PROFILE OF THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
December 27, 1996
This Profile is a summary of some of the more important points that you should
consider and know before purchasing the Valuemark IV Variable Annuity Contract
with a fixed account option. The Contract is more fully described in the
prospectus which accompanies this Profile. Please read the prospectus carefully.
1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT. The variable annuity contract
with a fixed account option offered by Allianz Life is a contract between you,
the owner, and Allianz Life Insurance Company of North America, an insurance
company. The Contract provides a means for investing on a tax-deferred basis in
23 funds of Franklin Valuemark Funds, a series fund, and a fixed account of
Allianz Life. The Contract is intended for retirement savings or other long-term
investment purposes and provides for a death benefit and guaranteed annuity
income options.
The Contract has 24 investment options. There are 23 funds which are managed by
professional money managers. A list of the available funds is contained in
Section 4. Depending upon market conditions, you can make or lose money in the
funds.
The fixed account offers an interest rate that is guaranteed by Allianz Life.
The interest rate is set monthly and is guaranteed for 12 months. While your
money is in the fixed account, the interest your money will earn as well as your
principal is guaranteed by Allianz Life.
Allianz Life reserves the right to limit the number of funds which you may
invest in at any one time (now or in the future). Currently, you can put your
money in 10 investment options (which includes any of the 23 funds listed in
Section 4 and the Allianz Life fixed account).
Like all deferred annuity contracts, your Contract has two phases: the
accumulation phase and the income phase. During the accumulation phase, your
earnings accumulate on a tax-deferred basis and are based on the investment
performance of the fund(s) you selected and/or the interest rate earned on the
money you have in the fixed account. During the accumulation phase, the earnings
are taxed as income only when you make a withdrawal. The income phase occurs
when you begin receiving regular payments from your Contract. The amount of the
payments you may receive during the income phase depends in part upon the amount
of money you are able to accumulate in your Contract during the accumulation
phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE). You can receive monthly annuity payments
from your Contract by selecting one of the following annuity options (all of
these options assume you are the owner and the annuitant): (1) payments for your
life; (2) payments for your life, but if you die before payments have been made
for the guaranteed period you selected, payments will continue for the remainder
of the guaranteed period (5,10, 15 or 20 years); (3) payments during the joint
lifetime of you and the joint annuitant - when either of you die, payments will
continue as long as the survivor lives; (4) payments during the joint lifetime
of you and the joint annuitant, but if you or the joint annuitant die before
payments have been made for the guaranteed period you selected, payments will
continue for the remainder of the guaranteed period (5, 10, 15 or 20 years); and
(5) payments during your life ending with the last payment due prior to your
death with a guarantee that at your death Allianz Life will make a refund to
your beneficiary. Once you begin receiving regular payments, you cannot change
your annuity option or surrender your contract.
During the income phase, you have the same investment choices you had during the
accumulation phase. You can choose to have payments come from the fixed account,
the funds or both. If you choose to have any part of your payments come from the
funds, the dollar amount of your annuity payments may go up or down, depending
on the investment performance.
3. PURCHASE. You can buy the Contract with $5,000 or more under most
circumstances. You can add $250 or more any time you like during the
accumulation phase. You and the annuitant cannot be older than 85 years old
at the time you buy the Contract.
4.INVESTMENT OPTIONS. You may invest in the Allianz Life fixed account or the
following funds of Franklin Valuemark Funds:
FUND SEEKING STABILITY OF PRINCIPAL AND INCOME:
Money Market
FUNDS SEEKING CURRENT INCOME:
High Income
Templeton Global Income Securities
The U.S. Government Securities
Zero Coupon - 2000, 2005 and 2010
FUNDS SEEKING GROWTH AND INCOME:
Growth and Income
Income Securities
Mutual Shares Securities
Real Estate Securities
Rising Dividends
Templeton Global Asset Allocation
Utility Equity
FUNDS SEEKING CAPITAL GROWTH:
Capital Growth
Mutual Discovery Securities
Precious Metals
Small Cap
Templeton Developing Markets Equity
Templeton Global Growth
Templeton International Equity
Templeton International Smaller Companies
Templeton Pacific Growth
The funds are fully described in the attached prospectus for Franklin Valuemark
Funds. You can make or lose money in the funds, depending upon market
conditions.
5. EXPENSES. The Contract has insurance features and investment features,
and there are costs related to each.
The annual insurance charges total 1.49% of the average daily value of your
Contract allocated to the funds during the accumulation period (1.40% during the
income phase). Each year Allianz Life deducts a $30 contract maintenance charge
from your Contract. Allianz Life currently waives this charge if the cumulative
value of all your Valuemark IV Contracts (registered with the same social
security number) are at least $50,000 (except in New Jersey). There are also
annual fund charges which range from .40% to 1.41% of the average daily value of
the funds depending upon the fund(s) you invest in.
You can transfer between accounts up to 12 times a year without charge. After 12
transfers, the charge is $25 or 2% of the amount transferred, whichever is less.
If you make a withdrawal from the Contract, Allianz Life may assess a contingent
deferred sales charge (withdrawal charge). The amount of the charge depends upon
how long Allianz Life has had your payment. The charge is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of complete years from receipt 0 1 2 3 4 5 6 7 or more
Contingent Deferred Sales Charge
(as a percentage of purchase payments) 6% 6% 6% 5% 4% 3% 2% 0%
</TABLE>
Under certain circumstances, after the first year, Allianz Life will permit
you to access your money in the Contract without deducting a contingent
deferred sales charge: 1) if you become confined to a nursing home; 2) if you
become terminally ill; or 3) if you become disabled. Also, if you are
unemployed for at least 90 days, you can take up to 50% of your money out
without incurring a contingent deferred sales charge. These options may not be
available in all states.
Allianz Life will assess a state premium tax charge which ranges from 0-3.5%
(depending upon the state) when you die, start receiving annuity payments or
make a complete withdrawal.
We have provided the following chart to help you understand the charges in your
Contract. The column "Total Annual Charges" shows the total of the $30 contract
maintenance charge (which is represented as .10% below), the 1.49% insurance
charges and the total annual fund charges for each fund. The next two columns
show you two examples of the charges, in dollars, you would pay under a
Contract. The examples assume that you invested $1,000 in a Contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. For year 1, the Total Annual Charges are assessed as well
as the contingent deferred sales charge. For year 10, the Total Annual Charges
are assessed but no contingent deferred sales charge is deducted. The premium
tax is assumed to be 0% in both examples. These are just examples. Future
expenses may be higher or lower than those shown.
<TABLE>
<CAPTION>
EXAMPLES:
<S> <C> <C> <C> <C> <C>
Total Total Total Expenses Expenses
Insurance Annual Fund Annual at end of at end of
Fund Charges Charges Charges 1 Year 10 Years
- ----------------------------------- ---------- ------------ -------- ---------- ----------
Money Market 1.59% .53% 2.12% $ 82 $ 245
High Income 1.59% .56% 2.15% $ 82 $ 248
Templeton Global Income Securities 1.59% .64% 2.23% $ 83 $ 256
The U.S. Government Securities 1.59% .52% 2.11% $ 81 $ 244
Zero Coupon 2000 1.59% .40% 1.99% $ 80 $ 231
Zero Coupon 2005 1.59% .40% 1.99% $ 80 $ 231
Zero Coupon 2010 1.59% .40% 1.99% $ 80 $ 231
Growth and Income 1.59% .52% 2.11% $ 81 $ 244
Income Securities 1.59% .51% 2.10% $ 81 $ 243
Mutual Shares Securities 1.59% .85% 2.44% $ 85 $ 278
Real Estate Securities 1.59% .59% 2.18% $ 82 $ 251
Rising Dividends 1.59% .78% 2.37 $ 84 $ 271
Templeton Global Asset Allocation 1.59% .90% 2.49% $ 85 $ 283
Utility Equity 1.59% .50% 2.09% $ 81 $ 242
Capital Growth 1.59% .79% 2.38% $ 84 $ 272
Mutual Discovery Securities 1.59% 1.05% 2.64% $ 87 $ 298
Precious Metals 1.59% .66% 2.25% $ 83 $ 258
Small Cap 1.59% .90% 2.49% $ 85 $ 283
Templeton Developing Markets Equity 1.59% 1.41% 3.00% $ 90 $ 332
Templeton Global Growth 1.59% .97% 2.56% $ 86 $ 290
Templeton International Equity 1.59% .92% 2.51% $ 85 $ 285
Templeton International Smaller
Companies 1.59% 1.10% 2.69% $ 87 $ 302
Templeton Pacific Growth 1.59% 1.01% 2.60% $ 86 $ 294
</TABLE>
The charges for the newly formed funds have been estimated. The charges for some
of the funds reflect expense reimbursement and/or fee waiver arrangements. For
more detailed information, see the Fee Table in the prospectus for the Contract.
