturity to available-for-sale classification, net of deferred federal income taxes 1,789 0 0 Net unrealized gain (loss) during the year, net of deferred federal income taxes 199,488 (146,010) (3,000) --------- --------- -------- Balance at end of year 139,204 (62,073) 9,071 --------- --------- -------- Net unrealized Canadian currency gain (loss): Balance at beginning of year (3,787) (2,708) (1,835) Net unrealized gain (loss) during the year, net of deferred federal income taxes 332 (1,079) (873) --------- --------- -------- Balance at end of year (3,455) (3,787) (2,708) --------- --------- -------- Retained earnings: Balance at beginning of year 278,811 223,749 140,239 Net income 87,197 55,475 83,510 Cash dividend to stockholder (2,651) (413) 0 --------- --------- -------- Balance at end of year 363,357 278,811 223,749 --------- --------- -------- Total stockholder's equity $951,194 679,445 651,416 ========= ========= ========
See accompanying notes to consolidated financial statements.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 (in thousands) 1995 1994 1993 ---------- --------- --------- Cash flows used in operating activities: Net income $ 87,197 55,475 83,510 ---------- --------- --------- Adjustments to reconcile net income to net cash used in operating activities: Realized gains on investments (29,202) (829) (28,318) Deferred federal income tax (benefit) expense 25,772 16,053 (6,496) Cumulative effect of changes in accounting 0 0 (26,875) Charges to policy account balances (120,254) (125,488) (105,912) Interest credited to policy account balances 169,151 150,490 147,983 Change in: Accrued investment income (2,072) (764) (2,725) Receivables (13,300) 12,040 (20,206) Reinsurance receivables (190,953) (93,453) (107,809) Deferred acquisition costs (28,552) (132,090) (253,234) Future policy benefit reserves 66,932 20,791 (9,557) Policy and contract claims 25,116 25,072 40,211 Unearned premiums (6,195) (1,194) (2,111) Reinsurance payable (8,669) 19,779 31,653 Current tax recoverable (153) (6,255) 1,085 Deferred tax liability 0 0 15,936 Accrued expenses and other liabilities (43,867) 54,626 14,657 Commissions due and accrued (1,211) 3,316 1,461 Depreciation and amortization (23,391) (11,498) (7,681) Other, net 916 (86) 2,303 ---------- --------- --------- Total adjustments (179,932) (69,490) (315,635) ---------- --------- --------- Net cash used in operating activities (92,735) (14,015) (232,125) ---------- --------- ---------
See accompanying notes to consolidated financial statements.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Consolidated Statements of Cash Flows, continued Years Ended December 31, 1995, 1994 and 1993 (in thousands) 1995 1994 1993 ------------ --------- ----------- Cash flows used in investing activities: Purchase of fixed maturities, at amortized cost $ 0 0 (1,191,749) Purchase of fixed maturities, at market (1,533,290) (928,532) 0 Purchase of equity securities (166,701) (145,267) (205,345) Purchase of other long-term investments 0 (467) (650) Funding of mortgage loans (66,301) (64,808) (20,097) Sale of fixed maturities, at amortized cost 0 0 666,893 Sale of fixed maturities, at market 1,242,988 791,659 0 Matured or redeemed fixed maturities, at amortized cost 7,022 4,342 314,223 Matured fixed maturities, at market 38,991 32,508 0 Sale of equity securities 97,619 150,347 217,524 Repayment of mortgage loans 25,563 28,206 15,989 Sale of minority interest in subsidiary 0 0 8,189 Purchase of minority interest's shares in subsidiary (7,903) 0 0 Net change in certificates of deposit and short-term securities 123,806 (96,344) 33,330 Other (2,851) (6,232) 782 ------------ --------- ----------- Net cash used in investing activities (241,057) (234,588) (160,911) ------------ --------- ----------- Cash flows used in financing activities: Policyholders' deposits to account balances $ 553,699 526,918 639,633 Policyholders' withdrawals from account balances (291,102) (235,309) (164,911) Change in assets held under reinsurance agreements 36,354 (59,349) (75,658) Net change in mortgage notes payable (1,049) (39) (36) Additional paid-in capital from parent 594 5,190 0 Preferred stock transactions (15,000) 40,000 0 Cash dividends paid (2,651) (413) 0 ------------ --------- ----------- Net cash used in financing activities 280,845 276,998 399,028 ------------ --------- ----------- Net change in cash (52,947) 28,395 5,992 Cash at beginning of year 63,883 35,488 29,496 ------------ --------- ----------- Cash at end of year $ 10,936 63,883 35,488 ============ ========= ===========
See accompanying notes to consolidated financial statements. ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 (in thousands) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Allianz Life Insurance Company of North America (the Company) is a wholly owned subsidiary of Allianz of America, Inc. (AZOA), a majority-owned subsidiary of Allianz A.G. Holding, a Federal Republic of Germany company. The Company is a life insurance company which is licensed to sell both group and individual life, annuity and accident and health policies in the United States, Canada and several U.S. territories. Based on 1995 gross premium volume, 13%, 71% and 16% of the Company's business is life, annuity and accident and health, respectively. The Company's primary distribution channels are through strategic alliances with other insurance companies and third party marketing organizations. The Company has a significant relationship as of December 31, 1995 with a mutual fund company and its broker/dealer network related to sales of its variable life and variable annuity products and another significant administration, marketing and reinsurance relationship with an unrelated insurance company. Following is a summary of the significant accounting policies reflected in the accompanying consolidated financial statements. BASIS OF PRESENTATION The consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) which vary in certain respects from accounting rules prescribed or permitted by state insurance regulatory authorities. The accounts of the Company's major subsidiaries, Preferred Life Insurance Company of New York and Canadian American Financial Corporation and other less significant subsidiaries have been consolidated. All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts as previously reported have been reclassified to be consistent with the current year's presentation. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect reported assets and liabilities including reporting or disclosure of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could vary significantly from management's estimates. RECOGNITION OF TRADITIONAL LIFE, GROUP LIFE AND GROUP ACCIDENT AND HEALTH REVENUE Traditional life products include products with guaranteed premiums and benefits and consist principally of whole life and term insurance policies, limited payment contracts and certain annuity products with life contingencies. Premiums on traditional life and group life products are recognized as income when due. Group accident and health premiums are recognized as earned on a pro rata basis over the risk coverage periods. Benefits and expenses for traditional and group products are matched with earned premiums so that profits are recognized over the premium paying periods of the contracts. This matching is accomplished by establishing provisions for future policy benefits and policy and contract claims, and deferring and amortizing related policy acquisition costs. RECOGNITION OF NONTRADITIONAL AND VARIABLE LIFE AND ANNUITY REVENUE Nontraditional and variable life insurance and interest sensitive contracts that have significant mortality or morbidity risk are accounted for in accordance with the retrospective deposit method. Interest sensitive contracts that do not have significant mortality or morbidity risk are accounted for in a manner consistent with interest bearing financial instruments. For both types of contracts, premium receipts are reported as deposits to the contractholder's account while revenues consist of amounts assessed against contractholders including surrender charges and earned administrative service fees. Mortality or morbidity charges are also accounted for as revenue on those contracts containing mortality or morbidity risk. Benefits consist of interest credited to contractholder's accounts and claims or benefits incurred in excess of the contractholder's balance. DEFERRED ACQUISITION COSTS Acquisition costs, consisting of commissions and other costs which vary with and are primarily related to production of new business, are deferred. For traditional life and group life products, such costs are amortized over the revenue-producing period of the related policies using the same actuarial assumptions used in computing future policy benefit reserves. Acquisition costs for accident and health insurance policies are deferred and amortized over the lives of the policies in the same manner as premiums are earned. For interest sensitive products, acquisition costs are amortized in relation to the present value of expected future gross profits from investment margins and mortality, morbidity and expense charges. Deferred acquisition costs amortized during 1995, 1994 and 1993 were $117,782, $108,676 and $72,431, respectively. FUTURE POLICY BENEFIT RESERVES Future policy benefit reserves on traditional life products are computed by the net level premium method based upon estimated future investment yield, mortality and withdrawal assumptions, commensurate with the Company's experience, modified as necessary to reflect anticipated trends, including possible unfavorable deviations. Most life reserve interest assumptions are graded from 9% to 5.5%. Future policy benefit reserves for interest sensitive products are generally carried at accumulated contract values. Reserves on some deferred annuity contracts are computed based on contractholder cash value accumulations, adjusted for mortality, withdrawal and interest margin assumptions. Fair values of investment contracts, which include deferred annuities and other annuities without significant mortality risk, were determined by testing amounts payable on demand against discounted cash flows using interest rates commensurate with the risks involved. Fair values are based on the amount payable on demand at December 31, 1995 and 1994. POLICY AND CONTRACT CLAIMS Policy and contract claims represent an estimate of claims and claim adjustment expenses on accident and health and life insurance policies that have been reported but not yet paid and incurred but not yet reported as of December 31. REINSURANCE Insurance liabilities are reported before the effects of reinsurance. Amounts paid or deemed to have been paid for claims covered by reinsurance contracts are recorded as reinsurance receivable. Reinsurance receivables are recognized in a manner consistent with the liabilities related to the underlying reinsured contracts. INVESTMENTS On January 1, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities which addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Those investments are classified in one of three categories. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as "held-to-maturity securities" and reported at amortized cost. Debt and equity securities bought and held principally for the purpose of selling them in the near term are classified as "trading securities" and reported at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as either "held-to-maturity securities" or "trading securities" are classified as "available-for-sale securities" and reported at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity, net of deferred taxes. SFAS No. 115 did not permit retroactive application of its provisions. The Company classified the majority of its investment portfolio as "available-for-sale securities" with a limited number of securities classified as "held-to-maturity" at January 1, 1994. At December 31, 1995, the Company transferred all of its securities with an amortized cost of $83,357 classified as "held-to-maturity' to the "available-for-sale" classifications as provided in the Financial Accounting Standards Board (FASB) Special Report on the implementation of SFAS No. 115. The effect of this transfer was an increase in stockholder's equity of $1,789. All of the Company's investment portfolio is classified as "available-for-sale" at December 31, 1995. Short-term investments are carried at amortized cost which approximates market. Policy loans are reflected at their unpaid principal balances. Mortgage loans are reflected at unpaid principal balances adjusted for premium and discount amortization and an allowance for uncollectible balances. During 1995, the Company adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan and SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures. SFAS No. 114 addresses accounting by creditors for impairment of certain loans. It requires that impaired loans within the scope of the Statement be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, alternatively, at the loan's observable market price of the fair value of supporting collateral. The Company analyzes loan impairment at least once a year when assessing the adequacy of the allowance for possible credit losses. SFAS No. 118 permits existing income recognition practices to continue. The Company does not accrue interest on impaired loans and accounts for interest income on a cash basis. The adoption of these Statements did not have a material impact on the Company's net income or financial position. Investments in real estate are reflected at the lower of cost or market value. Real estate occupied by the Company is reflected at cost, less accumulated depreciation. Investments in real estate, exclusive of land, are being depreciated on a straight-line basis over estimated useful lives ranging from 3 to 30 years. Realized gains and losses are computed based on the specific identification method. As of December 31, 1995 and 1994, investments with a carrying value of $37,879 and $44,337, respectively, were held on deposit with various insurance departments as required by statutory regulations. The fair values of invested assets, excluding investments in real estate, are deemed by management to approximate their estimated market values. The fair value of mortgage loans has been calculated using discounted cash flows and is based on pertinent information available to management as of year end. Policy loan balances which are supported by the underlying cash value of the policies approximate fair value. Changes in market conditions subsequent to year end may cause estimates of fair values to differ from the amounts presented herein. INCOME TAXES Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. SEPARATE ACCOUNTS Separate accounts represent funds for which investment income and investment gains and losses accrue directly to the policyholders and contractholders. Each account has specific investment objectives and the assets are carried at market value. The assets of each account are legally segregated and are not subject to claims which arise out of any other business of the Company. Fair values of separate accounts assets were determined using the market value of the investments held in segregated fund accounts. Fair values of separate accounts liabilities were determined using the cash surrender values of the policyholder's and contractholder's account. RECEIVABLES Receivable balances approximate estimated fair values. This is based on pertinent information available to management as of year end including the financial condition and credit worthiness of the parties underlying the receivables. Changes in market conditions subsequent to year end may cause estimates of fair values to differ from the amounts presented herein. ACCOUNTING CHANGES The impact of implementation of SFAS No. 115 in 1994 was an increase in equity of $74,866 at January 1, 1994.
The table below presents the cumulative effect of changes, net of tax, in accounting principles implemented in 1993 on after tax net income: SFAS No. 106, Accounting for Postretirement Benefits Other Than Pensions $(4,006) SFAS No. 109, Accounting for Income Taxes 30,881 -------- Total cumulative effect on after tax net income of changes in accounting principles $26,875 ========
ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of by a company. The Company will adopt SFAS No. 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. (2) BUSINESS COMBINATION On May 31, 1993, the Company acquired the majority of the assets and liabilities of Fidelity Union Life Insurance Company (FULICO), a wholly owned subsidiary of AZOA, through an assumption reinsurance arrangement. FULICO remained in existence retaining only its corporate charter and those assets necessary to maintain its charter and licenses to conduct life insurance and annuity business until it was sold in 1994. The Company accounted for this transaction as an "as-if pooling of interests" involving the combination of entities under the common control of AZOA. Accordingly, all financial data for periods prior to May 31, 1993 were restated to include the operations of FULICO and all intercompany transactions were eliminated.
Total revenues and net income, before adoption of any changes in accounting, of the separate companies for the five-months ended May 31, 1993 were: Allianz Life FULICO Combined ------------- ------ -------- Five-months ended May 31, 1993: Total revenue $ 309,159 78,814 387,973 Net income 19,224 12,944 32,168
(3) INVESTMENTS
Investments at December 31, 1995 consist of: Amount Amortized Estimated shown on cost fair balance or cost value sheet ---------- --------- --------- Fixed maturities - Available-for-sale: U.S. government $ 793,311 867,793 867,793 States and political subdivisions 469 481 481 Foreign government 254,457 265,797 265,797 Public utilities 32,100 36,728 36,728 Corporate securities 709,906 747,609 747,609 Mortgage backed securities 516,538 548,182 548,182 Collateralized mortgage obligations 80,949 83,008 83,008 ---------- --------- --------- Total fixed maturities $2,387,730 2,549,598 2,549,598 ---------- --------- --------- Equity securities - Available-for-sale: Common stocks: Public utilities 9,305 10,377 10,377 Banks, trusts and insurance companies 6,305 7,108 7,108 Industrial and miscellaneous 171,163 221,002 221,002 Nonredeemable preferred stocks 14,835 15,971 15,971 ---------- --------- --------- Total equity securities $ 201,608 254,458 254,458 ---------- --------- --------- Other investments: Mortgage loans on real estate 203,128 XXXXXXXXX 203,128 Real estate: Investment properties 8,806 XXXXXXXXX 8,806 Partnerships 11,975 XXXXXXXXX 11,975 Certificates of deposit and short term securities 31,501 XXXXXXXXX 31,501 Policy loans 104,184 XXXXXXXXX 104,184 Other long term investments 650 XXXXXXXXX 650 ---------- --------- --------- Total other investments $ 360,244 XXXXXXXXX 360,244 ---------- --------- --------- Total investments $2,949,582 XXXXXXXXX 3,164,300 ========== ========= =========
At December 31, 1995 and 1994, the amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of marketable securities are as follows: Amortized Gross Gross Estimated cost unrealized unrealized fair or cost gains losses value ---------- ---------- ---------- --------- 1995: Available-for-sale: U.S. government $ 793,311 74,482 0 867,793 States and political subdivisions 469 12 0 481 Foreign government 254,457 11,613 273 265,797 Public utilities 32,100 4,628 0 36,728 Corporate securities 709,906 41,746 4,043 747,609 Mortgage backed securities 516,538 31,644 0 548,182 Collateralized mortgage obligations 80,949 2,751 692 83,008 ---------- ---------- ---------- --------- Total fixed maturities 2,387,730 166,876 5,008 2,549,598 Equity securities 201,608 61,753 8,903 254,458 ---------- ---------- ---------- --------- Total $2,589,338 228,629 13,911 2,804,056 ========== ========== ========== ========= 1994: Held-to maturity: Corporate securities $ 90,615 110 5,166 85,559 ---------- ---------- ---------- --------- Total held-to-maturity 90,615 110 5,166 85,559 ---------- ---------- ---------- --------- Available-for-sale: U.S. government 495,048 49 31,403 463,694 States and political subdivisions 519 3 24 498 Foreign government 44,818 562 1,886 43,494 Public utilities 79,170 1,154 322 80,002 Corporate securities 1,099,623 7,034 63,790 1,042,867 Mortgage backed securities 228,894 0 7,815 221,079 Collateralized mortgage obligations 57,739 0 3,165 54,574 ---------- ---------- ---------- --------- Total fixed maturities 2,005,811 8,802 108,405 1,906,208 Equity securities 127,048 18,556 13,892 131,712 ---------- ---------- ---------- --------- Total available-for-sale 2,132,859 27,358 122,297 2,037,920 ---------- ---------- ---------- --------- Total $2,223,474 27,468 127,463 2,123,479 ========== ========== ========== =========
The changes in unrealized gains (losses) on fixed maturities available-for-sale securities were $261,471 and $(214,245) and the changes in unrealized losses on held-to-maturity securities were $0 and $(8,783) for the years ended December 31, 1995 and 1994, respectively. The change in unrealized gains from fixed maturities was $33,645 for the year ended December 31, 1993. The changes in unrealized gains (losses) in equity investments, which include common stocks and nonredeemable preferred stocks, and other investments were $48,186, $(9,587) and $(2,468) for the years ended December 31, 1995, 1994 and 1993, respectively.
