485BPOS 1 file001.txt CHARTER II NY 485B DATED APRIL 27, 2009 File Nos. 333-105274 and 811-05716 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( ) Pre-Effective Amendment No. ( ) ------------ ------------ Post-Effective Amendment No. 7 (X) ------------ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( ) Amendment No. 124 (X) ------------ (Check appropriate box or boxes.) ALLIANZ LIFE OF NY VARIABLE ACCOUNT C (Exact Name of Registrant) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK (Name of Depositor) One Chase Manhattan Plaza, 37th Floor, New York, New York 10005-1423 (Address of Depositor's Principal Executive Offices) (Zip Code) (212) 586-7733 (Depositor's Telephone Number, including Area Code) Allianz Life Insurance Company of New York One Chase Manhattan Plaza, 37th Floor New York, New York 10005-1423 (Name and Address of Agent for Service) Copies to: Stewart D. Gregg, Senior Securities Counsel Allianz Life Insurance Company of North America 5701 Golden Hills Drive Minneapolis, MN 55416 (763) 765-2913 It is proposed that this filing will become effective (check the appropriate box): ____ immediately upon filing pursuant to paragraph (b) of Rule 485 __X_ on April 27, 2009 pursuant to paragraph (b) of Rule 485 ____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485 ____ on (date) pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following: __X_ this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Approximate Date of the Proposed Public Offering: April 27, 2009 Titles of Securities Being Registered: Individual Flexible Purchase Payment Variable Deferred Annuity Contracts PART A - PROSPECTUS 1 THE ALLIANZ CHARTER[{R}] II NEW YORK VARIABLE ANNUITY CONTRACT ISSUED BY ALLIANZ LIFE[{R}] OF NY VARIABLE ACCOUNT C AND ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK FOR YOUR CONVENIENCE WE HAVE PROVIDED A GLOSSARY (SEE SECTION 12) THAT DEFINES KEY, CAPITALIZED TERMS THAT ARE USED IN THIS PROSPECTUS. This prospectus describes an individual flexible purchase payment variable deferred annuity contract (Contract) issued by Allianz Life Insurance Company of New York (Allianz Life of New York, we, us, our). The Contract is a "flexible purchase payment" contract because you (the Owner) can make more than one Purchase Payment, subject to certain restrictions. The Contract is "variable" because the Contract Value and any variable Annuity Payments you receive will increase or decrease depending on the performance of the Investment Options you select (in this prospectus, the term "Investment Options" refers only to the variable Investment Options listed on the following page, and not to any fixed investment choices). The Contract is "deferred" because you do not begin receiving regular Annuity Payments immediately. The Contract offers two optional Guaranteed Benefit Packages (GBPs). Each GBP includes a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit (GPWB) and both GBPs carry a higher Contract expense. We designed the GBPs to give you options on how to turn your accumulated retirement assets into a stream of retirement income. Additional information about the Separate Account has been filed with the Securities and Exchange Commission (SEC) and is available upon written or oral request without charge. A Statement of Additional Information (SAI) dated the same date as this prospectus includes additional information about the annuity offered by this prospectus. The SAI is incorporated by reference into this prospectus. The SAI is filed with the SEC and is available without charge by contacting us at the telephone number or address listed at the back of this prospectus. The table of contents of the SAI appears before the Privacy and Security Statement in this prospectus. The SEC also maintains a website (http://www.sec.gov). The prospectus, the SAI and other information about the Contract are available on the EDGAR database on the SEC's website. Please read this prospectus before investing and keep it for future reference. It contains important information about your annuity and Allianz Life of New York that you ought to know before investing. This prospectus is not an offering in any state, country, or jurisdiction in which we are not authorized to sell the Contracts. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. To the extent that the issuance of this Contract may subject Allianz Life to a duty under section 15(d) of the Securities Exchange Act of 1934 to file reports required by section 13(a) of that Act, Allianz Life is relying on the exemption from such reporting provided by Rule 12h-7 under that Act. THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT IN THIS CONTRACT IS NOT A DEPOSIT OF A BANK OR FINANCIAL INSTITUTION AND IS NOT FEDERALLY INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL GOVERNMENT AGENCY. AN INVESTMENT IN THIS CONTRACT INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. VARIABLE ANNUITY CONTRACTS ARE COMPLEX INSURANCE AND INVESTMENT VEHICLES. BEFORE YOU INVEST, BE SURE TO ASK YOUR REGISTERED REPRESENTATIVE ABOUT THE CONTRACT'S FEATURES, BENEFITS, RISKS AND FEES, AND WHETHER THE CONTRACT IS APPROPRIATE FOR YOU BASED UPON YOUR FINANCIAL SITUATION AND OBJECTIVES. Dated: April 27, 2009 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 2 This prospectus contains information on currently offered Contracts. Information regarding the product features and expenses of older Contracts that we no longer offer can be found in the SAI. We currently offer the Investment Options listed below. You can select up to 15 Investment Options at any one time. We may add, substitute or remove Investment Options in the future. WE DO NOT CURRENTLY OFFER A FIXED ACCOUNT. INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT AIM AZL[{R}] AIM International Equity Fund BLACKROCK AZL[{R}] BlackRock Capital Appreciation Fund AZL[{R}] BlackRock Growth Fund AZL[{R}] International Index Fund AZL[{R}] Money Market Fund BlackRock Global Allocation V.I. Fund COLUMBIA AZL[{R}] Columbia Mid Cap Value Fund AZL[{R}] Columbia Small Cap Value Fund AZL[{R}] Columbia Technology Fund DAVIS AZL[{R}] Davis NY Venture Fund Davis VA Financial Portfolio DREYFUS AZL[{R}] Dreyfus Equity Growth Fund AZL[{R}] S&P 500 Index Fund AZL[{R}] Small Cap Stock Index Fund FIRST TRUST AZL[{R}] First Trust Target Double Play Fund FRANKLIN TEMPLETON AZL[{R}] Franklin Small Cap Value Fund AZL[{R}] Franklin Templeton Founding Strategy Plus Fund Franklin Global Real Estate Securities Fund Franklin Growth and Income Securities Fund Franklin High Income Securities Fund Franklin Income Securities Fund Franklin Large Cap Growth Securities Fund Franklin Rising Dividends Securities Fund Franklin Small-Mid Cap Growth Securities Fund Franklin Small Cap Value Securities Fund[(1)] Franklin Templeton VIP Founding Funds Allocation Fund Franklin U.S. Government Fund Franklin Zero Coupon Fund 2010 Mutual Global Discovery Securities Fund Mutual Shares Securities Fund Templeton Foreign Securities Fund Templeton Global Bond Securities Fund Templeton Growth Securities Fund FUND OF FUNDS AZL[{R}] Allianz Global Investors Select Fund AZL[{R}] Balanced Index Strategy Fund AZL[{R}] Fusion Balanced Fund AZL[{R}] Fusion Conservative Fund AZL[{R}] Fusion Growth Fund AZL[{R}] Fusion Moderate Fund AZL[{R}] Moderate Index Strategy Fund JENNISON AZL[{R}] Jennison 20/20 Focus Fund J.P. MORGAN AZL[{R}] JPMorgan Large Cap Equity Fund AZL[{R}] JPMorgan U.S. Equity Fund NICHOLAS-APPLEGATE AZL[{R}] NACM International Fund OPPENHEIMER CAPITAL AZL[{R}] OCC Growth Fund AZL[{R}] OCC Opportunity Fund OpCap Mid Cap Portfolio[(2)] OPPENHEIMER FUNDS AZL[{R}] Oppenheimer Global Fund AZL[{R}] Oppenheimer International Growth Fund Oppenheimer High Income Fund/VA PIMCO AZL[{R}] PIMCO Fundamental IndexPLUS Total Return Fund PIMCO VIT All Asset Portfolio PIMCO VIT CommodityRealReturn[TM] Strategy Portfolio PIMCO VIT Emerging Markets Bond Portfolio PIMCO VIT Global Bond Portfolio (Unhedged) PIMCO VIT Global Multi-Asset Portfolio PIMCO VIT High Yield Portfolio PIMCO VIT Real Return Portfolio PIMCO VIT StocksPLUS[{R}] Growth and Income Portfolio[(3)] PIMCO VIT Total Return Portfolio PRUDENTIAL SP International Growth Portfolio SP Strategic Partners Focused Growth Portfolio SCHRODER AZL[{R}] Schroder Emerging Markets Equity Fund AZL[{R}] Schroder International Small Cap Fund TARGETPLUS PORTFOLIOS AZL TargetPLUS[SM] Balanced Fund AZL TargetPLUS[SM] Equity Fund AZL TargetPLUS[SM] Growth Fund AZL TargetPLUS[SM] Moderate Fund TURNER AZL[{R}] Turner Quantitative Small Cap Growth Fund VAN KAMPEN AZL[{R}] Van Kampen Comstock Fund AZL[{R}] Van Kampen Equity and Income Fund AZL[{R}] Van Kampen Global Franchise Fund AZL[{R}] Van Kampen Global Real Estate Fund AZL[{R}] Van Kampen Growth and Income Fund AZL[{R}] Van Kampen Mid Cap Growth Fund (1)The Franklin Small Cap Value Securities Fund is available for additional Purchase Payments and/or transfers only to Owners with Contract Value in this Investment Option on April 29, 2005. (2)A fund of the Premier VIT series. (3)The fund will be liquidated on or about July 17, 2009 and will then no longer be available as an Investment Option under the Contract. For additional information regarding the liquidation, please see the PIMCO VIT StocksPLUS Growth and Income Portfolio prospectus. Any Contract Value remaining in the Investment Option at the time the fund is liquidated will be transferred to the AZL Money Market Fund. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 3 TABLE OF CONTENTS FEE TABLES........................4 Contract Owner Transaction Expenses4 Contract Owner Periodic Expenses5 Annual Operating Expenses of the Investment Options5 Examples........................6 1.THE VARIABLE ANNUITY CONTRACT...7 Ownership.......................7 2.THE ANNUITY PHASE...............9 Income Date.....................9 Partial Annuitization...........9 Annuity Options................10 Traditional Annuity Payments...12 Guaranteed Minimum Income Benefits (GMIBs)13 Taxation of GMIB Payments......14 Amount Used To Calculate GMIB Payments14 Traditional GMIB Value.........15 Enhanced GMIB Value............15 3.PURCHASE.......................17 Purchase Payments..............17 Automatic Investment Plan (AIP)17 Allocation of Purchase Payments18 Tax-Free Section 1035 Exchanges18 Faxed Applications.............19 Free Look/Right to Examine.....19 Accumulation Units/Computing the Contract Value19 4.INVESTMENT OPTIONS.............20 Substitution and Limitation on Further Investments28 Transfers......................28 Excessive Trading and Market Timing29 Dollar Cost Averaging (DCA) Program31 Flexible Rebalancing...........32 Financial Advisers - Asset Allocation Programs32 Voting Privileges..............32 5.OUR GENERAL ACCOUNT............33 6.EXPENSES.......................33 Mortality and Expense Risk (M&E) Charges33 Contract Maintenance Charge....34 Withdrawal Charge..............34 Transfer Fee...................36 Premium Taxes..................36 Income Taxes...................36 Investment Option Expenses.....36 7.TAXES..........................36 Annuity Contracts in General...36 Qualified Contracts............37 Multiple Contracts.............38 Partial 1035 Exchanges.........38 Distributions - Non-Qualified Contracts38 Distributions - Qualified Contracts39 Assignments, Pledges and Gratuitous Transfers40 Death Benefits.................40 Withholding....................40 Federal Estate Taxes...........40 Generation-Skipping Transfer Tax41 Foreign Tax Credits............41 Annuity Purchases by Nonresident Aliens and Foreign Corporations...........41 Possible Tax Law Changes.......41 Diversification................41 Required Distributions.........41 8.ACCESS TO YOUR MONEY...........42 Guaranteed Partial Withdrawal Benefits (GPWBs)42 GPWB Payments..................44 Taxation of GPWB Payments......46 Systematic Withdrawal Program..46 The Minimum Distribution Program and Required Minimum Distribution (RMD) Payments 46 Suspension of Payments or Transfers47 9.ILLUSTRATIONS..................47 10.DEATH BENEFIT.................47 Traditional Guaranteed Minimum Death Benefit (Traditional GMDB)48 Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB)................48 Termination of the Death Benefit49 Death of the Owner Under Inherited IRA Contracts49 Death of the Owner and/or Annuitant Under All Other Contracts............50 Death Benefit Payment Options..53 11.OTHER INFORMATION.............53 Allianz Life of New York.......53 The Separate Account...........53 Distribution...................54 Additional Credits for Certain Groups55 Administration/Allianz Service Center55 Legal Proceedings..............56 Financial Statements...........56 12.GLOSSARY......................56 13.TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION (SAI)59 14.PRIVACY AND SECURITY STATEMENT60 APPENDIX A - ANNUAL OPERATING EXPENSES FOR EACH INVESTMENT OPTION...........62 APPENDIX B - CONDENSED FINANCIAL INFORMATION67 APPENDIX C - GMIB AND GPWB VALUE CALCULATION EXAMPLES76 APPENDIX D - DEATH BENEFIT CALCULATION EXAMPLES78 APPENDIX E - WITHDRAWAL CHARGE EXAMPLES79 FOR SERVICE OR MORE INFORMATION..80 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 4 The following is a list of common abbreviations used in this prospectus:
AIA = ANNUAL INCREASE AMOUNT GMIB = GUARANTEED MINIMUM INCOME BENEFIT GBP = GUARANTEED BENEFIT PACKAGE GPWB = GUARANTEED PARTIAL WITHDRAWAL BENEFIT GMDB = GUARANTEED MINIMUM DEATH BENEFIT MAV = MAXIMUM ANNIVERSARY VALUE
FEE TABLES The following tables describe the fees and expenses that you will pay when purchasing, owning and taking a withdrawal from the Contract. For more information, see section 6, Expenses. The first tables describe the fees and expenses that you will pay if you take a withdrawal from the Contract during the Accumulation Phase or if you make transfers. CONTRACT OWNER TRANSACTION EXPENSES WITHDRAWAL CHARGE DURING THE ACCUMULATION PHASE[(1),(2) ](as a percentage of each Purchase Payment withdrawn) NUMBER OF COMPLETE YEARS SINCE WE RECEIVED YOUR PURCHASE PAYMENT CHARGE 0 8% 1 7% 2 years or more 0% TRANSFER FEE[(3)]...................$25 PREMIUM TAXES[(4)]...........0% to 3.5% (as a percentage of each Purchase Payment) (1)[]GPWB Payments are not subject to a withdrawal charge. For more details and additional information, please see section 8, Access to Your Money - Guaranteed Partial Withdrawal Benefits (GPWBs). (2)The total amount under your Contract that is subject to a withdrawal charge is the Withdrawal Charge Basis. The Withdrawal Charge Basis is equal to the total Purchase Payments, less any withdrawals from the Contract (including any withdrawal charges). (3)The first twelve transfers in a Contract Year are free. Dollar cost averaging and flexible rebalancing transfers do not count against any free transfers we allow. Currently, we deduct this fee only during the Accumulation Phase, but we reserve the right to also deduct this fee during the Annuity Phase. For more information, please see section 6, Expenses - Transfer Fee. (4)Although New York does not currently impose a premium tax, we reserve the right to collect that tax if imposed by New York in the future. If your Contract is subject to a premium tax, it is our current practice not to make deductions from the Contract to reimburse ourselves for premium taxes that we pay, although we reserve the right to make such a deduction in the future. For more information, please see section 6, Expenses - Premium Taxes. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 5 CONTRACT OWNER PERIODIC EXPENSES The next tables describe the fees and expenses that you will pay periodically during the time that you own your Contract, not including the Investment Options' fees and expenses. The Separate Account annual expenses include the mortality and expense risk (M&E) charges. DURING THE ACCUMULATION PHASE: CONTRACT MAINTENANCE CHARGE[(5)]....$30 (per Contract per year) SEPARATE ACCOUNT ANNUAL EXPENSES[(6)] The annualized rate is realized on a daily basis as a percentage of the net asset value of an Investment Option. M&E CHARGES NO GBP TRADITIONAL GBP ENHANCED GBP Traditional GMDB 1.75% 1.95% 2.45% Enhanced GMDB 1.95% 2.10% 2.60% The Traditional GBP consists of: o The Traditional GMIB, and o The Traditional GPWB. The Enhanced GBP consists of: o The Enhanced GMIB, and o The Enhanced GPWB. DURING THE ANNUITY PHASE: CONTRACT MAINTENANCE CHARGE[(5)]....$30 (per Contract per year) SEPARATE ACCOUNT ANNUAL EXPENSES - IF YOU REQUEST VARIABLE TRADITIONAL ANNUITY PAYMENTS The annualized rate is realized on a daily basis as a percentage of the net asset value of an Investment Option. M&E CHARGE......................1.75% (5)We waive the contract maintenance charge if the Contract Value is at least $75,000 at the time we are to deduct the charge. If the total Contract Value of all your Contracts that are registered with the same social security number is at least $75,000, we waive the charge on all your Contracts. For more information, please see section 6, Expenses - Contract Maintenance Charge. (6)If you exercise the GPWB, the increased M&E charges associated with the GBP will continue until the GPWB endorsement terminates and the increased M&E charges associated with the Enhanced GMDB (if applicable) will continue as long as the Enhanced GMDB value is greater than zero. ANNUAL OPERATING EXPENSES OF THE INVESTMENT OPTIONS This table describes the total annual operating expenses associated with the Investment Options and shows the minimum and maximum expenses for the period ended December 31, 2008, charged by any of the Investment Options before the effect of any contractual expense reimbursement or fee waiver. We show the expenses as a percentage of an Investment Option's average daily net assets.
MINIMUM MAXIMUM Total annual Investment Option operating expenses* 0.63% 1.93% (including management fees, distribution or 12b-1 fees, and other expenses) before fee waivers and expense reimbursements
* Some of the Investment Options or their affiliates may also pay service fees to us or our affiliates. The amount of these fees may be different for each Investment Option. The maximum current fee is 0.25%. The amount of these fees, if deducted from Investment Option assets, is reflected in the above table and is disclosed in Appendix A. Appendix A also contains more details regarding the annual operating expenses for each of the Investment Options, including the amount and effect of any waivers and/or reimbursements. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 6 EXAMPLES The expenses for your Contract may be different from those shown in the examples below depending upon which Investment Option(s) you select and the benefits that apply. These examples are intended to help you compare the cost of investing in a Contract with the cost of investing in other variable annuity contracts. These costs include Contract Owner transaction expenses, Contract Owner periodic expenses, and the annual operating expenses of the Investment Options before the effect of reimbursements and waivers. You should not consider the examples below as a representation of past or future expenses. Actual expenses may be greater or less than those shown. The entire $30 contract maintenance charge is deducted in the examples at the end of each year during the Accumulation Phase. Please note that this charge does not apply if your Contract Value at the end of year is at least $75,000. Transfer fees may apply, but are not reflected in these examples. For additional information, see section 6, Expenses. If you take a full withdrawal at the end of each time period, and assuming a $10,000 investment and a 5% annual return on your money, you may pay expenses as follows. a) The Enhanced GMDB and the Enhanced GBP (which includes the Enhanced GMIB and Enhanced GPWB and carries the highest M&E charge of 2.60%). b) The Traditional GMDB and no GBP (which carries the lowest M&E charge of 1.75%).
TOTAL ANNUAL INVESTMENT OPTION OPERATING EXPENSES 1 YEAR 3 YEARS 5 YEARS 10 YEARS BEFORE ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS OF: a) $1,284 $1,459 $2,442 $4,938 b) $1,200 $1,216 $2,052 $4,232 a) $1,156 $1,085 $1,838 $3,831 b) $1,071 $832 $1,420 $3,016
If you do not take a full withdrawal or if you take a Full Annuitization* of the Contract at the end of each time period, and assuming a $10,000 investment and a 5% annual return on your money, you may pay expenses as follows.
TOTAL ANNUAL INVESTMENT OPTION OPERATING EXPENSES 1 YEAR 3 YEARS 5 YEARS 10 YEARS BEFORE ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS OF: a) $484 $1,459 $2,442 $4,938 b) $400 $1,216 $2,052 $4,232 a) $356 $1,085 $1,838 $3,831 b) $271 $832 $1,420 $3,016
* Traditional Annuity Payments are not available until 13 months after your Issue Date and GMIB Payments are not available until the tenth Contract Anniversary. See Appendix B for condensed financial information regarding the Accumulation Unit values (AUVs) for the highest and lowest M&E charges. See the appendix to the Statement of Additional Information for condensed financial information regarding the AUVs for other expense levels. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 7 1. THE VARIABLE ANNUITY CONTRACT An annuity is a contract between you (the Owner), and an insurance company (in this case Allianz Life of New York), where you make payments to us and, in turn, we promise to make regular periodic income payments (Annuity Payments) to the Payee. The Contract is tax deferred. You generally are not taxed on any earnings or appreciation on the assets in your Contract until you take money out of your Contract. FOR QUALIFIED CONTRACTS, THE TAX DEFERRAL IS PROVIDED THROUGH COMPLIANCE WITH SPECIALIZED TAX-QUALIFICATION RULES, AND YOU DO NOT RECEIVE ANY ADDITIONAL TAX BENEFIT BY PURCHASING THE CONTRACT. HOWEVER, THE CONTRACT MAY OFFER OTHER FEATURES THAT MEET YOUR NEEDS. ACCORDINGLY, IF YOU ARE PURCHASING A QUALIFIED CONTRACT, YOU SHOULD CONSIDER PURCHASING THIS CONTRACT FOR ITS DEATH BENEFIT, ANNUITY BENEFITS AND OTHER NON-TAX DEFERRAL RELATED BENEFITS. PLEASE CONSULT A TAX ADVISER FOR INFORMATION SPECIFIC TO YOUR CIRCUMSTANCES TO DETERMINE WHETHER A QUALIFIED CONTRACT IS AN APPROPRIATE INVESTMENT FOR YOU. The Contract has an Accumulation Phase and an Annuity Phase. You can take withdrawals from the Contract during the Accumulation Phase and, subject to certain restrictions, you can make additional Purchase Payments. The Accumulation Phase begins on the Issue Date and ends upon the earliest of the following. o The Business Day before the Income Date if you take a Full Annuitization. o The Business Day we process your request for a full withdrawal. o Upon the death of any Owner (or the Annuitant if the Contract is owned by a non-individual), it will terminate on the Business Day we receive in good order at our Service Center, both due proof of death and an election of the death benefit payment option, unless the spouse of the deceased continues the Contract. The Annuity Phase is the period during which we will make Annuity Payments from the Contract. Under all Contracts, Traditional Annuity Payments are available during the Annuity Phase. Traditional Annuity Payments must begin on a designated date (the Income Date) that is at least 13 months after your Issue Date. For Contracts with a GBP, you can request fixed Annuity Payments under the GMIB (GMIB Payments) beginning on the tenth Contract Anniversary. If you apply the entire Contract Value to Annuity Payments, we call that a Full Annuitization, and if you apply only part of the Contract Value to Annuity Payments, we call that a Partial Annuitization.* The maximum number of annuitizations you can have at any one time is five. Because the Contract allows Partial Annuitization, it is possible that some portion of the Contract will be in the Accumulation Phase and other portions will be in the Annuity Phase at the same time. The Annuity Phase begins on the Income Date (or the first Income Date if you take any Partial Annuitizations) and ends when all portion(s) of the Contract that you apply to Annuity Payments have terminated, as indicated in section 2, The Annuity Phase. * GMIB Payments are not available under a Partial Annuitization. The amount of Contract Value you are able to accumulate in your Contract during the Accumulation Phase and the amount of any variable Traditional Annuity Payments we make during the Annuity Phase depend in large part upon the investment performance of the Investment Option(s) you select. You cannot invest in more than 15 Investment Options at any one time. Depending upon market conditions, you can gain or lose value in the Contract based on the investment performance of the Investment Options. We will not make any changes to your Contract without your permission except as may be required by law. THE CONTRACT WILL TERMINATE WHEN: o the Accumulation Phase has terminated, o the Annuity Phase has terminated, and/or o all applicable death benefit payments have been made. OWNERSHIP OWNER You, as the Owner, have all the rights under the Contract. The Owner is designated at Contract issue. You can change Owners at any time subject to our approval. However, Qualified Contracts can only have one Owner and there may be Internal Revenue Service (IRS) or other restrictions on changing the ownership of a Qualified Contract. Upon our approval, any ownership change will become effective as of the date you sign the request. Changing ownership may be a taxable event. You should consult with your tax adviser before doing this. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 8 JOINT OWNER A Non-Qualified Contract can be owned by up to two Owners. Upon the death of either Joint Owner, the surviving Joint Owner will become the sole primary Beneficiary. We will then treat any other Beneficiary designation on record at the time of death as a contingent Beneficiary. You can change Joint Owners under the same conditions as described for an Owner. If a Contract has Joint Owners, we require the signature of both Owners on any forms that are submitted to our Service Center, unless we allow otherwise. NOTE FOR PARTIAL ANNUITIZATIONS: Partial Annuitizations are not available to Joint Owners. There can be only one Owner, the Owner must be the Annuitant, and we will not allow the Owner to add a joint Annuitant. ANNUITANT The Annuitant is the individual on whose life we base Annuity Payments. Subject to our approval, you designate an Annuitant and you can add a joint Annuitant for the Annuity Phase if you take a Full Annuitization. You may change the Annuitant at any time before the Income Date unless the Contract is owned by a non-individual (for example, a qualified plan or trust). You cannot change the Annuitant if the Contract is owned by a non-individual, but you can add a joint Annuitant (subject to our approval) for the Annuity Phase if you take a Full Annuitization. For Qualified Contracts, the Owner must be the Annuitant unless the Contract is owned by a qualified plan or is part of a custodial arrangement. DESIGNATING DIFFERENT PERSONS AS OWNER(S) AND ANNUITANT(S) CAN HAVE IMPORTANT IMPACTS ON WHETHER A DEATH BENEFIT IS PAID, AND ON WHO WOULD RECEIVE IT. USE CARE WHEN DESIGNATING OWNERS AND ANNUITANTS, AND CONSULT YOUR REGISTERED REPRESENTATIVE IF YOU HAVE QUESTIONS. PAYEE The Payee is the person or entity you designate (subject to our approval) to receive Annuity Payments during the Annuity Phase. The Owner will receive tax reporting on those payments. For Non-Qualified Contracts, an Owner or Annuitant can be the Payee, but it is not required. For Qualified Contracts owned by a qualified plan, the qualified plan must be the Payee. For all other Qualified Contracts, the Owner is not required to be the Payee, but the Owner cannot transfer or assign his or her rights under the Contract to someone else. If you do not designate a Payee by the Income Date, we will make Annuity Payments to the Owner unless the Contract is a Qualified Contract owned by a qualified plan. The Owner can change the Payee at any time, subject to our approval, provided that designation of a Payee is consistent with federal and state laws and regulations. BENEFICIARY The Beneficiary is the person(s) or entity you designate at Contract issue to receive any death benefit. You can change the Beneficiary or contingent Beneficiary at any time before your death unless you name an irrevocable Beneficiary. If you do not designate a Beneficiary, any death benefit will be paid to your estate. NOTE FOR JOINT OWNERS: For jointly owned Contracts, the sole primary Beneficiary will be the surviving Joint Owner. For Contracts that are jointly owned by spouses, if both spousal Joint Owners die before we pay the death benefit, we will pay the death benefit to the contingent Beneficiaries, or to the estate of the Joint Owner who died last if there are no named contingent Beneficiaries. However, for tax reasons, if the Joint Owners were not spouses and both Joint Owners die before we pay the death benefit, we will pay the death benefit to the estate of the Joint Owner who died last. ASSIGNMENT OF A CONTRACT An authorized request specifying the terms of an assignment of a Contract must be provided to our Service Center and approved by us. We will not be liable for any payment made or action taken before we record the assignment. An assignment may be a taxable event. We will not be responsible for the validity or tax consequences of any assignment. After the death benefit has become payable, an assignment can only be made with our consent. If the Contract is assigned, your rights may only be exercised with the consent of the assignee of record. Qualified Contracts generally cannot be assigned. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 9 2. THE ANNUITY PHASE You can apply your Contract Value to regular periodic income payments (Annuity Payments). A Full Annuitization occurs when you apply the entire Contract Value to Annuity Payments. A Partial Annuitization occurs when you apply only part of your Contract Value to Annuity Payments.* The Payee will receive the Annuity Payments. You will receive tax reporting on those payments, however, whether or not you are the Payee. We may require proof of the Annuitant(s)' age before making any life contingent Annuity Payment. If the age or gender of the Annuitant(s) have been misstated, the amount payable will be the amount that would have been provided at the true age or gender. * GMIB Payments are not available under a Partial Annuitization. NOTE: YOU WILL BE REQUIRED TO TAKE A FULL ANNUITIZATION OF YOUR CONTRACT ON OR BEFORE THE MAXIMUM PERMITTED INCOME DATE IF, AT THAT TIME, YOU HAVE NOT REDUCED YOUR CONTRACT VALUE TO ZERO. At our discretion, we may extend the maximum permitted Income Date subject to the requirements of applicable law. The maximum permitted Income Date may vary depending on the broker/dealer you purchase your Contract through and your state of residence. UPON FULL ANNUITIZATION YOU WILL NO LONGER HAVE A CONTRACT VALUE, ANY PERIODIC WITHDRAWAL OR INCOME PAYMENTS OTHER THAN ANNUITY PAYMENTS (WHICH INCLUDES GPWB PAYMENTS) WILL STOP, AND THE DEATH BENEFIT WILL TERMINATE. If you have not selected an Annuity Option we will make payments under the default option described in the "Annuity Payments" discussion of this section. INCOME DATE The Income Date is the date Annuity Payments (GMIB Payments or Traditional Annuity Payments) will begin. Your Income Date is specified in your Contract as the maximum permitted date allowed for your Contract, which is the first day of the calendar month following the Annuitant's 90th birthday. You can make an authorized request for a different Income Date after the Issue Date, however, any such request is subject to our approval. Your Income Date must be the first day of a calendar month and must be at least 13 months after the Issue Date. The Income Date will never be later than what is permitted under applicable law. To receive the annuity income protection of the GMIB, your Income Date must be within 30 days following a Contract Anniversary beginning with the tenth Contract Anniversary (and certain other conditions must also be met). An earlier Income Date may be required to satisfy minimum required distribution rules under certain Qualified Contracts. PARTIAL ANNUITIZATION PARTIAL ANNUITIZATIONS ARE NOT AVAILABLE TO EVERYONE. THERE CAN BE ONLY ONE OWNER, THE OWNER MUST BE THE ANNUITANT, AND WE WILL NOT ALLOW THE OWNER TO ADD A JOINT ANNUITANT. You can take Partial Annuitizations as Traditional Annuity Payments after 13 months. GMIB Payments are not available under a Partial Annuitization. Partial Annuitizations are not available after you exercise the GPWB (if applicable) or after you take a Full Annuitization. If you take a Full Annuitization, the Accumulation Phase of the Contract will end. You can take one Partial Annuitization every 12 months. THE MAXIMUM NUMBER OF ANNUITIZATIONS WE ALLOW AT ANY ONE TIME IS FIVE. We do not allow you to allocate additional Contract Value to an existing stream of Traditional Annuity Payments. You also cannot transfer any amounts allocated to a stream of Annuity Payments to any other portion of the Contract. If you have four Partial Annuitizations and you would like to take a fifth, you must take a Full Annuitization and apply the entire remaining Contract Value to Annuity Payments, and the Accumulation Phase of the Contract will end. The amounts you apply to a Partial Annuitization and Annuity Payments we make under a Partial Annuitization are not subject to the withdrawal charge. A Partial Annuitization will decrease the Contract Value, the Withdrawal Charge Basis, the GMDB value, and for Contracts with a GBP, it will also decrease the GMIB and GPWB values. This will decrease the amounts available for withdrawals (including GPWB Payments), additional Annuity Payments (including GMIB Payments), and payment of the death benefit. For more information, see section 2, Annuity Phase - Guaranteed Minimum Income Benefits (GMIBs); section 6, Expenses - Withdrawal Charge; section 8, Access to Your Money - Guaranteed Partial Withdrawal Benefits (GPWBs); and see the discussion of the GMDB that applies to your Contract in section 10, Death Benefit. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 10 FOR TAX PURPOSES, ANNUITY PAYMENTS WE MAKE UNDER A PARTIAL ANNUITIZATION WILL BE TREATED AS PARTIAL WITHDRAWALS AND NOT AS ANNUITY PAYMENTS. However, once the entire Contract Value has been reduced to zero, we intend to treat all Annuity Payments we make after that as annuity payments (and not withdrawals) for tax purposes. If you take a Partial Annuitization(s) and subsequently take a full withdrawal of the entire remaining Contract Value, all Annuity Payments we make on or after the Business Day you take the withdrawal, should be treated as annuity payments (and not withdrawals) for tax purposes. If the Annuity Payments we make are treated as withdrawals (and not annuity payments) for tax purposes, under Non-Qualified Contracts, any gains in the entire Contract will be considered to be distributed before Purchase Payments and will be subject to ordinary income tax. For Qualified Contracts, in most cases, the entire Annuity Payment we make under a Partial Annuitization will be subject to ordinary income taxes. If any Owner is younger than age 59 1/2, the taxable portion of the Annuity Payments we make under a Partial Annuitization may also be subject to a 10% federal penalty tax. Partial Annuitizations may also affect the tax treatment of any future Annuity Payments. YOU SHOULD CONSULT A TAX ADVISER BEFORE REQUESTING A PARTIAL ANNUITIZATION. ANNUITY OPTIONS You can choose one of the income plans (Annuity Options) described below or any other payment option to which we agree. Before the Income Date, you can select and/or change the Annuity Option with at least 30 days written notice to us. After Annuity Payments begin, you cannot change the Annuity Option. Annuity Payments will usually be lower if you select an Annuity Option that requires us to make more frequent Annuity Payments or to make payments over a longer period of time. For example, the guaranteed initial monthly fixed payout rates under Annuity Option 4 with a guarantee period of 20 years or more are the lowest fixed rates we offer, and the guaranteed initial monthly fixed payout rates under Annuity Option 1 are the highest fixed rates we offer. Annuity Payments will also be lower if you request Annuity Payments at an early age (for example, when the Annuitant is age 50) as opposed to waiting until the Annuitant is older (for example, when the Annuitant is age 70). OPTION 1. LIFE ANNUITY. We will make Annuity Payments during the life of the Annuitant, and the last payment will be the one that is due before the Annuitant's death. If the Annuitant dies shortly after the Income Date, the Payee may receive less than your investment in the Contract. OPTION 2. LIFE ANNUITY WITH PAYMENTS OVER 5, 10, 15 OR 20 YEARS GUARANTEED. We will make Annuity Payments during the life of the Annuitant. If you take one single Full Annuitization and the Annuitant dies before the end of the selected guaranteed period, we will continue to make Annuity Payments to the Payee for the rest of the guaranteed period. Alternatively, the Owner may elect to receive a lump sum payment. Under a Partial Annuitization, if the Annuitant dies before the end of the selected guaranteed period, we will make a lump sum payment to the Beneficiary. The lump sum payment is equal to the present value of the remaining guaranteed variable Traditional Annuity Payments as of the date we receive proof of the Annuitant's death and a payment election form at our Service Center, using the selected assumed investment return as the interest rate for the present value calculation. This lump sum payment is not available under a fixed payout. We require proof of the Annuitant's death and return of the Contract before we will make any lump sum payment. There are no additional costs associated with a lump sum payment. Under a Partial Annuitization, this Annuity Option is only available for variable payouts; fixed Partial Annuitizations are not allowed. OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. We will make Annuity Payments during the lifetimes of the Annuitant and the joint Annuitant. Upon the death of one Annuitant, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant, at a level of 100%, 75% or 50% of the previous amount, as selected by the Owner. Annuity Payments will stop with the last payment that is due before the last surviving joint Annuitant's death. If both Annuitants die shortly after the Income Date, the Payee may receive less than your investment in the Contract. This Annuity Option is not available to you under a Partial Annuitization. OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH PAYMENTS OVER 5, 10, 15 OR 20 YEARS GUARANTEED. We will make Annuity Payments during the lifetimes of the Annuitant and the joint Annuitant. Upon the death of one Annuitant, Annuity Payments will continue to the Payee during the lifetime of the surviving joint Annuitant at 100% of the amount that was paid when both Annuitants were alive. However, if both joint Annuitants die before the end of the selected guaranteed period, we will continue to make Annuity Payments to the Payee for the rest of the guaranteed period. Alternatively, the Owner may elect to receive a lump sum payment equal to the present value of the remaining guaranteed variable Traditional Annuity Payments as of the date we receive proof of the last surviving joint Annuitant's death and a payment election form at our Service Center, using the selected assumed investment return as the interest rate for the The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 11 present value calculation. This lump sum payment is not available under a fixed payout. We require proof of death of both joint Annuitants and return of the Contract before we will make any lump sum payment. There are no additional costs associated with a lump sum payment. This Annuity Option is not available to you under a Partial Annuitization. OPTION 5. REFUND LIFE ANNUITY. We will make Annuity Payments during the lifetime of the Annuitant, and the last payment will be the one that is due before the Annuitant's death. After the Annuitant's death, the Payee may receive a lump sum refund. For a fixed payout, the amount of the refund will equal the amount applied to this Annuity Option minus the total of all Annuity Payments made under this option. For variable Traditional Annuity Payments, the amount of the refund will depend on the current Investment Option allocation and will be the sum of refund amounts attributable to each Investment Option. We calculate the refund amount for a given Investment Option using the following formula. (A) x {[(B) x (C) x (D)/(E)] - [(D) x (F)]} where: (A)= Annuity Unit value of the subaccount for that given Investment Option when due proof of the Annuitant's death is received at our Service Center. (B)= The amount applied to variable Traditional Annuity Payments on the Income Date. (C)= Allocation percentage in a given subaccount (in decimal form) when due proof of the Annuitant's death is received at our Service Center. (D)= The number of Annuity Units used in determining each variable Traditional Annuity Payment attributable to that given subaccount when due proof of the Annuitant's death is received at our Service Center. (E)= Dollar value of first variable Traditional Annuity Payment. (F)= Number of variable Traditional Annuity Payments made since the Income Date. We will base this calculation upon the allocation of Annuity Units actually in force at the time due proof of the Annuitant's death is received at our Service Center. We will not pay a refund if the total refund determined using the above calculation is less than or equal to zero. EXAMPLE o The Contract has one Owner who is a 65-year-old male. He elects variable Annuity Payments under Annuity Option 5 based on a Contract Value of $100,000 (item "B"). o The Owner who is also the Annuitant allocates all the Contract Value to one Investment Option, so the allocation percentage in this subaccount is 100% (item "C"). o The purchase rate for the selected assumed investment rate is $6.15 per month per thousand dollars of Contract Value annuitized. Therefore, the first variable Annuity Payment is: $6.15 x ($100,000 / $1,000) = $615 (item "E"). o Assume the Annuity Unit value on the Income Date is $12, then the number of Annuity Units used in determining each Annuity Payment is: $615 / $12 = 51.25 (item "D"). o The Owner who is also the Annuitant dies after receiving 62 Annuity Payments (item "F") and the Annuity Unit value for the subaccount on the date the Service Center receives due proof of death is $15 (item "A"). WE CALCULATE THE REFUND AS FOLLOWS: (A) x {[(B) x (C) x (D)/(E)] - [(D) x (F)]} = 15 x {[100,000 x 1.00 x (51.25 / 615)] - [51.25 x 62]} = 15 x {[100,000 x 0.083333] - 3,177.50} = 15 x {8,333.33 - 3,177.50} = 15 x 5,155.83 = $77,337.50 OPTION 6. SPECIFIED PERIOD CERTAIN ANNUITY. THIS OPTION IS ONLY AVAILABLE IF YOU SELECT AN OPTIONAL GBP AND ELECT TO RECEIVE GMIB PAYMENTS BASED ON THE GMIB VALUE, OR IF YOU EXERCISE THE GPWB AND ELECT TO STOP GPWB PAYMENTS AND INSTEAD RECEIVE FIXED ANNUITY PAYMENTS BASED ON YOUR REMAINING GPWB VALUE. Under this option, we will make Annuity Payments for a specified period of time. You select the specified period, which must be a whole number of years from ten to 30. If the last Annuitant dies before the end of the specified period certain, we will continue to make Annuity Payments to the Payee for the rest of the specified period certain. This Annuity Option is not available to you under a Partial Annuitization. NOTE FOR OWNERS THAT ARE YOUNGER THAN AGE 59 1/2: Your Annuity Payments under Annuity Option 6 may be subject to a 10% federal penalty tax if the specified period certain you select is less than your life expectancy. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 12 TRADITIONAL ANNUITY PAYMENTS Annuity Payments offer a guaranteed income stream with certain tax advantages and are designed for Owners who are not concerned with continued access to Contract Value. You can request Traditional Annuity Payments under Annuity Options 1-5 as: o a variable payout, o a fixed payout, or o a combination of both. Annuity Option 6 is only available if you select an optional GBP and: o you request GMIB Payments based on the GMIB value; or o if you exercise the GPWB and elect to stop GPWB Payments and instead request fixed Annuity Payments based on your remaining GPWB value. If you do not choose an Annuity Option before the Income Date, we will make variable Traditional Annuity Payments to the Payee under Annuity Option 2 with ten years of guaranteed monthly payments. Under a fixed payout, all of the Annuity Payments will be the same dollar amount (equal installments) except as provided for under Annuity Option 3. If you choose a variable payout, you can continue to invest in up to 15 of the available Investment Options. We may change this in the future, but we will always allow you to invest in at least ten Investment Options. If you do not tell us otherwise, we will base variable Traditional Annuity Payments on the investment allocations that were in place on the Income Date. We will not allow you to apply amounts of less than $2,000 to an Annuity Option. If your Contract Value is less than $2,000 on the Income Date, we will pay that amount to you. We may change the frequency of your Traditional Annuity Payments if the amount of the payment is less than $20. Guaranteed fixed Traditional Annuity Payments are based on an interest rate and mortality table specified in your Contract. The payout rates for fixed Traditional Annuity Payments provided by your Contract are guaranteed and in no event will we use lower fixed payout rates to calculate your fixed Traditional Annuity Payments. However, we may use higher fixed payout rates to calculate fixed Traditional Annuity Payments than the guaranteed rates provided by your Contract. If you choose to have any portion of the Traditional Annuity Payments based on the investment performance of the Investment Option(s), the dollar amount of the payments will depend upon the following factors. o The Contract Value on the Income Date. o The age of the Annuitant and any joint Annuitant on the Income Date. o The gender of the Annuitant and any joint Annuitant, where permitted. o The Annuity Option you select. o The assumed investment return (AIR) you select. o The mortality table specified in the Contract. o The future performance of the Investment Option(s) you select. You can choose an AIR of either 3% or 4.5%. Using a higher AIR results in a higher initial variable Traditional Annuity Payment, but later payments will increase more slowly when investment performance rises and decrease more rapidly when investment performance declines. If the actual performance of your Investment Options exceeds the AIR you selected, the variable Traditional Annuity Payments will increase. Similarly, if the actual performance is less than the AIR you selected, the variable Traditional Annuity Payments will decrease. EACH PORTION OF THE CONTRACT THAT YOU APPLY TO TRADITIONAL ANNUITY PAYMENTS WILL TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o Under Annuity Options 1 and 3, the death of the last surviving Annuitant. o Under Annuity Options 2 and 4, the death of the last surviving Annuitant and expiration of the guaranteed period. If we make a lump sum payment of the remaining guaranteed Traditional Annuity Payments at the death of the last surviving Annuitant, this portion of the Contract will terminate upon payment of the lump sum. o Under Annuity Option 5, the death of the Annuitant and payment of any lump sum refund. o Under Annuity Option 6, the expiration of the specified period certain. o Contract termination. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 13 GUARANTEED MINIMUM INCOME BENEFITS (GMIBS) The GMIBs are only available as part of the optional GBPs. The Traditional GBP consists of: o the Traditional GMIB, and o the Traditional GPWB. The Enhanced GBP consists of: o the Enhanced GMIB, and o the Enhanced GPWB. The GPWBs are not available separately from the GMIBs. The GBPs provide a guaranteed minimum fixed income stream and are designed for Owners who want flexibility in the way they access income and can wait at least ten years before taking income. All GBPs carry an additional M&E charge. We calculate the additional M&E charge as discussed in section 6, Expenses - Mortality and Expense Risk (M&E) Charges. The additional M&E charge for the GBPs will reduce the performance of your selected Investment Options, and in the long term may provide less Contract Value to you than would otherwise be available from the same Contract without a GBP. THE GBPS DO NOT CREATE CONTRACT VALUE OR GUARANTEE THE PERFORMANCE OF ANY INVESTMENT OPTION. You select a GBP at Contract issue, and you can only select one GBP. The Enhanced GBP is available only if the older Owner is age 76 or younger on the Issue Date (or the Annuitant is age 76 or younger if the Contract is owned by a non-individual). The Enhanced GBP may not be appropriate for Owners who are nearing age 65 because the benefit values are limited after age 80. AFTER THE ISSUE DATE, A GBP CANNOT BE ADDED TO, CHANGED, OR REMOVED FROM YOUR CONTRACT. We designed the GBPs to give you options on how to turn your accumulated retirement assets into a stream of retirement income. The GMIBs provide a guaranteed minimum fixed income in the form of Annuity Payments (GMIB Payments). Depending on the Annuity Option you select, the GMIB can provide guaranteed lifetime income, but if the Annuitant(s) die shortly after the Income Date, the Payee may receive less than your investment in the Contract. The GPWBs provide a guaranteed minimum amount of level income in the form of annual partial withdrawals (GPWB Payments). However, GPWB Payments are not guaranteed for life and you could outlive your payment stream. You must wait ten complete Contract Years before you can exercise a GMIB or GPWB and they can only be exercised within 30 days after a Contract Anniversary. You can always annuitize your Contract Value 13 months or more after the Issue Date under a fixed and/or variable traditional Annuity Option. However, if you do, you cannot use the GMIB value. BECAUSE THE GBPS CARRY A HIGHER CONTRACT EXPENSE, THEY MAY NOT BE APPROPRIATE IF YOU: o DO NOT INTEND TO EXERCISE EITHER THE GMIB OR GPWB, o DO NOT INTEND TO HOLD THE CONTRACT FOR THE ENTIRE TEN YEAR WAITING PERIOD, OR o INTEND TO TAKE A FULL ANNUITIZATION BEFORE THE END OF THE TEN YEAR WAITING PERIOD. IF YOUR CONTRACT INCLUDES A GBP AND YOU DO NOT EXERCISE EITHER THE GMIB OR GPWB, YOU WILL HAVE INCURRED HIGHER CONTRACT EXPENSES WITHOUT RECEIVING ANY ADVANTAGE FROM THE GBP. The Contract offers a choice of two GBPs: the Traditional GBP, where the GMIB value is total Purchase Payments adjusted for partial withdrawals and Partial Annuitizations, or the Enhanced GBP, where the GMIB value is either the MAV, or the 7% AIA. THE GMIB VALUE UNDER THE ENHANCED GBP WILL NEVER BE LESS THAN THE GMIB VALUE UNDER THE TRADITIONAL GBP, BUT THEY MAY BE EQUAL. YOU CAN ONLY ACCESS THE GMIB VALUE BY EXERCISING THE GMIB. For more information, see the GMIB value discussions later in this section. If you purchase this Contract under a qualified plan that is subject to required minimum distributions (RMDs) and you do not exercise the GMIB on or before the date RMD payments must begin under a qualified plan, the Owner or Beneficiary may not be able to exercise the GMIB due to the restrictions imposed by the minimum distribution requirements. YOU SHOULD CONSIDER WHETHER THE GMIB IS APPROPRIATE FOR YOUR SITUATION IF YOU PLAN TO EXERCISE THE GMIB AFTER YOUR RMD BEGINNING DATE. BE SURE TO DISCUSS WITH YOUR REGISTERED REPRESENTATIVE WHETHER OR NOT A GBP IS APPROPRIATE FOR YOUR SITUATION. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 14 The annuity income protection provided by the GMIB will apply only under the following circumstances. o Your Income Date must be within 30 days following a Contract Anniversary beginning with the tenth Contract Anniversary. o GMIB Payments can only be made as fixed payments, regardless of the Annuity Option you select. o If the Annuity Option you select involves a guaranteed period, the duration of the guaranteed period must be at least ten years. o If you select Annuity Option 6, we will base the GMIB Payments on an interest rate of 1% per year. o If you request GMIB Payments based on the 7% AIA, your available Annuity Options are restricted to Annuity Options 2 or 4, and the duration of the period certain must be at least ten years. Under the 7% AIA, we will base GMIB Payments on an interest rate of 1% per year, and the mortality table specified in your endorsement. Under the GMIB you can only take a Full Annuitization. IF YOU EXERCISE THE GMIB: o The Accumulation Phase will end and the Annuity Phase will begin. o The portion of the Contract that you apply to the GMIB will no longer be subject to the M&E charge, but any portion of the Contract that has been applied to variable Traditional Annuity Payments will continue to be subject to a 1.75% M&E charge. o The GPWB will terminate. o The GMDB endorsement will terminate. In order to begin receiving GMIB Payments, you must submit an income option election form to our Service Center after the expiration of the ten-year waiting period and within 30 days following a Contract Anniversary. GMIB Payments will begin after your request has been received at our Service Center and is determined to be in good order. We will make GMIB Payments to you beginning on the 30th day after your Contract Anniversary. If the scheduled GMIB Payment date does not fall on a Business Day, we will make payment to you on the next Business Day. BEFORE YOU EXERCISE THE GMIB, THE GMIB ENDORSEMENT WILL ONLY TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o Contract termination. o The Business Day before the Income Date that you take a Full Annuitization and request Traditional Annuity Payments. o The Business Day the GMIB value and Contract Value are both zero. o The date GPWB Payments begin. o The death of the Owner, unless the spouse continues the Contract as the new Owner. IF YOU EXERCISE THE GMIB, THE PORTION OF THE CONTRACT THAT YOU APPLY TO GMIB PAYMENTS WILL TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o Under Annuity Options 1 and 3, the death of the last surviving Annuitant. o Under Annuity Options 2 and 4, the death of the last surviving Annuitant and expiration of the guaranteed period. o Under Annuity Option 5, the death of the Annuitant and payment of any lump sum refund. o Under Annuity Option 6, the expiration of the specified period certain. o Contract termination. TAXATION OF GMIB PAYMENTS GMIB Payments should be treated as annuity payments for tax purposes. For Non- Qualified Contracts, a portion of each GMIB Payment may be treated as gains that are subject to tax as ordinary income, and the remaining portion of the payment will be considered to be a return of your investment and will not be subject to income tax. Once we have paid out all of your Purchase Payments, however, the full amount of each GMIB Payment will be subject to tax as ordinary income. For Qualified Contracts, the entire GMIB Payment will most likely be subject to tax as ordinary income. Once you apply the entire Contract Value to Annuity Payments, GMIB Payments will generally not be subject to the 10% federal penalty tax. AMOUNT USED TO CALCULATE GMIB PAYMENTS The GMIB guarantees that the GMIB Payments will be equal to the guaranteed fixed payout rates applied to the GMIB value. There may be situations where the GMIB value is greater than the Contract Value, but the GMIB Payments are less The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 15 than fixed Traditional Annuity Payments based on the Contract Value. This may occur because the guaranteed fixed payout rates available with the GMIB may be less than the current fixed payout rates that are otherwise available under Traditional Annuity Payments. We will base your Annuity Payments on whichever amount (GMIB value or Contract Value) produces the greater payment. However, if we use the Contract Value and the current fixed payout rates to calculate Traditional Annuity Payments, you will have incurred higher Contract expenses without receiving any explicit benefit from the GMIB. While the 7% AIA may be larger than the MAV, it may produce a lower GMIB Payment because under the 7% AIA you have fewer available Annuity Options and the guaranteed fixed payout rates are lower. If the GMIB Payment available under the 7% AIA would always be less than the GMIB Payment available under the MAV, we will base GMIB Payments on the amount that produces the largest payment. However, it is possible that the GMIB Payments under the 7% AIA may be more or less than the GMIB Payments available under the MAV depending on the Annuity Option you select. In these instances, we will allow you to select the amount we use to calculate GMIB Payments and the Annuity Option that you feel is most appropriate. TRADITIONAL GMIB VALUE The Traditional GMIB value before the date of any Owner's death or exercise of the GPWB (if applicable) is equal to: o total Purchase Payments received, and o reduced proportionately by the percentage of Contract Value applied to a traditional Partial Annuitization or withdrawn (including any withdrawal charge) for each traditional annuitization or withdrawal taken. ANY TRADITIONAL PARTIAL ANNUITIZATIONS OR WITHDRAWALS YOU TAKE MAY REDUCE THE TRADITIONAL GMIB VALUE BY MORE THAN THE AMOUNT ANNUITIZED OR WITHDRAWN. If the Contract Value at the time of annuitization or withdrawal is less than the GMIB value, we will deduct more than the amount annuitized or withdrawn from the GMIB value. Please see Appendix C for examples of the calculations of the Traditional GMIB value. ENHANCED GMIB VALUE The Enhanced GMIB value before the date of any Owner's death or exercise of the GPWB (if applicable) is equal to either: o the 7% AIA; or o the MAV. If the MAV is greater than the 7% AIA, the Enhanced GMIB value is equal to the MAV. If the 7% AIA is greater than the MAV, you can decide whether to set the Enhanced GMIB value equal to the 7% AIA or the MAV. THE 7% AIA MAY BE MORE LIMITED THAN THE MAV BECAUSE: o the 7% AIA is subject to a maximum of two times Purchase Payments received in the first five Contract Years; and o under the GMIB, the guaranteed fixed payout rates for the 7% AIA are lower and there are fewer available Annuity Options. CALCULATING THE 7% AIA The 7% AIA on the Issue Date is equal to your initial Purchase Payment received on the Issue Date. On each Business Day other than a Contract Anniversary, the 7% AIA is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments received that day; and o reduced proportionately by the percentage of Contract Value applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge). On each Contract Anniversary before the older Owner's 80th birthday (or the Annuitant's 80th birthday if the Contract is owned by a non-individual), the 7% AIA is equal to its value on the immediately preceding Business Day increased by 7%. We then process any transactions received on that Contract Anniversary (such as additional Purchase Payments, withdrawals, and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 16 Beginning with the Contract Anniversary that occurs on or after the older Owner's 80th birthday (or the Annuitant's 80th birthday if the Contract is owned by a non-individual), we calculate the 7% AIA in the same way that we do on each Business Day other than a Contract Anniversary. WE LIMIT THE 7% AIA TO A MAXIMUM OF: o 2 times the total Purchase Payments received in the first five Contract Years, and o reduced proportionately by the percentage of Contract Value applied to each traditional Partial Annuitization or withdrawal (including any withdrawal charge) for each annuitization or withdrawal taken. CALCULATING THE MAV The MAV on the Issue Date is equal to your initial Purchase Payment received on the Issue Date. On each Business Day other than a Contract Anniversary, the MAV is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments received that day, and o reduced proportionately by the percentage of Contract Value applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge). On each Contract Anniversary before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual), the MAV is equal to the greater of its value on the immediately preceding Business Day, or the Contract Value that occurs on that Contract Anniversary before we process any transactions. We then process any transactions we received on that Contract Anniversary (such as additional Purchase Payments, withdrawals, and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. Beginning with the Contract Anniversary that occurs on or after the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual), we calculate the MAV in the same way that we do on each Business Day other than a Contract Anniversary. ANY TRADITIONAL PARTIAL ANNUITIZATIONS OR WITHDRAWALS YOU TAKE MAY REDUCE THE 7% AIA OR THE MAV BY MORE THAN THE AMOUNT ANNUITIZED OR WITHDRAWN. If the Contract Value at the time of annuitization or withdrawal is less than the 7% AIA (or MAV as appropriate), we will deduct more than the amount annuitized or withdrawn from the 7% AIA (or MAV). Please see Appendix C for examples of the calculations of the Enhanced GMIB value. IF YOU EXERCISE THE GPWB, YOUR GMIB ENDORSEMENT WILL TERMINATE. YOUR TRADITIONAL GPWB VALUE ON THE DATE YOU BEGIN RECEIVING GPWB PAYMENTS IS EQUAL TO TOTAL PURCHASE PAYMENTS ADJUSTED FOR PARTIAL WITHDRAWALS AND PARTIAL ANNUITIZATIONS. YOUR ENHANCED GPWB VALUE ON THE DATE YOU BEGIN RECEIVING GPWB PAYMENTS IS EQUAL TO EITHER THE 5% AIA OR THE MAV. ONCE YOU EXERCISE THE GPWB, THE GPWB VALUE WILL STOP INCREASING, AND IT WILL DECREASE: o on a dollar for dollar basis with each GPWB Payment we make; and o proportionately by the percentage of any Contract Value taken as an Excess Withdrawal (including any withdrawal charge) for each withdrawal taken. If you exercise the GPWB, the increased M&E charge associated with the GBP will continue until the GPWB endorsement terminates. If you exercise the GPWB, you can elect to stop GPWB Payments and instead do one of the following. o Take an Excess Withdrawal of the entire Contract Value (available at any time). o Request Traditional Annuity Payments under a Full Annuitization based on the entire Contract Value, less any withdrawal charges (available at any time). o Request Annuity Payments under a Full Annuitization based on the remaining GPWB value (only available within 30 days after a Contract Anniversary and before we make the next GPWB Payment). Annuity Payments based on the remaining GPWB value are subject to all the restrictions associated with GMIB Payments discussed in this section. For example, payments can only be made on a fixed basis and the duration of any period certain Annuity Option must be at least ten years. In addition, Annuity Payments based on the 5% AIA are subject to the restrictions associated with GMIB Payments based on the 7% AIA. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 17 If you take an Excess Withdrawal of the entire Contract Value, the Contract will terminate and you may receive less money than you would have received under the GPWB. If you request fixed Traditional Annuity Payments, the GPWB endorsement will terminate and we will no longer assess the M&E charge on that portion of the Contract. If you request variable Traditional Annuity Payments, the GPWB endorsement will terminate and we will reduce the M&E charge to 1.75% for that portion of the Contract. If you request Annuity Payments based on the remaining GPWB value, we will no longer assess the M&E charge on that portion of the Contract, and that portion of the Contract you applied to Annuity Payments will terminate as indicated in this section. If you do not elect to stop your GPWB Payments and there is Contract Value remaining after we make the last GPWB Payment, we will pay you the Contract Value if it is less than $2,000 (less any withdrawal charges) and your Contract will terminate. However, if your remaining Contract Value after the last GPWB Payment is at least $2,000, you can instead elect to: o continue the Contract, or o annuitize the remaining Contract Value. If you elect to continue or annuitize the Contract, we will no longer assess the M&E charge associated with the GBP. 3. PURCHASE PURCHASE PAYMENTS A Purchase Payment is the money you put into the Contract. To purchase this Contract, all Owners and Annuitant(s) must be age 80 or younger on the Issue Date. The initial Purchase Payment is due on the Issue Date. The Purchase Payment requirements for this Contract are as follows. o The minimum initial payment we will accept is $25,000. o You can make additional Purchase Payments of $50 or more during the Accumulation Phase before you exercise the GPWB, if applicable. o YOU CANNOT MAKE ANY ADDITIONAL PURCHASE PAYMENTS TO THE CONTRACT AFTER THE INCOME DATE THAT YOU TAKE A FULL ANNUITIZATION (INCLUDING A REQUIRED FULL ANNUITIZATION ON THE MAXIMUM PERMITTED INCOME DATE) OR AFTER YOU EXERCISE THE GPWB. o The maximum total amount we will accept without prior approval is $1 million (including amounts already invested in other Allianz Life of New York variable annuities). o If we make this Contract available as an Inherited IRA, the death benefit proceeds of the previous tax-qualified investment must be directly transferred into this Contract (see section 8, Access to Your Money - The Minimum Distribution Program and Required Minimum Distribution (RMD) Payments). A beneficiary can apply the death benefit proceeds from multiple tax-qualified investments that were owned by the same owner to the purchase of an Inherited IRA Contract. We will not accept any other forms of Purchase Payment on an Inherited IRA Contract. The death benefit proceeds cannot be received by the beneficiary and then applied to an Inherited IRA Contract. For more information on Inherited IRA Contracts, see section 7, Taxes - Qualified Contracts - Inherited IRA. PURCHASE PAYMENTS TO QUALIFIED CONTRACTS MUST NOT BE GREATER THAN ALLOWED UNDER FEDERAL LAW AND MUST BE FROM EARNED INCOME OR A QUALIFIED TRANSFER. PURCHASE PAYMENTS TO QUALIFIED CONTRACTS OTHER THAN FROM A QUALIFIED TRANSFER MAY BE RESTRICTED AFTER THE OWNER REACHES AGE 70 1/2. We may, at our sole discretion, waive the minimum Purchase Payment requirements. We reserve the right to decline any Purchase Payment in order to comply with state and/or federal law. AUTOMATIC INVESTMENT PLAN (AIP) The AIP is a program that allows you to make additional Purchase Payments to your Contract during the Accumulation Phase on a monthly or quarterly basis by electronic transfer of money from your savings, checking or brokerage account. You may participate in this program by completing the appropriate form. Our Service Center must receive your form by the first of the month in order for AIP to begin that same month. Investments will take place on the 20th of the month or the next Business Day if the 20th is not a Business Day. The minimum investment that you can make by AIP is $50. You may stop or change the AIP at any time. We must be notified by the first of the month in order to stop or change the AIP for that month. If the AIP is used for a Qualified Contract, you should consult your tax adviser for advice regarding maximum contributions. The AIP is not available if the Qualified Contract is funding a plan that is tax qualified under Section 401 of the Internal Revenue Code. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 18 YOU CANNOT EXERCISE THE GPWB AND PARTICIPATE IN THE AIP AT THE SAME TIME. THE AIP WILL NO LONGER BE AVAILABLE TO YOU AFTER THE INCOME DATE ON WHICH YOU TAKE A FULL ANNUITIZATION. ALLOCATION OF PURCHASE PAYMENTS We do not currently accept allocation instructions from you via email, website, or other electronic communications. This service may be available to you in the future. When you purchase a Contract, we will allocate your initial Purchase Payment to the Investment Options you selected according to your instructions. We ask that you allocate your money in whole percentages. Transfers of Contract Value between Investment Options will not change the allocation instructions for any future additional Purchase Payments. You can instruct us how to allocate additional Purchase Payments you make. If you do not instruct us, we will allocate them according to your most recent allocation instructions. You may provide us with new allocation instructions at any time without fee, penalty or other charge upon written notice or telephone instructions to our Service Center. The new allocation instructions will be effective for Purchase Payments received on or after the Business Day we receive your notice or instructions in good order at our Service Center. If you change your allocation instructions and you are participating in the automatic investment plan or the flexible rebalancing program, your allocation instructions must include directions for the plan/program. We reserve the right to limit the number of Investment Options that you can invest in at any one time. Currently, you can invest in up to 15 of the Investment Options at any one time. We may change this in the future; however, we will always allow you to invest in at least ten Investment Options. Once we receive your initial Purchase Payment and the necessary information, we will issue the Contract and allocate your initial Purchase Payment within two Business Days. If you do not give us all of the information we need, we will contact you or your registered representative to get it. If for some reason we are unable to complete this process within five Business Days, we will either send back your money or get your permission to keep it until we get all of the necessary information. If you make additional Purchase Payments, we will credit these amounts to the Contract within one Business Day. Our Business Day closes when regular trading on the New York Stock Exchange closes. If you submit a Purchase Payment and/or application to your registered representative, we will not begin processing the Purchase Payment until it is received at our Service Center. We consider a Purchase Payment to be "received" when it is received at our Service Center regardless of how or when you made the payment. If mandated under applicable law, we may be required to reject a Purchase Payment. We also may be required to provide information about you or your Contract to government regulators. In addition, we may be required to block an Owner's Contract and thereby refuse any request for transfers, and refuse to pay any withdrawals, surrenders, or death benefits until instructions are received from the appropriate regulator. TAX-FREE SECTION 1035 EXCHANGES Subject to certain restrictions, you can make a "tax-free" exchange under Section 1035 of the Internal Revenue Code for all or a portion of one annuity contract for another, or all of a life insurance policy for an annuity contract. Before making an exchange, you should compare both contracts carefully. Remember that if you exchange a life insurance policy or annuity contract for the Contract described in this prospectus: o you might have to pay a withdrawal charge on your previous contract, o there will be a new withdrawal charge period for this Contract, o other charges under this Contract may be higher (or lower), o the benefits may be different, and o you will no longer have access to any benefits from your previous contract. If the exchange does not qualify for Section 1035 treatment, you also may have to pay federal income tax, including a possible federal penalty tax, on the exchange. You should not exchange an existing life insurance policy or another annuity contract for this Contract unless you determine that the exchange is in your best interest and not just better for the person trying to sell you the Contract (that person will generally earn a commission on each contract sale). IF YOU CONTEMPLATE SUCH AN EXCHANGE, YOU SHOULD CONSULT A TAX ADVISER TO DISCUSS THE POTENTIAL TAX EFFECTS OF SUCH A TRANSACTION. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 19 FAXED APPLICATIONS We will accept Contract applications delivered in writing, as well as via fax. It is important that you verify that we have received any faxed application you send. We are not liable for faxed transaction requests that were sent by you but not received by us. We will treat a manually signed faxed application as an application delivered in writing. Please note that fax communications may not always be available. Any fax system, whether it is ours, yours, your service provider's, or your registered representative's can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should submit your application in writing to our Service Center. We reserve the right to discontinue or modify the faxed application privilege at any time and for any reason. We do not currently accept applications delivered via email or our website. This may be available in the future. FREE LOOK/RIGHT TO EXAMINE If you change your mind about owning the Contract, you can cancel it within ten days after receiving it. When you cancel the Contract within this time period, we will not assess a withdrawal charge. You will receive your Contract Value as of the day we receive your request. This may be more or less than your initial Purchase Payment. If you purchased this Contract as an IRA, we are required to refund your Purchase Payment less withdrawals if you decide to cancel your Contract within the free look period. In these instances, if you cancel your Contract you will receive the greater of Purchase Payments less withdrawals, or Contract Value. In cases where we are required to refund the Purchase Payment, we reserve the right to allocate your initial Purchase Payment to the AZL Money Market Fund until the expiration of the free look period. At the end of that period, we will re-allocate your money as you selected. If we are required to refund the Purchase Payments and you cancel your Contract or we reject your application, you will receive the greater of Purchase Payments less withdrawals or Contract Value, regardless of how your Purchase Payments were allocated. The free look provision under the Contract is also called the right to examine. ACCUMULATION UNITS/COMPUTING THE CONTRACT VALUE Your Contract Value in the subaccounts will go up or down based upon the investment performance of the Investment Option(s) you choose. Your Contract Value will also be affected by the charges of the Contract. In order to keep track of your Contract Value in the Separate Account, we use a measurement called an Accumulation Unit. If you request variable Traditional Annuity Payments during the Annuity Phase of the Contract, we call this measurement an Annuity Unit. When we receive a Purchase Payment, we credit your Contract with Accumulation Units for the Purchase Payment at the daily price next determined after receipt of the Purchase Payment at our Service Center. The daily purchase price is normally determined at the end of each Business Day, and any Purchase Payment received at or after the end of the current Business Day will receive the next Business Day's price. The Purchase Payments you allocate to the Investment Options are actually placed into subaccounts. Each subaccount invests exclusively in one Investment Option. We determine the number of Accumulation Units we credit to your Contract by dividing the amount of the Purchase Payment allocated to a subaccount by the value of the corresponding Accumulation Unit. Every Business Day, we determine the value of an Accumulation Unit for each subaccount by multiplying the Accumulation Unit value for the previous Business Day by the net investment factor for the current Business Day. We determine the net investment factor by: o dividing the net asset value of a subaccount at the end of the current Business Day by the net asset value of the subaccount at the end of the immediately preceding Business Day, o adding any applicable dividends or capital gains, and o multiplying this result by one minus the amount of the Separate Account annual expenses for the current Business Day, and any additional calendar days since the immediately preceding Business Day. We calculate the value of each Accumulation Unit after regular trading on the New York Stock Exchange closes each Business Day. The value of an Accumulation Unit may go up or down from Business Day to Business Day. We calculate your Contract Value in the Separate Account by multiplying the Accumulation Unit value in each subaccount by the number of Accumulation Units for each subaccount and then adding those results together. (For example, the Contract Value on any Contract Anniversary will reflect the number and value of the Accumulation Units at the end of the previous Business Day.) The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 20 EXAMPLE o On Wednesday, we receive at our Service Center an additional Purchase Payment of $3,000 from you before the end of the Business Day. o When the New York Stock Exchange closes on that Wednesday, we determine that the value of an Accumulation Unit based on the Investment Option you chose is $13.25. We then divide $3,000 by $13.25 and credit your Contract on Wednesday night with 226.41509 subaccount Accumulation Units for the Investment Option you chose. If the $3,000 payment had been received at or after the end of the current Business Day, it would have received the next Business Day's price. 4. INVESTMENT OPTIONS The Contract offers the Investment Options listed in the following table. Each Investment Option has its own investment objective. In the future, we may add, eliminate or substitute Investment Options. Depending on market conditions, you can gain or lose value by investing in the Investment Options. YOU SHOULD READ THE INVESTMENT OPTIONS' PROSPECTUSES CAREFULLY. The Investment Options invest in different types of securities and follow varying investment strategies. There are potential risks associated with each of these types of securities and investment strategies. For example, an Investment Option's performance may be affected by risks specific to certain types of investments, such as foreign securities, derivative investments, non-investment grade debt securities, initial public offerings (IPOs) or companies with relatively small market capitalizations. IPOs and other investment techniques may have a magnified performance impact on an Investment Option with a small asset base. An Investment Option may not experience similar performance as its assets grow. The operation of the Investment Options and the various risks associated with the Investment Options are described in the Investment Options' prospectuses. TO OBTAIN A CURRENT PROSPECTUS FOR ANY OF THE INVESTMENT OPTIONS, CONTACT YOUR REGISTERED REPRESENTATIVE OR CALL US AT THE TOLL FREE TELEPHONE NUMBER LISTED AT THE BACK OF THIS PROSPECTUS. We will send copies of the Investment Options' prospectuses to you when we issue the Contract. Certain Investment Options issue two or more classes of shares and certain share classes may have Rule 12b-1 fees. The classes of shares currently offered by this Contract are listed in the table of annual operating expenses for each Investment Option that appears in Appendix A. For more information about share classes, see the Investment Options' prospectuses. Currently, the Investment Options are not publicly traded mutual funds. They are available only as investment options in variable annuity contracts or variable life insurance policies issued by life insurance companies or in some cases, through participation in certain qualified pension or retirement plans. The names, investment objectives and policies of certain Investment Options may be similar to the names, investment objectives and policies of other portfolios that the same investment advisers manage. Although the names, objectives and policies may be similar, the investment results of the Investment Options may be higher or lower than the results of such portfolios. The investment advisers cannot guarantee, and make no representation, that the investment results of similar funds will be comparable even though the Investment Options have the same names, investment advisers, objectives and policies. Each of the Investment Options offered by the Allianz Variable Insurance Products Fund of Funds Trust (Allianz VIP Fund of Funds Trust), including the AZL FusionPortfolios, is a "fund of funds" and diversifies its assets by investing in the shares of several other affiliated mutual funds. The underlying funds may pay 12b-1 fees to the distributor of the Contracts, our affiliate, Allianz Life Financial Services, LLC, for distribution and/or administrative services. The underlying funds do not pay service fees or 12b-1 fees to the Allianz VIP Fund of Funds Trust and the Allianz VIP Fund of Funds Trust does not pay service fees or 12b-1 fees. The underlying funds of the Allianz VIP Fund of Funds Trust or their advisers may pay service fees to us and our affiliates for providing customer service and other administrative services to Contract Owners. The amount of such service fees may vary depending on the underlying fund. We offer other variable annuity contracts that may invest in the same Investment Options. These contracts may have different charges and may offer different benefits more appropriate to your needs. For more information about these contracts, please contact our Service Center. The following advisers and subadvisers are affiliated with us: Allianz Investment Management LLC, Nicholas-Applegate Capital Management, Oppenheimer Capital LLC and Pacific Investment Management Company LLC. The following is a The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 21 list of the Investment Options available under the Contract, the investment advisers and subadvisers for each Investment Option, the investment objectives for each Investment Option, and the primary investments of each Investment Option. INVESTMENT OPTIONS
INVESTMENT NAME OF INVESTMENT OPTION ASSET CATEGORY OBJECTIVE(S) PRIMARY INVESTMENTS MANAGEMENT COMPANY (Normal market conditions) AND ADVISER/SUBADVISER AIM Managed by Allianz AZL AIM International Equity International Long-term growth of At least 80% of its assets in a diversified Investment Fund Equity capital portfolio of international equity securities Management whose issuers are considered by the fund's LLC/Invesco Aim subadviser to have strong earnings momentum. Capital Management, Inc. BLACKROCK Managed by Allianz AZL BlackRock Capital Large Growth Long-term growth of Invests at least 80% of total assets in Investment Appreciation Fund capital common and preferred stock and securities Management convertible into common and preferred stock LLC/BlackRock of mid-size and large-size companies. Capital Management, Inc. AZL BlackRock Growth Fund Large Growth Maximum long-term Invests at least 80% of total assets in capital appreciation common and preferred stock and securities with minimum long-term convertible into common and preferred stock risk to principal of mid- and large-size companies. AZL International Index Fund International Match the performance Invests at least 80% of its assets in a Equity of the MSCI statistically selected sampling of equity EAFE[{R}] securities of companies included in the Index as closely as Morgan Stanley Capital Inernational Europe, possible Australia and Far East Index (MSCI EAFE) and in derivative instruments linked to the MSCI EAFE index. Managed by Allianz AZL Money Market Fund Cash Current income Invests in a broad range of short-term, high Investment Equivalent consistent with quality U.S. dollar-denominated money market Management stability of principal instruments, including government, U.S. and LLC/BlackRock foreign bank, commercial and other Institutional obligations. During extended periods of low Management interest rates, and due in part to contract Corporation fees and expenses, the yield of the AZL Money Market Fund may also become extremely low and possibly negative. Managed by BlackRock Global Allocation Specialty High total investment Invests in both equity and debt securities BlackRock V.I. Fund return of issuers located around the world to Advisors, achieve a combination of capital growth and LLC/BlackRock income. Investment Management, LLC and BlackRock Asset Management U.K. Limited COLUMBIA Managed by Allianz AZL Columbia Mid Cap Value Mid Cap Long-term growth of Invests at least 80% of net assets in equity Investment Fund capital securities of companies that have market Management capitalizations in the range of the LLC/Columbia companies in the Russell Management Midcap[{R}] Value Index at the Advisors, LLC time of purchase that the fund's subadviser believes are undervalued and have the potential for long-term growth. AZL Columbia Small Cap Value Small Cap Long-term capital Invests at least 80% of net assets in equity Fund appreciation securities of companies with market capitalizations in the range of the companies in the Russell 2000 Value Index[{R}] at the time of purchase that the subadviser believes are undervalued. AZL Columbia Technology Fund Specialty Capital Appreciation At least 80% of its total net assets in common stocks of U.S and foreign technology companies that may benefit from technological improvements, advancements or developments. DAVIS Managed by Allianz AZL Davis NY Venture Fund Large Value Long-term growth of Invests the majority of assets in equity Investment capital securities issued by large companies with Management market capitalizations of at least LLC/Davis Selected $10 billion. Advisers, L.P. Managed by Davis Davis VA Financial Portfolio Specialty Long-term growth of At least 80% of net assets in securities Advisors capital issued by companies principally engaged in the financial services sector. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 22 DREYFUS Managed by Allianz AZL Dreyfus Equity Growth Large Growth Long-term growth of Primarily invests in common stocks of large, Investment Fund capital and income well-established and mature companies. Management Normally invests at least 80% of its net LLC/Founders Asset assets in stocks that are included in a Management LLC widely recognized index of stock market performance. May invest in non-dividend paying companies if they offer better prospects for capital appreciation. May invest up to 30% of its total assets in foreign securities. Managed by Allianz AZL S&P 500 Index Fund Large Blend Match total return of Normally invests in all 500 stocks in the Investment the S&P S&P 500[{R}] in proportion to Management LLC/The 500[{R}] their weighting in the index. Dreyfus Corporation AZL Small Cap Stock Index Small Cap Match performance of Invests in a representative sample of stocks Fund the S&P SmallCap 600 included in the S&P SmallCap 600 Index{R} Index[{R}], and in futures whose performance is related to the index, rather than attempt to replicate the index. FIRST TRUST Managed by Allianz AZL First Trust Target Double Large Blend Total Return Invests primarily in common stocks of Investment Play Fund companies that are identified by a model Management based on an allocation of 50% in two LLC/First Trust separate strategies that seek to provide Advisors L.P. above-average total return. FRANKLIN TEMPLETON Managed by Allianz AZL Franklin Small Cap Value Small Cap Long-term total return Under normal market conditions, invests at Investment Fund least 80% of its net assets in investments Management of small capitalization companies similar to LLC/Franklin those that comprise the Russell Advisory Services, 2500{trademark} Index at the time of LLC investment. Managed by Allianz AZL Franklin Templeton A "Fund of Long-term capital Invests in a combination of subportfolios or Investment Founding Strategy Plus Fund Funds" Model appreciation, with strategies, each of which is managed by an Management Portfolio income as a secondary asset manager that is part of Franklin LLC/Franklin goal Templeton. Mutual Advisers, LLC, Templeton Global Advisors Limited, and Franklin Advisers, Inc. Managed by Franklin Global Real Estate Specialty High Total Return At least 80% of net assets in investments of Franklin Templeton Securities Fund companies located anywhere in the world that Institutional, LLC operate in the real estate sector and normally invests predominantly in equity securities. Managed by Franklin Growth and Income Large Value Capital appreciation, Invests predominantly in a broadly Franklin Advisers, Securities Fund with current income as diversified portfolio of equity securities, Inc. a secondary goal including securities convertible into common stock. Franklin High Income High-Yield High current income Invests primarily to predominantly in debt Securities Fund Bonds with capital securities offering high yield and expected appreciation as a total return. secondary goal Franklin Income Securities Specialty Maximize income while Normally invests in debt and equity Fund maintaining prospects securities, including corporate, foreign and for capital U.S. Treasury bonds and stocks with dividend appreciation yields the manager believes are attractive. Franklin Large Cap Growth Large Growth Capital appreciation At least 80% of net assets in investments of Securities Fund large capitalization companies, and normally invests predominantly in equity securities. Managed by Franklin Rising Dividends Mid Cap Long-term capital At least 80% of net assets in investments of Franklin Advisory Securities Fund appreciation with companies that have paid rising dividends, Services, LLC preservation of capital and normally invests predominantly in equity as an important securities. consideration Managed by Franklin Small-Mid Cap Growth Mid Cap Long-term capital At least 80% of net assets in investments of Franklin Securities Fund growth small capitalization and mid capitalization Advisers, Inc. companies and normally invests predominantely in equity securities. Managed by Franklin Small Cap Value Small Cap Long term total return At least 80% of net assets in investments of Franklin Advisory Securities Fund small capitalization companies and normally Services, LLC invests predominantly in equity securities. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 23 Administered by Franklin Templeton VIP Model Capital appreciation Invests equal portions in Class 1 shares of Franklin Templeton Founding Funds Allocation Portfolio with income as a the Franklin Income Securities Fund, Mutual Services, LLC Fund (Fund of secondary goal. Shares Securities Fund, and Templeton Growth Funds) Securities Fund. Managed by Franklin U.S. Government Fund Short-Term Income At least 80% of its net assets in U.S. Franklin Advisers, Bonds government securities and normally invests Inc. primarily in fixed and variable rate mortgage-backed securities. Franklin Zero Coupon Fund Intermediate- As high an investment Normally invests at least 80% of its net 2010 Term Bonds return as is consistent assets in zero coupon debt securities. The with capital fund will mature in December of 2010 and preservation will then no longer be available as an Investment Option under the Contract. For additional information regarding the maturity of the fund, please see the Franklin Zero Coupon Fund prospectus. Managed by Mutual Global Discovery International Capital appreciation Invests primarily in U.S. and foreign equity Franklin Mutual Securities Fund Equity securities that the manager believes are Advisers, undervalued. The fund also invests, to a LLC/Franklin lesser extent, in risk arbitrage securities Templeton and distressed companies. Investment Management Limited Managed by Mutual Shares Securities Fund Large Value Capital appreciation, Invests primarily in U.S. and foreign equity Franklin Mutual with income as a securities that the manager believes are Advisers, LLC secondary goal undervalued. The fund also invests, to a lesser extent, in risk arbitrage securities and distressed companies. Managed by Templeton Foreign Securities International Long-term capital Normally invests at least 80% of net assets Templeton Fund Equity growth in investments of issuers located outside Investment the U.S., including those in emerging Counsel, LLC markets, and normally invests predominantly in equity securities. Managed by Templeton Global Bond Intermediate- High current income, Normally invests at least 80% of its net Franklin Advisers, Securities Fund Term Bonds consisent with assets in bonds, which include debt Inc. preservation of securities of any maturity, such as bonds, capital, with capital notes, bills and debentures. The fund may appreciation as a invest a portion of its total assets in secondary consideration bonds rated below investment grade and a significant portion of its assets in foreign securities. Managed by Templeton Growth Securities International Long-term capital Normally invests primarily in equity Templeton Global Fund Equity growth securities of companies located anywhere in Advisors the world, including those in the U.S. and Limited/Templeton in emerging markets. Asset Management Ltd. FUND OF FUNDS Managed by Allianz AZL Allianz Global Investors A "Fund of Long-term capital Normally invests in a combination of AGI Investment Select Fund Funds" Model appreciation with Mutual Funds, with 45% to 65% of the fund's Management LLC Portfolio preservation of capital assets allocated to equity investments and 35% to 55% allocated to fixed income investments. AZL Balanced Index Strategy A "Fund of Long-term capital Invests primarily in a combination of five Fund Funds" Model appreciation with underlying bond and equity index funds. Portfolio preservation of capital AZL Fusion Balanced Fund A "Fund of Long-term capital Allocation among the underlying investments, Funds" Model appreciation with to achieve a range generally from 40% to 60% Portfolio preservation of capital of assets in equity funds with the remaining as an important balance invested in fixed income funds. consideration AZL Fusion Conservative Fund A "Fund of Long-term capital Allocation among the underlying investments, Funds" Model appreciation with to achieve a range generally from 25% to 45% Portfolio preservation of capital of assets in equity funds with the remaining as an important balance invested in fixed income funds. consideration AZL Fusion Growth Fund A "Fund of Long-term capital Allocation among the underlying investments, Funds" Model appreciation to achieve a range generally from 70% to 90% Portfolio of assets in equity funds with the remaining balance invested in fixed income funds. AZL Fusion Moderate Fund A "Fund of Long-term capital Allocation among the underlying investments, Funds" Model appreciation to achieve a range generally from 55% to 75% Portfolio of assets in equity funds with the remaining balance invested in fixed income funds. AZL Moderate Index Strategy A "Fund of Long-term capital Invests primarily in a combination of five Fund Funds" Model appreciation underlying bond and equity index funds. Portfolio JENNISON Managed by Allianz AZL Jennison 20/20 Focus Fund Large Blend Long-term growth of At least 80% of its total assets in Investment capital approximately 40 (which may range up to 45) Management equity and equity-related securities of LLC/Jennison companies that the subadviser believes have Associates LLC strong capital appreciation potential. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 24 J.P. MORGAN Managed by Allianz AZL JPMorgan Large Cap Equity Large Blend Long-term growth of Invests at least 80% of its net assets, plus Investment Fund capital any borrowings for investment purposes, Management primarily in equity securities of large- and LLC/J.P. Morgan medium-capitalization U.S. companies. Investment Management, Inc. AZL JPMorgan U.S. Equity Fund Large Blend High total return Invests at least 80% of its net assets, plus any borrowings for investment purposes, primarily in equity securities of large- and medium-capitalization U.S. companies. NICHOLAS-APPLEGATE Managed by Allianz AZL NACM International Fund International Maximum long-term At least 80% of its net assets in securities Investment Equity capital appreciation of companies in developed countries located Management outside the U.S., represented in the Morgan LLC/Nicholas- Stanley Capital International Europe Applegate Capital Australasia Far East (MSCI EAFE) Index. Management, LLC OPPENHEIMER CAPITAL Managed by Allianz AZL OCC Growth Fund Large Growth Long-term growth of Invests at least 65% of its assets in common Investment capital with income as stocks of "growth" companies with market Management LLC/ an incidental capitalizations of at least $5 billion. Oppenheimer consideration Capital LLC AZL OCC Opportunity Fund Small Cap Capital appreciation At least 65% of its assets in common stocks of "growth" companies with market capitalizations of less than $2 billion at the time of investment. Managed by Allianz OpCap Mid Cap Portfolio Mid Cap Long-term capital Invests at least 80% of its net assets in Global Investors appreciation equity securities of companies with market Fund Management capitalizations between $500 million and $15 LLC billion at the time of purchase that the adviser believes are undervalued in the marketplace. OPPENHEIMERFUNDS Managed by Allianz AZL Oppenheimer Global Fund International Capital appreciation Invests mainly in common stocks of mid and Investment Equity large-cap companies in the U.S. and foreign Management LLC/ countries, including countries with OppenheimerFunds, developed and emerging markets. Inc. AZL Oppenheimer International International Long-term capital Common stocks of growth companies that are Growth Fund Equity appreciation domiciled outside the U.S. or have their primary operations outside the U.S., including companies in emerging markets. Managed by Oppenheimer High Income High-Yield High level of current Invests mainly in a variety of high-yield OppenheimerFunds, Fund/VA Bonds income fixed-income securities of domestic and Inc. foreign issuers with at least 65% of total assets in high-yield, lower grade fixed income securities commonly known as "junk" bonds. PIMCO Managed by Allianz AZL PIMCO Fundamental Large Blend Exceed the total return Invests substantially all assets in Investment IndexPLUS Total Return Fund of the FTSE derivative instruments based on the Enhanced Management RAFI{trademark} 1000 RAFI{trademark} 1000, backed by a portfolio LLC/Pacific Index of short and intermediate term fixed income Investment instruments. Management Company LLC Managed by Pacific PIMCO VIT All Asset Portfolio Specialty Maximum real return Invests in institutional class shares of the Investment (Fund of consistent with underlying PIMCO Funds and does not invest Management Company Funds) preservation of real directly in stocks or bonds of other LLC capital and prudent issuers. investment management PIMCO VIT CommodityReal Specialty Maximum real return Invests in commodity linked derivative Return[TM] Strategy Portfolio consistent with prudent instruments backed by a portfolio of investment management inflation-indexed securities and other fixed income securities. PIMCO VIT Emerging Markets Intermediate- Maximum total return, At least 80% of its assets in fixed income Bond Portfolio Term Bonds consistent with instruments of issuers that economically are preservation of capital tied to countries with emerging securities and prudent investment markets. management The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 25 PIMCO VIT Global Bond Intermediate- Maximum total return, At least 80% of its assets in fixed income Portfolio (Unhedged) Term Bonds consistent with instruments of issuers in at least three preservation of capital countries (one of which may be the U.S.), and prudent investment which may be represented by futures management contracts. May invest, without limitation, in securities of issuers in emerging market countries. PIMCO VIT Global Multi-Asset A "Fund of Total return which Invests in a combination of affiliated and Portfolio Funds" Model exceeds a 60% MSCI unaffiliated funds, fixed income Portfolio World Index/40% instruments, equity securities, forwards and Barclays Capital U.S. derivatives. Typically invests 20% to 80% of Aggregate Index blend total assets in equity-related investments. PIMCO VIT High Yield High-Yield Maximum total return, At least 80% of assets in a diversified Portfolio Bonds consistent with portfolio of high-yield securities ("junk preservation of capital bonds") rated below investment grade, but at and prudent investment least Caa by Moody's or equivalently rated management by S&P or Fitch. May invest up to 20% of total asets in securities denominated in foreign currencies. PIMCO VIT Real Return Intermediate- Maximum real return, At least 80% of its net assets in inflation- Portfolio Term Bonds consistent with indexed bonds of varying maturities issued preservation of real by the U.S. and non-U.S. governments, their capital and prudent agencies or instrumentalities, and investment management corporations. PIMCO VIT Large Growth Total return which Invests substantially in S&P StocksPLUS[{R}] exceeds that of the S&P 500[{R}] derivatives, backed by Growth and Income Portfolio 500[{R}] a portfolio of fixed income instruments. May invest in common stocks, options, futures, options on futures, and swaps. The fund will be liquidated on or about July 17, 2009 and will then no longer be available as an Investment Option under the Contract. For additional information regarding the liquidation, please see the PIMCO VIT StocksPLUS Growth and Income Portfolio prospectus. Any Contract Value remaining in the Investment Option at the time the fund is liquidated will be transferred to the AZL Money Market Fund. PIMCO VIT Total Return Intermediate- Maximum total return, At least 65% of total assets in a Portfolio Term Bonds consistent with diversified portfolio of fixed income preservation of capital instruments of varying maturities, which may and prudent investment be represented by forwards or derivatives management such as options, futures contracts, or swap agreements. PRUDENTIAL Managed by SP International Growth International Long-term growth of Invests primarily in equity-related Prudential Portfolio Equity capital securities of foreign issuers with at least Investments 65% of its total assets in common stocks of LLC/William Blair foreign companies operating or based in at & Company LLC and least five different countries. Marsico Capital Management LLC Managed by SP Strategic Partners Focused Large Growth Long-term growth of At least 65% of total assets in equity and Prudential Growth Portfolio capital equity-related securities of U.S. companies Investments that the adviser believes to have strong LLC/Jennison capital appreciation potential. Associates LLC and AllianceBernstein L.P. SCHRODER Managed by Allianz AZL Schroder Emerging Markets Specialty Capital appreciation Invests at least 80% of its net assets in Investment Equity Fund equity securities of companies that the Management subadviser believes to be "emerging market" LLC/Schroder issuers. May invest remainder of assets in Investment securities of issuers located anywhere in Management North the world. America Inc. AZL Schroder International International Long-term capital At least 80% of net assets in equity Small Cap Fund Equity appreciation securities of small capitalization companies located outside the U.S. (generally with market capitalizations of $3.5 billion or less at the time of investment) that it believes offer the potential for capital appreciation. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 26 TARGETPLUS PORTFOLIOS Managed by Allianz AZL TargetPLUS Balanced Fund Model Long-term capital Invests primarily in a diversified portfolio Investment Portfolio appreciation with of equity and fixed income securities with Management preservation of capital 40% to 60% allocated to the equity portfolio LLC/First Trust as an important and the balance allocated to the fixed Advisors L.P. and consideration income portfolio. May invest a significant Pacific Investment portion of its total assets in securities of Management Company non-U.S. companies. LLC Managed by Allianz AZL TargetPLUS Equity Fund Model Total return Invests at least 80% of net assets in common Investment Portfolio stocks of companies that are identified by a Management model based on an allocation of 20% of fund LLC/First Trust assets in each of five separate strategies. Advisors L.P. Managed by Allianz AZL TargetPLUS Growth Fund Model Long-term capital Invests primarily in a diversified portfolio Investment Portfolio appreciation of equity and fixed income securities with Management 70% to 90% allocated to the equity portfolio LLC/First Trust and the balance allocated to the fixed Advisors L.P. and income portfolio. May invest a significant Pacific Investment portion of its total assets in securities of Management Company non-U.S. companies. LLC AZL TargetPLUS Moderate Fund Model Long-term capital Invests primarily in a diversified portfolio Portfolio appreciation of equity and fixed income securities with 55% to 75% allocated to the equity portfolio and the balance allocated to the fixed income portfolio. May invest a significant portion of its total assets in securities of non-U.S. companies. TURNER Managed by Allianz AZL Turner Quantitative Small Small Cap Long-term growth of At least 80% of its net assets in common Investment Cap Growth Fund capital stocks and other equity securities of U.S. Management companies with small market capitalizations LLC/Turner that the subadviser believes, based on a Investment quantitative model, have strong earnings Partners, Inc. growth potential. Small capitalization companies are defined as companies with market capitalizations, at the time of purchase, in the range of companies included in the Russell[ ]2000[{R}] Growth Index. VAN KAMPEN Managed by Allianz AZL Van Kampen Comstock Fund Large Value Capital growth and Invests at least 80% of net assets in common Investment income stocks with the potential for capital growth Management LLC/Van and income. May invest up to 25% of total Kampen Asset assets in foreign securities. Management AZL Van Kampen Equity and Specialty Highest possible income Invests at least 65% of its total assets in Income Fund consistent with safety income-producing equity securities and also of principal with long- invests in investment grade quality debt term growth of capital securities. May invest up to 25% ot total as an important assets in foreign securities, including secondary objective emerging market securities. AZL Van Kampen Global International Long term capital Invests primarily in a portfolio of equity Franchise Fund Equity appreciation securities of issuers located throughout the world that it believes have, among other things, resilient business franchises and growth potential. Normally invests at least 65% of total assets in securities of issuers from at least three different countries, which may include the U.S. AZL Van Kampen Global Real Specialty Income and capital Invests at least 80% of assets in equity Estate Fund appreciation securities of companies in the real estate industry located throughout the world, including real estate investment trusts and real estate operating companies established outside the U.S. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 27 AZL Van Kampen Growth and Large Value Income and long-term Invests at least 65% of total assets in Income Fund growth of capital income-producing equity securities, including common stocks and convertible securities; also in non-convertible preferred stocks and debt securities rated "investment grade." May invest up to 25% of total assets in foreign securities, including emerging market securities. AZL Van Kampen Mid Cap Growth Mid Cap Capital growth At least 80% of net assets in common stocks Fund and other equity securities of mid capitalization growth companies.