6. TAXES. Your earnings are not taxed until you take them out. In most cases, if
you take money out, earnings come out first and are taxed as income. If you are
younger than 59 1/2 when you take money out, you may be charged a 10% federal
tax penalty on the taxable amounts withdrawn. Payments during the income phase
are considered partly a return of your original investment. That part of each
payment is not taxable as income. If the Contract is tax-qualified, the entire
payment may be taxable.
7. ACCESS TO YOUR MONEY. You may make a withdrawal at any time during the
accumulation phase. Any partial withdrawal must be for at least $500. You may
request a withdrawal or elect the Systematic Withdrawal Program or Minimum
Distribution Program which are briefly described in Section 10 of this Profile.
After the first year, you can make multiple withdrawals up to a total of 15% of
the value of your Contract each year without charge from Allianz Life.
Withdrawals in excess of that amount will be subject to a contingent deferred
sales charge. After Allianz Life has had a payment for 7 years, there is no
charge for withdrawals. Each purchase payment you add to your Contract has its
own 7 year charge period. Of course, you may also have to pay income tax and a
tax penalty on any money you take out.
8. PERFORMANCE OF THE FUNDS. The value of the Contract will vary up or down
depending upon the performance of the fund(s) you choose. From time to time,
Allianz Life may advertise total return figures for each fund. As of the date
of this prospectus, the sale of the Contracts has not begun. Therefore, no
performance is presented here.
9. DEATH BENEFIT. If you die during the accumulation phase, the person you have
selected as your beneficiary will receive a death benefit. This death benefit
will be the greater of: 1) the current value of your Contract, less any taxes,
on the day all claims proofs and payment election forms are received by Allianz
Life at the Valuemark Service Center; or 2) (if applicable) the guaranteed
minimum death benefit, less any taxes, as of the day you die. During the first
year, the guaranteed minimum death benefit is equal to the payments you have
made, less any money you have taken out and any charges paid on the money you
have taken out. After the first year and before your 76th birthday, the
guaranteed minimum death benefit as of the date of death is the greater of: A)
payments you have made, less any money you have taken out and charges paid on
the money you have taken out, increased by 5% per year on each Contract
anniversary; or B) the highest of the Contract values for each six year Contract
anniversary determined by the Contract value on such six year anniversary plus
any payments made, less any money taken out since that Contract anniversary, and
charges paid on the money you have taken out. Different rules will apply after
your 76th birthday.
10. OTHER INFORMATION.
Free Look. If you cancel the Contract within 10 days after receiving it (or
whatever period is required in your state), we will send your money back without
assessing a contingent deferred sales charge. You will receive whatever your
Contract is worth on the day we receive your request. This may be more or less
than your original payment. (Some states require that we return your payment.)
No Probate. In most cases, when you die, your beneficiary will receive
the death benefit without going through probate.
Who should purchase the Contract? The Valuemark IV Variable Annuity
Contract is designed for people seeking long-term tax-deferred accumulation of
assets, generally for retirement or other long-term purposes. The tax-deferred
feature is most attractive to people in high federal and state tax brackets. You
should not buy this Contract if you are looking for a short-term investment or
if you cannot accept the risk of getting back less money than you put in.
Additional Features. The Contract offers additional features which you
might be interested in. These include:
Automatic Investment Plan - You can automatically add to your Contract on a
monthly or quarterly basis for as little as $100 by electronic transfer of funds
from your savings or checking account.
Dollar Cost Averaging Program - You can arrange to have a regular amount
of money automatically transferred to selected funds each month, theoretically
giving you a lower average cost per unit over time than a single one time
purchase. However, there are no guarantees that this will take place.
Flexible Rebalancing - Allianz Life will automatically readjust your money
among the funds to maintain your specified allocation mix. This can be done
quarterly, semi-annually or annually.
Systematic Withdrawal Program - You can elect to receive monthly or
quarterly payments from Allianz Life while your Contract is in the accumulation
phase. Of course, you may have to pay taxes on the money you receive.
Minimum Distribution Program - You can arrange to have money sent to you
each month or quarter to meet certain required distribution requirements imposed
by the Internal Revenue Code.
These features are not available in all states and may not be suitable for your
particular situation.
11. INQUIRIES. If you have any questions about your Contract or need more
information, please contact us at:
Valuemark Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
(800) 624-0197
THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
ISSUED BY
ALLIANZ LIFE VARIABLE ACCOUNT B
AND
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
This prospectus describes the Valuemark IV Variable Annuity Contract with a
fixed account option offered by Allianz Life Insurance Company of North America
(Allianz Life).
The annuity has 24 investment options - the 23 funds of Franklin Valuemark Funds
which are listed below and a fixed account option of Allianz Life. You can put
your money in 10 investment options (which includes any of the funds listed
below and the fixed account). The fixed account may not be available in your
state.
FUND SEEKING STABILITY OF PRINCIPAL AND INCOME
Money Market
FUNDS SEEKING CURRENT INCOME
High Income
Templeton Global Income Securities
The U.S. Government Securities
Zero Coupon - 2000, 2005 and 2010
FUNDS SEEKING GROWTH AND INCOME
Growth and Income
Income Securities
Mutual Shares Securities
Real Estate Securities
Rising Dividends
Templeton Global Asset Allocation
Utility Equity
FUNDS SEEKING CAPITAL GROWTH
Capital Growth
Mutual Discovery Securities
Precious Metals
Small Cap
Templeton Developing Markets Equity
Templeton Global Growth
Templeton International Equity
Templeton International Smaller Companies
Templeton Pacific Growth
Please read this prospectus before investing and keep it for future reference.
It contains important information about the Valuemark IV Variable Annuity
Contract with a fixed account option.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated December 27, 1996.
The SAI has been filed with the Securities and Exchange Commission (SEC) and is
incorporated by reference into this prospectus. The Table of Contents of the SAI
is on Page 21 of this prospectus. For a free copy of the SAI, call us at (800)
342-3863 or write us at: 1750 Hennepin Avenue, Minneapolis, Minnesota
55403-2195.
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
December 27, 1996
TABLE OF CONTENTS
PAGE
INDEX OF TERMS
FEE TABLE
1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
Contract Owner
Joint Owner
Annuitant
Beneficiary
Assignment
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Options
3. PURCHASE
Purchase Payments
Automatic Investment Plan
Allocation of Purchase Payments
Free Look
Accumulation Units
4. INVESTMENT OPTIONS
Transfers
Dollar Cost Averaging Program
Flexible Rebalancing
Voting Rights
Substitution
5. EXPENSES
Insurance Charges
Mortality and Expense Risk Charge
Administrative Charge
Contract Maintenance Charge
Contingent Deferred Sales Charge
Waiver of Contingent Deferred Sales Charge Benefits
Reduction or Elimination of the Contingent Deferred Sales Charge
Transfer Fee
Premium Taxes
Income Taxes
Fund Expenses
6. TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
7. ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Minimum Distribution Program
Suspension of Payments or Transfers
8. PERFORMANCE
9. DEATH BENEFIT
Upon Your Death
Death of Annuitant
10. OTHER INFORMATION
Allianz Life
The Separate Account
Distribution
Administration
Financial Statements
APPENDIX
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
INDEX OF TERMS
We have tried to make this prospectus as understandable for you as possible.
Below is a list of some of the technical terms used in this prospectus. They are
capitalized in the prospectus. The page that is indicated below is where you
will find the definition for the word or term.
Page
Accumulation Phase.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Contract Owner...........................................................
Fixed Account............................................................
Funds....................................................................
Income Date..............................................................
Income Phase.............................................................
Joint Owner..............................................................
Non-Qualified............................................................
Purchase Payment.........................................................
Qualified................................................................
Tax Deferral.............................................................
FEE TABLE
CONTRACT OWNER TRANSACTION FEES
Contingent Deferred Sales Charge*
(as a percentage of purchase payments)
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Complete Years From Receipt Charge
---------------------------------------- -------
0 6%
1 6%
2 6%
3 5%
4 4%
5 3%
6 2%
7 years or more 0%
Transfer Fee First 12 transfers in a Contract year
are free. Thereafter, the fee is $25
(or 2% of the amount transferred, if
less). Dollar Cost Averaging transfers
and Flexible Rebalancing transfers are
not counted.
Contract Maintenance Charge ** $30 per Contract per year
Separate Account Annual Expenses
(as a percentage of average
account value)
Mortality and Expense Risk Charge*** 1.34%
Administrative Charge .15%
--------------------------
Total Separate Account Annual Expenses 1.49%
<FN>
* Each year after the first contract year, you may make multiple partial
withdrawals of up to a total of 15% of the value of your contract and no
contingent deferred sales charge will be assessed. See Section 7 - Access to
Your Money for additional options.
** During the accumulation phase, the charge is waived if the value of your
contract is at least $50,000. If you own more than one Valuemark IV Contract
(registered with the same social security number), we will determine the total
value of all your Contracts. If the total value of all your contracts is at
least $50,000, the charge is waived (except in New Jersey).