The amortized cost and estimated fair value of fixed maturities at December 31, 1995, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Estimated cost fair value ---------- ---------- Available-for-sale: Due in one year or less $ 3,494 3,552 Due after one year through five years 282,290 295,698 Due after five years through ten years 1,252,516 1,337,963 Due after ten years 251,943 281,195 Mortgage backed securities 597,487 631,190 ---------- ---------- Totals $2,387,730 2,549,598 ========== ==========
Gross gains of $41,962 and $26,848 and gross losses of $14,607 and $26,805 were realized on sales of available-for-sale securities in 1995 and 1994, respectively; related taxes were $9,574 and $715 in 1995 and 1994, respectively. Proceeds from redemptions of held-to-maturity securities during 1995 and 1994 were $7,022 and $4,342, respectively, with no gain or loss realized on the transactions. Proceeds from sales of fixed maturity securities in 1993 were $666,893. Gross gains of $25,229 and gross losses of $2,102 were realized on sales of fixed maturities in 1993; related taxes were $8,094.
Net realized investment gains (losses) for the respective years ended December 31 are summarized as follows: 1995 1994 1993 -------- ------- ------- Fixed maturities, at amortized cost $ 0 0 23,127 Fixed maturities, at market 21,877 (2,712) 0 Equity securities 5,478 2,745 5,876 Mortgage loans (687) (1,667) (189) Real estate 2,530 2,067 (513) Other 4 396 17 -------- ------- ------- Net gains before taxes 29,202 829 28,318 Tax expense on net realized gains 10,218 352 10,329 -------- ------- ------- Net gains after taxes $18,984 477 17,989 ======== ======= =======
In 1995, in conjunction with an expanded marketing agreement, the Company provided an unrelated insurance company with $30 million in exchange for a fifteen year convertible debenture paying 5% interest for the first five years with the interest rate reset annually thereafter at the one-year LIBOR plus 1%. If converted, the Company would obtain approximately 10% equity ownership in the unrelated company. The Company has no intention of converting the debenture in the near term. During 1995 and 1994, the Company entered into mortgage backed security reverse repurchase transactions ("dollar rolls") with certain securities dealers. Under this program, the Company sells certain securities for delivery in the current month and simultaneously contracts with the same dealer to repurchase similar, but not identical, securities on a specified future date. The Company gives up the right to receive principal and interest on the securities sold. As of December 31, 1995 there were no outstanding amounts under the Company's dollar roll program. As of December 31, 1994, mortgage backed securities underlying the agreements were carried at a market value of $58,174 and other liabilities included $58,150 for funds received under these agreements. Average balances outstanding were $67,735 and $66,110 and weighted average interest rates were 7.4% and 6.5% during 1995 and 1994, respectively. During 1995 and 1994 the Company participated in a securities lending program that is administered by Allianz Investment Corporation (AIC), an affiliated company. Under this program, the Company loans U.S. Treasury Notes to qualified third parties. The Company obtains collateral for the loan equal to 102 percent of the estimated market value and accrued interest on the loaned securities and receives a portion of the interest earned on the collateral. In addition, the Company maintains full ownership rights to the securities loaned, including investment income and has the ability to sell the securities while they are on loan with the consent of the borrower. There were no securities on loan at December 31, 1995. As of December 31, 1994, the estimated market value of the loaned securities was $110,063, collateralized by investments in FNMA securities.
Impaired mortgage loans are defined as those where it is probable that amounts due according to contractual terms, including principal and interest, will not be collected. Impaired mortgage loans are measured by the Company at the fair value of collateral. Interest income on impaired mortgage loans is recorded on a cash basis. Below is a summary of impaired mortgage loans as of December 31, 1995. Impaired Impaired Total mortgage loans mortgage loans impaired with a related without a related mortgage allowance allowance loans --------------- ----------------- -------- Balance $ 9,210 8,541 17,751 Related allowance 3,580 - 3,580 --------------- ----------------- -------- Balance, net of allowance $ 5,630 8,541 14,171 =============== ================= ========
Below is a summary of interest income on impaired mortgage loans. 1995 ------- Average impaired mortgage loans $19,671 Total interest income on impaired mortgage loans 1,100 Interest income on impaired mortgage loans recorded on a cash basis 1,100
The valuation allowances at December 31, 1995, 1994 and 1993 and the changes in the allowance for the years then ended are summarized as follows: Writedowns Beginning Charged to Charged to End of year Operations Allowance Recoveries of year ---------- ---------- ---------- ---------- ------- December 31, 1995: Mortgage loans $ 11,552 914 0 1,979 10,487 Investment in real estate 1,550 0 0 1,550 0 ---------- ---------- ---------- ---------- ------- Total valuation allowance $ 13,102 914 0 3,529 10,487 ========== ========== ========== ========== ======= December 31, 1994: Mortgage loans $ 11,552 1,598 0 1,598 11,552 Investment in real estate 1,550 0 0 0 1,550 ---------- ---------- ---------- ---------- ------- Total valuation allowance $ 13,102 1,598 0 1,598 13,102 ========== ========== ========== ========== ======= December 31, 1993: Mortgage loans $ 13,602 0 0 2,050 11,552 Investment in real estate 1,854 973 0 1,277 1,550 ---------- ---------- ---------- ---------- ------- Total valuation allowance $ 15,456 973 0 3,327 13,102 ========== ========== ========== ========== =======
Major categories of net investment income for the respective years ended December 31 are: 1995 1994 1993 -------- ------- ------- Interest: Fixed maturities, at amortized cost $ 6,284 6,966 142,814 Fixed maturities, at market 158,421 141,611 0 Mortgage loans 16,125 13,706 12,764 Policy loans 6,688 6,329 6,404 Short-term investments 7,182 3,012 4,159 Dividends: Preferred stock 581 495 231 Common stock 3,204 2,673 2,496 Rental income on real estate 2,781 3,135 2,540 Interest on assets held by reinsurers 10,445 10,470 10,074 Other 833 577 1,131 -------- ------- ------- Total investment income 212,544 188,974 182,613 Investment expenses 11,386 7,683 7,782 -------- ------- ------- Net investment income $201,158 181,291 174,831 ======== ======= =======
(4) SUMMARY TABLE OF FAIR VALUE DISCLOSURES
1995 1995 1994 1994 ---------- ---------- ---------- ---------- Carrying Fair Carrying Fair Amount Value Amount Value ---------- ---------- ---------- ---------- Financial assets - ------------------------------------------- Fixed maturities, at amortized cost: Corporate securities $ 0 $ 0 $ 90,615 $ 85,559 Fixed maturities, at market: U.S. Government 867,793 867,793 463,694 463,694 States and political subdivisions 481 481 498 498 Foreign governments 265,797 265,797 43,494 43,494 Public utilities 36,728 36,728 80,002 80,002 Corporate securities 747,609 747,609 1,042,867 1,042,867 Mortgage backed securities 548,182 548,182 221,079 221,079 Collateralized mortgage obligations 83,008 83,008 54,574 54,574 Equity securities 254,458 254,458 131,712 131,712 Mortgage loans 203,128 212,766 163,099 162,903 Short term investments 31,501 31,501 155,307 155,307 Policy loans 104,184 104,184 101,899 101,899 Other long term investments 650 650 1,117 1,117 Receivables 124,700 124,700 111,874 111,874 Separate accounts assets 8,402,003 8,402,003 6,965,755 6,965,755 Financial liabilities - ------------------------------------------- Investment contracts 3,063,100 2,542,260 2,753,304 2,319,872 Separate account liabilities 8,402,003 8,181,725 6,965,755 6,715,730
See Note 1 "Summary of Significant Accounting Policies" for description of the methods and significant assumptions used to estimate fair values. (5) RECEIVABLES
Receivables at December 31 consist of the following: 1995 1994 -------- ------- Premiums due $ 83,695 76,840 Agents balances 7,236 7,299 Related party receivables 922 1,042 Reinsurance commission receivable 16,693 13,723 Scholarship enrollment fees 6,822 6,753 Due from administrators 6,149 2,735 Other 3,183 3,008 -------- ------- Total receivables $124,700 111,400 ======== =======
(6) ACCIDENT AND HEALTH CLAIMS RESERVES Accident and health claims reserves are based on long-range projections subject to uncertainty. Uncertainty regarding reserves of a given accident year is gradually reduced as new information emerges each succeeding year, thereby allowing more reliable re-evaluations of such reserves. While management believes that reserves as of December 31, 1995 are adequate, uncertainties in the reserving process could cause such reserves to develop favorably or unfavorably in the near term as new or additional information emerges. Any adjustments to reserves are reflected in the operating results of the periods in which they are made. Movements in reserves which are small relative to the amount of such reserves could significantly impact future reported earnings of the Company.
Activity in the accident and health claims reserves, exclusive of long term care, hospital indemnity and AIDS reserves of $18,858, $11,149 and $8,742 in 1995, 1994 and 1993, respectively, is summarized as follows: 1995 1994 1993 --------- -------- -------- Balance at January 1, net of reinsurance recoverables of $96,090, $86,551 and $91,303 $185,028 170,123 168,872 Incurred related to: Current year 242,024 230,995 226,815 Prior years (9,163) (7,290) (8,432) --------- -------- -------- Total incurred 232,861 223,705 218,383 --------- -------- -------- Paid related to: Current year 100,165 82,338 84,172 Prior years 125,920 126,462 132,960 --------- -------- -------- Total paid 226,085 208,800 217,132 --------- -------- -------- Balance at December 31, net of reinsurance recoverables of $99,292, $96,090 and $86,551 $191,804 185,028 170,123 ========= ======== ========
There were no significant adjustments to accident and health claim liabilities resulting from changes in estimates of benefits related to prior years. (7) REINSURANCE In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding risks under excess coverage and coinsurance contracts. The Company retains a maximum of $1 million coverage per individual life. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk to minimize its exposure to significant losses from reinsurer insolvencies. Included in reinsurance receivables at December 31, 1995 are $873,724, $67,819 and $148,319 recoverable from insurers who, as of December 31, 1995, were rated A+, A+ and B++, respectively by Best's Insurance Reports. A contingent liability exists to the extent that the Company's reinsurers are unable to meet their contractual obligations. Management is of the opinion that no liability will accrue to the Company with respect to this contingency.
Life insurance, annuities and accident and health business assumed from and ceded to other companies is as follows: Percentage Assumed Ceded of amount Gross from other to other Net assumed Year ended amount companies companies amount to net - -------------------------------- ----------- ---------- --------- ---------- ----------- December 31, 1995: Life insurance In force $39,601,531 28,790,199 6,884,645 61,507,085 46.8% ----------- ---------- --------- ---------- ----------- Premiums: Life insurance 242,704 108,102 40,291 310,515 34.8% Annuities 145,994 1,117 10,376 136,735 0.8% Accident and health insurance 361,290 165,769 172,559 354,500 46.8% ----------- ---------- --------- ---------- ----------- Total premiums 749,988 274,988 223,226 801,750 34.3% =========== ========== ========= ========== =========== December 31, 1994: Life insurance In force $39,789,859 24,411,513 6,893,030 57,308,342 42.6% ----------- ---------- --------- ---------- ----------- Premiums: Life insurance 230,241 96,308 35,578 290,971 33.1% Annuities 119,045 1,195 6,806 113,434 1.1% Accident and health insurance 388,759 158,749 201,824 345,684 45.9% ----------- ---------- --------- ---------- ----------- Total premiums 738,045 256,252 244,208 750,089 34.2% =========== ========== ========= ========== =========== December 31, 1993: Life insurance In force $39,784,564 21,861,833 6,297,943 55,348,454 39.5% ----------- ---------- --------- ---------- ----------- Premiums: Life insurance 220,287 85,433 42,323 263,397 32.4% Annuities 68,713 870 6,633 62,950 1.4% Accident and health insurance 365,894 142,891 153,948 354,837 40.3% ----------- ---------- --------- ---------- ----------- Total premiums 654,894 229,194 202,904 681,184 33.6% =========== ========== ========= ========== ===========
Of the amounts ceded to others, the Company ceded life insurance inforce of $182,638, $86,055 and $30,841 in 1995, 1994 and 1993, respectively, and life insurance premiums earned of $641, $203 and $98 in 1995, 1994 and 1993, respectively, to its ultimate parent Allianz Aktiengesellshaft. The Company also ceded accident and health premiums earned to Allianz Aktiengesellshaft of $(7,520), $12,256 and $8,966 in 1995, 1994 and 1993. In addition to the above transactions, the Company ceded a portion of its mortality risk associated with the variable annuity product to Allianz Aktiengesellshaft. The Company recorded a recoverable on future policy benefit reserves of $930 as of December 31, 1995. (8) INCOME TAXES INCOME TAX EXPENSE
Total income tax expense (benefit) for the years ended December 31 are as follows: 1995 1994 1993 -------- -------- -------- Income tax expense attributable to operations: Current tax expenses $ 12,993 5,098 30,215 -------- -------- -------- Deferred tax (benefit) expense 25,772 16,053 (10,847) Benefit of operating loss carryforwards 0 0 3,406 Adjustment of deferred tax assets and liabilities for enacted change in tax rates 0 0 945 -------- -------- -------- Total deferred tax (benefit) expense 25,772 16,053 (6,496) -------- -------- -------- Total income tax expense attributable to operations 38,765 21,151 23,719 Income tax effect on equity: Income tax allocated to cumulative effect of adoption of SFAS No. 106 0 0 (2,064) Income tax allocated to stockholder's equity: Adoption of SFAS No. 115 0 40,312 0 Attributable to unrealized gains and losses for the year 108,559 (79,201) 62 -------- -------- -------- Total income tax effect on equity $147,324 (17,738) 21,717 ======== ======== ========
COMPONENTS OF INCOME TAX EXPENSE
Income tax expense computed at the statutory rate of 35% in 1995, 1994 and 1993, varies from tax expense reported in the Consolidated Statements of Income for the respective years ended December 31 as follows: 1995 1994 1993 -------- ------- ------- Income tax expense computed at the statutory rate $44,087 26,819 28,125 Dividends received deductions and tax-exempt interest (5,430) (3,967) (2,189) Foreign tax (464) (79) (1,324) Interest on tax deficiency 408 (716) 528 Impact of statutory rate change on deferred tax liability 0 0 945 Utilization of net operating loss and alternative minimum tax credits 0 0 (2,549) Other 164 (906) 183 -------- ------- ------- Income tax expense as reported $38,765 21,151 23,719 ======== ======= =======
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES ON THE BALANCE SHEET
Tax effects of temporary differences giving rise to the significant components of the net deferred tax liability at December 31 are as follows: 1995 1994 -------- ------- Deferred tax assets: Provision for post retirement benefits $ 1,936 1,885 Allowance for uncollectible accounts 2,283 2,961 Policy reserves 175,963 188,602 Unrealized losses on investments in available for sale securities 0 35,584 -------- ------- Total deferred tax assets 180,182 229,032 -------- ------- Deferred tax liabilities: Deferred acquisition costs 234,393 229,577 Net unrealized gain 72,975 0 Other 12,988 5,262 -------- ------- Total deferred tax liabilities 320,356 234,839 -------- ------- Net deferred tax liability $140,174 5,807 ======== =======
Although realization is not assured, the Company believes it is not necessary to establish a valuation allowance for the deferred tax asset as it is more likely than not the deferred tax asset will be realized principally through future reversals of existing taxable temporary differences and future taxable income. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future reversals of existing taxable temporary differences and future taxable income are reduced. As of December 31, 1995, the Company had no tax loss carryforwards or alternative minimum tax credits. The Company files a consolidated federal income tax return with AZOA and all of its wholly owned subsidiaries. The consolidated tax allocation agreement stipulates that each company participating in the return will bear its share of the tax liability pursuant to United States Treasury Department regulations. The Company and each of its insurance subsidiaries generally will be paid for the tax benefit on their losses, and any other tax attributes, to the extent they could have obtained a benefit against their post-1990 separate return taxable income or tax. Income taxes paid by the Company were $14,865, $15,162 and $28,465 in 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994 the Company has a tax recoverable from AZOA of $3,257 and $5,095 and a recoverable from Revenue Canada Taxation of $690 and a payable to Revenue Canada Taxation of $1,301, respectively. (9) RELATED PARTY TRANSACTIONS In November 1995, the Company purchased the 400 non-voting common shares in its subsidiary, Canadian American Financial Corporation from AZOA for $7,903. The acquisition of the shares increased the Company's equity ownership in both voting and non-voting common stock to 100%. As of December 31, 1995 and 1994, Allianz Real Estate (AzRE), a wholly owned subsidiary of AZOA, owned 100% of the stock or was a limited partner of certain entities whose assets include mortgage loans issued by the Company amounting to $6,245 and $12,100, respectively. Included in the mortgage loans are properties originally foreclosed upon by the Company of which the balances at December 31, 1995 and 1994 are $1,650 and $4,575, respectively. Allianz Investment Corporation (AIC) manages the Company's investment portfolio. The Company paid AIC $1,024, $1,285 and $1,207 in 1995, 1994 and 1993, respectively, for investment advisory fees. The Company's liability to AIC was $377 and $0 at December 31, 1995 and 1994, respectively. The Company shares a data center with affiliated insurance companies. Usage charges paid to the data center by the Company were $3,752, $4,228 and $4,715 in 1995, 1994 and 1993, respectively. The Company's liability for data center charges was $337 and $457 at December 31, 1995 and 1994, respectively. The Company reimbursed AZOA $738, $817 and $339 in 1995, 1994 and 1993, respectively, for certain administrative services performed. The Company's liability to AZOA was $528 and $264 at December 31, 1995 and 1994, respectively. In June 1994, the Company authorized 200 million shares of preferred stock with a par value of $1 per share. This preferred stock is issuable in series with the number of shares, redemption rights and dividend rate designated by the Board of Directors for each series. Dividends are cumulative at a rate reflective of prevailing market conditions at time of issue and are payable semiannually. Dividend payments are restricted by provisions in State of Minnesota statutes. In June 1994, the Company issued 25 millions shares of Series A preferred stock with a dividend rate of 6.4% to AZOA for $25,000. In December 1994, the Company issued 15 millions shares of Series B preferred stock with a dividend rate of 6.95% to AZOA for $15,000. In December 1995, the Company redeemed and canceled the 15 million shares of Series B preferred stock issued to AZOA. There are currently 25 million shares of Series A preferred stock issued and outstanding. In 1995 and 1994, AZOA contributed additional capital to the Company of $594 and $5,190, respectively. (10) EMPLOYEE BENEFIT PLANS The Company participates in the Allianz Primary Retirement Plan (Primary Retirement Plan), a defined contribution plan. The Company makes contributions to a money purchase pension plan on behalf of eligible participants. All employees, excluding agents, are eligible to participate in the Primary Retirement Plan after two years of service. The contributions are based on a percentage of the participant's salary with the participants being 100% vested upon eligibility. It is the Company's policy to fund the plan costs as accrued. Total pension contributions were $860, $918 and $1,363 in 1995, 1994 and 1993, respectively. The Company participates in the Allianz Asset Accumulation Plan (Allianz Plan), a defined contribution plan sponsored by AZOA. Under the Allianz Plan provisions, the Company will match from 50% to 100% of eligible employees' contributions up to a maximum of 6% of a participant's compensation. The total Company match for 1995, 1994 and 1993 Plan participants was 100%. All employees, excluding agents, are eligible to participate after one year of service and are fully vested in the Company's matching contribution after three years of service. The Allianz Plan will accept participants' pretax or after-tax contributions up to 15% of the participant's compensation. It is the Company's policy to fund the Allianz Plan costs as accrued. The Company has accrued $1,188, $1,266 and $1,270 in 1995, 1994 and 1993, respectively, toward planned contributions. The Company sponsors an asset accumulation plan for field agents. Under the Plan provisions, the Company will match 100% of eligible agents' contributions up to a maximum of 3% of a participant's compensation. The Plan accepts participant's pretax or after tax contributions up to 10% of participant's compensation. It is the Company's policy to fund the Plan costs as accrued. In 1995, the Company discontinued support of its individual agency field force and suspended contributions to the Plan as of January 1, 1996. Also during 1995, participation in the Plan decreased significantly resulting in a partial plan termination whereby participants as of January 1, 1995 became fully vested in the Plan. The Company has no intention to fully terminate the Plan in the near term. Total Company contributions to the Plan were $118, $386 and $319 in 1995, 1994 and 1993, respectively. The Company adopted SFAS No. 106, effective January 1, 1993 which requires benefits paid to retirees, other than pension benefits, to be accrued. The transition obligation associated with this adoption was $4,006, which is net of a $2,064 tax benefit. The Company's current plan obligation is $5,532 and the liability is included in "Other liabilities" in the accompanying balance sheet. (11) STATUTORY FINANCIAL DATA AND DIVIDEND RESTRICTIONS Statutory accounting is directed toward insurer solvency and protection of policyholders. Accordingly, certain items recorded in financial statements prepared under GAAP are excluded in determining statutory policyholders' surplus. These items include, among other, deferred acquisition costs, furniture and fixtures, accident and health premiums receivable which are more than 90 days past due, deferred taxes and undeclared dividends to policyholders. Additionally, future life policy and annuity benefit reserves calculated for statutory accounting do not include provisions for withdrawals.