Shares of the Investment Options may be offered in connection with certain variable annuity contracts and variable life insurance policies of various insurance companies that may or may not be affiliated with us. Certain Investment Options may also be sold directly to pension and retirement plans that qualify under Section 401 of the Internal Revenue Code. As a result, a material conflict of interest may arise between insurance companies, owners of different types of contracts and retirement plans or their participants. Each Investment Option's Board of Directors will monitor for the existence of any material conflicts, and determine what action, if any, should be taken. We may enter into certain arrangements under which we, or our affiliate Allianz Life Financial Services, LLC, the principal underwriter for the Contracts, are compensated by the Investment Options' advisers, distributors and/or affiliates for the administrative services and benefits that we provide to the Investment Options. The amount of the compensation usually is based on the aggregate assets of the Investment Options or other investment portfolios that are attributable to contracts that we issue or administer. Some advisers may pay us more or less than others. The maximum fee that we currently receive is at the annual rate of 0.25% of the average aggregate amount invested by us in the Investment Options. In addition, our affiliate Allianz Life Financial Services, LLC, may receive Rule 12b-1 fees deducted from certain Investment Option assets attributable to the Contract for providing distribution and support services to some Investment Options. Because 12b-1 fees are paid out of an Investment Option's assets on an ongoing basis, over time they will increase the cost of an investment in the Investment Option. SUBSTITUTION AND LIMITATION ON FURTHER INVESTMENTS We may substitute another Investment Option for one of the Investment Options you selected for any reason in our sole discretion. Substitutions may be made with respect to existing investments, the investment of future Purchase Payments, or both. New or substitute Investment Options may have different fees and expenses, and their availability may be limited to certain classes of purchasers. We may limit further investment in, or transfers to, an Investment Option if marketing, tax or investment considerations warrant, or for any reason in our sole discretion. We also may close Investment Options to allocations of Purchase Payments and/or Contract Value, at any time and at our sole discretion. The fund companies that sell shares of the Investment Options to us, pursuant to participation agreements, may terminate those agreements and discontinue offering their shares to us. To the extent required by the Investment Company Act of 1940 or other applicable law, we will not substitute any shares without notice to you and prior approval of the SEC. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 28 TRANSFERS You can make transfers among the Investment Options, subject to certain restrictions. Transfers may be subject to a transfer fee. For more information, see section 6, Expenses - Transfer Fee. We currently allow you to make as many transfers each Contract Year as you wish. We may change this practice in the future. There is no minimum required transfer amount. This product is not designed for professional market timing organizations, other entities or persons using programmed, large, or frequent transfers, and excessive or inappropriate transfer activity may be restricted. The following applies to any transfer. o We may choose not to allow you to make transfers during the free look/right-to-examine period. o Your request for a transfer must clearly state: - which Investment Options are involved in the transfer; and - how much you wish to transfer. o After the Income Date, you cannot make a transfer from a fixed Annuity Payment stream to a variable Annuity Payment stream. o After the Income Date, you can make a transfer from a variable Annuity Payment stream to establish a new fixed Annuity Payment stream. o Your right to make transfers is subject to modification if we determine, in our sole discretion, that exercise of the right by one or more Owners is, or may be, to the disadvantage of other Owners. For more information, see the "Excessive Trading and Market Timing" discussion in this section. o Transfer instructions apply equally to the accumulation and annuitization portions of the Contract. You cannot make transfers selectively within different portions of the Contract. o Transfers of Contract Value between Investment Options will not change the allocation instructions for any future Purchase Payments. When you make a transfer request, we will process the request based on the Accumulation Unit values and/or Annuity Unit values next determined after receipt of the request in good order at our Service Center. The Accumulation Unit values and Annuity Unit values are normally determined at the end of each Business Day and any transfer request received at or after the end of the current Business Day will receive the next Business Day's Accumulation Unit values and/or Annuity Unit values. The Investment Options may, in the future, add policies or change existing policies designed to restrict market timing activities. For example, Investment Options may impose restrictions on transfers between Investment Options in an affiliated group of Investment Options if the investment adviser to one or more of the Investment Options determines that the Owner or his or her designee requesting the transfer has engaged, or is engaging in, market timing or other abusive trading activities. In addition, an Investment Option may impose a short-term trading fee on purchases and sales within a specified period. You should review the Investment Options' prospectuses regarding any applicable transfer restrictions and the imposition of any fee to discourage short-term trading. The imposition of these restrictions would occur as a result of Investment Option restrictions and actions taken by the managers of the Investment Options. TELEPHONE AND OTHER ELECTRONIC TRANSFERS You can request transfers by telephone, fax, or by website at www.allianzlife.com. We may allow you to authorize someone else to request transfers by telephone, fax, or website on your behalf. We will accept instructions from either you or a Joint Owner unless we are instructed otherwise. We will use reasonable procedures to confirm that instructions given to us by telephone or by website are genuine. If we do not use such procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. We record all telephone instructions and log all website instructions. We reserve the right to deny any transfer request submitted by telephone, website, or by fax, and to discontinue or modify the telephone, fax and/or website transfer privileges at any time and for any reason. We do not currently accept transfer instructions from you via email or via electronic communications other than by telephone, fax, or by website. This service may be available to you in the future. When you make a transfer request by telephone, fax, or by website, we will process the request based on the Accumulation Unit values next determined after receipt of the request at our Service Center. If you or your authorized representative have not given instructions to a Service Center representative before the end of the Business Day, even if due to our delay in answering your call or a delay caused by our telephone, fax and/or computer system, we will consider The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 29 the request to be received at or after the end of the current Business Day and the request will receive the next Business Day's Accumulation Unit values. Please note that telephone, fax and/or the website may not always be available. Any telephone, fax and/or computer system, whether it is ours, yours, your service provider's, or your registered representative's, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your transfer by writing to our Service Center. By authorizing transfers by telephone or website, you authorize us to accept and act upon such instructions for transfers involving your Contract. There are risks associated with telephone and website transactions that do not occur if a written request is submitted. Anyone authorizing or making such requests bears those risks. You should protect your website password, because the website is available to anyone who provides your password; we will not be able to verify that the person providing electronic transfer instructions via the website is you or is authorized by you. EXCESSIVE TRADING AND MARKET TIMING We may restrict or modify your right to make transfers to prevent any use that we consider to be part of a market timing program. Frequent transfers, programmed transfers, transfers into and then out of an Investment Option in a short period of time, and transfers of large amounts at one time (collectively referred to as "potentially disruptive trading") may have harmful effects for other Owners, Annuitants and Beneficiaries. These risks and harmful effects include the following. o Dilution of the interests of long-term investors in an Investment Option, if market timers or others transfer into the Investment Option at prices that are below their true value or transfer out of the Investment Option at prices that are higher than their true value. o An adverse effect on portfolio management, such as causing the Investment Option to maintain a higher level of cash than would otherwise be the case, or causing the Investment Option to liquidate investments prematurely. o Increased brokerage and administrative expenses. In order to attempt to protect our Owners and the Investment Options from potentially disruptive trading, we have adopted certain excessive trading and market timing policies and procedures. Under our excessive trading and market timing policy, we could modify your transfer privileges for some or all of the Investment Options. Unless prohibited by the terms of the Contract or applicable state law, the modifications we may apply include (but are not limited to) the following. o Limiting the frequency of transfers (for example, prohibit more than one transfer a week, or more than two a month, etc.). o Restricting the method of making a transfer (for example, requiring that all transfers be sent by first class U.S. mail and rescinding the telephone, fax or website transfer privileges). o Requiring a minimum time period between each transfer into or out of a particular Investment Option. Our current policy, which is subject to change without notice, prohibits "round trips" with Investment Options, other than the AZL Money Market Fund and the AZL FusionPortfolios, within 14 calendar days. Round trips are transfers into and back out of a particular Investment Option, or transfers out of and back into a particular Investment Option. o Not accepting transfer requests made on your behalf by an asset allocation and/or market timing service. o Limiting the dollar amount of any Purchase Payment or transfer request allocated to any Investment Option at any one time. o Imposing redemption fees on short-term trading (or implementing and administering redemption fees imposed by one or more of the Investment Options). o Prohibiting transfers into specific Investment Options. o Imposing other limitations or restrictions. We also reserve the right to reject any specific Purchase Payment allocation or transfer request from any person if in the investment adviser's, subadviser's or our judgment, an Investment Option may be unable to invest effectively in accordance with its investment objectives and policies. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 30 Currently, we attempt to DETER disruptive trading as follows. If a transfer(s) is/are identified as potentially disruptive trading, we may (but are not required to) send a warning letter. If the conduct continues and we determine that it constitutes disruptive trading, we will also impose transfer restrictions. Transfer restrictions may include refusing to take orders by fax, telephone or website and requiring the submission of all transfer requests via first-class U.S. mail. We do not enter into agreements permitting market timing and would not permit activities determined to be disruptive trading to continue. We also reserve the right to impose transfer restrictions on a Contract if we determine, in our sole discretion, that the transfers are disadvantageous to other Owners. We will notify the Owner in writing if we impose transfer restrictions on the Owner. We do not include automatic transfers made under any programs we provide, or automatic transfers made under any of the Contract features, when applying our market timing policy. We have adopted these policies and procedures as a preventative measure to protect all Owners from the potential effects of disruptive trading, while also abiding by the Owners' legitimate interest in diversifying their investment and making periodic asset re-allocations based upon their personal situations or overall market conditions. We attempt to protect the Owners' interests in making legitimate transfers by providing reasonable and convenient methods of making transfers that do not harm other Owners. We may make exceptions when imposing transfer restrictions if we determine a transfer is appropriate, although it may technically violate our policies and procedures that are discussed above. In determining whether a transfer is appropriate, we may, but are not required to, take into consideration the relative size of a transaction, whether the transaction was purely a defensive transfer into the AZL Money Market Fund, and whether the transaction involved an error or similar event. We may also reinstate telephone, fax or website transfer privileges after we have revoked them, but we will not reinstate these privileges if we have reason to believe that they might be used for disruptive trading purposes in the future. We cannot guarantee the following. o Our monitoring will be 100% successful in detecting all potentially disruptive trading activity. o Revoking telephone, fax or website transfer privileges will successfully deter all potentially disruptive trading. In addition, certain of the Investment Options are available to insurance companies other than us and we do not know whether those other insurance companies have adopted policies and procedures to detect and deter potentially disruptive trading, or what their policies and procedures might be. As a result of the fact that we may not be completely successful at detecting and preventing market timing activities, and other insurance companies that offer the Investment Options may not have adopted adequate market timing procedures, there is some risk that market timing activity may occur and negatively affect other Owners. We may, without prior notice to any party, take whatever action we deem appropriate to comply with or take advantage of any state or federal regulatory requirement. In addition, orders for the purchase of an Investment Option's shares are subject to acceptance by that Investment Option. We reserve the right to reject, without prior notice, any transfer request into an Investment Option or allocation of a Purchase Payment to an Investment Option if the order to purchase the Investment Option's shares is not accepted for any reason. We have entered into agreements required under SEC Rule 22c-2 (Rule 22c-2 agreements) whereby, upon request by an underlying fund or its designee, we are required to provide the underlying fund with information about you and your trading activities into or out of one or more Investment Options. This information will be provided to the underlying fund or its designee. Under the terms of the Rule 22c-2 agreements, we are required to: (1) provide details concerning every purchase, redemption, transfer, or exchange of Investment Options during a specified period; and (2) restrict your trading activity if the party receiving the information so requests. Under certain Rule 22c-2 agreements, if we fail to comply with a request to restrict trading activity, the underlying fund or its designee may refuse to accept transfers from us until we comply. We retain some discretion in determining what actions constitute potentially disruptive trading and in determining when and how to impose trading restrictions. Therefore, persons engaging in potentially disruptive trading may be subjected to some uncertainty as to when and in what form trading restrictions may be applied, and persons not engaging in potentially disruptive trading may not know precisely what actions will be taken against a person engaging in potentially disruptive trading. For example, if we determine a person is engaging in potentially disruptive trading, we may revoke that person's telephone, fax or website transfer privileges and require all future requests to be sent by first class U.S. mail. In the alternative, if the disruptive trading affects only a single Investment Option, we may prohibit transfers into or allocations of Purchase Payments to that Investment Option. We will notify the person or entity making the potentially disruptive trade when we revoke any transfer privileges. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 31 The retention of some level of discretion by us may result in disparate treatment among persons engaging in potentially disruptive trading, and it is possible that some persons could experience adverse consequences if other persons are able to engage in practices that may constitute disruptive trading, and that result in negative effects. DOLLAR COST AVERAGING (DCA) PROGRAM The DCA program allows you to systematically transfer a set amount of money each month or quarter from any one Investment Option to other Investment Options. The Investment Option you transfer from may not be the Investment Option you transfer to in this program. By allocating amounts on a regularly scheduled basis, as opposed to allocating the total amount at one particular time, you may be less susceptible to the impact of market fluctuations. You may only participate in this program during the Accumulation Phase. Generally, the DCA program requires a $1,500 minimum allocation and participation for at least six months. All DCA transfers will be made on the tenth day of the month or the next Business Day if the tenth is not a Business Day. You can elect this program by properly completing the DCA form provided by us. Your participation in the program will end when any of the following occurs. o The number of desired transfers has been made. o You do not have enough money in the Investment Options to make the transfer (if less money is available, that amount will be dollar cost averaged and the program will end). o You request to terminate the program (your request must be received at our Service Center by the first of the month to terminate that month). o Contract termination. If you participate in the DCA program, there are no fees for the transfers made under this program, we do not currently count these transfers against the free transfers that we allow, and you will not be charged additional fees for participating in or terminating from this program. We reserve the right to discontinue or modify the DCA program at any time and for any reason. FLEXIBLE REBALANCING You can choose to have us rebalance your account. Once your money has been invested, the performance of the Investment Options may cause your chosen allocation to shift. Flexible rebalancing is designed to help you maintain your specified allocation mix among the different Investment Options. You can direct us to automatically readjust your balance in the Investment Options on a quarterly, semi-annual or annual basis to return to your selected Investment Option allocations. Flexible rebalancing transfers will be made on the 20th day of the month or the previous Business Day if the 20th is not a Business Day. If you participate in the flexible rebalancing program, there are no fees for the transfers made under this program, we do not currently count these transfers against any free transfers that we allow, and you will not be charged additional fees for participating in or terminating from this program. We reserve the right to discontinue or modify the flexible rebalancing program at any time and for any reason. To participate in this program your request must be received in good order at our Service Center by the eighth of the month so that we may rebalance your account on the 20th of the month. To terminate your participation in this program, your request must also be received at our Service Center by the eighth of the month to terminate that month. FINANCIAL ADVISERS - ASSET ALLOCATION PROGRAMS If you have or establish a relationship with a personal financial adviser and the advisory agreement provides that you will pay all or a portion of your adviser's fees out of the Contract, we will, pursuant to written instructions from you in a form acceptable to us, make a partial withdrawal of the Contract Value to pay for the services of the financial adviser. We will treat any fee that is withdrawn as a withdrawal under the terms of this Contract. If the Contract is Non-Qualified, the withdrawal will be treated like any other distribution; it may be included in your gross income for federal tax purposes and, if any Owner is under age 59 1/2, it may be subject to a 10% federal penalty tax. If the Contract is Qualified, the withdrawal for the payment of fees may not be treated as a taxable distribution if certain conditions are met. You should consult a tax adviser regarding the tax treatment of the payment of financial adviser fees from your Contract. We do not set the amount of the fees charged or receive any portion of the fees from your adviser. Any fee that is charged by your adviser is in addition to the fees and expenses that apply under your Contract. We are not party to the agreement you have with your adviser. You should ask your adviser for any details about the compensation he or she receives in connection with your Contract. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 32 Please note that the adviser you engage to provide advice and/or to make transfers for you is not acting on our behalf, but is acting on your behalf. We do not review or approve the actions of any adviser, and do not assume any responsibility for these actions. However, we do reserve the right to request and review prior transaction history of any adviser prior to granting your request to allow the adviser to act on your behalf. If, in our sole discretion, we believe the adviser's trading history indicates a pattern of excessive trading, we reserve the right to deny that adviser trading authority. If an adviser is granted trading authority, that adviser is subject to the same limitations applicable to Owners as stated above. VOTING PRIVILEGES We are the legal owner of the Investment Option shares. However, when an Investment Option solicits proxies in conjunction with a shareholder vote that affects your investment, we will obtain from you and other affected Owners instructions as to how to vote those shares. When we receive those instructions, we will vote all of the shares we own including any shares that we own on our own behalf, in proportion to those instructions. Because of this proportional voting and because many Owners do not respond to our request for them to provide us with voting instructions, a small number of Owners may determine the outcome of the vote. Should we determine that we are no longer required to obtain your voting instructions, we will vote the shares in our own right. Only Owners have voting privileges under the Contract. Annuitants, Beneficiaries, Payees and other persons have no voting privileges unless they are also Owners. We determine your voting interest in an Investment Option as follows. o You are permitted to cast votes based on the dollar value of the Investment Option's shares that we hold for your Contract in the corresponding subaccount. We calculate this value based on the number of Accumulation/Annuity Units allocated to your Contract on the record date and the value of each unit on that date. We count fractional votes. o We will determine the number of shares that you can vote. o You will receive any proxy materials and a form to give us voting instructions as well as periodic reports relating to the Investment Options in which you have an interest. 5. OUR GENERAL ACCOUNT Our general account consists of all of our assets other than those in our separate accounts. We have complete ownership of all assets in our general account and we use these assets to support our insurance and annuity obligations other than those funded by our separate accounts. These assets are subject to our general liabilities from business operations. It is possible for assets invested in our general account to lose value. Subject to applicable law, we have sole discretion over the investment of the assets of our general account. We have not registered our general account as an investment company under the Investment Company Act of 1940, nor have we registered interests in our general account under the Securities Act of 1933. As a result, the SEC has not reviewed the disclosures in this prospectus relating to our general account. We do not currently offer any investment choices under our general account during the Accumulation Phase. Any amounts that you allocate to provide fixed Annuity Payments during the Annuity Phase become part of our general account. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 33 6. EXPENSES There are charges and other expenses associated with the Contract that will reduce your investment return. These charges and expenses are described in detail in this section. MORTALITY AND EXPENSE RISK (M&E) CHARGES Each Business Day during the Accumulation and Annuity Phases, we make a deduction from your Separate Account assets for the mortality and expense risk (M&E) charges. We do this as part of our calculation of the value of the Accumulation and Annuity Units. The M&E charge is an annualized rate that is realized on a daily basis as a percentage of the net asset value of an Investment Option. The amount of the M&E charge during the Accumulation Phase depends on the benefit options that apply. During the Accumulation Phase, the M&E charges are as follows: M&E CHARGES TRADITIONAL GBP ENHANCED NO GBP GBP Traditional GMDB 1.75% 1.95% 2.45% Enhanced GMDB 1.95% 2.10% 2.60% The Traditional GBP consists of: o The Traditional GMIB, and o The Traditional GPWB. The Enhanced GBP consists of: o The Enhanced GMIB, and o The Enhanced GPWB. If you exercise the GPWB, the increased expenses associated with the GBP will continue until the GPWB endorsement terminates and the increased expenses associated with the Enhanced GMDB (if applicable) will continue as long as the Enhanced GMDB value is greater than zero. During the Annuity Phase, if you request variable Traditional Annuity Payments, the M&E charge is equal, on an annual basis, to 1.75%. Because the Contract allows Partial Annuitization, it is possible for one portion of the Contract to be in the Accumulation Phase and other portions will be in the Annuity Phase at the same time. It is also possible to have different M&E charges on different portions of the Contract at the same time if you request a variable traditional Partial Annuitization. These charges compensate us for all the insurance benefits provided by your Contract, for example: o our contractual obligation to make Annuity Payments, o the death, income, and withdrawal benefits under the Contract, o certain expenses related to the Contract, and o for assuming the risk (expense risk) that the current charges will be insufficient in the future to cover the cost of administering the Contract. If the M&E charges are sufficient to cover such costs and risks, any excess will be profit to us. We anticipate making such a profit, and using it to cover distribution expenses as well as the cost of providing certain features under the Contract. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 34 CONTRACT MAINTENANCE CHARGE We deduct $30 from the Contract annually as a contract maintenance charge during the Accumulation and Annuity Phases. The charge is for the expenses associated with the administration and maintenance of the Contract. We deduct this charge on the last day of each Contract Year and we deduct it proportionately from the Investment Options as set out in your Contract. During the Annuity Phase, we will collect a portion of the charge out of each Annuity Payment. This charge cannot be increased. We will not deduct this charge if the Contract Value is at least $75,000 at the time we are to deduct the charge. If you own more than one Contract offered under this prospectus, we will determine the total value of all your Contracts. If the total value of all Contracts registered under the same social security number is at least $75,000, we will not assess the contract maintenance charge. If you take a full withdrawal from your Contract (other than on a Contract Anniversary), we will deduct the full contract maintenance charge. If the Contract is owned by a non-individual (for example, a qualified plan or trust), we will look to the Annuitant to determine if we will assess the charge. WITHDRAWAL CHARGE You can take withdrawals from the portion of the Contract that is in the Accumulation Phase. A withdrawal charge applies if all or part of the amount withdrawn is from Purchase Payments we received within two complete years before the withdrawal. The withdrawal charge compensates us for expenses associated with selling the Contract. We do not assess the withdrawal charge on: amounts deducted to pay the contract maintenance charge, Annuity Payments (including GMIB Payments), GPWB Payments, death benefits, or amounts paid as part of a minimum distribution payment under our minimum distribution program. (For more information, see section 8, Access to Your Money - The Minimum Distribution Program and Required Minimum Distribution (RMD) Payments.) The total amount under your Contract that is subject to a withdrawal charge is the Withdrawal Charge Basis. The Withdrawal Charge Basis is equal to the total Purchase Payments, less any withdrawals from the Contract (including any withdrawal charges). Amounts applied to Partial Annuitizations will reduce each Purchase Payment proportionately by the percentage of Contract Value you annuitize. We do not reduce the Withdrawal Charge Basis for the deduction of the contract maintenance charge. We do not adjust the Withdrawal Charge Basis for any gains or losses on your Investment Options. THIS MEANS THAT ON A FULL WITHDRAWAL, IF THE CONTRACT VALUE HAS DECLINED DUE TO POOR PERFORMANCE OF YOUR SELECTED INVESTMENT OPTIONS, THE WITHDRAWAL CHARGE MAY BE GREATER THAN THE AMOUNT AVAILABLE FOR WITHDRAWAL. BECAUSE WE ASSESS THE WITHDRAWAL CHARGE AGAINST THE WITHDRAWAL CHARGE BASIS, IN SOME INSTANCES, THE CONTRACT VALUE MAY BE POSITIVE, BUT YOU WILL NOT RECEIVE A DISTRIBUTION DUE TO THE AMOUNT OF THE WITHDRAWAL CHARGE. For more information, please see the examples in Appendix E. For purposes of calculating any withdrawal charge, we withdraw Purchase Payments on a "first-in-first-out" (FIFO) basis and we make withdrawals from your Contract in the following order. 1.First, we withdraw any Purchase Payments that are beyond the withdrawal charge period shown in your Contract (for example, Purchase Payments that we have had for two or more complete years). We do not assess a withdrawal charge on these Purchase Payments. 2.Next, on a FIFO basis, we withdraw Purchase Payments that are within the withdrawal charge period shown in your Contract. We do assess a withdrawal charge on these Purchase Payments, but we withdraw them on a FIFO basis, which may help reduce the total withdrawal charge you will pay because the withdrawal charge declines over time. We determine your total withdrawal charge by multiplying each of these payments by the applicable withdrawal charge percentage and then totaling the charges. 3.Finally, we withdraw any Contract earnings. We do not assess a withdrawal charge on Contract earnings. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 35 We keep track of each Purchase Payment we receive. The amount of the withdrawal charge depends upon the length of time since we received your Purchase Payment. The charge as a percentage of each Purchase Payment withdrawn is as follows. NUMBER OF COMPLETE YEARS SINCE WE RECEIVED YOUR PURCHASE PAYMENT CHARGE 0 8% 1 7% 2 years or more 0% After we have had a Purchase Payment for two complete years, there is no charge when you withdraw that Purchase Payment. We calculate the withdrawal charge at the time of each withdrawal. For a full withdrawal that is subject to a withdrawal charge, we will deduct the withdrawal charge as a percentage of the Withdrawal Charge Basis from the amount withdrawn. For a partial withdrawal that is subject to a withdrawal charge, the amount we deduct from your Contract will be the amount you request, plus any applicable withdrawal charge. We apply the withdrawal charge to this total amount and we pay you the amount you requested. For partial withdrawals, we deduct the charge from the remaining Contract Value and we deduct it proportionately from the Investment Options. EXAMPLE: You purchase a Contract with an initial Purchase Payment of $30,000 and make another Purchase Payment in the first month of the second Contract Year of $70,000. Later in the second Contact Year, your Contract Value is $110,000 and you request a withdrawal of $52,000. We would withdraw money from the Contract Value and compute the withdrawal charge as follows. 1)PURCHASE PAYMENTS THAT ARE BEYOND THE WITHDRAWAL CHARGE PERIOD. All payments are still within the withdrawal charge period so this does not apply. 2)PURCHASE PAYMENTS ON A FIFO BASIS. The total amount we deduct from the first Purchase Payment is $30,000, which is subject to a 7% withdrawal charge, and you will receive $27,900. We determine this amount as follows: (AMOUNT WITHDRAWN) X (1 - WITHDRAWAL CHARGE) = THE AMOUNT YOU RECEIVE, OR: $30,000 x 0.930 = $27,900. Next we determine how much we need to deduct from the second Purchase Payment. So far we have deducted $27,900 from the first Purchase Payment, so we would need to deduct $24,100 from the second Purchase Payment to get you the $52,000 you requested. The second Purchase Payment is subject to an 8% withdrawal charge. We calculate the total amount withdrawn and the withdrawal charge you pay on this amount as follows: (THE AMOUNT YOU RECEIVE) {divide} (1 - WITHDRAWAL CHARGE) = AMOUNT WITHDRAWN, OR: $24,100 {divide} 0.920 = $26,196 3)CONTRACT EARNINGS. As we have already withdrawn your requested amount, this does not apply. In total we withdrew $56,196 from your Contract, of which you received $52,000 and paid total withdrawal charges of $4,196. NOTE: WITHDRAWALS MAY HAVE TAX CONSEQUENCES AND, IF TAKEN BEFORE AGE 59 1/2, MAY BE SUBJECT TO A 10% FEDERAL PENALTY TAX. FOR TAX PURPOSES, UNDER NON-QUALIFIED CONTRACTS, WITHDRAWALS ARE CONSIDERED TO HAVE COME FROM THE LAST MONEY YOU PUT INTO THE CONTRACT. THUS, FOR TAX PURPOSES, EARNINGS ARE CONSIDERED TO COME OUT FIRST. REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE We may reduce or eliminate the amount of the withdrawal charge when the Contract is sold under circumstances that reduce its sales expenses. For example, if there is a large group of individuals that will be purchasing the Contract or if a prospective purchaser already has a relationship with us. We may choose not to deduct a withdrawal charge under a Contract issued to an officer, director, or employee of Allianz Life of New York or any of its affiliates. Also, we may reduce or waive the withdrawal charge when a Contract is sold by a registered representative appointed with Allianz Life of New York to any members of his or her immediate family and the commission is waived. We require our prior approval for any reduction or elimination of the withdrawal charge. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 36 TRANSFER FEE You can currently make 12 free transfers every Contract Year. If you make more than 12 transfers in a Contract Year, we will deduct a transfer fee of $25 for each additional transfer. Currently, we deduct this fee only during the Accumulation Phase, but we reserve the right to deduct it during the Annuity Phase. We will deduct the transfer fee from the Investment Options from which the transfer is made. If you transfer the entire amount in the Investment Option, then we will deduct the transfer fee from the amount transferred. If you are transferring from multiple Investment Options, we will treat the transfer as a single transfer and we will deduct any transfer fee proportionately from the Investment Choices if you transfer less than the entire amount that is in the Investment Choice. If the transfer is made under the dollar cost averaging or flexible rebalancing programs, there is no fee for the transfer and we currently do not count these transfers against any free transfers we allow. PREMIUM TAXES State and other governmental premium taxes are not currently assessed in the state of New York. However, we reserve the right to make a deduction from your Contract Value to reimburse ourselves for premium taxes if the State of New York enacts legislation requiring us to pay premium taxes or if the Owner lives in a state where premium tax is applicable. Where premium taxes apply, it is our current practice not to make deductions from the Contract to reimburse ourselves for the premium taxes that we pay although we reserve the right to make such a deduction in the future. Premium taxes normally range from 0% to 3.5% of the Purchase Payment, depending on the state or governmental entity. INCOME TAXES We reserve the right to deduct from the Contract any income taxes that we may incur because of the Contract. Currently, we are not making any such deductions. INVESTMENT OPTION EXPENSES There are deductions from the assets of the various Investment Options for operating expenses (including management fees) that are described in the Fee Tables and in the table of annual operating expenses for each Investment Option in Appendix A in this prospectus and in the prospectuses for the Investment Options. These charges apply during the Accumulation and Annuity Phases if you make allocations to the Investment Options. These expenses will reduce the performance of the Investment Options and, therefore, will negatively affect your Contract Value and the amounts available for withdrawals and Annuity Payments. They may also negatively impact the death benefit proceeds. The investment advisers for the Investment Options provided the fee and expense information and we did not independently verify it. 7. TAXES NOTE: We have prepared the following information on taxes as a general discussion of the subject. The Contract offers flexibility regarding how distributions can be taken. Not all of these distributions (or their attendant tax consequences) are discussed in this section. This information is not intended as tax advice. You should, therefore, consult your own tax adviser about your own circumstances. We have included additional information regarding taxes in the Statement of Additional Information. For more information on the taxation of Annuity Payments made under a Partial Annuitization, see section 2, The Annuity Phase - Partial Annuitization. For more information on the taxation of GMIB Payments, see section 2, The Annuity Phase - Guaranteed Minimum Income Benefits (GMIBs). For more information on the taxation of GPWB Payments, see section 8, Access to Your Money - Guaranteed Partial Withdrawal Benefits (GPWBs). ANNUITY CONTRACTS IN GENERAL Annuity contracts are a means of setting aside money for future needs - usually retirement. Congress recognized how important saving for retirement was and provided special rules in the Internal Revenue Code (Code) for annuities. These rules generally provide that you will not be taxed on any earnings on the money held in your annuity until you take the money out. This is called tax deferral. There are different rules regarding how you will be taxed, depending upon how you take the money out and whether the annuity is Qualified or Non- Qualified (see the following discussion in this section). If you do not purchase the Contract under a tax qualified retirement plan, the Contract is referred to as a Non-Qualified Contract. When a Non-Qualified Contract is owned by a non-individual (for example, a corporation or certain other entities other than a trust holding the Contract as an agent for an individual), the Contract will generally not be treated as The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 37 an annuity for tax purposes. This means that the Contract may not receive the benefits of tax deferral and Contract earnings may be taxed as ordinary income every year. QUALIFIED CONTRACTS If you purchase the Contract under a pension or retirement plan that is qualified under the Code, the Contract is referred to as a Qualified Contract. Qualified Contracts are subject to special rules. Adverse tax consequences may result if contributions, distributions, and transactions in connection with the Qualified Contract do not comply with the law. A Qualified Contract will not provide any necessary or additional tax deferral if it is used to fund a qualified plan that is tax deferred. However, the Contract has features and benefits other than tax deferral that may make it an appropriate investment for a qualified plan. You should consult your tax adviser regarding these features and benefits before purchasing a Qualified Contract. We may issue the following types of Qualified Contracts. o Traditional Individual Retirement Annuity. Section 408 of the Code permits eligible individuals to maintain Individual Retirement Annuities (IRAs). IRA contributions are limited each year to the lesser of a dollar amount specified in the Code or 100% of the amount of compensation included in the Owner's income. The limit on the amount contributed to an IRA does not apply to distributions from certain other types of qualified plans that are "rolled over" on a tax-deferred basis into an IRA. Purchasers of a Contract for use with IRAs will have the right to revoke their purchase within seven days of the earlier of the establishment of the IRA or their purchase. o Simplified Employee Pension (SEP) IRA. Employers may establish Simplified Employee Pension (SEP) IRAs under Code Section 408(k) to provide IRA contributions on behalf of their employees. In addition to all of the general rules governing IRAs, such plans are subject to additional requirements and different contribution limits. o Roth IRA. Section 408A of the Code permits certain eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA are limited each year to the lesser of a dollar amount specified in the Code or 100% of the amount of compensation included in the Owner's income and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. Distributions from a Roth IRA generally are not taxed until after the total amount distributed from the Roth IRA exceeds the amount contributed to the Roth IRA. After that, income tax and a 10% federal penalty tax may apply to distributions made: (1) before age 59 1/2 (subject to certain exceptions), or (2) during the five tax years starting with the year in which the first contribution is made to any Roth IRA. o TSAs or 403(b) Contracts. Section 403(b) of the Code allows employees of certain Section 501(c)(3) organizations and public schools to exclude from their gross income the purchase payments made, within certain limits, on a contract that will provide an annuity for the employee's retirement. As a result of changes to the regulations regarding 403(b)/TSA contracts which requires information sharing agreements between the financial organization or insurance company and employers sponsoring 403(b)/TSA plans, these plans are no longer offered with this Contract. However, that may change in the future. o Inherited IRA. The Code permits beneficiaries of investments that were issued under certain tax-qualified pension or retirement plans to directly transfer the death benefit from that investment into a variable annuity contract (Inherited IRA Contract). If we make this Contract available as an Inherited IRA Contract, the beneficiary of the previous tax-qualified investment will become the Owner of the new Inherited IRA Contract. The ownership of the Contract must also reflect the name of the previous deceased owner. The purpose of the Inherited IRA Contract is to allow the Owner to change the investment vehicle to an annuity and receive required minimum distribution withdrawal payments instead of receiving a lump sum death benefit payment. If we make this Contract available as an Inherited IRA Contract, the death benefit proceeds must be directly transferred into this Contract; they cannot be received by the beneficiary and then applied to the Contract. A beneficiary can apply the death benefit proceeds from multiple tax-qualified investments that were owned by the same owner to the purchase of an Inherited IRA Contract. We will not accept any other forms of Purchase Payment on an Inherited IRA Contract. We permit you to add enhanced optional benefits to an Inherited IRA Contract. We currently believe this is allowable because enhanced optional benefits can be added to traditional IRA plans. However, the Internal Revenue Service (IRS) has not yet issued any rulings on this issue with respect to Inherited IRA Contracts. Therefore, Owners should discuss this issue with their tax and legal advisers before adding enhanced optional benefits to an Inherited IRA Contract. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 38 QUALIFIED PLANS. A qualified plan is a retirement or pension plan that meets the requirements for tax qualification under the Code. If the Contract is an investment for assets of a qualified plan under Section 401 of the Code, the plan is both the Owner and the Beneficiary. The authorized signatory or plan trustee for the plan must make representations to us that the plan is qualified under the Code on the Issue Date and is intended to continue to be qualified for the entire Accumulation Phase of the Contract, or as long as the qualified plan owns the Contract. The qualified plan may designate a third party administrator to act on its behalf. All tax reporting will be the responsibility of the plan. In the event the qualified plan instructs us to roll the plan assets into an IRA for the Annuitant under this Contract, we will change the qualification type of the Contract to an IRA and make the Annuitant the Owner. The qualified plan will be responsible for any reporting required for the rollover transactions. MULTIPLE CONTRACTS Section 72(e)(12) of the Code provides that multiple Non-Qualified deferred annuity contracts that are issued within a calendar year period to the same owner by one company or its affiliates are treated as one annuity contract for purposes of determining the tax consequences of any distribution. Such treatment may result in adverse tax consequences, including more rapid taxation of the distributed amounts from such combination of contracts. For purposes of this rule, contracts received in a Section 1035 exchange will be considered issued in the year of the exchange. You should consult a tax adviser before purchasing more than one Non-Qualified Contract in any calendar year period. PARTIAL 1035 EXCHANGES Section 1035 of the Code provides that an annuity contract may be exchanged in a tax-free transaction for another annuity contract. Historically, it was presumed that only the exchange of an entire contract (as opposed to a partial exchange) would be accorded tax-free status. Guidance from the IRS, however, confirmed that the direct transfer of a portion of an annuity contract into another annuity contract can qualify as a non-taxable exchange. IRS guidance provides that this direct transfer can go into an existing annuity contract as well as a new annuity contract. If you perform a partial 1035 exchange, please be aware that no distributions or withdrawals can occur from the old or new annuity contract within12 months of the partial exchange, unless you qualify for an exception to this rule. IRS guidance also provides that certain partial exchanges may not qualify as tax-free exchanges. Therefore, Owners should consult their own tax advisers before entering into a partial exchange of an annuity contract. DISTRIBUTIONS - NON-QUALIFIED CONTRACTS You, as the Owner, generally will not be taxed on increases in the value of the Contract until an actual or deemed distribution occurs - either as a withdrawal (including, if available, Partial Annuitizations, GPWB Payments and Excess Withdrawals) or as Traditional Annuity Payments or GMIB Payments under a Full Annuitization. Section 72 of the Code governs treatment of distributions. When a withdrawal from a Non-Qualified Contract occurs, the amount received will generally be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the Contract Value immediately before the distribution over your investment in the Contract (generally, the Purchase Payments or other consideration paid for the Contract, reduced by any amount previously distributed from the Contract that was not subject to tax) at that time. GPWB Payments and amounts received as a result of a Partial Annuitization are treated as partial withdrawals. If you exercise the GPWB and the GPWB value is greater than the Contract Value, it is possible that the IRS could assert that the amount you receive will be taxable as ordinary income up to an amount equal to the excess of the GPWB value immediately before the withdrawal over your investment in the Contract at that time. In the case of a full withdrawal under a Non-Qualified Contract, the amount received generally will be taxable only to the extent it exceeds your investment in the Contract. If you take a Full Annuitization, different rules apply. Periodic installments (for example, GMIB Payments) scheduled to be received at regular intervals (for example, monthly) after you take a Full Annuitization should be treated as annuity payments (and not withdrawals) for tax purposes. (In this regard, we intend to make tax reporting on periodic installments scheduled to be received at regular intervals under a Partial Annuitization as annuity payments ONLY after a Contract's entire Contract Value has been applied to Annuity Payments, provided that such installments extend over a period of more than one full year from the time of the Full Annuitization. Due to the lack of guidance on whether this is the appropriate tax treatment for such payments, however, Owners should consult with a tax adviser on this issue.) After a Full Annuitization, a portion of each Annuity Payment may be treated as a partial return of your Purchase Payment and will not be taxed. The remaining portion of the payment will be treated as ordinary income. How the Annuity Payment is divided between taxable and non-taxable portions depends upon the period over which we expect to make the payments. Once we have paid out all of your Purchase Payment(s), the entire Annuity Payment is taxable as ordinary income. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 39 Section 72 of the Code further provides that any amount received under an annuity contract, which is included in income, may be subject to a federal penalty tax. The amount of the federal penalty tax is equal to 10% of the amount that is included in income. Some distributions will be exempt from the federal penalty tax. There is an exception to this 10% federal penalty tax for amounts: 1)paid on or after you reach age 59 1/2; 2)paid after you die; 3)paid if you become totally disabled (as that term is defined in Section 72(m)(7) of the Code); 4)paid in a series of substantially equal payments made annually (or more frequently) under a lifetime annuity; 5)paid as annuity payments under an immediate annuity; or 6)that come from Purchase Payments made before August 14, 1982. With respect to (4) above, if the series of substantially equal periodic payments is modified, as permitted by the Code, before the later of your attaining age 59 1/2 or the close of the five year period that began on the Income Date, then the tax for the year of the modification is increased by the 10% federal penalty tax, plus interest, for the tax years in which the exception was used. A partial withdrawal taken after a series of substantially equal periodic payments has begun may result in the modification of the series of substantially equal payments and therefore could result in the imposition of the 10% federal penalty tax and interest for the period as described above. DISTRIBUTIONS - QUALIFIED CONTRACTS Section 72 of the Code governs treatment of distributions from Qualified Contracts. Special rules may apply to withdrawals from certain types of Qualified Contracts, including Roth IRAs. You should consult with your qualified plan sponsor and tax adviser to determine how these rules affect the distribution of your benefits. Section 72(t) of the Code provides that any amount received under a Qualified Contract, which is included in income, may be subject to a federal penalty tax. The amount of the federal penalty tax is equal to 10% of the amount that is included in income. Some distributions will be exempt from the federal penalty tax. There is an exception to this 10% federal penalty tax for: 1)distributions made on or after the date you (or the Annuitant as applicable) reach age 59 1/2; 2)distributions following your death or disability (or the Annuitant as applicable) (for this purpose disability is as defined in Section 72(m)(7) of the Code); 3)after separation from service, paid in a series of substantially equal payments made annually (or more frequently) under a lifetime annuity; 4)distributions made to you to the extent such distributions do not exceed the amount allowed as a deduction under Code Section 213 for amounts paid during the tax year for medical care; 5)distributions made on account of an IRS levy upon the Qualified Contract; 6)distributions from an IRA for the purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code) for you (or the Annuitant as applicable) and his or her spouse and dependents if you have received unemployment compensation for at least 12 weeks (this exception will no longer apply after you have been re-employed for at least 60 days); 7)distributions from an IRA made to you, to the extent such distributions do not exceed your qualified higher education expenses (as defined in Section 72(t)(7) of the Code) for the tax year; 8)distributions from an IRA which are qualified first-time homebuyer distributions (as defined in Section 72(t)(8) of the Code); 9)distributions made to an alternate Payee pursuant to a qualified domestic relations order (does not apply to an IRA); and 10)a reservist called to active duty during the period between September 11, 2001 and December 31, 2007, for a period in excess of 179 days (or for an indefinite period), distributions from IRAs or amounts attributable to elective deferrals under a 401(k) plan made during such active period. The exception stated in (3) above applies to an IRA without the requirement that there be a separation from service. With respect to (3) above, if the series of substantially equal periodic payments is modified as permitted by the Code, before the later of the Annuitant attaining age 59 1/2 or the close of the five year period that began on the Income Date, then the tax for the year of the modification is increased by the 10% federal penalty tax, plus interest for the tax years in which the exception was used. A partial withdrawal taken after a series of substantially equal periodic payments has begun may The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 40 result in the modification of the series of substantially equal payments and therefore could result in the imposition of the 10% federal penalty tax and interest for the period as described above, unless another exception to the federal penalty tax applies. You should obtain competent tax advice before you take any partial withdrawals from your Contract. Distributions from a Qualified Contract must commence no later than the required beginning date. For IRAs, the required beginning date is April 1 of the calendar year following the year in which you attain age 70 1/2. Under a qualified plan, the required beginning date is generally April 1 of the calendar year following the later of the calendar year in which you reach age 70 1/2 or retire. Generally, required minimum distributions must be made over a period not exceeding the life or life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated Beneficiary. If the required minimum distributions are not made, a 50% federal penalty tax is imposed as to the amount not distributed. It is unclear whether a partial withdrawal taken after an Income Date will have an adverse impact on the determination of required minimum distributions. If you are attempting to satisfy these rules through partial withdrawals, the present value of future benefits provided under the Contract may need to be included in calculating the amount required to be distributed. If you are receiving Annuity Payments or are age 70 1/2 or older, you should consult with a tax adviser before taking a partial withdrawal. NOTE: The Worker, Retiree, and Employer Recovery Act of 2008 does not require minimum distributions for 2009 from a qualified retirement plan or IRA for a participant or beneficiary. This relief applies to funds held in deferred annuity contracts, but the relief does not apply to contracts that have been annuitized. ASSIGNMENTS, PLEDGES AND GRATUITOUS TRANSFERS Other than in the case of Qualified Contracts (which generally cannot be assigned or pledged), any assignment or pledge of (or agreement to assign or pledge) the Contract Value is treated for federal income tax purposes as a full withdrawal. The investment in the Contract is increased by the amount includible as income with respect to such amount or portion, though it is not affected by any other aspect of the assignment or pledge (including its release). If an Owner transfers a Contract without adequate consideration to a person other than the Owner's spouse (or to a former spouse incidental to divorce), the Owner will be taxed on the difference between his or her Contract Value and the investment in the Contract at the time of transfer and for each subsequent year until the assignment is released. In such case, the transferee's investment in the Contract will be increased to reflect the increase in the transferor's income. The transfer or assignment of ownership of the Contract, the designation of an Annuitant, the selection of certain Income Dates, or the exchange of the Contract may result in certain other tax consequences that are not discussed here. An Owner contemplating any such transfer, assignment, or exchange should consult a tax adviser as to the tax consequences. DEATH BENEFITS Any death benefits paid under the Contract are taxable to the recipient as ordinary income. The rules governing the taxation of payments from an annuity contract generally apply to the payment of death benefits and depend on whether the death benefits are paid as a lump sum or as Annuity Payments. Estate taxes may also apply. WITHHOLDING Annuity distributions are generally subject to withholding for the recipient's federal income tax liability. Recipients can, however, generally elect not to have tax withheld from distributions unless they are subject to mandatory state withholding. "Eligible rollover distributions" from qualified plans are subject to a mandatory federal income tax withholding of 20%. An eligible rollover distribution is any distribution to an employee (or employee's spouse or former spouse as Beneficiary or alternate Payee) from such a plan, except certain distributions such as distributions required by the Code, distributions in a specified annuity form, or hardship distributions. The 20% withholding does not apply, however, to nontaxable distributions or if the employee chooses a "direct rollover" from the Contract plan to a qualified plan, IRA, TSA or 403(b) plan, or to a governmental Section 457 plan that agrees to separately account for rollover contributions. FEDERAL ESTATE TAXES While no attempt is being made to discuss the federal estate tax implications of the Contract, an Owner should keep in mind that the value of an annuity contract owned by a decedent and payable to a Beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated Beneficiary or the actuarial value of the payments to be received by the Beneficiary. Consult an estate planning adviser for more information. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 41 GENERATION-SKIPPING TRANSFER TAX Under certain circumstances, the Code may impose a "generation-skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS. FOREIGN TAX CREDITS We may benefit from any foreign tax credits attributable to taxes paid by certain funds to foreign jurisdictions to the extent permitted under the federal tax law. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS The preceding discussion provides general information regarding federal income tax consequences to Owners that are U.S. citizens or residents. Owners that are not U.S. citizens or residents will generally be subject to federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, Owners may be subject to state and/or municipal taxes and taxes that may be imposed by the Owners' country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state, and foreign taxation with respect to an annuity contract purchase. In Revenue Ruling 2004-75, 2004-31 I.R.B. 109, the IRS announced that income received by residents of Puerto Rico under life insurance policies or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S. source income that is generally subject to United States federal income tax. POSSIBLE TAX LAW CHANGES Although the likelihood of legislative or regulatory changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation, regulation or otherwise. Consult a tax adviser with respect to legislative or regulatory developments and their effect on the Contract. We have the right to modify the Contract in response to legislative or regulatory changes that could otherwise diminish the favorable tax treatment that annuity owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend the above discussion as tax advice. DIVERSIFICATION The Code provides that the underlying investments for a Non-Qualified variable annuity must satisfy certain diversification requirements in order to be treated as an annuity contract. We believe that the Investment Options are being managed so as to comply with the requirements. In some circumstances, owners of variable annuities who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the policies, we believe that the Owner should not be treated as the owner of the Separate Account assets. We reserve the right to modify the Contract to bring it into conformity with applicable standards should such modification be necessary to prevent Owners from being treated as the owners of the underlying Separate Account assets. REQUIRED DISTRIBUTIONS Section 72(s) of the Code requires that, to be treated as an annuity contract for federal income tax purposes, a Non-Qualified Contract must contain certain provisions specifying how amounts will be distributed in the event of the death of an Owner of the Contract. Specifically, Section 72(s) requires that: (a) if any Owner dies on or after you take a Full Annuitization, but before the time the entire interest in the Contract has been distributed, the entire interest in the Contract must be distributed at least as rapidly as under the method of distribution being used as of the date of the Owner's death; and (b) if any Owner dies before you take a Full Annuitization, the entire interest in the Contract must be distributed within five years after the date of the Owner's death. These requirements will be considered satisfied as to any portion of an Owner's interest that is payable to or for the benefit of a designated Beneficiary and that is distributed over the life of such designated Beneficiary, or over a period not extending beyond the life expectancy of that Beneficiary, provided that such distributions begin within one year of the Owner's death. The designated Beneficiary refers to an individual designated by the Owner as a Beneficiary and to whom ownership of the Contract passes by reason of death. However, if the designated Beneficiary is the surviving spouse of the deceased Owner, the Contract may be continued with the surviving spouse as the new Owner. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 42 Non-Qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. When such requirements are clarified by regulation or otherwise, we intend to review such provisions and modify them, as necessary, to assure that they comply with the applicable requirements. Other rules may apply to Qualified Contracts. 8. ACCESS TO YOUR MONEY The money in the Contract is available under the following circumstances: o by taking a withdrawal (including GPWB Payments); o by receiving Annuity Payments; or o when we pay a death benefit. You can only take withdrawals during the Accumulation Phase. When you make a withdrawal request, we will process the request based on the Accumulation Unit values next determined after receipt of the request at our Service Center. The Accumulation Unit values are normally determined at the end of each Business Day. Any withdrawal request received at or after the end of the current Business Day will receive the next Business Day's Accumulation Unit values. When you take a full withdrawal, we will process the withdrawal on the Business Day we receive the request in good order at our Service Center: o based upon the number of Accumulation Units held by the Contract on that Business Day and valued at the next available daily price, o less any applicable withdrawal charge, and o less any contract maintenance charge. See the Fee Tables and section 6, Expenses for a discussion of the charges. There is no minimum associated with requesting a partial withdrawal and there is no minimum amount of Contract Value that we require to remain in the Contract after requesting a partial withdrawal for as long as you hold the Contract. In the future, if we require a minimum amount of Contract Value to remain in the Contract, we reserve the right to treat a request for a partial withdrawal that would reduce the Contract Value below this minimum as a request for a full withdrawal of the Contract. Unless you instruct us otherwise, we will deduct any partial withdrawal (including any withdrawal charge) proportionately from the Investment Options. We will pay the amount of any withdrawal from the Investment Options within seven days of when we receive your request in good order, unless the suspension of payments or transfers provision is in effect (see the "Suspension of Payments or Transfers" discussion later in this section). Upon withdrawal, we assess the withdrawal charge against the Withdrawal Charge Basis. Any withdrawals from the Contract (including any withdrawal charges) will reduce the Withdrawal Charge Basis. However, we do not adjust the Withdrawal Charge Basis for any gains or losses on your Investment Options. THIS MEANS THAT IF YOU TAKE A FULL WITHDRAWAL WHILE THE WITHDRAWAL CHARGE APPLIES AND YOU HAVE HAD LOSSES IN YOUR INVESTMENT OPTIONS, YOU MAY BE ASSESSED A WITHDRAWAL CHARGE ON MORE THAN THE AMOUNT YOU ARE WITHDRAWING. IN SOME INSTANCES, YOU WILL NOT RECEIVE A DISTRIBUTION DUE TO THE AMOUNT OF THE WITHDRAWAL CHARGE. For more information, please see section 6, Expenses - Withdrawal Charge and the examples in Appendix E. ORDINARY INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU TAKE. GUARANTEED PARTIAL WITHDRAWAL BENEFITS (GPWBS) The GPWBs are only available as part of the optional GBPs. The Traditional GBP consists of: o the Traditional GMIB, and o the Traditional GPWB. The Enhanced GBP consists of: o the Enhanced GMIB, and o the Enhanced GPWB. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 43 The GPWBs are not available separately from the GMIBs. The GBPs provide a guaranteed minimum fixed income stream and are designed for Owners who want flexibility in the way they access income and can wait at least ten years before taking income. All GBPs carry an additional M&E charge. We calculate the additional M&E charge as discussed in section 6, Expenses - Mortality and Expense Risk (M&E) Charges. The additional M&E charge for the GBPs will reduce the performance of your selected Investment Options, and in the long term may provide less Contract Value to you than would otherwise be available from the same Contract without a GBP. THE GBPS DO NOT CREATE CONTRACT VALUE OR GUARANTEE THE PERFORMANCE OF ANY INVESTMENT OPTION. You select a GBP on your application at Contract issue, and you can only select one GBP. The Enhanced GBP is available only if the older Owner is age 76 or younger on the Issue Date (or the Annuitant is age 76 or younger if the Contract is owned by a non-individual). The Enhanced GBP may not be appropriate for Owners who are nearing age 65 because the benefit values are limited after age 80. AFTER THE ISSUE DATE, A GBP CANNOT BE ADDED TO, CHANGED, OR REMOVED FROM YOUR CONTRACT. We designed the GBPs to give you options on how to turn your accumulated retirement assets into a stream of retirement income. The GMIBs provide a guaranteed minimum fixed income in the form of Annuity Payments (GMIB Payments). Depending on the Annuity Option you select, the GMIB can provide guaranteed lifetime income, but if the Annuitant(s) die shortly after the Income Date, the Payee may receive less than your investment in the Contract. The GPWBs provide a guaranteed minimum amount of level income in the form of annual partial withdrawals (GPWB Payments). However, GPWB Payments are not guaranteed for life and you could outlive your payment stream. You must wait ten complete Contract Years before you can exercise a GMIB or GPWB and they can only be exercised within 30 days after a Contract Anniversary. BECAUSE THE GBPS CARRY A HIGHER CONTRACT EXPENSE, THEY MAY NOT BE APPROPRIATE IF YOU: o DO NOT INTEND TO EXERCISE EITHER THE GMIB OR GPWB, o DO NOT INTEND TO HOLD THE CONTRACT FOR THE ENTIRE TEN YEAR WAITING PERIOD, OR o INTEND TO TAKE A FULL ANNUITIZATION BEFORE THE END OF THE TEN YEAR WAITING PERIOD. IF YOUR CONTRACT INCLUDES A GBP AND YOU DO NOT EXERCISE EITHER THE GMIB OR GPWB, YOU WILL HAVE INCURRED HIGHER CONTRACT EXPENSES WITHOUT RECEIVING ANY ADVANTAGE FROM THE GBP. The Contract offers a choice of two GBPs: the Traditional GBP where the GPWB value is total Purchase Payments adjusted for partial withdrawals and Partial Annuitizations, or the Enhanced GBP where the GPWB value is either the MAV, or the 5% AIA. THE GPWB VALUE UNDER THE ENHANCED GBP WILL NEVER BE LESS THAN THE GPWB VALUE UNDER THE TRADITIONAL GBP, BUT THEY MAY BE EQUAL. YOU CAN ONLY ACCESS THE GPWB VALUE BY EXERCISING THE GPWB. BE SURE TO DISCUSS WITH YOUR REGISTERED REPRESENTATIVE WHETHER OR NOT A GBP IS APPROPRIATE FOR YOUR SITUATION. You can only exercise a GPWB within 30 days after a Contract Anniversary beginning with the tenth Contract Anniversary. You cannot exercise a GPWB before the tenth Contract Anniversary. IF YOU EXERCISE THE GPWB: o The GMIB will terminate. o You can no longer make additional Purchase Payments to the Contract and the automatic investment plan (AIP) will no longer be available to you. If you are participating in the AIP, your participation will stop. o Partial Annuitizations are no longer available. o The additional M&E charge for the GBP will continue until the GPWB terminates. o If you have the Enhanced GMDB, the additional M&E charge for the Enhanced GMDB will continue as long as the Enhanced GMDB value is greater than zero. o The systematic withdrawal and minimum distribution programs will no longer be available to you and if you are participating in these programs, your participation will stop. o Your Contract Value will fluctuate as a result of market performance, and it will decrease on a dollar for dollar basis with each GPWB Payment and any Excess Withdrawals. o The GMDB and GPWB values will no longer increase. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 44 o Each GPWB Payment will reduce the GMDB value on a dollar for dollar basis and any Excess Withdrawals will reduce the GMDB value proportionately by the percentage of Contract Value withdrawn. o Each GPWB Payment will reduce the GPWB value on a dollar for dollar basis and any Excess Withdrawals will reduce the GPWB value proportionately by the percentage of Contract Value withdrawn. o GPWB Payments and any Excess Withdrawals will reduce the Withdrawal Charge Basis, as set out in section 6, Expenses - Withdrawal Charge. In order to begin receiving GPWB Payments, you must submit a GPWB Payment election form to our Service Center after the expiration of the ten-year waiting period and within 30 days following a Contract Anniversary. GPWB Payments will not begin until your request has been received at the Service Center and determined to be in good order. We will make annual GPWB Payments to you no later than 45 days after your Contract Anniversary or the next Business Day if the 45th day is not a Business Day. ONCE YOU EXERCISE THE GPWB, YOU CANNOT CANCEL IT. However, you can terminate the GPWB by electing to stop GPWB Payments and instead do one of the following. o Take an Excess Withdrawal of the entire Contract Value (available at any time). o Request Traditional Annuity Payments under a Full Annuitization based on the entire Contract Value, less any withdrawal charges (available at any time). o Request Annuity Payments under a Full Annuitization based on the remaining GPWB value (only available within 30 days after a Contract Anniversary and before we make the next GPWB Payment). Annuity Payments based on the remaining GPWB value are subject to all the restrictions associated with GMIB Payments discussed in section 2, The Annuity Phase - Guaranteed Minimum Income Benefits (GMIBs), such as payments can only be made on a fixed basis and the duration of any period certain Annuity Option must be at least ten years. In addition, Annuity Payments based on the 5% AIA are subject to the restrictions associated with GMIB Payments based on the 7% AIA. If you take an Excess Withdrawal of the entire Contract Value, the Contract will terminate and you may receive less money than you would have received under the GPWB. If you request fixed Traditional Annuity Payments, the GPWB endorsement will terminate and we will no longer assess the M&E charge on that portion of the Contract. If you request variable Traditional Annuity Payments, the GPWB endorsement will terminate and we will reduce the M&E charge to 1.75% for that portion of the Contract. If you request Annuity Payments based on the remaining GPWB value, we will no longer assess the M&E charge on that portion of the Contract and that portion of the Contract you applied to Annuity Payments will terminate as indicated in section 2, The Annuity Phase. Although you to terminate the GPWB, you cannot terminate the GMIB. If you do elect to stop GPWB Payments: o the Accumulation Phase of the Contract will end, o the GMDB endorsement will terminate, o if you take an Excess Withdrawal or request Traditional Annuity Payments, the GPWB will terminate, and o if you request Annuity Payments, that portion of the Contract will terminate as indicated in Section 2, The Annuity Phase. IF YOU DO NOT ELECT TO STOP GPWB PAYMENTS, THE GPWB WILL TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o The Business Day you take an Excess Withdrawal of the entire Contract Value. o The Business Day that the GPWB value and Contract Value are both zero. o The Business Day before the Income Date that you take a Full Annuitization, INCLUDING A REQUIRED FULL ANNUITIZATION ON THE MAXIMUM PERMITTED INCOME DATE. For more information, see section 2, The Annuity Phase. o Contract termination. o The death of any Owner (unless the deceased Owner's spouse continues the Contract as the new Owner). GPWB PAYMENTS Before you exercise the Traditional GPWB, your Traditional GPWB value is equal to the Traditional GMIB value. Before you exercise the Enhanced GPWB, your Enhanced GPWB value is equal to either the 5% AIA or the MAV. The 5% AIA is calculated in the same manner as the 7% AIA that is available under the Enhanced GMIB, except that on each Contract Anniversary before the older Owner's 81st birthday, we apply a 5% increase instead of a 7% increase. The 5% AIA is subject to the same maximum limit as the 7% AIA. The MAV under the Enhanced GPWB is calculated in exactly the same manner as the MAV that is available under the Enhanced GMIB. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 45 For more details on how the GMIB values are calculated, please see the discussions of the "Traditional GMIB Value" and the "Enhanced GMIB Value" in section 2, The Annuity Phase - Guaranteed Minimum Income Benefits (GMIBs) and Appendix C. If you have the Enhanced GPWB, you can choose whether your Enhanced GPWB value is equal to the 5% AIA or the MAV. Although the 5% AIA may be the greater amount, it may also be more limited because you can only request a maximum of 5% of the GPWB value per year as the GPWB Payment percentage, but you can request up to 10% of the GPWB value per year under the MAV. If you exercise the GPWB, we will make GPWB Payments based on the percentage of the initial GPWB value you select, subject to the maximum allowable payment. The maximum allowable GPWB Payment an Owner can elect to receive is: o 10% of the GPWB value per year under the Traditional GBP, o 10% of the GPWB value per year under the Enhanced GBP if the MAV applies, or o 5% of the GPWB value per year under the Enhanced GBP if the 5% AIA applies. ONCE YOU CHOOSE THE PERCENTAGE OF GPWB VALUE YOU WANT TO RECEIVE, YOU CANNOT CHANGE IT. Therefore, under a Qualified Contract that is subject to a minimum distribution requirement, once you select your GPWB Payment percentage, you will not be able to adjust your GPWB Payment to meet your required minimum distribution needs. Although GPWB Payments are partial withdrawals, they are not subject to the withdrawal charge. However, withdrawal charges may apply to any Excess Withdrawals you take in the first two years after you exercise the GPWB.* In addition, if you take an Excess Withdrawal, the amount withdrawn will reduce: o the Withdrawal Charge Basis, o the Contract Value, o the GPWB value (which determines the amount available for future GPWB Payments and/or Annuity Payments), and o the GMDB value. * Amounts paid as part of a required minimum distribution are never subject to a withdrawal charge. Excess Withdrawals will not affect the GPWB Payment amount or frequency, but they may decrease the time over which you will receive GPWB Payments. If you take no Excess Withdrawals while the GPWB is in effect, we would pay the GPWB value to you: o within ten years if you are eligible for and elect to receive the 10% maximum allowable payment each year. o within 20 years if you elect to receive the 5% maximum allowable payment each year that is available with the 5% AIA under the Enhanced GBP. We will deduct each GPWB Payment proportionately from your Investment Options. We will continue to allocate your Contract Value among the Investment Options according to your instructions while the GPWB is in effect. You can also continue to make transfers between the Investment Options (subject to certain restrictions set out in section 4, Investment Options - Transfers) while the GPWB is in effect. You can continue to receive GPWB Payments until the GPWB value is exhausted, even if you have no remaining Contract Value. If you do not elect to stop your GPWB Payments and there is Contract Value remaining after we make the last GPWB Payment, we will pay you the Contract Value if it is less than $2,000 (less any withdrawal charges) and your Contract will terminate. However, if your remaining Contract Value after the last GPWB Payment is at least $2,000 you can instead elect to: o continue the Contract, or o annuitize the remaining Contract Value. If you elect to continue or annuitize the Contract, we will no longer assess the additional M&E charge associated with the GBP. We will send you notice at least 30 days before the last GPWB Payment date to ask for your instructions. If we do not receive any instructions by the date we make the last GPWB Payment, we will continue your Contract if your remaining Contract Value is at least $2,000. If the remaining Contract Value is less than $2,000, we will pay you that amount (less any withdrawal charge) in a lump sum and your Contract will terminate. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 46 NOTE: YOU WILL BE REQUIRED TO TAKE A FULL ANNUITIZATION OF YOUR CONTRACT ON OR BEFORE THE MAXIMUM PERMITTED INCOME DATE. (For more information see section 2, The Annuity Phase.) Upon such a Full Annuitization the Guaranteed Partial Withdrawal Benefit will no longer be available to you and any GPWB Payments you were receiving will stop. TAXATION OF GPWB PAYMENTS GPWB Payments are withdrawals and will be treated as such for tax purposes. This means that for Non-Qualified Contracts, Contract gains from the entire Contract are considered to be distributed first and are subject to income tax. Purchase Payments are distributed after gains have been paid out and are generally considered to be a return of your investment and are not subject to income tax. For Qualified Contracts, the entire GPWB Payment will most likely be subject to income tax. In addition, if any Owner is younger than age 59 1/2, GPWB Payments may also be subject to a 10% federal penalty tax, but are not subject to a withdrawal charge. SYSTEMATIC WITHDRAWAL PROGRAM If your Contract Value is at least $25,000, the systematic withdrawal program provides automatic monthly or quarterly payments to you. The minimum amount you can withdraw under this program is $500. There is no restriction on the maximum you may withdraw under this program if your Purchase Payments are no longer subject to the withdrawal charge. All systematic withdrawals will be made on the ninth day of the month or the previous Business Day if the ninth is not a Business Day. You will not be charged additional fees for participating in or terminating from this program. ORDINARY INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC WITHDRAWALS. YOU CANNOT PARTICIPATE IN THE SYSTEMATIC WITHDRAWAL PROGRAM AND THE MINIMUM DISTRIBUTION PROGRAM AT THE SAME TIME. YOU ALSO CANNOT EXERCISE THE GPWB AND PARTICIPATE IN THE SYSTEMATIC WITHDRAWAL PROGRAM AT THE SAME TIME. THE MINIMUM DISTRIBUTION PROGRAM AND REQUIRED MINIMUM DISTRIBUTION (RMD) PAYMENTS If you own a Qualified Contract, you may participate in the minimum distribution program during the Accumulation Phase of the Contract. Under this program, we will make payments to you from your Contract that are designed to meet the applicable minimum distribution requirements imposed by the Code for this Qualified Contract. RMD payments from this Contract will not be subject to a withdrawal charge, but they will reduce the Withdrawal Charge Basis. You cannot aggregate RMD payments between this Contract and other qualified contracts that you own. Any RMD payments from this Contract that exceed the RMD amount calculated for this Contract will be subject to any applicable withdrawal charge. We can make payments to you on a monthly, quarterly, or annual basis. However, we will only make annual payments if your Contract Value is less than $25,000. This Contract offers a choice of GMDBs and optional GBPs. All GBPs include a GMIB and GPWB. These benefits may have limited usefulness if you purchase a Qualified Contract that is subject to a RMD. If your Contract includes a GBP and you do not exercise the GMIB on or before the date RMD payments must begin under a qualified plan, the Owner or Beneficiary may not be able to exercise the GMIB due to the restrictions imposed by the minimum distribution requirements. You should consider whether the GMIB is appropriate for your situation if you plan to exercise the GMIB after your RMD beginning date. You also cannot participate in the minimum distribution program available under this Contract if you elect to receive GPWB Payments. In addition, once you choose your GPWB Payment percentage, you cannot change it. Therefore, you will not be able to adjust your GPWB Payment to meet your RMD needs if you elect to receive GPWB Payments. In addition, RMD payments will reduce your GMDB, GMIB and GPWB values. YOU CANNOT PARTICIPATE IN THE SYSTEMATIC WITHDRAWAL AND THE MINIMUM DISTRIBUTION PROGRAMS AT THE SAME TIME. YOU ALSO CANNOT EXERCISE THE GPWB AND PARTICIPATE IN THE MINIMUM DISTRIBUTION PROGRAM AT THE SAME TIME. WE ENCOURAGE PROSPECTIVE OWNERS WHO ARE CONSIDERING PURCHASING QUALIFIED CONTRACTS THAT ARE SUBJECT TO RMD PAYMENTS TO CONSULT A TAX ADVISER REGARDING THESE BENEFITS. INHERITED IRA CONTRACTS. If you (the Owner) were the spouse of the deceased owner of the previous tax-qualified investment, and your spouse had not yet reached the date at which he/she was required to begin receiving required minimum distribution (RMD) payments, then you can wait to begin receiving RMD payments until the year that your spouse would have reached age 70 1/2. Alternatively, if the deceased owner of the previous tax-qualified investment had already reached the date at which he/she was required to begin receiving RMD payments, you can begin RMD payments based on your single life expectancy in the year following the deceased owner's death, or (if longer) the deceased previous owner's life expectancy in the year of his/her death reduced by one. You must begin to receive these RMD payments by December 31 of the year following the year of the deceased previous owner's death. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 47 SUSPENSION OF PAYMENTS OR TRANSFERS We may be required to suspend or postpone payments for withdrawals (including GPWB Payments if available) or transfers for any period when: o the New York Stock Exchange is closed (other than customary weekend and holiday closings); o trading on the New York Stock Exchange is restricted; o an emergency (as determined by the SEC) exists as a result of which disposal of the Investment Option shares is not reasonably practicable or we cannot reasonably value the Investment Option shares; or o during any other period when the SEC, by order, so permits for the protection of Owners. We reserve the right to defer payment for a withdrawal or transfer from any general account Investment Choice for the period permitted by law, but not for more than six months. 9. ILLUSTRATIONS In order to help you understand how your Contract Values vary over time and under different sets of assumptions, we may provide you with certain personalized illustrations upon request and free of charge. These illustrations may provide hypothetical depictions of either the Accumulation Phase or the Annuity Phase. You can request an illustration free of charge by contacting your registered representative. 10.DEATH BENEFIT At Contract issue, you may be able to select one of two death benefit options. If you do not make a selection, the Traditional GMDB will apply to your Contract. THE DEATH BENEFIT IS ONLY AVAILABLE DURING THE ACCUMULATION PHASE OF THE CONTRACT. The Enhanced GMDB is available at Contract issue for an additional M&E charge if all Owners are age 76 or younger on the Issue Date (or the Annuitant is age 76 or younger if the Contract is owned by a non-individual). The Enhanced GMDB does not provide any additional benefit before the first Contract Anniversary and the benefit values are limited after age 81. As a result, any Owner who is nearing age 65 should determine if selecting the Enhanced GMDB (which has an additional cost) is appropriate for their situation. THE DEATH BENEFIT PROVIDED BY THE ENHANCED GMDB WILL NEVER BE LESS THAN THE DEATH BENEFIT PROVIDED BY THE TRADITIONAL GMDB, BUT THEY MAY BE EQUAL. YOU CAN ONLY SELECT ONE DEATH BENEFIT AT CONTRACT ISSUE. ONCE YOU SELECT A DEATH BENEFIT, YOU CANNOT CHANGE OR CANCEL IT. BE SURE TO DISCUSS WITH YOUR REGISTERED REPRESENTATIVE WHETHER YOUR SELECTED DEATH BENEFIT IS APPROPRIATE FOR YOUR SITUATION. The use of the term "you" in this section refers to the Annuitant if the Contract is owned by a non-individual; otherwise it refers to the Owner. We will process the death benefit based on the Accumulation Unit values next determined after receipt in good order at our Service Center of both due proof of death and an election of the death benefit payment option. WE CONSIDER DUE PROOF OF DEATH TO BE ANY OF THE FOLLOWING: a copy of the certified death certificate, a decree of court of competent jurisdiction as to the finding of death, or any other proof that we consider to be satisfactory. The Accumulation Unit values are normally determined at the end of each Business Day and due proof of death and an election of the death benefit payment option received at or after the end of the current Business Day will receive the next Business Day's Accumulation Unit values. Any part of the death benefit amount that had been invested in the Investment Options remains in the Investment Options until distribution begins. From the time the death benefit is determined until we make a complete distribution, any amount in the Investment Options will continue to be subject to investment risk that will be borne by the recipient. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 48 TRADITIONAL GUARANTEED MINIMUM DEATH BENEFIT (TRADITIONAL GMDB) If the Traditional GMDB applies, the amount of the death benefit will be the greater of 1 or 2. 1.The Contract Value, determined as of the end of the Business Day during which we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. 2.The Traditional GMDB value, which is the total of all Purchase Payments received before you exercise the GPWB (if applicable), reduced proportionately by the percentage of Contract Value applied to a traditional Partial Annuitization or withdrawn (including any withdrawal charge) for each traditional annuitization and/or withdrawal taken before you exercise the GPWB (if applicable). ANY WITHDRAWALS TAKEN BEFORE YOU EXERCISE THE GPWB, EXCESS WITHDRAWALS, AND/OR AMOUNTS APPLIED TO TRADITIONAL PARTIAL ANNUITIZATIONS MAY REDUCE THE TRADITIONAL GMDB VALUE BY MORE THAN THE AMOUNT WITHDRAWN AND/OR ANNUITIZED. If the Contract Value at the time of withdrawal and/or annuitization is less than the Traditional GMDB value, we will deduct more than the amount withdrawn and/or annuitized from the Traditional GMDB value. ENHANCED GUARANTEED MINIMUM DEATH BENEFIT (ENHANCED GMDB) If the Enhanced GMDB applies, the amount of the death benefit will be the greater of 1 or 2. 1.The Contract Value, determined as of the end of the Business Day during which we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. 2.The Enhanced GMDB value, which is the Maximum Anniversary Value (MAV). We determine the MAV as of the end of the Business Day during which we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. MAXIMUM ANNIVERSARY VALUE (MAV) We only calculate the MAV until the date of any Owner's death. The MAV on the Issue Date is equal to your initial Purchase Payment received on the Issue Date. On each Business Day other than a Contract Anniversary and before the exercise of the GPWB (if applicable), the MAV is equal to: o its value on the immediately preceding Business Day, o plus any additional Purchase Payments received that day, o reduced proportionately by the percentage of Contract Value applied to a traditional Partial Annuitization or withdrawn that day (including any withdrawal charge). On each Contract Anniversary before the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual) and before the exercise of the GPWB (if applicable), the MAV is equal to the greater of its value on the immediately preceding Business Day, or the Contract Value that occurs on that Contract Anniversary before we process any transactions. We then process any transactions received on that Contract Anniversary (such as additional Purchase Payments, withdrawals and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. Beginning with the Contract Anniversary that occurs on or after the older Owner's 81st birthday (or the Annuitant's 81st birthday if the Contract is owned by a non-individual) and before the exercise of the GPWB (if applicable), we calculate the MAV in the same way that we do on each Business Day other than a Contract Anniversary. ANY WITHDRAWALS TAKEN BEFORE YOU EXERCISE THE GPWB AND/OR AMOUNTS APPLIED TO TRADITIONAL PARTIAL ANNUITIZATIONS MAY REDUCE THE MAV BY MORE THAN THE AMOUNT WITHDRAWN AND/OR ANNUITIZED. If the Contract Value at the time of withdrawal and/or annuitization is less than the MAV, we will deduct more than the amount withdrawn and/or annuitized from the MAV. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 49 NOTE FOR CONTRACTS WITH A GUARANTEED BENEFIT PACKAGE: If you exercise the GPWB, then on and after the exercise date: o the Traditional GMDB value, or Enhanced GMDB value that applies to your Contract will stop increasing and each GPWB Payment we make and any Excess Withdrawals you take will reduce the GMDB Value proportionately by the percentage of Contract Value withdrawn (including any withdrawal charge); o the death benefit that is equal to your Contract Value will continue to fluctuate with market performance, but it will decrease on a dollar for dollar basis with each GPWB Payment we make and any Excess Withdrawals you take (including any withdrawal charge); and o the increased M&E charge associated with the Enhanced GMDB (if applicable) will continue as long as the Enhanced GMDB value is greater than zero. Please see Appendix D for examples of calculations of the death benefit. TERMINATION OF THE DEATH BENEFIT THE GMDB THAT APPLIES TO YOUR CONTRACT WILL TERMINATE UPON THE EARLIEST OF THE FOLLOWING. o The Business Day before the Income Date that you take a Full Annuitization, INCLUDING A REQUIRED FULL ANNUITIZATION ON THE MAXIMUM PERMITTED INCOME DATE. For more information, see section 2, The Annuity Phase. o The Business Day that the GMDB value and Contract Value are both zero. o Contract termination. DEATH OF THE OWNER UNDER INHERITED IRA CONTRACTS Upon the death of the Owner under an Inherited IRA Contract, the Beneficiary can either: o continue to receive the required minimum distribution payments based on the remaining life expectancy of the deceased Owner and the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and the appropriately completed election form; or o receive a lump sum payment based on the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and the appropriately completed election form. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 50 DEATH OF THE OWNER AND/OR ANNUITANT UNDER ALL OTHER CONTRACTS The following tables are intended to help you better understand what happens upon the death of any Owner and/or Annuitant under the different portions of the Contract. FOR QUALIFIED CONTRACTS, THERE CAN BE ONLY ONE OWNER AND THE OWNER MUST BE THE ANNUITANT, UNLESS THE CONTRACT IS A QUALIFIED CONTRACT OWNED BY A QUALIFIED PLAN OR IS PART OF A CUSTODIAL ARRANGEMENT. PARTIAL ANNUITIZATIONS ARE NOT AVAILABLE TO JOINT OWNERS. IF YOU TAKE A PARTIAL ANNUITIZATION, THERE CAN BE ONLY ONE OWNER; THE OWNER MUST BE THE ANNUITANT, AND WE WILL NOT ALLOW THE OWNER TO ADD A JOINT ANNUITANT. DESIGNATING DIFFERENT PERSONS AS OWNER(S) AND ANNUITANT(S) CAN HAVE AN IMPORTANT IMPACT ON WHETHER A DEATH BENEFIT IS PAID, AND ON WHO WOULD RECEIVE IT. USE CARE WHEN DESIGNATING OWNERS AND ANNUITANTS, AND CONSULT YOUR REGISTERED REPRESENTATIVE IF YOU HAVE QUESTIONS. UPON THE DEATH OF A SOLE OWNER ACTION UNDER THE PORTION OF THE CONTRACT THAT IS IN THE ACCUMULATION PHASE o We will pay a death benefit to the Beneficiary.* For a description of the payout options, see the "Death Benefit Payment Options" discussion later in this section. o If the GPWB was in effect, it will terminate unless the deceased Owner's spouse continues the Contract. ACTION UNDER ANY PORTION OF THE CONTRACT APPLIED TO ANNUITY PAYMENTS o The Beneficiary becomes the Owner. o If the deceased was not an Annuitant, Annuity Payments to the Payee will continue. No death benefit is payable. o If the deceased was the only surviving Annuitant, Annuity Payments to the Payee will continue until that portion of the Contract terminates and will be paid at least as rapidly as they were being paid at the Annuitant's death. For more information on when any portion of the Contract applied to Annuity Payments terminates, see the discussion of "Traditional Annuity Payments" and "Guaranteed Minimum Income Benefit (GMIB)" in section 2, The Annuity Phase. No death benefit is payable under Annuity Options 1 through 4, or Annuity Option 6. However, there may be a lump sum refund due to the Payee under Annuity Option 5. For more information, see section 2, The Annuity Phase - Annuity Options. o If the deceased was an Annuitant and there is a surviving joint Annuitant, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant. No death benefit is payable. * If the Beneficiary is the spouse of the deceased Owner, the spouse who is also the Beneficiary may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election to continue the Contract on the death claim form. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 51 UPON THE DEATH OF A JOINT OWNER (NOTE: WE DO NOT ALLOW JOINT OWNERS TO TAKE PARTIAL ANNUITIZATIONS) ACTION UNDER THE PORTION OF THE CONTRACT THAT IS IN THE ACCUMULATION PHASE o The surviving Joint Owner is the sole primary Beneficiary. If the Joint Owners were spouses there may also be contingent Beneficiaries. o We will pay a death benefit to the surviving Joint Owner.* For a description of the payout options available, see the "Death Benefit Payment Options" discussion later in this section. o If the GPWB was in effect, it will terminate unless the Joint Owners were spouses and the surviving spouse who is also the Joint Owner continues the Contract. ACTION UNDER ANY PORTION OF THE CONTRACT APPLIED TO ANNUITY PAYMENTS o The surviving Joint Owner becomes the sole Owner. o If the deceased was not an Annuitant, Annuity Payments to the Payee will continue. No death benefit is payable. o If the deceased was the only surviving Annuitant, Annuity Payments to the Payee will continue until that portion of the Contract terminates and will be paid at least as rapidly as they were being paid at the Annuitant's death. For more information on when any portion of the Contract applied to Annuity Payments terminates, see the discussion of "Traditional Annuity Payments" and "Guaranteed Minimum Income Benefit (GMIB)" in section 2, The Annuity Phase. No death benefit is payable under Annuity Options 1 through 4, or Annuity Option 6. However, there may be a lump sum refund due to the Payee under Annuity Option 5. For more information, see section 2, The Annuity Phase - Annuity Options. o If the deceased was an Annuitant and there is a surviving joint Annuitant, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant. No death benefit is payable. * If the surviving Joint Owner is the spouse of the deceased Owner, the spouse who is also the surviving Joint Owner may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election to continue the Contract on the death claim form. If both spousal Joint Owners die before we pay the death benefit, we will pay any contingent Beneficiaries or the estate of the Joint Owner who died last if there are no contingent Beneficiaries. If the Joint Owners were not spouses and they both die before we pay the death benefit, for tax reasons, we will pay the estate of the Joint Owner who died last. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 52 UPON THE DEATH OF THE ANNUITANT AND THERE IS NO SURVIVING JOINT ANNUITANT ACTION UNDER THE PORTION OF THE CONTRACT THAT IS IN THE ACCUMULATION PHASE o If the Contract is owned by a non-individual (for example a qualified plan or a trust), we will treat the death of the Annuitant as the death of an Owner; we will pay the Beneficiary* a death benefit, and a new Annuitant cannot be named. If the GPWB was in effect, it will terminate unless the deceased Owner's spouse continues the Contract. o If the deceased Annuitant was not an Owner, and the Contract is owned only by an individual(s), no death benefit is payable. The Owner can name a new Annuitant subject to our approval. If the GPWB was in effect, it will continue. o If the deceased Annuitant was a sole Owner, we will pay the Beneficiary* a death benefit. If the GPWB was in effect, it will terminate unless the deceased Owner's spouse continues the Contract. o If the deceased Annuitant was a Joint Owner and there is a surviving Joint Owner, the surviving Joint Owner is the sole primary Beneficiary. If the Joint Owners were spouses, there may also be contingent Beneficiaries. We will pay a death benefit to the surviving Joint Owner.** If the GPWB was in effect, it will terminate unless the Joint Owners were spouses and the surviving spouse who is also the Joint Owner continues the Contract. o For a description of the payout options, see the "Death Benefit Payment Options" discussion later in this section. ACTION UNDER ANY PORTION OF THE CONTRACT APPLIED TO ANNUITY PAYMENTS o Annuity Payments to the Payee will continue until that portion of the Contract terminates and will be paid at least as rapidly as they were being paid at the Annuitant's death. For more information on when any portion of the Contract applied to Annuity Payments terminates, see the discussion of "Traditional Annuity Payments" and "Guaranteed Minimum Income Benefit (GMIB)" in section 2, The Annuity Phase. No death benefit is payable under Annuity Options 1 through 4, or Annuity Option 6. However, there may be a lump sum refund due to the Payee under Annuity Option 5. For more information, see section 2, The Annuity Phase - Annuity Options. o If the deceased was a sole Owner, the Beneficiary will become the Owner if the Contract continues. o If the deceased was a Joint Owner, the surviving Joint Owner becomes the sole Owner if the Contract continues. * If the Beneficiary is the spouse of the deceased Owner, the spouse who is also the Beneficiary may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election to continue the Contract on the death claim form. **If the surviving Joint Owner is the spouse of the deceased Owner, the spouse who is also the surviving Joint Owner may be able to continue the Contract instead of receiving a death benefit payout. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election to continue the Contract on the death claim form. If both spousal Joint Owners die before we pay the death benefit, we will pay any contingent Beneficiaries or the estate of the Joint Owner who died last if there are no contingent Beneficiaries. If the Joint Owners were not spouses and they both die before we pay the death benefit, for tax reasons, we will pay the estate of the Joint Owner who died last. UPON THE DEATH OF THE ANNUITANT AND THERE IS A SURVIVING JOINT ANNUITANT (NOTE: WE DO NOT ALLOW JOINT ANNUITANTS UNDER A PARTIAL ANNUITIZATION AND WE DO NOT ALLOW JOINT ANNUITANTS DURING THE ACCUMULATION PHASE, SO THIS CAN ONLY OCCUR UNDER A FULL ANNUITIZATION) o Only Annuity Options 3 and 4 allow joint Annuitants. Under Annuity Options 3 and 4, Annuity Payments to the Payee will continue during the lifetime of the surviving joint Annuitant and, for Annuity Option 4, during any remaining specified period of time. For more information, see section 2, The Annuity Phase - Annuity Options. o No death benefit is payable. o If the deceased was a sole Owner, the Beneficiary will become the Owner. o If the deceased was a Joint Owner, the surviving Joint Owner becomes the sole Owner. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 53 DEATH BENEFIT PAYMENT OPTIONS If you have not previously designated a death benefit payment option, a Beneficiary must request the death benefit be paid under one of the death benefit payment options below. If the Beneficiary is the spouse of the deceased Owner, he/she can choose to continue the Contract in his/her own name. An election by the spouse to continue the Contract must be made on the death claim form before we pay the death benefit. If the Contract continues, we will increase the Contract Value to equal the death benefit if that amount is greater than the Contract Value as of the Business Day we receive in good order at our Service Center both due proof of death and an election of the death benefit payment option. If the surviving spouse continues the Contract, he or she may exercise all of the Owner's rights under this Contract, including naming a new Beneficiary or Beneficiaries. If the surviving spouse continues the Contract, any optional benefits will also continue with the possible exception of the GMIB Payments under the Guaranteed Benefit Package, which can only continue if the surviving spouse is also an Annuitant. For more information, please see the discussion of the termination of the GMIB in section 2, The Annuity Phase - Guaranteed Minimum Income Benefits (GMIBs). If a lump sum payment is requested, we will pay the amount within seven days of our receipt of proof of death and a valid election of a death benefit payment option, including any required governmental forms, unless the suspension of payments or transfers provision is in effect. Payment of the death benefit may be delayed, pending receipt of any applicable tax consents and/or state forms. We will pay interest as required by the state from the date of death when there is a delay in the payment of the death benefit. OPTION A: Lump sum payment of the death benefit. We will not deduct the contract maintenance charge at the time of a full withdrawal if the distribution is due to death. OPTION B: Payment of the entire death benefit within five years of the date of any Owner's death. We will assess the full contract maintenance charge on each Beneficiary's portion on each Contract Anniversary. However, we will waive the contract maintenance charge if the Contract Value at the time we are to deduct the charge is at least $75,000. OPTION C: If the Beneficiary is an individual, payment of the death benefit as a Traditional Annuity Payment under an Annuity Option over the lifetime of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary. Distribution under this option must begin within one year of the date of any Owner's death. We will continue to assess the full contract maintenance charge on each Beneficiary's portion proportionately over the Annuity Payments. However, we will waive the contract maintenance charge if the Contract Value on the Income Date is at least $75,000. GMIB PAYMENTS ARE NOT AVAILABLE UNDER THIS OPTION. Any portion of the death benefit not applied to Traditional Annuity Payments within one year of the date of the Owner's death must be distributed within five years of the date of death. If the Contract is owned by a non-individual, then we treat the death of any Annuitant as the death of an Owner for purposes of the Internal Revenue Code's distribution at death rules, which are set forth in Section 72(s) of the Code. In all events, notwithstanding any provision to the contrary in the Contract or this prospectus, the Contract will be interpreted and administered in accordance with Section 72(s) of the Code. 11.OTHER INFORMATION ALLIANZ LIFE OF NEW YORK Allianz Life of New York is a stock life insurance company organized under the laws of the state of New York on September 21, 1982. Our address is One Chase Manhattan Plaza, 37[th] Floor, New York, NY 10005-1423. We offer fixed and variable annuities, individual and group life insurance, and long-term care insurance. We are licensed to do direct business in six states, including New York and the District of Columbia. We are a subsidiary of Allianz SE, a provider of integrated financial services. THE SEPARATE ACCOUNT We established Allianz Life of NY Variable Account C (the Separate Account, formerly Preferred Life Variable Account C), as a separate account under New York insurance law on February 26, 1988. The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. The SEC does not supervise our management of the Separate Account. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 54 The Separate Account holds the assets that underlie the Contracts, except assets allocated to our general account. We keep the Separate Account assets separate from the assets of our general account and other separate accounts. The Separate Account is divided into subaccounts, each of which invests exclusively in a single Investment Option. We own the assets of the Separate Account. We credit gains to or charge losses against the Separate Account, whether or not realized, without regard to the performance of other investment accounts. The Separate Account's assets may not be used to pay any of our liabilities, other than those arising from the Contracts. If the Separate Account's assets exceed the required reserves and other liabilities, we may transfer the excess to our general account. Amounts transferred to our general account will represent seed money invested by us or earned fees and charges. The obligations of the Separate Account are not generalized obligations of Allianz Life of New York. The obligations under the Contracts are obligations of Allianz Life of New York. DISTRIBUTION Allianz Life Financial Services, LLC (Allianz Life Financial), a wholly-owned subsidiary of Allianz Life Insurance Company of North America, serves as principal underwriter for the Contracts. Allianz Life Financial, a limited liability company organized in Minnesota, is located at 5701 Golden Hills Drive, Minneapolis, MN 55416. Allianz Life Financial is registered as a broker/dealer with the SEC under the Securities Exchange Act of 1934 (the 1934 Act), as well as with the securities commissions in the states in which it operates, and is a member of the Financial Industry Regulatory Authority (FINRA). Allianz Life Financial is not a member of Securities Investors Protection Corporation. More information about Allianz Life Financial is available at http://www.finra.org or by calling 1-800-289-9999. You also can obtain an investor brochure from FINRA describing its Public Disclosure Program. We have entered into a distribution agreement with our affiliate Allianz Life Financial for the distribution and sale of the Contracts. Allianz Life Financial also may perform various administrative services on our behalf. Allianz Life Financial does not itself sell the Contracts on a retail basis. Rather, Allianz Life Financial enters into selling agreements with other broker/dealers registered under the 1934 Act (selling firms) for the sale of the Contracts. These selling firms include third party broker/dealers and Questar Capital Corporation, an affiliated broker/dealer. We pay sales commissions to the selling firms and their registered representatives. Investment Options that assess Rule 12b-1 fees make payments of the fees to Allianz Life Financial as consideration for providing certain services and incurring certain expenses permitted under the Investment Option's plan. These payments typically equal 0.25% of an Investment Option's average daily net assets for the most recent calendar year. The investment adviser and/or subadviser (and/or their affiliates) of an Investment Option may from time to time make payments for administrative services to Allianz Life Financial or its affiliates. The maximum commission payable to the selling firms for Contract sales is expected to not exceed 5% of Purchase Payments. Sometimes, we enter into an agreement with a selling firm to pay commissions as a combination of a certain amount of the commission at the time of sale and a trail commission which, when totaled, could exceed 5% of Purchase Payments. We may fund Allianz Life Financial's operating and other expenses, including: overhead; legal and accounting fees; registered representative training; compensation for the Allianz Life Financial management team; and other expenses associated with the Contracts. Registered representatives and their managers are also eligible for various benefits, such as production incentive bonuses, insurance benefits, and non-cash compensation items that we may provide jointly with Allianz Life Financial. Non-cash items include conferences, seminars and trips (including travel, lodging and meals in connection therewith), entertainment, awards, merchandise and other similar items. Selling firms and their registered representatives and managers may receive other payments from us for administrative issues and for services that do not directly involve the sale of the Contracts, including payments made for the recruitment and training of personnel, production of promotional literature and similar services. In addition, certain firms and their representatives may receive compensation for distribution and administrative services when acting in a wholesaling capacity and working with retail firms. We and/or Allianz Life Financial may pay certain selling firms additional marketing support allowances for: o marketing services and increased access to registered representatives; o sales promotions relating to the Contracts; o costs associated with sales conferences and educational seminars for their registered representatives; o the cost of client meetings and presentations; and o other sales expenses incurred by them. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 55 We retain substantial discretion in determining whether to grant a marketing support payment to a particular broker/dealer firm and the amount of any such payment. However, we do consider a number of specific factors in determining marketing support payments, which may include a review of the following: o the level of existing sales and assets held in contracts issued by us that are sold through the broker/dealer firm and the potential for new or additional sales; o the organizational "fit" between the broker/dealer firm and the type of wholesaling and marketing force we operate; o whether the broker/dealer firm's operational, IT, and support services structure and requirements are compatible with our method of operation; o whether the broker/dealer firm's product mix is oriented toward our core markets; o whether the broker/dealer firm has a structure facilitating a marketing support arrangement, such as frequent registered representative meetings and training sessions; o the potential return on investment of investing in a particular firm's system; o our potential ability to obtain a significant level of the market share in the broker/dealer firm's distribution channel; o the broker/dealer firm's registered representative and customer profiles; and o the prominence and reputation of the broker/dealer firm in its marketing channel. We may also make payments for marketing and wholesaling support to broker/dealer affiliates of Investment Options that are available through the variable annuities we offer. Additional information regarding marketing support payments can be found in the Distributor section of the Statement of Additional Information. We and/or Allianz Life Financial may make bonus payments to certain selling firms based on aggregate sales of our variable insurance contracts (including this Contract) or persistency standards, or as part of a special promotion. These additional payments are not offered to all selling firms, and the terms of any particular agreement governing the payments may vary among selling firms. In some instances, the amount paid may be significant. A portion of the payments made to selling firms may be passed on to their registered representatives in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. Ask your registered representative for further information about what your registered representative and the selling firm for which he or she works may receive in connection with your purchase of a Contract. We intend to recover commissions and other sales expenses through fees and charges imposed under the Contract. Commissions paid on the Contract, including other incentives or payments, are not charged directly to the Owners or the Separate Account. We offer the Contracts to the public on a continuous basis. We anticipate continuing to offer the Contracts but reserve the right to discontinue the offering. ADDITIONAL CREDITS FOR CERTAIN GROUPS We may credit additional amounts to a Contract instead of modifying charges because of special circumstances that result in lower sales or administrative expenses or better than expected mortality or persistency experience. ADMINISTRATION/ALLIANZ SERVICE CENTER The Allianz Service Center performs certain administrative services regarding the Contracts and is located at 5701 Golden Hills Drive, Minneapolis, Minnesota. The Service Center mailing address and telephone number are listed at the back of this prospectus. The administrative services performed by our Service Center include: o issuance and maintenance of the Contracts, o maintenance of Owner records, o processing and mailing of account statements and other mailings to Owners, and o routine customer service including: - responding to Owner correspondence and inquiries, - processing of Contract changes, - processing withdrawal requests (both partial and total) and - processing annuitization requests. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 56 To reduce expenses, only one copy of most financial reports and prospectuses, including reports and prospectuses for the Investment Options, will be mailed to your household, even if you or other persons in your household have more than one contract issued by us or our affiliate. Call us at the toll-free number listed at the back of this prospectus if you need additional copies of financial reports, prospectuses, or annual and semiannual reports, or if you would like to receive one copy for each contract in future mailings. LEGAL PROCEEDINGS We and our subsidiaries, like other life insurance companies, from time to time are involved in legal proceedings of various kinds, including regulatory proceedings and individual and class action lawsuits. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any such proceedings cannot be predicted with certainty, we believe that, at the present time, there are no pending or threatened legal proceedings to which we, the Separate Account, or Allianz Life Financial is a party that are reasonably likely to materially affect the Separate Account, our ability to meet our obligations under the Contracts, or Allianz Life Financial's ability to perform its obligations. FINANCIAL STATEMENTS The financial statements of Allianz Life of New York and the financial statements of the Separate Account have been included in the Statement of Additional Information. 12.GLOSSARY This prospectus is written in plain English to make it as understandable as possible. However, there are some technical words or terms that are defined below and are capitalized in the prospectus. The following is a list of common abbreviations used in this prospectus:
AIA = ANNUAL INCREASE AMOUNT GMIB = GUARANTEED MINIMUM INCOME BENEFIT GBP = GUARANTEED BENEFIT PACKAGE GPWB = GUARANTEED PARTIAL WITHDRAWAL BENEFIT GMDB = GUARANTEED MINIMUM DEATH BENEFIT MAV = MAXIMUM ANNIVERSARY VALUE
ACCUMULATION PHASE - the period of time before you apply the entire Contract Value to Annuity Payments. Subject to certain restrictions, you can make additional Purchase Payments during this time. The Accumulation Phase may occur at the same time as the Annuity Phase if you take Partial Annuitizations. ACCUMULATION UNIT - the units into which we convert amounts invested in the subaccounts that invest in the Investment Options during the Accumulation Phase. AIA (ANNUAL INCREASE AMOUNT) - a calculation used in determining the Enhanced GMIB/GPWB values. ANNUITANT - the individual upon whose life we base the Annuity Payments. Subject to our approval, the Owner designates the Annuitant and can add a joint Annuitant for the Annuity Phase if they take a Full Annuitization. ANNUITY OPTIONS - the income options available to you under the Contract. ANNUITY PAYMENTS - payments made by us to the Payee pursuant to the Annuity Option chosen. Annuity Payments may be variable, fixed, or a combination of both variable and fixed. ANNUITY PHASE - the phase the Contract is in once Annuity Payments begin. This may occur at the same time as the Accumulation Phase if you take a Partial Annuitization. ANNUITY UNIT - the units into which we convert amounts invested in the subaccounts that invest in the Investment Options during the Annuity Phase. BENEFICIARY - the person(s) or entity the Owner designates to receive any death benefit. BUSINESS DAY - each day on which the New York Stock Exchange is open for trading, except when an Investment Option does not value its shares. Allianz Life of New York is open for business on each day that the New York Stock Exchange is open. Our Business Day closes when regular trading on the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern Time. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 57 CONTRACT - the deferred annuity contract described by this prospectus that allows you to accumulate money tax deferred by making one or more Purchase Payments. It provides for lifetime or other forms of Annuity Payments beginning on the Income Date. CONTRACT ANNIVERSARY - a 12-month anniversary of the Issue Date of your Contract. If the Contract Anniversary does not occur on a Business Day, we will consider it to occur on the next Business Day. CONTRACT VALUE - on any Business Day it is equal to the sum of the values in your selected Investment Options. It does not include amounts applied to Annuity Payments. CONTRACT YEAR - any period of 12 months commencing on the Issue Date and on each Contract Anniversary thereafter. EXCESS WITHDRAWAL - for Contracts with a GBP that exercise the GPWB, this is an additional withdrawal you take while you are receiving GPWB Payments. FULL ANNUITIZATION - the application of the entire Contract Value to Annuity Payments. YOU WILL BE REQUIRED TO TAKE A FULL ANNUITIZATION OF YOUR CONTRACT ON OR BEFORE THE MAXIMUM PERMITTED INCOME DATE IF, AT THAT TIME, YOUR CONTRACT VALUE HAS NOT BEEN REDUCED TO ZERO. Upon Full Annuitization you will no longer have a Contract Value, any periodic withdrawal or income payments other than Annuity Payments (which includes GPWB Payments) will stop, and the death benefit will terminate. GBP (GUARANTEED BENEFIT PACKAGE) - two optional benefit packages consisting of either the Traditional GBP (which includes the Traditional GMIB and Traditional GPWB) or the Enhanced GBP (which includes the Enhanced GMIB and Enhanced GPWB). GMDB (GUARANTEED MINIMUM DEATH BENEFIT) - you can select one of two GMDBs at Contract issue that may provide different guaranteed death benefit values. The Traditional GMDB is the default death benefit, or you can select the Enhanced GMDB for an additional M&E charge, subject to certain age restrictions. GMIB (GUARANTEED MINIMUM INCOME BENEFIT) - a benefit under the GBPs that provides guaranteed minimum fixed income in the form of Annuity Payments (GMIB Payments). GMIB PAYMENT - fixed Annuity Payments we make under the GMIB. GPWB (GUARANTEED PARTIAL WITHDRAWAL BENEFIT) - a benefit under the GBPs that provides a guaranteed income through partial withdrawals regardless of your Contract Value. GPWB PAYMENT - guaranteed minimum amount of level income in the form of annual partial withdrawals. INCOME DATE - the date we begin making Annuity Payments to the Payee from the Contract. This date must be the first day of a calendar month. Because the Contract allows for Partial Annuitizations there may be multiple Income Dates. INVESTMENT OPTIONS - the variable Investment Options available under the Separate Account. You may invest in up to 15 of the Investment Options at any one time. We may add, substitute or remove Investment Options in the future. ISSUE DATE - the date shown on the Contract that starts the first Contract Year. Contract Anniversaries and Contract Years are measured from the Issue Date. JOINT OWNERS - two Owners who own a Non-Qualified Contract. We do not allow Joint Owners to take Partial Annuitizations. MAV (MAXIMUM ANNIVERSARY VALUE) - a calculation used in determining the Enhanced GMIB/GPWB/GMDB values. NON-QUALIFIED CONTRACT - a Contract that is not purchased under a pension or retirement plan qualified under sections of the Internal Revenue Code. OWNER - "you," "your" and "yours." The person or entity (or persons or entities if there are Joint Owners) named in the Contract who may exercise all rights granted by the Contract. The Owner is designated at Contract issue. PARTIAL ANNUITIZATION - the application of only part of the Contract Value to Traditional Annuity Payments. If you take a Partial Annuitization, the Accumulation Phase and Annuity Phase of the Contract may occur at the same time. You can take one Partial Annuitization every 12 months. The maximum number of annuitizations we allow at any one time is five. Partial Annuitizations are not available to Joint Owners. If you take a Partial Annuitization, there can be only one Owner, the Owner must be the Annuitant, and we will not allow the Owner to designate a joint Annuitant. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 58 PAYEE - the person or entity you designate (subject to our approval) to receive Annuity Payments during the Annuity Phase. If you do not designate a Payee by the Income Date, we will make Annuity Payments to the Owner. PURCHASE PAYMENT - the money you put in the Contract. QUALIFIED CONTRACT - a Contract purchased under a pension or retirement plan qualified under sections of the Internal Revenue Code (for example, 401(k) and H.R. 10 plans), Individual Retirement Annuities (IRAs), or Tax-Sheltered Annuities (referred to as TSA or 403(b) contracts). Currently, we may issue Qualified Contracts that may include, but are not limited to Roth IRAs, Traditional IRAs, Simplified Employee Pension (SEP) IRAs and Inherited IRAs. SEPARATE ACCOUNT - Allianz Life of NY Variable Account C is the Separate Account that issues your Contract. It is a separate investment account of Allianz Life of New York. The Separate Account holds the assets invested in the Investment Options that underlie the Contracts. The Separate Account is divided into subaccounts, each of which invests exclusively in a single Investment Option. SERVICE CENTER - the Allianz Service Center. Our Service Center address and telephone number are listed at the back of this prospectus. TRADITIONAL ANNUITY PAYMENTS - Annuity Payments we make to the Payee based on the Contract Value. WITHDRAWAL CHARGE BASIS - the total amount under your Contract that is subject to a withdrawal charge. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 59 13.TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION (SAI) ALLIANZ LIFE OF NEW YORK..........2 EXPERTS...........................2 LEGAL OPINIONS....................2 DISTRIBUTOR.......................2 REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE3 FEDERAL TAX STATUS................3 General.........................3 Diversification.................4 Owner Control...................4 Contracts Owned by Non-Individuals5 Income Tax Withholding..........5 Required Distributions..........5 Qualified Contracts.............6 ANNUITY PROVISIONS................6 Annuity Units/Calculating Annuity Payments7 MORTALITY AND EXPENSE RISK GUARANTEE7 ENHANCED GMIB/GPWB VALUES FOR CONTRACTS ISSUED ON OR BEFORE APRIL 28, 2006.......7 Calculating the AIAs............8 Calculating the MAV.............8 FINANCIAL STATEMENTS..............9 APPENDIX - CONDENSED FINANCIAL INFORMATION10 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 60 14.PRIVACY AND SECURITY STATEMENT MARCH 2009 Your privacy is a high priority for Allianz Life[{R}] of NY. Our pledge to protect your privacy is reflected in our Privacy and Security Statement. This statement outlines our principles for collecting, using and protecting information that we gather about you. ALLIANZ LIFE OF NY DOES NOT SELL YOUR INFORMATION TO ANYONE We do not share your information with anyone for their own marketing purposes. For this reason, we are not required to obtain an "opt-in election," an "opt-out election" or an authorization from you. We also do not share your information with any of our affiliated companies, except for the purpose of servicing your policy. INFORMATION ABOUT YOU THAT ALLIANZ LIFE OF NY COLLECTS Allianz Life of NY collects information about you so that we can process the insurance transactions you request. We limit the amount of your information collected to what we feel is needed to maintain your account. We may collect your information from the following sources: o From you, either directly or through your agent. This may include information on your insurance application or other forms you may complete, such as your name, address and telephone number. o From others, through the process of handling a claim. This may include information from medical or accident reports. o From your doctor or during a home visit by a health assessment professional. This may include medical information about you gathered with your written authorization. o From your relationship with us, such as the number of years you have been a customer or the types of insurance products you purchased. o From a consumer reporting agency such as a medical, credit, or motor vehicle report. The information in these reports may be kept by the agency and shared with others. If you visit one of our websites, we may use "cookies" (small text files sent from our site to your hard drive). These cookies help us to recognize repeat visitors and allow easy access to and use of the site. We do not use cookies to gather your information. The cookies only enable you to use our website more easily. INFORMATION ABOUT YOU THAT ALLIANZ LIFE OF NY SHARES Allianz Life of NY does not share information about current or former customers with anyone, except as "allowed by law." "Allowed by law" means that we may share your information, such as your name, address and policy information, as follows: o With consumer reporting agencies to obtain a medical report, credit report, or motor vehicle report. These reports are used to determine eligibility for coverage or to process your requested transactions. o With your insurance agent so that they can perform services for you. o With medical professionals in order to process your claim. o With a state Department of Insurance in order to examine our records or business practices. o With a state or federal law enforcement agency, as required by law or to report suspected fraud activities. o With research groups to conduct studies on claims results. No individual is identified in any study or report. We advise the vendors with whom we legally share your information of our privacy policy. We make every effort to use vendors whose privacy policy reflects our own. ALLIANZ LIFE OF NY POLICIES AND PRACTICES REGARDING SECURITY OF YOUR INFORMATION Allianz Life of NY uses computer hardware and software tools to maintain physical and electronic safeguards. These safeguards comply with applicable federal and state regulations. We restrict access to information about you to those employees who need the information to service your policy. Allianz Life of NY works to ensure that our websites are secure. We use state of the art technology to protect the information that may be shared over these sites. YOUR ABILITY TO ACCESS AND CORRECT YOUR INFORMATION You have the right to access and get a copy of your information. This does not include the right to access and copy your information related to a claim or civil or criminal proceeding. If you wish to review your information, please write us at the address below. Provide your full name, address and policy number(s). For your protection, please have your request notarized. This will ensure the identity of the person requesting your information. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 61 Within 30 working days of our receipt of your written request, you may see and get a copy of your information in person. If you prefer, we will send you a copy of your information. If medical information is contained in your file, we may request that you name a medical professional to whom we will send your information. If you believe any of your information is incorrect, notify us in writing at the address below. Within 30 working days, we will let you know if our review has resulted in a correction of your information. If we do not agree there is an error, you may file a statement disputing our finding. We will attach the statement to your file. We will send any corrections we make, or your statement, to anyone we shared your information with over the past two years, and to anyone who may receive your information from us in the future. We do not control the information about you obtained from a consumer reporting agency or a Department of Motor Vehicles. We will provide you with the names and addresses of these agencies so that you can contact them directly. NOTIFICATION OF CHANGE Your trust is one of our most important assets. If we revise our privacy practices in the future, we will notify you prior to introducing any changes. FOR MORE INFORMATION OR IF YOU HAVE QUESTIONS If you have any questions or concerns about our privacy policies or procedures, please call us at 212.586.7733, or write to us at the following address. Allianz Life Insurance Company of New York Home Office: New York, NY Administrative Office PO Box 1431 Minneapolis, MN 55440-1431 M40018-NY (R-3/2009) The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 62 APPENDIX A - ANNUAL OPERATING EXPENSES FOR EACH INVESTMENT OPTION This table describes, in detail, the annual expenses for each of the Investment Options. We show the expenses as a percentage of an Investment Option's average daily net assets for the most recent calendar year. Except for the AZL Funds, the PIMCO VIT portfolios, and the Premier VIT OpCap Mid Cap Portfolio, neither the Investment Options nor their advisers are affiliated with Allianz Life. Expenses may vary in current and future years. The investment advisers for the Investment Options provided the fee and expense information and we did not independently verify it. See the Investment Options' prospectuses for further information regarding the expenses you may expect to pay.
INVESTMENT OPTION MANAGEMENT RULE SERVICE OTHER ACQUIRED TOTAL ANNUAL OPERATING AMOUNT OF TOTAL ANNUAL OPERATING FEES 12B-1 FEES EXPENSES FUND FEES EXPENSES BEFORE CONTRACTUAL EXPENSES AFTER FEES* AND CONTRACTUAL FEE WAIVERS FEE WAIVERS CONTRACTUAL FEE WAIVERS EXPENSES OR EXPENSE REIMBURSEMENTS AND OR EXPENSE REIMBURSEMENTS REIMBURSEMENTS AIM AZL AIM .90 .25 - .20 - 1.35 - 1.35 International Equity Fund[(1)] BLACKROCK AZL BlackRock .80 .25 - .14 - 1.19 - 1.19 Capital Appreciation Fund[(1)] AZL BlackRock .85 .25 - .12 - 1.22 - 1.22 Growth Fund[(1)] AZL International .35 .25 - .10 - .70 - .70 Index Fund[(1),(13)] AZL Money Market .35 .25 - .09 - .69 - .69 Fund[(1)] BlackRock Global .65 .25 - .13 - 1.03 - 1.03 Allocation V.I. Fund - Class 3 COLUMBIA AZL Columbia Mid .75 .25 - .12 - 1.12 - 1.12 Cap Value Fund[(1)] AZL Columbia Small .90 - - .32 - 1.22 .12 1.10 Cap Value Fund - Class 1[(1),(7),(8)] AZL Columbia Small .90 .25 - .32 - 1.47 .12 1.35 Cap Value Fund - Class 2[(1),(7)] AZL Columbia .81 .25 - .15 - 1.21 - 1.21 Technology Fund[(1)] DAVIS AZL Davis NY .75 - - .10 - .85 - .85 Venture Fund - Class 1[(1),(7),(8)] AZL Davis NY .75 .25 - .10 - 1.10 - 1.10 Venture Fund - Class 2[(1),(7)] Davis VA Financial .75 - - .13 - .88 - .88 Portfolio[(6)] DREYFUS AZL Dreyfus Equity .77 .25 - .07 - 1.09 - 1.09 Growth Fund[(1)] AZL S&P 500 Index .17 - - .21 - .38 .14 .24 Fund - Class 1[(1),(7),(8)] AZL S&P 500 Index .17 .25 - .21 - .63 .14 .49 Fund - Class 2[(1),(7)] AZL Small Cap .26 .25 - .24 - .75 .17 .58 Stock Index Fund - Class 2[(1)] FIRST TRUST AZL First Trust .60 .25 - .13 - .98 .19 .79 Target Double Play Fund[(1)] FRANKLIN TEMPLETON AZL Franklin .75 .25 - .10 - 1.10 - 1.10 Small Cap Value Fund[(1)] AZL Franklin .70 .25 - .25 - 1.20 - 1.20 Templeton Founding Strategy Plus Fund - Class 2[(1),(13)] Franklin .80 .25 - .30 - 1.35 .32 1.03 Global Real Estate Securities Fund - Class 2[(4)] Franklin .50 .25 - .05 - .80 - .80 Growth and Income Securities Fund - Class 2[(3) ] Franklin High .57 .25 - .09 - .91 - .91 Income Securites Fund - Class 2[(3)] Franklin Income .45 .25 - .02 - .72 - .72 Securities Fund - Class 2[(3)] Franklin Large Cap .73 .25 - .04 - 1.02 - 1.02 Growth Securities Fund - Class 2[(3)] The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 63 Franklin Rising .60 .25 - .02 .01 .88 .01 .87 Dividends Securities Fund - Class 2[(3),(5)] Franklin Small-Mid .50 .25 - .28 .02 1.05 .02 1.03 Cap Growth Securities Fund - Class 2[(5)] Franklin Small Cap .52 .25 - .16 .01 .94 .01 .93 Value Securities Fund - Class 2[(5)] Franklin Templeton .00 .25 - .13 .65 1.03 .03 1.00 VIP Founding Funds Allocation Fund - Class 2[(9)] Franklin U.S. .49 .25 - .04 - .78 - .78 Government Fund - Class 2[(3)] Franklin Zero .60 - - .08 - .68 - .68 Coupon Fund 2010 - Class 1[(3)] Mutual Global .80 .25 - .18 - 1.23 - 1.23 Discovery Securities Fund - Class 2 Mutual Shares .60 .25 - .13 - .98 - .98 Securities Fund - Class 2 Templeton Foreign .64 .25 - .15 .02 1.06 .02 1.04 Securities Fund - Class 2[(5)] Templeton Global .47 .25 - .11 - .83 - .83 Bond Securities Fund - Class 2[(3)] Templeton Growth .74 .25 - .04 - 1.03 - 1.03 Securities Fund - Class 2[(3)] JENNISON AZL Jennison 20/20 .75 .25 - .10 - 1.10 - 1.10 Focus Fund[(1)] J.P. MORGAN AZL JPMorgan Large .75 .25 - .10 - 1.10 - 1.10 Cap Equity Fund[(1)] AZL JPMorgan U.S. .80 - - .23 - 1.03 .08 .95 Equity Fund - Class 1[(1),(7),(8)] AZL JPMorgan U.S. .80 .25 - .23 - 1.28 .08 1.20 Equity Fund - Class 2[(1),(7)] NICHOLAS- APPLEGATE AZL NACM .85 .25 - .35 - 1.45 - 1.45 International Fund[(1)] OPPENHEIMER CAPITAL AZL OCC Growth .75 .25 - .20 - 1.20 - 1.20 Fund[(1),(13)] AZL OCC .85 .25 - .14 - 1.24 - 1.24 Opportunity Fund[(1)] OpCap Mid Cap .80 - - .18 - .98 - .98 Portfolio[(10)] OPPENHEIMER FUNDS AZL Oppenheimer .90 - - .22 - 1.12 - 1.12 Global Fund - Class 1[(1),(7),(8)] AZL Oppenheimer .90 .25 - .22 - 1.37 - 1.37 Global Fund - Class 2[(1),(7)] AZL Oppenheimer .75 .25 - .17 - 1.17 - 1.17 International Growth Fund[(1)] Oppenheimer High .74 - - .06 - .80 - .80 Income Fund/VA - Non Service Class[ (6)] PIMCO AZL PIMCO .75 .25 - .22 - 1.22 .02 1.20 Fundamental IndexPLUS Total Return Fund[(1)] PIMCO VIT All .425 - .15 - .76 1.335 .02 1.315 Asset Portfolio - Admin. Class[(6),(11),(12)] PIMCO VIT .74 - .15 .17 .09 1.15 .09 1.06 CommodityRealReturn Strategy Portfolio - Admin. Class[(2),(6),(12)] PIMCO VIT Emerging .85 - .15 .13 - 1.13 - 1.13 Markets Bond Portfolio - Admin. Class[(6)] PIMCO VIT Global .75 - .15 .07 - .97 - .97 Bond Portfolio (Unhedged) - Admin. Class[(6)] The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 64 PIMCO VIT Global .95 - .15 .09 .66 1.85 .75 1.10 Multi-Asset Portfolio - Admin. Class[(13)] PIMCO VIT High .60 - .15 - - .75 - .75 Yield Portfolio - Admin. Class[(6)] PIMCO VIT Real .50 - .15 .06 - .71 - .71 Return Portfolio - Admin. Class[(6)] PIMCO VIT .35 - .15 .34 - .84 - .84 StocksPLUS[{R}] Growth and Income Portfolio - Admin. Class[(6)] PIMCO VIT Total .50 - .15 .23 - .88 - .88 Return Portfolio - Admin. Class[(6)] PRUDENTIAL SP International .85 .25 - .29 - 1.39 - 1.39 Growth Portfolio - Class 2[(6)] SP Strategic .90 .25 - .48 - 1.63 - 1.63 Partners Focused Growth Portfolio - Class 2[(6)] SCHRODER AZL Schroder 1.23 .25 - .45 - 1.93 .28 1.65 Emerging Markets Equity Fund[(1)] AZL Schroder 1.00 .25 - .28 - 1.53 - 1.53 International Small Cap Fund[(1)] TARGETPLUS PORTFOLIOS AZL TargetPLUS .52 .25 - .53 - 1.30 .41 .89 Balanced Fund[(1)] AZL TargetPLUS .60 .25 - .24 - 1.09 .30 .79 Equity Fund[(1)] AZL TargetPLUS .52 .25 - .36 - 1.13 .24 .89 Growth Fund[(1)] AZL TargetPLUS .52 .25 - .44 - 1.21 .32 .89 Moderate Fund[(1)] TURNER AZL Turner .85 .25 - .14 - 1.24 - 1.24 Quantitative Small Cap Growth Fund[(1)] VAN KAMPEN AZL Van Kampen .73 .25 - .09 - 1.07 - 1.07 Comstock Fund[(1)] AZL Van Kampen .75 .25 - .13 - 1.13 - 1.13 Equity and Income Fund[(1)] AZL Van Kampen .95 .25 - .14 - 1.34 - 1.34 Global Franchise Fund[(1)] AZL Van Kampen .90 .25 - .27 - 1.42 .07 1.35 Global Real Estate Fund[(1)] AZL Van Kampen .76 .25 - .11 - 1.12 - 1.12 Growth and Income Fund[(1)] AZL Van Kampen Mid .80 .25 - .09 - 1.14 - 1.14 Cap Growth Fund[(1)]
* The 12b-1 fees cover certain distribution and shareholder support services provided by the companies selling Contracts. Our principal underwriter, Allianz Life Financial Services, LLC, will receive 12b-1 fees, except for those classes of shares that do not pay a 12b-1 fee, as identified by footnote (7). The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 65 (1)Allianz Investment Management LLC (AZL), the Investment Option's investment adviser, and the Investment Option have entered into a written contract limiting operating expenses to the "after waiver" amount listed above through April 30, 2010. The operating expenses covered by the expense limitation agreement include fees deducted from Investment Option assets such as audit fees and payments to independent trustees, but do not include the operating expenses of other investment companies in which the Investment Option may invest (acquired fund fees and expenses). The Investment Option is authorized to reimburse AZL for management fees previously waived and/or for the cost of other expenses paid by AZL provided that such reimbursement will not cause the Investment Option to exceed the expense limits in effect at the time of such reimbursement. The Investment Option's ability to reimburse AZL in this manner only applies to fees paid or reimbursement made by AZL within the three fiscal years prior to the date of such reimbursement. (2)PIMCO has contractually agreed to waive the management fee and the administration fee it receives from the Portfolio in an amount equal to the management fee paid to PIMCO by the subsidiary. This waiver may not be terminated by PIMCO and will remain in effect for as long as PIMCO's contract with the subsidiary is in place. (3)The Fund administration fee is paid indirectly through the management fee. (4)The manager and administrator have contractually agreed in advance to waive or limit their respective fees so that the increase in investment management and fund administration fees paid by the Fund are phased in over a five year period, with there being no increase in the rate of such fees for the first year ending April 30, 2008. For each of the four years thereafter through April 30, 2012, the manager and administrator will receive one-fifth of the increase in the rate of fees. Beginning May 1, 2012, the full new investment management and administration fees will then be in effect. It is estimated that the increase for the year ending April 30, 2010 will be 0.14%. In future years the fee rates will vary in accordance with the fee rate schedules and fund assets. (5)The manager has agreed in advance to reduce its fee from assets invested by the Fund in a Franklin Templeton money market fund (the acquired fund) to the extent that the Fund's fees and expenses are due to those of the acquired fund. This reduction is required by the Trust's board of trustees and an exemptive order of the Securities and Exchange Commission (SEC); this arrangement will continue as long as the exemptive order is relied upon. (6)We may enter into certain arrangements under which we, or our affiliate Allianz Life Financial Services, LLC, the principal underwriter for the Contracts, are compensated by the Investment Options' advisers, distributors and/or affiliates for the administrative services and benefits which we provide to the Investment Options. The amount of the compensation usually is based on the aggregate assets of the Investment Options of other investment portfolios from contracts that we issue or administer. Some advisers may pay us more or less than others, however, the maximum fee that we currently receive is at the annual rate of 0.25% of the average aggregate amount invested by us in the Investment Options. (7)The Investment Option has both Class 1 shares and Class 2 shares. Class 2 shares pay a 12b-1 fee of up to 0.25% of its average daily assets. Class 1 shares do not pay a 12b-1 fee. (8)Not currently available. (9)The Fund's administrator has contractually agreed to waive or limit its fee and to assume as its own expense certain expenses of the Fund, so that common annual operating expenses of the fund do not exceed 0.10% (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2010. The Fund does not pay management fees but will indirectly bear its proportionate share of any management fees and other expenses paid by the underlying funds (or "acquired funds") in which it invests. Acquired funds' estimated fees and expenses are based on the acquired funds' expenses for the fiscal year ended December 31, 2008. (10)OpCap Advisors has contractually agreed to reduce the total annual portfolio operating expenses to the extent they would exceed 1.00% (net of any expenses offset by earnings credits from the custodian bank) of the Portfolio's average daily net assets. This reduction of annual portfolio operating expenses is guaranteed by OpCap Advisors through December 31, 2015. Net portfolio operating expenses do not reflect a reduction of custody expenses offset by custody credits earned on cash balances at the custodian bank. (11)Acquired fund fees and expenses (underlying fund expenses) for the Portfolio are based upon an allocation of the Portfolio's assets among the underlying funds and upon the total annual operating expenses of the institutional class shares of these underlying funds. Acquired fund fees and expenses will vary with changes in the expenses of the underlying funds, as well as allocation of the Portfolio's assets, and may be higher or lower than those shown above. (12)PIMCO has contractually agreed to waive or reduce the advisory fee and/or administration fee. PIMCO may recoup these waivers in future periods, not exceeding three years, provided total expenses, including such recoupment, does not exceed the annual expense limit. See the Investment Option prospectus for further information. (13)The Investment Option commenced operations under this Contract as of April 27, 2009. Therefore, the expenses shown are estimated for the current calendar year. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 66 This table describes, in detail, the annual expenses for each of the AZL Fund of Funds. We show the expenses as a percentage of an Investment Option's average daily net assets. The underlying funds may pay 12b-1 fees to the distributor of the Contracts for distribution and/or administrative services. The underlying funds do not pay service fees or 12b-1 fees to the AZL Fund of Funds and the AZL Fund of Funds do not pay service fees or 12b-1 fees. The underlying funds of the AZL Fund of Funds may pay service fees to the insurance companies issuing variable contracts, or their affiliates, for providing customer service and other administrative services to contract purchasers. The amount of such service fees may vary depending on the underlying fund.