*** The Mortality and Expense Risk Charge is 1.25% during the income phase.
</FN>
</TABLE>
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES
(as a percentage of Franklin Valuemark Funds' average net assets)
The Management Fees for each fund are based on a percentage of that fund's
assets under management. See the prospectus for Franklin Valuemark Funds for
more information.
The "Management and Fund Administration Fees" below are the amounts that were
paid to the Managers and Fund Administrators for the 1995 calendar year except
for funds with fee waivers/expense reductions or newer funds without a full year
of operations as of December 31, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Other
and Fund Expenses (after Total
Administration expense Annual
Fees(1/) reductions) Expenses
Money Market Fund (2/) .51% .02% .53%
High Income Fund .53% .03% .56%
Templeton Global Income
Securities Fund (3/) .55% .09% .64%
The U.S. Government Securities Fund .49% .03% .52%
Zero Coupon Fund-2000 (4/) .37% .03% .40%
Zero Coupon Fund-2005 (4/) .37% .03% .40%
Zero Coupon Fund-2010 (4/) .37% .03% .40%
Growth and Income Fund .49% .03% .52%
Income Securities Fund .47% .04% .51%
Mutual Shares Securities Fund (5/) .75% .10% .85%
Real Estate Securities Fund .56% .03% .59%
Rising Dividends Fund .75% .03% .78%
Templeton Global Asset Allocation Fund (5/) .80% .10% .90%
Utility Equity Fund .47% .03% .50%
Capital Growth Fund (5/) .75% .04% .79%
Mutual Discovery Securities Fund (5/) .95% .10% 1.05%
Precious Metals Fund .61% .05% .66%
Small Cap Fund (5/) .75% .15% .90%
Templeton Developing Markets Equity Fund 1.25% .16% 1.41%
Templeton Global Growth Fund .93% .04% .97%
Templeton International Equity Fund .83% .09% .92%
Templeton International Smaller Companies
Fund (5/) 1.00% .10% 1.10%
Templeton Pacific Growth Fund .90% .11% 1.01%
<FN>
1/ The Fund Administration Fee is a direct expense for the Templeton Global
Asset Allocation Fund, the Templeton International Smaller Companies Fund, the
Mutual Shares Securities Fund and the Mutual Discovery Securities Fund; other
funds pay for similar services indirectly through the Management Fee. See the
Franklin Valuemark Funds prospectus for further information regarding these
fees.
2/ Franklin Advisers, Inc. agreed to waive a portion of its Management Fee
and to pay certain expenses of the Money Market Fund during 1995. It is
currently continuing this arrangement in 1996. This arrangement may be
terminated at any time. With this reduction, the fund's total annual expenses
for 1995 were 0.40% of the average daily net assets of the fund.
3/ Prior to May 1, 1996, the Templeton Global Income Securities Fund was known as
the Global Income Fund.
4/ Although not obligated to, Franklin Advisers, Inc. has agreed to waive a
portion of its Management Fees and to pay certain expenses of the three Zero
Coupon Funds through at least December 31, 1996 so that the total expenses of
the Zero Coupon Funds will not exceed 0.40% of each fund's net assets. Absent
the management fee waivers and expense payments, for the year ended December 31,
1995, the Total Annual Expenses and Management and Fund Administration Fees
would have been as follows: Zero Coupon Fund-2000, .63% and .60%; Zero Coupon
Fund-2005, .66% and .63%; and Zero Coupon Fund- 2010, .66% and .63%.
5/ The Templeton Global Asset Allocation Fund began operations on May 1,
1995; the Small Cap Fund began operations on November 1, 1995; the Capital
Growth and Templeton International Smaller Companies Funds began operations on
May 1, 1996; and the Mutual Shares Securities and Mutual Discovery Securities
Funds began operations on November 8, 1996. The expenses shown above for these
funds are therefore estimated for 1996.
</FN>
</TABLE>
The purpose of this Fee Table is to show you the expenses you will incur
directly or indirectly with the contract. The Fee Table reflects expenses of the
Separate Account as well as the funds. The examples below should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown. The $30 contract maintenance charge is
included in the Examples as a prorated charge of $1. Since the average contract
account size is greater than $1,000, the contract maintenance charge is reduced
accordingly. Premium taxes are not reflected in the tables. Premium taxes may
apply. For additional information, see Section 5 - Expenses and the Franklin
Valuemark Funds prospectus.
EXAMPLES
You will pay the following expenses on a $1,000 investment, assuming a 5% annual
return on your money if you surrender your Contract at the end of each time
period:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 3 5 10
Year Years Years Years
Money Market Fund $ 82 $ 117 $ 148 $ 245
High Income Fund $ 82 $ 118 $ 149 $ 248
Templeton Global Income Securities Fund $ 83 $ 121 $ 153 $ 256
The U.S. Government Securities Fund $ 81 $ 117 $ 147 $ 244
Zero Coupon Fund-2000# $ 80 $ 113 $ 141 $ 231
Zero Coupon Fund-2005# $ 80 $ 113 $ 141 $ 231
Zero Coupon Fund-2010# $ 80 $ 113 $ 141 $ 231
Growth and Income Fund $ 81 $ 117 $ 147 $ 244
Income Securities Fund $ 81 $ 117 $ 147 $ 243
Mutual Shares Securities Fund ** $ 85 $ 127
Real Estate Securities Fund $ 82 $ 119 $ 151 $ 251
Rising Dividends Fund $ 84 $ 125 $ 161 $ 271
Templeton Global Asset Allocation Fund** $ 85 $ 129 $ 167 $ 283
Utility Equity Fund $ 81 $ 116 $ 146 $ 242
Capital Growth Fund** $ 84 $ 125 $ 161 $ 272
Mutual Discovery Securities ** $ 87 $ 133
Precious Metals Fund $ 83 $ 121 $ 154 $ 258
Small Cap Fund** $ 85 $ 129 $ 167 $ 283
Templeton Developing Markets Equity Fund $ 90 $ 144 $ 192 $ 332
Templeton Global Growth Fund $ 86 $ 131 $ 170 $ 290
Templeton International Equity Fund $ 85 $ 129 $ 168 $ 285
Templeton International Smaller Companies
Fund** $ 87 $ 135 $ 177 $ 302
Templeton Pacific Growth Fund $ 86 $ 132 $ 172 $ 294
</TABLE>
** Estimated
# Calculated with waiver of fees and reimbursement of expenses
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money if your contract is not surrendered or is
annuitized:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 3 5 10
Year Years Years Years
Money Market Fund $ 22 $ 66 $ 114 $ 245
High Income Fund $ 22 $ 67 $ 115 $ 248
Templeton Global Income Securities Fund $ 23 $ 70 $ 119 $ 256
The U.S. Government Securities Fund $ 22 $ 66 $ 113 $ 244
Zero Coupon Fund-2000# $ 20 $ 62 $ 107 $ 231
Zero Coupon Fund-2005# $ 20 $ 62 $ 107 $ 231
Zero Coupon Fund-2010# $ 20 $ 62 $ 107 $ 231
Growth and Income Fund $ 21 $ 66 $ 113 $ 244
Income Securities Fund $ 21 $ 66 $ 113 $ 243
Mutual Shares Securities Fund** $ 25 $ 76
Real Estate Securities Fund $ 22 $ 68 $ 117 $ 251
Rising Dividends Fund $ 24 $ 74 $ 127 $ 271
Templeton Global Asset Allocation Fund** $ 25 $ 78 $ 133 $ 283
Utility Equity Fund $ 21 $ 65 $ 112 $ 242
Capital Growth Fund** $ 24 $ 74 $ 127 $ 272
Mutual Discovery Securities Fund** $ 27 $ 82
Precious Metals Fund $ 23 $ 70 $ 120 $ 258
Small Cap Fund** $ 25 $ 78 $ 133 $ 283
Templeton Developing Markets Equity Fund $ 30 $ 93 $ 158 $ 332
Templeton Global Growth Fund $ 26 $ 80 $ 136 $ 290
Templeton International Equity Fund $ 25 $ 78 $ 134 $ 285
Templeton International Smaller Companies
Fund** $ 27 $ 84 $ 143 $ 302
Templeton Pacific Growth Fund $ 26 $ 81 $ 138 $ 294
</TABLE>
** Estimated
# Calculated with waiver of fees and reimbursement of other expenses
As of the date of this prospectus, no contracts have been sold. Therefore,
Allianz Life has not provided Condensed Financial Information.
1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
This prospectus describes a variable annuity contract with a fixed account
option offered by Allianz Life.
An annuity is a contract between you, the owner, and an insurance company (in
this case Allianz Life), where the insurance company promises to pay you (or
someone else you choose) an income, in the form of annuity payments, beginning
on a designated date that is at least two years in the future. Until you decide
to begin receiving annuity payments, your annuity is in the accumulation phase.
Once you begin receiving annuity payments, your contract switches to the income
phase. The contract benefits from tax deferral.
