File Nos. 33-76190
811-05618
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 6 (X)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 33 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
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(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 347-6596
Name and Address of Agent for Service
-------------------------------------
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph(b) of Rule 485
___ on (date) pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_X_ on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Individual Immediate Variable Annuity Contracts
CROSS REFERENCE SHEET
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
<S> <C> <C>
PART A
Item 1. Cover Page. . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . . . Definitions
Item 3. Synopsis or Highlights. . . . . . . . . . . . . Highlights
Item 4. Condensed Financial Information . . . . . . . . Condensed Financial
Information
Item 6. Deductions. . . . . . . . . . . . . . . . . . . Charges and
Deductions
Item 7. General Description of Variable Annuity
Contracts . . . . . . . . . . . . . . . . . . . The Contracts
Item 8. Annuity Period. . . . . . . . . . . . . . . . . Annuity Provisions
Item 9. Death Benefit. . . . . . . . . . . . . . . . . The Contracts;
Annuity Provisions
Item 10. Purchases and Contract Value. . . . . . . . . . Purchase Payments
and Contract Value
Item 11. Redemptions . . . . . . . . . . . . . . . . . . Surrenders
Item 12. Taxes . . . . . . . . . . . . . . . . . . . . . Tax Status
Item 13. Legal Proceedings . . . . . . . . . . . . . . . Legal Proceedings
Item 14. Table of Contents of the Statement of
Additional Information. . . . . . . . . . . . . Table of Contents of
the Statement of Ad-
ditional Information
</TABLE>
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
<S> <C> <C>
PART B
Item 15. Cover Page. . . . . . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . . . The Company
Item 18. Services. . . . . . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered. . . . . . Not Applicable
Item 20. Underwriters. . . . . . . . . . . . . . . . . . Distributor
Item 21. Calculation of Performance Data . . . . . . . . Calculation of
Performance Data
Item 22. Annuity Payments. . . . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements. . . . . . . . . . . . . . Financial
Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.
<PAGE>
PART A
PROFILE OF THE [FRANKLIN TEMPLETON VALUEMARK INCOME PLUS] IMMEDIATE VARIABLE
ANNUITY CONTRACT
May 1, 1998
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
CONSIDER AND KNOW BEFORE PURCHASING THE IMMEDIATE VARIABLE ANNUITY CONTRACT. THE
CONTRACT IS MORE FULLY DESCRIBED IN THE PROSPECTUS WHICH ACCOMPANIES THIS
PROFILE. PLEASE READ THE PROSPECTUS CAREFULLY.
1. THE IMMEDIATE VARIABLE ANNUITY CONTRACT
The immediate variable annuity contract with a fixed payment annuity (Contract)
offered by Allianz Life Insurance Company of North America is a contract between
you, the owner, and Allianz Life, an insurance company. The Contract provides
for income to you and another person, if elected, under a payment plan you
select.
The Contract has variable or fixed payment options. The variable option offers a
choice of 17 portfolios of the Franklin Valuemark Funds, which are managed by
Franklin Advisers, Inc. and its Templeton and Franklin affiliates. A list of
available portfolios is contained in Section 4. Depending on market conditions,
variable option payments may increase or decrease under the Contract based on
the investment performance of the portfolios you choose. The variable option
portfolios are designed to offer a better return than the fixed payment annuity;
but, variable option payments may also go down and no minimum payment is
guaranteed. (Sometimes a portfolio may be referred to as a sub-account in the
prospectus and the Contract.)
The fixed payment annuity offers fixed annuity payments that are guaranteed by
Allianz Life. Any portion of your purchase payment allocated to the fixed
payment annuity will be temporarily allocated to the Money Market Fund on the
day we allocate your purchase payment and will be allocated to the fixed payment
annuity when you begin receiving annuity payments from your Contract (if you
choose a fixed payout).
Allianz Life reserves the right to limit the number of portfolios which you may
invest in at any one time (except in Texas) (now or in the future). Currently,
you can put your money in up to nine portfolios and the fixed payment annuity
initially and may only be invested in a maximum of ten investment options at any
one time throughout the life of the Contract. The requested allocation to each
portfolio and the fixed payment annuity must be made in whole percentages and
each must be at least 10%.
Under this Contract, you are the owner and the annuitant. You may name a joint
annuitant. Unlike a deferred annuity contract, there is no accumulation phase
for this immediate annuity Contract. You select an income payment date when you
buy the Contract which must not be later than 60 days after we allocate your
purchase payment.
2. ANNUITY PAYMENTS
You can receive annuity payments from your Contract by selecting one of the
following annuity options:
(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 to the
beneficiary for the remainder of the guaranteed period (5, 10, 15, 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 and 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);
(5) payments for your life and ending with the last payment due prior to
your death with a guarantee that at your death, the beneficiary will
receive a single cash payment as set forth in the Contract; and
(6) payments for a specified period of time (5 - 30 years) with payments
continuing to the beneficiary for the remainder of the period certain
if you and any joint annuitant die before the end of the specified
period.
Under certain circumstances, if you selected annuity option 6, you can exchange
it for a life contingent payout (options 1-5). Annuity payments can be based
upon the available portfolios (variable payout) and/or the fixed payment annuity
(fixed payout) under all annuity options except annuity payments under Option 6
which may only come from the portfolios (variable payout). If you choose to have
any part of your payments based on the performance of the portfolios (i.e.,
variable payout), the dollar amount of your annuity payments may go up or down,
depending on the investment performance of the portfolio(s) you choose.
3. PURCHASE
You can buy the Contract with $35,000 or more under most circumstances. You
cannot add to your Contract (i.e., it is a single purchase payment contract).
Contact your registered representative to help you fill out the proper forms.
4. INVESTMENT OPTIONS
You may invest in the Allianz Life fixed payment annuity and the following
portfolios of Franklin Valuemark Funds:
PORTFOLIO SEEKING STABILITY OF PRINCIPAL AND INCOME
Money Market Fund
PORTFOLIOS SEEKING GROWTH AND INCOME
Global Utilities Securities Fund (formerly, Utility Equity Fund)
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
PORTFOLIOS SEEKING CAPITAL GROWTH
Capital Growth Fund
Mutual Discovery Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
Value Securities Fund
The portfolios are fully described in the attached prospectus for Franklin
Valuemark Funds. Your income will fluctuate up or down based on the portfolios'
performance; no minimum dollar payment is guaranteed. IN CALIFORNIA, THE VALUE
SECURITIES FUND IS NOT AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE
DEPARTMENT. CHECK WITH YOUR REGISTERED REPRESENTATIVE REGARDING AVAILABILITY.