The differences between stockholder's equity and net income reported in accordance with statutory accounting practices and the accompanying consolidated financial statements as of and for the year ended December 31 are as follows: Stockholder's Stockholder's Net Net Net equity equity Income Income Income --------------- -------------- -------- --------- --------- 1995 1994 1995 1994 1993 --------------- -------------- -------- --------- --------- Statutory basis $ 299,186 294,334 11,565 6,895 657 Adjustments: Change in reserve basis (211,678) (339,283) (43,642) (109,473) (138,864) Deferred acquisition costs 826,994 798,442 28,552 132,090 253,240 Net deferred taxes (140,174) (5,807) (25,772) (16,053) 6,496 Statutory asset valuation reserve 100,462 59,169 0 0 0 Statutory interest maintenance reserve 25,061 16,305 8,756 (4,768) 11,178 Modified coinsurance reinsurance (119,178) (51,947) 104,222 44,920 (75,611) Unrealized gains (losses) on investments 163,237 (99,408) 0 0 0 Nonadmitted assets 1,471 2,302 0 0 0 Cumulative effect of accounting changes 0 0 0 0 26,875 Other 5,813 5,338 3,516 1,864 (461) --------------- -------------- -------- --------- --------- As reported in the accompanying consolidated financial statements $ 951,194 679,445 87,197 55,475 83,510 =============== ============== ======== ========= =========
The Company is required to meet minimum statutory capital and surplus requirements. The Company's statutory capital and surplus as of December 31, 1995 and 1994 was in compliance with these requirements. The maximum amount of dividends which can be paid by Minnesota insurance companies to stockholders without prior approval of the Commissioner of Commerce is subject to restrictions relating to statutory earned surplus, also known as unassigned funds. Unassigned funds are determined in accordance with the accounting procedures and practices governing preparation of the statutory annual statement, minus 25% of earned surplus attributable to unrealized capital gains. In accordance with Minnesota Statutes, the Company may declare and pay from its surplus, cash dividends of not more than the greater of 10% of its beginning of the year statutory surplus in any year, or the net gain from operations of the insurer, not including realized gains, for the 12-month period ending the 31st day of the next preceding year. In 1995 and 1994, respectively, the Company paid dividends on preferred stock in the amount of $2,651 and $413, respectively to AZOA. Dividends of $23,433 could be paid in 1996 without prior approval of the Commissioner of Commerce. REGULATORY RISK BASED CAPITAL
An insurance enterprise's state of domicile imposes minimum risk-based capital requirements that were developed by the National Association of Insurance Commissioners (NAIC). The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of an enterprise's regulatory total adjusted capital to its authorized control level risk-based capital, as defined by the NAIC. Enterprises below specific triggerpoints or ratios are classified within certain levels, each of which requires specified corrective action. The levels and ratios are as follows: Ratio of total adjusted capital to authorized control level risk-based Regulatory Event Capital (less than or equal to) - ------------------------ ------------------------------------ Company action level 2 (or 2.5 with negative trends) Regulatory action level 1.5 Authorized control level 1 Mandatory control level 0.7
The Company met the minimum risk-based capital requirements for the years ended December 31, 1995 and 1994. PERMITTED STATUTORY ACCOUNTING PRACTICES The Company is required to file annual statements with insurance regulatory authorities which are prepared on an accounting basis prescribed or permitted by such authorities. Currently, prescribed statutory accounting practices include state laws, regulations, and general administrative rules, as well as a variety of publications of the NAIC. Permitted statutory accounting practices encompass all accounting practices that are not prescribed; such practices differ from state to state, may differ from company to company within a state, and may change in the future. The NAIC currently has a project underway to codify statutory accounting practices, the result of which is expected to constitute the only source of "prescribed" statutory accounting practices. Accordingly, that project will likely change the definition of what comprises prescribed versus permitted statutory accounting practices, and may result in changes to existing accounting policies insurance enterprises use to prepare their statutory financial statements. The Company does not currently use permitted statutory accounting practices which have a significant impact on its statutory financial statements. (12) COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are involved in various pending or threatened legal proceedings arising from the conduct of their business. In the opinion of management, the ultimate resolution of such litigation will not have a material adverse effect on the consolidated financial position of the Company. The Company is contingently liable for possible future assessments under regulatory requirements pertaining to insolvencies and impairments of unaffiliated insurance companies. Provision has been made for assessments currently received and assessments anticipated for known insolvencies. (13) FOREIGN CURRENCY TRANSLATION
The net assets of the Company's foreign operations are translated into U.S. dollars using exchange rates in effect at each year end. Translation adjustments arising from differences in exchange rates from period to period are included in the accumulated foreign currency translation adjustment reported as a separate component of stockholder's equity. An analysis of this account for the respective years ended December 31 follows: 1995 1994 1993 -------- ------- ------- Beginning amount of cumulative translation adjustments $(3,787) (2,708) (1,835) -------- ------- ------- Aggregate adjustment for the period resulting from translation adjustments 511 (1,659) (1,746) Amount of income tax benefit for period related to aggregate adjustment (179) 580 873 -------- ------- ------- Net aggregate translation included in equity 332 (1,079) (873) -------- ------- ------- Ending amount of cumulative translation adjustments $(3,455) (3,787) (2,708) ======== ======= ======= Canadian foreign exchange rate at end of year 0.7329 0.7129 0.7554
(14) SUPPLEMENTARY INSURANCE INFORMATION
The following table summarizes certain financial information by line of business for 1995, 1994 and 1993: As of December 31 For the year ended December 31 --------- --------- -------- -------- --------- ------- --------- --------- --------- --------- Amortiz- Future Premium Benefits, ation policy Other revenue claims of Deferred benefits, policy and losses, deferred policy losses, claims other Net and policy acquis- claims and contract invest- settle- acquis- Other Premiums ition and loss Unearned benefits consider- ment ment ition operating written costs expense premiums payable ations income expenses costs (a) expenses (b) --------- --------- -------- -------- --------- ------- --------- --------- --------- --------- 1995: Life $ 179,915 1,088,964 5,493 62,660 310,514 83,741 239,287 8,475 124,415 Annuities 629,515 2,601,943 0 580 136,736 98,214 89,321 (34,235) 137,000 Accident and health 17,564 0 28,688 308,658 354,500 19,203 249,232 (2,792) 105,615 --------- --------- -------- -------- --------- ------- --------- --------- --------- $ 826,994 3,690,907 34,181 371,898 801,750 201,158 577,840 (28,552) 367,030 ========= ========= ======== ======== ========= ======= ========= ========= ========= 1994: Life $ 188,390 1,022,537 6,012 63,728 290,971 78,100 228,383 6,889 114,767 Annuities 595,280 2,304,560 0 360 113,434 86,168 88,100 (140,776) 210,933 Accident and health 14,772 0 34,364 291,323 345,684 17,023 236,614 1,797 121,645 --------- --------- -------- -------- --------- ------- --------- --------- --------- $ 798,442 3,327,097 40,376 355,411 750,089 181,291 553,097 (132,090) 447,345 ========= ========= ======== ======== ========= ======= ========= ========= ========= 1993: Life $ 195,279 989,309 7,389 57,763 263,397 80,422 206,157 (10,925) 186,457 Annuities 454,504 1,986,801 0 578 62,950 78,674 86,227 (243,113) 191,783 Accident and health 16,569 0 34,181 264,583 354,837 15,735 241,443 804 154,493 --------- --------- -------- -------- --------- ------- --------- --------- --------- $ 666,352 2,976,110 41,570 322,924 681,184 174,831 533,827 (253,234) 532,733 ========= ========= ======== ======== ========= ======= ========= ========= =========
(a) Represents the net change in deferred policy acquisition cost reported in the income statement. (b) Premiums written are not applicable for life insurance companies. PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits a. Financial Statements The following financial statements of the Company are included in Part B hereof. 1. Independent Auditors' Report. 2. Consolidated Balance Sheets as of December 31, 1995 and 1994. 3. Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993. 4. Consolidated Statements of Stockholder's Equity for the years ended December 31, 1995, 1994 and 1993. 5. Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993. 6. Notes to Consolidated Financial Statements - December 31, 1995, 1994 and 1993. The following financial statements of the Separate Account are included in Part B hereof. 1. Statements of Assets and Liabilities as of September 30, 1996 (unaudited). 2. Statements of Operations for the period ended September 30, 1996 (unaudited). 3. Statements of Changes in Net Assets for the period ended September 30, 1996 (unaudited) and the year ended December 31, 1995. 4. Notes to Financial Statements - September 30, 1996 (unaudited). 5. Independent Auditors' Report. 6. Statements of Assets and Liabilities as of December 31, 1995. 7. Statements of Operations for the year ended December 31, 1995. 8. Statements of Changes in Net Assets for the years ended December 31, 1995 and 1994. 9. Notes to Financial Statements - December 31, 1995. b. Exhibits 1. Resolution of Board of Directors of the Company authorizing the establishment of the Variable Account* 2. Not Applicable 3. Principal Underwriter's Agreement 4. Individual Variable Annuity Contract* 4.a. Waiver of Contingent Deferred Sales Charge Endorsement* 4.b. Enhanced Death Benefit Endorsement* 5. Application for Individual Variable Annuity Contract* 6. (i) Copy of Articles of Incorporation of the Company* (ii) Copy of the Bylaws of the Company* 7. Not Applicable 8. Form of Fund Participation Agreement* 9. Opinion and Consent of Counsel 10. Independent Auditors' Consent 11. Not Applicable 12. Not Applicable 13. Calculation of Performance Data 14. Company Organizational Chart 27. Financial Data Schedule * Incorporated by reference to Registrant's Form N-4 electronically filed on June 24, 1996. Item 25. Directors and Officers of the Depositor The following are the Officers and Directors of the Insurance Company:
Name and Principal Positions and Offices Business Address with Depositor - ---------------------------- --------------------------------- Lowell C. Anderson Chairman, President, Chief 1750 Hennepin Avenue Executive Officer and Director Minneapolis, MN 55403 Herbert F. Hansmeyer Director 777 San Marin Drive Novato, CA 94998 Michael P. Sullivan Director 7505 Metro Boulevard Minneapolis, MN 55439 Dr. Jerry E. Robertson Director 220-13E-29/3M Center St. Paul, MN 55144 Dr. Gerhard Rupprecht Director Reinsburgstrasse 19 D-70178 Stuttgart, Germany Edward J. Bonach Senior Vice President, Chief 1750 Hennepin Avenue Financial Officer and Treasurer Minneapolis, MN 55403 Alan A. Grove Vice President-Law & Secretary 1750 Hennepin Avenue Minneapolis, MN 55403 Robert S. James President - Individual 1750 Hennepin Avenue Division Minneapolis, MN 55403 Ronald L. Wobbeking President-Mass Marketing Division 1750 Hennepin Avenue Minneapolis, MN 55403 Rev. Dennis Dease Director c/o University of St. Thomas 215 Summit Avenue St. Paul, MN 55105-1096 James R. Campbell Director c/o Norwest Corp. Norwest Center Sixth & Marquette Minneapolis, MN 55479-0116
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant The Insurance Company organizational chart is included as Exhibit 14. Item 27. Number of Contract Owners Not Applicable Item 28. Indemnification The Bylaws of the Insurance Company provide that: Each person (and the heirs, executors, and administrators of such person) made or threatened to be made a party to any action, civil or criminal, by reason of being or having been a Director, officer, or employee of the corporation (or by reason of serving any other organization at the request of the corporation) shall be indemnified to the extent permitted by the laws of the State of Minnesota, and in the manner prescribed therein. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted for directors and officers or controlling persons of the Insurance Company pursuant to the foregoing, or otherwise, the Insurance Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Insurance Company of expenses incurred or paid by a director, officer or controlling person of the Insurance Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 29. Principal Underwriters a. NALAC Financial Plans LLC is the principal underwriter for the Contracts. It also is the principal underwriter for: Allianz Life Variable Account A Preferred Life Variable Account C b. The following are the officers and directors of NALAC Financial Plans LLC:
Positions and Offices Business Address with Underwriter - ---------------------- ---------------------- James P. Kelso Director 1750 Hennepin Avenue Minneapolis, MN 55403 Alan A. Grove Director 1750 Hennepin Avenue Minneapolis, MN 55403 Thomas B. Clifford President and Director 1750 Hennepin Avenue Minneapolis, MN 55403 Michael T. Westermeyer Secretary and Director 1750 Hennepin Avenue Minneapolis, MN 55403 Michael J. Yates Treasurer 1750 Hennepin Avenue Minneapolis, MN 55403 Edward J. Bonach Director 1750 Hennepin Avenue Minneapolis, MN 55403 Catherine L. Mielke Compliance Officer 1750 Hennepin Avenue Minneapolis, MN 55403