Tax deferral means that you are not taxed on earnings or appreciation on the
assets in your contract until you take money out of your contract.
The contract is called a variable annuity because you can choose among 23 funds.
Depending upon market conditions, you can make or lose money in any of these
funds. If you select the variable annuity portion of the contract, the amount of
money you are able to accumulate in your contract during the accumulation phase
depends in part upon the investment performance of the fund(s) you select. The
amount of the annuity payments you receive during the income phase from the
variable annuity portion of the contract also depends upon the investment
performance of the funds you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed for all deposits made within the twelve month period by
Allianz Life. This interest rate is set monthly and is guaranteed for 12 months.
Allianz Life guarantees that the interest credited to the fixed account will not
be less than 3% per year. If you select the fixed account, your money will be
placed with the other general assets of Allianz Life. If you select the fixed
account, the amount of money you are able to accumulate in your contract during
the accumulation phase depends upon the total interest credited to your
contract.
We will not make any changes to your contract without your permission except as
may be required by law.
CONTRACT OWNER . You, as the contract owner, have all the rights under the
contract. The contract owner is as designated at the time the contract is
issued, unless changed. You may change contract owners at any time. This may be
a taxable event. You should consult with your tax adviser before doing this.
JOINT OWNER . The contract can be owned by joint owners. Any joint owner must be
the spouse of the other contract owner (except in Pennsylvania and Oregon). Upon
the death of either joint owner, the surviving spouse will be the designated
beneficiary. Any other beneficiary designation at the time the contract was
issued or as may have been later changed will be treated as a contingent
beneficiary unless otherwise indicated.
ANNUITANT . You name an annuitant. You may change the annuitant at any time
before the income date unless the contract is owned by a non-individual (for
example, a corporation).
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary or contingent beneficiary.
ASSIGNMENT
You can assign the contract at any time during your lifetime. Allianz Life will
not be bound by the assignment until it receives the written notice of the
assignment. Allianz Life will not be liable for any payment or other action we
take in accordance with the contract before we receive notice of the assignment.
Any assignment made after the death benefit has become payable can only be done
with our consent. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be limitations
on your ability to assign the contract.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
You can receive regular monthly income payments under your contract. You can
choose the month and year in which those payments begin. We call that date the
income date. Your income date must be the first day of a calendar month and must
be at least 2 years after you buy the contract. You can also choose among income
plans. We call those annuity options.
We ask you to choose your income date when you purchase the contract. You can
change it at any time before the income date with 30 days notice to us. Annuity
payments must begin by the annuitant's 85th birthday or 10 years from the date
the contract was issued, whichever is later. The annuitant is the person whose
life we look to when we make annuity payments. You (or someone you designate)
will receive the annuity payments. You will receive tax reporting on those
payments.
If you do not choose an annuity option prior to the income date, we will assume
that you selected Option 2 which provides a life annuity with 10 years of
guaranteed payments.
You may elect to receive your annuity payments as a variable payout, a fixed
payout, or a combination of both. Under a fixed payout, all of the annuity
payments will be the same dollar amount (equal installments). Under a variable
payout, you have the same investment choices from the funds that were available
during the accumulation phase. If you do not tell us otherwise, your annuity
payments will be based on the investment allocations that were in place on the
income date.
If you choose to have any portion of your annuity payments come from the
fund(s), the dollar amount of your payment will depend upon three things: 1) the
value of your contract in the fund(s) on the income date, 2) the 5% assumed
investment rate used in the annuity table for the contract, and 3) the
performance of the fund(s) you selected. If the actual performance exceeds the
5% assumed rate, your annuity payments will increase. Similarly, if the actual
rate is less than 5%, your annuity payments will decrease.
ANNUITY OPTIONS
You can choose one of the following annuity options or any other annuity option
you want and that Allianz Life agrees to provide. After annuity payments begin,
you cannot change the annuity option.
OPTION 1. LIFE ANNUITY. Under this option, we will make monthly annuity
payments so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
OPTION 2. LIFE ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under this
option, we will make monthly annuity payments so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will continue to make annuity payments
to you for the rest of the guaranteed period. If you do not want to receive
annuity payments, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
monthly annuity payments during the joint lifetime of the annuitant and the
joint annuitant. When the annuitant dies, if the joint annuitant is still alive,
we will continue to make annuity payments, so long as the joint annuitant
continues to live. The amount of the annuity payments we will make to the
survivor can be equal to 100%, 75% or 50% of the amount that we would have paid
if they both were alive. The monthly annuity payments will end when the last
surviving annuitant dies.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS
GUARANTEED. Under this option, we will make monthly annuity payments during the
joint lifetime of the annuitant and the joint annuitant. When the annuitant
dies, if the joint annuitant is still alive, we will continue to make annuity
payments, so long as the surviving annuitant continues to live, at 100% of the
amount that would have been paid if they were both alive. If, when the last
death occurs, we have made annuity payments for less than the selected
guaranteed period, we will continue to make annuity payments to you or any
person you designate for rest of the guaranteed period. If you do not want to
receive annuity payments, you can ask us for a single lump sum.
OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make monthly annuity
payments during the annuitant's lifetime. The last annuity payment will be made
before the annuitant dies with a guarantee that Allianz Life will pay you a
refund.
3. PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you invest in the contract. The minimum payment
Allianz Life will accept is $5,000 when the contract is bought as a
non-qualified contract. If you enroll in the Automatic Investment Plan (which is
described below), your purchase payment can be $2,000. If you are buying the
contract as part of an IRA (Individual Retirement Annuity), 401(k) or other
qualified plan, the minimum amount we will accept is $2,000. The maximum we will
accept without our prior approval is $1 million. You can make additional
purchase payments of $250 (or as low as $100 if you have selected the Automatic
Investment Plan) or more to either type of contract. At the time you buy the
contract, you and the annuitant cannot be older than 85 years old.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan (AIP) is a program which allows you to make
additional purchase payments to your contract on a monthly or quarterly basis by
electronic transfer of funds from your savings or checking account. You may
participate in this program by completing the appropriate form. We must receive
your form by the first of the month in order for AIP to begin that same month.
Investments will take place on the 20th of the month, or the next business day.
The minimum investment that can be made by AIP is $100. You may stop AIP at any
time you want. We need to be notified by the first of the month in order to stop
or change AIP that month. If AIP is used for a qualified contract, you should
consult your tax adviser for advice regarding maximum contributions.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the funds you have selected. We ask that you
allocate your money in either whole percentages or round dollars. The fixed
account may not be available in your state (check with your registered
representative). You can instruct us how to allocate additional purchase
payments you make. If you do not instruct us, we will allocate them in the same
way as your previous instructions to us. Allianz Life reserves the right to
limit the number of funds that you may invest in at one time. Currently, you may
invest in 10 investment options at one time (which includes any of the 23 funds
of Franklin Valuemark Funds listed in Section 4 and the Allianz Life fixed
account). We may change this in the future. However, we will always allow you to
invest in at least five funds.
Once we receive your purchase payment, the necessary information and federal
funds (federal funds means monies credited to a bank's account with its regional
federal reserve bank), we will issue your contract and allocate your first
purchase payment within 2 business days. If you do not give us all of the
information we need, we will contact you to get it. If for some reason we are
unable to complete this process within 5 business days, we will either send back
your money or get your permission to keep it until we get all of the necessary
information. If you make additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern time.
FREE LOOK
If you change your mind about owning the contract, you can cancel it within 10
days after receiving it (or the period required in your state). When you cancel
the contract within this time period, Allianz Life will not assess a contingent
deferred sales charge. You will receive back whatever your contract is worth on
the day we receive your request. In certain states or if you have purchased the
contract as an IRA, we may be required to give you back your purchase payment if
you decide to cancel your contract within 10 days after receiving it (or
whatever period is required in your state). If that is the case, we reserve the
right to put your purchase payment in the Money Market Fund for 15 days after we
issue your contract. (In some states, the period may be longer.) At the end of
that period, we will re-allocate those funds as you selected. Currently,
however, we will directly allocate your money to the funds and/or the fixed
account as you have selected.
ACCUMULATION UNITS
The value of the portion of your contract allocated to the funds will go up or
down depending upon the investment performance of the fund(s) you choose. The
value of your contract will also depend on the expenses of the contract. In
order to keep track of the value of your contract, we use a measurement called
an accumulation unit (which is like a share of a mutual fund). During the income
phase of the contract we call it an annuity unit.
Every business day we determine the value of an accumulation unit for a fund by
multiplying the accumulation unit value for the previous period by a factor for
each fund for the current period. The factor for each fund is determined by:
1. dividing the value of a fund share at the end of the current period
by the value of a fund share for the previous period; and
2. multiplying it by one minus the daily amount of the insurance charges
and any charges for taxes.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to a fund by the value of the
accumulation unit for that fund.
We calculate the value of an accumulation unit for each fund after the New York
Stock Exchange closes each day and then credit your contract.