5. EXPENSES
The Contract has insurance features and investment features, and there are costs
related to each.
The annual insurance charges consist of the Mortality and Expense Risk Charge
and the Administrative Expense Charge which together total 1.40% of the average
daily value of your Contract allocated to the portfolios. There are also annual
portfolio operating expenses, which vary depending upon the portfolios you
select and from year to year. In 1997, these expenses ranged from .49% to 1.42%
of the average daily value of the portfolios.
Allianz Life assesses a state premium tax charge which ranges from 0% to 3.5% of
your purchase payment (depending upon the state).
We have provided the following chart to help you understand the expenses in your
Contract. The column "Total Annual Expenses" shows the 1.40% insurance charges
and the total annual portfolio expenses for 1997 for each portfolio. The effects
of the charges are reflected in the illustrations of annuity income which are
contained in the Appendix to the full prospectus. The illustrations are intended
to assist you in assessing the effects of the charges and the effect of
investment performance on the amount of variable annuity income.
<TABLE>
<CAPTION>
1997
Total Annual Total Annual Total Annual
Insurance Charges Expenses Portfolio Expenses
Portfolio
<S> <C> <C> <C>
Capital Growth 1.40% .77% 2.17%
Global Utilities Securities 1.40% .50% 1.90%
Growth and Income 1.40% .49% 1.89%
Income Securities 1.40% .50% 1.90%
Money Market 1.40% .53% 1.93%
Mutual Discovery Securities 1.40% 1.06% 2.46%
Mutual Shares Securities 1.40% .80% 2.20%
Real Estate Securities 1.40% .54% 1.94%
Rising Dividends 1.40% .74% 2.14%
Small Cap 1.40% .77% 2.17%
Templeton Developing Markets Equity 1.40% 1.42% 2.82%
Templeton Global Asset Allocation 1.40% .94% 2.34%
Templeton Global Growth 1.40% .88% 2.28%
Templeton International Equity 1.40% .89% 2.29%
Templeton International Smaller Companies 1.40% 1.06% 2.46%
Templeton Pacific Growth 1.40% 1.03% 2.43%
Value Securities 1.40% .81% 2.21%
</TABLE>
The expenses for the Value Securities Fund, a newly formed portfolio, have been
estimated. For more detailed information, see the Fee Table in the prospectus
for the Contract.
6. TAXES
Annuity payments will be treated for federal tax purposes as 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. If you make a
partial liquidation, the earnings come out first and are taxed as income. If you
are younger than 59 1/2 when you make a liquidation, you may be charged a 10%
federal tax penalty on the taxable amount withdrawn.
7. ACCESS TO YOUR MONEY
The Contract is generally irrevocable; that is, you can't "cash out." That's why
you should have other money set aside for non-routine expenses. Under certain
circumstances, however, you may make one liquidation (withdrawal) per Contract
year once you begin receiving annuity payments if you selected annuity options
2, 4 or 6. The amount that you may liquidate is set forth in your Contract and
is described in the prospectus for the Contract. There may be a commutation fee
assessed on liquidations; there may be adverse tax consequences, and your
annuity payments will be lower than they would have been without the partial
liquidation (during the period certain). You may not make any withdrawals before
your income date.
8. PERFORMANCE OF THE PORTFOLIOS
The income you receive will vary up or down depending upon the performance of
the portfolios you choose. The following chart shows total returns for the
portfolios for the periods shown. Performance is not shown for the Value
Securities Fund because it was first offered for sale on May 1, 1998. These
numbers reflect the insurance charges and the operating expenses of the
portfolios. Past performance is not a guarantee of future results.
<TABLE>
<CAPTION>
CALENDAR YEAR
PORTFOLIO 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth 16.66% 12.54% NA NA NA NA NA NA
Global Utilities Securities 25.00% 5.57% 29.53% -12.79% 9.00% 7.20% 22.87% 0.44%
Growth and Income 25.97% 12.59% 30.99% -3.38% 8.77% 5.22% 21.09% -3.70%
Income Securities 1.05% 8.10% 13.09% -6.30% 15.06% -1.77% 10.73% 8.26%
Money Market 3.78% 3.69% 4.29% 2.39% 1.12% 1.62% 4.02% 6.12%
Mutual Discovery Securities 17.71% 1.80% NA NA NA NA NA NA
Mutual Shares Securities 16.10% 3.30% NA NA NA NA NA NA
Real Estate Securities 19.02% 30.96% 15.90% 1.46% 17.36% 10.53% 31.65% -13.20%
Rising Dividends 31.18% 22.44% 27.94% -5.41% -4.80% 8.48% NA NA
Small Cap 15.79% 27.26% 1.46% NA NA NA NA NA
Templeton Developing Markets Equity -9.99% 19.89% 1.35% -5.46% NA NA NA NA
Templeton Global Asset Allocation 10.16% 18.16% 5.91% NA NA NA NA NA
Templeton Global Growth 11.92% 19.58% 11.16% 2.01% NA NA NA NA
Templeton International Equity 10.14% 21.25% 9.06% -0.53% 26.79% -3.58% NA NA
Templeton International Smaller Companies -2.87% 11.45% NA NA NA NA NA NA
Templeton Pacific Growth -36.84% 9.55% 6.47% -10.06% 45.82% -2.39% NA NA
</TABLE>
9. DEATH BENEFIT
If you die before the income date and there is no joint annuitant, the Contract
will be treated as if it had never been issued and we will return your purchase
payment to your estate. If you have chosen an option with a joint annuitant and
either you or the joint annuitant dies before the income date, the annuity
option will be changed to option 2 (with 120 monthly payments guaranteed or 60
monthly payments guaranteed if the survivor's life expectancy is less than 120
months).