Item 30. Location of Accounts and Records Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota, maintains physical possession of the accounts, books or documents of the Variable Account required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder. Item 31. Management Services Not Applicable Item 32. Undertakings a. Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen (16) months old for so long as payment under the variable annuity contracts may be accepted. b. Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. c. Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. d. Allianz Life Insurance Company of North America ("Company") hereby represents that the fees and charges deducted under the Contract described in the Prospectus, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by the Company. REPRESENTATIONS The Insurance Company hereby represents that it is relying upon a No Action Letter issued to the American Council of Life Insurance, dated November 28, 1988 (Commission ref. IP-6-88), and that the following provisions have been complied with: 1. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in each registration statement, including the prospectus, used in connection with the offer of the contract; 2. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in any sales literature used in connection with the offer of the contract; 3. Instruct sales representatives who solicit participants to purchase the contract specifically to bring the redemption restrictions imposed by Section 403(b)(11) to the attention of the potential participants; 4. Obtain from each plan participant who purchases a Section 403(b) annuity contract, prior to or at the time of such purchase, a signed statement acknowledging the participant's understanding of (1) the restrictions on redemption imposed by Section 403(b)(11), and (2) other investment alternatives available under the employer's Section 403(b) arrangement to which the participant may elect to transfer his contract value. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, as amended, the Registrant has caused this Registration Statement to be signed on its behalf in the City of Minneapolis and State of Minnesota, on this 9th day of December, 1996. ALLIANZ LIFE VARIABLE ACCOUNT B (Registrant) By: ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA (Depositor) By:/s/ ALAN A. GROVE -------------------------------- ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA (Depositor) By:/s/ ALAN A. GROVE ------------------------------ Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature and Title
Chairman of the Board, Lowell C. Anderson* President 12/9/96 - ----------------------- ------- Lowell C. Anderson and Chief Executive Officer Herbert F. Hansmeyer* Director 12/9/96 - ----------------------- ------- Herbert F. Hansmeyer Michael P. Sullivan* Director 12/9/96 - ----------------------- ------- Michael P. Sullivan Dr. Jerry E. Robertson* Director 12/9/96 - ----------------------- ------- Dr. Jerry E. Robertson Dr. Gerhard Rupprecht* Director 12/9/96 - ----------------------- ------- Dr. Gerhard Rupprecht Edward J. Bonach* Chief Financial Officer 12/9/96 - ----------------------- ------- Edward J. Bonach Rev. Dennis Dease* Director 12/9/96 - ----------------------- ------- Rev. Dennis Dease James R. Campbell* Director 12/9/96 - ----------------------- ------- James R. Campbell
*By Power of Attorney By: /s/ ALAN A. GROVE -------------------------------- Alan A. Grove Attorney-in-Fact EXHIBITS TO PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM N-4 ALLIANZ LIFE VARIABLE ACCOUNT B ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA INDEX TO EXHIBITS EXHIBIT PAGE 99.B3 Principal Underwriter's Agreement 99.B9 Opinion and Consent of Counsel 99.B10 Independent Auditor's Consent 99.B13 Calculation of Performance Data 99.B14 Company Organizational Chart 27 Financial Data Schedule EX-99.B3 2 PRINCIPAL UNDERWRITER'S AGREEMENT PRINCIPAL UNDERWRITER'S AGREEMENT IT IS HEREBY AGREED by and between NORTH AMERICAN LIFE AND CASUALTY COMPANY ("INSURANCE COMPANY") on behalf of NALAC VARIABLE ACCOUNT B (the "Variable Account") and NALAC FINANCIAL PLANS, INC. ("PRINCIPAL UNDERWRITER") as follows: I INSURANCE COMPANY proposes to issue and sell Individual Flexible Payment Variable Annuity Contracts (the "Contracts") to the public through PRINCIPAL UNDERWRITER. The PRINCIPAL UNDERWRITER agrees to provide sales service subject to the terms and conditions hereof. The Contracts to be sold are more fully described in the registration statement and the prospectuses hereinafter mentioned. Such Contracts will be issued by INSURANCE COMPANY through the Variable Account. II INSURANCE COMPANY grants PRINCIPAL UNDERWRITER the exclusive right, during the term of this Agreement, subject to registration requirements of the Securities Act of 1933 and the Investment Company Act of 1940 and the provisions of the Securities Exchange Act of 1934, to be the distributor of the Contracts issued through the Variable Account. PRINCIPAL UNDERWRITER will sell the Contracts under such terms as set by INSURANCE COMPANY and will make such sales to purchasers permitted to buy such Contracts as specified in the prospectus. III PRINCIPAL UNDERWRITER agrees that it shall undertake at its own expense, to perform all duties and functions which are necessary and proper for the distribution of the Contracts. IV PRINCIPAL UNDERWRITER shall be compensated for its distribution services with respect to the Contracts covered hereby to the extent necessary for PRINCIPAL UNDERWRITER to meet its obligations pursuant to selling agreements with approved broker/dealers. V On behalf of the Variable Account, INSURANCE COMPANY shall furnish PRINCIPAL UNDERWRITER with copies of all prospectuses, financial statements and other documents which PRINCIPAL UNDERWRITER reasonably requests for use in connection with the distribution of the Contracts. INSURANCE COMPANY shall provide to PRINCIPAL UNDERWRITER such number of copies of the current effective prospectus as PRINCIPAL UNDERWRITER shall request. VI PRINCIPAL UNDERWRITER is not authorized to give any information, or to make any representations concerning the Contracts or the Variable Account of INSURANCE COMPANY other than those contained in the current registration statement or prospectus filed with the Securities and Exchange Commission or such sales literature as may be authorized by INSURANCE COMPANY. VII Both parties to this Agreement agree to keep the necessary records as indicated by applicable state and federal law and to render the necessary assistance to one another for the accurate and timely preparation of such records. VIII This Agreement shall be effective upon the execution hereof and will remain in effect unless terminated as hereinafter provided. This Agreement shall automatically be terminated in the event of its assignment by PRINCIPAL UNDERWRITER. This Agreement may at any time be terminated by either party hereto upon 60 days written notice to the other party. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been given on the date of service if served personally on the party to whom notice is to be given, or on the date of mailing if sent by First Class Mail, Registered or Certified, postage prepaid and properly addressed. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed on their behalf by their respective officers thereunto duly authorized. EXECUTED this 14 day of September, 1988. INSURANCE COMPANY NORTH AMERICAN LIFE AND CASUALTY COMPANY /s/ Lowell C. Anderson BY: _____________________________ Lowell C. Anderson, President /s/Michael Westermeyer ATTEST: _______________________ Secretary PRINCIPAL UNDERWRITER NALAC FINANCIAL PLANS, INC. /s/ Thomas B. Clifford BY: _________________________________ Thomas B. Clifford, Exec. Vice Pres. /s/Michael Westermeyer ATTEST: ____________________ Secretary EX-99.B9 3 OPINION AND CONSENT OF COUNSEL December 13, 1996 Board of Directors Allianz Life Insurance Company of North America 1750 Hennepin Avenue Minneapolis, MN 55403-2195 RE: Opinion and Consent of Counsel - Allianz Life Variable Account B ----------------------------------------------------------------- Dear Sir or Madam: You have requested our Opinion of Counsel in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, of a Registration Statement on Form N-4 for the Individual Flexible Payment Variable Annuity Contracts to be issued by Allianz Life Insurance Company of North America and its separate account, Allianz Life Variable Account B. We are of the following opinions: 1. Allianz Life Insurance Company of North America is a valid and existing stock life insurance company of the state of Minnesota. 2. Allianz Life Variable Account B is a separate investment account of Allianz Life Insurance Company of North America created and validly existing pursuant to the Minnesota Insurance Laws and the Regulations thereunder. 3. Upon the acceptance of purchase payments made by an Owner pursuant to a Contract issued in accordance with the Prospectus contained in the Registration Statement and upon compliance with applicable law, such an Owner will have a legally-issued, fully-paid, non-assessable contractual interest under such Contract. You may use this opinion letter, or copy hereof, as an exhibit to the Registration Statement. We consent to the reference to our Firm under the caption "Legal Opinions" contained in the Statement of Additional Information which forms a part of the Registration Statement. Sincerely, BLAZZARD, GRODD & HASENAUER, P.C. By: /s/ LYNN KORMAN STONE ------------------------ Lynn Korman Stone EX-99.B10 4 INDEPENDENT AUDITOR'S CONSENT KPMG Peat Marwick LLP Telephone 612 305 5000 Telefax 612 305 5039 4200 Norwest Center Minneapolis, MN 55402 Independent Auditors' Consent The Board of Directors of Allianz Life Insurance Company of North America and the Contract Owners of Allianz Life Variable Account B: We consent to the use of our report, dated January 22, 1996, on the financial statements of Allianz Life Variable Account B and our report dated February 6, 1996, on the consolidated financial statements of Allianz Life Insurance Company of North America and subsidiaries included herein and to the reference to our Firm under the heading "EXPERTS". KPMG Peat Marwick LLP Minneapolis, Minnesota December 13, 1996 EX-99.B13 5 CALCULATION OF PERFORMANCE EX-99.B13 6 CALCULATION OF PERFORMANCE INFORMATION
FRANKLIN VALUEMARK IV Allianz Life Variable Account B Cumulative and Average Annual Total Return Calculations Original Purchase as of September 30, 1995 Valuation Date as of September 30, 1996 Dollar Units This Accum. Accum. Date Transaction Amount Unit Value Trans. Units Value Growth and Income 9-30-95 Purchase $1,000.00 $16.06727515 62.238 62.238 $1,000.00 9-30-96 Contract Fee (1.00) 17.99590776 (0.056) 62.183 1,119.03 9-30-96 Value before Surr Chg 17.99590776 0.000 62.183 1,119.03 9-30-96 Surrender Charge (60.00) 17.99590776 (3.334) 58.849 1,059.03 Cumulative and Average Annual Total Returns without/with charges 12.00% A 5.90% B High Income 9-30-95 Purchase $1,000.00 $16.74221226 59.729 59.729 $1,000.00 9-30-96 Contract Fee (1.00) 18.51829760 (0.054) 59.675 1,105.08 9-30-96 Value before Surr Chg 18.51829760 0.000 59.675 1,105.08 9-30-96 Surrender Charge (60.00) 18.51829760 (3.240) 56.435 1,045.08 Cumulative and Average Annual Total Returns without/with charges 10.61% A 4.51% B Income Securities 9-30-95 Purchase $1,000.00 $18.92064395 52.852 52.852 $1,000.00 9-30-96 Contract Fee (1.00) 20.56625705 (0.049) 52.804 1,085.97 9-30-96 Value before Surr Chg 20.56625705 0.000 52.804 1,085.97 9-30-96 Surrender Charge (60.00) 20.56625705 (2.917) 49.886 1,025.97 Cumulative and Average Annual Total Returns without/with charges 8.70% A 2.60% B Money Market 9-30-95 Purchase $1,000.00 $12.67862500 78.873 78.873 $1,000.00 9-30-96 Contract Fee (1.00) 13.14897921 (0.076) 78.797 1,036.10 9-30-96 Value before Surr Chg 13.14897921 0.000 78.797 1,036.10 9-30-96 Surrender Charge (60.00) 13.14897921 (4.563) 74.234 976.10 Cumulative and Average Annual Total Returns without/with charges 3.71% A -2.39% B Precious Metals 9-30-95 Purchase $1,000.00 $14.30299298 69.915 69.915 $1,000.00 9-30-96 Contract Fee (1.00) 14.44871469 (0.069) 69.846 1,009.19 9-30-96 Value before Surr Chg 14.44871469 0.000 69.846 1,009.19 9-30-96 Surrender Charge (60.00) 14.44871469 (4.153) 65.694 949.19 Cumulative and Average Annual Total Returns without/with charges 1.02% A -5.08% B Real Estate Securities 9-30-95 Purchase $1,000.00 $17.14662208 58.321 58.321 $1,000.00 9-30-96 Contract Fee (1.00) 20.41418251 (0.049) 58.272 1,189.57 9-30-96 Value before Surr Chg 20.41418251 0.000 58.272 1,189.57 9-30-96 Surrender Charge (60.00) 20.41418251 (2.939) 55.332 1,129.57 Cumulative and Average Annual Total Returns without/with charges 19.06% A 12.96% B Rising Dividends 9-30-95 Purchase $1,000.00 $11.76021472 85.032 85.032 $1,000.00 9-30-96 Contract Fee (1.00) 13.75349501 (0.073) 84.960 1,168.49 9-30-96 Value before Surr Chg 13.75349501 0.000 84.960 1,168.49 9-30-96 Surrender Charge (60.00) 13.75349501 (4.363) 80.597 1,108.49 Cumulative and Average Annual Total Returns without/with charges 16.95% A 10.85% B Templeton Developing Markets Equity 9-30-95 Purchase $1,000.00 $9.86694826 101.348 101.348 $1,000.00 9-30-96 Contract Fee (1.00) 10.77702435 (0.093) 101.256 1,091.23 9-30-96 Value before Surr Chg 10.77702435 0.000 101.256 1,091.23 9-30-96 Surrender Charge (60.00) 10.77702435 (5.567) 95.688 1,031.23 Cumulative and Average Annual Total Returns without/with charges 9.22% A 3.12% B Templeton Global Asset Allocation 9-30-95 Purchase $1,000.00 $10.31547742 96.942 96.942 $1,000.00 9-30-96 Contract Fee (1.00) 11.66530262 (0.086) 96.856 1,129.85 9-30-96 Value before Surr Chg 11.66530262 0.000 96.856 1,129.85 9-30-96 Surrender Charge (60.00) 11.66530262 (5.143) 91.713 1,069.85 Cumulative and Average Annual Total Returns without/with charges 13.09% A 6.99% B Templeton Global Growth 9-30-95 Purchase $1,000.00 $11.35313989 88.081 88.081 $1,000.00 9-30-96 Contract Fee (1.00) 12.50397253 (0.080) 88.001 1,100.37 9-30-96 Value before Surr Chg 12.50397253 0.000 88.001 1,100.37 9-30-96 Surrender Charge (60.00) 12.50397253 (4.798) 83.203 1,040.37 Cumulative and Average Annual Total Returns without/with charges 10.14% A 4.04% B Templeton Global Income Securities 9-30-95 Purchase $1,000.00 $14.81615304 67.494 67.494 $1,000.00 9-30-96 Contract Fee (1.00) 15.95015926 (0.063) 67.431 1,075.54 9-30-96 Value before Surr Chg 15.95015926 0.000 67.431 1,075.54 9-30-96 Surrender Charge (60.00) 15.95015926 (3.762) 63.669 1,015.54 Cumulative and Average Annual Total Returns without/with charges 7.65% A 1.55% B Templeton International Equity 9-30-95 Purchase $1,000.00 $13.46442393 74.270 74.270 $1,000.00 9-30-96 Contract Fee (1.00) 14.80159719 (0.068) 74.202 1,098.31 9-30-96 Value before Surr Chg 14.80159719 0.000 74.202 1,098.31 9-30-96 Surrender Charge (60.00) 14.80159719 (4.054) 70.149 1,038.31 Cumulative and Average Annual Total Returns without/with charges 9.93% A 3.83% B Templeton Pacific Growth 9-30-95 Purchase $1,000.00 $13.51540299 73.990 73.990 $1,000.00 9-30-96 Contract Fee (1.00) 14.81034174 (0.068) 73.922 1,094.81 9-30-96 Value before Surr Chg 14.81034174 0.000 73.922 1,094.81 9-30-96 Surrender Charge (60.00) 14.81034174 (4.051) 69.871 1,034.81 Cumulative and Average Annual Total Returns without/with charges 9.58% A 3.48% B U.S. Government Securities 9-30-95 Purchase $1,000.00 $15.61931137 64.023 64.023 $1,000.00 9-30-96 Contract Fee (1.00) 16.10244905 (0.062) 63.961 1,029.93 9-30-96 Value before Surr Chg 16.10244905 0.000 63.961 1,029.93 9-30-96 Surrender Charge (60.00) 16.10244905 (3.726) 60.235 969.93 Cumulative and Average Annual Total Returns without/with charges 3.09% A -3.01% B Utility Equity 9-30-95 Purchase $1,000.00 $17.90165113 55.861 55.861 $1,000.00 9-30-96 Contract Fee (1.00) 19.56116280 (0.051) 55.810 1,091.70 9-30-96 Value before Surr Chg 19.56116280 0.000 55.810 1,091.70 9-30-96 Surrender Charge (60.00) 19.56116280 (3.067) 52.742 1,031.70 Cumulative and Average Annual Total Returns without/with charges 9.27% A 3.17% B Zero Coupon - 2000 9-30-95 Purchase $1,000.00 $17.41377516 57.426 57.426 $1,000.00 9-30-96 Contract Fee (1.00) 17.91679072 (0.056) 57.370 1,027.89 9-30-96 Value before Surr Chg 17.91679072 0.000 57.370 1,027.89 9-30-96 Surrender Charge (60.00) 17.91679072 (3.349) 54.021 967.89 Cumulative and Average Annual Total Returns without/with charges 2.89% A -3.21% B Zero Coupon - 2005 9-30-95 Purchase $1,000.00 $19.28096297 51.865 51.865 $1,000.00 9-30-96 Contract Fee (1.00) 19.52625010 (0.051) 51.813 1,011.72 9-30-96 Value before Surr Chg 19.52625010 0.000 51.813 1,011.72 9-30-96 Surrender Charge (60.00) 19.52625010 (3.073) 48.741 951.72 Cumulative and Average Annual Total Returns without/with charges 1.27% A -4.83% B Zero Coupon - 2010 9-30-95 Purchase $1,000.00 $19.93315414 50.168 50.168 $1,000.00 9-30-96 Contract Fee (1.00) 20.00293397 (0.050) 50.118 1,002.50 9-30-96 Value before Surr Chg 20.00293397 0.000 50.118 1,002.50 9-30-96 Surrender Charge (60.00) 20.00293397 (3.000) 47.118 942.50 Cumulative and Average Annual Total Returns without/with charges 0.35% A -5.75% B A = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase B = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
Original Purchase as of September 30, 1991 Valuation Date as of September 30, 1996 Dollar Units This Accum. Accum. Date Transaction Amount Unit Value Trans. Units Value Growth and Income 9-30-91 Purchase $1,000.00 $11.11307938 89.984 89.984 $1,000.00 9-30-92 Contract Fee (1.00) 11.77981877 (0.085) 89.899 1,059.00 9-30-93 Contract Fee (1.00) 12.98367595 (0.077) 89.822 1,166.22 9-30-94 Contract Fee (1.00) 13.30137398 (0.075) 89.747 1,193.76 9-30-95 Contract Fee (1.00) 16.06727515 (0.062) 89.685 1,440.99 9-30-96 Contract Fee (1.00) 17.99590776 (0.056) 89.629 1,612.96 9-30-96 Value before Surr Chg 17.99590776 0.000 89.629 1,612.96 9-30-96 Surrender Charge (34.00) 17.99590776 (1.889) 87.740 1,578.96 Cumulative Total Returns without/with chrgs. 61.93% A 57.90% C Avg. Annual Total Returns without/with chrgs. 10.12% B 9.57% D High Income 9-30-91 Purchase $1,000.00 $11.09352674 90.143 90.143 $1,000.00 9-30-92 Contract Fee (1.00) 13.04375499 (0.077) 90.066 1,174.80 9-30-93 Contract Fee (1.00) 14.40649362 (0.069) 89.997 1,296.54 9-30-94 Contract Fee (1.00) 14.50024299 (0.069) 89.928 1,303.97 9-30-95 Contract Fee (1.00) 16.74221226 (0.060) 89.868 1,504.59 9-30-96 Contract Fee (1.00) 18.51829760 (0.054) 89.814 1,663.20 9-30-96 Value before Surr Chg 18.51829760 0.000 89.814 1,663.20 9-30-96 Surrender Charge (34.00) 18.51829760 (1.836) 87.978 1,629.20 Cumulative Total Returns without/with chrgs. 66.93% A 62.92% C Avg. Annual Total Returns without/with chrgs. 10.79% B 10.25% D Income Securities 9-30-91 Purchase $1,000.00 $12.94854349 77.229 77.229 $1,000.00 9-30-92 Contract Fee (1.00) 15.04352509 (0.066) 77.162 1,160.79 9-30-93 Contract Fee (1.00) 17.17256419 (0.058) 77.104 1,324.07 9-30-94 Contract Fee (1.00) 16.76538096 (0.060) 77.044 1,291.68 9-30-95 Contract Fee (1.00) 18.92064395 (0.053) 76.992 1,456.73 9-30-96 Contract Fee (1.00) 20.56625705 (0.049) 76.943 1,582.43 9-30-96 Value before Surr Chg 20.56625705 0.000 76.943 1,582.43 9-30-96 Surrender Charge (34.00) 20.56625705 (1.653) 75.290 1,548.43 Cumulative Total Returns without/with chrgs. 58.83% A 54.84% C Avg. Annual Total Returns without/with chrgs. 9.70% B 9.14% D Money Market 9-30-91 Purchase $1,000.00 $11.62427827 86.027 86.027 $1,000.00 9-30-92 Contract Fee (1.00) 11.85934433 (0.084) 85.943 1,019.22 9-30-93 Contract Fee (1.00) 11.98111664 (0.083) 85.859 1,028.69 9-30-94 Contract Fee (1.00) 12.18621456 (0.082) 85.777 1,045.30 9-30-95 Contract Fee (1.00) 12.67862500 (0.079) 85.698 1,086.53 9-30-96 Contract Fee (1.00) 13.14897921 (0.076) 85.622 1,125.84 9-30-96 Value before Surr Chg 13.14897921 0.000 85.622 1,125.84 9-30-96 Surrender Charge (34.00) 13.14897921 (2.586) 83.036 1,091.84 Cumulative Total Returns without/with chrgs. 13.12% A 9.18% C Avg. Annual Total Returns without/with chrgs. 2.50% B 1.77% D Precious Metals 9-30-91 Purchase $1,000.00 $10.42792473 95.896 95.896 $1,000.00 9-30-92 Contract Fee (1.00) 10.41331878 (0.096) 95.800 997.60 9-30-93 Contract Fee (1.00) 11.85475192 (0.084) 95.716 1,134.69 9-30-94 Contract Fee (1.00) 15.18429112 (0.066) 95.650 1,452.38 9-30-95 Contract Fee (1.00) 14.30299298 (0.070) 95.580 1,367.08 9-30-96 Contract Fee (1.00) 14.44871469 (0.069) 95.511 1,380.01 9-30-96 Value before Surr Chg 14.44871469 0.000 95.511 1,380.01 9-30-96 Surrender Charge (34.00) 14.44871469 (2.353) 93.158 1,346.01 Cumulative Total Returns without/with chrgs. 38.56% A 34.60% C Avg. Annual Total Returns without/with chrgs. 6.74% B 6.12% D Real Estate Securities 9-30-91 Purchase $1,000.00 $10.99590200 90.943 90.943 $1,000.00 9-30-92 Contract Fee (1.00) 12.26872901 (0.082) 90.861 1,114.75 9-30-93 Contract Fee (1.00) 16.07323172 (0.062) 90.799 1,459.44 9-30-94 Contract Fee (1.00) 15.29416684 (0.065) 90.734 1,387.70 9-30-95 Contract Fee (1.00) 17.14662208 (0.058) 90.676 1,554.78 9-30-96 Contract Fee (1.00) 20.41418251 (0.049) 90.627 1,850.07 9-30-96 Value before Surr Chg 20.41418251 0.000 90.627 1,850.07 9-30-96 Surrender Charge (34.00) 20.41418251 (1.666) 88.961 1,816.07 Cumulative Total Returns without/with chrgs. 85.65% A 81.61% C Avg. Annual Total Returns without/with chrgs. 13.17% B 12.67% D Templeton Global Income Securities 9-30-91 Purchase $1,000.00 $12.49203165 80.051 80.051 $1,000.00 9-30-92 Contract Fee (1.00) 12.51234189 (0.080) 79.971 1,000.63 9-30-93 Contract Fee (1.00) 14.11181721 (0.071) 79.900 1,127.54 9-30-94 Contract Fee (1.00) 13.72647440 (0.073) 79.827 1,095.75 9-30-95 Contract Fee (1.00) 14.81615304 (0.067) 79.760 1,181.73 9-30-96 Contract Fee (1.00) 15.95015926 (0.063) 79.697 1,271.18 9-30-96 Value before Surr Chg 15.95015926 0.000 79.697 1,271.18 9-30-96 Surrender Charge (34.00) 15.95015926 (2.132) 77.566 1,237.18 Cumulative Total Returns without/with chrgs. 27.68% A 23.72% C Avg. Annual Total Returns without/with chrgs. 5.01% B 4.35% D U.S. Government Securities 9-30-91 Purchase $1,000.00 $12.17838777 82.113 82.113 $1,000.00 9-30-92 Contract Fee (1.00) 13.53894292 (0.074) 82.039 1,110.72 9-30-93 Contract Fee (1.00) 14.66831622 (0.068) 81.971 1,202.37 9-30-94 Contract Fee (1.00) 13.70372342 (0.073) 81.898 1,122.30 9-30-95 Contract Fee (1.00) 15.61931137 (0.064) 81.834 1,278.19 9-30-96 Contract Fee (1.00) 16.10244905 (0.062) 81.772 1,316.72 9-30-96 Value before Surr Chg 16.10244905 0.000 81.772 1,316.72 9-30-96 Surrender Charge (34.00) 16.10244905 (2.111) 79.660 1,282.72 Cumulative Total Returns without/with chrgs. 32.22% A 28.27% C Avg. Annual Total Returns without/with chrgs. 5.75% B 5.11% D Utility Equity 9-30-91 Purchase $1,000.00 $13.69965004 72.995 72.995 $1,000.00 9-30-92 Contract Fee (1.00) 15.56051892 (0.064) 72.930 1,134.83 9-30-93 Contract Fee (1.00) 18.00360267 (0.056) 72.875 1,312.01 9-30-94 Contract Fee (1.00) 14.77614344 (0.068) 72.807 1,075.81 9-30-95 Contract Fee (1.00) 17.90165113 (0.056) 72.751 1,302.37 9-30-96 Contract Fee (1.00) 19.56116280 (0.051) 72.700 1,422.10 9-30-96 Value before Surr Chg 19.56116280 0.000 72.700 1,422.10 9-30-96 Surrender Charge (34.00) 19.56116280 (1.738) 70.962 1,388.10 Cumulative Total Returns without/with chrgs. 42.79% A 38.81% C Avg. Annual Total Returns without/with chrgs. 7.38% B 6.78% D Zero Coupon - 2000 9-30-91 Purchase $1,000.00 $12.59260278 79.412 79.412 $1,000.00 9-30-92 Contract Fee (1.00) 14.71494891 (0.068) 79.344 1,167.54 9-30-93 Contract Fee (1.00) 16.81558014 (0.059) 79.284 1,333.21 9-30-94 Contract Fee (1.00) 15.40589641 (0.065) 79.219 1,220.45 9-30-95 Contract Fee (1.00) 17.41377516 (0.057) 79.162 1,378.51 9-30-96 Contract Fee (1.00) 17.91679072 (0.056) 79.106 1,417.33 9-30-96 Value before Surr Chg 17.91679072 0.000 79.106 1,417.33 9-30-96 Surrender Charge (34.00) 17.91679072 (1.898) 77.208 1,383.33 Cumulative Total Returns without/with chrgs. 42.28% A 38.33% C Avg. Annual Total Returns without/with chrgs. 7.31% B 6.71% D Zero Coupon - 2005 9-30-91 Purchase $1,000.00 $12.79857996 78.134 78.134 $1,000.00 9-30-92 Contract Fee (1.00) 14.90429381 (0.067) 78.067 1,163.53 9-30-93 Contract Fee (1.00) 18.28851943 (0.055) 78.012 1,426.72 9-30-94 Contract Fee (1.00) 15.78150738 (0.063) 77.949 1,230.15 9-30-95 Contract Fee (1.00) 19.28096297 (0.052) 77.897 1,501.92 9-30-96 Contract Fee (1.00) 19.52625010 (0.051) 77.845 1,520.03 9-30-96 Value before Surr Chg 19.52625010 0.000 77.845 1,520.03 9-30-96 Surrender Charge (34.00) 19.52625010 (1.741) 76.104 1,486.03 Cumulative Total Returns without/with chrgs. 52.57% A 48.60% C Avg. Annual Total Returns without/with chrgs. 8.82% B 8.24% D Zero Coupon - 2010 9-30-91 Purchase $1,000.00 $12.57337363 79.533 79.533 $1,000.00 9-30-92 Contract Fee (1.00) 14.15737846 (0.071) 79.463 1,124.98 9-30-93 Contract Fee (1.00) 18.48051806 (0.054) 79.408 1,467.51 9-30-94 Contract Fee (1.00) 15.25790641 (0.066) 79.343 1,210.61 9-30-95 Contract Fee (1.00) 19.93315414 (0.050) 79.293 1,580.55 9-30-96 Contract Fee (1.00) 20.00293397 (0.050) 79.243 1,585.09 9-30-96 Value before Surr Chg 20.00293397 0.000 79.243 1,585.09 9-30-96 Surrender Charge (34.00) 20.00293397 (1.700) 77.543 1,551.09 Cumulative Total Returns without/with chrgs. 59.09% A 55.11% C Avg. Annual Total Returns without/with chrgs. 9.73% B 9.18% D A = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase B = [(A+1)^(1/5 Years)]-1 C = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch. D = [(C+1)^(1/5 Years)]-1
Original Purchase as of Sub-Account Inception Valuation Date as of September 30, 1996 Dollar Units This Accum. Accum. Date Transaction Amount Unit Value Trans. Units Value Capital Growth 5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 9-30-96 Contract Fee (1.00) 10.84251110 (0.092) 99.908 1,083.25 9-30-96 Value before Surr Chg 10.84251110 0.000 99.908 1,083.25 9-30-96 Surrender Charge (60.00) 10.84251110 (5.534) 94.374 1,023.25 Cumulative Total Returns without/with chgs. 8.43% A 2.33% C Avg. Annual Total Returns without/with chgs. NA B NA D Growth and Income 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 9.59756692 (0.104) 99.896 958.76 1-24-91 Contract Fee (1.00) 10.03104257 (0.100) 99.796 1,001.06 1-24-92 Contract Fee (1.00) 12.16171947 (0.082) 99.714 1,212.69 1-24-93 Contract Fee (1.00) 12.57661487 (0.080) 99.634 1,253.06 1-24-94 Contract Fee (1.00) 14.09886247 (0.071) 99.563 1,403.73 1-24-95 Contract Fee (1.00) 13.27759299 (0.075) 99.488 1,320.96 1-24-96 Contract Fee (1.00) 17.25393143 (0.058) 99.430 1,715.56 9-30-96 Value before Surr Chg 17.99590776 0.000 99.430 1,789.34 9-30-96 Contract Fee (1.00) 17.99590776 (0.056) 99.375 1,788.34 9-30-96 Surrender Charge 0.00 17.99590776 0.000 99.375 1,788.34 Cumulative Total Returns without/with chgs. 79.96% A 78.83% C Avg. Annual Total Returns without/with chgs. 7.94% B 7.85% D High Income 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 9.98265449 (0.100) 99.900 997.27 1-24-91 Contract Fee (1.00) 8.98103976 (0.111) 99.788 896.20 1-24-92 Contract Fee (1.00) 11.85616038 (0.084) 99.704 1,182.11 1-24-93 Contract Fee (1.00) 13.39874388 (0.075) 99.630 1,334.91 1-24-94 Contract Fee (1.00) 15.29126669 (0.065) 99.564 1,522.46 1-24-95 Contract Fee (1.00) 14.64571855 (0.068) 99.496 1,457.19 1-24-96 Contract Fee (1.00) 17.40215300 (0.057) 99.438 1,730.44 9-30-96 Value before Surr Chg 18.51829760 0.000 99.438 1,841.43 9-30-96 Contract Fee (1.00) 18.51829760 (0.054) 99.384 1,840.43 9-30-96 Surrender Charge 0.00 18.51829760 0.000 99.384 1,840.43 Cumulative Total Returns without/with chgs. 85.18% A 84.04% C Avg. Annual Total Returns without/with chgs. 8.35% B 8.26% D Income Securities 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 10.70345941 (0.093) 99.907 1,069.35 1-24-91 Contract Fee (1.00) 9.93454622 (0.101) 99.806 991.53 1-24-92 Contract Fee (1.00) 13.99562082 (0.071) 99.734 1,395.85 1-24-93 Contract Fee (1.00) 15.30544228 (0.065) 99.669 1,525.48 1-24-94 Contract Fee (1.00) 17.64961404 (0.057) 99.612 1,758.12 1-24-95 Contract Fee (1.00) 16.27638185 (0.061) 99.551 1,620.33 1-24-96 Contract Fee (1.00) 20.08267334 (0.050) 99.501 1,998.25 9-30-96 Value before Surr Chg 20.56625705 0.000 99.501 2,046.37 9-30-96 Contract Fee (1.00) 20.56625705 (0.049) 99.453 2,045.37 9-30-96 Surrender Charge 0.00 20.56625705 0.000 99.453 2,045.37 Cumulative Total Returns without/with chgs. 105.66% A 104.54% C Avg. Annual Total Returns without/with chgs. 9.83% B 9.76% D Money Market 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 10.67178511 (0.094) 99.906 1,066.18 1-24-91 Contract Fee (1.00) 11.31010498 (0.088) 99.818 1,128.95 1-24-92 