EXAMPLE:
On Wednesday we receive an additional purchase payment of $3,000 from you. You
have told us you want this to go to the Growth and Income Fund. When the New
York Stock Exchange closes on that Wednesday, we determine that the value of an
accumulation unit for the Growth and Income Fund is $12.50. We then divide
$3,000 by $12.50 and credit your contract on Wednesday night with 240
accumulation units for the Growth and Income Fund.
4. INVESTMENT OPTIONS
The Contract offers 23 funds of Franklin Valuemark Funds and a fixed account
option of Allianz Life. Additional funds may be available in the future.
YOU SHOULD READ THE FRANKLIN VALUEMARK FUNDS PROSPECTUS (WHICH IS ATTACHED TO
THIS PROSPECTUS) CAREFULLY BEFORE INVESTING.
Franklin Valuemark Funds is the mutual fund underlying your contract. Each fund
has its own investment objective. Franklin Advisers, Inc. serves as each fund's
investment manager (except the Templeton Global Growth Fund, the Templeton
Developing Markets Equity Fund, the Templeton Global Asset Allocation Fund, the
Templeton International Smaller Companies Fund, the Rising Dividends Fund, the
Mutual Shares Securities Fund and the Mutual Discovery Securities Fund). The
investment manager for the Templeton Global Growth and the Templeton Global
Asset Allocation Funds is Templeton Global Advisors Limited. The investment
manager for the Templeton Developing Markets Equity Fund is Templeton Asset
Management Ltd. The investment manager for the Templeton International Smaller
Companies Fund is Templeton Investment Counsel, Inc. The investment manager for
the Rising Dividends Fund is Franklin Advisory Services, Inc. The investment
manager for the Mutual Shares Securities and the Mutual Discovery Securities
Funds is Franklin Mutual Advisers, Inc. Certain managers have retained one or
more sub-advisers to help them manage the funds.
Franklin Valuemark Funds serves as the underlying mutual fund for variable life
insurance policies offered by Allianz Life and other variable annuity contracts
offered by Allianz Life and its affiliates. Franklin Valuemark Funds does not
believe that offering its shares in this manner will be disadvantageous to you.
The following is a list of the funds which are available under the contract:
FUND SEEKING STABILITY OF PRINCIPAL AND INCOME:
Money Market
FUNDS SEEKING CURRENT INCOME:
High Income
Templeton Global Income Securities
The U.S. Government Securities
Zero Coupon - 2000, 2005 and 2010
FUNDS SEEKING GROWTH AND INCOME:
Growth and Income
Income Securities
Mutual Shares Securities
Real Estate Securities
Rising Dividends
Templeton Global Asset Allocation
Utility Equity
FUNDS SEEKING CAPITAL GROWTH:
Capital Growth
Mutual Discovery Securities
Precious Metals
Small Cap
Templeton Developing Markets Equity
Templeton Global Growth
Templeton International Equity
Templeton International Smaller Companies
Templeton Pacific Growth
TRANSFERS
You can transfer money among the 23 funds and/or the fixed account. Allianz Life
currently allows you to make as many transfers as you want to each year. Allianz
Life may change this practice in the future. However, this product is not
designed for professional market timing organizations or other individuals using
programmed and frequent transfers. Such activity may be disruptive to a fund. We
reserve the right to stop or prohibit these types of transfers if we determine
that they could harm a fund.
Your contract provides that you can make 3 transfers every year without charge.
However, currently Allianz Life permits you to make 12 transfers every year
without charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any fund. If you make more than 12 transfers in a year, there is a transfer fee
deducted. The fee is $25 per transfer or, if less, 2% of the amount transferred.
The following applies to any transfer:
1. The minimum amount which you can transfer is $1,000 ($500 in New Jersey)
or your entire value in the fund or fixed account. This requirement is waived if
the transfer is in connection with the Dollar Cost Averaging Program or Flexible
Rebalancing (which are described below).
2. We may not allow you to make transfers during the free look period.
3. Your request for a transfer must clearly state which fund(s) or the
fixed account is involved in the transfer.
4. Your request for a transfer must clearly state how much the transfer
is for.
5. You cannot make any transfers within 7 calendar days prior to the date
your first annuity payment is due.
6. During the income phase, you may not make a transfer from a fixed
annuity option to a variable annuity option.
7. During the income phase, you can make at least one transfer from a
variable annuity option to a fixed annuity option.
Allianz Life has reserved the right to modify the transfer provisions subject to
the guarantees described above.
You can make transfers by telephone. We may allow you to authorize someone else
to make transfers by telephone on your behalf. If you own the contract with a
joint owner, unless Allianz Life is instructed otherwise, Allianz Life will
accept instructions from either one of you. Allianz Life will use reasonable
procedures to confirm that instructions given us by telephone are genuine. If we
do not use such procedures, we may be liable for any losses due to unauthorized
or fraudulent instructions. Allianz Life tape records all telephone
instructions.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount of money each month or quarter from any one fund or the fixed account to
up to eight of the other funds. By allocating amounts on a regularly scheduled
basis, as opposed to allocating the total amount at one particular time, you may
be less susceptible to the impact of market fluctuations. You may only
participate in this program during the accumulation phase.
You must participate in the program for at least six months (or two quarters)
and must transfer at least $500 each time (or $1,500 each quarter). Your
allocations can be in whole percentages or dollar amounts. The fund(s) you
transfer from may not be the fund(s) you transfer to in this program. You may
elect this program by properly completing the Dollar Cost Averaging forms
provided by Allianz Life.
All Dollar Cost Averaging transfers will be made on the 10th day of the month
unless that day is not a business day. If it is not, then the transfer will be
made the next business day.
Your participation in the program will end when any of the following occurs: (1)
the number of desired transfers have been made; (2) you do not have enough money
in the fund(s) or fixed account to make the transfer (if less money is
available, that amount will be dollar cost averaged and the program will end);
(3) you request to terminate the program (your request must be received by us by
the first of the month to terminate that month); (4) the contract is terminated;
or (5) we receive proof of the Contract Owner's death.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
You may not participate in the Dollar Cost Averaging Program and Flexible
Rebalancing at the same time.
FLEXIBLE REBALANCING
Once your money has been invested, the performance of the funds and the earnings
from the fixed account may cause your allocation to shift. Flexible Rebalancing
is designed to help you maintain your specified allocation mix between the
different funds. You can direct us to readjust your money on a quarterly,
semi-annual or annual basis to return to your original allocations. Flexible
Rebalancing transfers will be made on the 20th day of the month unless that day
is not a business day. If it is not, then the transfer will be made on the
previous day. If you participate in the Flexible Rebalancing Program, the
transfers made under the program are not taken into account in determining any
transfer fee. The fixed account is not permitted to be part of Flexible
Rebalancing.
VOTING RIGHTS
Allianz Life is the legal owner of the fund shares. However, Allianz Life
believes that when a fund solicits proxies in conjunction with a shareholder
vote, it is required to obtain from you and other contract owners instructions
as to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. This will also
include any shares that Allianz Life owns on its own behalf. Should Allianz Life
determine that it is no longer required to comply with the above, we will vote
the shares in our own right.
SUBSTITUTION
Allianz Life may be required to substitute one of the funds you have selected
with another fund. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intention to
do this.
5. EXPENSES
There are charges and other expenses associated with the contract that will
reduce your investment return. These charges and expenses are:
INSURANCE CHARGES
Each day, Allianz Life makes a deduction for its insurance charges. Allianz
Life does this as part of its calculation of the value of the accumulation
units and the annuity units. The insurance charge has two parts: 1) the
mortality and expense risk charge and 2) the administrative charge.
MORTALITY AND EXPENSE RISK CHARGE . During the accumulation phase, this charge
is equal, on an annual basis, to 1.34% of the average daily value of the
contract invested in a fund, after the deduction of expenses. During the income
phase, the charge is equal, on an annual basis, to 1.25% of the average daily
value of the contract invested in a fund, after the deduction of expenses. This
charge compensates us for all the insurance benefits provided by your contract
(for example, the guarantee of annuity rates, the death benefits, certain
expenses related to the contract, and for assuming the risk (expense risk) that
the current charges will be insufficient in the future to cover the cost of
administering the contract). The amount of the mortality and expense risk charge
is less during the income phase because Allianz Life does not pay a death
benefit if you die during the income phase. If this charge is not sufficient,
then Allianz Life will bear the loss. Allianz Life does, however, expect to
profit from this charge. The mortality and expense risk charge cannot be
increased. Allianz Life may use any profits it makes from this charge to pay for
the costs of distributing the contract.