10. OTHER INFORMATION
FREE LOOK. If you cancel the Contract within 10 days after receiving it (or
whatever period is required in your state), you will receive whatever your
Contract is worth on the day we receive your request, less any benefits paid in
states where permitted (this may be more or less than your original payment). 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).
PURCHASING CONSIDERATIONS. The immediate variable annuity contract is designed
for people seeking a medium to long-term periodic payment plan. Many options
provide for payments guaranteed for as long as you live. We recommend that you
do not buy this Contract if you cannot accept the risk of getting back less
money than you put in. Since certain payment options do not permit you to
liquidate (withdraw) money, and all options limit payments to your heirs, we
generally recommend you have other money set aside for emergencies and bequests.
11. INQUIRIES
If you have any questions about your Contract or need more information, please
contact us at:
VIP Service Center
P.O. Box 30343
Tampa, Florida 33630-3343
(800) 774-5001
<PAGE>
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ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
HOME OFFICE: VIP SERVICE CENTER:
1750 Hennepin Avenue P.O. Box 30343
Minneapolis, MN 55403-2195 Tampa, FL 33630-3343
(800) 542-5427 (800) 774-5001
INDIVIDUAL IMMEDIATE
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
MAY 1, 1998
The Individual Immediate Variable Annuity Contracts (the "Contracts") described
in this Prospectus provide lifetime income to the Annuitant and Joint Annuitant,
if any, under the Annuity Option selected. The Annuitant is the Contract Owner.
The Contract Owner selects the Annuity Option and the frequency of payment
(e.g., monthly, quarterly, semi-annual, annual).
The Contracts are available for retirement plans which do not qualify for the
special federal tax advantages available under the Internal Revenue Code
("Non-Qualified Contracts"). They can also be purchased as a "Qualified
Contract" that is an Individual Retirement Annuity with contributions
rolled-over from tax-qualified plans such as 403(b) plans, 401 plans, or IRAs.
The Contracts are acquired by the payment of a single purchase payment. Some
states assess premium taxes (see "Charges and Deductions - Premium Taxes"). The
Single Purchase Payment less the premium tax is referred to as the Net Purchase
Payment. The Single Purchase Payment for the Contracts will be allocated to a
segregated investment account of Allianz Life Insurance Company of North America
(the "Company") which account has been designated Allianz Life Variable Account
B (the "Variable Account") or to the Company's Fixed Payment Annuity. Any
portion of the Net Purchase Payment selected to be allocated to the Fixed
Payment Annuity will temporarily be allocated to the Money Market Sub-Account on
the Effective Date and will be allocated to the Fixed Payment Annuity on the
Annuity Calculation Date.
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). The Trust is a series fund with twenty-five Portfolios, seventeen of
which are currently available in connection with the Contracts offered under
this Prospectus: the Capital Growth Fund, the Global Utilities Securities Fund,
the Growth and Income Fund, the Income Securities Fund, the Money Market Fund,
the Mutual Discovery Securities Fund, the Mutual Shares Securities Fund, the
Real Estate Securities Fund, the Rising Dividends Fund, the Small Cap Fund, the
Templeton Developing Markets Equity Fund, the Templeton Global Asset Allocation
Fund, the Templeton Global Growth Fund, the Templeton International Equity Fund,
the Templeton International Smaller Companies Fund, the Templeton Pacific Growth
Fund, and the Value Securities Fund. Prior to May 1, 1998, the Global Utilities
Securities Fund was known as the Utility Equity Fund. IN CALIFORNIA, THE VALUE
SECURITIES FUND IS NOT AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE
DEPARTMENT. (CHECK WITH YOUR AGENT REGARDING AVAILABILITY). See "Highlights" and
"Tax Status" for a discussion of owner control of the underlying investments in
a variable annuity contract.
Under certain circumstances, Contract Owners may make withdrawals after the
Income Date other than the Annuity Payments they will receive under the
Contract. See "Annuity Provisions - Contract Withdrawals (Liquidations)" for
more information regarding the ability to make withdrawals under the Contract.
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.
INVESTMENT IN THE CONTRACT IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
CONTRACT OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE RETURNED
WITHIN THE FREE LOOK PERIOD, THE REFUND MAY BE HIGHER OR LOWER THAN THE PURCHASE
PAYMENT.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the "Statement of Additional Information," which is available at no
charge. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
SEC maintains a Web Site (http://www.sec.gov) that contains the SAI material
incorporated by reference and other information about registrants that file
electronically with the SEC. The Table of Contents of the Statement of
Additional Information can be found on the last page of this Prospectus. For the
Statement of Additional Information, call or write the VIP Service Center
address shown above.
INQUIRIES: Any inquiries can be made by telephone or in writing to the Company
at the VIP Service Center phone number or address listed above.
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.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, COUNTRY, OR JURISDICTION IN WHICH THE OFFERING IS UNAUTHORIZED. NO SALES
REPRESENTATIVE, DEALER OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS
PROSPECTUS MUST BE ACCOMPANIED BY OR PRECEDED BY A CURRENT PROSPECTUS FOR
FRANKLIN VALUEMARK FUNDS.
This Prospectus and the Statement of Additional Information are dated May 1,
1998, and may be amended from time to time.
This Prospectus should be kept for future reference.
In the State of Oregon, all references to "Franklin Templeton Valuemark(R)
Income Plus" refer to "Valuemark Income Plus."
TABLE OF CONTENTS PAGE
DEFINITIONS ......................................
HIGHLIGHTS .......................................
FEE TABLE ........................................
CONDENSED FINANCIAL
INFORMATION .....................................
THE COMPANY ......................................
THE VARIABLE ACCOUNT .............................
FRANKLIN VALUEMARK FUNDS .........................
General .........................................
Substitution of Securities ......................
Voting Privileges ...............................
CHARGES AND DEDUCTIONS ...........................
Deduction for Mortality and
Expense Risk Charge ............................
Deduction for Administrative
Expense Charge .................................
Deduction for Premium Taxes .....................
Deduction for Income Taxes ......................
Deduction for Trust Expenses ....................
ANNUITY PROVISIONS ...............................
Income Date .....................................
Annuity Options .................................
Contract Withdrawals (Liquidations) .............