Contract Fee (1.00) 11.72881708 (0.085) 99.733 1,169.75 1-24-93 Contract Fee (1.00) 11.90009827 (0.084) 99.649 1,185.83 1-24-94 Contract Fee (1.00) 12.02348344 (0.083) 99.565 1,197.12 1-24-95 Contract Fee (1.00) 12.32338409 (0.081) 99.484 1,225.98 1-24-96 Contract Fee (1.00) 12.84105599 (0.078) 99.406 1,276.48 9-30-96 Value before Surr Chg 13.14897921 0.000 99.406 1,307.09 9-30-96 Contract Fee (1.00) 13.14897921 (0.076) 99.330 1,306.09 9-30-96 Surrender Charge 0.00 13.14897921 0.000 99.330 1,306.09 Cumulative Total Returns without/with chgs. 31.49% A 30.61% C Avg. Annual Total Returns without/with chgs. 3.63% B 3.53% D Precious Metals 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 12.88562226 (0.078) 99.922 1,287.56 1-24-91 Contract Fee (1.00) 9.76834317 (0.102) 99.820 975.08 1-24-92 Contract Fee (1.00) 10.91292825 (0.092) 99.728 1,088.33 1-24-93 Contract Fee (1.00) 9.12197464 (0.110) 99.619 908.72 1-24-94 Contract Fee (1.00) 14.41516281 (0.069) 99.549 1,435.02 1-24-95 Contract Fee (1.00) 12.96347704 (0.077) 99.472 1,289.51 1-24-96 Contract Fee (1.00) 15.88612084 (0.063) 99.409 1,579.23 9-30-96 Value before Surr Chg 14.44871469 0.000 99.409 1,436.34 9-30-96 Contract Fee (1.00) 14.44871469 (0.069) 99.340 1,435.34 9-30-96 Surrender Charge 0.00 14.44871469 0.000 99.340 1,435.34 Cumulative Total Returns without/with chgs. 44.49% A 43.53% C Avg. Annual Total Returns without/with chgs. 4.90% B 4.81% D Real Estate Securities 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 10.13076509 (0.099) 99.901 1,012.08 1-24-91 Contract Fee (1.00) 9.36020172 (0.107) 99.794 934.10 1-24-92 Contract Fee (1.00) 12.25114822 (0.082) 99.713 1,221.60 1-24-93 Contract Fee (1.00) 13.49614031 (0.074) 99.639 1,344.74 1-24-94 Contract Fee (1.00) 15.30618064 (0.065) 99.573 1,524.09 1-24-95 Contract Fee (1.00) 14.92840438 (0.067) 99.506 1,485.47 1-24-96 Contract Fee (1.00) 18.04447622 (0.055) 99.451 1,794.54 9-30-96 Value before Surr Chg 20.41418251 0.000 99.451 2,030.21 9-30-96 Contract Fee (1.00) 20.41418251 (0.049) 99.402 2,029.21 9-30-96 Surrender Charge 0.00 20.41418251 0.000 99.402 2,029.21 Cumulative Total Returns without/with chgs. 104.14% A 102.92% C Avg. Annual Total Returns without/with chgs. 9.73% B 9.64% D Rising Dividends 1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-27-93 Contract Fee (1.00) 10.68876950 (0.094) 99.906 1,067.88 1-27-94 Contract Fee (1.00) 10.36623339 (0.096) 99.810 1,034.65 1-27-95 Contract Fee (1.00) 9.94675745 (0.101) 99.709 991.79 1-27-96 Contract Fee (1.00) 12.48933274 (0.080) 99.629 1,244.30 9-30-96 Value before Surr Chg 13.75349501 0.000 99.629 1,370.25 9-30-96 Contract Fee (1.00) 13.75349501 (0.073) 99.557 1,369.25 9-30-96 Surrender Charge (34.00) 13.75349501 (2.472) 97.085 1,335.25 Cumulative Total Returns without/with chgs. 37.53% A 33.53% C Avg. Annual Total Returns without/with chgs. 7.05% B 6.37% D Small Cap 11-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 9-30-96 Value before Surr Chg 12.40823708 0.000 100.000 1,240.82 9-30-96 Contract Fee (1.00) 12.40823708 (0.081) 99.919 1,239.82 9-30-96 Surrender Charge (60.00) 12.40823708 (4.835) 95.084 1,179.82 Cumulative Total Returns without/with chgs. 24.08% A 17.98% C Avg. Annual Total Returns without/with chgs. NA B NA D Templeton Developing Markets Equity 3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 3-15-95 Contract Fee (1.00) 8.62058630 (0.116) 99.884 861.06 3-15-96 Contract Fee (1.00) 10.27729571 (0.097) 99.787 1,025.54 9-30-96 Value before Surr Chg 10.77702435 0.000 99.787 1,075.40 9-30-96 Contract Fee (1.00) 10.77702435 (0.093) 99.694 1,074.40 9-30-96 Surrender Charge (51.00) 10.77702435 (4.732) 94.962 1,023.40 Cumulative Total Returns without/with chgs. 7.77% A 2.34% C Avg. Annual Total Returns without/with chgs. 2.98% B 0.91% D Templeton Global Asset Allocation 5-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 5-1-96 Contract Fee (1.00) 11.24184599 (0.089) 99.911 1,123.18 9-30-96 Value before Surr Chg 11.66530262 0.000 99.911 1,165.49 9-30-96 Contract Fee (1.00) 11.66530262 (0.086) 99.825 1,164.49 9-30-96 Surrender Charge (51.00) 11.66530262 (4.372) 95.453 1,113.49 Cumulative Total Returns without/with chgs. 16.65% A 11.35% C Avg. Annual Total Returns without/with chgs. 11.46% B 7.87% D Templeton Global Growth 3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 3-15-95 Contract Fee (1.00) 10.09452231 (0.099) 99.901 1,008.45 3-15-96 Contract Fee (1.00) 11.79417892 (0.085) 99.816 1,177.25 9-30-96 Value before Surr Chg 12.50397253 0.000 99.816 1,248.10 9-30-96 Contract Fee (1.00) 12.50397253 (0.080) 99.736 1,247.10 9-30-96 Surrender Charge (51.00) 12.50397253 (4.079) 95.657 1,196.10 Cumulative Total Returns without/with chgs. 25.04% A 19.61% C Avg. Annual Total Returns without/with chgs. 9.17% B 7.28% D Templeton Global Income Securities 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 10.85157001 (0.092) 99.908 1,084.16 1-24-91 Contract Fee (1.00) 11.76337661 (0.085) 99.823 1,174.25 1-24-92 Contract Fee (1.00) 12.92541183 (0.077) 99.745 1,289.25 1-24-93 Contract Fee (1.00) 12.75002133 (0.078) 99.667 1,270.76 1-24-94 Contract Fee (1.00) 14.76765782 (0.068) 99.599 1,470.85 1-24-95 Contract Fee (1.00) 13.50498150 (0.074) 99.525 1,344.09 1-24-96 Contract Fee (1.00) 15.35232035 (0.065) 99.460 1,526.94 9-30-96 Value before Surr Chg 15.95015926 0.000 99.460 1,586.41 9-30-96 Contract Fee (1.00) 15.95015926 (0.063) 99.397 1,585.41 9-30-96 Surrender Charge 0.00 15.95015926 0.000 99.397 1,585.41 Cumulative Total Returns without/with chgs. 59.50% A 58.54% C Avg. Annual Total Returns without/with chgs. 6.26% B 6.18% D Templeton International Equity 1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-27-93 Contract Fee (1.00) 9.53509236 (0.105) 99.895 952.51 1-27-94 Contract Fee (1.00) 12.85431852 (0.078) 99.817 1,283.08 1-27-95 Contract Fee (1.00) 11.91221607 (0.084) 99.733 1,188.05 1-27-96 Contract Fee (1.00) 13.52801052 (0.074) 99.659 1,348.19 9-30-96 Value before Surr Chg 14.80159719 0.000 99.659 1,475.12 9-30-96 Contract Fee (1.00) 14.80159719 (0.068) 99.592 1,474.12 9-30-96 Surrender Charge (34.00) 14.80159719 (2.297) 97.295 1,440.12 Cumulative Total Returns without/with chgs. 48.02% A 44.01% C Avg. Annual Total Returns without/with chgs. 8.74% B 8.11% D Templeton International Smaller Companies 5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 9-30-96 Value before Surr Chg 10.34560408 0.000 100.000 1,034.56 9-30-96 Contract Fee (1.00) 10.34560408 (0.097) 99.903 1,033.56 9-30-96 Surrender Charge (60.00) 10.34560408 (5.800) 94.104 973.56 Cumulative Total Returns without/with chgs. 3.46% A -2.64% C Avg. Annual Total Returns without/with chgs. NA B NA D Templeton Pacific Growth 1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-27-93 Contract Fee (1.00) 9.91965141 (0.101) 99.899 990.97 1-27-94 Contract Fee (1.00) 14.07652865 (0.071) 99.828 1,405.23 1-27-95 Contract Fee (1.00) 11.91556247 (0.084) 99.744 1,188.51 1-27-96 Contract Fee (1.00) 14.44474860 (0.069) 99.675 1,439.78 9-30-96 Value before Surr Chg 14.81034174 0.000 99.675 1,476.22 9-30-96 Contract Fee (1.00) 14.81034174 (0.068) 99.607 1,475.22 9-30-96 Surrender Charge (34.00) 14.81034174 (2.296) 97.312 1,441.22 Cumulative Total Returns without/with chgs. 48.10% A 44.12% C Avg. Annual Total Returns without/with chgs. 8.76% B 8.12% D U.S. Government Securities 3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 3-14-90 Contract Fee (1.00) 10.29864074 (0.097) 99.903 1,028.86 3-14-91 Contract Fee (1.00) 11.44148140 (0.087) 99.815 1,142.04 3-14-92 Contract Fee (1.00) 12.36677937 (0.081) 99.735 1,233.40 3-14-93 Contract Fee (1.00) 14.05074266 (0.071) 99.663 1,400.35 3-14-94 Contract Fee (1.00) 14.20297756 (0.070) 99.593 1,414.52 3-14-95 Contract Fee (1.00) 14.59412892 (0.069) 99.525 1,452.47 3-14-96 Contract Fee (1.00) 15.82460547 (0.063) 99.461 1,573.94 9-30-96 Value before Surr Chg 16.10244905 0.000 99.461 1,601.57 9-30-96 Contract Fee (1.00) 16.10244905 (0.062) 99.399 1,600.57 9-30-96 Surrender Charge 0.00 16.10244905 0.000 99.399 1,600.57 Cumulative Total Returns without/with chgs. 61.02% A 60.06% C Avg. Annual Total Returns without/with chgs. 6.51% B 6.43% D Utility Equity 1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 1-24-90 Contract Fee (1.00) 11.47363453 (0.087) 99.913 1,146.36 1-24-91 Contract Fee (1.00) 11.95102656 (0.084) 99.829 1,193.06 1-24-92 Contract Fee (1.00) 14.20139407 (0.070) 99.759 1,416.71 1-24-93 Contract Fee (1.00) 15.91822229 (0.063) 99.696 1,586.98 1-24-94 Contract Fee (1.00) 16.43119760 (0.061) 99.635 1,637.12 1-24-95 Contract Fee (1.00) 15.48692698 (0.065) 99.571 1,542.04 1-24-96 Contract Fee (1.00) 19.69346882 (0.051) 99.520 1,959.89 9-30-96 Value before Surr Chg 19.56116280 0.000 99.520 1,946.72 9-30-96 Contract Fee (1.00) 19.56116280 (0.051) 99.469 1,945.72 9-30-96 Surrender Charge 0.00 19.56116280 0.000 99.469 1,945.72 Cumulative Total Returns without/with chgs. 95.61% A 94.57% C Avg. Annual Total Returns without/with chgs. 9.12% B 9.04% D Zero Coupon - 2000 3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 3-14-90 Contract Fee (1.00) 10.37748201 (0.096) 99.904 1,036.75 3-14-91 Contract Fee (1.00) 11.49325260 (0.087) 99.817 1,147.22 3-14-92 Contract Fee (1.00) 12.63019476 (0.079) 99.737 1,259.70 3-14-93 Contract Fee (1.00) 15.48457708 (0.065) 99.673 1,543.39 3-14-94 Contract Fee (1.00) 15.97181577 (0.063) 99.610 1,590.96 3-14-95 Contract Fee (1.00) 16.16440029 (0.062) 99.548 1,609.14 3-14-96 Contract Fee (1.00) 17.74484226 (0.056) 99.492 1,765.47 9-30-96 Value before Surr Chg 17.91679072 0.000 99.492 1,782.58 9-30-96 Contract Fee (1.00) 17.91679072 (0.056) 99.436 1,781.58 9-30-96 Surrender Charge 0.00 17.91679072 0.000 99.436 1,781.58 Cumulative Total Returns without/with chgs. 79.17% A 78.16% C Avg. Annual Total Returns without/with chgs. 8.03% B 7.95% D Zero Coupon - 2005 3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 3-14-90 Contract Fee (1.00) 10.38882453 (0.096) 99.904 1,037.88 3-14-91 Contract Fee (1.00) 11.53456820 (0.087) 99.817 1,151.35 3-14-92 Contract Fee (1.00) 12.62819047 (0.079) 99.738 1,259.51 3-14-93 Contract Fee (1.00) 16.36793990 (0.061) 99.677 1,631.50 3-14-94 Contract Fee (1.00) 16.86182251 (0.059) 99.617 1,679.73 3-14-95 Contract Fee (1.00) 17.12592868 (0.058) 99.559 1,705.04 3-14-96 Contract Fee (1.00) 19.37651757 (0.052) 99.507 1,928.11 9-30-96 Value before Surr Chg 19.52625010 0.000 99.507 1,943.01 9-30-96 Contract Fee (1.00) 19.52625010 (0.051) 99.456 1,942.01 9-30-96 Surrender Charge 0.00 19.52625010 0.000 99.456 1,942.01 Cumulative Total Returns without/with chgs. 95.26% A 94.20% C Avg. Annual Total Returns without/with chgs. 9.26% B 9.18% D Zero Coupon - 2010 3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 3-14-90 Contract Fee (1.00) 10.25922011 (0.097) 99.903 1,024.92 3-14-91 Contract Fee (1.00) 11.34740047 (0.088) 99.814 1,132.63 3-14-92 Contract Fee (1.00) 12.25923536 (0.082) 99.733 1,222.65 3-14-93 Contract Fee (1.00) 16.12714811 (0.062) 99.671 1,607.41 3-14-94 Contract Fee (1.00) 16.82866376 (0.059) 99.611 1,676.33 3-14-95 Contract Fee (1.00) 17.03620553 (0.059) 99.553 1,696.00 3-14-96 Contract Fee (1.00) 19.87163939 (0.050) 99.502 1,977.28 9-30-96 Value before Surr Chg 20.00293397 0.000 99.502 1,990.34 9-30-96 Contract Fee (1.00) 20.00293397 (0.050) 99.452 1,989.34 9-30-96 Surrender Charge 0.00 20.00293397 0.000 99.452 1,989.34 Cumulative Total Returns without/with chgs. 100.03% A 98.93% C Avg. Annual Total Returns without/with chgs. 9.61% B 9.53% D A = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase B = [(A+1)^(1/Years since Inception)]-1 C = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch. D = [(C+1)^(1/Years since Inception)]-1
FRANKLIN VALUEMARK IV ALLIANZ VARIABLE ACCOUNT B TOTAL RETURNS FOR THE PERIOD ENDED 9/30/96 COLUMN I FUND PERFORMANCE Original Purchase as of September 30, 1995 Valuation Date as of September 30, 1996 Lump Sum Investment of $10,000 FRANKLIN MONEY MARKET PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 137 137 10,137 0 10,000 0 10,000 137 10,137 10,137 09/30/96 10,000 389 526 10,527 0 10,000 0 10,000 527 10,527 10,527 Total 0 Total Return 5.27% Average Annual Total Return 5.27% FRANKLIN HIGH INCOME PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,278 0 10,278 0 10,278 752 09/30/96 10,000 903 903 10,903 48 10,218 51 10,269 959 11,229 829 Total 48 Total Return 12.29% Average Annual Total Return 12.29% TEMPLETON GLOBAL INCOME SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,450 0 10,450 0 10,450 776 09/30/96 10,000 804 804 10,804 0 10,085 0 10,085 842 10,929 841 Total 0 Total Return 9.29% Average Annual Total Return 9.29% FRANKLIN U.S. GOVERNMENT SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,409 0 10,409 0 10,409 743 09/30/96 10,000 722 722 10,722 0 9,717 0 9,717 747 10,465 801 Total 0 Total Return 4.65% Average Annual Total Return 4.65% FRANKLIN ZERO COUPON PORTFOLIO - 2000 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,480 0 10,480 0 10,480 666 09/30/96 10,000 574 574 10,574 6 9,847 6 9,853 592 10,444 707 Total 6 Total Return 4.44% Average Annual Total Return 4.44% FRANKLIN ZERO COUPON PORTFOLIO - 2005 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,822 0 10,822 0 10,822 623 09/30/96 10,000 536 536 10,536 0 9,720 0 9,720 560 10,280 659 Total 0 Total Return 2.80% Average Annual Total Return 2.80% FRANKLIN ZERO COUPON PORTFOLIO - 2010 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 11,226 0 11,226 0 11,226 622 09/30/96 10,000 546 546 10,546 148 9,452 157 9,609 578 10,187 671 Total 148 Total Return 1.87% Average Annual Total Return 1.87% FRANKLIN GROWTH AND INCOME PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,746 0 10,746 0 10,746 627 09/30/96 10,000 254 254 10,254 901 10,194 916 11,111 259 11,370 699 Total 901 Total Return 13.70% Average Annual Total Return 13.70% FRANKLIN INCOME SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,431 0 10,431 0 10,431 633 09/30/96 10,000 553 553 10,553 92 10,361 96 10,457 577 11,035 674 Total 92 Total Return 10.35% Average Annual Total Return 10.35% FRANKLIN REAL ESTATE SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,514 0 10,514 0 10,514 604 09/30/96 10,000 470 470 10,470 0 11,583 0 11,583 502 12,087 630 Total 0 Total Return 20.87% Average Annual Total Return 20.87% FRANKLIN RISING DIVIDENDS PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,630 0 10,630 0 10,630 840 09/30/96 10,000 234 234 10,234 0 11,629 0 11,629 243 11,873 857 Total 0 Total Return 18.73% Average Annual Total Return 18.73% FRANKLIN UTILITY EQUITY PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,901 0 10,901 0 10,901 609 09/30/96 10,000 557 557 10,557 0 10,512 0 10,512 570 11,082 642 Total 0 Total Return 10.82% Average Annual Total Return 10.82% FRANKLIN PRECIOUS METALS PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 9,839 0 9,839 0 9,839 699 09/30/96 10,000 137 137 10,137 126 10,007 118 10,125 129 10,255 716 Total 126 Total Return 2.55% Average Annual Total Return 2.55% TEMPLETON DEVELOPING MARKETS PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 9,731 0 9,731 0 9,731 995 09/30/96 10,000 100 100 10,100 184 10,806 183 10,989 99 11,088 1,021 Total 184 Total Return 10.88% Average Annual Total Return 10.88% TEMPLETON GLOBAL GROWTH PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,009 0 10,009 0 10,009 852 09/30/96 10,000 175 175 10,175 175 10,826 177 11,003 177 11,181 880 Total 175 Total Return 11.81% Average Annual Total Return 11.81% TEMPLETON INTERNATIONAL EQUITY PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 9,852 0 9,852 0 9,852 740 09/30/96 10,000 281 281 10,281 344 10,525 349 10,874 285 11,160 784 Total 344 Total Return 11.60% Average Annual Total Return 11.60% TEMPLETON PACIFIC GROWTH PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 0 0 10,000 0 10,087 0 10,087 0 10,087 725 09/30/96 10,000 319 319 10,319 185 10,624 183 10,807 316 11,124 759 Total 185 Total Return 11.24% Average Annual Total Return 11.24% TEMPLETON GLOBAL ASSET ALLOCATION PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/95 10,000 173 173 10,173 0 10,125 0 10,125 174 10,299 979 09/30/96 10,000 5 178 10,178 10 11,270 10 11,281 199 11,480 980 Total 10 Total Return 14.80% Average Annual Total Return 14.80%