INVESTMENT OPTION MANAGEMENT RULE OTHER TOTAL ACQUIRED FUND TOTAL ANNUAL OPERATING AMOUNT OF TOTAL ANNUAL OPERATING FEES 12B-1 EXPENSES FEES AND EXPENSES BEFORE CONTRACTUAL EXPENSES AFTER FEES* EXPENSES[(2)] CONTRACTUAL FEE WAIVERS FEE WAIVERS CONTRACTUAL FEE WAIVERS OR EXPENSE REIMBURSEMENTS AND OR EXPENSE REIMBURSEMENTS REIMBURSEMENTS FUND OF FUNDS AZL Allianz .05 - .15 .20 1.06 1.26 - 1.26 Global Investors Select Fund[(1),(4)] AZL Balanced .05 - .15 .20 .63 .83 - .83 Index Strategy Fund[(1),(4)] AZL Fusion .20 - .04 .24 1.25 1.49 - 1.49 Balanced Fund[(1),(3)] AZL Fusion .20 - .20 .40 .91 1.31 .05 1.26 Conservative Fund[(1),(3),(4)] AZL Fusion Growth .20 - .03 .23 1.36 1.59 - 1.59 Fund[(1),(3)] AZL Fusion .20 - .04 .24 1.29 1.53 - 1.53 Moderate Fund[(1),(3)] AZL Moderate .05 - .15 .20 .61 .81 - .81 Index Strategy Fund[(1),(4)]
* The 12b-1 fees cover certain distribution and shareholder support services provided by the companies selling Contracts. Our principal underwriter, Allianz Life Financial Services, LLC, will receive 12b-1 fees. (1)Allianz Investment Management LLC (AZL), the Investment Option's investment adviser, and the Investment Option have entered into a written contract limiting operating expenses (excluding certain fund expenses including, but not limited to, any taxes, interest, brokerage fees or extraordinary expenses) from exceeding 0.35% for the AZL Fusion Conservative Fund, 0.30% for the other three Fusion Funds, and 0.20% for the AZL Allianz Global Investors Select Fund, AZL Balanced Index Strategy Fund, and the AZL Moderate Index Strategy Fund, through at least April 30, 2010. The operating expenses covered by the expense limitation include fees deducted from fund assets such as audit fees and payments to outside trustees, but do not include the operating expenses of other investment companies in which the funds may invest (acquired fund fees and expenses). Acquired fund fees and expenses are incurred indirectly by the Investment Option(s) through the Investment Option's investment in permitted underlying funds. Accordingly, acquired fees and expenses affect the Investment Option's total returns. The Investment Option is authorized to reimburse AZL for fees previously waived and/or for the cost of other expenses paid by AZL provided that such reimbursement will not cause the Investment Option to exceed the expense limits in effect at the time of such reimbursement. AZL may request and receive reimbursement of fees waived or limited and other reimbursements made by AZL. The Investment Option's ability to reimburse AZL in this manner only applies to fees paid or reimbursement made by AZL within the three fiscal years prior to the date of such reimbursement. (2)Persons with Contract Value allocated to the AZL Fund of Funds will also indirectly pay the expenses of the underlying funds. The underlying fund fees and expenses are an estimate. These expenses will vary, depending upon the allocation of assets to individual underlying funds. In addition, it can be expected that underlying funds may be added or deleted as investments, with a resulting change in expenses. The investment advisers to the underlying funds or their affiliates may pay "service fees" to Allianz Life or its affiliates for providing customer service and other administrative services to Contract purchasers. The amount of such fees may vary by underlying fund. The underlying funds may also pay Rule 12b-1 distribution fees to the distributor of the Contracts. The underlying funds do not pay service fees or 12b-1 fees to the AZL Fund of Funds and the AZL Fund of Funds do not pay service fees or 12b-1 fees. (3)Effective December 1, 2008, (effective April 27, 2009, for AZL Fusion Conservative Fund) the Manager and the Fund entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.15% through April 30, 2010. If this voluntary fee reduction were reflected in the table, the net annual operating expenses would be lower. (4)The Investment Option commenced operations under this Contract as of April 27, 2009. Therefore the expenses shown are estimated for the current calendar year. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 67 APPENDIX B - CONDENSED FINANCIAL INFORMATION The financial statements of Allianz Life Insurance Company of New York and the financial statements of Allianz Life of NY Variable Account C may be found in the Statement of Additional Information. Accumulation Unit value (AUV) information corresponding to the highest and lowest combination of charges for the Contract currently offered by this prospectus is listed in the tables below. You can find AUV information corresponding to the additional combinations of charges in the appendix to the Statement of Additional Information. This information should be read in conjunction with the financial statements and related notes of the Separate Account included in the Statement of Additional Information. The Statement of Additional Information is available without charge by contacting us at the telephone number or address listed at the back of this prospectus. * KEY TO BENEFIT OPTION M&E CHARGES Allianz Charter II NY with the Traditional GMDB and No GBP 1.75% Allianz Charter II NY with the Enhanced GMDB and Enhanced GBP 2.60% The following Investment Options commenced operations under this Contract after December 31, 2008. Therefore, no AUV information is shown for them: AZL Allianz Global Investors Select Fund; AZL Balanced Index Strategy Fund; AZL[ ]Franklin Templeton Founding Strategy Plus Fund; AZL Fusion Conservative Fund; AZL International Index Fund; AZL Moderate Index Strategy Fund; AZL OCC Growth Fund; and PIMCO VIT Global Multi-Asset Portfolio. (Number of Accumulation Units in thousands)
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL AIM International Equity Fund 1.75% 12/31/2004 10.076 12.091 1 12/31/2005 12.091 13.826 2 12/31/2006 13.826 17.261 2 12/31/2007 17.261 19.440 3 12/31/2008 19.440 11.173 3 2.60% 12/31/2004 9.934 11.819 4 12/31/2005 11.819 13.401 8 12/31/2006 13.401 16.590 42 12/31/2007 16.590 18.525 14 12/31/2008 18.525 10.557 11 AZL BlackRock Capital Appreciation Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.939 1 12/31/2006 11.939 11.917 2 12/31/2007 11.917 12.988 2 12/31/2008 12.988 8.120 1 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.871 9 12/31/2006 11.871 11.749 21 12/31/2007 11.749 12.696 20 12/31/2008 12.696 7.870 18
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL BlackRock Growth Fund 1.75% 12/31/2004 10.100 10.726 0 12/31/2005 10.726 11.706 0 12/31/2006 11.706 11.584 1 12/31/2007 11.584 13.091 2 12/31/2008 13.091 5.055 6 2.60% 12/31/2004 9.958 10.485 0 12/31/2005 10.485 11.346 4 12/31/2006 11.346 11.133 15 12/31/2007 11.133 12.475 45 12/31/2008 12.475 4.776 21 AZL Columbia Mid Cap Value Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.053 2 12/31/2007 10.053 10.259 2 12/31/2008 10.259 4.823 4 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.996 3 12/31/2007 9.996 10.113 9 12/31/2008 10.113 4.715 12 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 68
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL Columbia Small Cap Value Fund 1.75% 12/31/2004 N/A 12.029 0 12/31/2005 12.029 12.222 1 12/31/2006 12.222 13.621 2 12/31/2007 13.621 12.281 4 12/31/2008 12.281 8.195 4 2.60% 12/31/2004 N/A 11.961 1 12/31/2005 11.961 12.050 7 12/31/2006 12.050 13.315 12 12/31/2007 13.315 11.903 11 12/31/2008 11.903 7.876 8 AZL Columbia Technology Fund 1.75% 12/31/2004 8.666 8.147 0 12/31/2005 8.147 8.062 0 12/31/2006 8.062 8.125 3 12/31/2007 8.125 9.800 3 12/31/2008 9.800 4.754 3 2.60% 12/31/2004 8.508 7.930 0 12/31/2005 7.930 7.782 2 12/31/2006 7.782 7.777 5 12/31/2007 7.777 9.300 7 12/31/2008 9.300 4.473 9 AZL Davis NY Venture Fund 1.75% 12/31/2004 9.890 10.744 0 12/31/2005 10.744 11.580 5 12/31/2006 11.580 12.963 14 12/31/2007 12.963 13.265 17 12/31/2008 13.265 7.755 27 2.60% 12/31/2004 9.710 10.459 11 12/31/2005 10.459 11.178 24 12/31/2006 11.178 12.407 64 12/31/2007 12.407 12.588 32 12/31/2008 12.588 7.297 50 AZL Dreyfus Equity Growth Fund 1.75% 12/31/2004 8.746 9.257 0 12/31/2005 9.257 9.512 0 12/31/2006 9.512 10.556 6 12/31/2007 10.556 11.280 6 12/31/2008 11.280 6.470 13 2.60% 12/31/2004 8.587 9.012 5 12/31/2005 9.012 9.182 6 12/31/2006 9.182 10.103 11 12/31/2007 10.103 10.704 27 12/31/2008 10.704 6.087 24
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL First Trust Target Double Play Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.571 0 12/31/2008 10.571 4.814 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.481 10 12/31/2008 10.481 4.732 10 AZL Franklin Small Cap Value Fund 1.75% 12/31/2004 12.688 15.346 0 12/31/2005 15.346 16.142 5 12/31/2006 16.142 18.307 3 12/31/2007 18.307 17.202 5 12/31/2008 17.202 11.201 4 2.60% 12/31/2004 12.616 15.130 3 12/31/2005 15.130 15.779 14 12/31/2006 15.779 17.745 20 12/31/2007 17.745 16.532 24 12/31/2008 16.532 10.673 22 AZL Fusion Balanced Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.605 0 12/31/2006 10.605 11.410 4 12/31/2007 11.410 12.009 12 12/31/2008 12.009 8.561 24 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.544 0 12/31/2006 10.544 11.249 42 12/31/2007 11.249 11.739 39 12/31/2008 11.739 8.298 38 AZL Fusion Growth Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.079 0 12/31/2006 11.079 12.216 0 12/31/2007 12.216 12.694 2 12/31/2008 12.694 7.616 5 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.016 58 12/31/2006 11.016 12.044 129 12/31/2007 12.044 12.408 144 12/31/2008 12.408 7.382 209 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 69
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL Fusion Moderate Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.783 1 12/31/2006 10.783 11.731 1 12/31/2007 11.731 12.280 1 12/31/2008 12.280 8.114 4 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.721 30 12/31/2006 10.721 11.566 68 12/31/2007 11.566 12.004 73 12/31/2008 12.004 7.865 66 AZL Jennison 20/20 Focus Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.217 0 12/31/2006 12.217 13.541 1 12/31/2007 13.541 14.733 1 12/31/2008 14.733 8.670 2 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.148 1 12/31/2006 12.148 13.350 15 12/31/2007 13.350 14.401 18 12/31/2008 14.401 8.403 41 AZL JPMorgan Large Cap Equity Fund 1.75% 12/31/2004 9.993 11.307 0 12/31/2005 11.307 11.808 3 12/31/2006 11.808 12.382 5 12/31/2007 12.382 11.413 6 12/31/2008 11.413 5.059 7 2.60% 12/31/2004 9.811 11.007 2 12/31/2005 11.007 11.397 14 12/31/2006 11.397 11.851 29 12/31/2007 11.851 10.830 28 12/31/2008 10.830 4.760 15 AZL JPMorgan U.S. Equity Fund 1.75% 12/31/2004 N/A 10.733 0 12/31/2005 10.733 11.123 1 12/31/2006 11.123 12.525 3 12/31/2007 12.525 12.774 3 12/31/2008 12.774 7.697 2 2.60% 12/31/2004N/A10.672 6 12/31/2005 10.672 10.966 11 12/31/2006 10.966 12.245 16 12/31/2007 12.245 12.382 13 12/31/2008 12.382 7.397 11
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL Money Market Fund 1.75% 12/31/2004 9.893 9.787 1 12/31/2005 9.787 9.865 5 12/31/2006 9.865 10.125 35 12/31/2007 10.125 10.426 26 12/31/2008 10.426 10.495 41 2.60% 12/31/2004 9.648 9.464 1 12/31/2005 9.464 9.459 13 12/31/2006 9.459 9.626 46 12/31/2007 9.626 9.828 55 12/31/2008 9.828 9.809 311 AZL NACM International Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.449 0 12/31/2008 9.449 5.115 2 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.395 0 12/31/2008 9.395 5.042 0 AZL OCC Opportunity Fund 1.75% 12/31/2004 12.731 13.480 0 12/31/2005 13.480 13.920 1 12/31/2006 13.920 15.276 2 12/31/2007 15.276 16.344 3 12/31/2008 16.344 8.487 2 2.60% 12/31/2004 12.551 13.177 2 12/31/2005 13.177 13.492 3 12/31/2006 13.492 14.682 38 12/31/2007 14.682 15.574 9 12/31/2008 15.574 8.019 5 AZL Oppenheimer Global Fund 1.75% 12/31/2004 N/A 11.445 0 12/31/2005 11.445 12.666 2 12/31/2006 12.666 14.475 5 12/31/2007 14.475 15.041 8 12/31/2008 15.041 8.712 13 2.60% 12/31/2004 N/A 11.380 6 12/31/2005 11.380 12.488 14 12/31/2006 12.488 14.150 21 12/31/2007 14.150 14.579 20 12/31/2008 14.579 8.373 21 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 70
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL Oppenheimer International Growth Fund 1.75% 12/31/2004 11.368 12.788 0 12/31/2005 12.788 14.348 0 12/31/2006 14.348 18.187 2 12/31/2007 18.187 20.066 4 12/31/2008 20.066 11.013 3 2.60% 12/31/2004 11.161 12.448 1 12/31/2005 12.448 13.849 3 12/31/2006 13.849 17.406 8 12/31/2007 17.406 19.041 16 12/31/2008 19.041 10.362 11 AZL PIMCO Fundamental IndexPLUS Total Return Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.055 0 12/31/2007 11.055 11.586 0 12/31/2008 11.586 6.733 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.992 0 12/31/2007 10.992 11.422 3 12/31/2008 11.422 6.581 7 AZL S&P 500 Index Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.859 0 12/31/2008 9.859 6.043 13 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.803 0 12/31/2008 9.803 5.958 13 AZL Schroder Emerging Markets Equity Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.447 5 12/31/2007 10.447 13.377 13 12/31/2008 13.377 6.324 19 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.388 51 12/31/2007 10.388 13.187 107 12/31/2008 13.187 6.182 16
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL Schroder International Small Cap Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.221 0 12/31/2008 9.221 4.931 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.169 0 12/31/2008 9.169 4.861 0 AZL Small Cap Stock Index Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.307 1 12/31/2008 9.307 6.316 1 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.254 6 12/31/2008 9.254 6.226 20 AZL TargetPLUS Balanced Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.093 0 12/31/2008 10.093 7.497 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.035 2 12/31/2008 10.035 7.391 2 AZL TargetPLUS Equity Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.487 1 12/31/2008 10.487 5.304 1 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.397 15 12/31/2008 10.397 5.214 16 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 71
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL TargetPLUS Growth Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.916 0 12/31/2008 9.916 5.907 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.859 1 12/31/2008 9.859 5.823 1 AZL TargetPLUS Moderate Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.056 0 12/31/2008 10.056 6.683 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.999 6 12/31/2008 9.999 6.588 2 AZL Turner Quantitative Small Cap Growth Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.099 1 12/31/2006 11.099 12.140 1 12/31/2007 12.140 12.653 1 12/31/2008 12.653 7.043 1 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.036 2 12/31/2006 11.036 11.969 4 12/31/2007 11.969 12.369 4 12/31/2008 12.369 6.827 6 AZL Van Kampen Comstock Fund 1.75% 12/31/2004 9.420 10.840 0 12/31/2005 10.840 11.070 0 12/31/2006 11.070 12.594 0 12/31/2007 12.594 12.100 2 12/31/2008 12.100 7.587 2 2.60% 12/31/2004 9.208 10.507 4 12/31/2005 10.507 10.639 14 12/31/2006 10.639 12.001 17 12/31/2007 12.001 11.432 58 12/31/2008 11.432 7.108 49
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL Van Kampen Equity and Income Fund 1.75% 12/31/2004 N/A 10.785 0 12/31/2005 10.785 11.313 0 12/31/2006 11.313 12.510 0 12/31/2007 12.510 12.668 0 12/31/2008 12.668 9.470 0 2.60% 12/31/2004 N/A 10.723 1 12/31/2005 10.723 11.154 7 12/31/2006 11.154 12.229 10 12/31/2007 12.229 12.279 8 12/31/2008 12.279 9.101 8 AZL Van Kampen Global Franchise Fund 1.75% 12/31/2004 12.245 13.501 0 12/31/2005 13.501 14.813 4 12/31/2006 14.813 17.650 3 12/31/2007 17.650 19.045 3 12/31/2008 19.045 13.369 3 2.60% 12/31/2004 12.176 13.310 1 12/31/2005 13.310 14.480 10 12/31/2006 14.480 17.108 23 12/31/2007 17.108 18.303 34 12/31/2008 18.303 12.739 31 AZL Van Kampen Global Real Estate Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.024 2 12/31/2007 12.024 10.788 3 12/31/2008 10.788 5.742 3 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.955 44 12/31/2007 11.955 10.636 18 12/31/2008 10.636 5.613 15 AZL Van Kampen Growth and Income Fund 1.75% 12/31/2004 10.124 11.323 0 12/31/2005 11.323 12.155 3 12/31/2006 12.155 13.843 1 12/31/2007 13.843 13.961 2 12/31/2008 13.961 9.211 2 2.60% 12/31/2004 9.897 10.975 0 12/31/2005 10.975 11.681 6 12/31/2006 11.681 13.192 9 12/31/2007 13.192 13.191 6 12/31/2008 13.191 8.629 6 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 72
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL Van Kampen Mid Cap Growth Fund 1.75% 12/31/2004 8.923 10.629 0 12/31/2005 10.629 12.278 1 12/31/2006 12.278 13.176 1 12/31/2007 13.176 15.819 10 12/31/2008 15.819 8.002 10 2.60% 12/31/2004 8.723 10.303 7 12/31/2005 10.303 11.800 10 12/31/2006 11.800 12.556 17 12/31/2007 12.556 14.946 97 12/31/2008 14.946 7.497 14 BlackRock Global Allocation V.I. Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A N/A N/A 12/31/2008 N/A 7.901 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A N/A N/A 12/31/2008 N/A 7.856 0 Davis VA Financial Portfolio 1.75% 12/31/2004 9.782 10.603 0 12/31/2005 10.603 11.293 0 12/31/2006 11.293 13.151 1 12/31/2007 13.151 12.140 1 12/31/2008 12.140 6.399 1 2.60% 12/31/2004 9.539 10.253 0 12/31/2005 10.253 10.828 4 12/31/2006 10.828 12.503 5 12/31/2007 12.503 11.444 6 12/31/2008 11.444 5.980 2 Franklin Global Real Estate Securities Fund 1.75% 12/31/2004 37.683 48.802 0 12/31/2005 48.802 54.420 0 12/31/2006 54.420 64.487 0 12/31/2007 64.487 50.143 1 12/31/2008 50.143 28.384 0 2.60% 12/31/2004 33.235 42.676 1 12/31/2005 42.676 47.187 4 12/31/2006 47.187 55.444 5 12/31/2007 55.444 42.745 4 12/31/2008 42.745 23.991 3
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
Franklin Growth and Income Securities Fund 1.75% 12/31/2004 28.555 31.037 0 12/31/2005 31.037 31.572 0 12/31/2006 31.572 36.224 1 12/31/2007 36.224 34.272 4 12/31/2008 34.272 21.841 3 2.60% 12/31/2004 25.185 27.141 1 12/31/2005 27.141 27.376 4 12/31/2006 27.376 31.144 6 12/31/2007 31.144 29.216 6 12/31/2008 29.216 18.461 6 Franklin High Income Securities Fund 1.75% 12/31/2004 19.995 21.587 1 12/31/2005 21.587 21.916 6 12/31/2006 21.916 23.554 5 12/31/2007 23.554 23.772 8 12/31/2008 23.772 17.897 8 2.60% 12/31/2004 17.635 18.877 2 12/31/2005 18.877 19.004 5 12/31/2006 19.004 20.251 7 12/31/2007 20.251 20.264 4 12/31/2008 20.264 15.127 5 Franklin Income Securities Fund 1.75% 12/31/2004 34.315 38.390 0 12/31/2005 38.390 38.331 4 12/31/2006 38.331 44.538 7 12/31/2007 44.538 45.405 10 12/31/2008 45.405 31.385 11 2.60% 12/31/2004 30.265 33.571 9 12/31/2005 33.571 33.237 25 12/31/2006 33.237 38.293 38 12/31/2007 38.293 38.706 50 12/31/2008 38.706 26.527 46 Franklin Large Cap Growth Securities Fund 1.75% 12/31/2004 16.894 17.917 0 12/31/2005 17.917 17.794 1 12/31/2006 17.794 19.391 5 12/31/2007 19.391 20.240 10 12/31/2008 20.240 13.021 9 2.60% 12/31/2004 15.828 16.644 9 12/31/2005 16.644 16.389 12 12/31/2006 16.389 17.710 25 12/31/2007 17.710 18.328 23 12/31/2008 18.328 11.691 15 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 73
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
Franklin Rising Dividends Securities Fund 1.75% 12/31/2004 28.766 31.374 0 12/31/2005 31.374 31.888 1 12/31/2006 31.888 36.701 2 12/31/2007 36.701 35.092 2 12/31/2008 35.092 25.137 2 2.60% 12/31/2004 25.989 28.105 5 12/31/2005 28.105 28.323 11 12/31/2006 28.323 32.324 14 12/31/2007 32.324 30.644 14 12/31/2008 30.644 21.765 8 Franklin Small Cap Value Securities Fund 1.75% 12/31/2004 12.198 14.832 0 12/31/2005 14.832 15.853 0 12/31/2006 15.853 18.224 0 12/31/2007 18.224 17.480 0 12/31/2008 17.480 11.505 0 2.60% 12/31/2004 11.624 14.014 1 12/31/2005 14.014 14.852 4 12/31/2006 14.852 16.929 4 12/31/2007 16.929 16.100 3 12/31/2008 16.100 10.507 4 Franklin Small-Mid Cap Growth Securities Fund 1.75% 12/31/2004 18.430 20.187 0 12/31/2005 20.187 20.788 1 12/31/2006 20.788 22.204 1 12/31/2007 22.204 24.269 1 12/31/2008 24.269 13.713 1 2.60% 12/31/2004 17.193 18.673 2 12/31/2005 18.673 19.066 4 12/31/2006 19.066 20.193 6 12/31/2007 20.193 21.883 7 12/31/2008 21.883 12.260 2 Franklin Templeton VIP Founding Funds Allocation Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.230 0 12/31/2008 9.230 5.816 2 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.191 1 12/31/2008 9.191 5.743 9
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
Franklin U.S. Government Fund 1.75% 12/31/2004 22.342 22.717 1 12/31/2005 22.717 22.860 4 12/31/2006 22.860 23.367 5 12/31/2007 23.367 24.476 6 12/31/2008 24.476 25.876 6 2.60% 12/31/2004 19.705 19.865 4 12/31/2005 19.865 19.822 7 12/31/2006 19.822 20.090 7 12/31/2007 20.090 20.865 5 12/31/2008 20.865 21.871 7 Franklin Zero Coupon Fund 2010 1.75% 12/31/2004 33.847 34.827 0 12/31/2005 34.827 34.750 0 12/31/2006 34.750 35.075 0 12/31/2007 35.075 37.434 0 12/31/2008 37.434 39.541 0 2.60% 12/31/2004 29.851 30.455 0 12/31/2005 30.455 30.131 1 12/31/2006 30.131 30.157 1 12/31/2007 30.157 31.911 1 12/31/2008 31.911 33.421 1 Mutual Global Discovery Securities Fund 1.75% 12/31/2004 16.325 18.959 0 12/31/2005 18.959 21.606 2 12/31/2006 21.606 26.127 7 12/31/2007 26.127 28.713 14 12/31/2008 28.713 20.186 15 2.60% 12/31/2004 15.362 17.690 17 12/31/2005 17.690 19.989 30 12/31/2006 19.989 23.968 32 12/31/2007 23.968 26.116 44 12/31/2008 26.116 18.204 38 Mutual Shares Securities Fund 1.75% 12/31/2004 16.344 18.088 0 12/31/2005 18.088 19.652 1 12/31/2006 19.652 22.861 7 12/31/2007 22.861 23.244 18 12/31/2008 23.244 14.364 18 2.60% 12/31/2004 15.380 16.877 6 12/31/2005 16.877 18.181 24 12/31/2006 18.181 20.972 70 12/31/2007 20.972 21.141 87 12/31/2008 21.141 12.954 67 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 74
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
OpCap Mid Cap Portfolio 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.986 0 12/31/2007 9.986 10.521 1 12/31/2008 10.521 6.030 2 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.929 0 12/31/2007 9.929 10.372 10 12/31/2008 10.372 5.894 10 Oppenheimer High Income Fund/VA 1.75% 12/31/2004 11.049 11.831 0 12/31/2005 11.831 11.895 0 12/31/2006 11.895 12.791 0 12/31/2007 12.791 12.555 0 12/31/2008 12.555 2.631 0 2.60% 12/31/2004 10.776 11.440 0 12/31/2005 11.440 11.405 0 12/31/2006 11.405 12.160 0 12/31/2007 12.160 11.834 0 12/31/2008 11.834 2.459 0 PIMCO VIT All Asset Portfolio 1.75% 12/31/2004 N/A 11.850 0 12/31/2005 11.850 12.370 7 12/31/2006 12.370 12.723 8 12/31/2007 12.723 13.542 8 12/31/2008 13.542 11.198 13 2.60% 12/31/2004 N/A 11.783 3 12/31/2005 11.783 12.196 7 12/31/2006 12.196 12.438 7 12/31/2007 12.438 13.126 3 12/31/2008 13.126 10.762 3 PIMCO VIT CommodityRealReturn Strategy Portfolio 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.011 1 12/31/2006 11.011 10.485 3 12/31/2007 10.485 12.696 2 12/31/2008 12.696 7.012 3 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.948 0 12/31/2006 10.948 10.337 4 12/31/2007 10.337 12.411 11 12/31/2008 12.411 6.797 12
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
PIMCO VIT Emerging Markets Bond Portfolio 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.902 4 12/31/2006 10.902 11.707 5 12/31/2007 11.707 12.172 11 12/31/2008 12.172 10.215 11 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.840 0 12/31/2006 10.840 11.542 1 12/31/2007 11.542 11.899 1 12/31/2008 11.899 9.901 2 PIMCO VIT Global Bond Portfolio (Unhedged) 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.327 1 12/31/2006 9.327 9.592 2 12/31/2007 9.592 10.343 2 12/31/2008 10.343 10.077 10 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.274 0 12/31/2006 9.274 9.457 0 12/31/2007 9.457 10.111 0 12/31/2008 10.111 9.767 0 PIMCO VIT High Yield Portfolio 1.75% 12/31/2004 11.464 12.341 1 12/31/2005 12.341 12.628 1 12/31/2006 12.628 13.540 2 12/31/2007 13.540 13.771 3 12/31/2008 13.771 10.346 7 2.60% 12/31/2004 11.180 11.934 3 12/31/2005 11.934 12.108 6 12/31/2006 12.108 12.872 8 12/31/2007 12.872 12.980 4 12/31/2008 12.980 9.669 4 PIMCO VIT Real Return Portfolio 1.75% 12/31/2004 10.447 11.181 0 12/31/2005 11.181 11.218 9 12/31/2006 11.218 11.103 8 12/31/2007 11.103 12.073 3 12/31/2008 12.073 11.026 6 2.60% 12/31/2004 10.388 11.023 6 12/31/2005 11.023 10.966 11 12/31/2006 10.966 10.762 12 12/31/2007 10.762 11.603 9 12/31/2008 11.603 10.507 9 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 75
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
PIMCO VIT StocksPLUS Growth and Income Portfolio 1.75% 12/31/2004 N/A 9.432 0 12/31/2005 9.432 9.592 0 12/31/2006 9.592 10.831 0 12/31/2007 10.831 11.372 0 12/31/2008 11.372 6.411 0 2.60% 12/31/2004 N/A 9.121 0 12/31/2005 9.121 9.197 0 12/31/2006 9.197 10.297 0 12/31/2007 10.297 10.719 0 12/31/2008 10.719 5.992 0 PIMCO VIT Total Return Portfolio 1.75% 12/31/2004 11.782 12.143 2 12/31/2005 12.143 12.226 14 12/31/2006 12.226 12.477 15 12/31/2007 12.477 13.333 11 12/31/2008 13.333 13.730 16 2.60% 12/31/2004 11.490 11.742 2 12/31/2005 11.742 11.722 4 12/31/2006 11.722 11.862 7 12/31/2007 11.862 12.568 8 12/31/2008 12.568 12.833 11 SP International Growth Portfolio 1.75% 12/31/2004 5.538 6.319 0 12/31/2005 6.319 7.190 0 12/31/2006 7.190 8.491 0 12/31/2007 8.491 9.938 0 12/31/2008 9.938 4.835 0 2.60% 12/31/2004 5.396 6.105 0 12/31/2005 6.105 6.888 0 12/31/2006 6.888 8.066 0 12/31/2007 8.066 9.360 3 12/31/2008 9.360 4.515 3
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
SP Strategic Partners Focused Growth Portfolio 1.75% 12/31/2004 5.938 6.412 0 12/31/2005 6.412 7.235 0 12/31/2006 7.235 7.031 0 12/31/2007 7.031 7.923 0 12/31/2008 7.923 4.784 0 2.60% 12/31/2004 5.786 6.195 1 12/31/2005 6.195 6.932 3 12/31/2006 6.932 6.679 2 12/31/2007 6.679 7.462 0 12/31/2008 7.462 4.468 0 Templeton Foreign Securities Fund 1.75% 12/31/2004 17.841 20.779 0 12/31/2005 20.779 22.496 1 12/31/2006 22.496 26.847 1 12/31/2007 26.847 30.456 1 12/31/2008 30.456 17.843 1 2.60% 12/31/2004 16.120 18.615 1 12/31/2005 18.615 19.983 3 12/31/2006 19.983 23.647 7 12/31/2007 23.647 26.597 7 12/31/2008 26.597 15.450 5 Templeton Global Bond Securities Fund 1.75% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 30.371 0 12/31/2008 30.371 31.695 0 2.60% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 26.004 2 12/31/2008 26.004 26.907 5 Templeton Growth Securities Fund 1.75% 12/31/2004 19.187 21.874 1 12/31/2005 21.874 23.401 1 12/31/2006 23.401 28.011 4 12/31/2007 28.011 28.169 7 12/31/2008 28.169 15.964 7 2.60% 12/31/2004 17.652 19.954 4 12/31/2005 19.954 21.167 14 12/31/2006 21.167 25.123 40 12/31/2007 25.123 25.049 53 12/31/2008 25.049 14.076 46 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 76 APPENDIX C - GMIB AND GPWB VALUE CALCULATION EXAMPLES o You purchase a Contract with an initial Purchase Payment of $100,000. You make no additional Purchase Payments and are the only Owner. o The MAV on the ninth Contract Anniversary is $180,000. o You take a partial withdrawal of $20,000 in the tenth Contract Year when the Contract Value (before the partial withdrawal) is $160,000. The withdrawal charge period on the initial Purchase Payment has expired so there is no withdrawal charge on this partial withdrawal. o You take no other partial withdrawals. o The Contract Value on the tenth Contract Anniversary is $140,000. o You have not yet reached your 80th birthday as of the tenth Contract Anniversary. NOTE: The M&E charges are higher for Contracts with the Enhanced GBP than for Contracts with the Traditional GBP. If the differences in these charges were reflected in the assumptions for these examples, the Contract Values would be lower for Contracts with the Enhanced GBP than for Contracts with the Traditional GBP. TRADITIONAL GBP EXAMPLE: On the tenth Contract Anniversary the Traditional GMIB value is equal to: Total Purchase Payments:..........................................$100,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $100,000 =.....................- 12,500 Traditional GMIB value as of the tenth Contract Anniversary:...$ 87,500 The Traditional GMIB value is less than the Contract Value and, therefore, GMIB Payments would not be available. However, fixed Traditional Annuity Payments based on the $140,000 Contract Value would be available. GPWB Payments would also be available. ENHANCED GBP EXAMPLE: On the tenth Contract Anniversary, the Enhanced GMIB value is equal to 1 or 2: 1)The 7% AIA: Initial Purchase Payment.......................................$100,000.00 Increased by 7% on the first Contract Anniversary......x 1.07 ......................................................$107,000.00 Increased by 7% on the second Contract Anniversary.....x 1.07 ......................................................$114,490.00 Increased by 7% on the third Contract Anniversary......x 1.07 ......................................................$122,504.30 On the ninth Contract Anniversary the 7% AIA is.............$183,845.92 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $183,845.92 =..............- 22,980.74 ......................................................$160,865.18 Increased by 7% on the tenth Contract Anniversary......x 1.07 ......................................................$172,125.74 Verifying that the 7% AIA is within the maximum limit: 2 times Purchase Payments: 2 x $100,000 =.........$200,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $200,000 =.......- 25,000 $175,000 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 77 2)The MAV: The MAV on the ninth Contract Anniversary.........................$180,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $180,000 =....................- 22,500 .........................................................$157,500 The 7% AIA is greater than the MAV, therefore, the Enhanced GMIB value on the tenth Contract Anniversary is equal to $172,125.74. However, it is possible that fixed Traditional Annuity Payments based on the $140,000 Contract Value may be more than GMIB Payments based on the 7% AIA depending on the current interest rates available at the time of annuitization. GPWB Payments would also be available, but GPWB Payments would be based on the greater of the MAV ($157,500) or the 5% AIA. The 5% AIA: Initial Purchase Payment.......................................$100,000.00 Increased by 5% on the first Contract Anniversary......x 1.05 ......................................................$105,000.00 Increased by 5% on the second Contract Anniversary.....x 1.05 ......................................................$110,250.00 Increased by 5% on the third Contract Anniversary......x 1.05 ......................................................$115,762.50 On the ninth Contract Anniversary the 5% AIA is.............$155,132.82 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $155,132.80 =..............- 19,391.60 ......................................................$135,741.22 Increased by 5% on the tenth Contract Anniversary......x 1.05 ......................................................$142,528.28 Verifying that the 5% AIA is within the maximum limit: 2 times Purchase Payments made in the first five Contract Years: 2 x $100,000 =...........................$200,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $200,000 =......- 25,000 $175,000 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 78 APPENDIX D - DEATH BENEFIT CALCULATION EXAMPLES o You purchase a Contract with an initial Purchase Payment of $100,000. You are the only Owner and are age 69 or younger on the Issue Date. You make no additional Purchase Payments. o The MAV on the ninth Contract Anniversary is $180,000. o You take a partial withdrawal of $20,000 in the tenth Contract Year when the Contract Value on the date of (but before the partial withdrawal) is $160,000. The withdrawal charge period on the initial Purchase Payment has expired so there is no withdrawal charge on this partial withdrawal. You take no other partial withdrawals. o The Contract Value on the tenth Contract Anniversary is $140,000. NOTE: We calculate the MAV only for Contracts with the Enhanced GMDB. The M&E charges are higher for Contracts with the Enhanced GMDB than for Contracts with the Traditional GMDB. If the differences in these charges were reflected above, the Contract Values would be lower for Contracts with the Enhanced GMDB than for Contracts with the Traditional GMDB. IF YOU SELECTED THE TRADITIONAL GMDB: We calculate the death benefit on the tenth Contract Anniversary as the greater of: 1)Contract Value............................................................ $140,000 2)The Traditional GMDB value: Total Purchase Payments received..................................$100,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $100,000 =...........- 12,500 .............................................................$ 87,500 Therefore, the death benefit that would be payable as of the tenth Contract Anniversary is the $140,000 Contract Value. IF YOU SELECTED THE ENHANCED GMDB: We calculate the death benefit on the tenth Contract Anniversary as the greater of: 1)Contract Value............................................................ $140,000 2)The Enhanced GMDB value, which is the MAV: The MAV on the ninth Contract Anniversary.........................$180,000 Reduced proportionately by the percentage of Contract Value withdrawn: ($20,000 / $160,000) = 0.125 x $180,000 =.....................- 22,500 .............................................................$157,500 Therefore, the death benefit that would be payable as of the tenth Contract Anniversary is the 157,500 MAV. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 79 APPENDIX E - WITHDRAWAL CHARGE EXAMPLES All of the following examples assume you purchase a Contract with an initial Purchase Payment of $100,000 and you make no additional Purchase Payments. FULL WITHDRAWAL WHEN THE CONTRACT VALUE HAS DECLINED DUE TO A LOSS IN YOUR SELECTED INVESTMENT OPTIONS: o You take a full withdrawal in the second Contract Year when the Contract Value is $90,000 and the withdrawal charge is 7%. You have taken no other withdrawals from the Contract. o There are no Purchase Payments that are beyond the withdrawal charge period. We assess the withdrawal charge against the entire Withdrawal Charge Basis. We calculate the withdrawal charge as follows: The Withdrawal Charge Basis is equal to total Purchase Payments, less any Purchase Payments withdrawn, less any withdrawal charges = $100,000 - $0 - $0 = $100,000 Multiplied by the withdrawal charge.......................x 7% .....................................................$ 7,000 Therefore, we would withdraw $90,000 from the Contract and pay you $83,000 ($90,000 less the $7,000 withdrawal charge). PARTIAL WITHDRAWAL FOLLOWED BY A FULL WITHDRAWAL: o You take a partial withdrawal of $10,000 in the first Contract Year when the withdrawal charge is 8%. The withdrawal is subject to a withdrawal charge and will reduce the Withdrawal Charge Basis. We calculate the withdrawal charge for the partial withdrawal as follows: The amount of the withdrawal.................................$10,000 Divided by (1 minus the withdrawal charge percentage){divide} 0.92 Total amount withdrawn.......................................$10,870 Total withdrawal charge (amount withdrawn minus the amount requested) = $10,870 - $10,000 =.....................................$ 870 Therefore, we would withdraw $10,870 from the Contract and pay you $10,000. o Continuing the example, assume you take a full withdrawal in the second Contract Year when the Contract Value is $90,000 and the withdrawal charge is 7%. At this time there are no Purchase Payments that are beyond the withdrawal charge period. We will assess the withdrawal charge against the entire Withdrawal Charge Basis. We calculate the withdrawal charge for the full withdrawal as follows: The Withdrawal Charge Basis is equal to total Purchase Payments, less any Purchase Payments withdrawn, less any withdrawal charges = $100,000 - $10,000 - $870 = $89,130 Multiplied by the withdrawal charge........................x 7% .......................................................$ 6,239 Therefore, upon the full withdrawal, we would withdraw $90,000 from the Contract and pay you $83,761 ($90,000 less the $6,239 withdrawal charge). In this example, your total distributions from the Contract after deducting the withdrawal charges are $93,761. The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 80 FOR SERVICE OR MORE INFORMATION In order to help you understand how your Contract Values vary over time and under different sets of assumptions, we will provide you with certain personalized illustrations upon request and free of charge. You can request illustrations by contacting your registered representative. Illustrations demonstrate how your Contract Value, cash surrender value, death benefits and (if applicable) the GMIB and/or GPWB values change based on the investment experience of the Investment Options or the hypothetical rate of return. The illustrations are hypothetical and may not be used to project or predict investment results. You can review and copy information about us, the Separate Account, the prospectus and the SAI at the SEC's Public Reference Room in Washington, D.C. You may obtain information about the operation of the Public Reference Room by calling (202) 551-8090. The SEC also maintains a website (http://www.sec.gov). The prospectus, the SAI and other information about the Contract are available on the EDGAR database on the SEC's website. If you do not have access to the website you can get copies of information from the website upon payment of a duplication fee by writing to: PUBLIC REFERENCE SECTION OF THE COMMISSION 100 F Street, NE Washington, DC 20549 You can contact us at: ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK One Chase Manhattan Plaza, 37[th] Floor New York, NY 10005-1423 (800) 624-0197 If you need service (such as changes in Contract information, inquiry into Contract Values, to request a withdrawal, etc.), please contact our Service Center: ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK P.O. Box 561 Minneapolis, MN 55440-0561 (800) 624-0197 The Allianz Charter[{R}] II NY Variable Annuity Contract Prospectus - April 27, 2009 PART B - SAI 1 STATEMENT OF ADDITIONAL INFORMATION ALLIANZ CHARTER[TM] II NEW YORK INDIVIDUAL FLEXIBLE PURCHASE PAYMENT VARIABLE DEFERRED ANNUITY CONTRACT ISSUED BY ALLIANZ LIFE(R) OF NY VARIABLE ACCOUNT C (THE SEPARATE ACCOUNT) AND ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK (ALLIANZ LIFE OF NEW YORK, WE, US, OUR) APRIL 27, 2009 This is not a prospectus. This Statement of Additional Information (SAI) should be read in conjunction with the prospectus for the Contract, which is dated the same date as this SAI. Definitions of capitalized terms can be found in the glossary in the prospectus. The prospectus is incorporated in this SAI by reference. The prospectus for the Contract concisely sets forth information that a prospective investor ought to know before investing. For a copy of the Contract prospectus, call or write us at: ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK One Chase Manhattan Plaza, 37th Floor New York, NY 10005-1423 (800) 624-0197 TABLE OF CONTENTS ALLIANZ LIFE OF NEW YORK...........................2 EXPERTS............................................2 LEGAL OPINIONS.....................................2 DISTRIBUTOR........................................2 REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE..3 FEDERAL TAX STATUS.................................3 General............................................3 Diversification....................................4 Owner Control......................................4 Contracts Owned by Non-Individuals.................5 Income Tax Withholding.............................5 Required Distributions.............................5 Qualified Contracts................................6 ANNUITY PROVISIONS.................................6 Annuity Units/Calculating Variable Annuity Payments7 MORTALITY AND EXPENSE RISK GUARANTEE...............7 ENHANCED GMIB/GPWB VALUES FOR CONTRACTS ISSUED ON OR BEFORE APRIL 28, 2006........................7 Calculating the AIAs...............................8 Calculating the MAV................................8 FINANCIAL STATEMENTS...............................9 APPENDIX - CONDENSED FINANCIAL INFORMATION........10 CHT2NYSAI-0409 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 2 ALLIANZ LIFE OF NEW YORK Allianz Life of New York is a stock life insurance company organized under the laws of the state of New York. Before January 1, 2003, Allianz Life of New York was known as Preferred Life Insurance Company of New York. We are a subsidiary of Allianz Life Insurance Company of North America (Allianz Life), which is also a stock life Insurance company. Allianz Life is a subsidiary of Allianz of America, Inc. (AZOA), a financial holding company. AZOA is a subsidiary of Allianz SE, a provider of integrated financial services. Allianz SE is headquartered in Munich, Germany, and has sales outlets throughout the world. We offer fixed and variable annuities, individual and group life insurance, and long-term care insurance. Allianz Life of New York does not have a separate custodian for the assets owned through the Separate Account. Most mutual fund shares are not in certificated form, and as such, Allianz Life of New York in effect acts as self custodian for the non-certificated shares we own through the Separate Account. EXPERTS The financial statements of Allianz Life of NY Variable Account C as of and for the year or period ended December 31, 2008 (including the statements of changes in net assets for each of the years or periods in the two year period then ended and the financial highlights for each of the periods presented) and the financial statements and supplemental schedules of Allianz Life Insurance Company of New York as of December 31, 2008 and 2007 and for each of the years in the three-year period ended December 31, 2008, included in this SAI in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2008 financial statements and supplemental schedules of Allianz Life of New York refers to an adoption of Statement of Financial Accounting Standards No. 157, Fair Value Measurements, effective January 1, 2008. The principal business address of KPMG LLP is 4200 Wells Fargo Center, Minneapolis, MN. LEGAL OPINIONS Stewart D. Gregg, Senior Securities Counsel of Allianz Life of New York, has provided legal advice on certain matters in connection with the issuance of the Contracts. DISTRIBUTOR Allianz Life Financial Services, LLC (Allianz Life Financial (previously USAllianz Investor Services, LLC)), a wholly-owned subsidiary of Allianz Life Insurance Company of North America, acts as the distributor. Allianz Life Financial does not sell the Contracts on a retail basis. Rather, Allianz Life Financial enters into selling agreements with other third-party broker/dealers registered under the Securities Exchange Act of 1934 (selling firms) for the sale of the Contracts. The Contracts are offered to the public on a continuous basis. We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering. We pay commissions for sales of the Contracts. Allianz Life Financial passes through most of the commissions it receives to selling firms for their sales. Allianz Life Financial received sales compensation with respect to the Contracts issued under Allianz Life of NY Variable Account C in the following amounts during the last three calendar years:
CALENDAR YEAR AGGREGATE AMOUNT OF AGGREGATE AMOUNT OF COMMISSIONS RETAINED BY ALLIANZ LIFE FINANCIAL AFTER PAYMENTS TO COMMISSIONS PAID TO SELLING FIRMS ALLIANZ LIFE FINANCIAL 2006 $5,508,561.44 $0 2007 $5,838,450.54 $0 2008 $7,945,634.64 $0
We may fund Allianz Life Financial's operating and other expenses including: overhead; legal and accounting fees; registered representative training; deferred compensation and insurance benefits for registered representatives; compensation for the Allianz Life Financial management team; and other expenses associated with the Contracts. We also pay for Allianz Life Financial's operating and other expenses, including overhead, legal and accounting fees. As described above, Allianz Life Financial sells its Contracts primarily through "wholesaling," in which Allianz Life Financial sells contracts through a large group of mostly non-affiliated broker/dealer firms. Currently, Allianz Life Financial has agreements with approximately 1,112 retail broker/dealers to sell its Contracts. All of the broker/dealer firms except one are non-affiliated. As described in the prospectus, Allianz Life Financial may pay marketing support The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 3 payments to certain of these firms for providing marketing support services in the sale of the Contracts. Currently, Allianz Life Financial makes marketing support payments to approximately 47 firms. These payments vary in amount. In 2008, the five firms receiving the largest payments, ranging from $522,495 to $2,345,992, are listed below. Marketing support payments may also be made to managers of Investment Options or their affiliates for providing Investment Option information and marketing support. FIRM NAME ---------------------------------- 1 LPL Financial Network 2 AIG Advisor Group 3 National Planning Holdings 4 H D Vest Investment Services 5 Wachovia Securities REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE We may reduce or eliminate the amount of the withdrawal charge on the Contracts when Contract sales are made to individuals or to a group of individuals in a manner that results in savings of sales expenses. We will determine the entitlement to a reduction of the withdrawal charge after examination of the following factors: o the size of the group; o the total amount of Purchase Payments expected to be received from the group; o the nature of the group for which the Contracts are purchased, and the persistency expected in that group (for example, the expectation that the Owners will continue to hold the Contracts for a certain period of time); o the purpose for which the Contracts are purchased and whether that purpose makes it likely that expenses will be reduced; and o any other circumstances which we believe to be relevant to determining whether reduced sales or administrative expenses may be expected. None of these reductions are contractually guaranteed. We may eliminate the withdrawal charge when the Contracts are issued to an officer, director or employee of Allianz Life of New York or any of its affiliates. We may reduce or eliminate the withdrawal charge when the Contract is sold by a registered representative appointed with Allianz Life of New York to any members of his or her immediate family and the commission is waived. In no event will any reduction or elimination of the withdrawal charge be permitted where the reduction or elimination will be unfairly discriminatory to any person. FEDERAL TAX STATUS NOTE: The following description is based upon our understanding of current federal income tax law applicable to annuities in general. We cannot predict the probability that any changes in such laws will be made. Purchasers are cautioned to seek competent tax advice regarding the possibility of such changes. We do not guarantee the tax status of the Contracts. Purchasers bear the complete risk that the Contracts may not be treated as "annuity contracts" under federal income tax laws. It should be further understood that the following discussion is not exhaustive and that special rules not described herein may be applicable in certain situations. Moreover, no attempt has been made to consider any applicable state or other tax laws. GENERAL Section 72 of the Internal Revenue Code of 1986, as amended (the Code) governs taxation of annuities in general. An Owner is generally not taxed on increases in the value of a Contract until distribution occurs, either in the form of a lump sum payment or as Annuity Payments. For a lump sum payment received as a full withdrawal (total redemption) or death benefit, the recipient is taxed on the portion of the payment that exceeds the cost basis of the Contract (your investment). For Non-Qualified Contracts, this cost basis is generally the Purchase Payments, while for Qualified Contracts there may be no cost basis. The taxable portion of the lump sum payment is taxed at ordinary income tax rates. A partial withdrawal results in tax on any gain in the Contract (for example, the difference, if any, between the Contract Value immediately before the withdrawal, unreduced by any charges, and the Contract's cash basis). Lump sum withdrawals, whether partial or full, may also be subject to a federal penalty tax equal to 10% of the taxable amount. For Annuity Payments, the portion of each payment included in income equals the excess of the payment over the exclusion amount. The exclusion amount for Annuity Payments based on a variable Annuity Option is determined by The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 4 dividing the investment in the Contract (adjusted for any period certain or refund guarantee) by the number of years over which the annuity is expected to be paid (which is determined by Treasury Regulations). The exclusion amount for Annuity Payments based on a fixed Annuity Option is determined by multiplying the Annuity Payment by the ratio that the investment in the Contract (adjusted for any period certain or refund guarantee) bears to the expected return under the Contract. Annuity Payments received after the investment in the Contract has been recovered (for example, when the total of the excludable amounts equal the investment in the Contract) are fully taxable. The taxable portion of an Annuity Payment is taxed at ordinary income tax rates. Partial Annuitizations are taxed as partial withdrawals, not as Annuity Payments, until the entire Contract Value has been applied to Annuity Payments. For certain types of Qualified Contracts there may be no cost basis in the Contract within the meaning of Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts should seek competent financial advice about the tax consequences of any distributions. We are taxed as a life insurance company under the Code. For federal income tax purposes, the Separate Account is not a separate entity from us, and its operations form a part of Allianz Life of New York. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Contract. We have the right to modify the Contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity Owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend the above discussion as tax advice. DIVERSIFICATION Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable annuity contracts. The Code provides that a variable annuity contract will not be treated as an annuity contract for any period (and any subsequent period) for which the investments are not adequately diversified in accordance with regulations prescribed by the United States Treasury Department (Treasury Department). Disqualification of the Contract as an annuity contract would result in the imposition of federal income tax to the Owner with respect to earnings allocable to the Contract before the receipt of Annuity Payments under the Contract. The Code contains a safe harbor provision which provides that annuity contracts, such as the Contract, meet the diversification requirements if, as of the end of each quarter, the underlying assets meet the diversification standards for a regulated investment company and no more than 55% of the total assets consist of cash, cash items, U.S. government securities and securities of other regulated investment companies. On March 2, 1989, the Treasury Department issued regulations (Treas. Reg. 1.817- 5) which established diversification requirements for the Investment Options underlying variable contracts such as the Contract. The regulations amplify the diversification requirements for variable contracts set forth in the Code and provide an alternative to the safe harbor provision described above. Under these regulations, an Investment Option will be deemed adequately diversified if: o no more than 55% of the value of the total assets of the Investment Option is represented by any one investment; o no more than 70% of the value of the total assets of the Investment Option is represented by any two investments; o no more than 80% of the value of the total assets of the Investment Option is represented by any three investments; and o no more than 90% of the value of the total assets of the Investment Option is represented by any four investments. The Code provides that for purposes of determining whether or not the diversification standards imposed on the underlying assets of variable contracts by Section 817(h) of the Code have been met, "each United States government agency or instrumentality shall be treated as a separate issuer." We intend that all Investment Options underlying the Contracts will be managed by the investment advisers in such a manner as to comply with these diversification requirements. OWNER CONTROL The Treasury Department has indicated that the diversification regulations do not provide guidance regarding the circumstances in which Owner control of the investments of the Separate Account will cause the Owner to be treated as the owner of the assets of the Separate Account, thereby resulting in the loss of favorable tax treatment for the Contract. In certain circumstances, owners of variable annuity contracts have been considered for federal income tax purposes to be the owners of the assets of the separate account, supporting their contracts due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 5 attributable to the variable account assets. There is little guidance in this area, and some features of our Contracts, such as the flexibility of an Owner to allocate Purchase Payments and transfer amounts among the investment divisions of the Separate Account, have not been explicitly addressed in published rulings. While we believe that the Contracts do not give Owners investment control over Separate Account assets, we reserve the right to modify the Contracts as necessary to prevent an Owner from being treated as the owner of the Separate Account assets supporting the Contract. CONTRACTS OWNED BY NON-INDIVIDUALS Under Section 72(u) of the Code, the investment earnings on Purchase Payments for the Contracts will be taxed currently to the Owner if the Owner is a non- individual, for example, a corporation or certain other entities. Such Contracts generally will not be treated as annuities for federal income tax purposes. However, this treatment is not applied to Contracts held by a trust or other entity as an agent for an individual or to Contracts held by qualified retirement plans. Purchasers should consult a tax adviser before purchasing a Contract to be owned by a non-individual. INCOME TAX WITHHOLDING All distributions or the portion thereof which is included in the gross income of the Owner are subject to federal income tax withholding. Generally, amounts are withheld from periodic payments at the same rate as wages and at the rate of 10% from non-periodic payments. However, the Owner, in most cases, may elect not to have taxes withheld or to have withholding done at a different rate. Certain distributions from retirement plans qualified under Section 401 of the Code, which are not directly rolled over to another eligible retirement plan or individual retirement account or Individual Retirement Annuity, are subject to a mandatory 20% withholding for federal income tax. The 20% withholding requirement generally does not apply to: o a series of substantially equal payments made at least annually for the life or life expectancy of the participant or joint and last survivor expectancy of the participant and a designated Beneficiary, or for a specified period of ten years or more; or o distributions which are required minimum distributions; or o the portion of the distributions not included in gross income (for example, returns of after-tax contributions); or o hardship withdrawals. Participants should consult a tax adviser regarding withholding requirements. REQUIRED DISTRIBUTIONS In order to be treated as an annuity contract for federal income tax purposes, Section 72(s) of the Code requires any non-qualified contract to contain certain provisions specifying how your interest in the contract will be distributed in the event of the death of an owner. Specifically, with regard to this Contract, Section 72(s) requires that: o if any Owner dies on or after the Income Date, but before the time the entire interest in the Contract has been distributed, the entire interest in the Contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such Owner's death; and o if any Owner dies before the Income Date, the entire interest in the Contract will be distributed within five years after the date of such Owner's death. These requirements will be considered satisfied as to any portion of an Owner's interest which is payable to or for the benefit of a designated Beneficiary and which is distributed over the life of such designated Beneficiary or over a period not extending beyond the life expectancy of that Beneficiary, provided that such distributions begin within one year of the Owner's death. The designated Beneficiary refers to an individual designated by the Owner as a Beneficiary and to whom ownership of the Contract passes by reason of death. However, if the designated Beneficiary is the surviving spouse of the deceased Owner, the Contract may be continued with the surviving spouse as the new Owner. If the Owner is a non-individual, then the death or change of an Annuitant is treated as the death of the Owner. Non-Qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. Other rules may apply to Qualified Contracts. The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 6 QUALIFIED CONTRACTS The Contract is designed to be suitable for use under various types of qualified plans. Because of the minimum Purchase Payment requirements, these Contracts may not be appropriate for some periodic payment retirement plans. Taxation of participants in each Qualified Contract varies with the type of plan and terms and conditions of each specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a Qualified Contract may be subject to the terms and conditions of the plan regardless of the terms and conditions of the Contracts issued pursuant to the plan. Some retirement plans are subject to distribution and other requirements that are not incorporated into our administrative procedures. We are not bound by the terms and conditions of such plans to the extent such terms conflict with the terms of a Contract, unless we specifically consent to be bound. Owners, participants and Beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contracts comply with applicable law. General descriptions of the types of qualified plans with which the Contracts may be used can be found in the prospectus. Such descriptions are not exhaustive and are for general informational purposes only. The tax rules regarding qualified plans are very complex and will have differing applications, depending on individual facts and circumstances. Each purchaser should obtain competent tax advice before purchasing a Contract issued under a qualified plan. On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v. Norris that optional annuity benefits provided under an employer's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. The Contracts sold by us in connection with qualified plans may utilize annuity tables that do not differentiate on the basis of sex. These annuity tables will also be available for use in connection with certain non-qualified deferred compensation plans. Qualified plans include special provisions restricting Contract provisions that may otherwise be available and described in this SAI. Generally, Contracts issued pursuant to qualified plans are not transferable except upon withdrawal or annuitization. Various penalty and excise taxes may apply to contributions or distributions made in violation of applicable limitations. Furthermore, certain withdrawal penalties and restrictions may apply to withdrawals from Qualified Contracts. Many withdrawals from Qualified Contracts can be rolled over to an IRA or another qualified retirement plan. If you receive a withdrawal from a Qualified Contract that could be rolled over and you do not elect to make a direct rollover of that amount to an IRA or qualified plan, by law 20% of the taxable amount must be withheld by us for taxes. In situations where this mandatory tax withholding does not apply, other tax amounts may be withheld unless you elect out of the withholding. You may request more detailed information about income tax withholding at the time of a withdrawal. For more information, see prospectus section 7, Taxes - Distributions - Qualified Contracts. PENSION AND PROFIT-SHARING PLANS. Sections 401(a) and 401(k) of the Code permit employers, including self-employed individuals, to establish various types of retirement plans for employees. These retirement plans may permit the purchase of the Contracts to provide benefits under the plan. Contributions to the plan for the benefit of employees will not be included in the gross income of the employee until distributed from the plan. The tax consequences to participants may vary, depending upon the particular plan design. However, the Code places limitations and restrictions on all plans, including on such items as: amount of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions and withdrawals. Participant loans are not allowed under the Contracts purchased in connection with these plans. For more information, see prospectus section 7, Taxes - Qualified Contracts. Purchasers of Contracts for use with pension or profit-sharing plans should obtain competent tax advice as to the tax treatment and suitability of such an investment. We may choose not to allow pension or profit-sharing plans to purchase this Contract. ANNUITY PROVISIONS We base Traditional Annuity Payments upon the following: o Whether you request fixed payments, variable payments, or a combination of both fixed and variable Traditional Annuity Payments. o The Contract Value on the Income Date. o The Annuity Option you select. o The age of the Annuitant and any joint Annuitant. o The sex of the Annuitant and any joint Annuitant where allowed. The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 7 We guarantee fixed Traditional Annuity Payments as to dollar amount and the amount does not vary with the investment experience of an Investment Option. If you request fixed Traditional Annuity Payments, the amount of Contract Value that you apply to fixed Traditional Annuity Payments will be placed in our general account and it will not participate in the investment experience of the Investment Options. Variable payments are not predetermined as to dollar amount and will vary in amount with the investment experience of the Investment Option(s) you select. We use Annuity Units to determine the amount of any variable Traditional Annuity Payments. ANNUITY UNITS/CALCULATING VARIABLE ANNUITY PAYMENTS The first variable Traditional Annuity Payment is equal to the amount of adjusted Contract Value you are applying to variable Traditional Annuity Payments on the Income Date, divided first by $1,000 and then multiplied by the appropriate variable annuity payout factor for each $1,000 of value for the Annuity Option you selected. We will then purchase a fixed number of Annuity Units on the Income Date for each subaccount of the Investment Options you select. We do this by dividing the amount of the first Traditional Annuity Payment among the subaccounts for your selected Investment Options according to your most recent allocation instructions. We then divide the amount in each subaccount by the Annuity Unit value for each subaccount on the Income Date. We determine the Annuity Unit value on each Business Day as follows: o multiply the Annuity Unit value for the immediately preceding Business Day by the net investment factor for the current Business Day; and o divide by the assumed net investment factor for the current Business Day. The assumed net investment factor for the current Business Day is one plus the annual AIR adjusted to reflect the number of calendar days that have elapsed since the immediately preceding Business Day. We will allow an AIR of either 3% or 4.5% based on your selection and applicable law. Thereafter, the number of Annuity Units in each subaccount generally remains unchanged unless you make a transfer. However, the number of Annuity Units will change if Annuity Option 3 is in effect, one Annuitant dies, and the Owner requests Traditional Annuity Payments at 75% or 50% of the previous payment amount. All calculations will appropriately reflect the payment frequency you selected. The Traditional Annuity Payment on each subsequent payment date is equal to the sum of the Traditional Annuity Payments for each subaccount. We determine the Traditional Annuity Payment for each subaccount by multiplying the number of Annuity Units allocated to the subaccount by the Annuity Unit value for that subaccount on the payment date. MORTALITY AND EXPENSE RISK GUARANTEE Allianz Life of New York guarantees that the dollar amount of each Variable Annuity Payment after the first Annuity Payment will not be affected by variations in mortality and expense experience. ENHANCED GMIB/GPWB VALUES FOR CONTRACTS ISSUED ON OR BEFORE APRIL 28, 2006 If your Contract was issued during the period beginning on February 19, 2004 and ending on April 28, 2006 and you elected to include the Enhanced GBP in your Contract, the Enhanced GMIB value and Enhanced GPWB value are calculated differently than is indicated in the current prospectus. The Enhanced GMIB value before the date of any Owner's death or exercise of the GPWB (if applicable) is equal to either: o the AIA; or o the MAV. We calculate the AIA two ways. We increase your total Purchase Payments adjusted for partial withdrawals on each Contract Anniversary by: a) 3%, and b) 5%. If the MAV is greater than both the 3% AIA and 5% AIA, the Enhanced GMIB value is equal to the MAV. If the 3% AIA is greater than the MAV, you can decide whether to set the Enhanced GMIB value equal to the 3% AIA or the 5% AIA. If only the 5% AIA is greater than the MAV, you can decide whether to set the Enhanced GMIB value equal to the 5% AIA or the MAV. The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 8 THE 5% AIA MAY BE MORE LIMITED THAN THE 3% AIA BECAUSE: o the 5% AIA is subject to a maximum of two times Purchase Payments received in the first five Contract Years; and o under the GMIB, the guaranteed fixed payout rates for the 5% AIA are lower and there are fewer available Annuity Options. CALCULATING THE AIAS If the Enhanced GMIB endorsement was effective on the Issue Date each AIA is equal to your initial Purchase Payment received on the Issue Date. If the Enhanced GMIB endorsement was effective after the Issue Date, each AIA is initially equal to the Contract Value on the endorsement effective date. ON EACH BUSINESS DAY OTHER THAN A CONTRACT ANNIVERSARY, each AIA is equal to: o its value on the immediately preceding Business Day; o plus any additional Purchase Payments received that day; o reduced proportionately by the percentage of any Contract Value applied to a traditional Partial Annuitization that day; and o reduced proportionately by the percentage of Contract Value withdrawn that day (including any withdrawal charge). ON EVERY CONTRACT ANNIVERSARY BEFORE THE OLDER OWNER'S 81ST BIRTHDAY*, each AIA is equal to its value on the immediately preceding Business Day increased by 3% for Contracts with the 3% AIA, and increased by 5% for Contracts with the 5% AIA. We then process any transactions received on that Contract Anniversary (such as additional Purchase Payments, withdrawals, and Partial Annuitizations) in the same way that we do on each Business Day other than a Contract Anniversary. BEGINNING WITH THE CONTRACT ANNIVERSARY THAT OCCURS ON OR AFTER THE OLDER OWNER'S 81ST BIRTHDAY*, we calculate each AIA in the same way that we do on each Business Day other than a Contract Anniversary. * If the Contract is owned by a non-individual (for example, a qualified plan or trust) we will use the Annuitant's age. WE LIMIT THE 3% AIA TO A MAXIMUM OF: o 1.5 times total Purchase Payments received, o reduced proportionately by the percentage of any Contract Value applied to each traditional Partial Annuitization, and o reduced proportionately by the percentage of Contract Value withdrawn (including any withdrawal charge) for each withdrawal taken. WE LIMIT THE 5% AIA TO A MAXIMUM OF: o 2 times the total Purchase Payments received in the first five Contract Years, o reduced proportionately by the percentage of any Contract Value applied to each traditional Partial Annuitization, and o reduced proportionately by the percentage of Contract Value withdrawn (including any withdrawal charge) for each withdrawal taken. CALCULATING THE MAV If the Enhanced GMIB endorsement was effective on the Issue Date, the MAV is equal to your initial Purchase Payment received on the Issue Date. If the Enhanced GMIB endorsement was effective after the Issue Date, the MAV is initially equal to the Contract Value on the endorsement effective date. After the endorsement effective date the MAV is calculated as indicated in prospectus section 2, The Annuity Phase - Enhanced GMDB Value. ANY TRADITIONAL PARTIAL ANNUITIZATIONS OR WITHDRAWALS YOU TAKE MAY REDUCE THE AIAS OR THE MAV BY MORE THAN THE AMOUNT ANNUITIZED OR WITHDRAWN. If the Contract Value at the time of annuitization or withdrawal is less than the AIA (or MAV as appropriate), we will deduct more than the amount annuitized or withdrawn from the AIA (or MAV). While the 5% AIA may be larger than the 3% AIA and/or the MAV, it may produce a lower GMIB Payment because under the 5% AIA you have fewer available Annuity Options and the guaranteed fixed payout rates are lower. If the GMIB Payment available under the 5% AIA would always be less than the GMIB Payment available under the 3% AIA or the MAV, we will base GMIB Payments on the amount that produces the largest payment. However, it is possible that the GMIB Payments under the 5% AIA may be more or less than the GMIB Payments available under the 3% AIA and/or the MAV depending on the Annuity Option you select. In these instances we will allow you to select the amount we use to calculate GMIB Payments and the Annuity Option that you feel is most appropriate. The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 9 IF YOU EXERCISE THE GPWB, YOUR GMIB ENDORSEMENT WILL TERMINATE. YOUR GPWB VALUE ON THE DATE YOU BEGIN RECEIVING GPWB PAYMENTS IS EQUAL TO THE GMIB VALUE ON THAT DATE. If you exercise the GPWB, we will make GPWB Payments based on the percentage of the initial GPWB value you select, subject to the maximum allowable payment. Before you exercise the GPWB, your GPWB value is equal to your GMIB value. If you have the Enhanced GPWB you can choose whether your Enhanced GPWB value is equal to the 5% AIA, the 3% AIA or the MAV. Although the 5% AIA may be the greatest amount it may also be more limited because you can only request a maximum of 5% of GPWB value per year as the GPWB Payment percentage, but you can request up to 10% of the GPWB value per year under the 3% AIA or the MAV. For more details on how the GMIB values are calculated please see the discussions of the "Traditional GMIB Value" and the "Enhanced GMIB Value" in prospectus section 2, The Annuity Phase. The Owner can elect to receive GPWB Payments of up to: o 10% of the GPWB value per year under the Traditional GBP, o 10% of the GPWB value per year under the Enhanced GBP if the 3% AIA or MAV applies, or o 5% of the GPWB value per year under the Enhanced GBP if the 5% AIA applies. FINANCIAL STATEMENTS The audited financial statements of Allianz Life of New York as of and for the year ended December 31, 2008 included herein should be considered only as bearing upon the ability of Allianz Life of New York to meet its obligations under the Contracts. The audited financial statements of the Separate Account as of and for the year ended December 31, 2008 are also included herein. The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 10 APPENDIX - CONDENSED FINANCIAL INFORMATION The financial statements of Allianz Life Insurance Company of New York and the financial statements of Allianz Life of NY Variable Account C are found in this SAI. Accumulation Unit value (AUV) information corresponding to the highest and lowest combination of charges for Contracts we currently offer is found in Appendix B to the prospectus. AUV information listing the additional combinations of charges for all Contracts is found below. This information should be read in conjunction with the financial statements and related notes of the Separate Account included in this SAI.
KEY TO BENEFIT OPTION* M&E CHARGES CHTR 2 Allianz Charter II NY - Enhanced GMDB and no GBP 1.95% CHTR 3 Allianz Charter II NY - Traditional GMDB and the Traditional GBP 1.95% CHTR 4 Allianz Charter II NY - Enhanced GMDB and the Traditional GBP 2.10% CHTR 5 Allianz Charter II NY - Traditional GMDB and the Enhanced GBP 2.45%
The following Investment Options commenced operations under this Contract after December 31, 2008. Therefore, no AUV information is shown for them: AZL Allianz Global Investors Select Fund; AZL Balanced Index Strategy Fund; AZL Franklin Templeton Founding Strategy Plus Fund; AZL Fusion Conservative Fund; AZL International Index Fund; AZL Moderate Index Strategy Fund; AZL OCC Growth Fund; and PIMCO VIT Global Multi-Asset Portfolio. (Number of Accumulation Units in thousands)
BENEFIT PERIOD OR YEAR AUV AT BEGINNING OF AUV AT END OF NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF OPTION * ENDED PERIOD PERIOD PERIOD INVESTMENT OPTION
AZL AIM International Equity Fund CHTR 2 1.95% 12/31/2004 10.042 12.027 0 12/31/2005 12.027 13.725 0 12/31/2006 13.725 17.101 0 12/31/2007 17.101 19.221 0 12/31/2008 19.221 11.025 0 CHTR 3 1.95% 12/31/2004 10.042 12.027 0 12/31/2005 12.027 13.725 0 12/31/2006 13.725 17.101 2 12/31/2007 17.101 19.221 2 12/31/2008 19.221 11.025 2 CHTR 4 2.10% 12/31/2004 10.017 11.979 0 12/31/2005 11.979 13.650 0 12/31/2006 13.650 16.982 1 12/31/2007 16.982 19.058 1 12/31/2008 19.058 10.915 0 CHTR 5 2.45% 12/31/2004 9.959 11.867 3 12/31/2005 11.867 13.475 5 12/31/2006 13.475 16.706 6 12/31/2007 16.706 18.683 2 12/31/2008 18.683 10.663 2 AZL BlackRock Capital Appreciation Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.923 0 12/31/2006 11.923 11.877 1 12/31/2007 11.877 12.918 1 12/31/2008 12.918 8.061 1 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.923 0 12/31/2006 11.923 11.877 0 12/31/2007 11.877 12.918 2 12/31/2008 12.918 8.061 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.911 0 12/31/2006 11.911 11.847 0 12/31/2007 11.847 12.867 0 12/31/2008 12.867 8.016 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.883 0 12/31/2006 11.883 11.779 0 12/31/2007 11.779 12.747 4 12/31/2008 12.747 7.914 4 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 11 AZL BlackRock Growth Fund CHTR 2 1.95% 12/31/2004 10.067 10.669 0 12/31/2005 10.669 11.620 0 12/31/2006 11.620 11.476 0 12/31/2007 11.476 12.944 0 12/31/2008 12.944 4.988 0 CHTR 3 1.95% 12/31/2004 10.067 10.669 0 12/31/2005 10.669 11.620 0 12/31/2006 11.620 11.476 0 12/31/2007 11.476 12.944 4 12/31/2008 12.944 4.988 1 CHTR 4 2.10% 12/31/2004 10.041 10.626 0 12/31/2005 10.626 11.556 0 12/31/2006 11.556 11.396 0 12/31/2007 11.396 12.834 0 12/31/2008 12.834 4.938 0 CHTR 5 2.45% 12/31/2004 9.983 10.527 0 12/31/2005 10.527 11.409 1 12/31/2006 11.409 11.211 1 12/31/2007 11.211 12.581 1 12/31/2008 12.581 4.824 1 AZL Columbia Mid Cap Value Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.040 0 12/31/2007 10.040 10.224 0 12/31/2008 10.224 4.798 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.040 0 12/31/2007 10.040 10.224 5 12/31/2008 10.224 4.798 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.030 0 12/31/2007 10.030 10.198 0 12/31/2008 10.198 4.778 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.006 0 12/31/2007 10.006 10.139 8 12/31/2008 10.139 4.734 8 AZL Columbia Small Cap Value Fund CHTR 2 1.95% 12/31/2004 N/A 12.013 0 12/31/2005 12.013 12.182 1 12/31/2006 12.182 13.548 1 12/31/2007 13.548 12.191 1 12/31/2008 12.191 8.119 1 CHTR 3 1.95% 12/31/2004 N/A 12.013 0 12/31/2005 12.013 12.182 0 12/31/2006 12.182 13.548 0 12/31/2007 13.548 12.191 4 12/31/2008 12.191 8.119 0 CHTR 4 2.10% 12/31/2004 N/A 12.001 0 12/31/2005 12.001 12.151 0 12/31/2006 12.151 13.494 0 12/31/2007 13.494 12.124 0 12/31/2008 12.124 8.062 0 CHTR 5 2.45% 12/31/2004 N/A 11.973 3 12/31/2005 11.973 12.080 3 12/31/2006 12.080 13.369 4 12/31/2007 13.369 11.969 6 12/31/2008 11.969 7.931 3 AZL Columbia Technology Fund CHTR 2 1.95% 12/31/2004 8.628 8.095 0 12/31/2005 8.095 7.995 3 12/31/2006 7.995 8.042 4 12/31/2007 8.042 9.680 4 12/31/2008 9.680 4.686 4 CHTR 3 1.95% 12/31/2004 8.628 8.095 0 12/31/2005 8.095 7.995 0 12/31/2006 7.995 8.042 0 12/31/2007 8.042 9.680 0 12/31/2008 9.680 4.686 0 CHTR 4 2.10% 12/31/2004 8.601 8.057 0 12/31/2005 8.057 7.945 0 12/31/2006 7.945 7.980 0 12/31/2007 7.980 9.591 0 12/31/2008 9.591 4.636 0 CHTR 5 2.45% 12/31/2004 8.536 7.968 0 12/31/2005 7.968 7.830 0 12/31/2006 7.830 7.837 0 12/31/2007 7.837 9.386 6 12/31/2008 9.386 4.521 1 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 12 AZL Davis NY Venture Fund CHTR 2 1.95% 12/31/2004 9.847 10.676 0 12/31/2005 10.676 11.484 4 12/31/2006 11.484 12.830 4 12/31/2007 12.830 13.103 4 12/31/2008 13.103 7.645 5 CHTR 3 1.95% 12/31/2004 9.847 10.676 2 12/31/2005 10.676 11.484 2 12/31/2006 11.484 12.830 7 12/31/2007 12.830 13.103 6 12/31/2008 13.103 7.645 2 CHTR 4 2.10% 12/31/2004 9.815 10.626 0 12/31/2005 10.626 11.413 0 12/31/2006 11.413 12.731 0 12/31/2007 12.731 12.982 1 12/31/2008 12.982 7.563 1 CHTR 5 2.45% 12/31/2004 9.741 10.508 3 12/31/2005 10.508 11.248 4 12/31/2006 11.248 12.503 9 12/31/2007 12.503 12.705 26 12/31/2008 12.705 7.376 33 AZL Dreyfus Equity Growth Fund CHTR 2 1.95% 12/31/2004 8.709 9.199 0 12/31/2005 9.199 9.433 1 12/31/2006 9.433 10.448 1 12/31/2007 10.448 11.142 1 12/31/2008 11.142 6.377 2 CHTR 3 1.95% 12/31/2004 8.709 9.199 0 12/31/2005 9.199 9.433 0 12/31/2006 9.433 10.448 3 12/31/2007 10.448 11.142 5 12/31/2008 11.142 6.377 5 CHTR 4 2.10% 12/31/2004 8.680 9.156 0 12/31/2005 9.156 9.375 0 12/31/2006 9.375 10.367 0 12/31/2007 10.367 11.039 0 12/31/2008 11.039 6.309 0 CHTR 5 2.45% 12/31/2004 8.615 9.055 0 12/31/2005 9.055 9.239 2 12/31/2006 9.239 10.182 3 12/31/2007 10.182 10.804 22 12/31/2008 10.804 6.153 22 AZL First Trust Target Double Play Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.550 0 12/31/2008 10.550 4.795 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.550 0 12/31/2008 10.550 4.795 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.534 0 12/31/2008 10.534 4.780 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.497 0 12/31/2008 10.497 4.746 0 AZL Franklin Small Cap Value Fund CHTR 2 1.95% 12/31/2004 12.671 15.295 0 12/31/2005 15.295 16.056 0 12/31/2006 16.056 18.173 4 12/31/2007 18.173 17.042 4 12/31/2008 17.042 11.075 4 CHTR 3 1.95% 12/31/2004 12.671 15.295 0 12/31/2005 15.295 16.056 0 12/31/2006 16.056 18.173 0 12/31/2007 18.173 17.042 1 12/31/2008 17.042 11.075 1 CHTR 4 2.10% 12/31/2004 12.658 15.257 1 12/31/2005 15.257 15.991 1 12/31/2006 15.991 18.074 1 12/31/2007 18.074 16.923 1 12/31/2008 16.923 10.981 1 CHTR 5 2.45% 12/31/2004 12.628 15.168 4 12/31/2005 15.168 15.842 7 12/31/2006 15.842 17.843 9 12/31/2007 17.843 16.648 9 12/31/2008 16.648 10.765 9 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 13 AZL Fusion Balanced Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.590 0 12/31/2006 10.590 11.372 0 12/31/2007 11.372 11.944 1 12/31/2008 11.944 8.499 1 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.590 1 12/31/2006 10.590 11.372 1 12/31/2007 11.372 11.944 21 12/31/2008 11.944 8.499 11 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.580 0 12/31/2006 10.580 11.343 2 12/31/2007 11.343 11.897 2 12/31/2008 11.897 8.452 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.555 1 12/31/2006 10.555 11.277 14 12/31/2007 11.277 11.786 75 12/31/2008 11.786 8.344 86 AZL Fusion Growth Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.064 0 12/31/2006 11.064 12.175 0 12/31/2007 12.175 12.626 0 12/31/2008 12.626 7.560 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.064 2 12/31/2006 11.064 12.175 4 12/31/2007 12.175 12.626 5 12/31/2008 12.626 7.560 1 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.053 3 12/31/2006 11.053 12.145 3 12/31/2007 12.145 12.575 3 12/31/2008 12.575 7.519 3 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.027 3 12/31/2006 11.027 12.074 16 12/31/2007 12.074 12.458 47 12/31/2008 12.458 7.423 46 AZL Fusion Moderate Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.768 6 12/31/2006 10.768 11.692 6 12/31/2007 11.692 12.215 6 12/31/2008 12.215 8.055 6 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.768 10 12/31/2006 10.768 11.692 7 12/31/2007 11.692 12.215 15 12/31/2008 12.215 8.055 7 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.757 0 12/31/2006 10.757 11.663 0 12/31/2007 11.663 12.166 0 12/31/2008 12.166 8.011 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.732 36 12/31/2006 10.732 11.595 47 12/31/2007 11.595 12.053 44 12/31/2008 12.053 7.908 42 AZL Jennison 20/20 Focus Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.201 1 12/31/2006 12.201 13.496 5 12/31/2007 13.496 14.654 5 12/31/2008 14.654 8.607 5 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.201 0 12/31/2006 12.201 13.496 1 12/31/2007 13.496 14.654 1 12/31/2008 14.654 8.607 2 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.188 0 12/31/2006 12.188 13.462 0 12/31/2007 13.462 14.595 0 12/31/2008 14.595 8.559 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 12.160 1 12/31/2006 12.160 13.383 0 12/31/2007 13.383 14.459 13 12/31/2008 14.459 8.450 13 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 14 AZL JPMorgan Large Cap Equity Fund CHTR 2 1.95% 12/31/2004 9.950 11.236 0 12/31/2005 11.236 11.710 1 12/31/2006 11.710 12.255 1 12/31/2007 12.255 11.273 1 12/31/2008 11.273 4.987 2 CHTR 3 1.95% 12/31/2004 9.950 11.236 0 12/31/2005 11.236 11.710 0 12/31/2006 11.710 12.255 0 12/31/2007 12.255 11.273 5 12/31/2008 11.273 4.987 0 CHTR 4 2.10% 12/31/2004 9.918 11.183 0 12/31/2005 11.183 11.637 0 12/31/2006 11.637 12.160 0 12/31/2007 12.160 11.169 0 12/31/2008 11.169 4.933 0 CHTR 5 2.45% 12/31/2004 9.843 11.059 0 12/31/2005 11.059 11.469 6 12/31/2006 11.469 11.943 5 12/31/2007 11.943 10.931 4 12/31/2008 10.931 4.811 4 AZL JPMorgan U.S. Equity Fund CHTR 2 1.95% 12/31/2004 N/A 10.719 1 12/31/2005 10.719 11.086 2 12/31/2006 11.086 12.459 2 12/31/2007 12.459 12.681 2 12/31/2008 12.681 7.625 2 CHTR 3 1.95% 12/31/2004 N/A 10.719 1 12/31/2005 10.719 11.086 1 12/31/2006 11.086 12.459 2 12/31/2007 12.459 12.681 2 12/31/2008 12.681 7.625 2 CHTR 4 2.10% 12/31/2004 N/A 10.708 0 12/31/2005 10.708 11.058 0 12/31/2006 11.058 12.409 0 12/31/2007 12.409 12.611 0 12/31/2008 12.611 7.572 0 CHTR 5 2.45% 12/31/2004 N/A 10.683 3 12/31/2005 10.683 10.994 5 12/31/2006 10.994 12.294 17 12/31/2007 12.294 12.450 19 12/31/2008 12.450 7.449 17 AZL Money Market Fund CHTR 2 1.95% 12/31/2004 9.835 9.710 0 12/31/2005 9.710 9.768 0 12/31/2006 9.768 10.005 0 12/31/2007 10.005 10.282 0 12/31/2008 10.282 10.329 0 CHTR 3 1.95% 12/31/2004 9.835 9.710 0 12/31/2005 9.710 9.768 3 12/31/2006 9.768 10.005 1 12/31/2007 10.005 10.282 1 12/31/2008 10.282 10.329 44 CHTR 4 2.10% 12/31/2004 9.792 9.652 0 12/31/2005 9.652 9.695 0 12/31/2006 9.695 9.916 0 12/31/2007 9.916 10.175 0 12/31/2008 10.175 10.207 0 CHTR 5 2.45% 12/31/2004 9.691 9.520 0 12/31/2005 9.520 9.529 3 12/31/2006 9.529 9.712 26 12/31/2007 9.712 9.931 0 12/31/2008 9.931 9.926 23 AZL NACM International Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.436 0 12/31/2008 9.436 5.098 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.436 0 12/31/2008 9.436 5.098 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.427 0 12/31/2008 9.427 5.085 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.405 0 12/31/2008 9.405 5.055 0 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 15 AZL OCC Opportunity Fund CHTR 2 1.95% 12/31/2004 12.688 13.408 0 12/31/2005 13.408 13.818 0 12/31/2006 13.818 15.134 1 12/31/2007 15.134 16.159 1 12/31/2008 16.159 8.374 1 CHTR 3 1.95% 12/31/2004 12.688 13.408 0 12/31/2005 13.408 13.818 0 12/31/2006 13.818 15.134 0 12/31/2007 15.134 16.159 0 12/31/2008 16.159 8.374 0 CHTR 4 2.10% 12/31/2004 12.656 13.355 0 12/31/2005 13.355 13.742 0 12/31/2006 13.742 15.029 0 12/31/2007 15.029 16.022 0 12/31/2008 16.022 8.291 0 CHTR 5 2.45% 12/31/2004 12.582 13.230 0 12/31/2005 13.230 13.567 0 12/31/2006 13.567 14.785 1 12/31/2007 14.785 15.707 14 12/31/2008 15.707 8.099 11 AZL Oppenheimer Global Fund CHTR 2 1.95% 12/31/2004 N/A 11.429 0 12/31/2005 11.429 12.624 0 12/31/2006 12.624 14.398 0 12/31/2007 14.398 14.931 0 12/31/2008 14.931 8.631 0 CHTR 3 1.95% 12/31/2004 N/A 11.429 0 12/31/2005 11.429 12.624 0 12/31/2006 12.624 14.398 1 12/31/2007 14.398 14.931 4 12/31/2008 14.931 8.631 1 CHTR 4 2.10% 12/31/2004 N/A 11.418 0 12/31/2005 11.418 12.592 0 12/31/2006 12.592 14.340 0 12/31/2007 14.340 14.849 0 12/31/2008 14.849 8.571 0 CHTR 5 2.45% 12/31/2004 N/A 11.391 0 12/31/2005 11.391 12.519 5 12/31/2006 12.519 14.207 10 12/31/2007 14.207 14.659 14 12/31/2008 14.659 8.432 12 AZL Oppenheimer International Growth Fund CHTR 2 1.95% 12/31/2004 11.319 12.707 1 12/31/2005 12.707 14.229 1 12/31/2006 14.229 18.000 1 12/31/2007 18.000 19.820 1 12/31/2008 19.820 10.856 1 CHTR 3 1.95% 12/31/2004 11.319 12.707 0 12/31/2005 12.707 14.229 0 12/31/2006 14.229 18.000 1 12/31/2007 18.000 19.820 1 12/31/2008 19.820 10.856 0 CHTR 4 2.10% 12/31/2004 11.282 12.647 0 12/31/2005 12.647 14.141 0 12/31/2006 14.141 17.861 0 12/31/2007 17.861 19.637 0 12/31/2008 19.637 10.740 0 CHTR 5 2.45% 12/31/2004 11.197 12.508 0 12/31/2005 12.508 13.936 0 12/31/2006 13.936 17.542 1 12/31/2007 17.542 19.218 1 12/31/2008 19.218 10.474 1 AZL PIMCO Fundamental IndexPLUS Total Return Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.040 0 12/31/2007 11.040 11.547 0 12/31/2008 11.547 6.697 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.040 0 12/31/2007 11.040 11.547 0 12/31/2008 11.547 6.697 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.029 0 12/31/2007 11.029 11.518 0 12/31/2008 11.518 6.670 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.003 0 12/31/2007 11.003 11.451 0 12/31/2008 11.451 6.608 0 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 16 AZL S&P 500 Index Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.846 0 12/31/2008 9.846 6.023 1 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.846 0 12/31/2008 9.846 6.023 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.836 0 12/31/2008 9.836 6.008 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.813 44 12/31/2008 9.813 5.973 46 AZL Schroder Emerging Markets Equity Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.433 0 12/31/2007 10.433 13.332 0 12/31/2008 13.332 6.290 5 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.433 0 12/31/2007 10.433 13.332 2 12/31/2008 13.332 6.290 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.422 0 12/31/2007 10.422 13.298 0 12/31/2008 13.298 6.265 1 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 10.398 0 12/31/2007 10.398 13.221 13 12/31/2008 13.221 6.207 10 AZL Schroder International Small Cap Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.209 0 12/31/2008 9.209 4.915 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.209 0 12/31/2008 9.209 4.915 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.199 0 12/31/2008 9.199 4.902 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.178 17 12/31/2008 9.178 4.874 17 AZL Small Cap Stock Index Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.295 0 12/31/2008 9.295 6.294 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.295 0 12/31/2008 9.295 6.294 2 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.285 0 12/31/2008 9.285 6.279 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.264 17 12/31/2008 9.264 6.242 26 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 17 AZL TargetPLUS Balanced Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.079 0 12/31/2008 10.079 7.472 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.079 0 12/31/2008 10.079 7.472 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.069 0 12/31/2008 10.069 7.453 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.045 0 12/31/2008 10.045 7.410 0 AZL TargetPLUS Equity Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.466 0 12/31/2008 10.466 5.283 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.466 0 12/31/2008 10.466 5.283 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.450 0 12/31/2008 10.450 5.267 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.919 0 12/31/2007 9.919 10.413 0 12/31/2008 10.413 5.230 0 AZL TargetPLUS Growth Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.903 0 12/31/2008 9.903 5.887 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.903 6 12/31/2008 9.903 5.887 6 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.893 0 12/31/2008 9.893 5.872 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.869 16 12/31/2008 9.869 5.838 16 AZL TargetPLUS Moderate Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.043 0 12/31/2008 10.043 6.660 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.043 0 12/31/2008 10.043 6.660 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.032 0 12/31/2008 10.032 6.643 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 10.009 11 12/31/2008 10.009 6.605 11 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 18 AZL Turner Quantitative Small Cap Growth Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.084 0 12/31/2006 11.084 12.100 0 12/31/2007 12.100 12.585 0 12/31/2008 12.585 6.992 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.084 0 12/31/2006 11.084 12.100 0 12/31/2007 12.100 12.585 0 12/31/2008 12.585 6.992 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.073 0 12/31/2006 11.073 12.070 0 12/31/2007 12.070 12.535 0 12/31/2008 12.535 6.953 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 11.047 0 12/31/2006 11.047 11.999 0 12/31/2007 11.999 12.418 0 12/31/2008 12.418 6.864 0 AZL Van Kampen Comstock Fund CHTR 2 1.95% 12/31/2004 9.369 10.761 0 12/31/2005 10.761 10.968 1 12/31/2006 10.968 12.452 2 12/31/2007 12.452 11.939 2 12/31/2008 11.939 7.472 3 CHTR 3 1.95% 12/31/2004 9.369 10.761 0 12/31/2005 10.761 10.968 1 12/31/2006 10.968 12.452 1 12/31/2007 12.452 11.939 8 12/31/2008 11.939 7.472 0 CHTR 4 2.10% 12/31/2004 9.332 10.702 0 12/31/2005 10.702 10.891 0 12/31/2006 10.891 12.346 0 12/31/2007 12.346 11.820 0 12/31/2008 11.820 7.386 0 CHTR 5 2.45% 12/31/2004 9.245 10.565 0 12/31/2005 10.565 10.714 0 12/31/2006 10.714 12.104 4 12/31/2007 12.104 11.547 11 12/31/2008 11.547 7.190 11 AZL Van Kampen Equity and Income Fund CHTR 2 1.95% 12/31/2004 N/A 10.770 0 12/31/2005 10.770 11.276 1 12/31/2006 11.276 12.443 1 12/31/2007 12.443 12.575 1 12/31/2008 12.575 9.382 1 CHTR 3 1.95% 12/31/2004 N/A 10.770 0 12/31/2005 10.770 11.276 0 12/31/2006 11.276 12.443 0 12/31/2007 12.443 12.575 0 12/31/2008 12.575 9.382 0 CHTR 4 2.10% 12/31/2004 N/A 10.759 0 12/31/2005 10.759 11.248 0 12/31/2006 11.248 12.393 0 12/31/2007 12.393 12.506 0 12/31/2008 12.506 9.317 0 CHTR 5 2.45% 12/31/2004 N/A 10.734 0 12/31/2005 10.734 11.182 0 12/31/2006 11.182 12.278 0 12/31/2007 12.278 12.347 13 12/31/2008 12.347 9.165 13 AZL Van Kampen Global Franchise Fund CHTR 2 1.95% 12/31/2004 12.229 13.456 0 12/31/2005 13.456 14.734 1 12/31/2006 14.734 17.521 1 12/31/2007 17.521 18.868 1 12/31/2008 18.868 13.218 1 CHTR 3 1.95% 12/31/2004 12.229 13.456 0 12/31/2005 13.456 14.734 0 12/31/2006 14.734 17.521 1 12/31/2007 17.521 18.868 0 12/31/2008 18.868 13.218 0 CHTR 4 2.10% 12/31/2004 12.217 13.422 1 12/31/2005 13.422 14.675 1 12/31/2006 14.675 17.425 1 12/31/2007 17.425 18.736 1 12/31/2008 18.736 13.105 1 CHTR 5 2.45% 12/31/2004 12.188 13.344 2 12/31/2005 13.344 14.538 3 12/31/2006 14.538 17.203 5 12/31/2007 17.203 18.432 22 12/31/2008 18.432 12.848 20 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 19 AZL Van Kampen Global Real Estate Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.007 0 12/31/2007 12.007 10.752 0 12/31/2008 10.752 5.711 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 12.007 0 12/31/2007 12.007 10.752 5 12/31/2008 10.752 5.711 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.995 0 12/31/2007 11.995 10.725 0 12/31/2008 10.725 5.689 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 11.967 1 12/31/2007 11.967 10.662 3 12/31/2008 10.662 5.635 3 AZL Van Kampen Growth and Income Fund CHTR 2 1.95% 12/31/2004 10.070 11.240 1 12/31/2005 11.240 12.042 2 12/31/2006 12.042 13.687 2 12/31/2007 13.687 13.776 2 12/31/2008 13.776 9.071 2 CHTR 3 1.95% 12/31/2004 10.070 11.240 0 12/31/2005 11.240 12.042 1 12/31/2006 12.042 13.687 2 12/31/2007 13.687 13.776 2 12/31/2008 13.776 9.071 2 CHTR 4 2.10% 12/31/2004 10.030 11.178 0 12/31/2005 11.178 11.957 0 12/31/2006 11.957 13.571 0 12/31/2007 13.571 13.639 1 12/31/2008 13.639 8.967 1 CHTR 5 2.45% 12/31/2004 9.937 11.035 3 12/31/2005 11.035 11.764 3 12/31/2006 11.764 13.305 5 12/31/2007 13.305 13.324 4 12/31/2008 13.324 8.729 1 AZL Van Kampen Mid Cap Growth Fund CHTR 2 1.95% 12/31/2004 8.875 10.552 0 12/31/2005 10.552 12.163 0 12/31/2006 12.163 13.028 1 12/31/2007 13.028 15.609 1 12/31/2008 15.609 7.880 1 CHTR 3 1.95% 12/31/2004 8.875 10.552 0 12/31/2005 10.552 12.163 0 12/31/2006 12.163 13.028 0 12/31/2007 13.028 15.609 1 12/31/2008 15.609 7.880 1 CHTR 4 2.10% 12/31/2004 8.840 10.494 0 12/31/2005 10.494 12.078 0 12/31/2006 12.078 12.917 0 12/31/2007 12.917 15.454 0 12/31/2008 15.454 7.790 0 CHTR 5 2.45% 12/31/2004 8.758 10.360 0 12/31/2005 10.360 11.883 2 12/31/2006 11.883 12.663 5 12/31/2007 12.663 15.097 33 12/31/2008 15.097 7.583 33 BlackRock Global Allocation V.I. Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A N/A N/A 12/31/2008 N/A 7.890 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A N/A N/A 12/31/2008 N/A 7.890 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A N/A N/A 12/31/2008 N/A 7.882 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A N/A N/A 12/31/2008 N/A 7.864 0 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 20 Davis VA Financial Portfolio CHTR 2 1.95% 12/31/2004 9.724 10.520 0 12/31/2005 10.520 11.182 0 12/31/2006 11.182 12.996 0 12/31/2007 12.996 11.973 0 12/31/2008 11.973 6.298 0 CHTR 3 1.95% 12/31/2004 9.724 10.520 0 12/31/2005 10.520 11.182 0 12/31/2006 11.182 12.996 2 12/31/2007 12.996 11.973 2 12/31/2008 11.973 6.298 2 CHTR 4 2.10% 12/31/2004 9.681 10.457 0 12/31/2005 10.457 11.099 0 12/31/2006 11.099 12.880 0 12/31/2007 12.880 11.849 0 12/31/2008 11.849 6.223 0 CHTR 5 2.45% 12/31/2004 9.582 10.314 0 12/31/2005 10.314 10.908 0 12/31/2006 10.908 12.615 1 12/31/2007 12.615 11.564 1 12/31/2008 11.564 6.052 1 Franklin Global Real Estate Securities Fund CHTR 2 1.95% 12/31/2004 36.585 47.286 0 12/31/2005 47.286 52.624 0 12/31/2006 52.624 62.235 0 12/31/2007 62.235 48.295 0 12/31/2008 48.295 27.283 0 CHTR 3 1.95% 12/31/2004 36.585 47.286 0 12/31/2005 47.286 52.624 0 12/31/2006 52.624 62.235 0 12/31/2007 62.235 48.295 0 12/31/2008 48.295 27.283 0 CHTR 4 2.10% 12/31/2004 35.783 46.180 0 12/31/2005 46.180 51.316 0 12/31/2006 51.316 60.597 0 12/31/2007 60.597 46.953 0 12/31/2008 46.953 26.486 0 CHTR 5 2.45% 12/31/2004 33.980 43.699 1 12/31/2005 43.699 48.390 1 12/31/2006 48.390 56.942 1 12/31/2007 56.942 43.966 1 12/31/2008 43.966 24.714 1 Franklin Growth and Income Securities Fund CHTR 2 1.95% 12/31/2004 27.724 30.073 0 12/31/2005 30.073 30.530 0 12/31/2006 30.530 34.959 0 12/31/2007 34.959 33.009 0 12/31/2008 33.009 20.994 0 CHTR 3 1.95% 12/31/2004 27.724 30.073 0 12/31/2005 30.073 30.530 0 12/31/2006 30.530 34.959 0 12/31/2007 34.959 33.009 0 12/31/2008 33.009 20.994 0 CHTR 4 2.10% 12/31/2004 27.116 29.369 0 12/31/2005 29.369 29.771 0 12/31/2006 29.771 34.039 0 12/31/2007 34.039 32.092 0 12/31/2008 32.092 20.380 0 CHTR 5 2.45% 12/31/2004 25.749 27.791 1 12/31/2005 27.791 28.073 2 12/31/2006 28.073 31.986 2 12/31/2007 31.986 30.051 0 12/31/2008 30.051 19.017 0 Franklin High Income Securities Fund CHTR 2 1.95% 12/31/2004 19.412 20.916 0 12/31/2005 20.916 21.193 1 12/31/2006 21.193 22.731 1 12/31/2007 22.731 22.895 1 12/31/2008 22.895 17.203 1 CHTR 3 1.95% 12/31/2004 19.412 20.916 0 12/31/2005 20.916 21.193 0 12/31/2006 21.193 22.731 6 12/31/2007 22.731 22.895 6 12/31/2008 22.895 17.203 0 CHTR 4 2.10% 12/31/2004 18.987 20.427 0 12/31/2005 20.427 20.667 0 12/31/2006 20.667 22.133 0 12/31/2007 22.133 22.259 0 12/31/2008 22.259 16.700 0 CHTR 5 2.45% 12/31/2004 18.030 19.329 1 12/31/2005 19.329 19.488 1 12/31/2006 19.488 20.798 1 12/31/2007 20.798 20.843 1 12/31/2008 20.843 15.583 3 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 21 Franklin Income Securities Fund CHTR 2 1.95% 12/31/2004 33.316 37.197 0 12/31/2005 37.197 37.066 1 12/31/2006 37.066 42.983 1 12/31/2007 42.983 43.732 2 12/31/2008 43.732 30.167 2 CHTR 3 1.95% 12/31/2004 33.316 37.197 0 12/31/2005 37.197 37.066 0 12/31/2006 37.066 42.983 0 12/31/2007 42.983 43.732 0 12/31/2008 43.732 30.167 0 CHTR 4 2.10% 12/31/2004 32.586 36.327 1 12/31/2005 36.327 36.145 1 12/31/2006 36.145 41.852 0 12/31/2007 41.852 42.517 0 12/31/2008 42.517 29.285 0 CHTR 5 2.45% 12/31/2004 30.943 34.375 0 12/31/2005 34.375 34.084 2 12/31/2006 34.084 39.328 3 12/31/2007 39.328 39.812 4 12/31/2008 39.812 27.326 4 Franklin Large Cap Growth Securities Fund CHTR 2 1.95% 12/31/2004 16.637 17.609 0 12/31/2005 17.609 17.453 0 12/31/2006 17.453 18.982 0 12/31/2007 18.982 19.773 0 12/31/2008 19.773 12.695 0 CHTR 3 1.95% 12/31/2004 16.637 17.609 0 12/31/2005 17.609 17.453 0 12/31/2006 17.453 18.982 0 12/31/2007 18.982 19.773 0 12/31/2008 19.773 12.695 0 CHTR 4 2.10% 12/31/2004 16.447 17.381 0 12/31/2005 17.381 17.201 0 12/31/2006 17.201 18.680 0 12/31/2007 18.680 19.430 0 12/31/2008 19.430 12.456 0 CHTR 5 2.45% 12/31/2004 16.011 16.862 0 12/31/2005 16.862 16.629 4 12/31/2006 16.629 17.996 8 12/31/2007 17.996 18.652 4 12/31/2008 18.652 11.915 4 Franklin Rising Dividends Securities Fund CHTR 2 1.95% 12/31/2004 28.087 30.572 0 12/31/2005 30.572 31.011 0 12/31/2006 31.011 35.621 0 12/31/2007 35.621 33.990 0 12/31/2008 33.990 24.300 0 CHTR 3 1.95% 12/31/2004 28.087 30.572 0 12/31/2005 30.572 31.011 0 12/31/2006 31.011 35.621 0 12/31/2007 35.621 33.990 0 12/31/2008 33.990 24.300 0 CHTR 4 2.10% 12/31/2004 27.588 29.984 0 12/31/2005 29.984 30.369 0 12/31/2006 30.369 34.831 0 12/31/2007 34.831 33.187 0 12/31/2008 33.187 23.690 0 CHTR 5 2.45% 12/31/2004 26.458 28.656 0 12/31/2005 28.656 28.922 1 12/31/2006 28.922 33.057 2 12/31/2007 33.057 31.385 2 12/31/2008 31.385 22.325 2 Franklin Small Cap Value Securities Fund CHTR 2 1.95% 12/31/2004 12.060 14.635 1 12/31/2005 14.635 15.611 1 12/31/2006 15.611 17.911 1 12/31/2007 17.911 17.145 1 12/31/2008 17.145 11.262 1 CHTR 3 1.95% 12/31/2004 12.060 14.635 0 12/31/2005 14.635 15.611 0 12/31/2006 15.611 17.911 0 12/31/2007 17.911 17.145 0 12/31/2008 17.145 11.262 0 CHTR 4 2.10% 12/31/2004 11.958 14.489 0 12/31/2005 14.489 15.433 0 12/31/2006 15.433 17.679 0 12/31/2007 17.679 16.898 0 12/31/2008 16.898 11.083 0 CHTR 5 2.45% 12/31/2004 11.723 14.155 0 12/31/2005 14.155 15.024 1 12/31/2006 15.024 17.151 1 12/31/2007 17.151 16.335 1 12/31/2008 16.335 10.677 1 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 22 Franklin Small-Mid Cap Growth Securities Fund CHTR 2 1.95% 12/31/2004 18.131 19.820 0 12/31/2005 19.820 20.369 0 12/31/2006 20.369 21.713 3 12/31/2007 21.713 23.685 3 12/31/2008 23.685 13.357 3 CHTR 3 1.95% 12/31/2004 18.131 19.820 0 12/31/2005 19.820 20.369 0 12/31/2006 20.369 21.713 0 12/31/2007 21.713 23.685 0 12/31/2008 23.685 13.357 0 CHTR 4 2.10% 12/31/2004 17.910 19.549 0 12/31/2005 19.549 20.061 0 12/31/2006 20.061 21.353 0 12/31/2007 21.353 23.257 0 12/31/2008 23.257 13.095 0 CHTR 5 2.45% 12/31/2004 17.405 18.931 0 12/31/2005 18.931 19.359 0 12/31/2006 19.359 20.534 1 12/31/2007 20.534 22.286 0 12/31/2008 22.286 12.505 0 Franklin Templeton VIP Founding Funds Allocation Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.221 0 12/31/2008 9.221 5.799 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.221 0 12/31/2008 9.221 5.799 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.214 0 12/31/2008 9.214 5.786 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 9.198 0 12/31/2008 9.198 5.756 0 Franklin U.S. Government Fund CHTR 2 1.95% 12/31/2004 21.692 22.011 0 12/31/2005 22.011 22.106 3 12/31/2006 22.106 22.551 3 12/31/2007 22.551 23.574 3 12/31/2008 23.574 24.872 2 CHTR 3 1.95% 12/31/2004 21.692 22.011 0 12/31/2005 22.011 22.106 1 12/31/2006 22.106 22.551 1 12/31/2007 22.551 23.574 1 12/31/2008 23.574 24.872 1 CHTR 4 2.10% 12/31/2004 21.216 21.496 0 12/31/2005 21.496 21.557 0 12/31/2006 21.557 21.958 0 12/31/2007 21.958 22.919 0 12/31/2008 22.919 24.145 0 CHTR 5 2.45% 12/31/2004 20.147 20.341 0 12/31/2005 20.341 20.327 1 12/31/2006 20.327 20.633 5 12/31/2007 20.633 21.461 4 12/31/2008 21.461 22.529 8 Franklin Zero Coupon Fund 2010 CHTR 2 1.95% 12/31/2004 32.861 33.745 0 12/31/2005 33.745 33.603 0 12/31/2006 33.603 33.850 0 12/31/2007 33.850 36.055 0 12/31/2008 36.055 38.007 0 CHTR 3 1.95% 12/31/2004 32.861 33.745 0 12/31/2005 33.745 33.603 0 12/31/2006 33.603 33.850 0 12/31/2007 33.850 36.055 0 12/31/2008 36.055 38.007 0 CHTR 4 2.10% 12/31/2004 32.141 32.955 0 12/31/2005 32.955 32.768 0 12/31/2006 32.768 32.959 0 12/31/2007 32.959 35.053 0 12/31/2008 35.053 36.896 0 CHTR 5 2.45% 12/31/2004 30.521 31.185 0 12/31/2005 31.185 30.899 0 12/31/2006 30.899 30.971 0 12/31/2007 30.971 32.823 0 12/31/2008 32.823 34.428 1 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 23 Mutual Global Discovery Securities Fund CHTR 2 1.95% 12/31/2004 16.093 18.653 0 12/31/2005 18.653 21.214 2 12/31/2006 21.214 25.602 3 12/31/2007 25.602 28.080 3 12/31/2008 28.080 19.701 3 CHTR 3 1.95% 12/31/2004 16.093 18.653 0 12/31/2005 18.653 21.214 0 12/31/2006 21.214 25.602 2 12/31/2007 25.602 28.080 4 12/31/2008 28.080 19.701 2 CHTR 4 2.10% 12/31/2004 15.921 18.426 0 12/31/2005 18.426 20.925 0 12/31/2006 20.925 25.216 1 12/31/2007 25.216 27.614 1 12/31/2008 27.614 19.345 0 CHTR 5 2.45% 12/31/2004 15.528 17.907 0 12/31/2005 17.907 20.265 2 12/31/2006 20.265 24.336 5 12/31/2007 24.336 26.557 20 12/31/2008 26.557 18.539 17 Mutual Shares Securities Fund CHTR 2 1.95% 12/31/2004 16.112 17.796 0 12/31/2005 17.796 19.295 3 12/31/2006 19.295 22.402 6 12/31/2007 22.402 22.731 6 12/31/2008 22.731 14.019 6 CHTR 3 1.95% 12/31/2004 16.112 17.796 0 12/31/2005 17.796 19.295 0 12/31/2006 19.295 22.402 2 12/31/2007 22.402 22.731 2 12/31/2008 22.731 14.019 1 CHTR 4 2.10% 12/31/2004 15.940 17.580 0 12/31/2005 17.580 19.032 0 12/31/2006 19.032 22.063 1 12/31/2007 22.063 22.354 2 12/31/2008 22.354 13.766 1 CHTR 5 2.45% 12/31/2004 15.546 17.085 2 12/31/2005 17.085 18.432 7 12/31/2006 18.432 21.293 11 12/31/2007 21.293 21.498 13 12/31/2008 21.498 13.192 9 OpCap Mid Cap Portfolio CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.972 0 12/31/2007 9.972 10.486 0 12/31/2008 10.486 5.998 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.972 0 12/31/2007 9.972 10.486 0 12/31/2008 10.486 5.998 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.962 0 12/31/2007 9.962 10.460 0 12/31/2008 10.460 5.974 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A 9.939 0 12/31/2007 9.939 10.398 5 12/31/2008 10.398 5.918 5 Oppenheimer High Income Fund/VA CHTR 2 1.95% 12/31/2004 10.984 11.737 0 12/31/2005 11.737 11.778 0 12/31/2006 11.778 12.639 0 12/31/2007 12.639 12.381 0 12/31/2008 12.381 2.590 0 CHTR 3 1.95% 12/31/2004 10.984 11.737 0 12/31/2005 11.737 11.778 0 12/31/2006 11.778 12.639 0 12/31/2007 12.639 12.381 0 12/31/2008 12.381 2.590 0 CHTR 4 2.10% 12/31/2004 10.936 11.668 0 12/31/2005 11.668 11.691 0 12/31/2006 11.691 12.527 0 12/31/2007 12.527 12.253 0 12/31/2008 12.253 2.559 0 CHTR 5 2.45% 12/31/2004 10.824 11.508 0 12/31/2005 11.508 11.490 0 12/31/2006 11.490 12.269 0 12/31/2007 12.269 11.958 0 12/31/2008 11.958 2.489 0 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 24 PIMCO VIT All Asset Portfolio CHTR 2 1.95% 12/31/2004 N/A 11.834 0 12/31/2005 11.834 12.329 0 12/31/2006 12.329 12.655 0 12/31/2007 12.655 13.443 0 12/31/2008 13.443 11.094 0 CHTR 3 1.95% 12/31/2004 N/A 11.834 0 12/31/2005 11.834 12.329 1 12/31/2006 12.329 12.655 0 12/31/2007 12.655 13.443 0 12/31/2008 13.443 11.094 0 CHTR 4 2.10% 12/31/2004 N/A 11.822 4 12/31/2005 11.822 12.298 4 12/31/2006 12.298 12.605 0 12/31/2007 12.605 13.369 0 12/31/2008 13.369 11.016 0 CHTR 5 2.45% 12/31/2004 N/A 11.794 2 12/31/2005 11.794 12.227 2 12/31/2006 12.227 12.487 2 12/31/2007 12.487 13.198 2 12/31/2008 13.198 10.838 0 PIMCO VIT CommodityRealReturn Strategy Portfolio CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.996 0 12/31/2006 10.996 10.450 0 12/31/2007 10.450 12.629 0 12/31/2008 12.629 6.961 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.996 0 12/31/2006 10.996 10.450 1 12/31/2007 10.450 12.629 1 12/31/2008 12.629 6.961 1 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.985 0 12/31/2006 10.985 10.424 0 12/31/2007 10.424 12.578 0 12/31/2008 12.578 6.923 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.959 1 12/31/2006 10.959 10.363 1 12/31/2007 10.363 12.461 3 12/31/2008 12.461 6.834 4 PIMCO VIT Emerging Markets Bond Portfolio CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.887 0 12/31/2006 10.887 11.668 0 12/31/2007 11.668 12.108 0 12/31/2008 12.108 10.140 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.887 0 12/31/2006 10.887 11.668 3 12/31/2007 11.668 12.108 3 12/31/2008 12.108 10.140 3 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.876 0 12/31/2006 10.876 11.639 0 12/31/2007 11.639 12.059 0 12/31/2008 12.059 10.084 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 10.851 0 12/31/2006 10.851 11.571 0 12/31/2007 11.571 11.947 0 12/31/2008 11.947 9.955 0 PIMCO VIT Global Bond Portfolio (Unhedged) CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.314 0 12/31/2006 9.314 9.560 0 12/31/2007 9.560 10.288 0 12/31/2008 10.288 10.003 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.314 0 12/31/2006 9.314 9.560 1 12/31/2007 9.560 10.288 2 12/31/2008 10.288 10.003 1 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.305 0 12/31/2006 9.305 9.536 0 12/31/2007 9.536 10.247 0 12/31/2008 10.247 9.948 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A 9.283 0 12/31/2006 9.283 9.480 0 12/31/2007 9.480 10.151 8 12/31/2008 10.151 9.821 8 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 25 PIMCO VIT High Yield Portfolio CHTR 2 1.95% 12/31/2004 11.396 12.244 0 12/31/2005 12.244 12.504 1 12/31/2006 12.504 13.380 1 12/31/2007 13.380 13.580 1 12/31/2008 13.580 10.182 1 CHTR 3 1.95% 12/31/2004 11.396 12.244 0 12/31/2005 12.244 12.504 1 12/31/2006 12.504 13.380 1 12/31/2007 13.380 13.580 0 12/31/2008 13.580 10.182 0 CHTR 4 2.10% 12/31/2004 11.346 12.172 0 12/31/2005 12.172 12.411 0 12/31/2006 12.411 13.261 0 12/31/2007 13.261 13.440 0 12/31/2008 13.440 10.062 0 CHTR 5 2.45% 12/31/2004 11.229 12.005 0 12/31/2005 12.005 12.198 1 12/31/2006 12.198 12.988 1 12/31/2007 12.988 13.117 1 12/31/2008 13.117 9.785 1 PIMCO VIT Real Return Portfolio CHTR 2 1.95% 12/31/2004 10.433 11.144 0 12/31/2005 11.144 11.158 3 12/31/2006 11.158 11.022 4 12/31/2007 11.022 11.961 4 12/31/2008 11.961 10.902 4 CHTR 3 1.95% 12/31/2004 10.433 11.144 1 12/31/2005 11.144 11.158 1 12/31/2006 11.158 11.022 1 12/31/2007 11.022 11.961 0 12/31/2008 11.961 10.902 0 CHTR 4 2.10% 12/31/2004 10.423 11.116 8 12/31/2005 11.116 11.114 10 12/31/2006 11.114 10.961 2 12/31/2007 10.961 11.877 0 12/31/2008 11.877 10.809 0 CHTR 5 2.45% 12/31/2004 10.398 11.051 6 12/31/2005 11.051 11.010 7 12/31/2006 11.010 10.822 6 12/31/2007 10.822 11.685 7 12/31/2008 11.685 10.597 6 PIMCO VIT StocksPLUS Growth and Income Portfolio CHTR 2 1.95% 12/31/2004 N/A 9.358 0 12/31/2005 9.358 9.498 0 12/31/2006 9.498 10.703 0 12/31/2007 10.703 11.215 0 12/31/2008 11.215 6.309 0 CHTR 3 1.95% 12/31/2004 N/A 9.358 0 12/31/2005 9.358 9.498 0 12/31/2006 9.498 10.703 0 12/31/2007 10.703 11.215 0 12/31/2008 11.215 6.309 0 CHTR 4 2.10% 12/31/2004 N/A 9.303 0 12/31/2005 9.303 9.428 0 12/31/2006 9.428 10.608 0 12/31/2007 10.608 11.098 0 12/31/2008 11.098 6.235 0 CHTR 5 2.45% 12/31/2004 N/A 9.175 0 12/31/2005 9.175 9.266 0 12/31/2006 9.266 10.389 0 12/31/2007 10.389 10.832 0 12/31/2008 10.832 6.063 0 PIMCO VIT Total Return Portfolio CHTR 2 1.95% 12/31/2004 11.712 12.047 1 12/31/2005 12.047 12.105 3 12/31/2006 12.105 12.329 3 12/31/2007 12.329 13.149 3 12/31/2008 13.149 13.514 3 CHTR 3 1.95% 12/31/2004 11.712 12.047 0 12/31/2005 12.047 12.105 3 12/31/2006 12.105 12.329 11 12/31/2007 12.329 13.149 12 12/31/2008 13.149 13.514 2 CHTR 4 2.10% 12/31/2004 11.661 11.976 0 12/31/2005 11.976 12.016 0 12/31/2006 12.016 12.220 0 12/31/2007 12.220 13.013 0 12/31/2008 13.013 13.353 0 CHTR 5 2.45% 12/31/2004 11.541 11.812 0 12/31/2005 11.812 11.809 1 12/31/2006 11.809 11.968 1 12/31/2007 11.968 12.700 4 12/31/2008 12.700 12.987 6 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 26 SP International Growth Portfolio CHTR 2 1.95% 12/31/2004 5.504 6.268 0 12/31/2005 6.268 7.118 0 12/31/2006 7.118 8.389 0 12/31/2007 8.389 9.799 0 12/31/2008 9.799 4.758 0 CHTR 3 1.95% 12/31/2004 5.504 6.268 0 12/31/2005 6.268 7.118 0 12/31/2006 7.118 8.389 0 12/31/2007 8.389 9.799 0 12/31/2008 9.799 4.758 0 CHTR 4 2.10% 12/31/2004 5.479 6.230 0 12/31/2005 6.230 7.064 0 12/31/2006 7.064 8.313 0 12/31/2007 8.313 9.696 0 12/31/2008 9.696 4.701 0 CHTR 5 2.45% 12/31/2004 5.421 6.142 0 12/31/2005 6.142 6.940 0 12/31/2006 6.940 8.139 0 12/31/2007 8.139 9.460 0 12/31/2008 9.460 4.570 0 SP Strategic Partners Focused Growth Portfolio CHTR 2 1.95% 12/31/2004 5.902 6.360 1 12/31/2005 6.360 7.163 1 12/31/2006 7.163 6.947 1 12/31/2007 6.947 7.812 1 12/31/2008 7.812 4.708 1 CHTR 3 1.95% 12/31/2004 5.902 6.360 0 12/31/2005 6.360 7.163 0 12/31/2006 7.163 6.947 0 12/31/2007 6.947 7.812 0 12/31/2008 7.812 4.708 0 CHTR 4 2.10% 12/31/2004 5.875 6.322 0 12/31/2005 6.322 7.109 0 12/31/2006 7.109 6.884 0 12/31/2007 6.884 7.730 0 12/31/2008 7.730 4.651 0 CHTR 5 2.45% 12/31/2004 5.812 6.233 0 12/31/2005 6.233 6.984 1 12/31/2006 6.984 6.740 1 12/31/2007 6.740 7.541 1 12/31/2008 7.541 4.522 2 Templeton Foreign Securities Fund CHTR 2 1.95% 12/31/2004 17.420 20.248 0 12/31/2005 20.248 21.877 1 12/31/2006 21.877 26.057 1 12/31/2007 26.057 29.501 1 12/31/2008 29.501 17.248 1 CHTR 3 1.95% 12/31/2004 17.420 20.248 0 12/31/2005 20.248 21.877 0 12/31/2006 21.877 26.057 1 12/31/2007 26.057 29.501 1 12/31/2008 29.501 17.248 1 CHTR 4 2.10% 12/31/2004 17.111 19.859 0 12/31/2005 19.859 21.425 0 12/31/2006 21.425 25.480 0 12/31/2007 25.480 28.804 0 12/31/2008 28.804 16.816 0 CHTR 5 2.45% 12/31/2004 16.411 18.980 0 12/31/2005 18.980 20.405 0 12/31/2006 20.405 24.182 0 12/31/2007 24.182 27.241 1 12/31/2008 27.241 15.848 1 Templeton Global Bond Securities Fund CHTR 2 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.282 0 12/31/2008 29.282 30.497 0 CHTR 3 1.95% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 29.282 0 12/31/2008 29.282 30.497 0 CHTR 4 2.10% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 28.491 0 12/31/2008 28.491 29.628 0 CHTR 5 2.45% 12/31/2004 N/A N/A N/A 12/31/2005 N/A N/A N/A 12/31/2006 N/A N/A N/A 12/31/2007 N/A 26.726 0 12/31/2008 26.726 27.696 0 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 27 Templeton Growth Securities Fund CHTR 2 1.95% 12/31/2004 18.814 21.407 0 12/31/2005 21.407 22.855 1 12/31/2006 22.855 27.303 4 12/31/2007 27.303 27.401 4 12/31/2008 27.401 15.498 4 CHTR 3 1.95% 12/31/2004 18.814 21.407 0 12/31/2005 21.407 22.855 0 12/31/2006 22.855 27.303 0 12/31/2007 27.303 27.401 0 12/31/2008 27.401 15.498 0 CHTR 4 2.10% 12/31/2004 18.539 21.062 0 12/31/2005 21.062 22.454 0 12/31/2006 22.454 26.784 0 12/31/2007 26.784 26.840 0 12/31/2008 26.840 15.158 0 CHTR 5 2.45% 12/31/2004 17.914 20.280 1 12/31/2005 20.280 21.545 3 12/31/2006 21.545 25.610 5 12/31/2007 25.610 25.573 6 12/31/2008 25.573 14.392 4 The Allianz Charter(R) II NY Variable Annuity Contract SAI - April 27, 2009 [Logo: KPMG] ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK FINANCIAL STATEMENTS DECEMBER 31, 2008 (WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THEREON) [logo: KPMG] KPMG LLP 4200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402 Report of Independent Registered Public Accounting Firm The Board of Directors of Allianz Life Insurance Company of New York and Contract Owners of Allianz Life of NY Variable Account C: We have audited the accompanying statements of assets and liabilities of the sub-accounts of Allianz Life of NY Variable Account C (the Variable Account) as of December 31, 2008, and the related statements of operations for the year or period then ended, the statements of changes in net assets for each of the years or periods in the two-year period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Investment securities held in custody for the benefit of the Variable Account were confirmed to us by the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the sub-accounts of Allianz Life of NY Variable Account C as of December 31, 2008, the results of their operations, the changes in their net assets, and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP Minneapolis, Minnesota March 30, 2009 KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements Statements of Assets and Liabilities December 31, 2008 (In thousands)
AIM V.I. AIM V.I. Alger American Alger Alger Alger Capital Core Equity Capital American American American Appreciation Fund Appreciation LargeCap MidCap SmallCap Fund Portfolio Growth Growth Growth Portfolio Portfolio Portfolio Assets: Investments at Net Asset Value $201 63 147 129 32 1 Total Assets 201 63 147 129 32 1 Liabilities: Accrued Mortality and Expense Risk - - - - - - and Administrative Charges Total Liabilities - - - - - - Net Assets $201 63 147 129 32 1 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 201 63 147 129 32 1 Contracts in Annuity Payment Period - - - - - - (Note 2) Total Contract Owners' Equity $201 63 147 129 32 1 Investment Shares 12 3 5 5 5 - Investments at Cost $310 80 266 280 76 1
See Accompanying Notes to Financial Statements 3 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued) Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands)
AZL BlackRock AZL AIM Capital AZL Columbia AZL Columbia AZL Davis International Appreciation Mid Cap Value Small Cap AZL Columbia NY Venture Equity Fund Fund Fund Value Fund Technology Fund Fund Assets: Investments at Net Asset Value $3,592 1,643 992 1,538 1,478 11,038 Total Assets 3,592 1,643 992 1,538 1,478 11,038 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $3,592 1,643 992 1,538 1,478 11,038 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 3,592 1,643 992 1,538 1,478 11,036 Contracts in Annuity Payment - - - - - 2 Period (Note 2) Total Contract Owners' Equity $3,592 1,643 992 1,538 1,478 11,038 Investment Shares 348 190 198 221 309 1,364 Investments at Cost $5,638 2,236 1,568 2,428 2,460 14,200
See Accompanying Notes to Financial Statements 4 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued) Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands)
AZL Dreyfus AZL First Trust AZL Franklin AZL Fusion Founders Equity Target Double Small Cap AZL Fusion AZL Fusion Moderate Growth Fund Play Fund Value Fund Balanced Fund Growth Fund Fund Assets: Investments at Net Asset Value $2,574 768 4,949 12,245 20,841 17,811 Total Assets 2,574 768 4,949 12,245 20,841 17,811 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $2,574 768 4,949 12,245 20,841 17,811 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 2,574 768 4,949 12,243 20,841 17,811 Contracts in Annuity Payment - - - 2 - - Period (Note 2) Total Contract Owners' Equity $2,574 768 4,949 12,245 20,841 17,811 Investment Shares 439 155 480 1,468 2,839 2,304 Investments at Cost $4,360 1,234 7,122 15,775 32,374 25,080
See Accompanying Notes to Financial Statements 5 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) AZL Legg AZL LMP AZL NACM AZL Jennison AZL Legg Mason Mason Value Large Cap AZL Money International 20/20 Focus Fund Growth Fund Fund Growth Fund Market Fund Fund Assets: Investments at Net Asset Value $4,552 3,893 2,043 - 54,199 459 Total Assets 4,552 3,893 2,043 - 54,199 459 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $4,552 3,893 2,043 - 54,199 459 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 4,552 3,893 2,043 - 54,199 459 Contracts in Annuity Payment - - - - - - Period (Note 2) Total Contract Owners' Equity $4,552 3,893 2,043 - 54,199 459 Investment Shares 539 769 409 - 54,199 90 Investments at Cost $6,594 5,664 4,382 - 54,199 600
See Accompanying Notes to Financial Statements 6 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) AZL PIMCO AZL OCC AZL OCC AZL Oppenheimer Fundamental Opportunity Value AZL Oppenheimer International AZL Oppenheimer IndexPLUS Total Fund Fund Global Fund Growth Fund Main Street Fund Return Fund Assets: Investments at Net Asset Value $2,323 - 4,620 3,867 3,215 723 Total Assets 2,323 - 4,620 3,867 3,215 723 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $2,323 - 4,620 3,867 3,215 723 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 2,323 - 4,620 3,867 3,215 723 Contracts in Annuity Payment - - - - - - Period (Note 2) Total Contract Owners' Equity $2,323 - 4,620 3,867 3,215 723 Investment Shares 333 - 563 372 506 120 Investments at Cost $4,057 - 7,183 6,330 5,173 851
See Accompanying Notes to Financial Statements 7 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) AZL Schroder Emerging AZL Schroder Markets Emerging AZL Schroder AZL Small Cap AZL S&P 500 Equity Fund Markets Equity International Stock Index AZL TargetPLUS Index Fund CL 1 Fund CL 2 Small Cap Fund Fund Balanced Fund Assets: Investments at Net Asset Value $5,205 1,424 5,296 689 3,120 1,530 Total Assets 5,205 1,424 5,296 689 3,120 1,530 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $5,205 1,424 5,296 689 3,120 1,530 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 5,205 1,424 5,296 689 3,120 1,530 Contracts in Annuity Payment - - - - - - Period (Note 2) Total Contract Owners' Equity $5,205 1,424 5,296 689 3,120 1,530 Investment Shares 846 312 1,161 139 491 202 Investments at Cost $6,921 1,238 7,936 1,030 4,369 1,757
See Accompanying Notes to Financial Statements 8 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) AZL Turner AZL Van Quantitative AZL Van Kampen AZL TargetPLUS AZL TargetPLUS AZL TargetPLUS Small Cap Kampen Equity and Equity Fund Growth Fund Moderate Fund Growth Fund Comstock Fund Income Fund Assets: Investments at Net Asset Value $962 2,456 1,736 888 4,844 2,372 Total Assets 962 2,456 1,736 888 4,844 2,372 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $962 2,456 1,736 888 4,844 2,372 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 962 2,456 1,736 888 4,844 2,372 Contracts in Annuity Payment - - - - - - Period (Note 2) Total Contract Owners' Equity $962 2,456 1,736 888 4,844 2,372 Investment Shares 177 408 256 151 785 264 Investments at Cost $1,690 3,571 2,263 1,485 8,397 2,862
See Accompanying Notes to Financial Statements 9 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) BlackRock AZL Van Kampen AZL Van Kampen AZL Van Kampen AZL Van Kampen Global Davis VA Global Global Real Growth and Mid Cap Growth Allocations Financial Franchise Fund Estate Fund Income Fund Fund V.I. Fund Portfolio (A) Assets: Investments at Net Asset Value $4,973 1,462 2,990 5,843 2,853 1,206 Total Assets 4,973 1,462 2,990 5,843 2,853 1,206 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $4,973 1,462 2,990 5,843 2,853 1,206 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 4,973 1,462 2,990 5,843 2,853 1,206 Contracts in Annuity Payment - - - - - - Period (Note 2) Total Contract Owners' Equity $4,973 1,462 2,990 5,843 2,853 1,206 Investment Shares 389 268 376 853 252 169 Investments at Cost $6,484 2,532 4,421 10,685 3,000 1,980
See Accompanying Notes to Financial Statements 10 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) Franklin Dreyfus IP Growth and Franklin Davis VA Small Cap Franklin Global Income High Income Value Stock Index Dreyfus Stock Communications Securities Securities Portfolio Portfolio Index Fund Securities Fund Fund Fund Assets: Investments at Net Asset Value $273 - - 7,508 15,825 6,062 Total Assets 273 - - 7,508 15,825 6,062 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $273 - - 7,508 15,825 6,062 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 273 - - 7,473 15,667 6,055 Contracts in Annuity Payment - - - 35 158 7 Period (Note 2) Total Contract Owners' Equity $273 - - 7,508 15,825 6,062 Investment Shares 33 - - 1,115 1,818 1,306 Investments at Cost $335 - - 15,027 28,127 9,379
See Accompanying Notes to Financial Statements 11 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) Franklin Franklin Franklin Franklin Large Cap Rising Small Cap Income Growth Franklin Dividends Value Securities Securities Money Market Franklin Real Estate Securities Securities Fund Fund Fund Fund Fund Fund Assets: Investments at Net Asset Value $32,473 5,145 4,979 4,664 18,443 1,693 Total Assets 32,473 5,145 4,979 4,664 18,443 1,693 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $32,473 5,145 4,979 4,664 18,443 1,693 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 32,236 5,136 4,964 4,635 18,306 1,693 Contracts in Annuity Payment Period (Note 2) 237 9 15 29 137 - Total Contract Owners' Equity $32,473 5,145 4,979 4,664 18,443 1,693 Investment Shares 2,838 485 4,979 434 1,329 160 Investments at Cost $42,956 7,559 4,979 9,855 20,217 2,244
See Accompanying Notes to Financial Statements 12 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) Franklin Franklin Templeton J.P. Morgan Small-Mid Cap VIP Founding J.P. Morgan U.S. Large Growth Funds International Cap Core Securities Allocation Franklin U.S. Franklin Zero Opportunities Equity Fund Fund Government Fund Coupon Fund 2010 Portfolio Portfolio Assets: Investments at Net Asset Value $3,420 7,016 25,009 5,768 7 9 Total Assets 3,420 7,016 25,009 5,768 7 9 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $3,420 7,016 25,009 5,768 7 9 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 3,379 7,016 24,997 5,759 7 9 Contracts in Annuity Payment Period (Note 2) 41 - 12 9 - - Total Contract Owners' Equity $3,420 7,016 25,009 5,768 7 9 Investment Shares 285 1,251 1,908 346 1 1 Investments at Cost $5,409 9,551 24,430 5,637 9 12
See Accompanying Notes to Financial Statements 13 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) Mutual Oppenheimer Jennison Discovery Mutual Shares Global 20/20 Focus Securities Securities OpCap Mid Cap Securities Oppenheimer High Portfolio Fund Fund Portfolio Fund/VA Income Fund/VA Assets: Investments at Net Asset Value $- 16,038 18,799 1,107 953 402 Total Assets - 16,038 18,799 1,107 953 402 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $- 16,038 18,799 1,107 953 402 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period - 16,012 18,775 1,107 953 402 Contracts in Annuity Payment Period (Note 2) - 26 24 - - - Total Contract Owners' Equity $- 16,038 18,799 1,107 953 402 Investment Shares - 1,006 1,591 128 47 255 Investments at Cost $- 18,421 26,186 1,653 1,270 850
See Accompanying Notes to Financial Statements 14 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) PIMCO VIT Commodity PIMCO VIT RealReturn Emerging PIMCO VIT PIMCO VIT Oppenheimer Main PIMCO VIT All Strategy Markets Bond Global Bond High Yield Street Fund/VA Asset Portfolio Portfolio Portfolio Portfolio Portfolio Assets: Investments at Net Asset Value $1,280 2,737 2,930 1,445 1,686 2,528 Total Assets 1,280 2,737 2,930 1,445 1,686 2,528 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $1,280 2,737 2,930 1,445 1,686 2,528 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 1,280 2,737 2,930 1,445 1,686 2,528 Contracts in Annuity Payment Period (Note 2) - - - - - - Total Contract Owners' Equity $1,280 2,737 2,930 1,445 1,686 2,528 Investment Shares 88 297 419 140 138 447 Investments at Cost $1,689 3,298 5,089 1,836 1,733 3,409
See Accompanying Notes to Financial Statements 15 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) PIMCO VIT SP Strategic StocksPLUS Seligman Seligman Partners Growth and Global Small-Cap Focused PIMCO VIT Real Income PIMCO VIT Total Technology Value Growth Return Portfolio Portfolio Return Portfolio Portfolio Portfolio Portfolio Assets: Investments at Net Asset Value $7,378 72 12,759 5 589 246 Total Assets 7,378 72 12,759 5 589 246 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $7,378 72 12,759 5 589 246 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 7,378 72 12,759 5 589 246 Contracts in Annuity Payment Period (Note 2) - - - - - - Total Contract Owners' Equity $7,378 72 12,759 5 589 246 Investment Shares 655 12 1,238 - 123 53 Investments at Cost $8,189 108 12,826 6 1,215 344
See Accompanying Notes to Financial Statements 16 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) Templeton Templeton Global Templeton Templeton Developing Templeton Income Growth SP International Asset Strategy Markets Foreign Securities Securities Growth Portfolio Fund Securities Fund Securities Fund Fund Fund Assets: Investments at Net Asset Value $218 536 - 11,026 6,613 13,480 Total Assets 218 536 - 11,026 6,613 13,480 Liabilities: Accrued Mortality and Expense - - - - - - Risk and Administrative Charges Total Liabilities - - - - - - Net Assets $218 536 - 11,026 6,613 13,480 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 218 536 - 10,995 6,613 13,458 Contracts in Annuity Payment Period (Note 2) - - - 31 - 22 Total Contract Owners' Equity $218 536 - 11,026 6,613 13,480 Investment Shares 65 62 - 1,010 383 1,634 Investments at Cost $464 999 - 14,471 5,869 21,282
See Accompanying Notes to Financial Statements 17 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Assets and Liabilities (continued) December 31, 2008 (In thousands) Van Kampen LIT Van Kampen LIT Growth and Capital Growth Income Portfolio Portfolio Total All Funds Assets: Investments at Net Asset Value $2 - 450,908 Total Assets 2 - 450,908 Liabilities: Accrued Mortality and Expense - - - Risk and Administrative Charges Total Liabilities - - - Net Assets $2 - 450,908 Contract Owners' Equity: (Note 6) Contracts in Accumulation Period 2 - 450,112 Contracts in Annuity Payment Period (Note 2) - - 796 Total Contract Owners' Equity $2 - 450,908 Investment Shares - - 103,824 Investments at Cost $4 - 600,079
(A) Period from May 1, 2008 (fund commencement) to December 31, 2008 See Accompanying Notes to Financial Statements 18 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations For the year ended December 31, 2008 (In thousands) Alger American Alger American Alger American AIM V.I. Capital LargeCap Alger American SmallCap AIM V.I. Capital Core Equity Appreciation Growth MidCap Growth Growth Appreciation Fund Fund Portfolio Portfolio Portfolio Portfolio Investment Income: Dividends Reinvested in Fund Shares $- 2 - - - - Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 5 1 3 3 1 - Investment Income (Loss), Net (5) 1 (3) (3) (1) - Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds - - - - 19 - Realized Gains (Losses) on Sales of Investments, Net (9) 1 (2) (11) 1 - Realized Gains (Losses) on Investments, Net (9) 1 (2) (11) 20 - Net Change in Unrealized Appreciation (Depreciation) on Investments (158) (31) (120) (105) (65) (1) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (167) (30) (122) (116) (45) (1) Net Increase (Decrease) in Net Assets From Operations $(172) (29) (125) (119) (46) (1)
See Accompanying Notes to Financial Statements 19 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) AZL BlackRock AZL AIM Capital AZL Columbia AZL Columbia International Appreciation Mid Cap Value Small Cap AZL Columbia AZL Davis NY Equity Fund Fund Fund Value Fund Technology Fund Venture Fund Investment Income: Dividends Reinvested in Fund Shares $24 - 6 9 - 95 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 107 43 23 45 46 222 Investment Income (Loss), Net (83) (43) (17) (36) (46) (127) Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 517 - - 163 193 254 Realized Gains (Losses) on Sales of Investments, Net (197) (78) (86) (200) (283) (294) Realized Gains (Losses) on Investments, Net 320 (78) (86) (37) (90) (40) Net Change in Unrealized Appreciation (Depreciation) on Investments (2,798) (739) (598) (659) (1,230) (4,308) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (2,478) (817) (684) (696) (1,320) (4,348) Net Increase (Decrease) in Net Assets From Operations $(2,561) (860) (701) (732) (1,366) (4,475)
See Accompanying Notes to Financial Statements 20 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) AZL Dreyfus AZL First Trust AZL Franklin Founders Equity Target Double Small Cap AZL Fusion AZL Fusion AZL Fusion Growth Fund Play Fund Value Fund Balanced Fund Growth Fund Moderate Fund Investment Income: Dividends Reinvested in Fund Shares $11 6 59 283 397 482 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 84 13 122 265 617 466 Investment Income (Loss), Net (73) (7) (63) 18 (220) 16 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 322 - 252 384 1,512 1,113 Realized Gains (Losses) on Sales of Investments, Net (201) (34) (321) (380) (526) (767) Realized Gains (Losses) on Investments, Net 121 (34) (69) 4 986 346 Net Change in Unrealized Appreciation (Depreciation) on Investments (2,019) (466) (1,974) (4,031) (13,301) (8,799) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (1,898) (500) (2,043) (4,027) (12,315) (8,453) Net Increase (Decrease) in Net Assets From Operations $(1,971) (507) (2,106) (4,009) (12,535) (8,437)
See Accompanying Notes to Financial Statements 21 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) AZL Legg AZL LMP Large AZL NACM AZL Jennison AZL Legg Mason Mason Value Cap Growth AZL Money International 20/20 Focus Fund Growth Fund Fund Fund Market Fund Fund Investment Income: Dividends Reinvested in Fund Shares $5 - - 7 797 11 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 95 69 75 57 761 5 Investment Income (Loss), Net (90) (69) (75) (50) 36 6 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 205 114 245 157 - - Realized Gains (Losses) on Sales of Investments, Net (295) (700) (279) (1,116) - (26) Realized Gains (Losses) on Investments, Net (90) (586) (34) (959) - (26) Net Change in Unrealized Appreciation (Depreciation) on Investments (2,362) (1,869) (2,498) (437) - (138) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (2,452) (2,455) (2,532) (1,396) - (164) Net Increase (Decrease) in Net Assets From Operations $(2,542) (2,524) (2,607) (1,446) 36 (158)
See Accompanying Notes to Financial Statements 22 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) AZL PIMCO AZL OCC AZL Oppenheimer Fundamental Opportunity AZL OCC AZL Oppenheimer International AZL Oppenheimer IndexPLUS Total Fund Value Fund Global Fund Growth Fund Main Street Fund Return Fund Investment Income: Dividends Reinvested in Fund Shares $- 188 49 58 41 - Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 68 120 148 114 97 8 Investment Income (Loss), Net (68) 68 (99) (56) (56) (8) Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 331 827 411 449 605 - Realized Gains (Losses) on Sales of Investments, Net (336) (5,686) (221) (203) (130) (10) Realized Gains (Losses) on Investments, Net (5) (4,859) 190 246 475 (10) Net Change in Unrealized Appreciation (Depreciation) on Investments (1,728) 489 (3,332) (3,195) (2,380) (123) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (1,733) (4,370) (3,142) (2,949) (1,905) (133) Net Increase (Decrease) in Net Assets From Operations $(1,801) (4,302) (3,241) (3,005) (1,961) (141)
See Accompanying Notes to Financial Statements 23 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) AZL Schroder Emerging AZL Schroder Markets Emerging AZL Schroder AZL Small Cap AZL S&P 500 Equity Fund Markets Equity International Stock Index AZL TargetPLUS Index Fund CL 1 Fund CL 2 Small Cap Fund Fund Balanced Fund Investment Income: Dividends Reinvested in Fund Shares $- - 7 14 16 - Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 49 2 111 12 33 16 Investment Income (Loss), Net (49) (2) (104) 2 (17) (16) Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds - 8 1,101 - 1 - Realized Gains (Losses) on Sales of Investments, Net (202) - (1,180) (50) (175) (29) Realized Gains (Losses) on Investments, Net (202) 8 (79) (50) (174) (29) Net Change in Unrealized Appreciation (Depreciation) on Investments (1,691) 187 (3,546) (325) (1,220) (220) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (1,893) 195 (3,625) (375) (1,394) (249) Net Increase (Decrease) in Net Assets From Operations $(1,942) 193 (3,729) (373) (1,411) (265)
See Accompanying Notes to Financial Statements 24 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) AZL Turner AZL Van Quantitative AZL Van Kampen AZL TargetPLUS AZL TargetPLUS AZL TargetPLUS Small Cap Kampen Equity and Equity Fund Growth Fund Moderate Fund Growth Fund Comstock Fund Income Fund Investment Income: Dividends Reinvested in Fund Shares $- - - - 141 52 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 30 40 27 22 156 42 Investment Income (Loss), Net (30) (40) (27) (22) (15) 10 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds - - - 196 789 64 Realized Gains (Losses) on Sales of Investments, Net (186) (63) (51) (40) (464) (52) Realized Gains (Losses) on Investments, Net (186) (63) (51) 156 325 12 Net Change in Unrealized Appreciation (Depreciation) on Investments (698) (1,099) (519) (661) (3,356) (561) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (884) (1,162) (570) (505) (3,031) (549) Net Increase (Decrease) in Net Assets From Operations $(914) (1,202) (597) (527) (3,046) (539)
See Accompanying Notes to Financial Statements 25 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) BlackRock AZL Van Kampen AZL Van Kampen AZL Van Kampen AZL Van Kampen Global Davis VA Global Global Real Growth and Mid Cap Growth Allocations Financial Franchise Fund Estate Fund Income Fund Fund V.I. Fund Portfolio (A) Investment Income: Dividends Reinvested in Fund Shares $122 31 73 25 69 - Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 146 39 80 187 19 37 Investment Income (Loss), Net (24) (8) (7) (162) 50 (37) Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 405 107 213 1,074 13 82 Realized Gains (Losses) on Sales of Investments, Net (143) (271) (152) (1,072) (104) (271) Realized Gains (Losses) on Investments, Net 262 (164) 61 2 (91) (189) Net Change in Unrealized Appreciation (Depreciation) on Investments (2,407) (865) (1,485) (5,814) (147) (753) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (2,145) (1,029) (1,424) (5,812) (238) (942) Net Increase (Decrease) in Net Assets From Operations $(2,169) (1,037) (1,431) (5,974) (188) (979)
See Accompanying Notes to Financial Statements 26 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) Franklin Dreyfus IP Growth and Franklin Small Cap Franklin Global Income High Income Davis VA Value Stock Index Dreyfus Stock Communications Securities Securities Portfolio Portfolio Index Fund Securities Fund Fund Fund Investment Income: Dividends Reinvested in Fund Shares $4 25 36 28 802 856 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 10 54 69 191 347 142 Investment Income (Loss), Net (6) (29) (33) (163) 455 714 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 7 438 - - 2,007 - Realized Gains (Losses) on Sales of Investments, Net 10 (315) 402 (1,239) (1,409) (721) Realized Gains (Losses) on Investments, Net 17 123 402 (1,239) 598 (721) Net Change in Unrealized Appreciation (Depreciation) on Investments (275) (115) (1,084) (6,182) (10,749) (2,058) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (258) 8 (682) (7,421) (10,151) (2,779) Net Increase (Decrease) in Net Assets From Operations $(264) (21) (715) (7,584) (9,696) (2,065)
See Accompanying Notes to Financial Statements 27 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) Franklin Franklin Franklin Large Cap Rising Small Cap Franklin Growth Franklin Dividends Value Income Securities Money Market Franklin Real Estate Securities Securities Securities Fund Fund Fund Fund Fund Fund Investment Income: Dividends Reinvested in Fund Shares $2,174 111 82 97 499 30 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 716 129 74 134 414 49 Investment Income (Loss), Net 1,458 (18) 8 (37) 85 (19) Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 889 490 - 2,066 194 189 Realized Gains (Losses) on Sales of Investments, Net (629) (180) - (673) 535 95 Realized Gains (Losses) on Investments, Net 260 310 - 1,393 729 284 Net Change in Unrealized Appreciation (Depreciation) on Investments (15,833) (3,409) (4) (5,280) (8,721) (1,179) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (15,573) (3,099) (4) (3,887) (7,992) (895) Net Increase (Decrease) in Net Assets From Operations $(14,115) (3,117) 4 (3,924) (7,907) (914)
See Accompanying Notes to Financial Statements 28 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued) Statements of Operations (continued) For the year ended December 31, 2008 (In thousands)
Franklin Franklin Templeton VIP J.P. Morgan Small-Mid Cap Founding J.P. Morgan U.S. Large Growth Funds International Cap Core Securities Allocation Franklin U.S. Franklin Zero Opportunities Equity Fund Fund Government Fund Coupon Fund 2010 Portfolio Portfolio Investment Income: Dividends Reinvested in Fund Shares $- 188 1,153 399 - - Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 87 95 385 150 - - Investment Income (Loss), Net (87) 93 768 249 - - Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 663 187 - - 2 - Realized Gains (Losses) on Sales of Investments, Net (45) (148) 3 (6) - - Realized Gains (Losses) on Investments, Net 618 39 3 (6) 2 - Net Change in Unrealized Appreciation (Depreciation) on Investments (3,373) (2,526) 643 46 (7) (5) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (2,755) (2,487) 646 40 (5) (5) Net Increase (Decrease) in Net Assets From Operations $(2,842) (2,394) 1,414 289 (5) (5)
See Accompanying Notes to Financial Statements 29 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) Mutual Oppenheimer Jennison Discovery Mutual Shares Global Oppenheimer 20/20 Focus Securities Securities OpCap Mid Cap Securities High Income Portfolio Fund Fund Portfolio Fund/VA Fund/VA Investment Income: Dividends Reinvested in Fund Shares $- 451 725 4 24 39 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 25 364 461 22 32 11 Investment Income (Loss), Net (25) 87 264 (18) (8) 28 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 88 810 998 102 106 - Realized Gains (Losses) on Sales of Investments, Net 95 95 (391) (52) 11 (72) Realized Gains (Losses) on Investments, Net 183 905 607 50 117 (72) Net Change in Unrealized Appreciation (Depreciation) on Investments (332) (7,529) (11,677) (544) (888) (430) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (149) (6,624) (11,070) (494) (771) (502) Net Increase (Decrease) in Net Assets From Operations $(174) (6,537) (10,806) (512) (779) (474)
See Accompanying Notes to Financial Statements 30 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) PIMCO VIT Commodity PIMCO VIT PIMCO VIT RealReturn Emerging PIMCO VIT Oppenheimer Main All Asset Strategy Markets Bond Global Bond PIMCO VIT High Street Fund/VA Portfolio Portfolio Portfolio Portfolio Yield Portfolio Investment Income: Dividends Reinvested in Fund Shares $28 173 268 100 58 225 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 39 59 133 33 39 62 Investment Income (Loss), Net (11) 114 135 67 19 163 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 122 9 43 75 - 8 Realized Gains (Losses) on Sales of Investments, Net (7) (81) (2,570) (51) (59) (116) Realized Gains (Losses) on Investments, Net 115 (72) (2,527) 24 (59) (108) Net Change in Unrealized Appreciation (Depreciation) on Investments (994) (552) (2,343) (381) (92) (842) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (879) (624) (4,870) (357) (151) (950) Net Increase (Decrease) in Net Assets From Operations $(890) (510) (4,735) (290) (132) (787)
See Accompanying Notes to Financial Statements 31 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) SP Strategic PIMCO VIT Seligman Seligman Partners StocksPLUS PIMCO VIT Global Small-Cap Focused PIMCO VIT Real Growth and Total Return Technology Value Growth Return Portfolio Income Portfolio Portfolio Portfolio Portfolio Portfolio Investment Income: Dividends Reinvested in Fund Shares $275 10 578 - - - Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 172 2 269 - 18 7 Investment Income (Loss), Net 103 8 309 - (18) (7) Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 12 - 237 - 311 26 Realized Gains (Losses) on Sales of Investments, Net (174) (5) 43 - (78) 1 Realized Gains (Losses) on Investments, Net (162) (5) 280 - 233 27 Net Change in Unrealized Appreciation (Depreciation) on Investments (800) (70) (252) (3) (710) (161) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (962) (75) 28 (3) (477) (134) Net Increase (Decrease) in Net Assets From Operations $(859) (67) 337 (3) (495) (141)
See Accompanying Notes to Financial Statements 32 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) Templeton Developing Templeton Templeton Templeton SP Templeton Markets Foreign Global Income Growth International Asset Securities Securities Securities Securities Growth Portfolio Strategy Fund Fund Fund Fund Fund Investment Income: Dividends Reinvested in Fund Shares $6 71 188 423 524 347 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) 8 9 130 260 221 344 Investment Income (Loss), Net (2) 62 58 163 303 3 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds 86 86 1,344 1,564 - 1,270 Realized Gains (Losses) on Sales of Investments, Net (57) (23) (2,833) 289 (779) (915) Realized Gains (Losses) on Investments, Net 29 63 (1,489) 1,853 (779) 355 Net Change in Unrealized Appreciation (Depreciation) on Investments (296) (316) (3,701) (10,265) (6) (10,395) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (267) (253) (5,190) (8,412) (785) (10,040) Net Increase (Decrease) in Net Assets From Operations $(269) (191) (5,132) (8,249) (482) (10,037)
See Accompanying Notes to Financial Statements 33 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Operations (continued) For the year ended December 31, 2008 (In thousands) Van Kampen LIT Van Kampen LIT Capital Growth Growth and Total All Portfolio Income Portfolio Funds Investment Income: Dividends Reinvested in Fund Shares $- - 14,081 Expenses: Mortality and Expense Risk and Administrative Charges (Note 2) - - 10,497 Investment Income (Loss), Net - - 3,584 Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Investments: Realized Capital Gain Distributions on Mutual Funds - - 26,555 Realized Gains (Losses) on Sales of Investments, Net - 2 (28,941) Realized Gains (Losses) on Investments, Net - 2 (2,386) Net Change in Unrealized Appreciation (Depreciation) on Investments (3) (3) (197,851) Total Realized Gains (Losses) & Changes in Appreciation (Depreciation) on Investments (3) (1) (200,237) Net Increase (Decrease) in Net Assets From Operations $(3) (1) (196,653)
(A) Period from May 1, 2008 (fund commencement) to December 31, 2008 See Accompanying Notes to Financial Statements 34 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AIM V.I. Capital Appreciation Alger American Capital Fund AIM V.I. Core Equity Fund Appreciation Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ (5) (7) 1 (2) (3) (4) Realized Gains (Losses) on Investments, Net (9) 6 1 8 (2) (5) Net Change in Unrealized Appreciation (Depreciation) on Investments (158) 46 (31) 3 (120) 86 Net Increase (Decrease) in Net Assets From Operations (172) 45 (29) 9 (125) 77 Contract Transactions-All Products (Note 5) Purchase Payments - - - - - - Transfers Between Funds (Note 2) (8) (11) - - - - Surrenders and Terminations (51) (71) (6) (47) (3) (71) Rescissions - - - - - - Bonus (Recapture) - - - - - - Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (59) (82) (6) (47) (3) (71) Increase (Decrease) in Net Assets (231) (37) (35) (38) (128) 6 Net Assets at Beginning of Period 432 469 98 136 275 269 Net Assets at End of Period $ 201 432 63 98 147 275
See Accompanying Notes to Financial Statements 35 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Alger American LargeCap Alger American MidCap Growth Alger American SmallCap Growth Portfolio Portfolio Growth Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(3) (4) (1) (1) - - Realized Gains (Losses) on Investments, Net (11) (43) 20 21 - - Net Change in Unrealized Appreciation (Depreciation) on Investments (105) 104 (65) 6 (1) 1 Net Increase (Decrease) in Net Assets From Operations (119) 57 (46) 26 (1) 1 Contract Transactions-All Products (Note 5) Purchase Payments - - - - - - Transfers Between Funds (Note 2) (6) - - - - - Surrenders and Terminations (25) (158) (7) (33) - - Rescissions - - - - - - Bonus (Recapture) - - - - - - Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (31) (158) (7) (33) - - Increase (Decrease) in Net Assets (150) (101) (53) (7) (1) 1 Net Assets at Beginning of Period 279 380 85 92 2 1 Net Assets at End of Period $ 129 279 32 85 1 2
See Accompanying Notes to Financial Statements 36 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL BlackRock AZL AIM Basic Value AZL AIM International Capital Appreciation Fund Equity Fund Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ - (55) (83) (94) (43) (33) Realized Gains (Losses) on Investments, Net - 915 320 894 (78) 40 Net Change in Unrealized Appreciation (Depreciation) on Investments - (719) (2,798) (244) (739) 100 Net Increase (Decrease) in Net Assets From Operations - 141 (2,561) 556 (860) 107 Contract Transactions-All Products (Note 5) Purchase Payments - 182 2,036 1,155 785 617 Transfers Between Funds (Note 2) - (4,792) (669) (2,742) (207) 254 Surrenders and Terminations - (314) (233) (631) (70) (146) Rescissions - (2) (118) (1) (16) - Bonus (Recapture) - 7 32 50 5 18 Contract Maintenance Charges (Note 2) - - (1) (1) - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions - (4,919) 1,047 (2,170) 497 743 Increase (Decrease) in Net Assets - (4,778) (1,514) (1,614) (363) 850 Net Assets at Beginning of Period - 4,778 5,106 6,720 2,006 1,156 Net Assets at End of Period $ - - 3,592 5,106 1,643 2,006
See Accompanying Notes to Financial Statements 37 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Columbia Mid Cap AZL Columbia Small AZL Columbia Value Fund Cap Value Fund Technology Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ (17) (18) (36) (64) (46) (75) Realized Gains (Losses) on Investments, Net (86) 4 (37) 221 (90) 350 Net Change in Unrealized Appreciation (Depreciation) on Investments (598) (16) (659) (455) (1,230) 176 Net Increase (Decrease) in Net Assets From Operations (701) (30) (732) (298) (1,366) 451 Contract Transactions-All Products (Note 5) Purchase Payments 525 556 454 699 514 964 Transfers Between Funds (Note 2) 217 44 (416) (256) 12 225 Surrenders and Terminations (16) (17) (120) (507) (231) (392) Rescissions (2) (1) (45) (12) (13) (46) Bonus (Recapture) 4 8 14 18 18 28 Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 728 590 (113) (58) 300 779 Increase (Decrease) in Net Assets 27 560 (845) (356) (1,066) 1,230 Net Assets at Beginning of Period 965 405 2,383 2,739 2,544 1,314 Net Assets at End of Period $ 992 965 1,538 2,383 1,478 2,544
See Accompanying Notes to Financial Statements 38 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL First Trust AZL Davis NY Venture AZL Dreyfus Founders Target Double Play Fund Equity Growth Fund Fund 2008 2007 2008 2007 2008 2007 (B) Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ (127) (253) (73) (71) (7) (3) Realized Gains (Losses) on Investments, Net (40) 950 121 179 (34) - Net Change in Unrealized Appreciation (Depreciation) on Investments (4,308) (488) (2,019) 42 (466) - Net Increase (Decrease) in Net Assets From Operations (4,475) 209 (1,971) 150 (507) (3) Contract Transactions-All Products (Note 5) Purchase Payments 2,751 4,353 445 939 899 228 Transfers Between Funds (Note 2) 2,851 (4,858) (509) 1,978 10 186 Surrenders and Terminations (524) (1,620) (262) (534) (51) (1) Rescissions (118) (103) (10) - (6) - Bonus (Recapture) 31 94 5 18 11 2 Contract Maintenance Charges (Note 2) (2) (1) (1) - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 4,989 (2,135) (332) 2,401 863 415 Increase (Decrease) in Net Assets 514 (1,926) (2,303) 2,551 356 412 Net Assets at Beginning of Period 10,524 12,450 4,877 2,326 412 - Net Assets at End of Period $ 11,038 10,524 2,574 4,877 768 412
See Accompanying Notes to Financial Statements 39 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Franklin Small AZL Fusion Balanced AZL Fusion Growth Cap Value Fund Fund Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ (63) (130) 18 (66) (220) (444) Realized Gains (Losses) on Investments, Net (69) 383 4 250 986 804 Net Change in Unrealized Appreciation (Depreciation) on Investments (1,974) (732) (4,031) 127 (13,301) 147 Net Increase (Decrease) in Net Assets From Operations (2,106) (479) (4,009) 311 (12,535) 507 Contract Transactions-All Products (Note 5) Purchase Payments 1,896 1,425 7,225 4,935 10,517 8,535 Transfers Between Funds (Note 2) 48 (936) (386) 769 (614) 361 Surrenders and Terminations (216) (1,165) (700) (1,285) (1,089) (1,585) Rescissions (68) (12) (305) (20) (352) (497) Bonus (Recapture) 26 31 104 116 151 226 Contract Maintenance Charges (Note 2) (1) (1) (1) (1) (4) (2) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 1,685 (658) 5,937 4,514 8,609 7,038 Increase (Decrease) in Net Assets (421) (1,137) 1,928 4,825 (3,926) 7,545 Net Assets at Beginning of Period 5,370 6,507 10,317 5,492 24,767 17,222 Net Assets at End of Period $4,949 5,370 12,245 10,317 20,841 24,767
See Accompanying Notes to Financial Statements 40 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Fusion Moderate AZL Jennison 20/20 AZL Legg Mason Fund Focus Fund Growth Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $16 (259) (90) (71) (69) (54) Realized Gains (Losses) on Investments, Net 346 651 (90) 251 (586) 142 Net Change in Unrealized Appreciation (Depreciation) on Investments (8,799) 257 (2,362) 35 (1,869) 17 Net Increase (Decrease) in Net Assets From Operations (8,437) 649 (2,542) 215 (2,524) 105 Contract Transactions-All Products (Note 5) Purchase Payments 7,788 8,289 1,706 1,203 1,867 1,259 Transfers Between Funds (Note 2) (1,196) 151 1,942 (59) (792) 2,668 Surrenders and Terminations (902) (2,535) (173) (367) (139) (300) Rescissions (694) (289) (124) - (50) - Bonus (Recapture) 97 196 28 40 20 24 Contract Maintenance Charges (Note 2) (3) (2) (1) - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 5,090 5,810 3,378 817 906 3,651 Increase (Decrease) in Net Assets (3,347) 6,459 836 1,032 (1,618) 3,756 Net Assets at Beginning of Period 21,158 14,699 3,716 2,684 5,511 1,755 Net Assets at End of Period $17,811 21,158 4,552 3,716 3,893 5,511
See Accompanying Notes to Financial Statements 41 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Legg Mason Value AZL LMP Large Cap Fund Growth Fund AZL Money Market Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(75) (135) (50) (90) 36 553 Realized Gains (Losses) on Investments, Net (34) 261 (959) 153 - - Net Change in Unrealized Appreciation (Depreciation) on Investments (2,498) (572) (437) 34 - - Net Increase (Decrease) in Net Assets From Operations (2,607) (446) (1,446) 97 36 553 Contract Transactions-All Products (Note 5) Purchase Payments 330 542 191 260 23,610 7,681 Transfers Between Funds (Note 2) (214) (231) (1,791) 37 20,984 9,051 Surrenders and Terminations (208) (919) (289) (654) (8,421) (14,000) Rescissions (62) - - (4) (2,253) (212) Bonus (Recapture) 6 8 8 7 332 210 Contract Maintenance Charges (Note 2) (1) (1) - - (4) (3) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (149) (601) (1,881) (354) 34,248 2,727 Increase (Decrease) in Net Assets (2,756) (1,047) (3,327) (257) 34,284 3,280 Net Assets at Beginning of Period 4,799 5,846 3,327 3,584 19,915 16,635 Net Assets at End of Period $2,043 4,799 - 3,327 54,199 19,915
See Accompanying Notes to Financial Statements 42 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL NACM AZL OCC Opportunity AZL OCC Renaissance International Fund Fund Fund 2008 2007 (B) 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $6 - (68) (99) - (36) Realized Gains (Losses) on Investments, Net (26) - (5) 874 - 440 Net Change in Unrealized Appreciation (Depreciation) on Investments (138) (4) (1,728) (526) - (81) Net Increase (Decrease) in Net Assets From Operations (158) (4) (1,801) 249 - 323 Contract Transactions-All Products (Note 5) Purchase Payments 440 70 615 864 - 444 Transfers Between Funds (Note 2) 114 21 (168) (2,559) - (5,399) Surrenders and Terminations - - (245) (487) - (281) Rescissions (26) - (14) (1) - - Bonus (Recapture) 2 - 11 27 - 14 Contract Maintenance Charges (Note 2) - - - - - (1) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 530 91 199 (2,156) - (5,223) Increase (Decrease) in Net Assets 372 87 (1,602) (1,907) - (4,900) Net Assets at Beginning of Period 87 - 3,925 5,832 - 4,900 Net Assets at End of Period $459 87 2,323 3,925 - -
See Accompanying Notes to Financial Statements 43 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Oppenheimer AZL Oppenheimer International Growth AZL OCC Value Fund Global Fund Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $68 (78) (99) (172) (56) (81) Realized Gains (Losses) on Investments, Net (4,859) 549 190 790 246 357 Net Change in Unrealized Appreciation (Depreciation) on Investments 489 (1,256) (3,332) (427) (3,195) 48 Net Increase (Decrease) in Net Assets From Operations (4,302) (785) (3,241) 191 (3,005) 324 Contract Transactions-All Products (Note 5) Purchase Payments 244 165 1,456 2,173 1,951 1,591 Transfers Between Funds (Note 2) (3,060) 4,135 (361) (774) (363) 816 Surrenders and Terminations (466) (1,796) (201) (945) (302) (517) Rescissions (87) - (108) (46) (28) (7) Bonus (Recapture) - 5 20 60 23 37 Contract Maintenance Charges (Note 2) (1) (1) (1) (1) (1) (1) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (3,370) 2,508 805 467 1,280 1,919 Increase (Decrease) in Net Assets (7,672) 1,723 (2,436) 658 (1,725) 2,243 Net Assets at Beginning of Period 7,672 5,949 7,056 6,398 5,592 3,349 Net Assets at End of Period $- 7,672 4,620 7,056 3,867 5,592
See Accompanying Notes to Financial Statements 44 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL PIMCO Fundamental AZL Oppenheimer Main IndexPLUS Total AZL S&P 500 Index Street Fund Return Fund Fund 2008 2007 2008 2007 2008 2007 (B) Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(56) (102) (8) 8 (49) 4 Realized Gains (Losses) on Investments, Net 475 500 (10) (4) (202) 1 Net Change in Unrealized Appreciation (Depreciation) on Investments (2,380) (310) (123) 2 (1,691) (25) Net Increase (Decrease) in Net Assets From Operations (1,961) 88 (141) 6 (1,942) (20) Contract Transactions-All Products (Note 5) Purchase Payments 848 937 353 149 1,953 615 Transfers Between Funds (Note 2) (213) (363) 390 (210) 4,647 108 Surrenders and Terminations (195) (993) (10) (15) (153) (1) Rescissions (108) - (21) (1) (22) - Bonus (Recapture) 5 18 12 4 19 2 Contract Maintenance Charges (Note 2) (1) (1) - - (1) - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 336 (402) 724 (73) 6,443 724 Increase (Decrease) in Net Assets (1,625) (314) 583 (67) 4,501 704 Net Assets at Beginning of Period 4,840 5,154 140 207 704 - Net Assets at End of Period $3,215 4,840 723 140 5,205 704
See Accompanying Notes to Financial Statements 45 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Schroder AZL Schroder Emerging AZL Schroder Emerging Markets Markets Equity Fund International Small Equity Fund CL 1 CL 2 Cap Fund 2008 2007 (B) 2008 2007 2008 2007 (B) Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(2) - (104) (126) 2 (2) Realized Gains (Losses) on Investments, Net 8 5 (79) 492 (50) (1) Net Change in Unrealized Appreciation (Depreciation) on Investments 187 (1) (3,546) 484 (325) (16) Net Increase (Decrease) in Net Assets From Operations 193 4 (3,729) 850 (373) (19) Contract Transactions-All Products (Note 5) Purchase Payments - 418 1,960 2,459 652 310 Transfers Between Funds (Note 2) 1,231 (327) (6,437) 6,997 96 49 Surrenders and Terminations (23) (69) (238) (404) (15) - Rescissions - (15) (62) (86) (24) - Bonus (Recapture) - 12 37 70 12 1 Contract Maintenance Charges (Note 2) - - (1) - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 1,208 19 (4,741) 9,036 721 360 Increase (Decrease) in Net Assets 1,401 23 (8,470) 9,886 348 341 Net Assets at Beginning of Period 23 - 13,766 3,880 341 - Net Assets at End of Period $1,424 23 5,296 13,766 689 341
See Accompanying Notes to Financial Statements 46 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Small Cap Stock AZL TargetPLUS AZL TargetPLUS Index Fund Balanced Fund Equity Fund 2008 2007 (B) 2008 2007 (B) 2008 2007 (B) Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(17) - (16) 5 (30) (9) Realized Gains (Losses) on Investments, Net (174) 11 (29) - (186) 9 Net Change in Unrealized Appreciation (Depreciation) on Investments (1,220) (29) (220) (7) (698) (30) Net Increase (Decrease) in Net Assets From Operations (1,411) (18) (265) (2) (914) (30) Contract Transactions-All Products (Note 5) Purchase Payments 891 570 1,487 296 1,122 1,270 Transfers Between Funds (Note 2) 3,238 (98) (81) 73 (833) 445 Surrenders and Terminations (57) 2 (2) (11) (24) (129) Rescissions (15) - (4) - (6) - Bonus (Recapture) 11 7 29 10 4 57 Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 4,068 481 1,429 368 263 1,643 Increase (Decrease) in Net Assets 2,657 463 1,164 366 (651) 1,613 Net Assets at Beginning of Period 463 - 366 - 1,613 - Net Assets at End of Period $3,120 463 1,530 366 962 1,613
See Accompanying Notes to Financial Statements 47 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Turner AZL TargetPLUS AZL TargetPLUS Quantitative Small Growth Fund Moderate Fund Cap Growth Fund 2008 2007 (B) 2008 2007 (B) 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(40) 6 (27) 2 (22) (25) Realized Gains (Losses) on Investments, Net (63) (3) (51) (2) 156 65 Net Change in Unrealized Appreciation (Depreciation) on Investments (1,099) (16) (519) (8) (661) (1) Net Increase (Decrease) in Net Assets From Operations (1,202) (13) (597) (8) (527) 39 Contract Transactions-All Products (Note 5) Purchase Payments 2,878 777 2,219 466 428 302 Transfers Between Funds (Note 2) (73) 173 (35) (56) 64 (52) Surrenders and Terminations (51) - (31) (6) (19) (162) Rescissions (86) - (189) (69) (18) (9) Bonus (Recapture) 41 12 42 - 8 10 Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 2,709 962 2,006 335 463 89 Increase (Decrease) in Net Assets 1,507 949 1,409 327 (64) 128 Net Assets at Beginning of Period 949 - 327 - 952 824 Net Assets at End of Period $2,456 949 1,736 327 888 952
See Accompanying Notes to Financial Statements 48 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Van Kampen AZL Van Kampen AZL Van Kampen Equity and Income Aggressive Growth Fund Comstock Fund Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $- (35) (15) (74) 10 (17) Realized Gains (Losses) on Investments, Net - 488 325 367 12 103 Net Change in Unrealized Appreciation (Depreciation) on Investments - (56) (3,356) (792) (561) (84) Net Increase (Decrease) in Net Assets From Operations - 397 (3,046) (499) (539) 2 Contract Transactions-All Products (Note 5) Purchase Payments - 478 774 1,111 1,365 597 Transfers Between Funds (Note 2) - (1,885) (728) 3,979 (167) (108) Surrenders and Terminations - (131) (413) (2,148) (76) (415) Rescissions - - (37) - (12) (1) Bonus (Recapture) - 11 5 34 25 12 Contract Maintenance Charges (Note 2) - - (1) (1) - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions - (1,527) (400) 2,975 1,135 85 Increase (Decrease) in Net Assets - (1,130) (3,446) 2,476 596 87 Net Assets at Beginning of Period - 1,130 8,290 5,814 1,776 1,689 Net Assets at End of Period $- - 4,844 8,290 2,372 1,776
See Accompanying Notes to Financial Statements 49 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued) Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands)
AZL Van Kampen AZL Van Kampen AZL Van Kampen Global Growth and Income Global Franchise Fund Real Estate Fund Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(24) (165) (8) (60) (7) (82) Realized Gains (Losses) on Investments, Net 262 436 (164) 327 61 558 Net Change in Unrealized Appreciation (Depreciation) on Investments (2,407) 135 (865) (384) (1,485) (664) Net Increase (Decrease) in Net Assets From Operations (2,169) 406 (1,037) (117) (1,431) (188) Contract Transactions-All Products (Note 5) Purchase Payments 1,259 2,716 723 2,769 685 1,077 Transfers Between Funds (Note 2) (738) (914) (158) (3,954) (112) (824) Surrenders and Terminations (218) (712) (48) (140) (562) (1,339) Rescissions (135) (38) (10) (35) (16) (40) Bonus (Recapture) 8 58 15 66 5 36 Contract Maintenance Charges (Note 2) (1) (1) - - (1) (1) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 175 1,109 522 (1,294) (1) (1,091) Increase (Decrease) in Net Assets (1,994) 1,515 (515) (1,411) (1,432) (1,279) Net Assets at Beginning of Period 6,967 5,452 1,977 3,388 4,422 5,701 Net Assets at End of Period $4,973 6,967 1,462 1,977 2,990 4,422
See Accompanying Notes to Financial Statements 50 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) AZL Van Kampen Mid AZL Van Kampen BlackRock Global Cap Growth Fund Strategic Growth Fund Allocations V.I. Fund 2008 2007 2008 2007 2008 (A) 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ (162) (166) - (28) 50 - Realized Gains (Losses) on Investments, Net 2 555 - 393 (91) - Net Change in Unrealized Appreciation (Depreciation) on Investments (5,814) 503 - (151) (147) - Net Increase (Decrease) in Net Assets From Operations (5,974) 892 - 214 (188) - Contract Transactions-All Products (Note 5) Purchase Payments 2,280 1,846 - 214 3,370 - Transfers Between Funds (Note 2) (7,497) 11,352 - (1,802) (42) - Surrenders and Terminations (405) (746) - (157) (44) - Rescissions (75) (53) - - (259) - Bonus (Recapture) 40 40 - 4 16 - Contract Maintenance Charges (Note 2) (1) (1) - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (5,658) 12,438 - (1,741) 3,041 - Increase (Decrease) in Net Assets (11,632) 13,330 - (1,527) 2,853 - Net Assets at Beginning of Period 17,475 4,145 - 1,527 - - Net Assets at End of Period $5,843 17,475 - - 2,853 -
See Accompanying Notes to Financial Statements 51 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Davis VA Financial Davis VA Real Estate Davis VA Value Portfolio Portfolio Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(37) (33) - - (6) (14) Realized Gains (Losses) on Investments, Net (189) 294 - 16 17 253 Net Change in Unrealized Appreciation (Depreciation) on Investments (753) (389) - (14) (275) (202) Net Increase (Decrease) in Net Assets From Operations (979) (128) - 2 (264) 37 Contract Transactions-All Products (Note 5) Purchase Payments 433 470 - - 1 4 Transfers Between Funds (Note 2) 133 75 - - (27) (229) Surrenders and Terminations (270) (542) - (39) (156) (441) Rescissions (10) (20) - - - - Bonus (Recapture) 4 10 - - - - Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 290 (7) - (39) (182) (666) Increase (Decrease) in Net Assets (689) (135) - (37) (446) (629) Net Assets at Beginning of Period 1,895 2,030 - 37 719 1,348 Net Assets at End of Period $1,206 1,895 - - 273 719
See Accompanying Notes to Financial Statements 52 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Franklin Global Dreyfus IP Small Cap Dreyfus Stock Index Communications Stock Index Portfolio Fund Securities Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(29) (99) (33) (48) (163) (266) Realized Gains (Losses) on Investments, Net 123 660 402 497 (1,239) (233) Net Change in Unrealized Appreciation (Depreciation) on Investments (115) (497) (1,084) (203) (6,182) 3,599 Net Increase (Decrease) in Net Assets From Operations (21) 64 (715) 246 (7,584) 3,100 Contract Transactions-All Products (Note 5) Purchase Payments 28 1,620 30 376 692 972 Transfers Between Funds (Note 2) (3,318) (1,796) (4,073) (504) (2,586) 2,502 Surrenders and Terminations (123) (717) (500) (1,555) (1,454) (2,297) Rescissions (18) (34) - (4) (76) (62) Bonus (Recapture) (1) 38 1 8 23 37 Contract Maintenance Charges (Note 2) - (1) (1) (1) (9) (10) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (3,432) (890) (4,543) (1,680) (3,410) 1,142 Increase (Decrease) in Net Assets (3,453) (826) (5,258) (1,434) (10,994) 4,242 Net Assets at Beginning of Period 3,453 4,279 5,258 6,692 18,502 14,260 Net Assets at End of Period $- 3,453 - 5,258 7,508 18,502
See Accompanying Notes to Financial Statements 53 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Franklin Growth and Income Securities Franklin High Income Franklin Income Fund Securities Fund Securities Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $455 300 714 542 1,458 859 Realized Gains (Losses) on Investments, Net 598 2,234 (721) (542) 260 1,645 Net Change in Unrealized Appreciation (Depreciation) on Investments (10,749) (3,985) (2,058) 8 (15,833) (1,625) Net Increase (Decrease) in Net Assets From Operations (9,696) (1,451) (2,065) 8 (14,115) 879 Contract Transactions-All Products (Note 5) Purchase Payments 57 714 979 1,286 7,911 5,996 Transfers Between Funds (Note 2) (1,457) (893) (1,270) (1,304) (800) 308 Surrenders and Terminations (2,802) (5,183) (1,136) (1,751) (5,231) (7,750) Rescissions - (60) (13) (15) (605) (31) Bonus (Recapture) 3 20 15 27 48 138 Contract Maintenance Charges (Note 2) (13) (15) (3) (4) (15) (14) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (4,212) (5,417) (1,428) (1,761) 1,308 (1,353) Increase (Decrease) in Net Assets (13,908) (6,868) (3,493) (1,753) (12,807) (474) Net Assets at Beginning of Period 29,733 36,601 9,555 11,308 45,280 45,754 Net Assets at End of Period $15,825 29,733 6,062 9,555 32,473 45,280
See Accompanying Notes to Financial Statements 54 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Franklin Large Cap Growth Securities Franklin Money Market Franklin Real Estate Fund Fund Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(18) (98) 8 184 (37) 85 Realized Gains (Losses) on Investments, Net 310 451 - - 1,393 1,594 Net Change in Unrealized Appreciation (Depreciation) on Investments (3,409) 210 (4) (1) (5,280) (4,935) Net Increase (Decrease) in Net Assets From Operations (3,117) 563 4 183 (3,924) (3,256) Contract Transactions-All Products (Note 5) Purchase Payments 49 272 - 17 20 173 Transfers Between Funds (Note 2) (524) (480) (1) (95) (724) (1,289) Surrenders and Terminations (926) (1,998) (442) (1,057) (925) (2,413) Rescissions - - - - - (26) Bonus (Recapture) 1 6 - - 1 4 Contract Maintenance Charges (Note 2) (3) (4) (2) (2) (3) (4) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (1,403) (2,204) (445) (1,137) (1,631) (3,555) Increase (Decrease) in Net Assets (4,520) (1,641) (441) (954) (5,555) (6,811) Net Assets at Beginning of Period 9,665 11,306 5,420 6,374 10,219 17,030 Net Assets at End of Period $5,145 9,665 4,979 5,420 4,664 10,219
See Accompanying Notes to Financial Statements 55 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Franklin Rising Franklin Small-Mid Dividends Securities Franklin Small Cap Cap Growth Fund Value Securities Fund Securities Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $85 277 (19) (47) (87) (138) Realized Gains (Losses) on Investments, Net 729 2,101 284 575 618 1,066 Net Change in Unrealized Appreciation (Depreciation) on Investments (8,721) (3,643) (1,179) (641) (3,373) (124) Net Increase (Decrease) in Net Assets From Operations (7,907) (1,265) (914) (113) (2,842) 804 Contract Transactions-All Products (Note 5) Purchase Payments 56 203 16 33 45 80 Transfers Between Funds (Note 2) (1,445) (1,113) (233) (428) (480) (224) Surrenders and Terminations (3,203) (4,239) (289) (483) (636) (1,640) Rescissions - (2) - (20) - - Bonus (Recapture) 1 3 - 1 1 3 Contract Maintenance Charges (Note 2) (12) (14) (1) (1) (3) (4) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (4,603) (5,162) (507) (898) (1,073) (1,785) Increase (Decrease) in Net Assets (12,510) (6,427) (1,421) (1,011) (3,915) (981) Net Assets at Beginning of Period 30,953 37,380 3,114 4,125 7,335 8,316 Net Assets at End of Period $18,443 30,953 1,693 3,114 3,420 7,335
See Accompanying Notes to Financial Statements 56 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Franklin Templeton VIP Founding Funds Franklin U.S. Franklin Zero Coupon Allocation Fund Government Fund Fund 2010 2008 2007 (B) 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $93 (2) 768 771 249 141 Realized Gains (Losses) on Investments, Net 39 (9) 3 (127) (6) (4) Net Change in Unrealized Appreciation (Depreciation) on Investments (2,526) (9) 643 543 46 159 Net Increase (Decrease) in Net Assets From Operations (2,394) (20) 1,414 1,187 289 296 Contract Transactions-All Products (Note 5) Purchase Payments 8,217 1,101 2,547 504 1,640 83 Transfers Between Funds (Note 2) (57) 317 2,058 (19) (279) 66 Surrenders and Terminations (242) (3) (3,828) (4,369) (435) (440) Rescissions (112) - (133) (3) (63) - Bonus (Recapture) 170 39 26 5 36 - Contract Maintenance Charges (Note 2) - - (11) (10) (1) (1) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 7,976 1,454 659 (3,892) 898 (292) Increase (Decrease) in Net Assets 5,582 1,434 2,073 (2,705) 1,187 4 Net Assets at Beginning of Period 1,434 - 22,936 25,641 4,581 4,577 Net Assets at End of Period $7,016 1,434 25,009 22,936 5,768 4,581
See Accompanying Notes to Financial Statements 57 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) J.P. Morgan International J.P. Morgan U.S. Opportunities Large Cap Core Jennison 20/20 Focus Portfolio Equity Portfolio Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $- - - - (25) (35) Realized Gains (Losses) on Investments, Net 2 - - - 183 234 Net Change in Unrealized Appreciation (Depreciation) on Investments (7) - (5) - (332) (79) Net Increase (Decrease) in Net Assets From Operations (5) - (5) - (174) 120 Contract Transactions-All Products (Note 5) Purchase Payments - - - - 61 8 Transfers Between Funds (Note 2) - - - - (1,339) 1 Surrenders and Terminations - - (1) - (87) (214) Rescissions - - - - - - Bonus (Recapture) - - - - - - Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions - - (1) - (1,365) (205) Increase (Decrease) in Net Assets (5) - (6) - (1,539) (85) Net Assets at Beginning of Period 12 12 15 15 1,539 1,624 Net Assets at End of Period $7 12 9 15 - 1,539
See Accompanying Notes to Financial Statements 58 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Mutual Discovery Mutual Shares OpCap Mid Cap Securities Fund Securities Fund Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $87 (118) 264 (128) (18) (10) Realized Gains (Losses) on Investments, Net 905 2,187 607 2,597 50 12 Net Change in Unrealized Appreciation (Depreciation) on Investments (7,529) 25 (11,677) (2,189) (544) (10) Net Increase (Decrease) in Net Assets From Operations (6,537) 2,094 (10,806) 280 (512) (8) Contract Transactions-All Products (Note 5) Purchase Payments 4,068 6,187 5,263 5,709 763 622 Transfers Between Funds (Note 2) (707) (2,058) (1,211) (185) 90 77 Surrenders and Terminations (1,248) (2,959) (2,133) (4,259) (39) (12) Rescissions (363) (190) (319) (29) (26) - Bonus (Recapture) 47 136 55 138 13 9 Contract Maintenance Charges (Note 2) (5) (4) (6) (6) - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 1,792 1,112 1,649 1,368 801 696 Increase (Decrease) in Net Assets (4,745) 3,206 (9,157) 1,648 289 688 Net Assets at Beginning of Period 20,783 17,577 27,956 26,308 818 130 Net Assets at End of Period $16,038 20,783 18,799 27,956 1,107 818
See Accompanying Notes to Financial Statements 59 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Oppenheimer Global Oppenheimer High Oppenheimer Main Securities Fund/VA Income Fund/VA Street Fund/VA 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(8) (18) 28 61 (11) (31) Realized Gains (Losses) on Investments, Net 117 458 (72) (16) 115 276 Net Change in Unrealized Appreciation (Depreciation) on Investments (888) (303) (430) (54) (994) (143) Net Increase (Decrease) in Net Assets From Operations (779) 137 (474) (9) (890) 102 Contract Transactions-All Products (Note 5) Purchase Payments 4 7 - - 2 14 Transfers Between Funds (Note 2) (250) (448) 257 (319) (56) (223) Surrenders and Terminations (182) (454) (44) (150) (85) (679) Rescissions - - - - - - Bonus (Recapture) - - - - - - Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (428) (895) 213 (469) (139) (888) Increase (Decrease) in Net Assets (1,207) (758) (261) (478) (1,029) (786) Net Assets at Beginning of Period 2,160 2,918 663 1,141 2,309 3,095 Net Assets at End of Period $953 2,160 402 663 1,280 2,309
See Accompanying Notes to Financial Statements 60 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) PIMCO VIT Commodity PIMCO VIT Emerging PIMCO VIT All Asset RealReturn Strategy Markets Bond Portfolio Portfolio Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ 114 117 135 40 67 34 Realized Gains (Losses) on Investments, Net (72) 11 (2,527) 4 24 22 Net Change in Unrealized Appreciation (Depreciation) on Investments (552) 1 (2,343) 275 (381) (23) Net Increase (Decrease) in Net Assets From Operations (510) 129 (4,735) 319 (290) 33 Contract Transactions-All Products (Note 5) Purchase Payments 1,246 305 2,917 580 594 425 Transfers Between Funds (Note 2) 234 (43) 2,875 (30) (68) 69 Surrenders and Terminations (219) (397) (236) (224) (35) (115) Rescissions (222) (8) (93) (1) (2) (9) Bonus (Recapture) 15 7 57 23 11 16 Contract Maintenance Charges (Note 2) - - (1) - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 1,054 (136) 5,519 348 500 386 Increase (Decrease) in Net Assets 544 (7) 784 667 210 419 Net Assets at Beginning of Period 2,193 2,200 2,146 1,479 1,235 816 Net Assets at End of Period $ 2,737 2,193 2,930 2,146 1,445 1,235
See Accompanying Notes to Financial Statements 61 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) PIMCO VIT Global Bond PIMCO VIT High Yield PIMCO VIT Real Portfolio Portfolio Return Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $19 7 163 163 103 161 Realized Gains (Losses) on Investments, Net (59) 10 (108) 17 (162) (77) Net Change in Unrealized Appreciation (Depreciation) on Investments (92) 42 (842) (129) (800) 441 Net Increase (Decrease) in Net Assets From Operations (132) 59 (787) 51 (859) 525 Contract Transactions-All Products (Note 5) Purchase Payments 871 301 561 328 3,332 870 Transfers Between Funds (Note 2) (12) 297 (104) (255) (778) (596) Surrenders and Terminations (56) (83) (311) (574) (367) (1,180) Rescissions (5) - (27) (1) (384) (11) Bonus (Recapture) 15 11 7 11 39 11 Contract Maintenance Charges (Note 2) - - (1) - (1) (1) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 813 526 125 (491) 1,841 (907) Increase (Decrease) in Net Assets 681 585 (662) (440) 982 (382) Net Assets at Beginning of Period 1,005 420 3,190 3,630 6,396 6,778 Net Assets at End of Period $ 1,686 1,005 2,528 3,190 7,378 6,396
See Accompanying Notes to Financial Statements 62 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) PIMCO VIT StocksPLUS Growth and Income PIMCO VIT Total Seligman Global Portfolio Return Portfolio Technology Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $8 12 309 247 - - Realized Gains (Losses) on Investments, Net (5) 40 280 (32) - - Net Change in Unrealized Appreciation (Depreciation) on Investments (70) (40) (252) 350 (3) 1 Net Increase (Decrease) in Net Assets From Operations (67) 12 337 565 (3) 1 Contract Transactions-All Products (Note 5) Purchase Payments 1 2 6,292 955 - - Transfers Between Funds (Note 2) (29) (112) (268) 440 - - Surrenders and Terminations (26) (32) (1,414) (1,835) - (2) Rescissions - - (1,258) (9) - - Bonus (Recapture) - - 44 30 - - Contract Maintenance Charges (Note 2) - - (2) (1) - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (54) (142) 3,394 (420) - (2) Increase (Decrease) in Net Assets (121) (130) 3,731 145 (3) (1) Net Assets at Beginning of Period 193 323 9,028 8,883 8 9 Net Assets at End of Period $72 193 12,759 9,028 5 8
See Accompanying Notes to Financial Statements 63 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) SP Strategic Partners Seligman Small-Cap Focused Growth SP International Value Portfolio Portfolio Growth Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $(18) (40) (7) (9) (2) (8) Realized Gains (Losses) on Investments, Net 233 265 27 39 29 130 Net Change in Unrealized Appreciation (Depreciation) on Investments (710) (165) (161) 15 (296) (55) Net Increase (Decrease) in Net Assets From Operations (495) 60 (141) 45 (269) 67 Contract Transactions-All Products (Note 5) Purchase Payments 2 3 1 6 8 8 Transfers Between Funds (Note 2) (444) (214) 41 (71) 25 213 Surrenders and Terminations (53) (234) (25) (58) (75) (167) Rescissions - - - - - - Bonus (Recapture) - - - - - - Contract Maintenance Charges (Note 2) - - - - - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (495) (445) 17 (123) (42) 54 Increase (Decrease) in Net Assets (990) (385) (124) (78) (311) 121 Net Assets at Beginning of Period 1,579 1,964 370 448 529 408 Net Assets at End of Period $ 589 1,579 246 370 218 529
See Accompanying Notes to Financial Statements 64 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Templeton Developing Templeton Asset Markets Securities Templeton Foreign Strategy Fund Fund Securities Fund 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ 62 123 58 33 163 113 Realized Gains (Losses) on Investments, Net 63 186 (1,489) 1,829 1,853 2,160 Net Change in Unrealized Appreciation (Depreciation) on Investments (316) (240) (3,701) 438 (10,265) 599 Net Increase (Decrease) in Net Assets From Operations (191) 69 (5,132) 2,300 (8,249) 2,872 Contract Transactions-All Products (Note 5) Purchase Payments - - 39 165 124 445 Transfers Between Funds (Note 2) - (1) (4,225) (1,016) (516) (464) Surrenders and Terminations (54) (106) (569) (1,340) (1,883) (2,936) Rescissions - - - - (39) (9) Bonus (Recapture) - - 1 6 3 16 Contract Maintenance Charges (Note 2) - - (2) (2) (8) (9) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (54) (107) (4,756) (2,187) (2,319) (2,957) Increase (Decrease) in Net Assets (245) (38) (9,888) 113 (10,568) (85) Net Assets at Beginning of Period 781 819 9,888 9,775 21,594 21,679 Net Assets at End of Period $536 781 - 9,888 11,026 21,594
See Accompanying Notes to Financial Statements 65 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Templeton Global Van Kampen LIT Income Securities Templeton Growth Capital Growth Fund Securities Fund Portfolio 2008 2007 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ 303 46 3 (106) - - Realized Gains (Losses) on Investments, Net (779) 136 355 1,750 - 1 Net Change in Unrealized Appreciation (Depreciation) on Investments (6) 133 (10,395) (1,622) (3) - Net Increase (Decrease) in Net Assets From Operations (482) 315 (10,037) 22 (3) 1 Contract Transactions-All Products (Note 5) Purchase Payments 4,106 634 4,047 4,650 - - Transfers Between Funds (Note 2) (732) 424 (997) (1,125) - - Surrenders and Terminations (486) (443) (1,941) (2,922) - (5) Rescissions (298) - (318) (11) - - Bonus (Recapture) 61 17 44 116 - - Contract Maintenance Charges (Note 2) (2) (2) (7) (7) - - Net Increase (Decrease) in Net Assets Resulting From Contract Transactions 2,649 630 828 701 - (5) Increase (Decrease) in Net Assets 2,167 945 (9,209) 723 (3) (4) Net Assets at Beginning of Period 4,446 3,501 22,689 21,966 5 9 Net Assets at End of Period $ 6,613 4,446 13,480 22,689 2 5
See Accompanying Notes to Financial Statements 66 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements (continued)
Statements of Changes in Net Assets (continued) For the year ended December 31, 2008 and 2007 (In thousands) Van Kampen LIT Growth and Income Portfolio Total All Funds 2008 2007 2008 2007 Increase (Decrease) in Net Assets: Operations: Investment Income (Loss), Net $ - - 3,584 356 Realized Gains (Losses) on Investments, Net 2 1 (2,386) 36,456 Net Change in Unrealized Appreciation (Depreciation) on Investments (3) (1) (197,851) (20,223) Net Increase (Decrease) in Net Assets From Operations (1) - (196,653) 16,589 Contract Transactions-All Products (Note 5) Purchase Payments - - 150,515 104,634 Transfers Between Funds (Note 2) - - (15,327) (83) Surrenders and Terminations (14) - (51,715) (97,251) Rescissions - - (9,982) (2,155) Bonus (Recapture) - - 2,023 2,594 Contract Maintenance Charges (Note 2) - - (141) (138) Net Increase (Decrease) in Net Assets Resulting From Contract Transactions (14) - 75,373 7,601 Increase (Decrease) in Net Assets (15) - (121,280) 24,190 Net Assets at Beginning of Period 15 15 572,188 547,998 Net Assets at End of Period $ - 15 450,908 572,188
(A) Period from May 1, 2008 (fund commencement) to December 31, 2008 (B) Period from May 1, 2007 (fund commencement) to December 31, 2007 See Accompanying Notes to Financial Statements 67 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements December 31, 2008 1. ORGANIZATION Allianz Life of New York Variable Account C (Variable Account) is a segregated investment account of Allianz Life Insurance Company of New York (Allianz Life of New York) 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 by Allianz Life of New York on February 26, 1988 and commenced operations September 6, 1991. Accordingly, it is an accounting entity wherein all segregated account transactions are reflected. The Variable Account's assets are the property of Allianz Life of New York 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 of New York. 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 of New York may conduct. The Variable Account's sub-accounts invest, at net asset values, in one or more of select portfolios of AIM Variable Insurance Funds, Inc., The Alger American Fund, Allianz Investment Management, LLC, LLC, Davis Variable Account Fund, Inc., Dreyfus Service Corporation, Franklin Templeton Variable Insurance Products Trust (formerly, Franklin Valuemark Funds), J.P. Morgan Series Trust II, Oppenheimer Variable Account Funds, Pacific Investment Management Company, Prudential Investments Fund Management, LLC, Seligman Portfolios, Inc., LLC, Van Kampen Life Investment Trust and William Blair & Company LLC, in accordance with the selection made by the contract owner. Not all portfolios are available as investment options for the products, which comprise the Variable Account. The investment advisers and specialist manager for each portfolio is listed in the following table.