Determination of Variable
Annuity Payments ...............................
Determination of Fixed
Annuity Payments ...............................
THE CONTRACTS ....................................
Ownership .......................................
Assignment ......................................
Beneficiary .....................................
Change of Beneficiary ...........................
Death of Beneficiary ............................
Annuitant .......................................
PROCEEDS PAYABLE AT DEATH ........................
PURCHASE PAYMENTS AND
CONTRACT VALUE ..................................
Single Purchase Payment .........................
Net Purchase Payment ............................
Allocation of Net Purchase Payment ..............
Contract Value ..................................
VIP Unit ........................................
Transfers .......................................
DISTRIBUTOR ......................................
Delay of Payments ...............................
ADMINISTRATION OF THE CONTRACTS ..................
PERFORMANCE DATA .................................
Money Market Sub-Account ........................
Other Contract Sub-Accounts .....................
Performance Ranking .............................
TAX STATUS .......................................
General .........................................
Diversification .................................
Multiple Contracts ..............................
Tax Treatment of Distributions -
Non-Qualified Contracts ........................
Qualified Plans .................................
Tax Treatment of Distributions -
IRA Contracts ..................................
Tax Treatment of Assignments ....................
Income Tax Withholding ..........................
FINANCIAL STATEMENTS .............................
LEGAL PROCEEDINGS ................................
APPENDIX - ILLUSTRATION
OF VALUES .......................................
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION ..........................
DEFINITIONS
- --------------------------------------------------------------------------------
AGE - Age to the nearest month unless otherwise specified.
ANNUITANT - The primary person upon whose continuation of life any annuity
payment involving life contingencies depends. The Contract Owner is the
Annuitant. See also, Joint Annuitant.
ANNUITY CALCULATION DATE - The date on which the first annuity payment is
calculated which will be no more than 10 business days prior to the Income Date.
ANNUITY OPTION - An arrangement under which annuity payments are made under the
Contract.
ANNUITY UNIT - An accounting unit of measure used to calculate annuity payments
after the Annuity Calculation Date.
ASSUMED INVESTMENT RETURn - The investment return upon which the annuity
payments in the Contract are based.
COMPANY - Allianz Life Insurance Company of North America at its VIP Service
Center shown on the cover page of this Prospectus.
CONTRACT ANNIVERSARY - An anniversary of the Effective Date of the Contract.
CONTRACT OWNER - The person or entity who own the Contract as named in the
Company's records. The Annuitant is the Contract Owner.
CONTRACT SUB-ACCOUNT - A segment of the Variable Account. Each Contract
Sub-Account is invested in shares of a Portfolio of an Eligible Investment
(referred to in the Contract as "Sub-Account").
CONTRACT VALUE - The dollar value as of any Valuation Date prior to the Annuity
Calculation Date of all amounts accumulated under the Contract.
EFFECTIVE DATE - The date on which the Net Purchase Payment is allocated to the
Variable Account.
ELIGIBLE INVESTMENT(S) - An investment entity which can be selected by the
Contract Owner to be the underlying investment of the Contract.
FIXED PAYMENT ANNUITY - Payments from the Company's general investment account
which contains all the assets of the Company with the exception of the Variable
Account and other segregated asset accounts (the Contract refers to this
investment option as the "Fixed Account").
INCOME DATE - The date on which annuity payments are to begin.
JOINT ANNUITANT - A person other than the Annuitant on whose life annuity
payments may also be based.
JOINT OWNER - If there is more than one Contract Owner, each Contract Owner
shall be a Joint Owner of the Contract. Joint Owners have equal ownership rights
and must both authorize any exercising of those ownership rights unless
otherwise allowed by the Company. Each Joint Owner must be either an Annuitant
or Joint Annuitant.
NET ASSET VALUE - The total value of the shares of the Eligible Investment or
Portfolio less the liabilities of the Eligible Investment or Portfolio held by
the Contract Sub-Account, as of the close of trading on a Valuation Date.
NON-QUALIFIED CONTRACTS - As used herein, Contracts issued under Non-Qualified
Plans which do not receive favorable tax treatment under Section 408 of the
Internal Revenue Code of 1986, as amended (the "Code").
PORTFOLIO - A segment of an Eligible Investment which constitutes a separate and
distinct class of interests under an Eligible Investment (referred to in the
Contract as "Fund").
QUALIFIED CONTRACTS - As used herein, Contracts issued under Qualified Plans
which receive favorable tax treatment under Section 408 of the Code.
VALUATION DATE - The Variable Account will be valued each day that the New York
Stock Exchange is open for trading, which is Monday through Friday, except for
normal business holidays.
VALUATION PERIOD - The period beginning at the close of business of the New York
Stock Exchange on each Valuation Date and ending at the close of business for
the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate investment account of the Company, designated as
Allianz Life Variable Account B, in which a portion of the Company's assets has
been allocated for the Contracts and certain other contracts.
VIP UNIT - An accounting unit of measure used to calculate the Contract Value
prior to the Annuity Calculation Date.
HIGHLIGHTS
- --------------------------------------------------------------------------------
Net Purchase Payments for the Contracts will be allocated to a segregated
investment account of Allianz Life Insurance Company of North America (the
"Company") which has been designated Allianz Life Variable Account B (the
"Variable Account") or to the Company's Fixed Payment Annuity. Any portion of
the Net Purchase Payment to be allocated to the Fixed Payment Annuity will
temporarily be allocated to the Money Market Sub-Account on the Effective Date
and then will be allocated to the Fixed Payment Annuity on the Annuity
Calculation Date.
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). (See "Franklin Valuemark Funds.") IN CALIFORNIA, THE VALUE SECURITIES
FUND IS NOT AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE DEPARTMENT.
(CHECK WITH YOUR AGENT REGARDING AVAILABILITY). CONTRACT OWNERS BEAR THE
INVESTMENT RISK FOR ALL AMOUNTS ALLOCATED TO THE VARIABLE ACCOUNT.