ADMINISTRATIVE CHARGE . This charge is equal, on an annual basis, to .15% of the
average daily value of the contract invested in a fund, after the deduction of
expenses. This charge, together with the contract maintenance charge (which is
explained below), is for all the expenses associated with the administration of
the contract. Some of these expenses include: preparation of the contract,
confirmations, annual reports and statements, maintenance of contract records,
personnel costs, legal and accounting fees, filing fees, and computer and
systems costs. Because this charge is taken out of every unit value, you may pay
more in administrative costs than those that are associated solely with your
contract. Allianz Life does not intend to profit from this charge. However, if
this charge and the contract maintenance charge are not enough to cover the
costs of the contracts in the future, Allianz Life will bear the loss.
CONTRACT MAINTENANCE CHARGE
Every year on the anniversary of the date when your contract was issued, Allianz
Life deducts $30 from your contract as a contract maintenance charge. This
charge is for administrative expenses (see above). This charge can not be
increased.
However, during the accumulation phase, if the value of your contract is at
least $50,000 when the deduction for the charge is to be made, Allianz Life will
not deduct this charge. If you own more than one Valuemark IV contract, Allianz
Life will determine the total value of all your contracts. If the total value of
all contracts registered under the same social security number is at least
$50,000, Allianz Life will not assess the contract maintenance charge (except in
New Jersey). If the contract is owned by a non-natural person (e.g., a
corporation), Allianz Life will look to the annuitant to determine if it will
assess the charge.
If you make a complete withdrawal from your contract, the contract maintenance
charge will also be deducted. During the income phase, the charge will be
collected monthly out of each annuity payment.
CONTINGENT DEFERRED SALES CHARGE
Withdrawals may be subject to a contingent deferred sales charge. During the
accumulation phase, you can make withdrawals from your contract. Allianz Life
keeps track of each purchase payment you make. The amount of the contingent
deferred sales charge depends upon how long Allianz Life has had your payment.
The charge is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of complete years from
receipt of payment: 0 1 2 3 4 5 6 7 or more
Contingent Deferred Sales Charge: 6% 6% 6% 5% 4% 3% 2% 0%
</TABLE>
However, after Allianz Life has had a purchase payment for 7 years, there is no
charge when you withdraw that purchase payment. For purposes of the contingent
deferred sales charge, Allianz Life treats withdrawals as coming from the oldest
purchase payments first. Allianz Life does not assess the contingent deferred
sales charge on any payments paid out as annuity payments or as death benefits.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money you put into the contract. Thus, for tax purposes, earnings are
considered to come out first.
Free Withdrawal Amount - Each year after the first contract year, you can make
multiple withdrawals up to 15% of the value of your contract and no contingent
deferred sales charge will be deducted from the 15% you take out. Withdrawals in
excess of that free amount will be subject to the contingent deferred sales
charge.
You may also select to participate in the Systematic Withdrawal
Program or the Minimum Distribution Program which allow you to withdraw money
without the deduction of the contingent deferred sales charge under certain
circumstances. See Section 7 - Access to Your Money for a description of the
Systematic Withdrawal Program and the Minimum Distribution Program.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE BENEFITS
Under certain circumstances, after the first year, Allianz Life will permit you
to take your money out of the contract without deducting a contingent deferred
sales charge: 1) if you become confined to a nursing home; 2) if you become
terminally ill, which is defined as life expectancy of 12 months or less (a full
surrender of the contract will be required); or 3) if you become totally
disabled for at least 90 days.
Also, after the first year, if you become unemployed for at least 90 days, you
can take up to 50% of your money out without incurring a contingent deferred
sales charge. This benefit is available only once during the life of the
contract and you may not use both this benefit and the 15% free withdrawal
amount in the same contract year.
These benefits may not be available in your state.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
Allianz Life will reduce or eliminate the amount of the contingent deferred
sales charge when the contract is sold under circumstances which reduce its
sales expenses. Some examples are: if there is a large group of individuals that
will be purchasing the contract or a prospective purchaser already had a
relationship with Allianz Life. Allianz Life will not deduct a contingent
deferred sales charge under a contract issued to an officer, director or
employee of Allianz Life or any of its affiliates. Also, Allianz Life will not
deduct a contingent deferred sales charge when a contract is sold by an agent of
Allianz Life to any members of his or her immediate family and the commission is
reduced. Any circumstances resulting in reduction or elimination of the
contingent deferred sales charge requires prior approval of Allianz Life.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred, whichever is less,
for each additional transfer.
If the transfer is part of the Dollar Cost Averaging Program or Flexible
Rebalancing, it will not count in determining the transfer fee.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Allianz Life is responsible for the payment of
these taxes and will make a deduction from the value of the contract for them.
Some of these taxes are due when the contract is issued, others are due when
annuity payments begin. It is Allianz Life's current practice to not charge you
for these taxes until you die, annuity payments begin or a complete withdrawal
is made. Allianz Life may some time in the future discontinue this practice and
assess the charge when the tax is due. Premium taxes generally range from 0% to
3.5%, depending on the state.
INCOME TAXES
Allianz Life will deduct from the contract for any income taxes which it may
incur because of the contract. Currently, Allianz Life is not making any such
deductions.
FUND EXPENSES
There are deductions from and expenses paid out of the assets of the various
funds which are described in the attached prospectus for Franklin Valuemark
Funds.
6. TAXES
NOTE: Allianz Life has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice. You should consult
your own tax adviser about your own circumstances. Allianz Life has included
additional information regarding taxes in the Statement of Additional
Information.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Basically, these rules provide that you will not be taxed on the earnings on the
money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules regarding how you will be
taxed depending upon how you take the money out and the type of contract
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment you receive will be treated as a partial return of your purchase
payments and will not be taxed. The remaining portion of the annuity payment
will be treated as ordinary income. How the annuity payment is divided between
taxable and non-taxable portions depends upon the period over which the annuity
payments are expected to be made. Annuity payments received after you have
received all of your purchase payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g., a
corporation or certain other entities other than tax-qualified trusts), the
contract will generally not be treated as an annuity for tax purposes. This
means that the contract may not receive the benefits of tax-deferral. Income may
be taxed as ordinary income every year.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract under a qualified plan, your contract is referred
to as a qualified contract. Examples of qualified plans are: Individual
Retirement Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as
403(b) contracts), H.R. 10 Plans (sometimes referred to as Keogh Plans), and
pension and profit-sharing plans, which include 401(k) plans.
If you do not purchase the contract under a qualified plan, your contract is
referred to as a non-qualified contract.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. In most
cases, such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a tax penalty. The amount of the penalty
is equal to 10% of the amount that is includible in income. Some withdrawals
will be exempt from the penalty. They include any amounts: (1) paid on or after
the taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the
taxpayer becomes totally disabled (as that term is defined in the Code); (4)
paid in a series of substantially equal payments made annually (or more
frequently) for the life or life expectancy of the taxpayer; (5) paid under an
immediate annuity; or (6) which come from purchase payments made prior to August
14, 1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern qualified
contracts. A more complete discussion of withdrawals from qualified contracts is
contained in the Statement of Additional Information.
WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of purchase payments made by owners from certain
Tax-Sheltered Annuities. Withdrawals can only be made when a Contract Owner: (1)
reaches age 59-1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled (as
that term is defined in the Code); or (5) in the case of hardship. However, in
the case of hardship, the Contract Owner can only withdraw the purchase payments
and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Allianz Life believes that the funds are being managed so as
to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Allianz Life
would be considered the owner of the shares of the funds. If this occurs, it
will result in the loss of the favorable tax treatment for the contract. It is
unknown to what extent under federal tax law Contract Owners are permitted to
select funds, to make transfers among the funds or the number and type of funds
Contract Owners may select from. If any guidance is provided which is considered
a new position, then the guidance would generally be applied prospectively.
However, if such guidance is considered not to be a new position, it may be
applied retroactively. This would mean that you, as the owner of the contract,
could be treated as the owner of the funds.
Due to the uncertainty in this area, Allianz Life reserves the
right to modify the contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making a withdrawal
(either a partial or a total withdrawal); (2) by receiving annuity payments; or
(3) when a death benefit is paid to your beneficiary. Withdrawals can only be
made during the accumulation phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any applicable contingent deferred sales
charge, less any premium tax and less any contract maintenance charge. (See
Section 5 - Expenses for a discussion of the charges.)
Any partial withdrawal must be for at least $500 and, unless you instruct
Allianz Life otherwise, and will be made pro-rata from all the funds and the
fixed account you selected. Allianz Life requires that after you make a partial
withdrawal the value of your contract must be at least $2,000.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan. For a more complete explanation see Section 6 - Taxes
and the discussion in the SAI.
SYSTEMATIC WITHDRAWAL PROGRAM
If the value of your contract is at least $25,000, Allianz Life offers a program
which provides automatic monthly or quarterly payments to you each year. The
total systematic withdrawals which you can make each year without Allianz Life
deducting a contingent deferred sales charge is limited to 15% of the value of
your contract on the day the request is received. You may withdraw any amount
you want under this program if your payments are no longer subject to the
contingent deferred sales charge. You may not participate in this program if you
own a non-qualified contract and are under age 59 1/2. If you make withdrawals
under this program, you may not also use the 15% free withdrawal amount that
year. For a discussion of the contingent deferred sales charge and the 15% free
withdrawal amount, see Section 5 - Expenses. All Systematic Withdrawals will be
made on the 9th day of the month unless that day is not a business day. If it is
not, then the withdrawal will be made the previous business day.