Portfolio Investment Adviser Specialist Manager/Adviser AIM V.I. Capital Appreciation Fund Invesco AIM Advisors, Inc. N/A AIM V.I. Core Equity Fund Invesco AIM Advisors, Inc. N/A Alger American Capital Appreciation Fred Alger Management, Inc. N/A Portfolio Alger American LargeCap Growth Portfolio Fred Alger Management, Inc. N/A Alger American MidCap Growth Portfolio Fred Alger Management, Inc. N/A Alger American SmallCap Growth Portfolio Fred Alger Management, Inc. N/A AZL AIM International Equity Fund * + Allianz Investment Invesco Aim Capital Management, Management, LLC Inc. AZL BlackRock Capital Appreciation Fund * + Allianz Investment BlackRock Capital Management, Inc. Management, LLC AZL Columbia Mid Cap Value Fund + Allianz Investment Columbia Management Advisors, LLC Management, LLC AZL Columbia Small Cap Value Fund + Allianz Investment Columbia Management Advisors, LLC Management, LLC AZL Columbia Technology Fund * + Allianz Investment Columbia Management Advisors, LLC Management, LLC AZL Davis NY Venture Fund * + Allianz Investment Davis Selected Advisers, L.P. Management, LLC AZL Dreyfus Founders Equity Growth Fund * + Allianz Investment Founders Asset Management, LLC Management, LLC AZL First Trust Target Double Play Fund + Allianz Investment First Trust Adivsors L.P. Management, LLC AZL Franklin Small Cap Value Fund * + Allianz Investment Franklin Advisory Services LLC Management, LLC AZL Fusion Balanced Fund + Allianz Investment Allianz Investment Management, LLC Management, LLC AZL Fusion Growth Fund + Allianz Investment Allianz Investment Management, LLC Management, LLC AZL Fusion Moderate Fund + Allianz Investment Allianz Investment Management, LLC Management, LLC AZL Jennison 20/20 Focus Fund * + Allianz Investment Jennison Associates LLC Management, LLC AZL Legg Mason Growth Fund * + Allianz Investment Legg Mason Funds Management, Inc. Management, LLC AZL Legg Mason Value Fund * + Allianz Investment Legg Mason Funds Management, Inc. Management, LLC AZL Money Market Fund * + Allianz Investment BlackRock Institutional Management, LLC Management Corporation AZL NACM International Fund + Allianz Investment Nicholas Applegate Capital Management, LLC Management, Inc. AZL OCC Opportunity Fund * + Allianz Investment Oppenheimer Capital, LLC Management, LLC AZL Oppenheimer Global Fund * + Allianz Investment OppenheimerFunds, Inc. Management, LLC AZL Oppenheimer International Growth Allianz Investment OppenheimerFunds, Inc. Fund * + Management, LLC AZL Oppenheimer Main Street Fund * + Allianz Investment OppenheimerFunds, Inc. Management, LLC AZL PIMCO Fundamental IndexPLUS Total Allianz Investment Pacific Investment Management Return Fund * + Management, LLC Company LLC AZL S&P 500 Index Fund + Allianz Investment The Dreyfus Corporation Management, LLC AZL Schroder Emerging Markets Equity Allianz Investment Schroder Investment Management NA Fund CL 1 + Management, LLC Inc. AZL Schroder Emerging Markets Equity Allianz Investment Schroder Investment Management NA Fund CL 2 + Management, LLC Inc. AZL Schroder International Small Cap Allianz Investment Schroder Investment Management NA Fund + Management, LLC Inc. AZL Small Cap Stock Index Fund + Allianz Investment The Dreyfus Corporation Management, LLC AZL TargetPLUS Balanced Fund + Allianz Investment First Trust Adivsors L.P./Pacific Management, LLC Invst Mgmt Co LLC AZL TargetPLUS Equity Fund + Allianz Investment First Trust Adivsors L.P. Management, LLC AZL TargetPLUS Growth Fund + Allianz Investment First Trust Adivsors L.P./Pacific Management, LLC Invst Mgmt Co LLC
See Accompanying Notes to Financial Statements 68 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 1. ORGANIZATION (continued)
Portfolio Investment Adviser Specialist Manager/Adviser AZL TargetPLUS Moderate Fund + Allianz Investment First Trust Adivsors Management, LLC L.P./Pacific Invst Mgmt Co LLC AZL Turner Quantitative Small Cap Allianz Investment Turner Investment Partners, Inc. Growth Fund + Management, LLC AZL Van Kampen Comstock Fund * + Allianz Investment Van Kampen Asset Management, Inc. Management, LLC AZL Van Kampen Equity and Income Fund * + Allianz Investment Van Kampen Asset Management, Inc. Management, LLC AZL Van Kampen Global Franchise Fund * + Allianz Investment Van Kampen Asset Management, Inc. Management, LLC AZL Van Kampen Global Real Estate Fund* + Allianz Investment Van Kampen Asset Management, Inc. Management, LLC AZL Van Kampen Growth and Income Fund * + Allianz Investment Van Kampen Asset Management, Inc. Management, LLC AZL Van Kampen Mid Cap Growth Fund * + Allianz Investment Van Kampen Asset Management, Inc. Management, LLC BlackRock Global Allocations V.I. Fund BlackRock Investment N/A Management, LLC Davis VA Financial Portfolio Davis Selected Advisers, LP N/A Davis VA Value Portfolio Davis Selected Advisers, LP N/A Franklin Global Communications Franklin Advisers, Inc. N/A Securities Fund * Franklin Growth and Income Securities Franklin Advisers, Inc. N/A Fund * Franklin High Income Securities Fund * Franklin Advisers, Inc. N/A Franklin Income Securities Fund * Franklin Advisers, Inc. N/A Franklin Large Cap Growth Securities Franklin Advisers, Inc. N/A Fund * Franklin Money Market Fund * Franklin Advisers, Inc. N/A Franklin Real Estate Fund * Franklin Templeton N/A Institutional, LLC Franklin Rising Dividends Securities Franklin Advisory Services, N/A Fund * LLC Franklin Small Cap Value Securities Franklin Advisory Services, N/A Fund * LLC Franklin Small-Mid Cap Growth Franklin Advisers, Inc. N/A Securities Fund * Franklin Templeton VIP Founding Funds Franklin Templeton Services, N/A Allocation Fund LLC Franklin U.S. Government Fund * Franklin Advisers, Inc. N/A Franklin Zero Coupon Fund 2010 Franklin Advisers, Inc. N/A J.P. Morgan International Opportunities J.P. Morgan Investment N/A Portfolio Management Inc. J.P. Morgan U.S. Large Cap Core Equity J.P. Morgan Investment N/A Portfolio Management Inc. Mutual Discovery Securities Fund * Franklin Mutual Advisers, LLC N/A Mutual Shares Securities Fund * Franklin Mutual Advisers, LLC N/A OpCap Mid Cap Portfolio + Allianz Global Invsetors Fund N/A Management LLC Oppenheimer Global Securities Fund/VA OppenheimerFunds, Inc. N/A Oppenheimer High Income Fund/VA OppenheimerFunds, Inc. N/A Oppenheimer Main Street Fund/VA OppenheimerFunds, Inc. N/A PIMCO VIT All Asset Portfolio + Pacific Investment N/A Management Company LLC PIMCO VIT CommodityRealReturn Strategy Pacific Investment N/A Portfolio + Management Company LLC PIMCO VIT Emerging Markets Bond Pacific Investment N/A Portfolio + Management Company LLC PIMCO VIT Global Bond Portfolio + Pacific Investment N/A Management Company LLC PIMCO VIT High Yield Portfolio + Pacific Investment N/A Management Company LLC PIMCO VIT Real Return Portfolio + Pacific Investment N/A Management Company LLC PIMCO VIT StocksPLUS Growth and Income Pacific Investment N/A Portfolio + Management Company LLC PIMCO VIT Total Return Portfolio + Pacific Investment N/A Management Company LLC Seligman Global Technology Portfolio J & W Seligman & Co. Inc. N/A Seligman Small-Cap Value Portfolio J & W Seligman & Co. Inc. N/A SP Strategic Partners Focused Growth Prudential Investments LLC N/A Portfolio * SP International Growth Portfolio * Prudential Investments LLC N/A Templeton Asset Strategy Fund * Templeton Investment N/A Counsel, LLC Templeton Foreign Securities Fund * Templeton Investment N/A Counsel, LLC Templeton Global Income Securities Fund * Franklin Advisers, Inc. N/A Templeton Growth Securities Fund * Templeton Global Advisors N/A Limited Van Kampen LIT Capital Growth Portfolio Van Kampen Asset Management, N/A Inc. * Portfolio contains class 2 shares which assess a2b-1 fees. + The investment advisor of this fund is an affiliate of Allianz Life of New York and is paid an investment management fee by the fund.
See Accompanying Notes to Financial Statements 69 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2.SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENTS Investments of the Variable Account are valued each day the markets are open at fair value using net asset values provided by the investment advisers of the portfolios after the 4 PM Eastern market close. On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements" - This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. The changes to current GAAP from the application of this statement relate to the definition of fair value, the methods used to measure fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of a Funds' investments under SFAS No. 157 guidance. The inputs are summarized into three broad categories. Level 1 includes valuations based on quoted prices of identical securities in active markets. Level 2 includes valuations for which all significant inputs are observable, either directly or indirectly. Direct observable inputs include closing prices of similar securities in active markets or closing prices for identical or similar securities in non-active markets. Indirect observable inputs include factors such as interest rates, yield curves, prepayment speeds, and credit risks. Level 3 includes valuations based on inputs that are unobservable and significant to the fair value measurement including a Funds' own assumptions in determining the fair value of the investment. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. As of December 31, 2008, all of the Separate Account's investments are in funds for which quoted prices are available in an active market. Therefore, all investments have been categorized as Level 1. The characterization of the underlying securities held by the funds in accordance with SFAS No. 157 differs from the characterization of an investment in the fund. Realized gains on investments include realized gain distributions received from the respective portfolios and gains on the sale of portfolio shares as determined by the average cost method. Realized gain distributions are reinvested in the respective portfolios. Dividend distributions received from the portfolios are reinvested in additional shares of the portfolios and are recorded as income to the Variable Account on the ex-dividend date. A Flexible Fixed Account investment option and a Dollar Cost Averaging Fixed Account investment option are available to deferred annuity contract owners. These accounts are comprised of equity and fixed income investments which are part of the general assets of Allianz Life of New York. The liabilities of the Fixed Account, including the guaranteed minimum rate of return on the Fixed Account of 3%, are part of the general obligations of Allianz Life of New York and are not included in the Variable Account. Certain of the sub-accounts invest in Investment Options that invest in various forms of fixed income securities, including mortgage backed securities. These types of securities may present a variety of potential risks, including credit risk, extension and prepayment risk, and interest rate risk. Recently, certain types of mortgage backed securities, such as structured investment vehicles (SIVs), subprime mortgage backed bonds, and commercial paper backed by mortgage backed securities have experienced losses as a result of defaults on underlying mortgages and a lack of liquidity. These securities have also been subject to price declines resulting from lack of a trading market for the securities. As a result of the lack of liquidity, it is possible that certain securities may become more difficult to value. It is possible that these types of securities may continue to experience price declines as a result of defaults and lack of liquidity. Available investment options, including the date the investment option became available for each product, as of December 31, 2008 are listed in the following table.
Allianz Allianz Allianz Charter II High Five Allianz Allianz Allianz Portfolio Advantage NY NY Opportunity Valuemark II Vision ------------- ------------ ------------ ------------- ------------- ---------- AZL AIM International Equity 5/1/2002 5/3/2004 3/19/2007 10/4/2002 N/A 5/1/2007 Fund AZL BlackRock Capital Appreciation Fund 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 AZL Columbia Mid Cap Value Fund 5/1/2006 5/1/2006 3/19/2007 5/1/2006 5/1/2006 5/1/2007 AZL Columbia Small Cap Value Fund 5/3/2004 5/3/2004 3/19/2007 5/3/2004 N/A 5/1/2007 AZL Columbia Technology Fund 11/5/2001 5/3/2004 3/19/2007 10/4/2002 11/5/2001 5/1/2007 AZL Davis NY Venture Fund 11/15/2001 5/3/2004 3/19/2007 3/8/2004 3/8/2004 5/1/2007 AZL Dreyfus Founders Equity Growth Fund 11/15/2001 5/3/2004 3/19/2007 3/8/2004 3/8/2004 5/1/2007 AZL First Trust Target Double Play Fund 12/28/2006 12/28/2006 3/19/2007 12/28/2006 12/28/2006 5/1/2007
See Accompanying Notes to Financial Statements 70 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments (continued)
Allianz Allianz Charter II Allianz High Allianz Allianz Allianz Portfolio Advantage NY Five NY Opportunity Valuemark II Vision -------------- ------------ -------------- ---------------- --------------- -------- AZL Franklin Small Cap Value 5/1/2003 5/3/2004 3/19/2007 5/1/2003 N/A 5/1/2007 Fund AZL Fusion Balanced Fund 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 AZL Fusion Growth Fund 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 AZL Fusion Moderate Fund 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 AZL Jennison 20/20 Focus Fund 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 AZL Legg Mason Growth Fund 5/1/2002 5/3/2004 3/19/2007 10/4/2002 N/A 5/1/2007 AZL Legg Mason Value Fund 11/5/2001 5/3/2004 3/19/2007 10/4/2002 11/5/2001 5/1/2007 AZL Money Market Fund 1/22/2001 5/3/2004 3/19/2007 10/4/2002 11/5/2001 5/1/2007 AZL NACM International Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL OCC Opportunity Fund 5/1/2002 5/3/2004 3/19/2007 10/4/2002 N/A 5/1/2007 AZL Oppenheimer Global Fund 5/3/2004 5/3/2004 3/19/2007 5/3/2004 N/A 5/1/2007 AZL Oppenheimer International Growth Fund 3/8/2004 5/3/2004 3/19/2007 3/8/2004 3/8/2004 5/1/2007 AZL Oppenheimer Main Street Fund 5/3/2004 5/3/2004 3/19/2007 5/3/2004 N/A 5/1/2007 AZL PIMCO Fundamental IndexPLUS Total Return Fund 5/1/2006 5/1/2006 3/19/2007 5/1/2006 5/1/2006 5/1/2007 AZL S&P 500 Index Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL Schroder Emerging Markets Equity Fund CL 2 5/1/2006 5/1/2006 3/19/2007 5/1/2006 5/1/2006 5/1/2007 AZL Schroder International Small Cap Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL Small Cap Stock Index Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Balanced Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Equity Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Growth Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL TargetPLUS Moderate Fund 5/1/2007 5/1/2007 3/19/2007 5/1/2007 5/1/2007 5/1/2007 AZL Turner Quantitative Small Cap Growth Fund 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 AZL Van Kampen Comstock Fund 5/1/2001 5/3/2004 3/19/2007 10/4/2002 5/1/2001 5/1/2007 AZL Van Kampen Equity and Income Fund 5/3/2004 5/3/2004 3/19/2007 5/3/2004 N/A 5/1/2007 AZL Van Kampen Global Franchise Fund 5/1/2003 5/3/2004 3/19/2007 5/3/2004 N/A 5/1/2007 AZL Van Kampen Global Real Estate Fund 5/1/2006 5/1/2006 3/19/2007 5/1/2006 5/1/2006 5/1/2007 AZL Van Kampen Growth and Income Fund 5/1/2001 5/3/2004 3/19/2007 10/4/2002 5/1/2001 5/1/2007 AZL Van Kampen Mid Cap Growth Fund 5/1/2001 5/3/2004 3/19/2007 10/4/2002 5/1/2001 5/1/2007 BlackRock Global Allocations V.I. Fund 5/1/2008 5/1/2008 5/1/2008 5/1/2008 5/1/2008 5/1/2008 Davis VA Financial Portfolio 11/5/2001 5/3/2004 3/19/2007 10/4/2002 N/A 5/1/2007 Franklin Global Communications Securities Fund 1/22/2001 5/3/2004 3/19/2007 10/4/2002 9/6/1991 5/1/2007 Franklin High Income Securities Fund 1/22/2001 5/3/2004 3/19/2007 10/4/2002 9/6/1991 5/1/2007
See Accompanying Notes to Financial Statements 71 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments (continued)
Allianz Allianz Charter II Allianz Allianz Allianz Allianz Portfolio Advantage NY High Five NY Opportunity Valuemark II Vision -------------- ------------- ------------- --------------- -------------- --------- Franklin Templeton VIP 9/25/2007 9/25/2007 3/19/2007 9/25/2007 9/25/2007 9/25/2007 Founding Funds Allocation Fund Franklin U.S. Government Fund 1/22/2001 5/3/2004 3/19/2007 10/4/2002 9/6/1991 5/1/2007 Franklin Zero Coupon Fund 2010 11/5/2001 5/3/2004 3/19/2007 10/4/2002 9/6/1991 5/1/2007 Mutual Discovery Securities Fund 1/22/2001 5/3/2004 3/19/2007 10/4/2002 11/8/1996 5/1/2007 Mutual Shares Securities Fund 1/22/2001 5/3/2004 3/19/2007 10/4/2002 11/8/1996 5/1/2007 OpCap Mid Cap Portfolio 5/1/2006 5/1/2006 3/19/2007 5/1/2006 5/1/2006 5/1/2007 PIMCO VIT All Asset Portfolio 5/3/2004 5/3/2004 3/19/2007 5/3/2004 N/A 5/1/2007 PIMCO VIT CommodityRealReturn Portfolio 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 PIMCO VIT Emerging Markets Bond Portfolio 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 PIMCO VIT Global Bond Portfolio 5/2/2005 5/2/2005 3/19/2007 5/2/2005 N/A 5/1/2007 PIMCO VIT High Yield Portfolio 1/22/2001 5/3/2004 3/19/2007 10/4/2002 11/5/2001 5/1/2007 PIMCO VIT Real Return Portfolio 5/1/2003 5/3/2004 3/19/2007 5/1/2003 N/A 5/1/2007 PIMCO VIT Total Return Portfolio 1/22/2001 5/3/2004 3/19/2007 10/4/2002 11/5/2001 5/1/2007 Templeton Global Income Securities Fund 11/5/2001 5/3/2004 3/19/2007 10/4/2002 1/24/1992 5/1/2007 Templeton Growth Securities Fund 11/5/2001 5/3/2004 3/19/2007 10/4/2002 7/31/1994 5/1/2007
For the Years Ended December 31, 2008 and 2007, several portfolios changed their name as summarized, with the effective date of the change, in the following table.
Current Portfolio Name Prior Portfolio Name Effective Date AZL Turner Quantitative Small Cap Growth Fund AZL LMP Small Cap Growth Fund June 26, 2007 AZL Schroder Emerging Markets Equity Fund CL 2 AZL Oppenheimer Developing Markets Fund December 7, 2007 Alger American Capital Appreciation Portfolio Alger American Leveraged AllCap Portfolio May 1, 2008 Alger American LargeCap Growth Portfolio Alger American Growth Portfolio May 1, 2008 Alger American SmallCap Growth Portfolio Alger American Small Capitalization Portfolio May 1, 2008 Van Kampen LIT Capital Growth Portfolio Van Kampen LIT Strategic Growth Portfolio May 1, 2008 AZL Columbia Small Cap Value Fund AZL Dreyfus Premier Small Cap Value Fund September 20, 2008 AZL BlackRock Capital Appreciation fund AZL Jennison Growth fund November 21, 2008 AZL Columbia Mid Cap Value Fund AZL Neuberger Regency Fund November 21, 2008
During the years ended December 31, 2008 and 2007, no portfolios were closed to new money. See Accompanying Notes to Financial Statements 72 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments (continued) For the Years Ended December 31, 2008 and 2007, several portfolios merged or replaced. The portfolio names and effective date of the mergers or replacements are summarized in the following table.
Closed Portfolio Receiving Portfolio Date Merged September 21, AZL AIM Basic Value Fund AZL Van Kampen Comstock Fund 2007 September 21, AZL Van Kampen Strategic Equity Growth Fund AZL Dreyfus Founders Equity Growth Fund 2007 September 21, AZL OCC Renaissance Fund AZL OCC Value Fund 2007 September 21, AZL Van Kampen Aggressive Growth Fund AZL Van Kampen Mid Growth Fund 2007 September 20, Jennison 20/20 Focus Portfolio AZL Jennison 20/20 Fucus Fund 2008 September 20, Dreyfus Stock Index Fund AZL S&P 500 Index Fund 2008 September 20, Dreyfus IP Small Cap Stock Index Portfolio AZL Small Cap Stock Index Fund 2008 November 21, AZL LMP Large Cap Growth Fund AZL Legg Mason Growth Fund 2008 November 21, AZL OCC Value Fund AZL Davis NY Venture Fund 2008 Templeton Developing Markets Securities Fund AZL Schroder Emerging Markets Equity November 21, Fund CL 1 2008 Templeton Developing Markets Securities Fund AZL Schroder Emerging Markets Equity November 21, Fund CL 2 2008
Contracts in Annuity Payment Period Annuity reserves are computed for currently payable contracts according to the 1983 and 2000 Individual Annuity Mortality Tables, using an assumed investment return (AIR) equal to the AIR of the specific contracts, either 3%, 4.5% or 5%. Charges to annuity reserves for mortality and risk expense are reimbursed to Allianz Life of New York if the reserves required are less than originally estimated. If additional reserves are required, Allianz Life of New York reimburses the account. Premium Bonus A premium bonus is awarded to the contract owner of the Allianz Opportunity product at the time of deposit. The bonus credited is 6% of the purchase payment. The M&E charge and administrative charge for Allianz Advantage can be summarized as follows: The Advantage Original Contract was available from January 2001 to February 19, 2004. For Advantage Original Contracts without an Enhanced Death Benefit (EDB) endorsement the death benefit is equal to the contract value. For Advantage Original Contracts with an EDB endorsement if the owner was age 80 or older at issue the death benefit is the greater of contract value, or total purchase payments less withdrawals. For Original Contracts with an EDB endorsement if the owner was age 79 or younger at issue the death benefit is either the contract value, or the greater of: a) total purchase payments less withdrawals, or b) the highest contract anniversary value. For Original Contracts with an EDB endorsement if the owner was age 80 or older at issue the death benefit is the greater of contract value, or total purchase payments less withdrawals. The currently offered Allianz Advantage contract replaced the Original Contract beginning in February 20004. The currently offered contract automatically provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner can instead select the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the greater of the current contract value or the highest contract anniversary value. Currently offered Allianz Advantage contracts also offer a choice of either the Traditional Guaranteed Benefit Package (Traditional GBP) or the Enhanced Guaranteed Benefit Package (Enhanced GBP) for an additional charge. The GBPs include a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit (GPWB). The GBPs provide guarantees on future income that can be accessed through partial withdrawals under the GPWB or through annuity payments under the GMIB. Under the Traditional GBP income is based on total purchase payments adjusted for partial withdrawals. Under the Enhanced GBP income is based on the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 7%. For Allianz Advantage contracts issued from February 19, 2004 to April 28, 2006 income under the Enhanced GBP is based on the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by either 3% or 5%. See Accompanying Notes to Financial Statements 73 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments (continued) Expenses (continued)
Charges during the Accumulation Phase Currently Currently (includes 0.15% of offered offered Contract Currently offered administrative Original Contract with the Contract with the charge) Contract without a GBP Traditional GBP Enhanced GBP ---------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------- 1.49% - - - Traditional GMDB - 1.65% 1.85% 2.35% Enhanced GMDB - 1.85% 2.00% 2.50%
The charges during the Annuity Phase if the owner takes variable annuity payments are 1.65% for the currently offered Allianz Advantage Contract; and the charges are 1.40% for the Original Contract. The M&E charge for Allianz Charter II can be summarized as follows: The Allianz Charter II contract automatically provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner can instead select the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the greater of the current contract value or the highest contract anniversary value. Allianz Charter II contracts also offer a choice of either the Traditional Guaranteed Benefit Package (Traditional GBP) or the Enhanced Guaranteed Benefit Package (Enhanced GBP) for an additional charge. The GBPs include a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit (GPWB). The GBPs provide guarantees on future income that can be accessed through partial withdrawals under the GPWB or through annuity payments under the GMIB. Under the Traditional GBP income is based on total purchase payments adjusted for partial withdrawals. Under the Enhanced GBP income is based on the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by 7%. For Charter II contracts issued from February 19, 2004 to April 28, 2006 income under the Enhanced GBP is based on the greater of: a) the highest contract anniversary value, or b) total purchase payments adjusted for partial withdrawals increased annually by either 3% or 5%.
M&E charges during the Accumulation Phase Contracts with Contracts the Traditional Contracts with the without a GBP GBP Enhanced GBP ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- Traditional GMDB 1.75% 1.95% 2.45% Enhanced GMDB 1.95% 2.10% 2.60%
The M&E charges during the Annuity Phase if the owner takes variable annuity payments are 1.75%. The M&E charge for Allianz High Five can be summarized as follows: The Allianz High Five contract automatically provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments adjusted for partial withdrawals. For an additional charge, the owner can instead select the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the greater of: a) current contract value, b) total purchase payments adjusted for partial withdrawals, or c) the highest contract anniversary value. Allianz High Five also automatically provides Living Guarantees unless the owner elects otherwise at Contract issue. The Living Guarantees include the Guaranteed Account Value Benefit (GAV Benefit), and the Guaranteed Withdrawal Benefit (GWB). There are no additional fees or charges associated with the Living Guarantees. However, we monitor the Contract Value daily and systematically transfer amounts between the selected investment options and the Fixed Period Accounts (FPAs) to support the Living Guarantees. The GAV Benefit guarantees that beginning on your fifth contract anniversary, and on each subsequent contract anniversary until the contract terminates or you begin receiving annuity payments, your contract value will be at least equal to an amount we call the Guaranteed Account Value (GAV) from five years ago, reduced by subsequent withdrawals. The GAV is initially equal to the purchase payments received within 90 days of contract issue. The GAV is recalculated on each contract anniversary to equal the greater of: a) the previous GAV adjusted for subsequent purchase payments and partial withdrawals, or b) the current contract value. The GAV Benefit does not provide any protection until the fifth and subsequent Contract Anniversaries, and does not lock in any investment gains until at least five years after they occur. The GWB guarantees a minimum level of income through partial withdrawals. See Accompanying Notes to Financial Statements 74 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Expenses (continued) M&E charges during the Accumulation Phase Contract with the Short Withdrawal Base Contract Charge Option Traditional GMDB 1.25% 1.75% Enhanced GMDB 1.45% 1.95% The M&E charges during the Annuity Phase if the owner takes variable annuity payments are 1.25%. The M&E charge for Allianz Opportunity can be summarized as follows: The Allianz Opportunity contract automatically provides a Traditional Guaranteed Minimum Death Benefit (Traditional GMDB) where the death benefit is based on the greater of contract value or total purchase payments, not including any bonus, adjusted for partial withdrawals. For an additional charge, the owner can instead select the optional Enhanced Guaranteed Minimum Death Benefit (Enhanced GMDB) where the death benefit is the greater of the current contract value or the highest contract anniversary value. Allianz Opportunity contracts also offer a choice of either the Traditional Guaranteed Benefit Package (Traditional GBP) or the Enhanced Guaranteed Benefit Package (Enhanced GBP) for an additional charge. The GBPs include a Guaranteed Minimum Income Benefit (GMIB) and a Guaranteed Partial Withdrawal Benefit (GPWB). The GBPs provide guarantees on future income that can be accessed through partial withdrawals under the GPWB or through annuity payments under the GMIB. Under the Traditional GBP income is based on total purchase payments, not including any bonus, adjusted for partial withdrawals. Under the Enhanced GBP income is based on the greater of: a) the highest contract anniversary value, or b) total purchase payments, not including any bonus, adjusted for partial withdrawals increased annually by 7%. For Opportunity contracts issued from February 19, 2004 to April 28, 2006 income under the Enhanced GBP is based on the greater of: a) the highest contract anniversary value, or b) total purchase payments, not including any bonus, adjusted for partial withdrawals increased annually by either 3% or 5%. M&E charges during the Accumulation Phase Contracts with Contracts the Traditional Contracts with the without a GBP GBP Enhanced GBP -------------------------------------------------------------------------------- Traditional GMDB 1.90% 2.10% 2.60% Enhanced GMDB 2.10% 2.25% 2.75% The M&E charges during the Annuity Phase if the owner takes variable annuity payments are 1.90% The M&E charge and administrative charge for Allianz Valuemark II can be summarized as follows: The Allianz Valuemark II contract was available from September 1991 to August 1998. Allianz Valuemark II contracts provided a death benefit of the greater of: a) total purchase payments less withdrawals, or b) the highest contract value from any fifth contract anniversary. Charges during the Accumulation Phase and during the Annuity Phase if the owner takes variable annuity payments (includes a 0.15% administrative charge) 1.40% The M&E charge and administrative charge for Allianz Valuemark IV can be summarized as follows: The Allianz Valuemark IV contract was available from August 1998 to January 2001. For Allianz Valuemark IV contracts without an Enhanced Death Benefit (EDB) endorsement the death benefit is equal to the contract value. For Valuemark IV contracts with an EDB endorsement if the owner was age 81 or older at issue the death benefit is the greater of contract value, or total purchase payments less withdrawals. For Valuemark IV contracts with an EDB endorsement if the owner was age 80 or younger at issue the death benefit is the contract value or the greater of: a) total purchase payments less withdrawals, or b) the highest contract anniversary value. See Accompanying Notes to Financial Statements 75 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. Significant Accounting Policies (CONTINUED) Expenses (continued) Charges during the Annuity Charges during the Phase if the owner takes Accumulation Phase variable annuity payments (includes a 0.15% (includes a 0.15% administrative charge) administrative charge) -------------------------------------------------------------- 1.49% 1.25% The M&E charge for Allianz Vision can be summarized as follows: The Allianz Vision Base Contract provides a Traditional Death Benefit or the owner can instead select the Quarterly Value Death Benefit for an additional M&E charge, which locks in the highest contract value from any quarterly anniversary. The Allianz Vision also allows the owner to select at issue for an additional M&E charge either: a) a Bonus Option that provides a 6% bonus that increases the withdrawal charge period from seven years to nine years, b) a Short Withdrawal Charge Option that shortens the withdrawal charge period from seven years to four years, or c) a No Withdrawal Charge Option that eliminates the withdrawal charge. The Allianz Vision also offers selection of either the Target Date Retirement Benefit, Lifetime Plus Benefit, or Lifetime Plus 8 Benefit. However, if the owner selected the No Withdrawal Charge Option they must also select one of these three benefits. The Target Date Retirement Benefit provides a future guarantee of contract value based on the greater of total purchase payments adjusted for partial withdrawals or the highest contract anniversary value. Both Lifetime Benefits are designed for those who want lifetime income and continued access to both contract value and a death benefit for a period of time, as opposed to annuity payments that provide higher periodic lifetime income payments but eliminate both contract value and a death benefit for a period of time. The Lifetime Plus Benefit has a higher payment percentage than the Lifetime Plus 8 Benefit and offers the ability to begin payments before age 65. The Lifetime Plus 8 Benefit offers the maximum potential initial payment but simple interest increases do not begin until age 60 and payments cannot begin until age 65.
M&E charges during the Accumulation Phase Traditional Death Benefit t Quarterly Value Death Benefit ------------------------------------------- --------------------------------------- -------------------------------------- Base Contract 1.40% 1.70% (Base Option 1) (Base Option 2) Contract with the Bonus Option 1.90% 2.20% (Bonus Option 1) (Bonus Option 2) Contract with the Short Withdrawal Charge Option 1.65% 1.95% (L Option 1) (L Option 2) Contract with the Target Date Retirement Benefit 1.80% 2.10% (Base Option 7) (Base Option 8) Contract with the Lifetime Plus Benefit (single Lifetime Plus Payments) 2.10% 2.40% (Base Option 3) (Base Option 4) Contract with the Lifetime Plus Benefit (joint Lifetime Plus Payments) 2.25% 2.55% (Base Option 5) (Base Option 6) Contract with single Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin 2.20% 2.50% (Base Option 9) (Base Option 10) Contract with joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin 2.35% 2.65% (Base Option 11) (Base Option 12) Contract with single Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin 2.10% 2.40% (Base Option 3) (Base Option 4) Contract with joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin 2.25% 2.55% (Base Option 5) (Base Option 6) Contract with the Bonus Option and Lifetime Plus Benefit (single Lifetime Plus Payments) 2.60% 2.90% (Bonus Option 3) (Bonus Option 4) Contract with the Bonus Option and Lifetime Plus Benefit (joint Lifetime Plus Payments) 2.75% 3.05% (Bonus Option 5) (Bonus Option 6) Contract with the Bonus Option and Target Date Retirement Benefit 2.30% 2.60% (Bonus Option 7) (Bonus Option 8)
See Accompanying Notes to Financial Statements 76 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Expenses (continued) Traditional Quarterly Death Benefit Value Death M&E charges during the Accumulation Phase t Benefit ------------------------------------------- -------------- ---------------- Contract with the Bonus Option and single 2.70% 3.00% Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin (Bonus Option 9) (Bonus Option 10) Contract with the Bonus Option and joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin 2.85% 3.15% (Bonus Option 11)(Bonus Option 12) Contract with the Bonus Option and single Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin 2.60% 2.90% (Bonus Option 3)(Bonus Option 4) Contract with the Bonus Option and joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin 2.75% 3.05% (Bonus Option 5) (Bonus Option 6) Contract with the Short Withdrawal Charge Option and Lifetime Plus Benefit (single Lifetime Plus Payments) 2.35% 2.65% (L Option 3) (L Option 4) Contract with the Short Withdrawal Charge Option and Lifetime Plus Benefit (joint Lifetime Plus Payments) 2.50% 2.80% (L Option 5) (L Option 6) Contract with the Short Withdrawal Charge Option and Target Date Retirement Benefit 2.05% 2.35% (L Option 7) (L Option 8) Contract with the Short Withdrawal Charge Option and single Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin 2.45% 2.75% (C Option 1) (C Option 2) Contract with the Short Withdrawal Charge Option and joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin 2.60% 2.90% (C Option 3) (C Option 4) Contract with the Short Withdrawal Charge Option and single Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin 2.35% 2.65% (L Option 3) (L Option 4) Contract with the Short Withdrawal Charge Option and joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin 2.50% 2.80% (L Option 5) (L Option 6) Contract with the No Withdrawal Charge Option and Target Date Retirement Benefit 2.15% 2.45% (C Option 5) (C Option 6) Contract with the No Withdrawal Charge Option and Lifetime Plus Benefit (single Lifetime Plus Payments) 2.45% 2.75% (L Option 9) (L Option 10) Contract with the No Withdrawal Charge Option and Lifetime Plus Benefit (joint Lifetime Plus Payments) 2.60% 2.90% (L Option 11) (L Option 12) Contract with the No Withdrawal Charge Option and single Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin 2.55% 2.85% (C Option 7) (C Option 8) Contract with the No Withdrawal Charge Option and joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, before payments begin 2.70% 3.00% (C Option 9) (C Option 10) See Accompanying Notes to Financial Statements 77 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Expenses (continued) Traditional Quarterly Death Benefit Value Death M&E charges during the Accumulation Phase t Benefit ------------------------------------------- --------------- ---------------- Contract with the No Withdrawal Charge 2.45% 2.75% Option and single Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin (L Option 9) (L Option 10) Contract with the No Withdrawal Charge Option and joint Lifetime Plus Payments under the Lifetime Plus 8 Benefit, once payments begin 2.60% 2.90% (L Option 11) (L Option 12) The M&E charges during the Annuity Phase if the owner takes variable annuity payments are 1.40% for a Contract without the Bonus Option, and 1.90% for a Contract with the Bonus Option. Contract Based Expenses A contract maintenance charge is paid by the contract owner annually from each deferred annuity contract by liquidating accumulation units at the end of the contract year and at the time of full surrender. During the annuity phase we deduct a portion of this charge from each annuity payment. The amount of the charge is $30 each year. Contract maintenance charges deducted during the years ended December 31, 2008 and 2007 were $141,000 and $138,000, respectively. These contract charges are reflected in the Statements of Changes in Net Assets as contract maintenance charges. A withdrawal charge is deducted at the time of withdrawal for withdrawals taken during the Accumulation Phase on Allianz Advantage, Allianz Charter II, Allianz Opportunity, Allianz High Five, Allianz Valuemark II, Allianz Valuemark IV, and Allianz Vision annuity contracts. If the withdrawal is a partial withdrawal the charge is deducted from the Contract Value. If the withdrawal is a full withdrawal the charge is deducted from the amount withdrawn. The amount of the withdrawal charge is shown below. For the Allianz Advantage Original Contracts and the Allianz Valuemark IV Contract, the withdrawal charge also applies to liquidations taken during the Annuity Phase.
Withdrawal Charge Complete Advantage Allianz Years Since and Charter II - High Five Valuemark Payment Valuemark IV NY NY* Opportunity II Vision** -------------- ------------- -------------- ------------ ---------- ------------ ---------- 0 6% 8% 8% 8.50% 5% 8.50% 1 6% 7% 7.50% 8.50% 5% 8.50% 2 6% 0% 7% 8.50% 4% 7.50% 3 5% 0% 6% 8% 3% 6.50% 4 4% 0% 5% 7% 1.50% 5% 5 3% 0% 4% 6% 0% 4% 6 2% 0% 3% 5% 0% 3% 7 0% 0% 0% 4% 0% 0% 8 0% 0% 0% 3% 0% 0% 9+ 0% 0% 0% 0% 0% 0% * This is the withdrawal charge for the Base Contract. The withdrawal charge for the a Contract with the Short Withdrawal Charge Option is 8.5%, 7.5%, 5.5%, 3%, and 0%. ** This is the withdrawal charge for the Base Contract. The withdrawal charge for the a Contract with the Bonus Option is 8.5%, 8.5%, 8.5%, 8%, 7%, 6%, 5%, 4%, 3%, and 0%. The withdrawal charge for the a Contract with the Short Withdrawal Charge Option is 8.5%, 7.5%, 5.5%, 3%, and 0%. There is no withdrawal charge for a Contract with the No Withdrawal Charge Option. Total withdrawal charges paid by the contract owners during the years ended December 31, 2008 and 2007 were $1,666,135, and $833,786, respectively. Allianz Valuemark IV and Allianz Advantage Contracts also include a waiver of withdrawal charge benefit if any owner becomes totally disabled after the first contract year. Allianz Vision also includes a waiver of withdrawal charge benefit for nursing home confinement or diagnosis of a terminal illness after the first contract year.
See Accompanying Notes to Financial Statements 78 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Expenses (continued) A free withdrawal privilege (or partial withdrawal privilege) is available that allows owners to withdraw a certain amount each year during the Accumulation Phase without incurring a withdrawal charge under the Allianz Advantage, Allianz Opportunity, Allianz High Five, Allianz Valuemark II, Allianz Valuemark IV, and Allianz Vision Contracts. The amount that can be withdrawn differs between the contracts. For Allianz Valuemark IV and Allianz Advantage each year the owner can withdraw 15% of the previous contract anniversaries contract value, less any previous withdrawals taken during the current year that were not subject to a withdrawal charge. For Allianz High Five each year the owner can withdraw 10% of total purchase payments, less any amount previously withdrawn under the partial withdrawal privilege in the same year. For Allianz Opportunity each year the owner can withdraw 10% of total purchase payments, not including any bonus, less any previous withdrawals taken during the year that were not subject to a withdrawal charge. For Allianz Valuemark II each year the owner can withdraw 15% of total purchase payments, less any previous withdrawals taken during the year; if the owner does not take any withdrawals during a given year the full 15% carries over to the next year. For Allianz Vision each year the owner can withdraw 12% of total purchase payments, less any amount previously withdrawn under the partial withdrawal privilege in the same year. Currently, twelve transfers are permitted each contract year. Thereafter, the fee is $25 per transfer (or, if less, 2% of the amount transferred for Allianz Valuermark II, Allianz Valuermark IV and Allianz Advantage). If the transfer is made under the dollar cost averaging program, flexible rebalancing program, GAV Transfers under the Living Guarantees for Allianz High Five, or the allocation and transfer restrictions for the Target Date Retirement Benefit of one of the Lifetime Benefits for Allianz Vision, there is no fee for the transfer and we currently do not count these transfers against any free transfers. Total transfer charges during the years ended December 31, 2008 and 2007 were $825 and $125, respectively. Net transfers to the Fixed Accounts were $(15,327,000) and $(83,000), years ended December 31, 2008 and 2007, respectively. Premium taxes are not currently assessed in the state of New York. However, we reserve the right to make a deduction to reimburse ourselves for premium taxes if the owner lives in a state where premium taxes are due. Premium taxes or other taxes payable to a state or other governmental entity will be charged against the contract values. Allianz Life of New York may, at 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 of New York may have to deduct such amounts at a later date. A rescission is defined as a contract that is returned to Allianz Life of New York and canceled within the free-look period, generally within 10 days. 3. FEDERAL INCOME TAXES Operations of the Separate Account form a part of the Company, which is taxed as a life insurance company under the Internal Revenue Code (the Code). Under current law, no federal income taxes are payable with respect to the Separate Account. Under the principles set forth in Internal Revenue Service Ruling 81-225 and Section 817(h) of the Code and regulations thereunder, the Company understands that it will be treated as owner of the assets invested in the Separate Account for federal income tax purposes, with the result that earnings and gains, if any, derived from those assets will not be included in an annuitant's gross income until amounts are received pursuant to an annuity. See Accompanying Notes to Financial Statements 79 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 4. PURCHASES AND SALES OF INVESTMENTS (IN THOUSANDS) The cost of purchases and proceeds from sales of investments for the year ended December 31, 2008 are as follows: Cost of Proceeds from Purchases Sales AIM V.I. Capital Appreciation Fund - 64 AIM V.I. Core Equity Fund 2 7 Alger American Capital Appreciation Portfolio - 6 Alger American LargeCap Growth Portfolio - 34 Alger American MidCap Growth Portfolio 19 8 Alger American SmallCap Growth Portfolio - - AZL AIM International Equity Fund 3,389 1,908 AZL BlackRock Capital Appreciation Fund 1,273 819 AZL Columbia Mid Cap Value Fund 1,143 432 AZL Columbia Small Cap Value Fund 967 953 AZL Columbia Technology Fund 1,292 845 AZL Davis NY Venture Fund 7,688 2,572 AZL Dreyfus Founders Equity Growth Fund 1,326 1,409 AZL First Trust Target Double Play Fund 1,069 213 AZL Franklin Small Cap Value Fund 3,194 1,320 AZL Fusion Balanced Fund 9,121 2,782 AZL Fusion Growth Fund 46,522 36,621 AZL Fusion Moderate Fund 12,596 6,377 AZL Jennison 20/20 Focus Fund 5,024 1,531 AZL Legg Mason Growth Fund 4,617 3,666 AZL Legg Mason Value Fund 802 781 AZL LMP Large Cap Growth Fund 451 2,225 AZL Money Market Fund 116,898 82,614 AZL NACM International Fund 637 101 AZL OCC Opportunity Fund 1,533 1,071 AZL OCC Value Fund 1,627 4,102 AZL Oppenheimer Global Fund 2,218 1,101 AZL Oppenheimer International Growth Fund 3,233 1,560 AZL Oppenheimer Main Street Fund 1,780 895 AZL PIMCO Fundamental IndexPLUS Total Return Fund 924 208 AZL S&P 500 Index Fund 7,260 866 AZL Schroder Emerging Markets Equity Fund CL 1 1,270 56 AZL Schroder Emerging Markets Equity Fund CL 2 6,144 9,888 AZL Schroder International Small Cap Fund 925 202 AZL Small Cap Stock Index Fund 4,629 577 AZL TargetPLUS Balanced Fund 1,813 400 AZL TargetPLUS Equity Fund 1,209 976 AZL TargetPLUS Growth Fund 3,197 528 AZL TargetPLUS Moderate Fund 2,684 705 AZL Turner Quantitative Small Cap Growth Fund 838 201 AZL Van Kampen Comstock Fund 2,050 1,676 AZL Van Kampen Equity and Income Fund 1,769 560 AZL Van Kampen Global Franchise Fund 1,942 1,386 AZL Van Kampen Global Real Estate Fund 1,195 574 AZL Van Kampen Growth and Income Fund 1,344 1,139 AZL Van Kampen Mid Cap Growth Fund 5,452 10,198 BlackRock Global Allocations V.I. Fund 4,134 950 See Accompanying Notes to Financial Statements 80 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 4. PURCHASES AND SALES OF INVESTMENTS (IN THOUSANDS) (CONTINUED) The cost of purchases and proceeds from sales of investments for the year ended December 31, 2008 are as follows:
Cost of Purchases Proceeds from Sales Davis VA Financial Portfolio 970 635 Davis VA Value Portfolio 22 203 Dreyfus IP Small Cap Stock Index Portfolio 707 3,730 Dreyfus Stock Index Fund 387 4,963 Franklin Global Communications Securities Fund 1,173 4,746 Franklin Growth and Income Securities Fund 2,917 4,667 Franklin High Income Securities Fund 3,498 4,212 Franklin Income Securities Fund 12,934 9,279 Franklin Large Cap Growth Securities Fund 836 1,767 Franklin Money Market Fund 17 458 Franklin Real Estate Fund 2,378 1,980 Franklin Rising Dividends Securities Fund 913 5,237 Franklin Small Cap Value Securities Fund 270 607 Franklin Small-Mid Cap Growth Securities Fund 779 1,276 Franklin Templeton VIP Founding Funds Allocation Fund 9,398 1,142 Franklin U.S. Government Fund 8,828 7,401 Franklin Zero Coupon Fund 2010 8,721 7,574 J.P. Morgan International Opportunities Portfolio 2 - J.P. Morgan U.S. Large Cap Core Equity Portfolio - 1 Jennison 20/20 Focus Portfolio 373 1,675 Mutual Discovery Securities Fund 6,856 4,167 Mutual Shares Securities Fund 8,658 5,747 OpCap Mid Cap Portfolio 1,354 469 Oppenheimer Global Securities Fund/VA 182 512 Oppenheimer High Income Fund/VA 604 369 Oppenheimer Main Street Fund/VA 185 213 PIMCO VIT All Asset Portfolio 2,225 1,048 PIMCO VIT CommodityRealReturn Strategy Portfolio 10,616 4,919 PIMCO VIT Emerging Markets Bond Portfolio 1,066 424 PIMCO VIT Global Bond Portfolio 1,996 1,164 PIMCO VIT High Yield Portfolio 1,022 726 PIMCO VIT Real Return Portfolio 5,787 3,831 PIMCO VIT StocksPLUS Growth and Income Portfolio 33 79 PIMCO VIT Total Return Portfolio 14,937 10,997 Seligman Global Technology Portfolio - - Seligman Small-Cap Value Portfolio 344 546 SP Strategic Partners Focused Growth Portfolio 71 35 SP International Growth Portfolio 240 198 Templeton Asset Strategy Fund 157 63 Templeton Developing Markets Securities Fund 2,041 5,395 Templeton Foreign Securities Fund 2,174 2,766 Templeton Global Income Securities Fund 14,546 11,594 Templeton Growth Securities Fund 6,386 4,285 Van Kampen LIT Capital Growth Portfolio - - Van Kampen LIT Growth and Income Portfolio 1 15
See Accompanying Notes to Financial Statements 81 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 5.CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows:
AIM V.I. Capital Alger American Capital Appreciation Fund AIM V.I. Core Equity Fund Appreciation Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - - - - - Transfers between funds (1) (1) - - - - Surrenders and terminations (8) (8) - (4) - (6) Rescissions - - - - - - Bonus - - - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (9) (9) - (4) - (6) Alger American LargeCap Alger American MidCap Growth Alger American SmallCap Growth Portfolio Portfolio Growth Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - - - - - Transfers between funds (1) - - - - - Surrenders and terminations (2) (17) - (2) - - Rescissions - - - - - - Bonus - - - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (3) (17) - (2) - - AZL AIM International Equity AZL BlackRock Capital AZL AIM Basic Value Fund Fund Appreciation Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - 14 127 64 75 49 Transfers between funds - (387) (44) (163) (19) 20 Surrenders and terminations - (26) (16) (34) (5) (11) Rescissions - - (7) - (1) - Bonus - 1 2 3 - 1 Contract Maintenance Charges - - - - - - Total Net Contract Transactions - (398) 62 (130) 50 59
See Accompanying Notes to Financial Statements 82 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: AZL Columbia Mid Cap Value AZL Columbia Small Cap Value AZL Columbia Technology Fund Fund Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 82 54 48 51 79 108 Transfers between funds 33 2 (38) (19) 21 43 Surrenders and terminations (2) (2) (13) (39) (47) (44) Rescissions - - (4) (1) (2) (5) Bonus 1 1 2 1 3 3 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 114 55 (5) (7) 54 105 AZL Dreyfus AZL First Trust AZL Davis NY Venture Founders Equity Target Double Play Fund Growth Fund Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 277 335 49 87 119 21 Transfers between funds 440 (382) (50) 178 6 17 Surrenders and terminations (51) (124) (32) (48) (3) - Rescissions (11) (8) (1) - (1) - Bonus 4 7 1 2 1 - Contract Maintenance Charges - - - - - - Total Net Contract Transactions 659 (172) (33) 219 122 38 AZL Franklin Small Cap Value Fund AZL Fusion Balanced Fund AZL Fusion Growth Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 142 76 720 422 986 678 Transfers between funds 13 (54) (47) 64 (42) 27 Surrenders and terminations (17) (66) (66) (108) (105) (125) Rescissions (5) (1) (31) (2) (40) (38) Bonus 2 2 10 10 14 18 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 135 (43) 586 386 813 560
See Accompanying Notes to Financial Statements 83 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: AZL Jennison 20/20 Focus AZL Fusion Moderate Fund Fund AZL Legg Mason Growth Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 777 684 146 84 200 96 Transfers between funds (114) 11 157 (6) 182 205 Surrenders and terminations (95) (208) (16) (25) (19) (24) Rescissions (79) (24) (9) - (6) - Bonus 11 17 2 3 2 2 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 500 480 280 56 359 279 AZL LMP Large Cap Growth AZL Legg Mason Value Fund Fund AZL Money Market Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 39 44 20 24 2,299 764 Transfers between funds (22) (20) (292) 3 2,132 934 Surrenders and terminations (27) (77) (32) (57) (837) (1,412) Rescissions (6) - - - (221) (21) Bonus 1 1 1 1 34 21 Contract Maintenance Charges - - - - - - Total Net Contract Transactions (15) (52) (303) (29) 3,407 286 AZL NACM International Fund AZL OCC Renaissance Fund AZL OCC Opportunity Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 67 7 - 29 54 55 Transfers between funds 17 2 - (355) 5 (171) Surrenders and terminations - - - (19) (22) (31) Rescissions (3) - - - (1) - Bonus 1 - - 1 1 2 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 82 9 - (344) 37 (145)
See Accompanying Notes to Financial Statements 84 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: AZL Oppenheimer AZL OCC Value Fund AZL Oppenheimer Global Fund International Growth Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 21 11 121 147 121 81 Transfers between funds (515) 264 (30) (53) (27) 41 Surrenders and terminations (44) (119) (19) (64) (20) (26) Rescissions (8) - (9) (3) (2) - Bonus - - 2 4 2 2 Contract Maintenance Charges - - - - - - Total Net Contract Transactions (546) 156 65 31 74 98 AZL Oppenheimer Main Street AZL PIMCO Fundamental Fund IndexPLUS Total Return Fund AZL S&P 500 Index Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 89 73 43 13 264 61 Transfers between funds (17) (28) 56 (18) 557 10 Surrenders and terminations (19) (77) (1) (1) (26) - Rescissions (12) - (2) - (3) - Bonus 1 1 2 - 2 - Contract Maintenance Charges - - - - - - Total Net Contract Transactions 42 (31) 98 (6) 794 71 AZL Schroder Emerging AZL Schroder Emerging AZL Schroder International Markets Equity Fund CL 1 Markets Equity Fund CL 2 Small Cap Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - 190 204 94 32 Transfers between funds 222 2 (351) 498 14 5 Surrenders and terminations (4) - (27) (32) (2) - Rescissions - - (6) (7) (4) - Bonus - - 4 6 2 - Contract Maintenance Charges - - - - - - Total Net Contract Transactions 218 2 (190) 669 104 37
See Accompanying Notes to Financial Statements 85 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: AZL Small Cap Stock Index Fund AZL TargetPLUS Balanced Fund AZL TargetPLUS Equity Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 116 59 178 29 127 119 Transfers between funds 341 (10) (11) 7 (97) 42 Surrenders and terminations (8) - (1) (1) (2) (12) Rescissions (2) - - - (1) - Bonus 2 1 3 1 - 5 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 449 50 169 36 27 154 AZL Turner Quantitative AZL TargetPLUS Growth Fund AZL TargetPLUS Moderate Fund Small Cap Growth Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 339 78 253 46 48 25 Transfers between funds (7) 17 (4) (6) 7 (4) Surrenders and terminations (5) - (5) (1) (2) (13) Rescissions (10) - (20) (7) (2) (1) Bonus 5 1 5 - 1 1 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 322 96 229 32 52 8 AZL Van Kampen Aggressive AZL Van Kampen Equity and Growth Fund AZL Van Kampen Comstock Fund Income Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - 51 79 91 131 47 Transfers between funds - (166) (78) 315 (13) (10) Surrenders and terminations - (14) (42) (174) (6) (33) Rescissions - - (4) - (1) - Bonus - 1 - 3 2 1 Contract Maintenance Charges - - - - - - Total Net Contract Transactions - (128) (45) 235 113 5
See Accompanying Notes to Financial Statements 86 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: AZL Van Kampen AZL Van Kampen AZL Van Kampen Global Franchise Global Real Estate Growth and Income Fund Fund Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 81 149 98 223 60 77 Transfers between funds (50) (51) (19) (312) (2) (76) Surrenders and terminations (16) (39) (6) (12) (47) (97) Rescissions (8) (2) (1) (3) (1) (3) Bonus 1 3 2 5 - 3 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 8 60 74 (99) 10 (96) AZL Van Kampen Mid Cap Growth AZL Van Kampen Strategic BlackRock Global Fund Growth Fund Allocations V.I. Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 192 125 - 26 399 - Transfers between funds (551) 758 - (195) (14) - Surrenders and terminations (35) (49) - (18) (4) - Rescissions (6) (4) - - (32) - Bonus 3 3 - 1 2 - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (397) 833 - (186) 351 - Davis VA Financial Davis VA Real Estate Davis VA Value Portfolio Portfolio Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 44 36 - - - - Transfers between funds 21 9 - - (3) (18) Surrenders and terminations (41) (42) - (1) (16) (35) Rescissions (1) (2) - - - - Bonus 1 1 - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions 24 2 - (1) (19) (53)
See Accompanying Notes to Financial Statements 87 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: Dreyfus IP Small Cap Stock Franklin Global Index Portfolio Dreyfus Stock Index Fund Communications Securities Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 2 110 3 29 31 40 Transfers between funds (243) (112) (366) (38) (125) 101 Surrenders and terminations (9) (49) (40) (116) (60) (81) Rescissions (1) (3) - - (3) (3) Bonus - 3 - 1 1 2 Contract Maintenance Charges - - - - - - Total Net Contract Transactions (251) (51) (403) (124) (156) 59 Franklin Growth and Income Franklin High Income Franklin Income Securities Securities Fund Securities Fund Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 2 22 50 55 217 139 Transfers between funds (46) (26) (56) (61) (21) 3 Surrenders and terminations (93) (133) (52) (74) (126) (168) Rescissions - (2) (1) (1) (16) (1) Bonus - 1 1 1 2 3 Contract Maintenance Charges - - - - - - Total Net Contract Transactions (137) (138) (58) (80) 56 (24) Franklin Large Cap Growth Securities Fund Franklin Money Market Fund Franklin Real Estate Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 3 14 - - - 3 Transfers between funds (31) (24) - (6) (18) (24) Surrenders and terminations (54) (97) (27) (63) (21) (40) Rescissions - - - - - - Bonus - - - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (82) (107) (27) (69) (39) (61)
See Accompanying Notes to Financial Statements 88 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: Franklin Rising Dividends Franklin Small Cap Value Franklin Small-Mid Cap Securities Fund Securities Fund Growth Securities Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 2 5 1 2 2 3 Transfers between funds (51) (31) (14) (23) (24) (11) Surrenders and terminations (96) (111) (18) (26) (31) (65) Rescissions - - - (1) - - Bonus - - - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (145) (137) (31) (48) (53) (73) Franklin Templeton VIP Founding Funds Allocation Franklin Zero Coupon Fund Fund Franklin U.S. Government Fund 2010 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 1,093 119 111 21 50 3 Transfers between funds (8) 33 87 (3) (6) 3 Surrenders and terminations (34) - (145) (177) (10) (12) Rescissions (15) - (6) - (2) - Bonus 22 4 1 - 1 - Contract Maintenance Charges - - - - - - Total Net Contract Transactions 1,058 156 48 (159) 33 (6) Jennison 20/20 Focus J.P. Morgan International J.P. Morgan U.S. Large Cap Portfolio Opportunities Portfolio Core Equity Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 4 1 - - - - Transfers between funds (92) - - - - - Surrenders and terminations (6) (13) - - - - Rescissions - - - - - - Bonus - - - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (94) (12) - - - -
See Accompanying Notes to Financial Statements 89 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: Mutual Discovery Securities Fund Mutual Shares Securities Fund OpCap Mid Cap Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 172 232 290 249 98 59 Transfers between funds (30) (67) (45) (14) 15 7 Surrenders and terminations (50) (107) (113) (180) (4) (1) Rescissions (15) (7) (16) (1) (4) - Bonus 2 5 4 6 2 1 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 79 56 120 60 107 66 Oppenheimer Global Oppenheimer High Income Oppenheimer Main Street Securities Fund/VA Fund/VA Fund/VA 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - - - - 1 Transfers between funds (22) (31) 108 (25) (7) (20) Surrenders and terminations (16) (30) (5) (12) (10) (60) Rescissions - - - - - - Bonus - - - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (38) (61) 103 (37) (17) (79) PIMCO VIT PIMCO VIT All Asset CommodityRealReturn Strategy PIMCO VIT Emerging Markets Portfolio Portfolio Bond Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 105 24 238 51 52 36 Transfers between funds 16 (4) 40 (4) (8) 5 Surrenders and terminations (17) (31) (22) (20) (4) (10) Rescissions (18) (1) (7) - - (1) Bonus 2 1 5 2 1 1 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 88 (11) 254 29 41 31
See Accompanying Notes to Financial Statements 90 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: PIMCO VIT Global Bond PIMCO VIT High Yield PIMCO VIT Real Return Portfolio Portfolio Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 84 31 49 25 282 77 Transfers between funds (7) 30 (5) (19) (75) (53) Surrenders and terminations (6) (8) (28) (44) (32) (104) Rescissions - - (2) - (33) (1) Bonus 1 1 1 1 3 1 Contract Maintenance Charges - - - - - - Total Net Contract Transactions 72 54 15 (37) 145 (80) PIMCO VIT StocksPLUS Growth PIMCO VIT Total Return Seligman Global Technology and Income Portfolio Portfolio Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - 451 76 - - Transfers between funds (3) (10) (15) 34 - - Surrenders and terminations (3) (3) (105) (145) - - Rescissions - - (91) (1) - - Bonus - - 3 3 - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (6) (13) 243 (33) - - Seligman Small-Cap Value SP Strategic Partners SP International Growth Portfolio Focused Growth Portfolio Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - - 1 1 1 Transfers between funds (27) (11) 7 (10) - 23 Surrenders and terminations (3) (11) (2) (8) (10) (18) Rescissions - - - - - - Bonus - - - - - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions (30) (22) 5 (17) (9) 6
See Accompanying Notes to Financial Statements 91 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008
5. CONTRACT TRANSACTIONS - ALL PRODUCTS ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED) Transactions in units for each subaccount, excluding units for annuitized contracts, for the years ended December 31, 2008 and 2007 were as follows: Templeton Asset Strategy Templeton Developing Markets Templeton Foreign Securities Fund Securities Fund Fund 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - 2 7 5 17 Transfers between funds - - (361) (48) (21) (16) Surrenders and terminations (2) (4) (24) (56) (71) (100) Rescissions - - - - (1) - Bonus - - - - - 1 Contract Maintenance Charges - - - - - - Total Net Contract Transactions (2) (4) (383) (97) (88) (98) Templeton Global Income Templeton Growth Securities Van Kampen LIT Capital Securities Fund Fund Growth Portfolio 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments 148 22 191 170 - - Transfers between funds (57) 15 (39) (48) - - Surrenders and terminations (15) (15) (91) (101) (1) - Rescissions (10) - (14) - - - Bonus 3 1 2 4 - - Contract Maintenance Charges - - - - - - Total Net Contract Transactions 69 23 49 25 (1) - Van Kampen LIT Enterprise Van Kampen LIT Growth and Portfolio Income Portfolio Total All Funds 2008 2007 2008 2007 2008 2007 Contract Transactions Purchase payments - - - - 13,133 7,194 Transfers between funds - - - - 215 484 Surrenders and terminations - - (1) (1) (3,270) (5,671) Rescissions - - - - (818) (155) Bonus - - - - 192 183 Contract Maintenance Charges - - - - - - Total Net Contract Transactions - - (1) (1) 9,452 2,035
See Accompanying Notes to Financial Statements 92 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ------------------------------------------ ------------------------------------------------------- Units Unit Fair Value Net Investment Expense Ratio Total Return Outstanding Assets Income **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** AIM V.I. Capital Appreciation Fund 2008 39 $4.74 to $5.20 201 0.00% 1.40% to 1.49% -43.35% to -43.29 2007 48 $8.37 to $9.17 432 0.00% 1.40% to 1.49% 10.35% to 10.45% 2006 57 $7.58 to $8.30 469 0.00% 1.49% to 1.49% 4.73% to 4.73% 2005 119 $7.24 to $7.24 265 0.00% 1.49% to 1.49% 7.23% to 7.23% 2004 159 $6.75 to $6.75 343 0.00% 1.49% to 1.49% 5.04% to 5.04% AIM V.I. Core Equity Fund 2008 8 $7.97 to $7.97 63 2.46% 1.49% to 1.49% -31.18% to -31.18 2007 8 $11.57 to $11.57 98 0.75% 1.49% to 1.49% 6.51% to 6.51% 2006 12 $10.87 to $10.87 136 2.00% 1.49% to 1.49% 8.22% to 8.22% 2005 22 $6.83 to $6.83 151 0.67% 1.49% to 1.49% 4.10% to 4.10% 2004 23 $6.56 to $6.56 150 0.70% 1.49% to 1.49% 4.20% to 4.20% Alger American Capital Appreciation Portfolio 2008 23 $6.47 to $6.53 147 0.00% 1.40% to 1.49% -45.95% to -45.90 2007 23 $11.97 to $12.06 275 0.00% 1.40% to 1.49% 31.55% to 31.67% 2006 29 $9.10 to $9.16 269 0.00% 1.40% to 1.49% 17.50% to 17.61% 2005 40 $7.75 to $7.79 313 0.00% 1.40% to 1.49% 12.76% to 12.86% 2004 53 $6.87 to $6.90 368 0.00% 1.40% to 1.49% 6.58% to 6.68% Alger American LargeCap Growth Portfolio 2008 25 $5.22 to $5.26 129 0.00% 1.40% to 1.49% -46.95% to -46.90 2007 28 $9.84 to $9.91 279 0.29% 1.40% to 1.49% 18.16% to 18.27% 2006 45 $8.32 to $8.38 380 0.24% 1.40% to 1.49% 3.60% to 3.69% 2005 59 $8.03 to $8.08 473 0.21% 1.40% to 1.49% 10.38% to 10.48% 2004 68 $7.28 to $7.31 499 0.00% 1.40% to 1.49% 3.93% to 4.03% Alger American MidCap Growth Portfolio 2008 5 $6.97 to $6.97 32 0.00% 1.49% to 1.49% -58.97% to -58.97 2007 5 $16.98 to $16.98 85 0.00% 1.49% to 1.49% 29.60% to 29.60% 2006 7 $13.11 to $13.11 92 0.00% 1.49% to 1.49% 8.52% to 8.52% 2005 8 $12.08 to $12.08 94 0.00% 1.49% to 1.49% 8.20% to 8.20% 2004 8 $11.16 to $11.16 92 0.00% 1.49% to 1.49% 11.37% to 11.37% Alger American SmallCap Growth Portfolio 2008 - $4.91 to $4.91 1 0.00% 1.49% to 1.49% -47.39% to -47.39 2007 - $9.34 to $9.34 2 0.00% 1.49% to 1.49% 15.50% to 15.50% 2006 - $8.09 to $8.09 1 0.00% 1.49% to 1.49% 18.25% to 18.25% 2005 - $6.84 to $6.84 1 0.00% 1.49% to 1.49% 15.16% to 15.16% 2004 - $5.94 to $5.94 1 0.00% 1.49% to 1.49% 14.84% to 14.84%
See Accompanying Notes to Financial Statements 93 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ---------------------------------------------- ------------------------------------------------------- Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** AZL AIM International Equity Fund 2008 334 $10.18 to $11.55 3,592 0.51% 1.25% to 3.15% -43.33% to -42.24% 2007 272 $18.37 to $20.00 5,106 0.54% 1.25% to 3.05% 10.92% to 14.04% 2006 402 $16.47 to $17.47 6,720 0.24% 1.49% to 2.75% 23.61% to 25.17% 2005 112 $13.33 to $13.96 1,508 0.27% 1.49% to 2.75% 13.22% to 14.65% 2004 62 $11.77 to $12.18 731 0.00% 1.49% to 2.75% 18.80% to 20.31% AZL BlackRock Capital Appreciation Fund 2008 207 $7.73 to $8.27 1,643 0.00% 1.25% to 3.15% -38.35% to -37.16% 2007 157 $12.65 to $13.16 2,006 0.00% 1.25% to 3.05% 7.34% to 9.54% 2006 98 $11.72 to $11.97 1,156 0.00% 1.49% to 2.75% -1.18% to 0.07% 2005 28 $11.86 to $11.96 331 0.00% 1.49% to 2.75% 18.62% to 19.61% AZL Columbia Mid Cap Value Fund 2008 209 $4.66 to $4.89 992 0.59% 1.25% to 3.15% -53.64% to -52.75% 2007 95 $10.09 to $10.34 965 0.00% 1.25% to 3.05% 0.50% to 2.56% 20063 40 $9.99 to $10.06 405 0.42% 1.49% to 2.75% -0.12% to 0.72% AZL Columbia Small Cap Value Fund 2008 194 $7.69 to $8.39 1,538 0.49% 1.25% to 3.15% -34.20% to -32.93% 2007 199 $11.84 to $12.42 2,383 0.28% 1.25% to 3.05% -11.20% to -9.25% 2006 205 $13.26 to $13.72 2,739 0.10% 1.49% to 2.75% 10.33% to 11.73% 2005 120 $12.02 to $12.28 1,444 0.00% 1.49% to 2.75% 0.59% to 1.70% 2004 39 $11.95 to $12.04 471 0.00% 1.65% to 2.75% 18.80% to 19.67% AZL Columbia Technology Fund 2008 325 $4.42 to $4.93 1,478 0.00% 1.25% to 3.15% -52.17% to -51.25% 2007 271 $9.21 to $10.11 2,544 0.00% 1.25% to 3.05% 18.78% to 22.30% 2006 166 $7.72 to $8.27 1,314 0.00% 1.40% to 2.75% -0.22% to 1.14% 2005 98 $7.73 to $8.18 779 0.00% 1.40% to 2.75% -2.02% to -0.69% 2004 78 $7.89 to $8.24 631 0.00% 1.40% to 2.75% -6.93% to -5.66% AZL Davis NY Venture Fund 2008 1,480 $7.02 to $8.04 11,038 0.97% 1.25% to 3.15% -42.35% to -41.24% 2007 821 $12.47 to $13.68 10,524 0.40% 1.25% to 3.05% 0.78% to 3.77% 2006 994 $12.31 to $13.20 12,450 0.30% 1.40% to 2.75% 10.83% to 12.33% 2005 543 $11.11 to $11.75 6,133 0.14% 1.40% to 2.75% 6.72% to 8.16% 2004 260 $10.41 to $10.86 2,767 0.27% 1.40% to 2.75% 7.55% to 9.02% AZL Dreyfus Founders Equity Growth Fund 2008 413 $6.02 to $6.71 2,574 0.30% 1.25% to 3.15% -43.45% to -42.36% 2007 446 $10.61 to $11.63 4,877 0.06% 1.25% to 3.05% 5.24% to 8.36% 2006 227 $10.03 to $10.75 2,326 0.00% 1.40% to 2.75% 9.87% to 11.36% 2005 155 $9.12 to $9.65 1,443 0.31% 1.40% to 2.75% 1.73% to 3.11% 2004 112 $8.97 to $9.36 1,032 0.00% 1.40% to 2.75% 4.79% to 6.22%
See Accompanying Notes to Financial Statements 94 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 -------------------------------------------- -------------------------------------------------------------- Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** AZL First Trust Target Double Play Fund 2008 161 $4.71 to $4.86 768 1.00% 1.25% to 3.15% -55.10% to -54.23% 2007(4) 39 $10.48 to $10.62 412 0.00% 1.25% to 3.05% 3.74% to 5.50% AZL Franklin Small Cap Value Fund 2008 457 $10.27 to $11.52 4,949 1.14% 1.25% to 3.15% -35.79% to -34.56% 2007 322 $16.42 to $17.61 5,370 0.54% 1.25% to 3.05% -7.46% to -5.14% 2006 365 $17.65 to $18.48 6,507 0.30% 1.49% to 2.75% 12.29% to 13.71% 2005 242 $15.72 to $16.25 3,831 0.59% 1.49% to 2.75% 4.14% to 5.45% 2004 100 $15.09 to $15.41 1,519 0.00% 1.49% to 2.75% 19.75% to 21.27% AZL Fusion Balanced Fund 2008 1,459 $8.15 to $8.72 12,245 2.45% 1.25% to 3.15% -29.70% to -28.35% 2007 873 $11.69 to $12.17 10,317 1.61% 1.25% to 3.05% 3.65% to 5.78% 2006 488 $11.22 to $11.46 5,492 0.31% 1.49% to 2.75% 6.53% to 7.87% 2005(2) 157 $10.53 to $10.61 1,658 0.00% 1.49% to 2.75% 5.36% to 6.25% AZL Fusion Growth Fund 2008 2,803 $7.21 to $7.76 20,841 1.56% 1.25% to 3.15% -40.84% to -39.70% 2007 1,990 $12.36 to $12.86 24,767 0.51% 1.25% to 3.05% 2.34% to 4.43% 2006 1,430 $12.01 to $12.27 17,222 0.07% 1.49% to 2.75% 9.17% to 10.55% 2005(2) 448 $11.00 to $11.10 4,941 0.00% 1.49% to 2.75% 10.07% to 11.00% AZL Fusion Moderate Fund 2008 2,248 $7.72 to $8.26 17,811 2.38% 1.25% to 3.15% -35.01% to -33.76% 2007 1,748 $11.96 to $12.45 21,158 1.04% 1.25% to 3.05% 3.10% to 5.21% 2006 1,268 $11.54 to $11.75 14,699 0.23% 1.49% to 2.75% 7.72% to 9.08% 2005(2) 590 $10.71 to $10.79 6,334 0.00% 1.49% to 2.75% 7.13% to 8.03% AZL Jennison 20/20 Focus Fund 2008 537 $8.25 to $8.83 4,552 0.12% 1.25% to 3.15% -41.97% to -40.85% 2007 257 $14.34 to $14.93 3,716 0.19% 1.25% to 3.05% 7.15% to 9.35% 2006 201 $13.32 to $13.60 2,684 0.00% 1.49% to 2.75% 9.73% to 11.12% 2005(2) 76 $12.14 to $12.24 926 0.25% 1.49% to 2.75% 21.38% to 22.40% AZL Legg Mason Growth Fu 2008 795 $4.71 to $5.23 3,893 0.00% 1.25% to 3.15% -61.92% to -61.19% 2007 436 $12.37 to $13.47 5,511 0.00% 1.25% to 3.05% 11.30% to 14.44% 2006 157 $11.06 to $11.73 1,755 0.00% 1.49% to 2.75% -2.03% to -0.79% 2005 67 $11.28 to $11.82 761 0.00% 1.49% to 2.75% 8.05% to 9.42% 2004 29 $10.44 to $10.80 306 0.00% 1.49% to 2.75% 5.14% to 6.47% ---------------------------------------------- ------------------------------------------------------------
See Accompanying Notes to Financial Statements 95 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** AZL Legg Mason Value Fund 2008 420 $4.58 to $5.24 2,043 0.00% 1.25% to 3.15% -56.29% to -55.45% 2007 435 $10.73 to $11.77 4,799 0.00% 1.25% to 3.05% -9.22% to -6.53% 2006 487 $11.76 to $12.61 5,846 0.00% 1.40% to 2.75% 3.82% to 5.23% 2005 372 $11.33 to $11.98 4,284 0.00% 1.40% to 2.75% 3.39% to 4.79% 2004 123 $10.95 to $11.43 1,367 0.42% 1.40% to 2.75% 12.02% to 13.55% AZL Money Market Fund 2008 5,375 $9.46 to $11.37 54,199 2.35% 1.25% to 3.15% -0.74% to 1.17% 2007 1,968 $9.73 to $11.24 19,915 4.70% 1.25% to 3.05% 1.64% to 3.49% 2006 1,683 $9.54 to $10.70 16,635 4.41% 1.40% to 2.75% 1.62% to 2.99% 2005 1,485 $9.39 to $10.45 14,627 2.61% 1.40% to 2.75% -0.20% to 1.15% 2004 679 $9.41 to $10.29 6,670 0.74% 1.40% to 2.75% -2.06% to -0.73% AZL NACM International Fund 2008 91 $5.01 to $5.16 459 3.93% 1.25% to 3.15% -46.62% to -45.60% 2007(4) 9 $9.39 to $9.48 87 0.00% 1.25% to 3.05% -6.43% to -5.19% AZL OCC Opportunity Fund 2008 287 $7.66 to $8.77 2,323 0.00% 1.25% to 3.15% -48.80% to -47.81% 2007 250 $15.44 to $16.81 3,925 0.00% 1.25% to 3.05% 5.37% to 8.33% 2006 396 $14.58 to $15.46 5,832 0.00% 1.49% to 2.75% 8.66% to 10.03% 2005 156 $13.42 to $14.05 2,113 0.00% 1.49% to 2.75% 2.24% to 3.53% 2004 117 $13.12 to $13.57 1,548 0.00% 1.49% to 2.75% 4.83% to 6.17% AZL Oppenheimer Global Fund 2008 547 $8.17 to $8.92 4,620 0.81% 1.25% to 3.15% -42.89% to -41.79% 2007 482 $14.50 to $15.32 7,056 0.45% 1.25% to 3.05% 2.34% to 4.59% 2006 452 $14.09 to $14.58 6,398 0.06% 1.49% to 2.75% 13.15% to 14.58% 2005 317 $12.46 to $12.72 3,956 0.00% 1.49% to 2.75% 9.57% to 10.96% 2004(1) 130 $11.37 to $11.45 1,482 0.00% 1.65% to 2.75% 13.71% to 14.54% AZL Oppenheimer International Growth Fund 2008 362 $9.96 to $11.41 3,867 1.12% 1.25% to 3.15% -45.88% to -44.84% 2007 288 $18.87 to $20.69 5,592 0.61% 1.25% to 3.05% 8.66% to 11.88% 2006 190 $17.27 to $18.52 3,349 0.00% 1.40% to 2.75% 25.49% to 27.20% 2005 102 $13.76 to $14.56 1,420 0.00% 1.40% to 2.75% 11.09% to 12.49% 2004 30 $12.39 to $12.89 378 0.65% 1.49% to 2.75% 11.37% to 12.79% AZL Oppenheimer Main Street Fund 2008 430 $7.33 to $7.88 3,215 1.02% 1.25% to 3.15% -40.59% to -39.44% 2007 388 $12.31 to $13.01 4,840 0.54% 1.25% to 3.05% 0.44% to 2.65% 2006 420 $12.20 to $12.61 5,154 0.56% 1.49% to 2.75% 11.49% to 12.90% 2005 323 $10.94 to $11.17 3,552 0.00% 1.49% to 2.75% 2.60% to 3.90% 2004(1) 195 $10.66 to $10.75 2,088 0.98% 1.49% to 2.75% 6.64% to 7.54% ------------------------------------------- ----------------------------------------------------------------
See Accompanying Notes to Financial Statements 96 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** AZL PIMCO Fundamental IndexPLUS Total Return Fund 2008 110 $6.48 to $6.82 723 0.00% 1.25% to 3.15% -42.70% to -41.60% 2007 12 $11.39 to $11.61 140 8.69% 1.25% to 3.05% 3.22% to 5.33% 2006(3) 19 $10.98 to $11.04 207 12.24% 1.49% to 2.75% 9.84% to 10.76% AZL S&P 500 Index Fund 2008 866 $5.91 to $6.10 5,205 0.00% 1.25% to 3.15% -39.56% to -38.33% 2007(4) 72 $9.79 to $9.90 704 4.97% 1.25% to 3.05% -2.38% to -1.03% AZL Schroder Emerging Markets Equity Fund CL 1 2008 220 $6.48 to $6.49 1,424 0.00% 1.40% to 1.49% -52.53% to -52.49% 2007(4) 2 $13.65 to $13.65 23 0.00% 1.40% to 1.49% 20.98% to 21.05% AZL Schroder Emerging Markets Equity Fund CL 2 2008 852 $6.11 to $6.41 5,296 0.15% 1.25% to 3.15% -53.38% to -52.49% 2007 1,042 $13.15 to $13.49 13,766 0.02% 1.25% to 3.05% 26.10% to 28.69% 2006(3) 373 10.38 to 10.47 3,880 0.30% 1.49% to 2.75% 3.79% to 4.67% AZL Schroder International Small Cap Fund 2008 141 $4.83 to $4.97 689 2.45% 1.25% to 3.15% -47.27% to -46.26% 2007(4) 37 $9.16 to $9.25 341 0.00% 1.25% to 3.05% -8.69% to -7.48% AZL Small Cap Stock Index Fund 2008 499 $6.19 to $6.37 3,120 1.09% 1.25% to 3.15% -33.09% to -31.80% 2007(4) 50 $9.25 to $9.34 463 1.54% 1.25% to 3.05% -7.84% to -6.61% AZL TargetPLUS Balanced Fund 2008 205 $7.35 to $7.56 1,530 0.00% 1.25% to 3.15% -26.75% to -25.34% 2007(4) 36 $10.04 to $10.13 366 6.06% 1.25% to 3.05% 0.04% to 1.37% AZL TargetPLUS Equity Fund 2008 182 $5.17 to $5.36 962 0.00% 1.25% to 3.15% -50.13% to -49.17% 2007(4) 155 $10.38 to $10.54 1,613 1.03% 1.25% to 3.05% 3.01% to 4.77% AZL TargetPLUS Growth Fund 2008 418 $5.77 to $5.96 2,456 0.00% 1.25% to 3.15% -41.26% to -40.13% 2007(4) 96 $9.86 to $9.95 949 3.14% 1.25% to 3.05% -1.81% to -0.50% AZL TargetPLUS Moderate Fund 2008 262 $6.58 to $6.74 1,736 0.00% 1.25% to 3.15% -34.47% to -33.21% 2007(4) 33 $10.00 to $10.09 327 3.17% 1.25% to 3.05% -0.42% to 0.90% AZL Turner Quantitative Small Cap Growth Fund 2008 129 $6.70 to $7.17 888 0.00% 1.25% to 3.15% -45.11% to -44.06% 2007 77 $12.32 to $12.82 952 0.00% 1.25% to 3.05% 2.64% to 4.75% 2006 69 $11.94 to $12.19 824 0.00% 1.49% to 2.75% 8.30% to 9.67%
See Accompanying Notes to Financial Statements 97 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** AZL Van Kampen Comstock Fund 2008 667 $7.03 to $7.88 4,844 2.11% 1.25% to 3.15% -38.17% to -36.98% 2007 712 $11.32 to $12.51 8,290 1.29% 1.25% to 3.05% -5.38% to -2.42% 2006 478 $11.90 to $12.85 5,814 1.09% 1.40% to 2.75% 12.63% to 14.16% 2005 388 $10.57 to $11.25 4,185 0.43% 1.40% to 2.75% 1.11% to 2.48% 2004 248 $10.45 to $10.98 2,647 0.44% 1.40% to 2.75% 13.93% to 15.48% AZL Van Kampen Equity and Income Fund 2008 256 $8.82 to $9.69 2,372 2.72% 1.25% to 3.15% -26.29% to -24.87% 2007 143 $12.21 to $12.90 1,776 1.45% 1.25% to 3.05% -0.27% to 1.92% 2006 137 $12.18 to $12.60 1,689 1.02% 1.49% to 2.75% 9.48% to 10.86% 2005 105 $11.13 to $11.33 1,170 0.00% 1.65% to 2.75% 3.86% to 5.18% 2004(1) 26 $10.71 to $10.77 274 0.91% 1.90% to 2.75% 7.15% to 7.75% AZL Van Kampen Global Franchise Fund 2008 386 $12.63 to $13.75 4,973 2.03% 1.25% to 3.15% -30.79% to -29.45% 2007 378 $18.18 to $19.50 6,967 0.00% 1.25% to 3.05% 6.27% to 8.93% 2006 318 $17.01 to $17.82 5,452 1.59% 1.49% to 2.75% 17.97% to 19.47% 2005 196 $14.42 to $14.92 2,844 0.00% 1.49% to 2.75% 8.62% to 10.00% 2004 58 $13.28 to $13.56 772 0.00% 1.49% to 2.75% 9.15% to 10.54% AZL Van Kampen Global Real Estate Fund 2008 259 $5.52 to $5.82 1,462 1.80% 1.25% to 3.15% -47.52% to -46.51% 2007 185 $10.61 to $10.88 1,977 0.39% 1.25% to 3.05% -11.63% to -9.82% 2006(3) 283 $11.94 to $12.04 3,388 2.72% 1.49% to 2.75% 19.46% to 20.46% AZL Van Kampen Growth and Income Fund 2008 338 $8.18 to $9.57 2,990 2.06% 1.25% to 3.15% -34.94% to -33.69% 2007 328 $13.06 to $14.29 4,422 1.07% 1.25% to 3.05% -0.68% to 2.43% 2006 424 $13.08 to $14.12 5,701 0.83% 1.40% to 2.75% 12.76% to 14.29% 2005 324 $11.60 to $12.35 3,839 0.38% 1.40% to 2.75% 6.28% to 7.72% 2004 187 $10.91 to $11.47 2,091 0.36% 1.40% to 2.75% 10.72% to 12.23% AZL Van Kampen Mid Cap Growth Fund 2008 761 $7.19 to $8.32 5,843 0.31% 1.25% to 3.15% -50.12% to -49.16% 2007 1,158 $14.80 to $16.36 17,475 0.01% 1.25% to 3.05% 18.24% to 21.93% 2006 325 $12.45 to $13.44 4,145 0.00% 1.40% to 2.75% 6.25% to 7.69% 2005 201 $11.72 to $12.48 2,404 0.00% 1.40% to 2.75% 14.36% to 15.91% 2004 117 $10.25 to $10.77 1,225 0.00% 1.40% to 2.75% 17.94% to 19.54% BlackRock Global Allocations V.I. Fund 2008(5) 351 $7.84 to $7.93 2,853 5.61% 1.25% to 3.15% -21.88% to -20.89%
See Accompanying Notes to Financial Statements 98 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** Davis VA Financial Portfolio 2008 185 $5.84 to $8.47 1,206 0.00% 1.25% to 3.15% -48.03% to -47.03% 2007 161 $11.33 to $16.00 1,895 0.97% 1.25% to 3.05% -8.88% to -7.22% 2006 158 $12.39 to $16.98 2,030 0.75% 1.49% to 2.75% 15.30% to 16.76% 2005 111 $10.75 to $14.55 1,237 0.65% 1.49% to 2.75% 5.45% to 6.78% 2004 65 $10.19 to $13.62 705 0.43% 1.49% to 2.75% 7.32% to 8.68% Davis VA Value Portfolio 2008 36 $6.93 to $8.32 273 0.74% 1.49% to 2.75% -41.95% to -41.21% 2007 55 $11.93 to $14.16 719 0.70% 1.49% to 2.75% 1.78% to 3.08% 2006 108 $11.72 to $13.73 1,348 0.77% 1.49% to 2.75% 11.89% to 13.30% 2005 120 $10.48 to $12.12 1,330 0.96% 1.49% to 2.75% 6.48% to 7.83% 2004 138 $9.84 to $11.24 1,434 0.86% 1.49% to 2.75% 9.28% to 10.66% Franklin Global Communications Securities Fund 2008 459 $12.10 to $17.15 7,508 0.23% 1.25% to 3.15% -47.83% to -46.71% 2007 615 $24.33 to $32.04 18,502 0.00% 1.25% to 3.05% 20.23% to 28.74% 2006 557 $20.13 to $26.08 14,260 0.34% 1.40% to 2.75% 21.19% to 22.96% 2005 606 $16.61 to $21.21 12,775 2.75% 1.40% to 2.75% 12.66% to 14.51% 2004 699 $14.75 to $18.52 12,935 1.02% 1.40% to 2.75% 11.07% to 13.06% Franklin Growth and Income Securities Fund 2008 672 $17.92 to $23.99 15,825 3.48% 1.25% to 2.75% -36.91% to -35.86% 2007 809 $28.40 to $37.40 29,733 2.39% 1.25% to 2.75% -6.33% to -4.81% 2006 948 $30.32 to $39.29 36,601 2.57% 1.40% to 2.75% 13.60% to 15.43% 2005 1,059 $26.70 to $34.04 35,744 2.72% 1.40% to 2.75% 0.71% to 2.27% 2004 1,184 $26.51 to $33.29 39,356 2.60% 1.40% to 2.75% 7.61% to 9.36% Franklin High Income Securities Fund 2008 340 $14.51 to $19.76 6,062 10.72% 1.25% to 3.15% -25.76% to -24.24% 2007 398 $19.70 to $26.12 9,555 6.97% 1.25% to 3.05% 0.09% to 1.58% 2006 478 $19.72 to $25.54 11,308 6.14% 1.40% to 2.75% 6.41% to 7.96% 2005 436 $18.53 to $23.66 9,773 6.30% 1.40% to 2.75% 0.52% to 2.29% 2004 582 $18.44 to $23.13 12,925 5.49% 1.40% to 2.75% 6.89% to 8.50% Franklin Income Securities Fund 2008 1,039 $22.88 to $34.66 32,473 5.39% 1.25% to 3.15% -31.84% to -30.39% 2007 983 $37.63 to $49.89 45,280 3.56% 1.25% to 3.05% 0.93% to 2.56% 2006 1,008 $37.29 to $48.33 45,754 3.63% 1.40% to 2.75% 15.04% to 16.83% 2005 1,019 $32.41 to $41.37 40,583 3.53% 1.40% to 2.75% -1.14% to 0.42% 2004 978 $32.79 to $41.20 39,699 3.19% 1.40% to 2.75% 10.76% to 12.54%
See Accompanying Notes to Financial Statements 99 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** Franklin Large Cap Growth Securities Fund 2008 387 $11.47 to $13.96 5,145 1.48% 1.25% to 2.75% -36.31% to -35.30% 2007 469 $18.01 to $21.58 9,665 0.87% 1.25% to 2.75% 3.33% to 5.04% 2006 576 $17.43 to $20.54 11,306 0.86% 1.40% to 2.75% 7.90% to 9.63% 2005 662 $16.15 to $18.74 12,037 0.68% 1.40% to 2.75% -1.68% to -0.10% 2004 655 $16.43 to $18.76 12,084 0.54% 1.40% to 2.75% 5.00% to 6.72% Franklin Money Market Fund 2008 295 $16.52 to $16.81 4,979 1.56% 1.40% to 1.49% 0.05% to 0.14% 2007 322 $16.51 to $16.79 5,420 4.45% 1.40% to 1.49% 2.97% to 3.06% 2006 390 $16.03 to $16.29 6,374 4.32% 1.40% to 1.49% 2.84% to 2.93% 2005 372 $15.59 to $15.83 5,890 2.50% 1.40% to 1.49% 1.04% to 1.13% 2004 423 $15.43 to $15.65 6,624 0.72% 1.40% to 1.49% -0.76% to -0.67% Franklin Real Estate Fund 2008 164 $23.29 to $31.20 4,664 1.30% 1.25% to 2.75% -43.96% to -43.03% 2007 203 $41.56 to $54.76 10,219 2.44% 1.25% to 2.75% -23.02% to -21.76% 2006 265 $53.99 to $69.99 17,030 2.11% 1.40% to 2.75% 17.32% to 19.20% 2005 284 $46.01 to $58.72 15,645 1.49% 1.40% to 2.75% 10.40% to 12.16% 2004 275 $41.68 to $52.35 14,022 1.96% 1.40% to 2.75% 28.22% to 30.34% Franklin Rising Dividends Securities Fund 2008 710 $21.22 to $27.26 18,443 2.00% 1.25% to 2.75% -29.08% to -27.96% 2007 855 $29.92 to $37.84 30,953 2.47% 1.25% to 2.75% -5.34% to -3.78% 2006 992 $31.61 to $39.32 37,380 1.20% 1.40% to 2.75% 13.95% to 15.80% 2005 1,114 $27.74 to $33.96 36,591 0.98% 1.40% to 2.75% 0.63% to 2.24% 2004 1,119 $27.56 to $33.21 36,526 0.71% 1.40% to 2.75% 7.98% to 9.70% Franklin Small Cap Value Securities Fund 2008 150 $10.34 to $12.25 1,693 1.24% 1.40% to 2.75% -34.84% to -33.81% 2007 181 $15.87 to $18.50 3,114 0.76% 1.40% to 2.75% -5.04% to -3.50% 2006 228 $16.71 to $19.17 4,125 0.74% 1.40% to 2.75% 13.82% to 15.68% 2005 263 $14.68 to $16.57 4,147 0.87% 1.40% to 2.75% 5.82% to 7.48% 2004 247 $13.87 to $15.42 3,695 0.27% 1.40% to 2.75% 20.38% to 22.36% Franklin Small-Mid Cap Growth Securities Fund 2008 239 $12.02 to $14.67 3,420 0.00% 1.25% to 2.75% -44.06% to -43.15% 2007 292 $21.49 to $25.81 7,335 0.00% 1.25% to 2.75% 8.21% to 9.95% 2006 365 $19.86 to $23.47 8,316 0.00% 1.40% to 2.75% 5.75% to 7.44% 2005 444 $18.78 to $21.84 9,508 0.00% 1.40% to 2.75% 1.95% to 3.63% 2004 473 $18.42 to $21.08 9,938 0.00% 1.40% to 2.75% 8.44% to 10.15%
See Accompanying Notes to Financial Statements 100 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** Franklin Templeton VIP Founding Funds Allocation Fund 2008 1,214 $5.70 to $5.86 7,016 4.03% 1.25% to 3.15% -37.86% to -36.67% 2007 156 $9.18 to $9.25 1,434 0.00% 1.25% to 3.05% -8.36% to -7.47% Franklin U.S. Government Fund 2008 946 $19.53 to $28.64 25,009 4.87% 1.25% to 3.15% 4.24% to 6.41% 2007 898 $20.29 to $26.96 22,936 4.79% 1.25% to 3.05% 3.16% to 10.40% 2006 1,058 $19.56 to $25.37 25,641 4.47% 1.40% to 2.75% 1.20% to 2.86% 2005 1,282 $19.33 to $24.67 30,472 4.28% 1.40% to 2.75% -0.37% to 1.22% 2004 1,304 $19.40 to $24.37 30,923 5.07% 1.40% to 2.75% 0.66% to 2.27% Franklin Zero Coupon Fund 2010 2008 157 $28.90 to $43.65 5,768 5.72% 1.25% to 3.15% 4.15% to 6.16% 2007 124 $31.02 to $39.98 4,581 4.95% 1.25% to 3.05% 5.11% to 12.43% 2006 132 $29.36 to $37.33 4,577 4.23% 1.40% to 2.75% -0.07% to 1.29% 2005 131 $29.38 to $36.85 4,593 3.94% 1.40% to 2.75% -1.21% to 0.13% 2004 126 $29.74 to $36.80 4,542 4.75% 1.40% to 2.75% 1.87% to 3.26% J.P. Morgan International Opportunities Portfolio 2008 1 $7.03 to $7.03 7 0.00% 1.49% to 1.49% -42.22% to -42.22% 2007 1 $12.17 to $12.17 12 0.00% 1.49% to 1.49% 7.71% to 7.71% 2006 1 $11.30 to $11.30 12 0.00% 1.49% to 1.49% 20.24% to 20.24% 2005 1 $9.40 to $9.40 10 0.00% 1.49% to 1.49% 9.06% to 9.06% 2004 1 $8.62 to $8.62 9 0.00% 1.49% to 1.49% 16.61% to 16.61% J.P. Morgan U.S. Large Cap Core Equity Portfolio 2008 2 $6.08 to $6.08 9 0.00% 1.49% to 1.49% -34.96% to -34.96% 2007 2 $9.35 to $9.35 15 0.00% 1.49% to 1.49% 0.15% to 0.15% 2006 2 $9.33 to $9.33 15 0.00% 1.49% to 1.49% 14.85% to 14.85% 2005 2 $8.13 to $8.13 13 0.00% 1.49% to 1.49% -0.14% to -0.14% 2004 2 $8.14 to $8.14 13 0.00% 1.49% to 1.49% 7.86% to 7.86% Mutual Discovery Securities Fund 2008 811 $16.67 to $21.51 16,038 2.39% 1.25% to 3.15% -30.68% to -29.29% 2007 732 $25.68 to $30.42 20,783 1.57% 1.25% to 3.05% 8.23% to 13.23% 2006 676 $23.61 to $27.51 17,577 1.12% 1.40% to 2.75% 19.73% to 21.61% 2005 582 $19.72 to $22.62 12,660 1.33% 1.40% to 2.75% 12.83% to 14.66% 2004 512 $17.47 to $19.73 9,929 1.13% 1.40% to 2.75% 14.98% to 16.90% Mutual Shares Securities Fund 2008 1,344 $11.86 to $15.33 18,799 3.10% 1.25% to 3.15% -39.06% to -37.81% 2007 1,224 $20.79 to $24.65 27,956 1.55% 1.25% to 3.05% 0.13% to 4.75% 2006 1,165 $20.65 to $24.10 26,308 1.37% 1.40% to 2.75% 15.18% to 17.02% 2005 980 $17.93 to $20.60 19,434 0.97% 1.40% to 2.75% 7.56% to 9.29% 2004 879 $16.67 to $18.85 16,326 0.88% 1.40% to 2.75% 9.57% to 11.31%