The Contract may be returned within 10 days (or longer in states where required)
after it is received (the "Free-Look Period"). It can be mailed or delivered to
either the Company or the agent who sold it. Return of the Contract by mail is
effective on being postmarked, properly addressed and postage prepaid. The
returned Contract will be treated as if the Company had never issued it. The
Company will promptly refund the net amount allocated to the Variable Account
modified for investment experience plus any taxes deducted less any benefits
paid in states where permitted. This may be more or less than the Single
Purchase Payment. Once the Free-Look Period expires, under certain
circumstances, Contract Owners may make withdrawals after the Income Date other
than the Annuity Payments they will receive under the Contract. See "Annuity
Provisions - Contract Withdrawals (Liquidations)" for more information regarding
the ability to make withdrawals under the Contract. The Company has the right to
allocate the Single Purchase Payment to the Money Market Sub-Account until the
expiration of the Free-Look Period. If the Company does so allocate the purchase
payment, it will refund the Single Purchase Payment, less any benefits paid. It
is the Company's current practice to directly allocate the Single Purchase
Payment to the Contract Sub-Account(s) (see "Purchase Payments and Contract
Value - Allocation of Net Purchase Payment") designated by the Contract Owner.
There is a Mortality and Expense Risk Charge which is equal, on an annual basis,
to 1.25% of the average daily net assets of the Variable Account. This charge
compensates the Company for assuming the mortality and expense risks under the
Contracts. (See "Charges and Deductions - Deduction for Mortality and Expense
Risk Charge.")
There is an Administrative Expense Charge which is equal, on an annual basis, to
0.15% of the average daily net assets of the Variable Account. This charge
compensates the Company for costs associated with the administration of the
Contracts and the Variable Account. (See "Charges and Deductions - Deduction for
Administrative Expense Charge.")
Under certain circumstances, there is a ten percent (10%) federal income tax
penalty that may be applied to the income portion of any distribution from the
Contracts. (See "Tax Status - Tax Treatment of Distributions - Non-Qualified
Contracts" and "Tax Status - Tax Treatment of Distributions - IRA Contracts.")
For a further discussion of the taxation of the Contracts, see "Tax Status."
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable annuity contract will not be treated as an annuity contract for
tax purposes if the owner of the contract has excessive control over the
investments underlying the contract. The issuance of such guidelines may require
the Company to impose limitations on a Contract Owner's right to control the
investments. It is not known whether any such guidelines would have a
retroactive effect (see "Tax Status - Diversification").
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Single Purchase Payment. (See "Charges and
Deductions - Deduction for Premium Taxes.")
The Company offers deferred variable annuity contracts but does not permit
exchange of those contracts for the Contracts offered by this Prospectus.
Because of certain exemptive and exclusionary provisions, interests in the Fixed
Payment Annuity are not registered under the Securities Act of 1933 and the
Fixed Payment Annuity is not registered as an investment company under the
Investment Company Act of 1940, as amended. Accordingly, neither the Fixed
Payment Annuity nor any interests therein are subject to the provisions of these
Acts, and the Company has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosures in the Prospectus relating
to the Fixed Payment Annuity. Disclosures regarding the Fixed Payment Annuity
may, however, be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B FEE TABLE
CONTRACT OWNER TRANSACTION FEES
NONE
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge......................... 1.25%
Administrative Expense Charge..................... ....... .15%
- --------------------------------------------------------------------------------
Total Variable Account Annual Expenses.................... 1.40%
The effects of the charges shown above are reflected in the illustrations of
annuity income contained in the Appendix on Page __. The illustrations are
intended to assist the purchaser in assessing the effects of these charges and
the effect of investment performance on the amount of variable annuity income.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES
(as a percentage of Franklin Valuemark Funds' average net assets).
The Management and Portfolio Administration Fees for each Portfolio are based on a percentage of that Portfolio's net
assets. See "Franklin Valuemark Funds" in this Prospectus and "Management" in the Trust prospectus.
The "Management and Portfolio Administration Fees" below include investment advisory and other management and administrative
fees not included as "Other Expenses" that were paid to the Managers and Portfolio Administrators by each Portfolio for the
1997 calendar year except for Portfolios with fee waivers or newer Portfolios without a full year of operations as of
December 31, 1997 (see explanatory footnotes below). The purpose of the Table is to assist the Contract Owner in
understanding the various costs and expenses of investing, directly or indirectly, in the Contract. Actual expenses may be
higher or lower than those shown.
MANAGEMENT TOTAL
AND PORTFOLIO OTHER ANNUAL
ADMINISTRATION FEES1 EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Growth Fund............................................................ .75% .02% .77%
Global Utilities Securities Fund2.............................................. .47% .03% .50%
Growth and Income Fund......................................................... .47% .02% .49%
Income Securities Fund......................................................... .47% .03% .50%
Money Market Fund3............................................................. .51% .02% .53%
Mutual Discovery Securities Fund............................................... .80% .26% 1.06%
Mutual Shares Securities Fund.................................................. .60% .20% .80%
Real Estate Securities Fund.................................................... .51% .03% .54%
Rising Dividends Fund.......................................................... .72% .02% .74%
Small Cap Fund................................................................. .75% .02% .77%
Templeton Developing Markets Equity Fund....................................... 1.25% .17% 1.42%
Templeton Global Asset Allocation Fund......................................... .65% .29% .94%
Templeton Global Growth Fund................................................... .83% .05% .88%
Templeton International Equity Fund............................................ .80% .09% .89%
Templeton International Smaller Companies Fund................................. .85% .21% 1.06%
Templeton Pacific Growth Fund.................................................. .92% .11% 1.03%
Value Securities Fund4......................................................... .75% .06% .81%
<FN>
1The Portfolio Administration Fee is a direct expense for the Mutual Discovery Securities Fund, the Mutual Shares Securities
Fund, the Templeton Global Asset Allocation Fund, the Templeton International Smaller Companies Fund, and the Value
Securities Fund.; other Portfolios pay for similar services indirectly through the Management Fee. See "Management" in the
Trust Prospectus for further information regarding Management and Portfolio Administration Fees.
2 Prior to May 1, 1998, the Global Utilities Securities Fund was known as the Utility Equity Fund.
3Franklin Advisers, Inc. agreed in advance to waive a portion of its Management Fee and to make certain payments to reduce
expenses of the Money Market Fund during 1997 and is currently continuing this arrangement in 1998. This arrangement may be
terminated at any time. With this reduction, actual Management Fees and Total Annual Expenses of the Money Market Fund for
1997 were 0.43% and 0.45%, respectively of the average daily net assets of the Portfolio.