Original Purchase as of September 30, 1991 Valuation Date as of September 30, 1996 FRANKLIN MONEY MARKET PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 114 114 10,114 0 10,000 0 10,000 114 10,114 10,114 12/31/92 10,000 309 423 10,423 0 10,000 0 10,000 423 10,423 10,423 12/31/93 10,000 264 687 10,687 0 10,000 0 10,000 687 10,687 10,687 12/31/94 10,000 408 1,095 11,095 0 10,000 0 10,000 1,095 11,095 11,095 12/31/95 10,000 637 1,732 11,732 0 10,000 0 10,000 1,732 11,732 11,732 09/30/96 10,000 450 2,183 12,183 0 10,000 0 10,000 2,183 12,183 12,183 Total 0 Total Return 21.83% Average Annual Total Return 4.03% FRANKLIN HIGH INCOME PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,423 0 10,423 0 10,423 984 12/31/92 10,000 528 528 10,528 0 11,585 0 11,585 563 12,148 1,032 12/31/93 10,000 471 999 10,999 0 12,923 0 12,923 1,133 14,057 1,071 12/31/94 10,000 686 1,685 11,685 0 12,018 0 12,018 1,744 13,762 1,127 12/31/95 10,000 1,027 2,711 12,711 0 13,445 0 13,445 3,037 16,481 1,207 09/30/96 10,000 1,448 4,159 14,159 77 13,366 82 13,448 4,556 18,004 1,326 Total 77 Total Return 80.04% Average Annual Total Return 12.48% TEMPLETON GLOBAL INCOME SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,388 0 10,388 0 10,388 825 12/31/92 10,000 334 334 10,334 126 9,901 122 10,023 323 10,346 862 12/31/93 10,000 430 763 10,763 140 10,982 282 11,264 809 12,072 907 12/31/94 10,000 312 1,075 11,075 0 10,058 258 10,316 1,050 11,366 932 12/31/95 10,000 455 1,531 11,531 0 11,106 285 11,391 1,643 13,034 968 09/30/96 10,000 1,002 2,533 12,533 0 10,718 275 10,993 2,636 13,629 1,049 Total 266 Total Return 36.29% Average Annual Total Return 6.39% FRANKLIN U.S. GOVERNMENT SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,463 0 10,463 0 10,463 827 12/31/92 10,000 352 352 10,352 7 10,951 8 10,959 372 11,331 856 12/31/93 10,000 438 790 10,790 67 11,514 77 11,591 841 12,431 893 12/31/94 10,000 579 1,368 11,368 0 10,397 70 10,467 1,335 11,801 939 12/31/95 10,000 903 2,271 12,271 0 11,580 77 11,657 2,440 14,098 1,007 09/30/96 10,000 978 3,249 13,249 0 10,811 72 10,883 3,291 14,174 1,084 Total 74 Total Return 41.74% Average Annual Total Return 7.23% FRANKLIN ZERO COUPON PORTFOLIO - 2000 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,659 0 10,659 0 10,659 814 12/31/92 10,000 428 428 10,428 0 11,294 0 11,294 471 11,765 848 12/31/93 10,000 524 952 10,952 27 12,563 28 12,591 1,074 13,665 885 12/31/94 10,000 671 1,623 11,623 0 11,082 25 11,107 1,608 12,715 934 12/31/95 10,000 624 2,247 12,247 0 12,799 28 12,828 2,515 15,343 975 09/30/96 10,000 840 3,087 13,087 8 12,026 35 12,061 3,230 15,291 1,035 Total 35 Total Return 52.91% Average Annual Total Return 8.87% FRANKLIN ZERO COUPON PORTFOLIO - 2005 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,581 0 10,581 0 10,581 831 12/31/92 10,000 506 506 10,506 0 11,312 0 11,312 569 11,881 872 12/31/93 10,000 455 961 10,961 5 13,355 5 13,361 1,160 14,520 903 12/31/94 10,000 608 1,569 11,569 0 11,429 5 11,433 1,593 13,026 947 12/31/95 10,000 649 2,217 12,217 0 14,435 6 14,441 2,722 17,163 987 09/30/96 10,000 850 3,068 13,068 0 12,965 5 12,970 3,333 16,303 1,044 Total 5 Total Return 63.03% Average Annual Total Return 10.27% FRANKLIN ZERO COUPON PORTFOLIO - 2010 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,527 0 10,527 0 10,527 836 12/31/92 10,000 607 607 10,607 0 11,162 0 11,162 680 11,843 887 12/31/93 10,000 831 1,438 11,438 34 13,110 37 13,148 1,711 14,859 948 12/31/94 10,000 621 2,058 12,058 0 10,886 31 10,917 2,041 12,958 995 12/31/95 10,000 486 2,545 12,545 0 15,084 43 15,126 3,376 18,503 1,026 09/30/96 10,000 901 3,445 13,445 244 12,701 294 12,995 3,795 16,790 1,105 Total 278 Total Return 67.90% Average Annual Total Return 10.92% FRANKLIN GROWTH AND INCOME PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,444 0 10,444 0 10,444 889 12/31/92 10,000 108 108 10,108 1 11,369 1 11,370 119 11,489 898 12/31/93 10,000 100 207 10,207 0 12,436 1 12,437 238 12,675 906 12/31/94 10,000 87 294 10,294 0 11,929 1 11,930 314 12,244 912 12/31/95 10,000 171 465 10,465 373 15,236 430 15,666 598 16,264 949 09/30/96 10,000 385 851 10,851 1,364 14,453 1,795 16,249 959 17,207 1,058 Total 1,738 Total Return 72.07% Average Annual Total Return 11.47% FRANKLIN INCOME SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,410 0 10,410 0 10,410 819 12/31/92 10,000 485 485 10,485 200 11,179 206 11,385 500 11,885 871 12/31/93 10,000 271 756 10,756 40 12,940 281 13,221 873 14,094 892 12/31/94 10,000 427 1,184 11,184 0 11,720 255 11,974 1,209 13,183 921 12/31/95 10,000 818 2,002 12,002 66 13,489 365 13,854 2,282 16,136 980 09/30/96 10,000 855 2,857 12,857 142 13,399 511 13,910 3,160 17,069 1,043 Total 447 Total Return 70.69% Average Annual Total Return 11.29% FRANKLIN REAL ESTATE SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,435 0 10,435 0 10,435 926 12/31/92 10,000 225 225 10,225 0 11,843 0 11,843 252 12,095 946 12/31/93 10,000 160 386 10,386 0 13,926 0 13,926 468 14,394 957 12/31/94 10,000 199 585 10,585 0 14,176 0 14,176 670 14,846 970 12/31/95 10,000 507 1,092 11,092 0 16,111 0 16,111 1,336 17,447 1,003 09/30/96 10,000 780 1,872 11,872 0 17,750 0 17,750 2,306 20,056 1,046 Total 0 Total Return 100.56% Average Annual Total Return 14.94% FRANKLIN UTILITY EQUITY PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 10,743 0 10,743 0 10,743 729 12/31/92 10,000 223 223 10,223 1 11,531 1 11,531 241 11,772 744 12/31/93 10,000 252 474 10,474 1 12,493 2 12,495 518 13,013 759 12/31/94 10,000 455 930 10,930 0 10,510 2 10,512 896 11,408 791 12/31/95 10,000 713 1,643 11,643 0 13,047 2 13,049 1,936 14,985 837 09/30/96 10,000 766 2,409 12,409 0 12,580 2 12,582 2,65 0 15,233 883 Total 2 Total Return 52.33% Average Annual Total Return 8.78% FRANKLIN PRECIOUS METALS PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/91 10,000 0 0 10,000 0 9,800 0 9,800 0 9,800 953 12/31/92 10,000 295 295 10,295 0 8,923 0 8,923 253 9,176 980 12/31/93 10,000 88 383 10,383 0 13,785 0 13,785 495 14,279 988 12/31/94 10,000 88 471 10,471 0 13,432 0 13,432 572 14,004 994 12/31/95 10,000 195 666 10,666 144 13,422 144 13,566 767 14,333 1,018 09/30/96 10,000 200 866 10,866 183 13,651 319 13,970 968 14,938 1,043 Total 328 Total Return 49.38% Average Annual Total Return 8.36%
Original Purchase as of Sub-Account Inception Valuation Date as of September 30, 1996 FRANKLIN MONEY MARKET PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 750 750 10,750 0 10,000 0 10,000 750 10,750 10,750 12/31/90 10,000 818 1,567 11,567 0 10,000 0 10,000 1,567 11,567 11,567 12/31/91 10,000 633 2,200 12,200 0 10,000 0 10,000 2,200 12,200 12,200 12/31/92 10,000 373 2,573 12,573 0 10,000 0 10,000 2,573 12,573 12,573 12/31/93 10,000 319 2,892 12,892 0 10,000 0 10,000 2,892 12,892 12,892 12/31/94 10,000 493 3,385 13,385 0 10,000 0 10,000 3,385 13,385 13,385 12/31/95 10,000 768 4,153 14,153 0 10,000 0 10,000 4,153 14,153 14,153 09/30/96 10,000 543 4,696 14,696 0 10,000 0 10,000 4,696 14,696 14,696 Total 0 Total Return 46.96% Average Annual Total Return 5.14% TEMPLETON HIGH INCOME PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 10,130 0 10,130 0 10,130 1,000 12/31/90 10,000 329 329 10,329 0 8,940 0 8,940 311 9,251 1,035 12/31/91 10,000 932 1,261 11,261 0 10,590 0 10,590 1,417 12,007 1,134 12/31/92 10,000 608 1,868 11,868 0 11,770 0 11,770 2,223 13,993 1,189 12/31/93 10,000 543 2,411 12,411 0 13,130 0 13,130 3,062 16,192 1,233 12/31/94 10,000 790 3,201 13,201 0 12,210 0 12,210 3,643 15,853 1,298 12/31/95 10,000 1,183 4,384 14,384 0 13,660 0 13,660 5,325 18,985 1,390 09/30/96 10,000 1,668 6,052 16,052 89 13,580 94 13,674 7,065 20,739 1,527 Total 89 Total Return 107.39% Average Annual Total Return 9.96% FRANKLIN GLOBAL INCOME SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 10,930 0 10,930 0 10,930 1,000 12/31/90 10,000 203 203 10,203 0 11,780 0 11,780 224 12,004 1,019 12/31/91 10,000 607 811 10,811 0 12,590 0 12,590 896 13,486 1,071 12/31/92 10,000 433 1,244 11,244 164 12,000 159 12,159 1,273 13,432 1,119 12/31/93 10,000 558 1,802 11,802 181 13,310 366 13,676 1,997 15,673 1,178 12/31/94 10,000 405 2,206 12,206 0 12,190 335 12,525 2,230 14,755 1,210 12/31/95 10,000 591 2,798 12,798 0 13,460 370 13,830 3,090 16,921 1,257 09/30/96 10,000 1,301 4,099 14,099 89 12,990 357 13,347 4,347 17,694 1,362 Total 345 Total Return 76.94% Average Annual Total Return 7.71% FRANKLIN U.S. GOVERNMENT SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 10,540 0 10,540 0 10,540 1,000 12/31/90 10,000 109 109 10,109 1 11,360 1 11,361 119 11,480 1,011 12/31/91 10,000 408 517 10,517 0 12,650 1 12,651 584 13,235 1,046 12/31/92 10,000 445 962 10,962 9 13,240 11 13,251 1,082 14,332 1,082 12/31/93 10,000 554 1,516 11,516 85 13,920 98 14,018 1,706 15,724 1,130 12/31/94 10,000 732 2,247 12,247 0 12,570 89 12,659 2,269 14,928 1,188 12/31/95 10,000 1,142 3,389 13,389 0 14,000 99 14,099 3,733 17,832 1,274 09/30/96 10,000 1,237 4,627 14,627 0 13,070 92 13,162 4,766 17,928 1,372 Total 95 Total Return 79.28% Average Annual Total Return 8.04% FRANKLIN ZERO COUPON PORTFOLIO - 2000 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 11,080 0 11,080 0 11,080 1,000 12/31/90 10,000 130 130 10,130 170 11,400 190 11,590 145 11,734 1,029 12/31/91 10,000 387 517 10,517 0 13,100 218 13,318 616 13,933 1,064 12/31/92 10,000 560 1,077 11,077 0 13,880 231 14,111 1,268 15,379 1,108 12/31/93 10,000 685 1,762 11,762 35 15,440 293 15,733 2,130 17,863 1,157 12/31/94 10,000 877 2,639 12,639 0 13,620 259 13,879 2,742 16,621 1,220 12/31/95 10,000 816 3,455 13,455 0 15,730 299 16,029 4,027 20,056 1,275 09/30/96 10,000 1,098 4,553 14,553 11 14,780 292 15,072 4,916 19,988 1,352 Total 216 Total Return 99.88% Average Annual Total Return 9.61% FRANKLIN ZERO COUPON PORTFOLIO - 2005 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 11,530 0 11,530 0 11,530 1,000 12/31/90 10,000 142 142 10,142 472 11,150 530 11,680 160 11,840 1,062 12/31/91 10,000 456 598 10,598 0 12,740 606 13,346 719 14,065 1,104 12/31/92 10,000 673 1,271 11,271 0 13,620 648 14,268 1,525 15,793 1,160 12/31/93 10,000 604 1,875 11,875 7 16,080 772 16,852 2,448 19,300 1,200 12/31/94 10,000 808 2,683 12,683 0 13,760 661 14,421 2,893 17,314 1,258 12/31/95 10,000 862 3,545 13,545 0 17,380 834 18,214 4,598 22,812 1,313 09/30/96 10,000 1,130 4,675 14,675 0 15,610 749 16,359 5,311 21,670 1,388 Total 479 Total Return 116.70% Average Annual Total Return 10.79% FRANKLIN ZERO COUPON PORTFOLIO - 2010 ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 11,610 0 11,610 0 11,610 1,000 12/31/90 10,000 131 131 10,131 249 11,250 280 11,530 147 11,676 1,038 12/31/91 10,000 576 706 10,706 0 12,590 313 12,903 846 13,749 1,092 12/31/92 10,000 793 1,499 11,499 0 13,350 332 13,682 1,785 15,467 1,159 12/31/93 10,000 1,085 2,584 12,584 44 15,680 438 16,118 3,288 19,407 1,238 12/31/94 10,000 810 3,394 13,394 0 13,020 364 13,384 3,540 16,924 1,300 12/31/95 10,000 635 4,030 14,030 0 18,040 504 18,544 5,622 24,166 1,340 09/30/96 10,000 1,176 5,206 15,206 319 15,190 762 15,952 5,977 21,928 1,444 Total 612 Total Return 119.28% Average Annual Total Return 10.96% FRANKLIN GROWTH AND INCOME PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 10,290 0 10,290 0 10,290 1,000 12/31/90 10,000 79 79 10,079 0 9,970 0 9,970 78 10,048 1,008 12/31/91 10,000 203 282 10,282 0 11,750 0 11,750 304 12,054 1,026 12/31/92 10,000 124 406 10,406 1 12,790 1 12,791 468 13,260 1,037 12/31/93 10,000 115 521 10,521 0 13,990 2 13,992 636 14,627 1,046 12/31/94 10,000 100 621 10,621 0 13,420 2 13,422 709 14,131 1,053 12/31/95 10,000 198 819 10,819 430 17,140 497 17,637 1,133 18,770 1,095 09/30/96 10,000 444 1,263 11,263 1,574 16,260 2,072 18,332 1,527 19,859 1,221 Total 2,006 Total Return 98.59% Average Annual Total Return 9.34% FRANKLIN INCOME SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 10,900 0 10,900 0 10,900 1,000 12/31/90 10,000 211 211 10,211 0 9,890 0 9,890 201 10,091 1,020 12/31/91 10,000 921 1,133 11,133 0 12,710 0 12,710 1,289 13,999 1,101 12/31/92 10,000 652 1,785 11,785 268 13,650 277 13,927 2,057 15,983 1,171 12/31/93 10,000 365 2,150 12,150 53 15,800 378 16,178 2,776 18,954 1,200 12/31/94 10,000 575 2,724 12,724 0 14,310 342 14,652 3,077 17,729 1,239 12/31/95 10,000 1,101 3,825 13,825 89 16,470 490 16,960 4,740 21,700 1,318 09/30/96 10,000 1,150 4,974 14,974 191 16,360 687 17,047 5,908 22,955 1,403 Total 601 Total Return 129.55% Average Annual Total Return 11.42% FRANKLIN REAL ESTATE SECURITIES PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 10,480 0 10,480 0 10,480 1,000 12/31/90 10,000 148 148 10,148 0 9,090 0 9,090 134 9,224 1,015 12/31/91 10,000 453 601 10,601 0 11,270 0 11,270 639 11,909 1,057 12/31/92 10,000 257 858 10,858 0 12,790 0 12,790 1,014 13,804 1,079 12/31/93 10,000 183 1,041 11,041 0 15,040 0 15,040 1,388 16,428 1,092 12/31/94 10,000 227 1,268 11,268 0 15,310 0 15,310 1,633 16,943 1,107 12/31/95 10,000 579 1,847 11,847 0 17,400 0 17,400 2,512 19,912 1,144 09/30/96 10,000 891 2,738 12,738 0 19,170 0 19,170 3,719 22,889 1,194 Total 0 Total Return 128.89% Average Annual Total Return 11.38% FRANKLIN RISING DIVIDENDS PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 01/31/93 10,000 0 0 10,000 0 10,860 0 10,860 0 10,860 1,000 01/31/94 10,000 28 28 10,028 0 10,710 0 10,710 29 10,739 1,003 01/31/95 10,000 171 199 10,199 0 10,240 0 10,240 202 10,442 1,020 01/31/96 10,000 246 445 10,445 0 12,910 0 12,910 541 13,451 1,042 09/30/96 10,000 290 735 10,735 0 13,850 0 13,850 881 14,731 1,064 Total 0 Total Return 47.31% Average Annual Total Return 8.64% FRANKLIN UTILITY EQUITY PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 12,140 0 12,140 0 12,140 1,000 12/31/90 10,000 98 98 10,098 0 12,260 0 12,260 103 12,363 1,008 12/31/91 10,000 348 446 10,446 0 14,740 0 14,740 535 15,275 1,036 12/31/92 10,000 316 762 10,762 1 15,820 1 15,821 917 16,738 1,058 12/31/93 10,000 358 1,120 11,120 2 17,140 3 17,143 1,359 18,502 1,079 12/31/94 10,000 647 1,767 11,767 0 14,420 3 14,423 1,798 16,220 1,125 12/31/95 10,000 1,014 2,782 12,782 0 17,900 3 17,903 3,403 21,306 1,190 09/30/96 10,000 1,089 3,871 13,871 0 17,260 3 17,263 4,395 21,658 1,255 Total 3 Total Return 116.58% Average Annual Total Return 10.58% FRANKLIN PRECIOUS METALS PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/89 10,000 0 0 10,000 0 12,430 0 12,430 0 12,430 1,000 12/31/90 10,000 84 84 10,084 68 10,520 59 10,579 72 10,651 1,012 12/31/91 10,000 202 286 10,286 13 10,280 70 10,350 267 10,617 1,033 12/31/92 10,000 320 607 10,607 0 9,360 64 9,424 517 9,941 1,062 12/31/93 10,000 95 701 10,701 0 14,460 99 14,559 912 15,471 1,070 12/31/94 10,000 95 797 10,797 0 14,090 96 14,186 986 15,172 1,077 12/31/95 10,000 211 1,008 11,008 156 14,080 252 14,332 1,196 15,529 1,103 09/30/96 10,000 217 1,225 11,225 199 14,320 443 14,763 1,420 16,184 1,130 Total 437 Total Return 61.84% Average Annual Total Return 6.47% TEMPLETON DEVELOPING MARKETS PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/94 10,000 0 0 10,000 0 9,560 0 9,560 0 9,560 1,000 12/31/95 10,000 37 37 10,037 9 9,780 9 9,789 37 9,825 1,005 09/30/96 10,000 100 137 10,137 186 10,860 194 11,054 140 11,194 1,031 Total 194 Total Return 11.94% Average Annual Total Return 4.53% TEMPLETON GLOBAL GROWTH PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 12/31/94 10,000 0 0 10,000 0 10,315 0 10,315 0 10,315 984 12/31/95 10,000 59 59 10,059 0 11,565 0 11,565 62 11,627 990 09/30/96 10,000 203 262 10,262 203 12,510 205 12,715 273 12,988 1,022 Total 203 Total Return 29.88% Average Annual Total Return 10.81% TEMPLETON INTERNATIONAL EQUITY PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 01/31/93 10,000 0 0 10,000 0 9,630 0 9,630 0 9,630 1,000 01/31/94 10,000 38 38 10,038 0 13,410 0 13,410 51 13,461 1,004 01/31/95 10,000 30 69 10,069 65 12,250 63 12,313 76 12,389 1,011 01/31/96 10,000 226 294 10,294 279 13,770 369 14,139 325 14,464 1,050 09/30/96 10,000 399 693 10,693 488 14,230 877 15,107 741 15,848 1,114 Total 833 Total Return 58.48% Average Annual Total Return 10.35% TEMPLETON PACIFIC GROWTH PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 01/31/93 10,000 0 0 10,000 0 9,980 0 9,980 0 9,980 1,000 01/31/94 10,000 0 0 10,000 0 14,720 0 14,720 0 14,720 1,000 01/31/95 10,000 28 28 10,028 59 12,280 52 12,332 24 12,356 1,006 01/31/96 10,000 259 287 10,287 108 15,040 186 15,226 326 15,552 1,034 09/30/96 10,000 455 742 10,742 264 14,650 443 15,093 769 15,862 1,083 Total 430 Total Return 58.62% Average Annual Total Return 10.37% TEMPLETON GLOBAL ASSET ALLOCATION PORTFOLIO ======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S ============= Cumulative Total From From From Inc Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held 05/31/95 10,000 0 0 10,000 0 10,070 0 10,070 0 10,070 1,000 12/31/95 10,000 180 180 10,180 0 10,520 0 10,520 181 10,701 1,017 09/30/96 10,000 0 185 10,185 0 11,710 11 11,721 206 11,927 1,019 Total 10 Total Return 19.27% Average Annual Total Return 13.23%
FRANKLIN VALUEMARK IV Allianz Life Variable Account B Performance Information of Selected Public Funds Original Purchase as of September 30, 1995 Valuation Date as of September 30, 1996 Dollar NAV Per Shrs. This Accum. Net Asset Date Transaction Amount Share Trans. Shrs. Value Mutual Discovery Fund 9-30-95 Purchase $1,000.00 $15.66 63.857 63.857 $1,000.00 12-29-95 Dividend Distribution ($.83/shr) 53.00 14.99 3.536 67.393 1,010.22 6-14-96 Dividend Distribution ($.35/shr) 23.59 16.89 1.397 68.789 1,161.85 9-30-96 Current Value 17.23 0.000 68.789 1,185.24 Average Annual Total Return 18.52% A Mutual Shares Fund 9-30-95 Purchase $1,000.00 $97.25 10.283 10.283 $1,000.00 12-29-95 Dividend Distribution ($12.14/shr) 124.83 85.63 1.458 11.741 1,005.35 6-14-96 Dividend Distribution ($3.00/shr) 35.22 91.93 0.383 12.124 1,114.53 9-30-96 Current Value 93.69 0.000 12.124 1,135.87 Average Annual Total Return 13.59% A A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
Dollar Units This Accum. Accum. Date Transaction Amount Unit Value Trans. Units Value Mutual Discovery Securities Sub-Account 9-30-95 Purchase $1,000.00 $16.99245035 58.850 58.850 $1,000.00 9-30-96 Contract Fee (1.00) 19.83270837 (0.050) 58.799 1,166.15 9-30-96 Value before Surr Chg 19.83270837 0.000 58.799 1,166.15 9-30-96 Surrender Charge (60.00) 19.83270837 (3.025) 55.774 1,106.15 Average Annual Total Returns without/with charges 16.71% B 10.61% C Mutual Shares Securities Sub-Account 9-30-95 Purchase $1,000.00 $481.22222262 2.078 2.078 $1,000.00 9-30-96 Contract Fee (1.00) 538.11504680 (0.002) 2.076 1,117.23 9-30-96 Value before Surr Chg 538.11504680 0.000 2.076 1,117.23 9-30-96 Surrender Charge (60.00) 538.11504680 (0.112) 1.965 1,057.23 Average Annual Total Returns without/with charges 11.82% B 5.72% C B = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch. C = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
Original Purchase as of September 30, 1991 Valuation Date as of September 30, 1996 Dollar NAV Per Shrs. This Accum. Net Asset Date Transaction Amount Share Trans. Shrs. Value Mutual Shares Fund 9-30-91 Purchase $1,000.00 $66.67 14.999 14.999 $1,000.00 12-31-91 Dividend Distribution ($2.73/shr) 40.95 63.27 0.647 15.646 989.95 7-6-92 Dividend Distribution ($1.00/shr) 15.65 70.18 0.223 15.869 1,113.71 12-31-92 Dividend Distribution ($3.75/shr) 59.51 72.71 0.818 16.688 1,213.37 7-12-93 Dividend Distribution ($.70/shr) 11.68 79.65 0.147 16.835 1,340.87 12-31-93 Dividend Distribution ($6.99/shr) 117.67 80.56 1.461 18.295 1,473.86 7-11-94 Dividend Distribution ($.60/shr) 10.98 80.60 0.136 18.431 1,485.57 12-29-94 Dividend Distribution ($5.30/shr) 97.69 78.31 1.247 19.679 1,541.05 7-10-95 Dividend Distribution ($2.60/shr) 51.16 88.78 0.576 20.255 1,798.25 12-29-95 Dividend Distribution ($12.14/shr) 245.90 85.63 2.872 23.127 1,980.34 6-14-96 Dividend Distribution ($3.00/shr) 69.38 91.93 0.755 23.881 2,195.42 9-30-96 Current Value 93.69 0.000 23.881 2,237.46 Cumulative Total Return 123.75% A Average Annual Total Return 17.47% B A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch. B = [(A+1)^(1/5 Years)]-1
Dollar Units This Accum. Accum. Date Transaction Amount Unit Value Trans. Units Value Mutual Shares Securities Sub-Account 9-30-91 Purchase $1,000.00 $260.24931474 3.842 3.842 $1,000.00 9-30-92 Contract Fee (1.00) 291.59722082 (0.003) 3.839 1,119.45 9-30-93 Contract Fee (1.00) 361.18312950 (0.003) 3.836 1,385.60 9-30-94 Contract Fee (1.00) 390.55841707 (0.003) 3.834 1,497.29 9-30-95 Contract Fee (1.00) 481.22222262 (0.002) 3.832 1,843.87 9-30-96 Contract Fee (1.00) 538.11504680 (0.002) 3.830 2,060.86 9-30-96 Value before Surr Chg 538.11504680 0.000 3.830 2,060.86 9-30-96 Surrender Charge (34.00) 538.11504680 (0.063) 3.767 2,026.86 Cumulative Total Rtns. without/with chrgs. 106.77% C 102.69% E Avg. Annual Total Rtns. without/with chrgs. 15.64% D 15.18% F C = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch. D = [(C+1)^(1/5 Years)]-1 E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch. F = [(E+1)^(1/5 Years)]-1
Original Purchase as of September 30, 1986 Valuation Date as of September 30, 1996 Dollar NAV Per Shrs. This Accum. Net Asset Date Transaction Amount Share Trans. Shrs. Value Mutual Shares Fund 9-30-86 Purchase $1,000.00 $63.86 15.659 15.659 $1,000.00 1-9-87 Dividend Distribution ($5.65/shr) 88.47 60.08 1.473 17.132 1,029.28 7-17-87 Dividend Distribution ($1.35/shr) 23.13 71.24 0.325 17.457 1,243.60 12-31-87 Dividend Distribution ($5.26/shr) 91.82 58.12 1.580 19.036 1,106.39 7-15-88 Dividend Distribution ($1.75/shr) 33.31 70.00 0.476 19.512 1,365.86 12-29-88 Dividend Distribution ($5.93/shr) 115.71 67.38 1.717 21.230 1,430.45 6-23-89 Dividend Distribution ($1.85/shr) 39.27 74.45 0.528 21.757 1,619.81 12-29-89 Dividend Distribution ($8.79/shr) 191.24 66.80 2.863 24.620 1,644.62 6-18-90 Dividend Distribution ($.75/shr) 18.47 66.20 0.279 24.899 1,648.31 12-31-90 Dividend Distribution ($3.48/shr) 86.65 56.16 1.543 26.442 1,484.97 7-8-91 Dividend Distribution ($.90/shr) 23.80 63.59 0.374 26.816 1,705.23 12-31-91 Dividend Distribution ($2.73/shr) 73.21 63.27 1.157 27.973 1,769.86 7-6-92 Dividend Distribution ($1.00/shr) 27.97 70.18 0.399 28.372 1,991.13 12-31-92 Dividend Distribution ($3.75/shr) 106.39 72.71 1.463 29.835 2,169.30 7-12-93 Dividend Distribution ($.70/shr) 20.88 79.65 0.262 30.097 2,397.24 12-31-93 Dividend Distribution ($6.99/shr) 210.38 80.56 2.611 32.709 2,635.01 7-11-94 Dividend Distribution ($.60/shr) 19.63 80.60 0.243 32.952 2,655.94 12-29-94 Dividend Distribution ($5.30/shr) 174.65 78.31 2.230 35.182 2,755.13 7-10-95 Dividend Distribution ($2.60/shr) 91.47 88.78 1.030 36.213 3,214.96 12-29-95 Dividend Distribution ($12.14/shr) 439.62 85.63 5.134 41.347 3,540.51 6-14-96 Dividend Distribution ($3.00/shr) 124.04 91.93 1.349 42.696 3,925.04 9-30-96 Current Value 93.69 0.000 42.696 4,000.18 Cumulative Total Return 300.02% A Average Annual Total Return 14.87% B A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch. B = [(A+1)^(1/10 Years)]-1
Dollar Units This Accum. Accum. Date Transaction Amount Unit Value Trans. Units Value Mutual Shares Securities Sub-Account 9-30-86 Purchase $1,000.00 $157.21256263 6.361 6.361 $1,000.00 9-30-87 Contract Fee (1.00) 203.12088734 (0.005) 6.356 1,291.01 9-30-88 Contract Fee (1.00) 214.21878130 (0.005) 6.351 1,360.55 9-30-89 Contract Fee (1.00) 256.05239699 (0.004) 6.347 1,625.25 9-30-90 Contract Fee (1.00) 213.33172521 (0.005) 6.343 1,353.08 9-30-91 Contract Fee (1.00) 260.24931474 (0.004) 6.339 1,649.67 9-30-92 Contract Fee (1.00) 291.59722082 (0.003) 6.335 1,847.37 9-30-93 Contract Fee (1.00) 361.18312950 (0.003) 6.333 2,287.22 9-30-94 Contract Fee (1.00) 390.55841707 (0.003) 6.349 2,479.52 9-30-95 Contract Fee (1.00) 481.22222262 (0.002) 6.347 3,054.12 9-30-96 Contract Fee (1.00) 538.11504680 (0.002) 6.345 3,414.19 9-30-96 Value before Surr Chg 538.11504680 0.000 6.345 3,414.19 9-30-96 Surrender Charge 0.00 538.11504680 0.000 6.345 3,414.19 Cumulative Total Rtns. without/with chrgs. 242.29% C 241.42% E Avg. Annual Total Rtns. without/with chrgs. 13.09% D 13.07% F C = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch. D = [(C+1)^(1/10 Years)]-1 E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch. F = [(E+1)^(1/10 Years)]-1
Original Purchase as of Inception Valuation Date as of September 30, 1996 Dollar NAV Per Shrs. This Accum. Net Asset Date Transaction Amount Share Trans. Shrs. Value Mutual Discovery Fund 12-31-92 Purchase $1,000.00 $10.00 100.000 100.000 $1,000.00 12-31-93 Dividend Distribution ($.53/shr) 53.00 12.93 4.099 104.099 1,346.00 7-11-94 Dividend Distribution ($.20/shr) 20.82 13.28 1.568 105.667 1,403.25 12-29-94 Dividend Distribution ($.77/shr) 81.36 12.52 6.499 112.165 1,404.31 7-10-95 Dividend Distribution ($.13/shr) 14.58 14.49 1.006 113.172 1,639.86 12-29-95 Dividend Distribution ($.83/shr) 93.93 14.99 6.266 119.438 1,790.38 6-14-96 Dividend Distribution ($.35/shr) 41.80 16.89 2.475 121.913 2,059.11 9-30-96 Current Value 17.23 0.000 121.913 2,100.56 Cumulative Total Return 110.06% A Average Annual Total Return 21.90% B A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch. B = [(A+1)^(1/Years since Inception)]-1
Dollar Units This Accum. Accum. Date Transaction Amount Unit Value Trans. Units Value Mutual Discovery Securities Sub-Account 12-31-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00 12-31-93 Contract Fee (1.00) 13.37903402 (0.075) 99.925 1,336.90 12-31-94 Contract Fee (1.00) 13.65174819 (0.073) 99.852 1,363.15 12-31-95 Contract Fee (1.00) 17.28544840 (0.058) 99.794 1,724.99 9-30-96 Contract Fee (1.00) 19.83270837 (0.050) 99.744 1,978.19 9-30-96 Value before Surr Chg 19.83270837 0.000 99.925 1,981.79 9-30-96 Surrender Charge (42.50) 19.83270837 (2.143) 97.782 1,939.29 Cumulative Total Rtns. without/with chgs. 98.33% C 93.93% E Avg. Annual Total Rtns. without/with chgs. 20.03% D 19.31% F C = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch. D = [(C+1)^(1/Years since Inception)]-1 E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch. F = [(E+1)^(1/Years since Inception)]-1
EX-99.B14 7 COMPANY ORGANIZATIONAL CHART Organizational Chart Allianz Aktiengesellschaft Holding (abbreviated as Allianz AG Holding), of Munich, Germany, is the controlling owner of Allianz of America, Inc. Allianz of America, Inc. is sole owner of Allianz Life Insurance Company of North America. Allianz Life is controlling owner of NALAC Financial Plans, LLC. EX-27 8 FDS
6 0000836346 Allianz Life Variable Account B 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 7,582,700 8,302,354 0 0 0 8,302,354 0 0 1,183 1,183 6,655,144 0 510,430 489,099 579,273 0 347,022 0 719,732 8,301,171 333,391 0 0 85,134 248,257 211,439 (56,424) 403,272 0 0 0 0 47,073 0 0 579,960 331,016 135,583 0 0 85,134 0 85,134 8,002,191 0 0 0 0 0 0 0 .011 0 0
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