See Accompanying Notes to Financial Statements 101 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** OpCap Mid Cap Portfolio 2008 186 $5.85 to $6.11 1,107 0.40% 1.25% to 3.15% -43.49% to -42.40% 2007 79 $10.35 to $10.61 818 0.22% 1.25% to 3.05% 3.99% to 5.89% 2006(3) 13 $9.92 to $10.00 130 0.00% 1.49% to 2.75% -1.24% to -0.41% Oppenheimer Global Securities Fund/VA 2008 112 $8.02 to $9.19 953 1.60% 1.49% to 2.75% -41.81% to -41.07% 2007 150 $13.78 to $15.60 2,160 1.49% 1.49% to 2.75% 3.42% to 4.74% 2006 210 $13.32 to $14.89 2,918 1.02% 1.49% to 2.75% 14.51% to 15.96% 2005 220 $11.63 to $12.84 2,651 1.05% 1.49% to 2.75% 11.21% to 12.62% 2004 232 $10.46 to $11.40 2,504 0.90% 1.49% to 2.75% 15.92% to 17.40% Oppenheimer High Income Fund/VA 2008 156 $2.43 to $2.71 402 7.09% 1.25% to 2.75% -79.25% to -78.94% 2007 53 $11.71 to $12.90 663 8.16% 1.25% to 2.75% -2.83% to -1.35% 2006 90 $12.05 to $13.11 1,141 7.80% 1.49% to 2.75% 6.46% to 7.81% 2005 188 $11.32 to $12.16 2,210 7.61% 1.49% to 2.75% -0.45% to 0.80% 2004 246 $11.37 to $12.06 2,898 8.74% 1.49% to 2.75% 6.00% to 7.35% Oppenheimer Main Street Fund/VA 2008 196 $6.27 to $6.84 1,280 1.52% 1.49% to 2.75% -40.14% to -39.38% 2007 213 $10.48 to $11.31 2,309 1.07% 1.49% to 2.75% 1.58% to 2.87% 2006 291 $10.31 to $11.01 3,095 1.16% 1.49% to 2.75% 11.91% to 13.33% 2005 344 $9.22 to $9.73 3,248 1.35% 1.49% to 2.75% 3.11% to 4.41% 2004 365 $8.94 to $9.34 3,330 0.68% 1.49% to 2.75% 6.48% to 7.84% PIMCO VIT All Asset Portfolio 2008 254 $10.04 to $11.34 2,737 6.74% 1.25% to 3.15% -18.46% to -16.89% 2007 166 $12.83 to $13.67 2,193 7.39% 1.25% to 3.05% 5.06% to 6.97% 2006 176 $12.39 to $12.81 2,200 5.13% 1.49% to 2.75% 1.83% to 3.12% 2005 250 $12.17 to $12.42 3,060 5.55% 1.49% to 2.75% 3.35% to 4.66% 2004(1) 57 $11.77 to $11.87 668 5.90% 1.49% to 2.75% 10.24% to 11.16% PIMCO VIT CommodityRealReturn Strategy Portfolio 2008 426 $6.69 to $7.14 2,930 4.84% 1.25% to 3.15% -45.54% to -44.49% 2007 172 $12.36 to $12.87 2,146 4.84% 1.25% to 3.05% 19.52% to 21.70% 2006 143 $10.31 to $10.53 1,479 4.70% 1.49% to 2.75% -5.72% to -4.53% 2005(2) 75 $10.94 to $11.03 823 3.40% 1.49% to 2.75% 9.20% to 10.11% PIMCO VIT Emerging Markets Bond Portfolio 2008 144 $9.83 to $10.40 1,445 6.54% 1.25% to 3.15% -17.25% to -15.66% 2007 103 $11.85 to $12.34 1,235 5.76% 1.25% to 3.05% 2.63% to 4.50% 2006 70 $11.51 to $11.76 816 5.25% 1.49% to 2.75% 6.32% to 7.66% 2005(2) 18 $10.83 to $10.92 198 3.24% 1.49% to 2.75% 8.22% to 9.12%
See Accompanying Notes to Financial Statements 102 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** PIMCO VIT Global Bond Portfolio 2008 171 $9.66 to $10.26 1,686 3.33% 1.25% to 3.15% -3.93% to -2.08% 2007 99 $10.07 to $10.48 1,005 3.39% 1.25% to 3.05% 6.43% to 8.38% 2006 44 $9.43 to $9.61 420 3.46% 1.49% to 2.75% 1.82% to 3.11% 2005(2) 7 $9.26 to $9.33 63 0.00% 1.65% to 2.75% -7.27% to -6.49% PIMCO VIT High Yield Portfolio 2008 254 $9.44 to $10.78 2,528 7.88% 1.25% to 3.15% -25.92% to -24.49% 2007 239 $12.85 to $14.14 3,190 7.00% 1.25% to 3.05% 0.39% to 2.22% 2006 276 $12.76 to $13.86 3,630 6.93% 1.40% to 2.75% 6.15% to 7.59% 2005 286 $12.02 to $12.88 3,518 6.58% 1.40% to 2.75% 1.31% to 2.68% 2004 226 $11.86 to $12.54 2,750 6.54% 1.40% to 2.75% 6.58% to 8.04% PIMCO VIT Real Return Portfolio 2008 685 $10.33 to $11.39 7,378 3.51% 1.25% to 3.15% -9.94% to -8.21% 2007 540 $11.57 to $12.30 6,396 4.70% 1.25% to 3.05% 7.33% to 9.29% 2006 621 $10.75 to $11.26 6,778 4.26% 1.49% to 2.75% -2.01% to -0.77% 2005 570 $10.97 to $11.34 6,319 2.84% 1.49% to 2.75% -0.66% to 0.59% 2004 382 $11.02 to $11.28 4,257 1.09% 1.49% to 2.75% 5.96% to 7.30% PIMCO VIT StocksPLUS Growth and Income Portfolio 2008 11 $5.99 to $6.55 72 7.40% 1.25% to 2.75% -44.19% to -43.34% 2007 17 $10.72 to $11.57 193 7.18% 1.25% to 2.75% 3.94% to 5.52% 2006 30 $10.30 to $10.98 323 4.95% 1.40% to 2.75% 11.79% to 13.31% 2005 33 $9.20 to $9.69 316 2.43% 1.40% to 2.60% 0.84% to 2.05% 2004 38 $9.10 to $9.50 357 1.66% 1.40% to 2.60% 7.96% to 9.27% PIMCO VIT Total Return Portfolio 2008 925 $12.53 to $15.49 12,759 4.44% 1.25% to 3.15% 1.54% to 3.50% 2007 682 $12.44 to $14.75 9,028 4.82% 1.25% to 3.05% 5.48% to 7.40% 2006 716 $11.76 to $13.52 8,883 4.44% 1.40% to 2.75% 1.04% to 2.41% 2005 678 $11.64 to $13.21 8,292 3.44% 1.40% to 2.75% -0.32% to 1.03% 2004 588 $11.67 to $13.09 7,202 1.89% 1.40% to 2.75% 2.04% to 3.43% Seligman Global Technology Portfolio 2008 1 $4.52 to $4.52 5 0.00% 1.49% to 1.49% -41.14% to -41.14% 2007 1 $7.68 to $7.68 8 0.00% 1.49% to 1.49% 13.73% to 13.73% 2006 1 $6.75 to $6.75 9 0.00% 1.49% to 1.49% 16.18% to 16.18% 2005 1 $5.81 to $5.81 8 0.00% 1.49% to 1.49% 6.54% to 6.54% 2004 1 $5.45 to $5.45 7 0.00% 1.49% to 1.49% 2.44% to 2.44%
See Accompanying Notes to Financial Statements 103 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ----------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** Seligman Small-Cap Value Portfolio 2008 49 $10.96 to $16.71 589 0.00% 1.49% to 2.75% -41.18% to -40.43% 2007 79 $18.64 to $28.05 1,579 0.00% 1.49% to 2.75% 1.30% to 2.59% 2006 100 $18.40 to $27.35 1,964 0.00% 1.49% to 2.75% 17.97% to 19.46% 2005 106 $15.60 to $22.89 1,746 10.45% 1.49% to 2.75% -6.58% to -5.39% 2004 113 $16.69 to $24.20 1,993 0.00% 1.49% to 2.75% 16.69% to 18.17% SP Strategic Partners Focused Growth Portfolio 2008 53 $4.41 to $4.92 246 0.00% 1.25% to 2.75% -40.21% to -39.31% 2007 48 $7.38 to $8.12 370 0.00% 1.25% to 2.75% 11.55% to 13.24% 2006 65 $6.62 to $7.18 448 0.00% 1.40% to 2.75% -3.78% to -2.48% 2005 80 $6.88 to $7.36 563 0.00% 1.40% to 2.75% 11.72% to 13.23% 2004 49 $6.16 to $6.50 311 0.00% 1.40% to 2.75% 6.91% to 8.37% SP International Growth Portfolio 2008 46 $4.46 to $4.97 218 1.55% 1.25% to 2.75% -51.83% to -51.10% 2007 55 $9.26 to $10.19 529 0.43% 1.25% to 2.75% 15.88% to 17.64% 2006 49 $7.99 to $8.67 408 1.54% 1.40% to 2.75% 16.92% to 18.51% 2005 52 $6.84 to $7.32 367 0.29% 1.40% to 2.75% 12.66% to 14.19% 2004 54 $6.07 to $6.41 340 0.00% 1.40% to 2.75% 12.96% to 14.50% Templeton Asset Strategy Fund 2008 31 $17.17 to $17.38 536 10.70% 1.40% to 1.49% -26.21% to -26.01% 2007 33 $23.23 to $23.49 781 16.91% 1.40% to 1.49% 8.38% to 8.78% 2006 38 $21.37 to $21.60 819 7.26% 1.40% to 1.49% 19.32% to 19.71% 2005 45 $17.87 to $18.04 816 3.97% 1.40% to 1.49% 2.32% to 2.41% 2004 49 $17.46 to $17.62 870 2.94% 1.40% to 1.49% 14.00% to 14.32% Templeton Foreign Securities Fund 2008 590 $15.06 to $19.45 11,026 2.59% 1.25% to 2.75% -42.00% to -41.07% 2007 678 $25.97 to $33.00 21,594 2.14% 1.25% to 2.75% 12.31% to 14.17% 2006 777 $23.12 to $28.90 21,679 1.38% 1.40% to 2.75% 18.16% to 20.01% 2005 814 $19.57 to $24.08 19,137 1.29% 1.40% to 2.75% 7.19% to 8.94% 2004 885 $18.26 to $22.11 19,411 1.16% 1.40% to 2.75% 15.30% to 17.22% Templeton Global Income Securities Fund 2008 209 $23.11 to $35.01 6,613 4.97% 1.25% to 3.15% 2.90% to 4.98% 2007 140 $25.30 to $33.35 4,446 2.76% 1.25% to 3.05% 7.48% to 15.16% 2006 115 $29.91 to $30.40 3,501 3.17% 1.40% to 1.49% 11.11% to 11.57% 2005 133 $26.83 to $27.24 3,626 6.34% 1.40% to 1.49% -4.51% to -4.26% 2004 145 $28.05 to $28.46 4,136 11.01% 1.40% to 1.49% 13.04% to 13.49%
See Accompanying Notes to Financial Statements 104 ALLIANZ LIFE OF NY VARIABLE ACCOUNT C OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to the Financial Statements (continued) December 31, 2008 6. FINANCIAL HIGHLIGHTS (CONTINUED) A summary of units outstanding (thousands), unit values, net assets (thousands), ratios, and total returns for variable annuity contracts for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 is as follows:
At December 31 For the years ended December 31 ------------------------------------- ------------------------------------------------------------------ Units Net Investment Outstanding Unit Fair Value Assets Income Expense Ratio Total Return **** lowest to highest **** Ratio* lowest to highest** lowest to highest*** Templeton Growth Securities Fund 2008 861 $12.63 to $17.21 13,480 1.89% 1.25% to 3.15% -44.12% to -42.94% 2007 812 $24.54 to $30.17 22,689 1.44% 1.25% to 3.05% -0.96% to 4.43% 2006 787 $24.64 to $29.84 21,966 1.40% 1.40% to 2.75% 18.51% to 20.51% 2005 717 $20.80 to $24.76 17,119 1.19% 1.40% to 2.75% 5.92% to 7.55% 2004 761 $19.63 to $23.02 17,190 1.25% 1.40% to 2.75% 12.87% to 14.63% Van Kampen LIT Capital Growth Portfolio 2008 - $4.43 to $4.43 2 0.00% 1.40% to 1.49% -49.87% to -49.82% 2007 1 $8.84 to $8.84 5 0.00% 1.40% to 1.49% 14.91% to 15.01% 2006 1 $7.69 to $7.73 9 0.00% 1.40% to 1.49% 1.11% to 1.20% 2005 2 $7.61 to $7.64 12 0.00% 1.40% to 1.49% 6.05% to 6.15% 2004 2 $7.18 to $7.20 14 0.00% 1.40% to 1.49% 5.19% to 5.29%
* These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk and administrative charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. Net investment income ratios may be calculated by applying applicable expense ratios. ** These ratios represent the annualized contract expenses of the separate account, consisting of mortality and expense risk and administrative charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying funds are excluded. *** These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect contract expenses of the separate account. The total return does not include any expenses assessed through the redemption of units, inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period and is not annualized. **** Units Outstanding excludes units for annuitized contracts. Total Net Assets includes the net assets of the annuitized contracts. Total net assets of annuitized contracts at December 31, 2008 and 2007 were $795 and $1,315, respectively. 1. Period from May 3, 2004 (fund commencement) to December 31, 2004 2. Period from May 2, 2005 (fund commencement) to December 31, 2005 3. Period from May 2, 2006 (fund commencement) to December 31, 2006 4. Period from May 1, 2007 (fund commencement) to December 31, 2007 5. Period from May 1, 2008 (fund commencement) to December 31, 2008 See Accompanying Notes to Financial Statements 105 [KPMG Logo] ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Financial Statements and Supplemental Schedules December 31, 2008 and 2007 (With Report of Independent Registered Public Accounting Firm Thereon) [KPMG Logo] KPMG LLP 4200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholder Allianz Life Insurance Company of New York: We have audited the accompanying balance sheets of Allianz Life Insurance Company of New York (the Company) as of December 31, 2008 and 2007, and the related statements of operations, comprehensive income (loss), stockholder's equity, and cash flows for each of the years in the three-year period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial position of Allianz Life Insurance Company of New York as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. As discussed in Note 2 to the financial statements, the Company has adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements, effective January 1, 2008. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in Schedules I, II, and III is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ KPMG LLP Minneapolis, Minnesota March 24, 2009 KPMG, LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative
ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Balance Sheets December 31, 2008 and 2007 (In thousands, except share data) Assets 2008 2007 --------------- ---------------- Investments: Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $347,328 and $278,599, respectively) $ 362,843$ 288,549 Short-term securities 30,296 1,218 Policy loans 163 96 --------------- ---------------- Total investments 393,302 289,863 Cash 3,581 1,921 Accrued investment income 4,677 3,766 Receivables (net of allowance for uncollectible accounts of $0 and $0, respectively) 13,033 Reinsurance recoverables and receivables 1,177 4,475 Deferred acquisition costs 58,339 38,741 Other assets 15,739 12,697 --------------- ---------------- Assets, exclusive of separate accounts assets 476,815 364,496 Separate account assets 450,820 572,186 --------------- ---------------- Total assets $ 927,635$ 936,682 =================== ============== See accompanying notes to financial statements.
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ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Balance Sheets December 31, 2008 and 2007 (In thousands, except share data) Liabilities and Stockholder's Equity 2008 2007 ---------------- ---------------- Policyholder liabilities: Policy and contract account balances $ 362,186 $ 263,300 Future policy benefit reserves 21,861 5,147 Policy and contract claims 3,295 7,298 Unearned premiums 1,026 737 Other policyholder funds 3,993 1,191 ---------------- ---------------- Total policyholder liabilities 392,361 277,673 Other liabilities 2,929 8,871 ---------------- ---------------- Liabilities, exclusive of separate account liabilities 395,290 286,544 Separate account liabilities 450,820 572,186 ---------------- ---------------- Total liabilities 846,110 858,730 ---------------- ---------------- Stockholder's equity: Common stock, $10 par value; 200,000 shares authorized, issued, and outstanding at December 31, 2008 and 2007 2,000 2,000 Additional paid-in capital 32,500 15,500 Retained earnings 42,793 57,147 Accumulated other comprehensive income, net of tax 4,232 3,305 ---------------- ---------------- Total stockholder's equity 81,525 77,952 ---------------- ---------------- ---------------- ---------------- Total liabilities and stockholder's equity $ 927,635 $ 936,682 ================= ============== See accompanying notes to financial statements.
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ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Statements of Operations Years ended December 31, 2008, 2007, and 2006 (In thousands) 2008 2007 2006 --------------- ------------------- ------------------- Revenue: Premiums $ 4,591 $ 6,563 $ 18,412 Policy fees 12,471 11,819 10,273 Premiums and annuity considerations, ceded (2,038) (4,824) (8,278) --------------- ------------------- ------------------- Net premiums and considerations 15,024 13,558 20,407 Interest and similar income, net 19,703 16,740 14,561 Derivative (loss) income (1,412) (314) 2,494 Realized investment losses, net (30,175) (6,035) (5,522) Other revenue 1,205 8,538 4,753 ------------------- ------------------- ---------------- Total revenue 4,345 32,487 36,693 ------------------- ------------------- ---------------- Benefits and expenses: Policyholder benefits 8,170 8,012 17,698 Change in fair value of annuity embedded derivatives 11,251 (2,594) 5,026 Benefit recoveries (1,584) (5,196) (5,941) Net interest credited to policyholder account values 10,749 8,022 5,744 ------------------- ------------------- ---------------- Net benefits 28,586 8,244 22,527 Commissions and other agent compensation 13,372 9,764 8,238 General and administrative expenses 9,765 13,103 12,648 Change in deferred acquisition costs, net (23,793) (9,650) (8,153) ------------------- ------------------- ---------------- Total benefits and expenses 27,930 21,461 35,260 ------------------- ------------------- ---------------- (Loss) income from operations before income taxes (23,585) 11,026 1,433 ------------------- ------------------- ---------------- Income tax (benefit) expense: Current (3,328) (1,537) 1,333 Deferred (5,903) 4,753 (1,356) ------------------- ------------------- ---------------- Total income tax (benefit) expense (9,231) 3,216 (23) ------------------- ------------------- ---------------- Net (loss) income $ (14,354) $ 7,810 $ 1,456 =================== =================== ================ See accompanying notes to financial statements.
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ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Statements of Comprehensive Income (Loss) Years ended December 31, 2008, 2007, and 2006 (In thousands) 2008 2007 2006 ------------------ ------------------ ------------------ Net (loss) income $ (14,354) $ 7,810 $ 1,456 ------------------ ------------------ ------------------ Other comprehensive income (loss): Unrealized losses on fixed-maturity securities: Unrealized holding losses arising during the period, net of effect of shadow adjustments of $(4,138), $(3,581), and $(1,061), in 2008, 2007, and 2006, respectively and net of tax benefit of $10,061, $1,143, and $1,866 in 2008, 2007, and 2006, respectively (18,687) (2,122) (3,467) Decrease in unrealized holding losses due to reclassification adjustment for realized losses included in net (loss) income, net of tax (expense) of $(10,561), $(2,112), and $(1,932) in 2008, 2007, and 2006, respectively 19,614 3,923 3,590 ------------------ ------------------ ------------------ Total other comprehensive income 927 1,801 123 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ Total comprehensive (loss) income $ (13,427) $ 9,611 $ 1,579 ================== ================== ================== See accompanying notes to financial statements.
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ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Statements of Stockholder's Equity Years ended December 31, 2008, 2007, and 2006 (In thousands) Accumulated Additional other Total Common paid-in Retained comprehensive stockholder's stock capital earnings income equity -------------- ----------------- -------------- --------------- --------------- 2006: Balance, beginning of year $ 2,000 $ 15,500 $ 47,881 $ 1,381 $ 66,762 Comprehensive income: Net income - - 1,456 - 1,456 Net unrealized gain on investments, net of shadow adjustments and deferred taxes - - - 123 123 -------------- Total comprehensive income 1,579 -------------- ----------------- -------------- --------------- -------------- Balance, end of year $ 2,000 $ 15,500 $ 49,337 $ 1,504 $ 68,341 ============== ================= ============== =============== ============== 2007: Balance, beginning of year $ 2,000 $ 15,500 $ 49,337 $ 1,504 $ 68,341 Comprehensive income: Net income - - 7,810 - 7,810 Net unrealized gain on investments, net of shadow adjustments and deferred taxes - - - 1,801 1,801 -------------- Total comprehensive income 9,611 -------------- ----------------- -------------- --------------- -------------- Balance, end of year $ 2,000 $ 15,500 $ 57,147 $ 3,305 $ 77,952 ============== ================= ============== =============== ============== 2008: Balance, beginning of year $ 2,000 $ 15,500 $ 57,147 $ 3,305 $ 77,952 Comprehensive loss: Net loss - - (14,354) - (14,354) Net unrealized gain on investments, net of shadow adjustments and deferred taxes - - - 927 927 -------------- Total comprehensive loss (13,427) Capital contribution - 17,000 - - 17,000 -------------- ----------------- -------------- --------------- -------------- Balance, end of year $ 2,000 $ 32,500 $ 42,793 $ 4,232 $ 81,525 ============== ================= ============== =============== ============== See accompanying notes to financial statements.
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ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Statements of Cash Flows Years ended December 31, 2008, 2007, and 2006 (In thousands) 2008 2007 2006 ------------------- ------------------- --------------- Cash flows provided by (used in) operating activities: Net (loss) income $ (14,354) $ 7,810 $ 1,456 ------------------- ------------------- --------------- Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Realized investment losses 30,175 6,035 5,522 Unrealized (loss) gain on annuity-related reserves (969) (3,197) 4,928 Deferred federal income tax (benefit) expense (5,903) 4,753 (1,356) Charges to policy account balances (224) (327) (16) Interest credited to policy account balances 10,749 8,022 5,744 Amortization of (discount) premium, net (831) (367) 450 Change in: Receivables and other assets 3,407 (1,045) (1,280) Reinsurance recoverable 3,298 9,306 (8,500) Deferred acquisition costs (23,794) (9,649) (8,153) Future policy benefit reserves 16,714 764 240 Policy and contract claims (4,003) (9,452) 67 Unearned premiums 289 371 259 Other policyholder funds 2,802 420 (2,174) Accrued expenses and other (4,331) (17,555) 11,379 Payable (receivable) to (from) parent 10,568 (12,334) 2,228 ------------------- ------------------- --------------- Total adjustments 37,947 (24,255) 9,338 ------------------- ------------------- --------------- ------------------- ------------------- --------------- Net cash provided by (used in) operating activities 23,593 (16,445) 10,794 ------------------- ------------------- --------------- Cash flows (used in) provided by investing activities: Purchase of fixed-maturity securities (115,649) (69,585) (59,334) Purchase of equity securities - - (9) Sale and other redemptions of fixed-maturity securities 17,576 64,649 20,696 Sale of equity securities, tax free exchanges, and spin-offs - - 1,088 Change in securities held under agreements to repurchase - - (879) Net change in short-term securities (29,078) 7,097 (1,425) Other, net (67) (28) (32) ------------------- ------------------- --------------- Net cash (used in) provided by investing activities (127,218) 2,133 (39,895) ------------------- ------------------- --------------- Cash flows provided by financing activities: Policyholders' deposits to account balances 93,203 57,756 50,045 Policyholders' withdrawals from account balances (19,097) (44,823) (13,651) Policyholders' net transfers between account balances 15,224 (251) (6,760) Change in amounts drawn in excess of bank balances (1,045) (419) (353) Contribution from parent 17,000 - - ------------------- ------------------- --------------- Net cash provided by financing activities 105,285 12,263 29,281 ------------------- ------------------- --------------- ------------------- ------------------- --------------- Net change in cash 1,660 (2,049) 180 Cash at beginning of year 1,921 3,970 3,790 ------------------- ------------------- --------------- Cash at end of year $ 3,581 $ 1,921 $ 3,970 =================== =================== =============== See accompanying notes to financial statements.
7 ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (1) ORGANIZATION Allianz Life Insurance Company of New York is a wholly owned subsidiary of Allianz Life Insurance Company of North America (Allianz Life), which is a wholly owned subsidiary of Allianz of America, Inc. (AZOA), which is a wholly owned subsidiary of Allianz Societas Europaea (Allianz SE), a European company incorporated in Germany. Allianz Life Insurance Company of New York is referred to as the Company. The Company is a life insurance company licensed to sell annuity, group accident and health, group life, and long-term care policies in six states and the District of Columbia. Based on 2008 statutory net premium written, 99%, 1%, and less than 1% of the Company's business is annuity, accident and health, and life insurance, respectively. The annuity business consists of variable, five-year deferred, and fixed-indexed annuities representing 61%, 29%, and 10% of 2008 statutory net premium written, respectively. Accident and health business is comprised primarily of long-term care (LTC) insurance. The Company exited most other health insurance business in 2006 (see note 10). Life business is comprised of both traditional and group life and consists principally of term insurance policies. The Company's primary distribution channels are through independent agents and third-party marketing organizations. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) BASIS OF PRESENTATION The Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which vary in certain respects from accounting practices prescribed or permitted by state insurance regulatory authorities. (b) USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect reported amounts of assets and liabilities, including reporting or disclosure of contingent assets and liabilities as of the Balance Sheet date and the reported amounts of revenues and expenses during the reporting period. Future events, including changes in mortality, morbidity, interest rates, capital markets, and asset valuations, could cause actual results to differ from the estimates used in the financial statements. Such changes in estimates are recorded in the period they are determined. (c) INVESTMENT PRODUCTS AND UNIVERSAL LIFE BUSINESS Investment products consist primarily of fixed-indexed, variable, and deferred annuity products. Premium receipts are reported as deposits to the contractholders' accounts. Policy fees on the Statements of Operations represent asset fees, cost of insurance charges, administrative fees, charges for guarantees on investment products, and surrender charges for investment products and universal life insurance. These fees have been earned and assessed against contractholders on a daily or monthly basis throughout the contract period and are recognized as revenue when assessed and earned. Amounts assessed that represent compensation to the Company for services to be provided in future periods are not earned in the period assessed. Such amounts are reported as unearned premiums and recognized in operations over the period benefited using the same assumptions and factors used to amortize capitalized acquisition costs. Surrender charges are recognized upon surrender of a contract in accordance with contractual terms. The change in fair value of embedded derivatives in fixed-indexed and variable products is included in change in fair value of annuity embedded derivatives on the Statements of Operations. Benefits consist of interest credited to contractholders' accounts and claims incurred in excess of the contractholders' account balance and are included in net interest credited to policyholder account values and policyholder benefits, respectively, on the Statements of Operations. 8 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (d) LIFE AND ACCIDENT AND HEALTH INSURANCE Premiums on traditional life products are recognized as earned when due. Benefits and expenses are associated with earned premiums so as to result in recognition of profits over the life of the contracts. This association is accomplished by establishing provisions for future policy benefits and deferring and amortizing related acquisition costs. Accident and health premiums are recognized as earned on a pro-rata basis over the risk coverage periods. Benefits and expenses are recognized as incurred. (e) DEFERRED ACQUISITION COSTS Acquisition costs, consisting of commissions and other costs that vary with and are primarily related to production of new business, are deferred to the extent recoverable from future policy revenues and gross profits. For interest-sensitive products, acquisition costs are amortized in relation to the present value of expected future gross profits from investment margins and mortality, morbidity, and expense charges. Acquisition costs for accident and health insurance policies are deferred and amortized over the lives of the policies in the same manner as premiums are earned. For traditional life and group life products, such costs are amortized over the projected earnings pattern of the related policies using the same actuarial assumptions used in computing future policy benefit reserves. Deferred acquisition costs (DAC) are reviewed for recoverability, at least annually, and adjusted when necessary. Recoverability is evaluated separately for fixed- indexed annuities, variable annuities, and life insurance products. Recoverability is a two-step process where current policy year issues are evaluated, and then in-force policies are evaluated. Before assessing recoverability, DAC is capped such that the balance can not exceed the original capitalized costs plus interest. Adjustments to DAC are made to reflect the corresponding impact on the present value of expected future gross profits from unrealized gains and losses on available-for-sale investments used to support policyholder liabilities (commonly known as shadow DAC). These adjustments are included in accumulated other comprehensive income and are explained further in the Investments section of this note. Changes in assumptions can have an impact on the amount of DAC reported for annuity and life insurance products and their related amortization patterns. In the event experience differs from assumptions or assumptions are revised, the Company is required to record an increase or decrease in DAC amortization expense (DAC unlocking). In general, increases in the estimated investment spreads and fees result in increased expected future profitability and may lower the rate of DAC amortization, while increases in costs of product guarantees, and lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of DAC amortization. The Company formally evaluates the appropriateness of the best-estimate assumptions on an annual basis. If the economic environment or policyholder behavior changes quickly and substantially, assumptions will be reviewed more frequently to affirm best estimates. Any resulting DAC unlocking is reflected prospectively on the Statements of Operations. Adjustments may also be made to the estimated gross profits related to DAC that correspond with deferred annuities and universal life products for investment activity, such as bond defaults on fixed-maturity securities and write-downs on other-than-temporarily impaired fixed-maturity securities. Management action may include assumption changes in the DAC models, such as adjustments to expected future gross profits used, as well as inforce management action such as crediting rate changes or index rate cap adjustments. This approach applies to fixed-maturity securities purchased as investment grade only and not noninvestment grade items that were purchased with other yield considerations. See further discussion of DAC unlocking in note 6. 9 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The Company assesses internal replacements on insurance contracts to determine whether such modifications significantly change the contract terms. An internal replacement represents a modification in product benefits, features, rights, or coverages that occurs by the exchange of an insurance contract for a new insurance contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. If the modification substantially changes the contract, the remaining DAC on the original contract are immediately expensed and any new DAC on the replacement contract are deferred. If the contract modification does not substantially change the contract, DAC amortization on the original contract continues and any new acquisition costs associated with the modification are immediately expensed. (f) DEFERRED SALES INDUCEMENTS Sales inducements are product features that enhance the investment yield to the contractholder on the contract. The Company offers two types of sales inducements on certain universal life and annuity contracts. The first type, an immediate bonus, increases the account value at inception, and the second type, a persistency bonus, increases the account value at the end of a specified period. Annuity sales inducements are deferred as paid or credited to contractholders and life sales inducements are deferred and recognized as part of the liability for policy benefits. Deferred sales inducements (DSI) is reported in other assets in the Balance Sheets. They are amortized over the expected life of the contract in a manner similar to DAC and are reviewed annually for recoverability. Amortization is recorded in policyholder benefits on the Statements of Operations. DSI capitalization related to a persistency and immediate bonus on nonindexed annuities are recorded in policyholder benefits on the Statements of Operations. DSI capitalization related to an immediate bonus on fixed-indexed annuities is recorded in policy fees on the Statements of Operations. Adjustments to DSI are made to reflect the estimated corresponding impact on the present value of expected future gross profits from unrealized gains and losses on available-for-sale investments used to support policyholder liabilities (commonly known as shadow DSI). These adjustments are included in accumulated other comprehensive income and are explained further in the Investments section of this note. Adjustments may also be made to DSI related to deferred annuities for investment activity, such as defaults on fixed-maturity securities and write-downs on other-than-temporarily impaired fixed-maturity securities. Management action may include assumption changes in the DSI models, such as adjustments to expected future gross profits used, as well as policyholder changes, such as credited rate changes. This approach applies to fixed-maturity securities purchased at investment grade only and not noninvestment grade items that were purchased with other yield considerations. (g) FUTURE POLICY BENEFIT RESERVES Future policy benefit reserves on traditional life products are computed by the net level-premium method based upon estimated future investment yield, mortality, and withdrawal assumptions, commensurate with the Company's experience, modified as necessary to reflect anticipated trends, including possible unfavorable deviations. Most life reserve interest assumptions range from 4.0% to 6.0%. (h) POLICY AND CONTRACT ACCOUNT BALANCES Policy and contract account balances for interest-sensitive products, which include universal life and fixed deferred annuities, are generally carried at accumulated contract values. For fixed-indexed annuity products, the policyholder obligation is divided into two parts - one part representing the value of the underlying base contract (host contract) and the second part representing the fair value of the expected index benefit over the life of the contract. The host contract 10 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) is valued using principles consistent with similar deferred annuity contracts without an index benefit. The index benefit is valued at fair value using current capital market assumptions, such as index and volatility, to estimate future index levels. The index benefit valuation is also dependent upon estimates of future policyholder behavior. The Company must include provisions for the Company's own credit risk and for risk that the Company's assumptions about policyholder activity could differ from actual experience. The fair value determination of the index benefit is sensitive to the economic market and interest rate environment, as it is discounted at current market interest rates. There is volatility in this liability due to these external market sensitivities. Policy and contract account balances for variable annuity products are carried at accumulated contract values. Additional reserves for any death and income benefits that may exceed the accumulated contract values are established using a range of economic scenarios and are accrued for using assumptions consistent with those used in estimating gross profits for purposes of amortizing DAC. Additional reserves for accumulation and withdrawal benefits that may exceed account values are established using capital market assumptions, such as index and volatility, along with estimates of future policyholder behavior. These additional reserves are reflected in future policy benefit reserves on the Balance Sheets. (i) POLICY AND CONTRACT CLAIMS Policy and contract claims include the liability for claims reported but not yet paid, claims incurred but not yet reported (IBNR), and claim settlement expenses as of December 31 on the Company's accident and health business. Development methods are generally used in the determination of IBNR liabilities. In cases of limited experience or lack of credible claims data, loss ratios are used to determine an appropriate IBNR liability. Claim and IBNR liabilities of a short-term nature are not discounted, but those claim liabilities resulting from disability income or long-term care benefits include interest and mortality discounting. (j) REINSURANCE The Company assumes and cedes business with other insurers. Reinsurance premium and benefits paid or provided are accounted for in a manner consistent with the basis used in accounting for original policies issued and the terms of the reinsurance contracts. Insurance liabilities are reported before the effects of reinsurance. Future policy benefit reserves, policy and contract account balances, and policy and contract claims covered under reinsurance contracts are recorded as a reinsurance recoverable. Amounts paid or deemed to have been paid for claims covered by reinsurance contracts are recorded as a reinsurance receivable. Reinsurance recoverables are recognized in a manner consistent with the liabilities related to the underlying reinsured contracts. Amounts due to other insurers on assumed business is recorded as a reinsurance payable, and are included in other liabilities on the Balance Sheets. A gain recognized when the Company enters into a coinsurance agreement with a third-party reinsurer is deferred and recorded in other liabilities on the Balance Sheets. Such gains are amortized into operations over either the revenue-producing period or the claims run-off period, as appropriate, of the related reinsured policies. These amortized gains are recorded in other revenue on the Statements of Operations. (k) INVESTMENTS The Company classifies certain fixed-maturity securities as "available-for-sale." Accordingly, the securities are carried at fair value, and related unrealized gains and losses are credited or charged directly to accumulated other comprehensive income in stockholder's equity, net of tax and related adjustments to DAC and DSI (commonly 11 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) referred to as shadow adjustments). The adjustments to DAC and DSI represent the change in amortization that would have been required as a charge or credit to operations had such unrealized amounts been realized. Dividends are accrued on the date they are declared. Interest is accrued as earned. Mortgage-backed securities and structured securities are amortized using anticipated prepayments. Prepayment assumptions for loan-backed securities are obtained from various external sources or internal estimates. The Company believes these assumptions are consistent with those a market participant would use. Premiums or discounts on fixed-maturity securities are amortized using the constant yield method. Short-term securities, which include certificates of deposit, are carried at amortized cost. Policy loans are reflected at their unpaid principal balances. For mortgage-backed securities and structured securities, the Company recognizes income using a constant effective-yield method based on prepayment assumptions and the estimated economic life of the securities. When estimated prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments, using the retrospective method. Any resulting adjustment is included in interest and similar income, net on the Statements of Operations. The fair value of fixed-maturity securities are obtained from third-party pricing sources wherever possible, except for short-term securities, which are priced at amortized cost. Prices obtained from third-party pricing sources are analytically reviewed by AZOA portfolio managers for reasonableness. In certain cases, including private assets as well as certain difficult to price securities, internal pricing models may be used that are based on market proxies. The internal pricing models use yield spreads versus U.S. Treasury Bonds to estimate a market price. Also, the models use market yields of corporate securities with credit and maturity characteristics similar to the security being priced to derive a spread to treasuries. All prices that are not supplied by pricing vendors are reviewed and approved by the AZOA Head of Fixed Income and further reviewed and approved by the AZOA Chief Operating Officer or AZOA Compliance Officer. Short-term securities, which include certificates of deposit, are carried at amortized cost, which approximates fair value. Policy loan balances, which are supported by the underlying cash value of the policies, approximate fair value. Realized gains and losses are computed based on sale lots with the highest cost basis on the trade date. Those lots are sold first. The Company adjusts DAC and DSI for unrealized gains and losses on available-for-sale investments that support policyholder liabilities. Changes in the fair value of available-for-sale investments are reflected as a direct charge or credit to accumulated other comprehensive income in stockholder's equity, net of related adjustments for DAC, DSI, and deferred taxes that would have been recorded if these investments had been sold as of the Balance Sheet date. The Company reviews the entire available-for-sale investment portfolio each quarter to determine whether or not declines in fair value are other-than-temporary. For the year ended December 31, 2006, the Company adopted Financial Accounting Standards Board (FASB), FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (FSP FAS 115-1). The Company continues to evaluate factors in addition to average cost and fair value, including credit quality, the extent and duration of the decline, market analysis, current events, recent price declines, likelihood of recovery in a reasonable period of time, and management's judgment, to determine whether fixed-maturity securities are considered other-than-temporarily impaired. In addition, FSP FAS 115-1 requires that the Company evaluate other-than-temporary impairments on available-for-sale fixed-income securities based on additional factors. Specifically, declines in value resulting from changes in risk-free interest rates must also be considered. If a fixed-maturity security's fair market value is less than its amortized cost value, an impairment loss must be recorded unless management can assert its ability and intent to hold until recovery. The Company's absence of control over the investment manager's decision to sell (or hold) renders the Company unable to assert ability to hold to recovery and will therefore require the Company to classify all impairments as other-than-temporary and 12 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) recognize an impairment loss in the period of the decline. For other- than-temporarily impaired securities where the Company is unable to assert intent and ability to hold, but otherwise expects the security to recover, in periods subsequent to the recognition of an other-than-temporary impairment loss, these impaired fixed-maturity securities are accounted for as if they had been purchased on the date of the impairment. That is, the discount or reduced premium recorded from the fixed-maturity securities would be accreted over their remaining life in a prospective manner. For securities that are impaired due to issuer default or due to the Company otherwise not expecting the security to recover, there is no accretion of the impaired amounts. The Company views equity securities that have a fair value of at least 20% below average cost at the end of a quarter or are in an unrealized loss position for nine consecutive months as other-than-temporarily impaired. However, other factors, including market analysis, current events, recent price declines, and management's judgment, are also used to determine whether equity securities are considered other-than-temporarily impaired and may result in an equity security being impaired. All previously impaired equity securities will incur additional impairments should the fair value fall below the book value. Impairments in the value of securities held by the Company, considered to be other-than-temporary, are recorded as a reduction of the cost of the security, and a corresponding realized loss is recognized on the Statements of Operations. The Company may adjust DAC and DSI for impairments on fixed-maturity securities, as discussed in their respective sections of this note. (l) ACCOUNTING FOR FUTURES CONTRACTS The Company provides additional benefits through certain life and annuity products, which are linked to the growth in the Standard and Poor's (S&P) 500 Index and the NASDAQ 100 Index. The Company has analyzed the characteristics of these benefits and, beginning in July 2006, uses exchange-traded futures contracts tied to an appropriate underlying index with similar characteristics with the objective to economically hedge these risks. The Company uses exchange- traded futures contracts with the objective to increase the effectiveness of the economic hedge. Management monitors in-force amounts and futures contract values to ensure satisfactory matching and to identify unsatisfactory mismatches. If persistency assumptions were to deviate significantly from anticipated rates, management would purchase or sell futures contracts as deemed appropriate or take other actions. Futures contracts do not require an initial cash outlay and the Company has agreed to daily net settlement based on movements of the representative index. Therefore, no asset or liability is recorded on the Balance Sheets. Gains and/or losses on futures contracts are included in derivative (loss) income on the Statements of Operations. (m) RECEIVABLES Receivable balances (contractual amount less allowance for doubtful accounts) approximate estimated fair values. This is based on pertinent information available to management as of year-end, including the financial condition and creditworthiness of the parties underlying the receivables. Receivable balances are monitored and allowances for doubtful accounts are maintained based on the nature of the receivable, and the Company's assessment of the ability to collect. The allowance is estimated by aging the balances of the parties and setting up an allowance for any balances that are more than 90 days old. 13 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (n) INCOME TAXES The Company and the Company's parent, Allianz Life, file a consolidated federal income tax return with AZOA and all of its wholly owned subsidiaries. The consolidated tax allocation agreement stipulates that each company participating in the return will bear its share of the tax liability pursuant to certain tax allocation elections under the Internal Revenue Code and its related regulations, and then reimbursement will be in accordance with an intercompany tax reimbursement arrangement. The Company generally will be paid for the tax benefit on its losses and any other tax attributes to the extent it could have obtained a benefit against the Company's post-1990 separate return tax liability. The Company provides for federal income taxes based on amounts the Company believes it ultimately will owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain items and the realization of certain tax credits. In the event the ultimate deductibility of certain items or the realization of certain tax credits differs from estimates, the Company may be required to significantly change the provision for federal income taxes recorded on the Balance Sheets. Any such change could significantly affect the amounts reported on the Statements of Operations. Management uses best estimates to establish reserves based on current facts and circumstances regarding tax exposure items where the ultimate deductibility is open to interpretation. Quarterly, management evaluates the appropriateness of such reserves based on any new developments specific to their fact patterns. Information considered includes results of completed tax examinations, Technical Advice Memorandums, and other rulings issued by the Internal Revenue Service (IRS) or the tax courts. The Company utilizes the asset and liability method of accounting for income tax. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Valuation allowances are established when it is determined that it is more likely than not that the deferred tax asset will not be fully realized or that the related temporary differences, such as other-than-temporary impairments, will not reverse over time (see further discussion in note 11). (o) SEPARATE ACCOUNTS AND ANNUITY PRODUCT GUARANTEES The Company issues variable annuity and life contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company recognizes gains or losses on transfers from the general account to the separate accounts at fair value to the extent of contractholder interests in separate accounts, which are offset by changes in contractholder liabilities. The Company also issues variable annuity and life contracts through its separate accounts, where the Company provides certain contractual guarantees to the contractholder. These guarantees are in the form of a guaranteed minimum death benefit (GMDB), a guaranteed minimum income benefit (GMIB), a guaranteed minimum accumulation benefit (GMAB), and a guaranteed minimum withdrawal benefit (GMWB). These guarantees provide for benefits that are payable to the contractholder in the event of death, annuitization, or at specified dates during the accumulation period. Separate account assets supporting variable annuity contracts represent funds for which investment income and investment gains and losses accrue directly to contractholders. Each fund has specific investment objectives, and the assets are carried at fair value. The assets of each account are legally segregated and are not subject to claims that arise out of any of other business of the Company. Separate account assets and liabilities are reported as summary totals on the Balance 14 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) Sheets. Amounts charged to the contractholders for mortality and contract maintenance are included in policy fees on the Statements of Operations. These fees have been earned and assessed against contractholders on a daily or monthly basis throughout the contract period and are recognized as revenue when assessed and earned. Changes in GMDB and GMIB are calculated in accordance with Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts, and are included in policyholder benefits on the Statements of Operations. GMAB and GMWB are considered to be embedded derivatives under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), and the changes in these embedded derivatives are included in change in fair value of annuity embedded derivatives on the Statements of Operations. The GMDB net amount at risk is defined as the guaranteed amount that would be paid upon death, less the current accumulated policyholder account value. The GMIB net amount at risk is defined as the current amount that would be needed to fund expected future guaranteed payments less the current policyholder account value, assuming that all benefit selections occur as of the valuation date. The GMAB net amount at risk is defined as the current amount that would be added to the contracts less the current policyholder account value. The GMWB net amount at risk is defined as the current accumulated benefit base amount less the current policyholder account value. The GMDB provides a specified minimum return upon death. The survivor has the option to terminate the contract or continue it and have the death benefit paid into the contract. The Company's GMDB options have the following features: o Return of Premium: Provides the greater of account value or total deposits made to the contract, less any partial withdrawals and assessments. o Reset: Provides the greater of a return of premium death benefit or the most recent five-year anniversary (prior to age 81) account value, adjusted for withdrawals. o Ratchet: Provides the greater of a return of premium death benefit or the highest specified "anniversary" account value (prior to age 81), adjusted for withdrawals. Currently, there are three versions of ratchet, with the difference based on the definition of anniversary: quarter - evaluated quarterly, annual - evaluated annually, and six-year - evaluated every sixth year. The GMIB is a living benefit that provides the contractholder with a guaranteed annuitization value. The GMIB features are: o Return of Premium: Provides the greater of account value or total deposits made to the contract, less any partial withdrawals and assessments. o Ratchet: Provides an annuitization value equal to the greater of account value, net premiums, or the highest one-year anniversary account value (prior to age 81), adjusted for withdrawals. o Rollup: Provides an annuitization value equal to the greater of account value and premiums, adjusted for withdrawals accumulated with a compound interest rate. 15 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The GMDB and GMIB liabilities are determined each period by estimating the expected future claims in excess of the associated account balances. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to policyholder benefits on the Statements of Operations, if actual experience or other evidence suggests that earlier assumptions should be revised. The following assumptions were used to determine the GMDB and GMIB liabilities as of December 31, 2008 and 2007: o 100 stochastically generated investment performance scenarios. o Mean investment performance assumption was 7.96%. o Volatility assumption was 13.69%. o Mortality is assumed to be 50% and 60% of the 1994 MGDB Mortality Table as of December 31, 2008 and 2007, respectively. o Lapse rates vary by contract type and duration. Spike rates could approach 45%, with an ultimate rate around 20%. o GMIB contracts have dynamic lapse and benefit utilization assumptions. For example, if the contract is projected to have a large additional benefit, then it becomes more likely to elect the GMIB benefit and less likely to lapse. o Discount rates vary by contract type and are equal to an assumed long-term investment return (8.6%), less the applicable mortality and expense rate. The GMAB is a living benefit that provides the contractholder with a guaranteed value that was established at least five years prior at each contract anniversary. This benefit is first available at the fifth contract anniversary. Depending on the contractholder's selection at issue, this value may be either a return of premium or may reflect market gains, adjusted at least proportionately for withdrawals. The contractholder also has the option to reset this benefit. The GMWB is a living benefit that provides the contractholder with a guaranteed amount of income in the form of partial withdrawals. The benefit is payable provided the covered person is between the ages of 50 and 90. The benefit is a fixed rate (depending on the age of the covered person) multiplied by the benefit base in the first year the benefit is taken and contract value in following years. The benefit does not decrease if the contract value decreases due to market losses. The benefit can decrease if the contract value is reduced by withdrawals. The benefit base used to calculate the initial benefit is the maximum of the contract value, the quarterly anniversary value, or the 5% annual increase of purchase payments (capped at twice the total purchase payments). The GMAB and GMWB liabilities are determined each period as the difference between expected future claims and the expected future profits. One result of this calculation is that these liabilities can be negative (contra-liability). The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to change in fair value of annuity embedded derivatives on the Statements of Operations, if actual experience or other evidence suggests that earlier assumptions should be revised. Products featuring these benefits were first issued in 2007. In the calendar year that a product launches, the reserves are set to zero, until the policy's first anniversary date. 16 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The following assumptions were used to determine the GMAB and GMWB liabilities as of December 31, 2008 and 2007: o 200 stochastically generated investment performance scenarios. o Market volatility assumption of 23.3% applied to an aggregate separate account funds beta of 58.0%. o Mortality is assumed to be 50% and 60% of the 1994 MGDB Mortality Table as of December 31, 2008 and 2007, respectively. o Lapse rates vary by contract type and duration. As of December 31, 2008, spike rates could approach 40%, with an ultimate rate around 15%. As of December 31, 2007, spike rates could approach 45%, with an ultimate rate around 20%. o Discount rates vary by contract type and are equal to an assumed long-term investment return (8.6%) less the applicable mortality and expense rate. (p) PERMITTED STATUTORY ACCOUNTING PRACTICES The Company is required to file annual statements with insurance regulatory authorities, which are prepared on an accounting basis prescribed or permitted by such authorities. Prescribed statutory accounting practices include state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (NAIC). Permitted statutory accounting practices encompass all accounting practices that are not prescribed; such practices differ from state to state, may differ from company to company within a state, and may change in the future. The Company currently has no permitted practices. (q) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - ADOPTED In January 2009, the FASB issued FSP EITF No. 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 (FSP EITF 99-20-1). The FSP amends the impairment guidance of EITF No. 99-20, Recognition of Interest Income and Impairment of Purchased Beneficial Interest and Beneficial Interest that Continue to Be Held by a Transferor in Securitized Financial Assets, by removing the exclusive reliance upon market participant assumptions about future cash flows when evaluating impairment of securities within its scope. FSP EITF 99-20-1 requires companies to follow the impairment guidance in SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115), which permits the use of reasonable management judgment of the probability that the holder will be unable to collect all amounts due. The FSP is effective prospectively for interim and annual reporting periods ending after December 15, 2008. The Company adopted the FSP on December 31, 2008 and the adoption did not have a material impact on the Company's Financial Statements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). For financial statement elements currently required to be measured at fair value, this statement defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). SFAS 157 provides guidance on how to measure fair value when required under existing accounting standards. The Company adopted this statement as of January 1, 2008. Adopting SFAS 157 required changes to the methods for valuing liabilities for equity-indexed and guaranteed benefits provided in the Company's fixed-indexed and variable annuity products, which are currently accounted for under SFAS 133. As required 17 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) by SFAS 157, the fair valuation models for these financial liabilities reflect components relating to the Company's own credit standing and risk margin. The consideration of these additional elements resulted in an increase in future policy benefit reserves on the Company's Balance Sheets of $19 as of January 1, 2008. The pre-tax income impact of this change, net of the related adjustments to amortization of DAC and DSI was $(6). In February 2008, the FASB issued FSP SFAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 (FSP FAS 157-1). FSP FAS 157-1 amends SFAS 157 to exclude SFAS No. 13, Accounting for Leases (SFAS 13), and other accounting pronouncements that address fair value measurements under SFAS 13. The Company adopted this FSP as of January 1, 2008. The adoption did not impact the Company's Financial Statements. In February 2008, the FASB issued FSP SFAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2). FSP FAS 157-2 delays the effective date of SFAS 157 to fiscal years beginning after December 15, 2008 for certain nonfinancial assets and nonfinancial liabilities within the scope of the FSP. As a result of the issuance of FSP FAS 157-2, the Company did not apply the provisions of FAS 157 to the nonfinancial assets and liabilities within the scope of FAS 157-2. In October 2008, the FASB issued FSP SFAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active. This FSP clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The FSP states that the objective of a fair value measurement is to estimate the price that would be received to sell an asset currently (an exit price) in an orderly transaction that is not a forced liquidation or a distress sale, even if there is little or no market activity for the asset at the measurement date. Further, when relevant observable market information is not available, an approach that incorporates management's judgments about the assumptions that market participants would use in pricing the asset in a current sale transaction would be acceptable. The FSP was effective when issued. Adoption of this FSP did not have a material impact on the Company's Financial Statements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This statement provides companies with an option to report selected financial assets and liabilities at fair value, with the associated changes in fair value reflected in the Statements of Operations. This statement was effective for fiscal years beginning after November 15, 2007 with early adoption permitted. The Company adopted this statement as of January 1, 2008. The Company did not elect to apply the fair value option to any financial assets or financial liabilities upon adoption. In June 2006, the FASB issued FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and additional disclosure. Upon adoption, the cumulative effect of applying FIN 48 is reported as an adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the balance sheet). This pronouncement was adopted January 1, 2007 and did not have a material impact on the Financial Statements. In May 2007, the FASB issued FSP FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (FSP FIN 48-1). The FSP addresses whether it is appropriate for a company to recognize a previously unrecognized tax 18 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) benefit when the only factor that has changed, since determining that a benefit should not be recognized, was the completion of an examination or audit by a taxing authority. The FSP is effective January 1, 2007, the date of the Company's initial adoption of FIN 48. The adoption of this interpretation did not have a material impact on the Financial Statements. In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133, and No. 140. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company adopted this guidance effective January 1, 2007, and the adoption did not have a material effect on the Company's Financial Statements. In September 2005, the AcSEC issued SOP 05-1, Deferred Acquisition Costs (DAC) on Internal Replacements (SOP 05-1), which expands the definition of internal replacements and changes the accounting for DAC on replacements in connection with modifications or exchanges of insurance contracts. An internal replacement, as defined in the guidance, is a policy revision that changes the nature of the investment rights or insurance risk between the Company and contractholder. If an internal replacement substantially changes a contract, then DAC is written off immediately through income. This Statement was effective for fiscal years beginning after December 15, 2006. The Company adopted SOP 05-1 on January 1, 2007 and the adoption did not have a material impact on the Company's Financial Statements. In September 2006, the Securities and Exchange Commission (SEC) published Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. This Bulletin addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. This Bulletin is effective for fiscal years ending after November 15, 2006. The adoption of this Bulletin did not have a material impact on the Financial Statements. In November 2005, the FASB issued FSP SFAS 115-1 and SFAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, effective for reporting periods beginning after December 15, 2005. The FSP provides guidance on when an investment is considered impaired, whether that impairment is other-than-temporary, subsequent recognition of other-than-temporary impairment, and disclosures on unrealized losses. The Company adopted the FSP effective December 31, 2006, which resulted in realizing $5,315 of additional losses from interest-related impairments on investments managed by a third party where the investment manager has the discretion to sell securities in a loss position. The realized investment losses impact the current and estimated future gross profits and assessments used in determining the amortization of DAC and DSI. The investment losses were offset by increases of $293 in DAC and $320 in DSI. In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections - a Replacement of APB Opinion No. 20 and SFAS No. 3. SFAS No. 154 was effective for fiscal years beginning after December 15, 2005 and applies to voluntary accounting changes and corrections of error made in fiscal years beginning after December 15, 2005. It also applies to changes required by new accounting pronouncements if the pronouncement does not include specific transition provisions. The standard requires retrospective application of changes in accounting principle, unless it is impracticable to determine either the period-specific effect of an accounting change or the cumulative effect of the change. Adoption of SFAS No. 154 did not have a material impact on the Financial Statements. 19 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (r RECLASSIFICATIONS Certain prior year balances have been reclassified to conform to the current year presentation. During 2008, the Company changed its method of presentation for the market value liability option (MVLO) reserve releases by reclassifying portions of this activity to premiums and benefits on the Statements of Operations (Adjustment 1). This change was made to better match surrenders, annuitizations, and death payments with the related reserve release, and isolated the change in fair value of the MVLO embedded derivative, resulting in more meaningful and representative benefit margins and other disclosures. The second reclassification (Adjustment 2) splits net investment income, as reported in prior years, into three separate report lines: interest and similar income, derivative income, and change in fair value of annuity embedded derivatives. The change in fair value of annuity embedded derivatives now includes the change in fair value of the MVLO and the change in fair value of GMWB and GMAB. 20 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The reclassifications resulted in adjustments to the Statements of Operations as presented in the following tables:
For the year ended December 31, 2007 ------------------------------------------------------------ As originally reported Adjustment 1 Adjustment 2 As adjusted -------------- --------------- --------------- ------------- Revenue: Premiums $ 6,563 $ - $ - $ 6,563 Policy fees 11,017 802 - 11,819 Premiums and annuity considerations, ceded (4,824) - - (4,824) -------------- --------------- --------------- ------------- Net premiums and considerations 12,756 802 - 13,558 Net investment income 19,893 (873) (19,020) - Interest and similar income, net - - 16,740 16,740 Derivative loss - - (314) (314) Realized investment losses, net (6,035) - - (6,035) Other revenue 8,538 - - 8,538 -------------- --------------- --------------- ------------- Total revenue 35,152 (71) (2,594) 32,487 -------------- --------------- --------------- ------------- Benefits and expenses: Policyholder benefits 8,083 (71) - 8,012 Change in fair value of annuity embedded derivatives - - (2,594) (2,594) Benefit recoveries (5,196) - - (5,196) Net interest credited to policyholder account values 8,022 - - 8,022 -------------- --------------- --------------- ------------- Net benefits 10,909 (71) (2,594) 8,244 Commissions and other agent compensation 9,764 - - 9,764 General and administrative expenses 13,103 - - 13,103 Change in deferred acquisition costs, net (9,650) - - (9,650) -------------- --------------- --------------- ------------- Total benefits and expenses 24,126 (71) (2,594) 21,461 -------------- --------------- --------------- ------------- Income from operations before income taxes 11,026 - - 11,026 -------------- --------------- --------------- ------------- Income tax (benefit) expense: Current (1,537) - - (1,537) Deferred 4,753 - - 4,753 -------------- --------------- --------------- ------------- Total income tax expense 3,216 - - 3,216 -------------- --------------- --------------- ------------- Net income $ 7,810 $ - $ - $ 7,810 ============== =============== =============== =============
21 (Continued)
ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) For the year ended December 31, 2006 ------------------------------------------------------------ As originally reported Adjustment 1 Adjustment 2 As adjusted -------------- --------------- --------------- ------------- Revenue: Premiums $ 18,412 $ - $ - $ 18,412 Policy fees 10,200 73 - 10,273 Premiums and annuity considerations, ceded (8,278) - - (8,278) -------------- --------------- --------------- ------------- Net premiums and considerations 20,334 73 - 20,407 Net investment income 12,127 (98) (12,029) - Interest and similar income, net - - 14,561 14,561 Derivative income - - 2,494 2,494 Realized investment losses, net (5,522) - - (5,522) Other revenue 4,753 - - 4,753 -------------- --------------- --------------- ------------- Total revenue 31,692 (25) 5,026 36,693 -------------- --------------- --------------- ------------- Benefits and expenses: Policyholder benefits 17,723 (25) - 17,698 Change in fair value of annuity embedded derivatives - - 5,026 5,026 Benefit recoveries (5,941) - - (5,941) Net interest credited to policyholder account values 5,744 - - 5,744 -------------- --------------- --------------- ------------- Net benefits 17,526 (25) 5,026 22,527 Commissions and other agent compensation 8,238 - - 8,238 General and administrative expenses 12,648 - - 12,648 Change in deferred acquisition costs, net (8,153) - - (8,153) -------------- --------------- --------------- ------------- Total benefits and expenses 30,259 (25) 5,026 35,260 -------------- --------------- --------------- ------------- Income from operations before income taxes 1,433 - - 1,433 -------------- --------------- --------------- ------------- Income tax (benefit) expense: Current 1,333 - - 1,333 Deferred (1,356) - - (1,356) -------------- --------------- --------------- ------------- Total income tax expense (23) - - (23) -------------- --------------- --------------- ------------- Net income $ 1,456 $ - $ - $ 1,456 ============== =============== =============== =============
(3) RISK DISCLOSURES The following is a description of the most significant risks facing the Company and how the Company attempts to mitigate those risks: (a) CREDIT RISK The risk that issuers of fixed-rate and variable-rate income securities or transactions with other parties, such as reinsurers, default on their contractual obligations. This risk has significantly increased in 2008 caused by the overall decline in U.S. economic conditions resulting in higher security credit spreads and related declines in investment value. The Company is at risk of economically realizing these losses if it is required to sell investments to meet its cash flow needs. The Company attempts to mitigate this risk by adhering to investment policies that provide portfolio diversification on an asset class, creditor, and industry basis, and by complying with investment limitations governed by state insurance laws and regulations, as applicable. The Company considers all relevant objective information available in estimating the cash flows related to structured 22 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) securities. The Company actively monitors and manages exposures, and determines whether any securities are impaired. The aggregate credit risk taken in the investment portfolio is influenced by management's risk/return preferences, the economic and credit environment, and the relationship of credit risk in the asset portfolio to liabilities. The Company also has an asset-liability management strategy to align cash flows and duration of the investment portfolio with policyholder liability cash flows and duration. (b) CREDIT CONCENTRATION RISK The risk of increased exposure to major asset defaults (of a single security issuer or class of security issuers); economic conditions (if business is concentrated in a certain industry sector or geographic area); or adverse regulatory or court decisions (if concentrated in a single jurisdiction) affecting credit. This risk has increased in 2008 and early 2009 due to the merger of financial institutions for which the Company holds related investments. The Company's Asset Liability Management Committee (ALCO) recommends an investment policy to both the Allianz of America Finance Committee (AZOA FiCo), and subsequently the Board of Directors for the Company. The investment policy and accompanying investment mandates specify asset allocation among major asset classes and the degree of asset manager flexibility for each asset class. The investment policy complies, at a minimum, with state statutes. Compliance with the policy is monitored by ALCO who is responsible for implementing internal controls and procedures. Deviations from the policy are monitored and addressed. AZOA FiCo and subsequently the Allianz Life Board of Directors review the investment policy and investment mandates at least annually. Mitigation controls include a monthly report from the asset manager that shows the fixed income risk profile, including sector allocation, credit rating distribution, and other credit statistics. The Company performs a quarterly calculation to ensure compliance with the State of New York basket clause. (c) LIQUIDITY RISK The risk that unexpected timing or amounts of cash needed will require liquidation of assets in a market that will result in loss of realized value or an inability to sell certain classes of assets such that an insurer will be unable to meet its obligations and contractual guarantees. Market or Company conditions may preclude access to, or cause disruption of, outside sources of liquidity (e.g., through borrowing, affiliate advances, reinsurance, or securitization) upon which an insurance company typically relies on in the normal course of business. Additionally, the Company may not be able to sell large blocks of assets at current market prices, especially in the current investment environment. Liquidity risk also arises from uncertain or unusual cash demands from catastrophic events. The Company attempts to manage liquidity within three specific domains: monitoring product development, product management, business operations, and the investment portfolio; setting asset/liability management (ALM) strategies; and managing the daily ALM and cash requirements. (d) INTEREST RATE RISK The risk that interest rates will change and cause a decrease in the value of an insurer's investments relative to the value of its liabilities and/or an unfavorable change in prepayment activity, resulting in compressed interest margins. This is also the risk that interest rates will change and cause an increase in the value of variable annuity guarantees, including GMWB, GMAB, GMIB, and GMDB. 23 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The Company attempts to mitigate risk by offering products that transfer interest rate risk to the policyholder and by attempting to approximately match the maturity schedule of its assets with the expected payouts of its liabilities, both at inception and on an ongoing basis. The transfer of interest rate risk exposure to policyholders is based on risk free rates versus changes in effective yield of the investment portfolio. Asset and liability matching models are used by the Company to mitigate interest rate risk due to the close relationship between its interest rate sensitive assets and liabilities. The Company considers both the maturity and duration of the asset portfolio as compared with the expected duration of the liability reserves. The Company also attempts to mitigate interest rate risk through asset/liability risk controls, including product development and pricing, product management, and investment asset management. The Company attempts to limit interest rate risk on variable annuity guarantees through product development and pricing and product management. In certain situations, the Company accepts some interest rate risk in exchange for a higher yield on the investment. (e) EQUITY MARKET RISK The risk that movements in the equity markets will result in losses to assets held by the Company or that product features tied to equity markets will increase in value by more than held assets. Fixed-indexed annuity products increase the policy value based on the growth of market indexes. The Company uses exchange-traded futures to assist in managing potential policyholder benefit obligations. An additional risk is that variable annuity products have guarantees, GMWB, GMIB, and GMDB, which provide a guaranteed level of payments irrespective of market movements. The risk here is of a market downturn. The Company attempts to manage risk prospectively through product development and pricing. Equity market risk is also partially mitigated by separate account fund allocation restrictions. For products with GMAB, policyholder contracts allow the Company to employ an automatic investment allocation process to move policyholder funds into fixed accounts during a market downturn to help mitigate this risk. (f) LEGAL/REGULATORY RISK The risk that changes in the legal or regulatory environment in which the Company operates may result in reduced demand for the Company's products or additional expenses not assumed in product pricing. Additionally, the Company is exposed to risk related to how the Company conducts itself in the market and the suitability of its product sales to contractholders. The Company attempts to mitigate risk by actively monitoring all market-related exposure and have members that participate in national and international discussions relating to legal, regulatory, and accounting changes that may impact the business. The Company also has defined suitability standards that are as at least as rigorous, and usually exceeding, the requirements of regulators. (g) RATINGS RISK The risk that rating agencies change their outlook or rating of the Company. The rating agencies generally utilize proprietary capital adequacy models in the process of establishing ratings for the Company. The Company is at risk of changes in these models and the impact that changes in the underlying business that the Company is engaged in can have on such models. In an attempt to mitigate this risk, the Company maintains regular communications with the rating agencies and evaluates the impact of significant transactions on such capital adequacy models and considers the same in the design of transactions to minimize the adverse impact of this risk. Stress tests are performed at least quarterly to assess how rating agency capital adequacy models would be impacted by severe economic events. 24 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (h) MORTALITY RISK The risk that life expectancy assumptions used by the Company to price its life insurance business are too aggressive (i.e., insureds live shorter than expected lives). The Company mitigates this risk primarily through reinsurance. Approximately 90% of the Company's mortality risk on its life business is reinsured to third parties. The Company also reviews its mortality assumptions at least annually, reviews mortality experience periodically, and uses conservative underwriting methods relative to the industry. (i) REINSURANCE RISK The risk that reinsurance companies default on their obligation where the Company has ceded a portion of its insurance risk. The Company uses reinsurance to limit its risk exposure in its life and long-term care business and to divest of blocks of business no longer considered core to the Company. The Company has established controls to mitigate reinsurance risk. Counterparty ratings must meet certain thresholds or a trust is required to be established. All arrangements are regularly monitored to determine if trusts or letters of credit are sufficient to support the ceded liabilities. The Company also diversifies its exposure across a minimum of three reinsurers for a single life product. Also, the Company reviews the financial standings and ratings of its reinsurance counterparties at least quarterly. (4) INVESTMENTS At December 31, 2008 and 2007, the amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair values of available-for-sale securities are as shown in the following table:
Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value ------------ ------------ ------------ ------------ 2008: Fixed-maturity securities: U.S. government $ 19,993 $ 5,508 $ - $ 25,501 States and political subdivisions 2,183 44 - 2,227 Foreign government 1,564 152 - 1,716 Public utilities 22,037 863 - 22,900 Corporate securities 192,841 5,471 - 198,312 Mortgage-backed securities 108,710 3,477 - 112,187 ------------ ------------ ------------ ------------- Total $ 347,328 $ 15,515 $ - $ 362,843 ============ ============ ============ ============= 2007: Fixed-maturity securities: U.S. government $ 29,790 $ 2,762 $ - $ 32,552 States and political subdivisions 2,204 99 - 2,303 Foreign government 1,571 103 - 1,674 Public utilities 14,917 296 - 15,213 Corporate securities 162,985 4,464 - 167,449 Mortgage-backed securities 67,132 2,226 - 69,358 ------------ ------------ ------------ ------------- Total $ 278,599 $ 9,950 $ - $ 288,549 ============ ============ ============ =============
25 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The net unrealized gains (losses) on available-for-sale securities consist of the following at December 31:
2008 2007 2006 ----------------- ----------------- ------------------ Available-for-sale: Fixed-maturity securities $ 15,515 $ 9,950 $ 3,598 Adjustments for: DAC (8,474) (4,278) (1,200) DSI (531) (589) (85) Deferred taxes (2,278) (1,778) (809) ----------------- ----------------- ------------------ Net unrealized gains $ 4,232 $ 3,305 $ 1,504 ================= ================= ==================
The changes in net unrealized gains on available-for-sale fixed-maturity securities before adjustments for deferred taxes, DAC, and DSI were $5,565, $6,352, and $1,495 for the years ended December 31, 2008, 2007, and 2006, respectively. As of December 31, 2008 and 2007, there were no fixed-maturity securities that were in an unrealized loss position. The changes in net unrealized gains (losses) on available-for-sale equity securities, before adjustments for deferred taxes, was $0, $0, and $(245) for the years ended December 31, 2008, 2007, and 2006, respectively. The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at December 31, 2008, by contractual maturity, are shown below:
Amortized Estimated cost fair value ----------------- ----------------- Available-for-sale: Due in one year or less $ 1,496 $ 1,497 Due after one year through five years 24,027 24,289 Due after five years through ten years 141,497 147,181 Due after ten years 71,598 77,689 Mortgage-backed securities 108,710 112,187 ----------------- ----------------- Total available-for-sale fixed maturity securities $ 347,328 $ 362,843 ================= =================
26 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The amortized cost of fixed-maturity securities with rights to call or prepay without penalty is $109,999 as of December 31, 2008. Proceeds from sales of fixed-maturity and equity securities are presented in the table below: 2008 2007 2006 --------- --------- --------- FIXED-MATURITY SECURITIES Proceeds from sales $ 11,568 $ 36,712 $ 13,358 Proceeds from tax-free and taxable exchanges - - (110) EQUITY SECURITIES Proceeds from sales - - 1,079 Proceeds from tax-free exchanges, redemptions and spin-offs - - 9 The negative proceeds of $110 in 2006 were the result of a reclassification related to an exchange of notes and were immaterial in nature. Gross and net realized investment gains (losses) for the respective years ended December 31 are summarized as follows:
2008 2007 2006 ------------ ------------ ------------- Fixed-maturity securities Gross realized gains on sales and exchanges $ 1,032 $ 2,330 $ 6 Gross realized losses on sales and exchanges (19) (1,246) (457) ------------ ------------ ------------- Net gains (losses) on fixed-maturity securities 1,013 1,084 (451) Other-than-temporary impairments (31,188) (7,119) (5,316) ------------ ------------ ------------- Net losses on fixed-maturity securities (30,175) (6,035) (5,767) Equity securities Gross realized gains on sales and exchanges - - 256 Gross realized losses on sales and exchanges - - (11) ------------ ------------ ------------- Net gains on equity securities - - 245 ------------ ------------ ------------- Net realized investment losses $ (30,175) $ (6,035)$ (5,522) ============ ============ =============
The other-than-temporary impairments (OTTI) listed above are limited due to the recognition of other-than-temporary impairments on the securities in prior periods. The increase in other-than-temporary impairments beginning in 2008 is related to the general U.S. economic downturn and related credit issues and increasing credit spreads on fixed-maturity securities. Forward commitments of $30,640, $0, and $0 were purchased and $30,640, $0, and $0 were sold by the Company during 2008, 2007, and 2006, respectively. 27 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) As of December 31, 2008, the Company held futures contracts, which do not require an initial investment; therefore, no asset or liability is recorded. The Company is required to settle cash daily based on movements of the representative index. The Company is also required by the Chicago Mercantile Exchange (CME) to post collateral for futures contracts. The Company retains ownership of the collateral but the collateral resides in an account designated by the CME. The collateral is subject to the CME exchange rules regarding rehypothecation. Collateral posted at December 31, 2008 and 2007 had a fair value of $7,719 and $5,172, respectively, and is included in fixed-maturity securities on the Balance Sheets. As of December 31, 2008 and 2007, investments with a carrying value of $2,501 and $1,698, respectively, were pledged to the New York Superintendent of Insurance, as required by statutory regulation. Major categories of interest and similar income, net and derivative income for the respective years ended December 31 are shown below. Interest and similar income related to securities held under repurchase agreements is shown with fixed-maturity securities and was $0, $0, and $8 in 2008, 2007, and 2006, respectively.