4The Value Securities Fund commenced operations May 1, 1998. The expenses shown are estimated expenses for the Portfolio for
1998.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
The consolidated financial statements of Allianz Life Insurance Company of North America and the financial statements of
Allianz Life Variable Account B may be found in the Statement of Additional Information.
The table below gives per accumulation unit information about the financial history of each Contract Sub-Account from the
inception of each to December 31, 1997.+
This information should be read in conjunction with the financial statements and related notes to the Variable Account included
in the Statement of Additional Information.
(NUMBER OF UNITS IN THOUSANDS) GLOBAL MUTUAL MUTUAL
CAPITAL UTILITIES GROWTH AND INCOME MONEY DISCOVERY SHARES REAL ESTATE RISING
CONTRACT SUB-ACCOUNTS: GROWTH SECURITIES* INCOME SECURITIES MARKET SECURITIES SECURITIES SECURITIES DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DEC 31, 1997
Unit value at beginning of period $11.254 $20.654 $19.490 $21.708 $13.359 $10.180 $10.330 $23.668 $15.303
Unit value at end of period $13.130 $25.818 $24.551 $25.065 $13.865 $11.983 $11.993 $28.169 $20.074
Number of units outstanding at
end of period 5,673 39,623 46,962 49,811 20,982 9,940 18,744 13,445 33,249
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period $10.000** $19.565 $17.310 $19.785 $12.883 $10.000** $10.000** $18.073 $12.498
Unit value at end of period 11.254 $20.654 $19.490 $21.708 $13.359 $10.180 $10.330 $23.668 $15.303
Number of units outstanding at
end of period 3,722 53,086 50,027 57,504 28,060 1,471 2,613 12,757 35,569
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period NA $15.104 $13.215 $16.392 $12.354 NA NA $15.594 $9.769
Unit value at end of period NA $19.565 $17.310 $19.785 $12.883 NA NA $18.073 $12.498
Number of units outstanding at
end of period NA 66,669 46,893 59,309 31,040 NA NA 10,998 33,789
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period NA $17.319 $13.677 $17.734 $12.066 NA NA $15.369 $10.327
Unit value at end of period NA $15.104 $13.215 $16.392 $12.354 NA NA $15.594 $9.769
Number of units outstanding at
end of period NA 70,082 35,695 56,569 39,437 NA NA 11,645 28,778
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period NA $15.889 $12.574 $15.163 $11.932 NA NA $13.095 $10.848
Unit value at end of period NA $17.319 $13.677 $17.734 $12.066 NA NA $15.369 $10.327
Number of units outstanding at
end of period NA 84,217 24,719 38,967 10,247 NA NA 5,589 26,256
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period NA $14.821 $11.949 $13.580 $11.742 NA NA $11.848 $10.000**
Unit value at end of period NA $15.889 $12.574 $15.163 $11.932 NA NA $13.095 $10.848
Number of units outstanding at
end of period NA 39,387 17,144 11,397 6,951 NA NA 1,052 8,388
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period NA $12.062 $9.803 $9.842 $11.288 NA NA $9.000 NA
Unit value at end of period NA $14.821 $11.949 $13.580 $11.742 NA NA $11.848 NA
Number of units outstanding at
end of period NA 16,188 9,671 4,472 5,682 NA NA 394 NA
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period NA $12.010 $10.180 $10.783 $10.637 NA NA $10.368 NA
Unit value at end of period NA $12.062 $9.803 $9.842 $11.288 NA NA $9.000 NA
Number of units outstanding at
end of period NA 6,300 5,356 3,011 5,768 NA NA 200 NA
PERIOD FROM INCEPTION** TO DEC. 31, 1989
Unit value at beginning of period NA $10.000 $10.000 $10.000 $10.000 NA NA $10.000 NA
Unit value at end of period NA $12.010 $10.180 $10.783 $10.637 NA NA $10.368 NA
Number of units outstanding at
end of period NA 1,173 1,662 1,508 1,199 NA NA 57 NA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(NUMBER OF UNITS IN THOUSANDS) TEMPLETON TEMPLETON TEMPLETON TEMPLETON TEMPLETON TEMPLETON
SMALL DEVELOPING GLOBAL ASSET GLOBAL INTERNATIONAL INTERNATIONAL PACIFIC VALUE +
CONTRACT SUB-ACCOUNTS: CAP MARKETS EQUITY ALLOCATION GROWTH EQUITY SMALLER COS GROWTH SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DEC 31, 1997
Unit value at beginning of period $12.913 $11.487 $12.514 $13.560 $16.081 $11.145 $14.932 NA
Unit value at end of period...... $14.952 $10.340 $13.785 $15.177 $17.711 $10.825 $9.431 NA
Number of units outstanding at
end of period.................... 16,925 23,005 5,229 41,433 58,179 1,998 15,833 NA
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period $10.146 $9.582 $10.591 $11.339 $13.263 $10.000** $13.630 NA
Unit value at end of period...... $12.913 $11.487 $12.514 $13.560 $16.081 $11.145 $14.932 NA
Number of units outstanding at
end of period.................... 12,784 22,423 4,104 40,327 64,375 1,388 22,061 NA
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period $10.000** $9.454 $10.000** $10.201 $12.161 NA $12.802 NA
Unit value at end of period...... $10.146 $9.582 $10.591 $11.339 $13.263 NA $13.630 NA
Number of units outstanding at
end of period..................... 1,302 15,618 1,338 28,309 59,883 NA 22,483 NA
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period..... NA $10.000** NA $10.000** $12.226 NA $14.233 NA
Unit value at end of period........... NA $9.454 NA $10.201 $12.161 NA $12.802 NA
Number of units outstanding at
end of period........................ NA 9,774 NA 14,637 60,464 NA 27,231 NA
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period..... NA NA NA NA $9.642 NA $9.761 NA
Unit value at end of period........... NA NA NA NA $12.226 NA $14.233 NA
Number of units outstanding at
end of period........................ NA NA NA NA 24,026 NA 14,240 NA
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period..... NA NA NA NA $10.000** NA $10.000** NA
Unit value at end of period........... NA NA NA NA $9.642 NA $9.761 NA
Number of units outstanding at
end of period........................ NA NA NA NA 1,329 NA 534 NA
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period..... NA NA NA NA NA NA NA NA
Unit value at end of period........... NA NA NA NA NA NA NA NA
Number of units outstanding at
end of period........................ NA NA NA NA NA NA NA NA
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period..... NA NA NA NA NA NA NA NA
Unit value at end of period........... NA NA NA NA NA NA NA NA
Number of units outstanding at
end of period........................ NA NA NA NA NA NA NA NA
PERIOD FROM INCEPTION** TO DEC. 31, 1989
Unit value at beginning of period..... NA NA NA NA NA NA NA NA
Unit value at end of period........... NA NA NA NA NA NA NA NA
Number of units outstanding at
end of period......................... NA NA NA NA NA NA NA NA
<FN>
+The Value Securities Sub-Account commenced operations May 1, 1998.