INCOME TAXES MAY APPLY TO SYSTEMATIC WITHDRAWALS.
MINIMUM DISTRIBUTION PROGRAM
If you own a contract that is an Individual Retirement Annuity (IRA), you may
select the Minimum Distribution Program. Under this program, Allianz Life will
make payments to you that are designed to meet the applicable minimum
distribution requirements imposed by the Internal Revenue Code for IRAs. If the
value of your contract is at least $25,000, Allianz Life will make payments to
you on a monthly or quarterly basis. The payments will not be subject to the
contingent deferred sales charge and will be instead of the 15% free withdrawal
amount.
SUSPENSION OF PAYMENTS OR TRANSFERS
Allianz Life may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of the fund shares
is not reasonably practicable or Allianz Life cannot reasonably value the fund
shares;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of Contract Owners.
Allianz Life has reserved the right to defer payment for a withdrawal or
transfer from the fixed account for the period permitted by law but not for more
than six months.
8. PERFORMANCE
Allianz Life periodically advertises performance of the various funds. Allianz
Life will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that unit
by the value of the accumulation unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges. It does not
reflect the deduction of any applicable contingent deferred sales charge and
contract maintenance charge. The deduction of any applicable contract
maintenance charge and contingent deferred sales charges would reduce the
percentage increase or make greater any percentage decrease. Any advertisement
will also include average annual total return figures which reflect the
deduction of the insurance charges, contract maintenance charge, contingent
deferred sales charges and the expenses of the funds. Allianz Life may also
advertise aggregate total return information. Aggregate total return is
determined the same way except that the results are not annualized.
Certain funds have been in existence for some time and have investment
performance history. However, the contracts are new. In order to demonstrate how
the actual investment experience of the funds may affect your accumulation unit
values, Allianz Life has prepared hypothetical performance information (Part A
of the Appendix to this prospectus). The performance is based on the performance
of the funds, modified to reflect the charges and expenses of your contract as
if it had been in existence for the time periods shown. The information is based
upon the historical experience of the funds and does not necessarily represent
what your investment would earn in those funds.
The Mutual Shares Securities Fund and the Mutual Discovery Securities Fund (New
Valuemark funds) are newly created and therefore also do not yet have any
meaningful performance history. However, they have the same investment
objectives and portfolio managers and substantially the same investment policies
as two corresponding series of Franklin Mutual Series Fund Inc. (formerly,
Mutual Series Fund Inc.) which have been sold to the public (Public Funds). In
order to show how the performance of the Public Funds would have affected
accumulation unit values, hypothetical performance information was developed.
Part B of the Appendix to this prospectus shows the historical performance of
the Public Funds which reflects the deduction of the historical fees and
expenses paid by the Public Funds and not those paid by the New Valuemark funds.
There are hypothetical performance figures for the accumulation units which
assume the deduction of the Mortality and Expense Risk Charge, the
Administrative Charge and the fees and expenses that the Public Funds paid.
There are also hypothetical performance figures for the accumulation units which
reflect the deduction of the Mortality and Expense Risk Charge, the
Administrative Charge, the Contingent Deferred Sales Charge, the contract
maintenance charge and the fees and expenses that the Public Funds paid. The
hypothetical performance figures for the accumulation units have not been
restated to reflect the higher fees for the New Valuemark funds. If the higher
fees were used, the hypothetical performance shown would be lower. Future
performance may vary and the results shown are not necessarily representative of
future results.
Allianz Life may in the future also advertise yield information for one or more
of the funds. If it does, it will provide you with information regarding how
yield is calculated. More detailed information regarding how performance is
calculated is found in the SAI.
Any performance advertised will be based on historical data and does not
guarantee future results of the funds.
9. DEATH BENEFIT
UPON YOUR DEATH
If you die during the accumulation phase, Allianz Life will pay a death benefit
to your beneficiary (see below). No death benefit is paid during the income
phase. If you have a joint owner, and the joint owner dies, the surviving owner
will be considered the beneficiary. Joint owners must be spouses (except in
Pennsylvania and Oregon).
The death benefit will be the greater of: 1) the current value of your contract,
less any taxes on the day all claim proofs and payment election forms are
received by Allianz Life at the Valuemark Service Center; or 2) as set forth in
the enhanced death benefit endorsement to the contract, the guaranteed minimum
death benefit, less any taxes, as of the day you die. Certain Contract Owners
will not receive an enhanced death benefit endorsement. For these owners, the
death benefit is as set forth in Item No. 1 above. During the first year, the
guaranteed minimum death benefit is equal to the payments you have made, less
any money you have taken out and any charges paid on the money you have taken
out. After the first year and before your 76th birthday, the guaranteed minimum
death benefit is the greater of: A) payments you have made, less any money you
have taken out and charges paid on the money you have taken out, increased by 5%
per year on each contract anniversary; or B) the highest of the contract values
for each six year contract anniversary determined by the contract value on such
six year anniversary plus any payments made, less any money taken out since that
contract anniversary, and charges paid on the money you have taken out. After
your 76th birthday, the guaranteed minimum death benefit will only be increased
by any payments you have made since the last contract anniversary before your
76th birthday less any money you have taken out and any charges paid on the
money you have taken out since such contract anniversary. If you have a joint
owner, the age of the oldest owner will be used to determine the guaranteed
minimum death benefit. The guaranteed minimum death benefit will be reduced by
any amounts withdrawn after the date of death. If the contract is owned by a
non-natural person, then all references to you mean the annuitant.
The death benefit provision described above may not
be available in your state. If it is not available, the death benefit will be
equal to the value of your contract (less any premium taxes) on the business day
that Allianz Life receives proof of the death and payment instructions.
A beneficiary may request that the death benefit be paid in one of the following
ways: (1) payment of the entire death benefit within 5 years of the date of
death; or (2) payment of the death benefit under an annuity option. The death
benefit payable under an annuity option must be paid over the beneficiary's
lifetime or for a period not extending beyond the beneficiary's life expectancy.
Payment must begin within one year of the date of death. If the beneficiary is
the spouse of the contract owner, he/she can choose to continue the contract in
his/her own name at the then current value, or if greater, the death benefit
value. If a lump sum payment is elected and all the necessary requirements are
met, the payment will be made within 7 days.
If you (or any joint owner) die during the income phase and you are not the
annuitant, any payments which are remaining under the annuity option selected
will continue at least as rapidly as they were being paid at your death. If you
die during the income phase, the beneficiary becomes the contract owner.
DEATH OF ANNUITANT
If the annuitant, who is not a contract owner or joint owner, dies during the
accumulation phase, you can name a new annuitant. If a new annuitant is not
named within 30 days of the death of the annuitant, you will become the
annuitant. However, if the contract owner is a non-natural person (e.g., a
corporation), then the death of the annuitant will be treated as the death of
the contract owner, and a new annuitant may not be named.
If the annuitant dies after annuity payments have begun, the remaining amounts
payable, if any, will be as provided for in the annuity option selected. The
remaining amounts payable will be paid to the contract owner at least as rapidly
as they were being paid at the annuitant's death.
10. OTHER INFORMATION
ALLIANZ LIFE
Allianz Life Insurance Company of North America (Allianz Life), 1750 Hennepin
Avenue, Minneapolis, Minnesota 55403, was organized under the laws of the state
of Minnesota in 1896. Allianz Life offers fixed and variable life insurance and
annuities and group life, accident and health insurance. Allianz Life is
licensed to do business in 49 states and the District of Columbia. Allianz Life
is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding.
THE SEPARATE ACCOUNT
Allianz Life established a separate account, Allianz Life Variable Account B
(Separate Account), to hold the assets that underlie the contracts. The Board of
Directors of Allianz Life adopted a resolution to establish the Separate Account
under Minnesota insurance law on May 31, 1985. Allianz Life has registered the
Separate Account with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940. The Separate Account
is divided into sub-accounts. Each sub-account invests in a fund.
The assets of the Separate Account are held in Allianz Life's name on behalf of
the Separate Account and legally belong to Allianz Life. However, those assets
that underlie the contracts, are not chargeable with liabilities arising out of
any other business Allianz Life may conduct. All the income, gains and losses
(realized or unrealized) resulting from these assets are credited to or charged
against the contracts and not against any other contracts Allianz Life may
issue.
DISTRIBUTION
NALAC Financial Plans LLC (NFP) 1750 Hennepin Avenue, Minneapolis, MN 55403,
acts as the distributor of the contracts. NFP is a wholly-owned subsidiary of
Allianz Life.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions up to 6.0% of purchase payments.