2008 2007 2006 -------------- ------------ ------------ Interest and similar income, net: Fixed-maturity securities $ 19,481 $ 16,445 $ 14,446 Short-term securities 262 233 209 Policy loans 10 3 4 Other 40 178 (1) -------------- ------------ ------------ Total 19,793 16,859 14,658 Less: Investment expenses 90 119 97 -------------- ------------ ------------ -------------- ------------ ------------ Total interest and similar income, net $ 19,703 $ 16,740 $ 14,561 ============== ============ ============ Derivative income: (Loss) gain on exercise of equity-indexed annuity and guaranteed benefit-related futures $ (1,412) $ (314) $ 2,494 ============== ============ ============
The Company's investment portfolio includes mortgage-backed securities. Due to the high quality of these securities and the lack of sub-prime loans within the securities, the Company does not have a material exposure to sub-prime mortgages. (5) FAIR VALUE MEASUREMENTS The following financial instruments are carried at fair value on a recurring basis in the Company's Financial Statements: fixed-maturity securities, embedded derivatives, and separate accounts assets. SFAS 157 establishes a fair value hierarchy that prioritizes the inputs used in the valuation techniques to measure fair value. Level 1 -Unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. 28 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) Level 2 -Valuations derived from techniques that utilize observable inputs, other than quoted prices included in Level 1, which are observable for the asset or liability either directly or indirectly, such as: (a) Quoted prices for similar assets or liabilities in active markets. (b) Quoted prices for identical or similar assets or liabilities in markets that are not active. (c) Inputs other than quoted prices that are observable. (d) Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 -Valuations derived from techniques in which the significant inputs are unobservable. Level 3 fair values reflect the Company's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). The Company has analyzed the valuation techniques and related inputs, evaluated its assets and liabilities reported at fair value, and determined an appropriate SFAS 157 fair value hierarchy level based upon trading activity and the observability of market inputs. Based on the results of this evaluation and investment class analysis, each valuation was classified into Level 1, 2, or 3. The following table presents the assets and liabilities measured at fair value on a recurring basis and their corresponding level in the fair value hierarchy at December 31, 2008:
Total Level 1 Level 2 Level 3 --------------------------------------------------------------------- Assets accounted for at fair value: Fixed-maturity securities $ 362,843 $ 25,502 $ 333,671 $ 3,670 Separate account assets (1) 450,820 450,820 - - ----------------------------------------------------------------------- Total assets accounted for at fair value $ 813,663 $ 476,322 $ 333,671 $ 3,670 ======================================================================= Liabilities accounted for at fair value: Annuity embedded derivative liabilities (2) 22,779 - - 22,779 ----------------------------------------------------------------------- Total liabilities accounted for at fair value $ 22,779 $ - $ - $ 22,779 =======================================================================
29 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (1) In accordance with SOP 03-1, the value of separate account liabilities is set to equal the value of separate account assets. (2) Annuity embedded derivative liabilities are reported in future policy benefit reserves and policy and contract account balances on the Balance Sheets. The following is a discussion of the methodologies used to determine fair values for the financial instruments listed in the above table. These fair values represent an exit price (i.e., what a buyer in the market place would pay for an asset in a current sale or charge to transfer a liability). VALUATION OF FIXED-MATURITY SECURITIES The fair value of fixed-maturity securities is based on quoted market prices in active markets when available. Based on the market data, the securities are categorized into asset class, and based on the asset class of the security, appropriate pricing applications, models, and related methodology and standard inputs are utilized to determine what a buyer in the marketplace would pay for the security in a current sale. When quoted prices are not readily available or in an inactive market, standard inputs used in the valuation models, listed in approximate order of priority, include, but are not limited to, benchmark yields, reported trades, municipal securities rulemaking board (MSRB) reported trades, nationally recognized municipal securities information repository (NRMSIR) material event notices, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. In certain cases, including private placement securities as well as certain difficult-to-price securities, internal pricing models may be used that are based on market proxies. Generally, treasury securities and exchange traded stocks are included in Level 1. Most bonds for which prices are provided by third-party pricing sources are included in Level 2 because the inputs used are market observable. Bonds for which prices were obtained from broker quotes and private placement securities that are internally priced are included in Level 3. At December 31, 2008, private placement securities of $3,020 were included in Level 3. Internal pricing models based on market proxy securities are used to value these holdings. AZOA portfolio managers monitor the proxies used on a monthly basis for reasonableness. This includes ensuring there are no significant credit events impacting the proxy security and that the spreads used are still reasonable under the circumstances. VALUATION OF SEPARATE ACCOUNT ASSETS Separate account assets are carried at fair value and reported as a summarized total on the Balance Sheet. The fair value of the separate account assets is based on the fair value of the underlying assets. Funds in the separate accounts are primarily invested in mutual funds with the following investment types - bond, domestic equity, international equity, or specialty. The separate account funds also hold certain money market funds. Mutual fund investments are generally included in Level 1. The remaining investments are categorized similar to the investments held by the Company in the general account (e.g., if the separate account invested in corporate bonds or other fixed-maturity securities, that portion could be considered a Level 2 or Level 3). EMBEDDED DERIVATIVES Contracts that do not in their entirety meet the definition of a derivative may contain embedded derivatives as defined in SFAS 133. Under some circumstances, these embedded derivatives must be separated from the host contracts and accounted for as if they are free-standing derivatives. Embedded derivatives principally include the equity-indexed features contained in fixed-indexed annuity products and certain variable annuity riders. Embedded derivatives are recorded in the financial statements at fair value with changes in fair value adjusted through net (loss) income. 30 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) Fair values of the embedded derivative liabilities are calculated based on internally developed models because active, observable markets do not exist for these liabilities. Fair value is derived from techniques in which one or more significant inputs are unobservable and are included in Level 3. These fair values represent the Company's best estimate of an amount that could be realized in a current market exchange absent actual market exchanges. The fair value of the embedded derivative contained in the fixed-indexed annuity products is the sum of the current year's option value projected stochastically, the projection of future index growth at the option budget and the historical interest/equity-indexed credits. Effective January 1, 2008 upon adoption of SFAS 157, the valuation of the embedded derivative now includes an adjustment for the Company's own credit standing and a risk margin for noncapital market inputs. The Company's own credit adjustment is determined by taking into consideration publicly available information on industry default risk with considerations for the Company's own credit profile. Risk margin is incorporated into the valuation model to capture the noncapital market risks of the instrument, which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of certain actuarial assumptions including surrenders, annuitization, and future equity index caps or participation rates. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility, changes in the Company's own credit standing, and variations in actuarial assumptions regarding policyholder behavior and risk margin related to noncapital market inputs may result in significant fluctuations in the fair value of these embedded derivatives that could materially affect net (loss) income. The Company issues certain variable annuity products with guaranteed minimum benefit riders. These include GMWB and GMAB riders. GMWB and GMAB riders are embedded derivatives, which are measured at fair value separately from the host variable annuity contract, with changes in fair value reported in change in fair value of annuity embedded derivatives on the Statements of Operations. These embedded derivatives are classified within future policy benefits on the Balance Sheets. The fair value for these riders is estimated using the present value of future benefits minus the present value of future fees using actuarial and capital market assumptions related to the projected cash flows over the expected lives of the contracts. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Effective January 1, 2008, upon adoption of SFAS 157, the valuation of these riders now includes an adjustment for the Company's own credit standing and a risk margin for noncapital market inputs. The Company's own credit adjustment is determined taking into consideration publicly available information relating to the Company's claims paying ability. Risk margin is established to capture the noncapital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of certain actuarial assumptions including surrenders, annuitization, and premium persistency. The establishment of the risk margin requires the use of significant management judgment. These riders may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility, changes in the Company's own credit standing and variations in actuarial assumptions regarding policyholder behavior and risk margins related to noncapital market inputs may result in significant fluctuations in the fair value of the riders that could materially affect net (loss) income. 31 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The following table provides a reconciliation of the beginning and ending balances for the Company's Level 3 assets and liabilities measured at fair value on a recurring basis:
Fixed-maturity Embedded derivative securities liabilities --------------------------------------------- Balance January 1, 2008 $ 15,340 $ (8,904) Total realized/unrealized (losses) gains included in: Net (loss) income (419) (10,503) Other comprehensive loss 12 - Purchases, sales, issuances, and settlements 2,500 (3,372) Transfer in and/or (out) of level 3 (13,763) - ----------------- ------------------------ Balance December 31, 2008 $ 3,670 $ (22,779) ================= ======================== Realized (losses) gains included in net (loss) income related to financial instruments still held at December 31, 2008 $ (419) $ (10,674) ================= ========================
TRANSFERS The Company reviews its fair value hierarchy classifications annually. This review could reveal that previously observable inputs for specific assets or liabilities are no longer available or reliable. For example, the market for a Level 1 asset becomes inactive. In this case, the Company may need to adopt a valuation technique that relies on unobservable components causing the asset to be transferred to Level 2 or Level 3. Alternatively, if the market for a Level 3 asset or liability becomes active, the Company will report a transfer out of Level 3. Transfers in and/or out of Level 3 are reported as of the beginning of the period in which the change occurs. The net transfers out of Level 3 for the year ended December 31, 2008 are a result of observable inputs becoming available for certain fixed-maturity securities. NONRECURRING FAIR VALUE MEASUREMENTS Occasionally, certain assets and liabilities are measured at fair value on a nonrecurring basis (e.g., impaired assets). At December 31, 2008, there were no assets or liabilities reported at fair value on a nonrecurring basis required to be disclosed under SFAS 157. 32 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The following table presents the carrying amounts and fair values of financial assets and liabilities at December 31, 2008 and 2007:
2008 2007 -------------------------- -------------------------- Carrying Fair Carrying Fair amount value amount value ------------ ------------ ----------- ------------ Financial assets: Fixed-maturity securities: U.S. government $ 25,501 $ 25,501 $ 32,552 $ 32,552 States and political subdivisions 2,227 2,227 2,303 2,303 Foreign governments 1,716 1,716 1,674 1,674 Public utilities 22,900 22,900 15,213 15,213 Corporate securities 198,312 198,312 167,449 167,449 Mortgage-backed securities 112,187 112,187 69,358 69,358 Short-term securities 30,296 30,296 1,218 1,218 Policy loans 163 163 96 96 Cash 3,581 3,581 1,921 1,921 Separate account assets 450,820 450,820 572,186 572,186 Financial liabilities: Investment contracts $ 373,673 $ 370,440 $ 254,694 $ 211,056 Separate account liabilities 450,820 450,820 572,186 572,186
Investment contracts include certain reserves related to deferred annuity products. These reserves are included in the future policy benefit reserves and the policy and contract claims balances on the Balance Sheets. Fair values of investment contracts, which include deferred annuities and other annuities without significant mortality risk, are determined by testing amounts payable on demand against discounted cash flows using market interest rates commensurate with the risks involved, including consideration of the Company's own credit standing and a risk margin for noncapital market inputs. Fair values of separate account liabilities are equal to the fair value of the separate account assets that support them. Changes in market conditions subsequent to year-end may cause fair values calculated subsequent to year-end to differ from the amounts presented herein. 33 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (6) DEFERRED ACQUISITION COSTS DAC at December 31, 2008, 2007, and 2006, and the changes in the balance for the years then ended are as follows:
2008 2007 2006 ------------------ ------------------ ------------------ Balance, beginning of year $ 38,741 $ 32,170 $ 25,101 Capitalization 13,875 11,154 11,210 Interest 2,292 2,099 1,615 Amortization 7,627 (3,604) (4,672) Change in shadow DAC (4,196) (3,078) (1,084) ------------------ ------------------ ------------------ Balance, end of year $ 58,339 $ 38,741 $ 32,170 ================== ================== ==================
The negative DAC amortization in 2008 is due primarily to a significant increase in other-than-temporary impairments and an increase in variable annuity guarantee reserves. These significant losses caused estimated gross profits to increase, which caused amortization to be negative. The Company reviews its best estimate assumptions each year and records "unlocking" as appropriate. During 2008, the Company completed a comprehensive study of assumptions underlying estimated gross profits (EGP), resulting in an "unlocking". This study was based on recent changes in the organization and businesses of the Company and actual and expected performance of in-force policies. The study included all assumptions, including mortality, lapses, expenses, and separate account returns. The revised best estimate assumptions were applied to the current in-force policies to project future gross profits. The pre-tax impact on the Company's assets and liabilities as a result of the unlocking during 2008 and 2007 was as follows:
2008 2007 ------------------- ------------------ Assets: DAC $ 1,134 $ (1,365) DSI 4,033 (86) ------------------- ------------------ Total asset increase 5,167 (1,451) ------------------- ------------------ Liabilities: Policy and contract account balances - (718) Future policy benefit reserves (390) (108) ------------------- ------------------ Total liabilities decrease (390) (826) ------------------- ------------------ Net increase 5,557 (625) Deferred income tax benefit 1,945 (219) ------------------- ------------------ Net increase $ 3,612 $ (406) =================== ==================
34 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (7) DEFERRED SALES INDUCEMENTS DSI at December 31, 2008, 2007, and 2006, and the changes in the balance for the years then ended are as follows:
2008 2007 2006 ------------------ ------------------ ------------------ Balance, beginning of year $ 10,992 $ 9,763 $ 6,878 Capitalization 2,690 3,369 3,268 Interest 624 609 490 Amortization (1,631) (2,245) (896) Change in shadow DSI 58 (504) 23 ------------------ ------------------ ------------------ Balance, end of year $ 12,733 $ 10,992 $ 9,763 ================== ================== =================
(8) SEPARATE ACCOUNTS AND ANNUITY PRODUCT GUARANTEES Guaranteed minimums for the respective years ended December 31 are summarized as follows (note that the amounts listed are not mutually exclusive, as many products contain multiple guarantees):
December 31, 2008 December 31, 2007 ---------------------------------- ---------------------------------- Account Net amount Weighted Account Net amount Weighted value at risk age (years) value at risk age (years) -------- ----------- ----------- -------- ----------- ----------- Guaranteed Minimum Death Benefits (GMDB): ---------------------------------------- Return of premium $ 181,729 $ 28,248 62.0 $ 164,072 $ 209 61.1 Ratchet and return of premium 216,737 81,476 67.1 272,151 4,443 67.2 Reset 117,766 25,980 72.4 191,531 1,520 71.4 -------- ----------- -------- ----------- Total $ 516,232 $ 135,704 $ 627,754 $ 6,172 ======== =========== ======== =========== Guaranteed Minimum Income Benefits (GMIB): ---------------------------------------- Return of premium $ 9,840 $ 1,913 60.0 $ 113,908 $ - 59.2 Ratchet and rollup 153,256 50,498 68.5 268,398 39 69.3 -------- ----------- -------- ----------- Total $ 163,096 $ 52,411 $ 382,306 $ 39 ======== =========== ======== =========== Guaranteed Minimum Accumulation Benefits (GMAB): ---------------------------------------- Five years $ 24,910 $ 4,670 61.5 $ 16,336 $ 274 n/a -------- ----------- -------- ----------- Total $ 24,910 $ 4,670 $ 16,336 $ 274 ======== =========== ======== =========== Guaranteed Minimum Withdrawal Benefits (GMWB): ---------------------------------------- No living benefit $ 25,544 $ 4,237 59.3 $ 2,238 $ - n/a Life benefit with optional reset 56,321 19,765 66.6 9,705 - n/a Life benefit with 8% rollup 6,396 2,004 65.6 - - n/a -------- ----------- -------- ----------- Total $ 88,261 $ 26,006 $ 11,943 $ - ======== =========== ======== ===========
The net amount at risk has increased in 2008 due to the current economic environment. Account values have dropped due to the underperformance of the markets, which causes the guarantee reserves to significantly increase. 35 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) At December 31, 2008 and 2007, variable annuity account balances were invested in separate account funds with the following investment objectives. Balances are presented at fair value: Investment type 2008 2007 ---------------------------------------- ------------------- --------------- Mutual funds: Bond $ 63,009 $ 58,557 Domestic equity 137,647 221,609 International equity 59,230 93,134 Specialty 130,977 172,252 ------------------- --------------- Total mutual fund 390,863 545,552 Money market funds 59,159 25,319 Other 798 1,315 ------------------- --------------- Total $ 450,820 $ 572,186 =================== =============== The following table summarizes the liabilities for variable contract guarantees that are reflected in the general account and shown in future policy benefit reserves on the Balance Sheets:
GMDB GMIB GMAB GMWB Totals ----------- ------------ ------------ ------------ ----------- Balance as of December 31, 2006 $ 591 $ 294 $ - $ - $ 885 Incurred guaranteed benefits 65 74 - - 139 Paid guaranteed benefits (40) - - - (40) ----------- ------------ ------------ ------------ ----------- Balance as of December 31, 2007 616 368 - - 984 Incurred guaranteed benefits 2,586 1,208 1,896 10,325 16,015 Paid guaranteed benefits (914) - - - (914) ----------- ------------ ------------ ------------ ----------- Balance as of December 31, 2008 $ 2,288 $ 1,576 $ 1,896 $ 10,325 $16,085 =========== ============ ============ ============ ===========
(9) ACCIDENT AND HEALTH CLAIM RESERVES Accident and health claim reserves are based on estimates that are subject to uncertainty. Uncertainty regarding reserves of a given accident year is gradually reduced as new information emerges each succeeding year, thereby allowing more reliable re-evaluations of such reserves. While management believes that reserves as of December 31, 2008 are appropriate, uncertainties in the reserving process could cause such reserves to develop favorably or unfavorably in the near term as new or additional information emerges. Any adjustments to reserves are reflected in the operating results of the periods in which they are made. Movements in reserves, which are small relative to the amount of such reserves, could significantly impact the Company's future reported earnings. 36 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) Activity in the accident and health claim reserves is summarized as follows:
2008 2007 2006 ------------------- ------------------- ------------------- Balance at January 1, net of reinsurance recoverables of $3,832, $13,293, and $4,782, respectively $ 3,038 $ 3,076 $ 11,476 Commutations - - (3,221) Incurred related to: Current year 37 87 2,720 Prior years (108) 99 1,287 ------------------- ------------------- ------------------- Total incurred (71) 186 4,007 ------------------- ------------------- ------------------- Paid related to: Current year 37 49 630 Prior years 144 175 8,556 ------------------- ------------------- ------------------- Total paid 181 224 9,186 ------------------- ------------------- ------------------- Balance at December 31, net of reinsurance recoverables of $548, $3,832, and $13,293, respectively $ 2,786 $ 3,038 $ 3,076 =================== =================== ===================
Prior year incurreds for 2008 reflect favorable reserve development. Prior year incurreds for 2007 reflect increased loss ratios due to unfavorable claim development in the group accident and health business. Prior year incurreds for 2006 reflect increased loss ratios due to unfavorable claim development in both group accident and health business and medical excess of loss business. The significant decrease in total incurred and total paid claims from 2006 to 2007 is a result of the exiting of the Health Products business on October 1, 2006 as discussed in note 10. (10) 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 has a maximum retention level of $1,500 on excess yearly renewal term coverage. On LTC business, the Company retains 90% of Limited Benefit Plans, and 90% on claims years one through eight and 20% on claims years eight and beyond for Lifetime Benefit Plans. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk to minimize its exposure to significant losses from reinsurer insolvencies. A contingent liability exists to the extent that the Company's reinsurers are unable to meet their contractual obligations under reinsurance contracts. Management is of the opinion that no liability will accrue to the Company with respect to this contingency. During 2006, the Company made the decision to exit the health products business. On October 1, 2006, the Company entered into a 100% quota share agreement with an unrelated insurance company, Houston Casualty Company (HCC), to reinsure the health block of business. Related to this transaction, the Company received a ceding commission of $12,950 for the recapture of $13,510 in reserves. The Company recorded a deferred gain of $12,950, which is being amortized into operations through 2009. The Company amortized $718, $7,956, and $4,246 for 2008, 2007, and 2006, respectively, and is included in other revenue on the Statements of Operations. The remaining deferred gain was $30 and $748 as of December 31, 2008 and 2007, respectively. Offsetting the gain on sale, total incremental expenses of 37 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) $1,877 were incurred in 2006 including $1,327 for commutation of reinsurance agreements in contemplation of the agreement with HCC, and $550 for employee-related termination benefits. The commutation of reinsurance agreements expense is included in benefit recoveries and termination benefits expense is included in general and administrative expenses on the Statements of Operations. As of December 31, 2006, all of these incremental costs have been paid. At December 31, 2008 and 2007, the Company had reinsurance recoverables of $3 and $1, respectively, on paid claims, policy and contract claims, future policy benefit reserves, and policy and contract account balances from Allianz Life. The Company attempts to mitigate risk by arranging trust accounts or letters of credit with certain insurers. Insurers with ratings lower than A-, and without a trust account or letter of credit, account for less than 2% of the total reinsurance recoverable as of December 31, 2008. Effective June 30, 2006, the Company recaptured certain health business previously ceded to R.W. Morey. Related to this transaction, the Company paid a ceding commission of $1,327 for the recapture of $4,988 in reserves. The Company entered into numerous reinsurance arrangements with unrelated insurance companies to reinsure group life and accident and health reinsurance-assumed, and excess of loss health insurance business as well as business produced through the broker administrator distribution channel. In connection with these agreements, the Company had ceded premiums of $1,740, $4,132, and $3,466 and received expense allowances of $288, $363, and $133 in 2008, 2007, and 2006, respectively. Of the amounts assumed from and ceded to other companies, accident and health insurance assumed from and ceded to Allianz Life on a statutory basis is as follows: ASSUMED CEDED ------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------------------------------------------- Premiums: Accident and health $ - $ 2 $ (5) $ - $ - $ 12 Total premiums $ - $ 2 $ (5) $ - $ - $ 12 ================================================= Effective January 1, 2005, the Company entered into a new multiline ceded reinsurance agreement with Allianz Life whereby Allianz Life assumes risk related to excess of loss medical coverage. The agreement ended in 2006. 38 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (11)INCOME TAXES (a) INCOME TAX (BENEFIT) EXPENSE Total income tax (benefit) expense for the years ended December 31 is as follows:
2008 2007 2006 ----------- ---------- ---------- Income tax (benefit) expense attributable to operations: Current tax (benefit) expense $ (3,328)$ (1,537) $ 1,333 Deferred tax (benefit) expense (5,903) 4,753 (1,356) ----------- ---------- ---------- Total income tax (benefit) expense attributable to net (loss) income (9,231) 3,216 (23) Income tax effect on equity: Attributable to unrealized gains for the year 500 969 66 ----------- ---------- ---------- Total income tax effect on equity $ (8,731)$ 4,185 $ 43 =========== ========== ==========
(b) Components of Income Tax (Benefit) Expense Income tax (benefit) expense computed at the statutory rate of 35% varies from income tax (benefit) expense reported on the Statements of Operations for the respective years ended December 31 as follows:
2008 2007 2006 ----------- ---------- ---------- Income tax (benefit) expense computed at the statutory rate $ (8,255)$ 3,859 $ 502 Dividends-received deductions and tax-exempt interest (928) (728) (677) Accrual of tax contingency reserve 24 5 19 Other (72) 80 133 ----------- ---------- ---------- Income tax (benefit) expense as reported $ (9,231)$ 3,216 $ (23) =========== ========== ==========
39 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (c) 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 asset (liability), which are included in other assets and other liabilities, respectively, at December 31 are as follows:
2008 2007 ------------------- ------------------- Deferred tax assets: Future benefit reserves $ 8,975 $ 5,263 Coinsurance deferred income 10 262 Expense accruals 887 644 Other-than-temporarily impaired assets 13,925 3,713 ------------------- ------------------- Total deferred tax assets 23,797 9,882 ------------------- ------------------- Deferred tax liabilities: Deferred acquisition costs (18,080) (11,608) Due and deferred premium (116) (15) Net unrealized gains on investments (5,430) (3,483) Investment income (140) (156) Other (19) (10) ------------------- ------------------- Total deferred tax liabilities (23,785) (15,272) ------------------- ------------------- Net deferred tax asset (liability) $ 12 $ (5,390) =================== ===================
Although realization is not assured, the Company believes it is not necessary to establish a valuation allowance for ordinary deferred tax assets, as it is more likely than not the deferred tax assets will be realized principally through future reversals of existing ordinary taxable temporary differences and future ordinary taxable income. For deferred tax assets that are capital in nature, considering all objective evidence and the available tax planning strategy, it is more likely than not the deferred tax assets that are capital in nature will be realized and no valuation allowance is required. The amount of the ordinary and capital deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future reversals of existing taxable temporary differences and future ordinary and capital taxable income are reduced. Income taxes (received) paid by the Company were $(2,118), $2,906, and $162 in 2008, 2007, and 2006, respectively. At December 31, 2008 and 2007, the Company had a tax receivable from AZOA of $2,542 and $1,333, respectively, reported in other assets on the Balance Sheets. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2002. The IRS has surveyed 2003 through 2005 and has informed the Company that they do not intend to do any further review of those years. During 2008, the IRS reviewed the credit taken for the Telephone Excise Tax on AZOA and Subsidiaries' 2006 consolidated return. The IRS informed the Company that final closure on the issue should be forthcoming during the first quarter of 2009. At this time, the Company is not aware of any adjustments that may be proposed by the IRS. 40 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized approximately a $349 increase in the liability for unrecognized tax benefits, which was accounted for as an increased current tax liability and an increased deferred tax asset as of January 1, 2007. It is reasonably expected that the amount of unrecognized tax benefits will increase in 2009 by approximately the same amount as it did in year 2008. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2008 2007 ------------------- Balance at January 1 $ 538 $ 349 Additions based on tax positions related to the current year 207 189 ------------------- Balance at December 31 $ 745 $ 538 =================== Included in the balance at December 31, 2008 are $745 of tax positions for which the deductibility is more likely than not; however, there is uncertainty with respect to the timing of the deduction. Because of the impact of deferred tax accounting, other than interest and penalty, the disallowance would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in federal income tax expense. During the years ended December 31, 2008, 2007, and 2006, the Company recognized $24, $5, and $19 in interest and penalties, respectively. The Company had $48 and $24 for the payment of interest and penalties accrued at December 31, 2008 and 2007, respectively. (12)RELATED-PARTY TRANSACTIONS (a) REINSURANCE The Company reinsured a portion of its group accident and health business with Allianz Life. See note 10 for further details. (b) SERVICE FEES Allianz Life performs certain administrative services for us and the Company has incurred fees for these services of $8,655, $4,801, and $7,762 in 2008, 2007, and 2006, respectively. At December 31, 2008, the Company's liability for these fees was $2,129. In 2007, the Company had an overpayment for service fees of $8,733, which was recorded in receivables on the Balance Sheet. The Company incurred fees for certain investment advisory services provided by affiliated companies. The Company incurred fees of $90, $90, and $95 in 2008, 2007, and 2006, respectively. The Company's liability for these charges was $6 and $0 as of December 31, 2008 and 2007, respectively. The Company has agreements with its affiliates Pacific Investment Management Company (PIMCO), Oppenheimer Capital LLC (OpCap), and Allianz Global Distributors, LLC (AGID), and with certain other related parties whereby (1) specific investment options managed by PIMCO and OpCap are made available through the Company's separate accounts to holders of the Company's variable annuity products, (2) the Company receives compensation for providing administrative and recordkeeping services relating to the investment options managed by PIMCO and OpCap, and (3) the Company compensates AGID for providing services in connection with the distribution of variable products that offer investment options managed by PIMCO. Income recognized by the Company from these affiliates for distribution and in-force related costs as a 41 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) result of providing investment options to the policyholders was $32, $77, and $49 during 2008, 2007, and 2006, respectively, which is included in other revenue on the Statements of Operations. At December 31, 2008 and 2007, $(4) and $14, respectively, was included for these fees in receivables on the Balance Sheets. (c) REAL ESTATE During 2005, the Company entered into an agreement to sublease office space from Fireman's Fund Insurance Company (an affiliate). In connection with this agreement, the Company incurred rent expense of $190, $157, and $150 in 2008, 2007, and 2006, respectively, which is included in general and administrative expenses on the Statements of Operations. (d) CAPITAL CONTRIBUTIONS The Company received a cash capital contribution in 2008 from Allianz Life of $17,000. (13)EMPLOYEE BENEFIT PLANS The Company participates in the Allianz Asset Accumulation Plan (AAAP), a defined contribution plan sponsored by AZOA. Eligible employees are immediately enrolled in the AAAP upon their first day of employment. The AAAP will accept participants' pre-tax or after-tax contributions up to 80% of the participants' eligible compensation, although contributions remain subject to annual limitations set by the Employee Retirement Income Security Act (ERISA). Under the eligible employees' provisions, the Company will match 100% of contributions up to a maximum of 6%. Participants are 100% vested in the Company's matching contribution after three years of service. The Company may decide to declare a profit-sharing contribution under the AAAP based on the discretion of Company management. Although the Company has recorded an accrual, management has not yet determined if there will be a profit-sharing contribution under the AAAP for the plan years ended December 31, 2008. The Company declared a profit-sharing contribution of 1.5% of employees' salaries for the plan years ended December 31, 2007 and 2006, reported in general and administrative expenses on the accompanying Statements of Operations and funded in 2008 and 2007, respectively. Employees are not required to participate in the AAAP to be eligible for the profit-sharing contribution. The expenses of administration of the AAAP and the trust fund, including all fees of the trustee, investment manager, and auditors, are payable from the trust fund, but may, at the Company's discretion, be paid by the Company. Any counsel fees are not paid from the trust fund, but are instead paid by the Company. It is the Company's policy to fund the AAAP costs as incurred. The Company has expensed $115, $96, and $182 in 2008, 2007, and 2006, respectively, toward the AAAP matching contributions and administration expenses. In addition to the AAAP, the Company offers certain benefits to eligible employees, including a comprehensive medical, dental, and vision plan and a flexible spending plan. In 2005, the Company started an Employee Severance Pay Plan for the benefit of eligible employees. The plan may provide severance benefits on account of an employee's termination of employment from the Company. To become a participant in the plan, an employee must be involuntarily terminated. In addition, the Company must determine if it wishes to provide the employee with a severance payment and must issue a written Severance Pay Award. The plan is unfunded, meaning no assets of the Company's have been segregated or defined to represent the liability for payments under the plan. Effective June 1, 2008, the Company adopted the AZOA Severance Allowance Plan, which replaced the Employee Severance Pay Plan. Under the AZOA Severance Allowance Plan, all employees who are involuntarily terminated due to job elimination or reduction in force are eligible to receive benefits. The Company expensed $265, $55, and $550 in 2008, 2007, and 2006, respectively, toward severance payments. 42 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) (14)STATUTORY FINANCIAL DATA AND DIVIDEND RESTRICTIONS Statutory accounting practices prescribed or permitted by the Company's state of domicile are directed toward insurer solvency and protection of policyholders. Accordingly, certain items recorded in financial statements prepared under GAAP are excluded or vary in calculation in determining statutory policyholders' surplus and gain from operations. Currently, these items include, among others, DAC, furniture and fixtures, deferred taxes, accident and health premiums receivable which are more than 90 days past due, reinsurance, certain investments, and undeclared dividends to policyholders. Additionally, future policy benefit reserves and policy and contract account balances calculated for statutory reporting do not include provisions for withdrawals. The Company's statutory capital and surplus as of December 31, 2008 and 2007 were $29,201 and $50,337, respectively. The Company is required to meet minimum statutory capital and surplus requirements. The Company's statutory capital and surplus as of December 31, 2008 and 2007 were in compliance with these requirements. The maximum amount of dividends that can be paid by New York insurance companies to stockholders without prior approval of the Superintendent of Insurance is subject to restrictions relating to statutory earned surplus, also known as unassigned funds. Unassigned funds are determined in accordance with the accounting procedures and practices governing preparation of the statutory annual statement. In accordance with New York statutes, the Company may declare and pay from its surplus, cash dividends of not more than the lesser of 10% of its beginning of the year statutory surplus, or its statutory net gain from operations, not including realized gains, for the 12-month period ending the 31[st] day of the next preceding year. The Company paid no dividends in 2008, 2007, and 2006. REGULATORY RISK-BASED CAPITAL An insurance enterprise's state of domicile imposes minimum risk-based capital requirements that were developed by the NAIC. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of an enterprise's regulatory total adjusted capital to its authorized control-level risk-based capital, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. This ratio for the Company was 526% and 1,734% as of December 31, 2008 and 2007, respectively. Regulatory action against a company may begin when this ratio falls below 200%. (15)COMMITMENTS AND CONTINGENCIES The Company is or may become subject to claims and lawsuits that arise in the ordinary course of business. In the opinion of management, the ultimate resolution of such litigation will not have a material adverse effect on the Company's financial position. The Company is contingently liable for possible future assessments under regulatory requirements pertaining to insolvencies and impairments of unaffiliated insurance companies. Provision has been made for assessments currently received and assessments anticipated for known insolvencies. The financial services industry, including mutual fund, variable and fixed annuity, life insurance, and distribution companies, has been the subject of increasing scrutiny by regulators, legislators, and the media over the past few years. Federal and state regulators are also investigating various selling practices in the annuity industry, including suitability reviews, product exchanges, and sales to seniors. In certain instances, these investigations have led to regulatory enforcement proceedings. In February 2007, the Company entered into a stipulated order with the New York Department of Insurance (DOI) resolving allegations made by the DOI that the Company did 43 (Continued) ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Notes to Financial Statements December 31, 2008, 2007, and 2006 (In thousands, except security holdings quantities) not comply with certain New York laws or regulations during the period January 1, 2002 through December 31, 2004. The impact of these settlements was not material to the Financial Statements. The Company is also subject to an ongoing financial examination by the DOI. In December 2008, the SEC adopted a rule having the effect of categorizing most fixed-indexed annuity products as securities. This rule, when effective, will subject issuers of fixed-indexed annuities to SEC jurisdiction for purposes of registration and disclosure, advertising and marketing, suitability, and requirements as to the distribution of products through registered broker-dealers. The rule will also have the effect of subjecting distribution and advertising of fixed-indexed annuities to the jurisdiction of the Financial Industry Regulatory Authority. The rule, which was published in the Federal Register on January 8, 2009, is expected to be effective in January of 2011. Several insurance companies issuing fixed- indexed annuities have filed a lawsuit challenging the validity of the rule. As a result, there is not complete certainty as to whether, when, or in what form the rule will finally become effective. It can be expected that annuity sales practices will be an ongoing source of litigation and rulemaking. Similarly, private litigation regarding sales practices is ongoing against a number of insurance companies. This could result in legal precedents and new industry-wide legislation, rules, and regulations that could significantly affect the financial services industry, including life insurance and annuity companies. It is unclear at this time whether any such litigation or regulatory actions will have a material adverse effect on the Company in the future. The Company leases office space. Expense for the operating lease was $190, $157, and $150 in 2008, 2007, and 2006, respectively. The future minimum lease payments required under this operating lease are as follows: 2009 $ 157 2010 157 2011 177 2012 179 2013 and beyond 1,443 ------------------- Total $ 2,113 =================== (16)SUBSEQUENT EVENTS On March 23, 2009, the Company announced suspension of sales of the living benefit riders on its primary variable annuity product family, effective March 31, 2009. 44 (Continued)
Schedule I ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Summary of Investments - Other Than Investments in Related Parties December 31, 2008 Amount at which shown Amortized in the Balance Type of investment cost (1) Fair value Sheet ---------------------------------------------------------- ------------------ ------------------ ------------------ Fixed-maturity securities: U.S. government $ 19,993 $ 25,501 $ 25,501 States and political subdivisions 2,183 2,227 2,227 Foreign government 1,564 1,716 1,716 Public utilities 22,037 22,900 22,900 Corporate securities 192,841 198,312 198,312 Mortgage-backed securities 108,710 112,187 112,187 ------------------ ------------------ ------------------ Total fixed-maturity securities 347,328 $ 362,843 362,843 ------------------ ================== ------------------ Other investments: Short-term securities 30,296 30,296 Policy loans 163 163 ------------------ ------------------ Total other investments 30,459 30,459 ------------------ ------------------ ------------------ ------------------ Total investments $ 377,787 $ 393,302 ================== ================== (1) Original cost of fixed maturities reduced by repayments and adjusted for amortization of premiums or accrual discounts. See accompanying report of independent registered public accounting firm.
45
Schedule II ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Supplementary Insurance Information December 31, Year ended December 31, --------------------------------------------------------------------------------------- ------------- Future benefit reserves and Net premium policy and Policy revenue Deferred Deferred contract and and other Interest and acquisition sales account Unearned contract contract similar Net costs inducements balances premiums claims considerations income, net benefits ----------- ------------- -------------- -------- ---------- ------------- ------------ ---------- 2008: Life $ 594 $ 52 $ 1,922 $ 54 $ 434 $ 472 $ (3)$ 183 Annuities 55,473 12,681 378,921 - - 12,236 19,330 28,476 Accident and health 2,272 - 3,204 972 2,861 2,316 376 1,610 ----------- ------------- -------------- -------- ---------- ------------- ------------ ---------- $ 58,339 $ 12,733 $ 384,047 $1,026 $ 3,295 $ 15,024 $ 19,703 $ 30,269 =========== ============= ============== ======== ========== ============= ============ ========== 2007: Life $ 273 $ - $ 1,169 $ 53 $ 428 $ 273 $ 71 $ 122 Annuities 36,862 10,992 265,652 - - 11,819 16,340 9,112 Accident and health 1,606 - 1,626 684 6,870 1,466 329 742 ----------- ------------- -------------- -------- ---------- ------------- ------------ ---------- $ 38,741 $ 10,992 $ 268,447 $ 737 $ 7,298 $ 13,558 $ 16,740 $ 9,976 =========== ============= ============== ======== ========== ============= ============ ========== 2006: Life $ - $ - $ 1,034 $ 54 $ 380 $ 410 $ 81 $ 112 Annuities 31,470 9,763 248,548 - - 10,273 13,749 14,442 Accident and health 700 - 922 312 16,370 9,724 731 10,835 ----------- ------------- -------------- -------- ---------- ------------- ------------ ---------- $ 32,170 $ 9,763 $ 250,504 $ 366 $ 16,750 $ 20,407 $ 14,561 $ 25,389 =========== ============= ============== ======== ========== ============= ============ ==========
Schedule II ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Supplementary Insurance Information Year ended December 31, ----------------------------------------- Net change Net change in deferred in deferred Other sales acquisition operating 2008: inducements * costs ** expenses ------------- --------------- ----------- Life Annuities $ (52)$ (321)$ 254 Accident and health (1,631) (22,806) 19,783 - (666) 1,585 ------------- --------------- ----------- $ (1,683)$ (23,793)$ 21,622 2007: ============= =============== =========== Life Annuities $ - $ (273)$ 503 Accident and health (1,732) (8,470) 20,394 - (907) 1,970 ------------- --------------- ----------- $ (1,732)$ (9,650)$ 22,867 2006: ============= =============== =========== Life Annuities $ - $ - $ 169 Accident and health (2,862) (7,454) 17,677 - (699) 3,040 ------------- --------------- ----------- $ (2,862)$ (8,153)$ 20,886 ============= =============== =========== * See note 7 for aggregate gross amortization of deferred sales inducements. ** See note 6 for aggregate gross amortization of deferred acquisition costs. See accompanying report of independent registered public accounting firm. 46
Schedule III ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK Reinsurance Percentage Ceded Assumed of amount Direct to other from other Net assumed Years ended amount companies companies amount to net ----------------------------------- ------------ ------------ ------------------- ---------- December 31, 2008: Life insurance in force $ 125,056 $ 101,742 $ - $ 23,314 -% ------------ ------------ --------- ------- ---------- Premiums: Life $ 1,697 $ 1,225 $ - $ 472 -% Annuities 12,236 - - 12,236 - Accident and health 2,907 813 222 2,316 9.6 ------------ ------------ --------- ------- ---------- Total premiums $ 16,840 $ 2,038 $ 222 $ 15,024 1.5% ============ ============ ========= ======= ========== December 31, 2007: Life insurance in force $ 94,658 $ 83,342 $ - $ 11,316 -% ------------ ------------ --------- ------- ---------- Premiums: Life $ 1,529 $ 1,256 $ - $ 273 -% Annuities 11,819 - - 11,819 - Accident and health 3,729 3,568 1,305 1,466 89.0 ------------ ------------ --------- ------- ---------- Total premiums $ 17,077 $ 4,824 $ 1,305 $ 13,558 9.6% ============ ============ ========= ======= ========== December 31, 2006: Life insurance in force $ 91,453 $ 78,095 $ - $ 13,358 -% ------------ ------------ --------- ------- ---------- Premiums: Life $ 1,780 $ 1,370 $ - $ 410 -% Annuities 10,273 - - 10,273 - Accident and health 10,102 6,908 6,530 9,724 67.2 ------------ ------------ --------- ------- ---------- Total premiums $ 22,155 $ 8,278 $ 6,530 $ 20,407 32.0% ============ ============ ========= ======= ========== See accompanying report of independent registered public accounting firm.
47
PART C - OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements The following financial statements of the Company are included in Part B hereof: 1. Report of Independent Registered Public Accounting Firm. 2. Balance Sheets as of December 31, 2008 and 2007. 3. Statements of Operations for the years ended December 31, 2008, 2007 and 2006. 4. Statements of Comprehensive Income for the years ended December 31, 2008, 2007 and 2006. 5. Statements of Stockholder's Equity for the years ended December 31, 2008, 2007 and 2006. 6. Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006. 7. Notes to Financial Statements 8. Supplemental Schedules: - Schedule I - Summary of Investments - Other Than Investments in Related Parties. - Schedule III - Supplemental Insurance Information. - Schedule IV - Reinsurance The following financial statements of the Variable Account are included in Part B hereof: 1. Report of Independent Registered Public Accounting Firm. 2. Statements of Assets and Liabilities as of December 31, 2008. 3. Statements of Operations for the year or period ended December 31, 2008. 4. Statements of Changes in Net Assets for the years or periods ended December 31, 2008 and 2007. 5. Notes to Financial Statements - December 31, 2008. b. Exhibits 1. Resolution of Board of Directors of the Company authorizing the establishment of the Separate Account, dated February 26, 1988(1) incorporated by reference as exhibit EX-99.B.1. 2. Not Applicable 3.a. Principal Underwriter Agreement by and between Preferred Life Insurance Company of New York on behalf of Preferred Life Variable Account C and NALAC Financial Plans, Inc. (2) incorporated by reference as exhibit EX-99.B3.a. Preferred Life Insurance Company of New York is the predecessor to Allianz Life Insurance Company of New York. Preferred Life Variable Account C is the predecessor to Allianz Life of NY Variable Account C. NALAC Financial Plans, Inc., is the predecessor to USAllianz Investor Services, LLC, which is the predecessor to Allianz Life Financial Services, LLC. b. Copy of Broker-Dealer Agreement between Preferred Life Insurance Company of New York and NALAC Financial Plans, Inc. (predecessor to Allianz Life Financial Services, LLC) (11)incorporated by reference as exhibit EX-99.B3.b. c. Form of General Agency Agreement with Allianz Life Financial Services, LLC. (9)incorporated by reference as exhibit EX-99.B3.b. 4.a. Individual Variable Annuity Contract - L40504(12)incorporated by reference as exhibit EX-99.B4.a. b. Contract Schedule Page - S40495-A through S40495-F(12)incorporated by reference as exhibit EX-99.B4.b. c. Traditional GMDB Endorsement - S40496(5)incorporated by reference as exhibit EX-99.B4.f. d. Enhanced GMDB Endorsement - S40497(5)incorporated by reference as exhibit EX-99.B4.f. e. Traditional GMIB Endorsement - S40499(5)incorporated by reference as exhibit EX-99.B4.e. f. Enhanced GMIB Endorsement - S40723(11)incorporated by reference as exhibit EX-99.B4.f. g. Traditional GPWB Endorsement - S40501(5)incorporated by reference as exhibit EX-99.B4.g. h. Enhanced GPWB Endorsement - S40724(11)incorporated by reference as exhibit EX-99.B4.h. i. DCA Fixed Account Endorsement - S40498(11)incorporated by reference as exhibit EX-99.B4.i. j. Unisex Endorsement - P20031(11)incorporated by reference as exhibit EX-99.B4.j. k. Pension Plan and Profit Sharing Plan Endorsement - S40690(11)incorporated by reference as exhibit EX-99.B4.k. l. 403(b) Endorsement - S40687(11)incorporated by reference as exhibit EX-99.B4.l. m. IRA Endorsement - P30012-NY(11)incorporated by reference as exhibit EX-99.B4.m. n. Roth IRA Endorsement - S40688-NY(11)incorporated by reference as exhibit EX-99.B4.n. o. Inherited IRA/Roth IRA Endorsement - S40714-NY(7)incorporated by reference as exhibit EX-99.B4.j. p. Waiver of CDSC Endorsement - S30077(11)incorporated by reference as exhibit EX-99.B4.p. q. Blanket Endorsement - S40689(11)incorporated by reference as exhibit EX-99.B4.q. r. GMIB/GPWB 5% Endorsements - S40644 & S40645(7)incorporated by reference as exhibit EX-99.B4.i. 5. Application for Individual Variable Annuity Contract - F40426 NY (1-06)(12)incorporated by reference as exhibit EX-99.B5. 6.(i)Copy of Certificate of the Amendment of Charter of the Company dated October 5, 1988 and the Declaration of Intention and Charter dated August 26, 1996(9)incorporated by reference as exhibit EX-99.B6.(i). (ii)Copy of the Restated Bylaws of the Company (as amended on October 2, 1996)(9)incorporated by reference as exhibit EX-99.B6.(ii). 7. Not Applicable 8.a. 22c-2 Agreements (13)incorporated by reference as exhibit EX-99.B8.a. b. 22c-2 Agreement-BlackRock Distributors, Inc. dated 5/1/2008(14) incorporated by reference as exhibit EX-99.B8.b. c. Copy of Participation Agreement between BlackRock Series Fund, Inc., BlackRock Distributors, Inc., Allianz Life Insurance Co. of New York, and Allianz Life Financial Services, LLC (14)incorporated by reference as exhibit EX-99.B8.c. d. Copy of Adminstrative Service Agreement between BlackRock Advisors, LLC and Allianz Life (14)incorporated by reference as exhibit EX-99.B8.d. e. Copy of Participation Agreement between Davis Variable Account Fund, Inc., Davis Distributors, LLC and Preferred Life Insurance Company of New York, dated 11/1/1999(3)incorporated by reference as exhibit EX-99.B8.e. f. Copy of Amendment to Participation Agreement between Davis Variable Account Fund, Inc., Davis Distributors, LLC and Allianz Life Insurance Company of New York dated 5/1/08(14) incorporated by reference as exhibit EX-99.B8.f. g. Copy of Administrative Services Agreement between The Dreyfus Corporation and Preferred Life Insurance Company of New York, dated 5/1/2002(11)incorporated by reference as exhibit EX-99.B8.f. h. Copy of Amendments to Administrative Services Agreement between The Dreyfus Corporation and Allianz Life Insurance Company of New York (formerly Preferred Life Insurance Company of New York), dated 8/7/02, 10/16/06(11)incorporated by reference as exhibit EX-99.B8.g. i. Copy of Disribution/12 b-1 Letter Agreement between Dreyfus Service Corporation and USAllianz Investor Services, LLC (predecessor to Allianz Life Financial Services, LLC.), dated 5/1/2002(11)incorporated by reference as exhibit EX-99.B8.h. j. Copy of Fund Participation Agreement between Preferred Life Insurance Company of New York, Dreyfus Investment Portfolios and The Dreyfus Life and Annuity Index Fund, dated 5/1/2002(5)incorporated by reference as exhibit EX-99.B8.q. k. Copy of Amendment to Fund Participation Agreement between Allianz Life Insurance Company of New York (formerly Preferred Life Insurance Company of New York), Dreyfus Investment Portfolios and the Dreyfus Stock Index Fund, Inc., dated 5/1/07(13) incorporated by reference as exhibit EX-99.B8.j. l. Copy of Administrative Services Agreement between Franklin Templeton Services LLC and Preferred Life Insurance Company of New York, dated 10/1/2003(8)incorporated by reference as exhibit EX-99.B8.ac. m. Copy of Amendment to Administrative Services Agreement between Franklin Templeton Services, LLC and Allianz Life Insurance Company of New York, dated 5/1/2008(14) incorporated by reference as exhibit EX-99.B8.h. n. Copy of Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Allianz Life Insurance Company of New York and USAllianz Investor Services, LLC (the predecessor to Allianz Life Financial Services, LLC.), and dated 10/1/2003(8)incorporated by reference as exhibit EX-99.B8.m. o. Copy of Amendment to Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Allianz Life Insurance Company of New York and USAllianz Investor Services, LLC (the predecessor to Allianz Life Financial Services, LLC.), dated 5/1/2008(14) incorporated by reference as exhibit EX-99.B8.j. p. Copy of Participation Agreement between Premier VIT, Allianz Life of New York and Allianz Global Investors Distributors LLC, dated 5/1/2006(10)incorporated by reference as exhibit EX-99.B8.i. q. Copy of Administrative Service Agreement between OpCap Advisors LLC and Allianz Life of New York, dated 5/1/2006(10)incorporated by reference as exhibit EX-99.B8.p. r. Copy of Administrative Support Service Agreement between OppenheimerFunds, Inc. and Preferred Life Insurance Company of New York, dated 12/1/1999(6)incorporated by reference as exhibit EX-99.B8.q. s. Copy of Amendment to Administrative Support Service Agreement between OppenheimerFunds, Inc. and Preferred Life Insurance Company of New York, dated 2/1/2000(11)incorporated by reference as exhibit EX-99.B8.r. t. Copy of Participation Agreement between Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and Preferred Life Insurance Company of New York, dated 12/1/1999(3)incorporated by reference as exhibit EX-99.B8.n. u. Copy of Amendment to Participation Agreement between Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and Allianz Life Insurance Company of New York (formerly Preferred Life Insurance Company of New York), dated 2/1/00, 5/1/02, 4/30/04, 5/1/06(11)incorporated by reference as exhibit EX-99.B8.t. v. Copy of Amended and Restated Services Agreement between Pacific Investment Management Company LLC and Allianz Life Insurance Company of New York, dated 01/01/2007(11)incorporated by reference as exhibit EX-99.B8.u. w. Copy of Participation Agreement between Preferred Life Insurance Company of New York, PIMCO Variable Insurance Trust, and PIMCO Funds Distributors LLC, dated 12/1/1999(3)incorporated by reference as exhibit EX-99.B8.v. x. Copy of Amendments to Participation Agreement between Allianz Life Insurance Company of New York (formerly Preferred Life Insurance Company of New York), PIMCO Variable Insurance Trust, and Allianz Global Investors Distributors LLC (formerly PIMCO Funds Distributors LLC), dated 4/1/00, 5/1/02, 5/1/03, 4/30/04, 4/29/05(11)incorporated by reference as exhibit EX-99.B8.w. y. Copy of Distribution Services Agreement between Allianz Life Insurance Company of New York and Allianz Global Investors Distributors, LLC, dated 01/01/2007(11)incorporated by reference as exhibit EX-99.B8.x. z. Copy of Services Agreement between Prudential Investment Management Services LLC and Preferred Life Insurance Company of New York, dated 12/15/2000(6)incorporated by reference as exhibit EX-99.B8.w. aa. Copy of Amendment to Services Agreement between Prudential Investment Management Services LLC and Preferred Life Insurance Company of New York, dated 9/9/2002(11)incorporated by reference as exhibit EX-99.B8.z. ab. Copy of Fund Participation Agreement between Preferred Life Insurance Company of New York, The Prudential Series Fund, Inc., Prudential Investments Fund Management LLC, and Prudential Investment Management Services, LLC, dated 12/15/2000(4)incorporated by reference as exhibit EX-99.B8.e. ac. Copy of Amendment to Participation Agreement between The Prudential Series Fund, Inc., The Prudential Insurance Company of America, Prudential Investment Management Services, LLC and Allianz Life Insurance Company of New York (formerly Preferred Life Insurance Company of New York), dated 5/1/2003(11)incorporated by reference as exhibit EX-99.B8.ab. 9. Opinion and Consent of Counsel* 10. Consent of Independent Registered Public Accounting Firm* 11. Not Applicable 12. Not Applicable 13. Power of Attorney(14) incorporated by reference as exhibit EX-99.B13.
* Filed herewith (1) Incorporated by reference from Registrant's N-4 filing (File Nos. 333-19699 and 811-05716) electronically filed on January 13, 1997. (2) Incorporated by reference from Registrant's Pre-Effective Amendment No. 1 to Form N-4 (File Nos. 333-19699 and 811-05716) electronically filed on May 12, 1997. (3) Incorporated by reference from Registrant's Post-Effective Amendment No. 8 to Form N-4 (File Nos.333-19699 and 811-05716) electronically filed on April 28, 2000. (4) Incorporated by reference from Registrant's Post-Effective Amendment No. 9 to Form N-4 (File Nos.333-19699 and 811-05716) electronically filed on December 15, 2000. (5) Incorporated by reference from Registrant's Post Effective Amendment No. 21 to Form N-4 (File Nos.333-19699 and 811-05716) electronically filed on December 29, 2003. (6) Incorporated by reference from Registrant's Post Effective Amendment No. 14 to Form N-4 (File Nos.333-75718 and 811-05716) electronically filed on April 27, 2004. (7) Incorporated by reference from Post-Effective Amendment No. 1 to Registrant's Form N-4 (File Nos. 333-105274 and 811-05716) electronically filed on April 26, 2005. (8) Incorporated by reference from Registrant's Post Effective Amendment No. 23 to Form N-4 (File Nos.333-19699 and 811-05716) electronically filed on April 27, 2005. (9) Incorporated by reference from the Initial Registration Statement to Allianz Life Variable Account B's Form N-4 (File Nos.333-134267 and 811-05618) electronically filed on May 19, 2006. (10)Incorporated by reference from Registrant's Post Effective Amendment No. 3 to Form N-4 (File Nos. 333-105274 and 811-05716) electronically filed on December 28, 2006. (11)Incorporated by reference from Registrant's Post Effective Amendment No. 26 to Form N-4 (File Nos. 333-19699 and 811-05716) electronically filed on April 23, 2007. (12)Incorporated by reference from Registrant's Post Effective Amendment No. 4 to Form N-4 (File Nos. 333-105274 and 811-05716) electronically filed on April 23, 2007. (13)Incorporated by reference from Registrant's Post Effective Amendment No. 28 to Form N-4 (File Nos. 333-19699 and 811-05716) electronically filed on April 24, 2008. (14)Incorporated by reference from Registrant's Post Effective Amendment No. 9 to Form N-4 (File Nos. 333-143195 and 811-05716) electronically filed on April 3, 2009. ITEM 25. OFFICERS AND DIRECTORS OF ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK. Unless noted otherwise, all officers and directors have the following principal business address: 5701 Golden Hills Drive Minneapolis, MN 55416-1297
The following are the Officers and Directors of the Company: -------------------------------------------------- ------------------------------------------------------ NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR -------------------------------------------------- ------------------------------------------------------ Gary C. Bhojwani Chairman of the Board and Chief Executive Officer -------------------------------------------------- ------------------------------------------------------ Giulio Terzariol Chief Financial Officer and Treasurer -------------------------------------------------- ------------------------------------------------------ Dennis J. Marion Director 39 Westview Road Wayne, NJ 07470 -------------------------------------------------- ------------------------------------------------------ Eugene T. Wilkinson Director 31A Mountain Blvd Warren, NJ 07059 -------------------------------------------------- ------------------------------------------------------ Stephen R. Herbert Director 900 Third Avenue New York, NY 10022 -------------------------------------------------- ------------------------------------------------------ Jack F. Rockett Director 140 East 95th Street, Ste 6A New York, NY 10129 -------------------------------------------------- ------------------------------------------------------ Martha Clark Goss Director -------------------------------------------------- ------------------------------------------------------ Gary A. Smith Director -------------------------------------------------- ------------------------------------------------------ Thomas P. Burns Director and President -------------------------------------------------- ------------------------------------------------------ John Esch Director, Vice President & Appointed Actuary -------------------------------------------------- ------------------------------------------------------ Yvonne Franzese Director Fireman's Fund Insurance Co. 777 San Marin Drive Novato, CA 94998 -------------------------------------------------- ------------------------------------------------------ William Gaumond Director -------------------------------------------------- ------------------------------------------------------ Maureen Phillips Director and Secretary -------------------------------------------------- ------------------------------------------------------ Marc Olson Director and Controller -------------------------------------------------- ------------------------------------------------------
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Insurance Company organizational chart is incorporated by reference from Registrant's Post-Effective No. 28 to Form N-4 (File Nos. 333-19699 and 811-05716) filed electronically on April 24, 2008. ITEM 27. NUMBER OF CONTRACT OWNERS As of March 31, 2009 there were 206 qualified Contract Owners and 179 non-qualified Contract Owners with Contracts in the Separate Account. ITEM 28. INDEMNIFICATION The Bylaws of the Insurance Company provide: ARTICLE XI. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES Section 1. RIGHT TO INDEMNIFICATION: (a)Subject to the conditions of this Article and any conditions or limitations imposed by applicable law, the Corporation shall indemnify any employee, director or officer of the Corporation (an "Indemnified Person") who was, is, or in the sole opinion of the Corporation, may reasonably become a party to or otherwise involved in any Proceeding by reason of the fact that such Indemnified Person is or was: (i) a director of the Corporation; or (ii) acting in the course and scope of his or her duties as an officer or employee of the Corporation; or (iii) rendering Professional Services at the request of and for the benefit of the Corporation; or (iv) serving at the request of the Corporation as an officer, director, fiduciary or member of another corporation, association, committee, partnership, joint venture, trust, employee benefit plan or other enterprise (an "Outside Organization"). (b)Notwithstanding the foregoing, no officer, director or employee shall be indemnified pursuant to these bylaws under the following circumstances: (i) in connection with a Proceeding initiated by such person, in his or her own personal capacity, unless such initiation was authorized by the Board of Directors; (ii) if a court of competent jurisdiction finally determines that any indemnification hereunder is unlawful; (iii) for acts or omissions involving intentional misconduct or knowing and culpable violation of law; (iv) for acts or omissions that the Indemnified Person believes to be contrary to the best interests of the Corporation or its shareholders or that involve the absence of good faith on the part of the Indemnified Person; (v) for any transaction for which the Indemnified Person derived an improper personal benefit; (vi) for acts or omissions that show a reckless disregard for the Indemnified Person's duty to the Corporation or its shareholders in circumstances in which the Indemnified Person was aware or should have been aware, in the ordinary course of performing the Indemnified Person's duties, of the risk of serious injury to the Corporation or its shareholders; (vii) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the Indemnified Person's duties to the Corporation or its shareholders; (viii) in circumstances where indemnification is prohibited by applicable law; (ix) in the case of service as an officer, director, fiduciary or member of an Outside Organization, where the Indemnified Person was aware or should have been aware that the conduct in question was outside the scope of the assignment as contemplated by the Corporation. Section 2. SCOPE OF INDEMNIFICATION: (a)Indemnification provided pursuant to Section 1(a)(iv) shall be secondary and subordinate to indemnification or insurance provided to an Indemnified Person by an Outside Organization or other source, if any. (b)Indemnification shall apply to all reasonable expenses, liability and losses, actually incurred or suffered by an Indemnified Person in connection with a Proceeding, including without limitation, attorneys' fees and any expenses of establishing a right to indemnification or advancement under this article, judgments, fines, ERISA excise taxes or penalties, amounts paid or to be paid in settlement and all interest, assessments and other charges paid or payable in connection with or in respect of such expense, liability and loss. (c)Such indemnification shall continue as to any Indemnified Person who has ceased to be an employee, director or officer of the Corporation and shall inure to the benefit of his or her heirs, estate, executors and administrators. Section 3. DEFINITIONS: (a)"Corporation" for the purpose of Article XI shall mean Allianz Life Insurance Company of New York and all of its subsidiaries. (b)"Proceeding" shall mean any threatened, pending, or completed action, suit or proceeding whether civil, criminal, administrative, investigative or otherwise, including actions by or in the right of the Corporation to procure a judgment in its favor. (c)"Professional Services" shall mean services rendered pursuant to (i) a professional actuarial designation, (ii) a license to engage in the practice of law issued by a State Bar Institution or (iii) a Certified Public Accountant designation issued by the American Institute of Certified Public Accountants. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted for directors and officers or controlling persons of the Insurance Company pursuant to the foregoing, or otherwise, the Insurance Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Insurance Company of expenses incurred or paid by a director, officer or controlling person of the Insurance Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITERS a. Allianz Life Financial Services, LLC (previously USAllianz Investor Services, LLC) is the principal underwriter for the Contracts. It also is the principal underwriter for: Allianz Life Variable Account A Allianz Life Variable Account B b. The following are the officers (managers) and directors (Board of Governors) of Allianz Life Financial Services, LLC. All officers and directors have the following principal business address: 5701 Golden Hills Drive Minneapolis, MN 55416-1297
-------------------------------------- ----------------------------------------------------------------- NAME POSITIONS AND OFFICES WITH UNDERWRITER -------------------------------------- ----------------------------------------------------------------- Robert DeChellis Chief Executive Officer, President and Governor -------------------------------------- ----------------------------------------------------------------- Thomas Burns Governor -------------------------------------- ----------------------------------------------------------------- Angela Forsman Chief Financial Officer and Vice President -------------------------------------- ----------------------------------------------------------------- Catherine Q. Farley Senior Vice President -------------------------------------- ----------------------------------------------------------------- Jeffrey W. Kletti Senior Vice President -------------------------------------- ----------------------------------------------------------------- Michael Brennan Chief Compliance Officer -------------------------------------- ----------------------------------------------------------------- Stewart D. Gregg Vice President and Secretary -------------------------------------- ----------------------------------------------------------------- Carol Dunn Assistant Secretary -------------------------------------- -----------------------------------------------------------------
c. For the period 1-1-2008 to 12-31-2008: ------------------------------------ --------------------- --------------------- --------------------- --------------------- NAME OF PRINCIPAL UNDERWRITER NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION DISCOUNTS AND COMMISSIONS REDEMPTION COMMISSIONS ------------------------------------ --------------------- --------------------- --------------------- --------------------- ------------------------------------ --------------------- --------------------- --------------------- --------------------- Allianz Life Financial Services, LLC $7,945,634.64 $0 $0 $0 ------------------------------------ --------------------- --------------------- --------------------- ---------------------
The $7,945,634.64 that Allianz Life Financial Services, LLC received from Allianz Life of New York as commissions on the sale of Contracts issued under Allianz Life of NY Variable Account C was subsequently paid entirely to the third party broker/dealers that perform the retail distribution of the Contracts and, therefore, no commission or compensation was retained by Allianz Life Financial Services, LLC. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS 5701 Golden Hills Drive, Minneapolis, Minnesota 55416 and Delaware Valley Financial Services, Allianz Service Center, 300 Berwyn Park, Berwyn, Pennsylvania 19312, maintain physical possession of the accounts, books or documents of the Variable Account required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder. ITEM 31. MANAGEMENT SERVICES Not Applicable ITEM 32. UNDERTAKINGS a. Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen (16) months old for so long as payment under the variable annuity contracts may be accepted. b. Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information. c. Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. REPRESENTATIONS Allianz Life Insurance Company of New York ("Company") hereby represents that the fees and charges deducted under the Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by the Company. The Company hereby represents that it is relying upon a No-Action Letter issued to the American Council of Life Insurance, dated November 28, 1988 (Commission ref. IP-6-88), and that the following provisions have been complied with: 1. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in each registration statement, including the prospectus, used in connection with the offer of the contract; 2. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in any sales literature used in connection with the offer of the contract; 3. Instruct sales representatives who solicit participants to purchase the contract specifically to bring the redemption restrictions imposed by Section 403(b)(11) to the attention of the potential participants; 4. Obtain from each plan participant who purchases a Section 403(b) annuity contract, prior to or at the time of such purchase, a signed statement acknowledging the participant's understanding of (1) the restrictions on redemption imposed by Section 403(b)(11), and (2) other investment alternatives available under the employer's Section 403(b) arrangement to which the participant may elect to transfer his contract value. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, as amended, Allianz Life Insurance Company of New York on behalf of the Registrant certifies that it meets the requirements of the Securities Act Rule 485(b) for effectiveness of this Registration Statement and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized in the City of Minneapolis and State of Minnesota, on this 15th day of April, 2009. ALLIANZ LIFE OF NY VARIABLE ACCOUNT C (Registrant) By: ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK (Depositor) BY: /S/ STEWART D. GREGG Stewart D. Gregg Senior Securities Counsel ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK (Depositor) BY: /S/ GARY C. BHOJWANI* Gary C. Bhojwani Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 15th day of April, 2009.
SIGNATURE TITLE Gary C. Bhojwani* Chairman of the Board and Gary C. Bhojwani Chief Executive Officer Giulio Terzariol* Chief Financial Officer Giulio Terzariol and Treasurer Stephen R. Herbert* Director Stephen R. Herbert Thomas P. Burns* Director and President Thomas P. Burns John Esch* Director, Vice President and John Esch Appointed Actuary Yvonne Franzese* Director Yvonne Franzese William Gaumond* Director William Gaumond Maureen Phillips* Director and Secretary Maureen Phillips Marc Olson* Directory and Controller Marc Olson * By Power of Attorney filed as Exhibit 13 to this Registration Statement.
BY /S/ STEWART D. GREGG Stewart D. Gregg Senior Securities Counsel EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 7 TO FORM N-4 (FILE NOS. 333-105274 and 811-05716) ALLIANZ LIFE VARIABLE ACCOUNT C ALLIANZ LIFE INSURANCE COMPANY OF NEW YORK INDEX TO EXHIBITS EX-99.B9 Opinion and Consent of Counsel EX-99.B10 Consent of Independent Registered Public Accounting Firm