*Prior to May 1, 1998, the Global Utilities Securities Sub-Account was known as the Utility Equity Sub-Account.
**Unit Value at inception was $10.00.
</FN>
</TABLE>
<PAGE>
The Accumulation Unit Value at inception was $10.00 for each Contract
Sub-Account. Inception was 1/24/89 for the Growth and Income, Income Securities,
Money Market, Real Estate Securities, and Utility Equity Sub-Accounts; 1/27/92
for the Rising Dividends, Templeton International Equity, and Templeton Pacific
Growth Sub-Accounts; 3/15/94 for the Templeton Developing Markets Equity, and
Templeton Global Growth Sub-Accounts; 5/1/95 for the Templeton Global Asset
Allocation Sub-Account; 11/1/95 for the Small Cap Sub-Account; 5/1/96 for the
Capital Growth, and Templeton International Smaller Companies Sub-Accounts;
11/8/96 for the Mutual Discovery Securities, and Mutual Shares Securities
Sub-Accounts; and 5/1/98 for the Value Securities Sub-Account.
THE COMPANY
- --------------------------------------------------------------------------------
Allianz Life Insurance Company of North America (the "Company") is a stock life
insurance company organized under the laws of the state of Minnesota in 1896.
The Company is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding
("Allianz"). Allianz is headquartered in Munich, Germany, and has sales outlets
throughout the world. The Company offers fixed and variable life insurance and
annuities, and group life, accident and health insurance.
NALAC Financial Plans, LLC is a wholly-owned subsidiary of the Company. It
provides marketing services for the Company and is the principal underwriter of
the Contracts. NALAC Financial Plans, LLC is reimbursed for expenses incurred in
the distribution of the Contracts.
Administration for the Contract is provided at the Company's VIP Service Center:
P.O. Box 30343, Tampa, FL 33630-3343, (800) 774-5001.
THE VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
The Variable Account was established pursuant to a resolution of the Board of
Directors on May 31, 1985. The Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended (the "1940 Act").
The assets of the Variable Account are the property of the Company. However, the
assets of the Variable Account equal to the reserves, and other contract
liabilities with respect to the Variable Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains or losses of the Company. The Company's obligations arising
under the Contracts are general corporate obligations.
The Variable Account meets the definition of a "separate account" under the
federal securities laws.
The Variable Account is divided into Contract Sub-Accounts with the assets of
each Contract Sub-Account invested in one of the Portfolios of Franklin
Valuemark Funds.
FRANKLIN VALUEMARK FUNDS
- --------------------------------------------------------------------------------
Seventeen of the twenty-five Portfolios currently constituting the Franklin
Valuemark Funds are available under the Contracts described in this Prospectus.
IN CALIFORNIA, THE VALUE SECURITIES FUND IS NOT AVAILABLE UNTIL APPROVED BY THE
CALIFORNIA INSURANCE DEPARTMENT. (CHECK WITH YOUR AGENT REGARDING AVAILABILITY).
Franklin Valuemark Funds (the "Trust") is an open-end management investment
company registered under the 1940 Act. The investment objectives of each
Portfolio and a discussion of potential risks are found in the accompanying
prospectus for the Trust, which is included with this Prospectus.
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS FOR THE
TRUST CAREFULLY BEFORE INVESTING.
<PAGE>
<TABLE>
<CAPTION>
Investment managers for each Portfolio are listed in the table below and are as follows: Franklin
Advisers, Inc. (FA), Franklin Advisory Services, Inc. (FAS), Franklin Mutual Advisers, Inc. (FMA),
Templeton Asset Management Ltd. (TAM), Templeton Global Advisors Limited (TGA), and Templeton
Investment Counsel, Inc. (TIC). Certain managers have retained one or more affiliated subadvisers.
AVAILABLE PORTFOLIOS INVESTMENT MANAGERS
- -----------------------------------------------------------------------------------------------------
<S> <C>
PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund ............................................................ FA
PORTFOLIOS SEEKING GROWTH AND INCOME
Global Utilities Securities Fund (formerly, Utility Equity Fund) ............ FA
Growth and Income Fund ........................................................ FA
Income Securities Fund ........................................................ FA
Mutual Shares Securities Fund ................................................. FMA
Real Estate Securities Fund ................................................... FA
Rising Dividends Fund ......................................................... FAS
Templeton Global Asset Allocation Fund ........................................ TGA
Value Securities Fund ......................................................... FAS
PORTFOLIOS SEEKING CAPITAL GROWTH
Capital Growth Fund ........................................................... FA
Mutual Discovery Securities Fund .............................................. FMA
Small Cap Fund ................................................................ FA
Templeton Developing Markets Equity Fund ...................................... TAM
Templeton Global Growth Fund .................................................. TGA
Templeton International Equity Fund ........................................... FA
Templeton International Smaller Companies Fund ............................... TIC
Templeton Pacific Growth Fund ................................................. FA
- ------------------------------------------------------------------------------------------------------
</TABLE>
GENERAL
There is no assurance that the investment objectives of any of the Portfolios
will be met. Contract Owners bear the complete investment risk.