Sometimes, Allianz Life enters into an agreement with the broker-dealer to pay
the broker-dealer commissions as a combination of a certain amount of the
commission at the time of sale and a trail commission (which when totaled could
exceed 6% of purchase payments). In addition, Allianz Life and Franklin
Advisers, Inc. and/or its affiliates may pay certain sellers for other services
not directly related to the sale of the contracts (such as special marketing
support allowances). To the extent that the contingent deferred sales charge is
insufficient to cover the actual cost of distribution, Allianz Life may use any
of its corporate assets, including any profit from the mortality and expense
risk charge, to make up any difference.
ADMINISTRATION
Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300
Berwyn Park, Berwyn, Pennsylvania, to perform administrative services regarding
the contracts. The administrative services include issuance of the contracts and
maintenance of contract owner's records.
FINANCIAL STATEMENTS
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
APPENDIX
PERFORMANCE INFORMATION
The following information is based on the historical investment performance of
the funds. The results shown are not necessarily representative of future
performance.
PART A - FRANKLIN VALUEMARK FUNDS - EXISTING FUNDS
The funds of Franklin Valuemark Funds have been in existence for some time and
have investment performance history (except the Small Cap, Capital Growth,
Templeton International Smaller Companies, Mutual Shares Securities and Mutual
Discovery Securities Funds). In order to show you how investment performance of
the funds affects accumulation unit values, we have developed the following
hypothetical performance information.
The chart below shows the actual historical investment performance of the funds
and hypothetical accumulation unit performance. The hypothetical accumulation
unit performance assumes that the accumulation units were invested in each of
the funds for the same periods. The performance figures in Column I reflect the
deduction of the actual fees and expenses paid by the funds. Column II
represents hypothetical performance figures for the accumulation units which
reflects the deduction of the insurance charges and the fees and expenses of the
funds. Column III represents hypothetical performance figures for the
accumulation units which reflects the insurance charges, the contract
maintenance charge, the fees and expenses of the funds and assumes that you make
a withdrawal at the end of the period (therefore the contingent deferred sales
charge is reflected).
Total Return for the periods ended 9/30/96:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Column I Column II Column III
Fund Performance Hypothetical Accumulation Unit Performance
--------------------------------------------------- -------------------------
Inception Since Since Since
--------- ------------------------- -------------------------- -------------------------
FUND Date 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception
- ----------------------------------- --------- ------------------------- -------------------------- -------------------------
Money Market 1/24/89 5.27% 4.03% 5.14% 3.71% 2.50% 3.63% -2.39% 1.77% 3.53%
High Income 1/24/89 12.29% 12.48% 9.96% 10.61% 10.79% 8.35% 4.51% 10.79% 8.26%
Templeton Global Income Securities 1/24/89 9.29% 6.39% 7.71% 7.65% 5.01% 6.26% 1.55% 4.35% 6.18%
The U.S. Government Securities 3/14/89 4.65% 7.23% 8.04% 3.09% 5.75% 6.51% -3.01% 5.11% 6.43%
Zero Coupon - 2000 3/14/89 4.44% 8.87% 9.61% 2.89% 7.31% 8.03% -3.21% 6.71% 7.95%
Zero Coupon - 2005 3/14/89 2.80% 10.27% 10.79% 1.27% 8.82% 9.26% -4.83% 8.24% 9.18%
Zero Coupon - 2010 3/14/89 1.87% 10.92% 10.96% 0.35% 9.73% 9.61% -5.75% 9.18% 9.53%
Growth and Income 1/24/89 13.70% 11.47% 9.34% 12.00% 10.12% 7.94% 5.90% 9.57% 7.85%
Income Securities 1/24/89 10.35% 11.29% 11.42% 8.70% 9.70% 9.83% 2.60% 9.14% 9.76%
Real Estate Securities 1/24/89 20.87% 14.94% 11.38% 19.06% 13.17% 9.73% 12.96% 12.67% 9.64%
Rising Dividends 1/27/92 18.73% -- 8.64% 16.95% -- 7.05% 10.85% -- 6.37%
Utility Equity 1/24/89 10.82% 8.78% 10.58% 9.27% 7.38% 9.12% 3.17% 6.78% 9.04%
Precious Metals 1/24/89 2.55% 8.36% 6.47% 1.02% 6.74% 4.90% -5.08% 6.12% 4.81%
Templeton Developing Markets Equity 3/15/94 10.88% -- 4.53% 9.22% -- 2.98% 3.12% -- 0.91%
Templeton Global Growth 3/15/94 11.81% -- 10.81% 10.14% -- 9.17% 4.04% -- 7.28%
Templeton International Equity 1/27/92 11.60% -- 10.35% 9.93% -- 8.74% 3.83% -- 8.11%
Templeton Pacific Growth 1/27/92 11.24% -- 10.37% 9.58% -- 8.76% 3.48% -- 8.12%
Templeton Global Asset Allocation 5/1/96 14.80% -- 13.23% 13.09% -- 11.46% 6.99% -- 7.87%
</TABLE>
PART B - PUBLIC FUNDS
The Mutual Shares Securities Fund and Mutual Discovery Securities Fund ("New
Valuemark funds") are newly created series of Franklin Valuemark Funds and do
not yet have any meaningful performance history. The New Valuemark funds do,
however, have the same investment objective and portfolio managers,(1) and
substantially the same investment policies, as two corresponding series of
Franklin Mutual Series Fund Inc. (formerly "Mutual Series Fund Inc.") which have
been sold directly to the public ("Public Funds").
Chart 1 below shows the past performance of the Public Funds, in terms of
average annual total return over the periods indicated. Average annual total
return represents the average annual change in value of an investment over the
stated periods, assuming reinvestment of dividends and capital gains at net
asset value. These figures reflect the deduction of the historical fees and
expenses paid by the Public Funds, which have been sold without sales charges.
Chart 2 below shows hypothetical performance of accumulation units of the New
Valuemark funds, based on the past average annual total return of the Public
Funds and the deduction of all current recurring expenses of the Separate
Account. These figures do not reflect any Contingent Deferred Sales Charge
or annual contract maintenance charge and have not been restated to reflect
the higher expenses of the New Valuemark funds; all of which would lower the
hypothetical performance shown.
Chart 3 below shows hypothetical performance of accumulation units of the New
Valuemark funds, based on the past average annual total return of the Public
Funds and the deduction of all current recurring expenses of the Separate
Account, as well as deduction of the annual contract maintenance charge and
the applicable Contingent Deferred Sales Charge. These figures have not been
restated to reflect the higher expenses of the New Valuemark funds which would
lower the hypothetical performance shown.
Past performance cannot predict or guarantee future results of the New Valuemark
funds. In addition, the investment performance of the New Valuemark funds will
differ from the performance of the Public Funds because of product and portfolio
differences, including differences in portfolio size, the investments held, the
timing of purchases of similar investments, cash flows, minor differences in
certain investment policies, insurance product related tax diversification
requirements, state insurance regulations, and additional administrative and
insurance costs associated with insurance company separate accounts. These
figures are not adjusted for tax consequences.
- -----------------------
(1) In November 1996, Franklin Resources, Inc., parent company of the investment
managers of the Franklin Valuemark Funds, completed the acquisition of Heine
Securities Corporation, the investment manager of Mutual Series Fund Inc. This
transaction did not, however, change the individuals responsible for the
day-to-day operations of Franklin Mutual Series Fund Inc., who are also
responsible for the day-to-day operations of the New Valuemark funds.
<TABLE>
<CAPTION>
1. Public Funds' Historical Performance
<S> <C> <C> <C> <C> <C>
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
---------------------- ------- ---------- --------- --------- ---------
Mutual Discovery Fund................. 18.52% -- -- 21.90% 12/31/92
Mutual Shares Fund.................... 13.59% 17.47% 14.87% -- 7/1/49
</TABLE>
<TABLE>
<CAPTION>
2. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account)
<S> <C> <C> <C> <C> <C>
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
---------------------- -------- ---------- --------- --------- ---------
Mutual Discovery Securities
Sub-Account ......................... 16.71% -- -- 20.03%% 12/31/92
Mutual Shares Securities
Sub-Account ......................... 11.82% 15.64% 13.09% -- 7/1/49
</TABLE>
<TABLE>
<CAPTION>
3. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate
Account and deduction of the Contingent Deferred Sales Charge and Annual Contract Maintenance Charge)
<S> <C> <C> <C> <C> <C>
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
---------------------- -------- ---------- --------- --------- ---------
Mutual Discovery Securities
Sub-Account.......................... 10.61% -- -- 19.31% 12/31/92
Mutual Shares Securities
Sub-Account.......................... 5.72% 15.18% 13.08% -- 7/1/49
</TABLE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Insurance Company
Experts
Legal Opinions
Distributor
Reduction or Elimination of the Contingent Deferred Sales Charge
Calculation of Performance Data
Tax Status
Annuity Provisions
Mortality and Expense Risk Guarantee
Financial Statements