Additional Portfolios and/or additional Eligible Investments may, from time to
time, be made available as investments to underlie the Contract. However, the
right to make such selections will be limited by the terms and conditions
imposed on such transactions by the Company. (See "Purchase Payments and
Contract Value - Allocation of Net Purchase Payment.")
SUBSTITUTION OF SECURITIES
The Company may substitute one of the Portfolios Contract Owners have selected
with another Portfolio. The Company would not do this without the prior approval
of the Securities and Exchange Commission. The Company will give Contract Owners
notice of its intention to do this.
VOTING PRIVILEGES
In accordance with its view of present applicable law, the Company will vote the
shares of the Trust held in the Variable Account at special meetings of the
shareholders of the Trust in accordance with instructions received from persons
having the voting interest in the Variable Account. The Company will vote shares
for which it has not received instructions, as well as shares attributable to
it, in the same proportion as it votes shares for which it has received
instructions. The Trust does not hold regular meetings of shareholders.
The number of shares which a person has a right to vote will be determined as of
a date to be chosen by the Company not more than sixty (60) days prior to the
meeting of the Trust. Voting instructions will be solicited by written
communication at least fourteen (14) days prior to the meeting.
Trust shares are issued and redeemed only in connection with variable annuity
contracts and variable life insurance policies issued through separate accounts
of the Company and its affiliates. The Trust does not foresee any disadvantage
to Contract Owners arising out of the fact that the Trust may be made available
to separate accounts which are used in connection with both variable annuity and
variable life insurance products. Nevertheless, the Trust's Board of Trustees
intends to monitor events in order to identify any material irreconcilable
conflicts which may possibly arise and to determine what action, if any, should
be taken in response thereto. If such a conflict were to occur, one of the
separate accounts might withdraw its investment in the Trust. This might force
the Trust to sell portfolio securities at disadvantageous prices.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Various charges and deductions are made from the Single Purchase Payment and the
Variable Account. These charges and deductions are:
DEDUCTION FOR MORTALITY AND
EXPENSE RISK CHARGE
The Company deducts on each Valuation Date a Mortality and Expense Risk Charge
which is equal, on an annual basis, to 1.25% of the average daily net assets of
the Variable Account. The mortality risks assumed by the Company arise from its
contractual obligation to make annuity payments for the life of the Annuitant in
accordance with annuity rates guaranteed in the Contracts. The expense risk
assumed by the Company is that all actual expenses involved in administering the
Contracts, including Contract maintenance costs, administrative costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees, and the
costs of other services may exceed the amount recovered from the Administrative
Expense Charge.
The Mortality and Expense Risk Charge is guaranteed by the Company and cannot be
increased.
The Mortality and Expense Risk Charge is assessed both before and after the
Income Date. The Company will continue to assess the Mortality and Expense Risk
Charge during payment of an Annuity Option that does not involve a life
contingency even though it no longer bears any mortality risk on such payment
obligation.
DEDUCTION FOR ADMINISTRATIVE EXPENSE CHARGE
The Company deducts on each Valuation Date an Administrative Expense Charge
which is equal, on an annual basis, to 0.15% of the average daily net assets of
the Variable Account. This charge is to reimburse the Company for the expenses
it incurs in the establishment and maintenance of the Contracts and the Variable
Account. These expenses include, but are not limited to: preparation of the
Contracts, confirmations, annual reports and statements, maintenance of Contract
records, maintenance of Variable Account records, administrative personnel
costs, mailing costs, data processing costs, legal fees, accounting fees, filing
fees, the costs of other services necessary for Contract servicing, and all
accounting, valuation, regulatory and reporting requirements.
DEDUCTION FOR PREMIUM TAXES
Premium taxes or other taxes payable to a state, municipality or other
governmental entity will be charged against the Single Purchase Payment. Premium
taxes currently imposed by certain states on the Contracts range from 0% to 3.5%
of premiums paid. For information regarding a particular state's premium tax a
purchaser should contact his or her agent or the Company's VIP Service Center.
DEDUCTION FOR INCOME TAXES
While the Company is not currently maintaining a provision for federal income
taxes, the Company has reserved the right to establish a provision for income
taxes if it determines, in its sole discretion, that it will incur a tax as a
result of the operation of the Variable Account. The Company will deduct for any
income taxes incurred by it as a result of the operation of the Variable Account
whether or not there was a provision for taxes and whether or not it was
sufficient.
DEDUCTION FOR TRUST EXPENSES
There are other deductions from the assets of Franklin Valuemark Funds for
operating expenses (including management fees), which are described in the
accompanying Trust Prospectus.
ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
INCOME DATE
The Income Date is the date on which annuity payments begin. The Contract Owner
selects an Income Date at the time of issue. The Income Date must be the first
or fifteenth day of a calendar month and not later than 60 days from the
Effective Date. Upon state approval, the Income Date may be no later than 12
months from the Effective Date and must be the first or fifteenth day of a
calendar month. (Check with your agent regarding availability).
ANNUITY OPTIONS
The Contract provides for an Annuity under any of the Annuity Options described
below, provided the Annuitant or any Joint Annuitant is alive on the Income
Date. Except for Annuity Option 6, once selected the Option is irrevocable. The
amount of each payment depends upon the Annuity Option chosen and for Annuity
Options 1-5, the Annuitant's and any Joint Annuitant's Age on the Annuity
Calculation Date. Annuity payments from the Variable Account will vary with the
investment experience of the Contract Sub-Accounts and may be higher or lower
than the first payment. Annuity payments from the Fixed Payment Annuity will be
equal payments unless otherwise specified by the Annuity Option selected.
Annuity payments may come from the Fixed and/or the Variable Account under all
Annuity Options (except annuity payments under Option 6 may only come from the
Variable Account).
The Annuity Options currently available are:
Option 1 - Life Annuity. Monthly annuity payments are paid during the life of
the Annuitant ceasing with the last annuity payment due prior to the Annuitant's
death.
Option 2 - Life Annuity with 60, 120, 180, or 240 Monthly Payments Guaranteed.
Monthly annuity payments are paid during the life of an Annuitant with a
guarantee that if, at the Annuitant's death, annuity payments have been made for
less than a 60, 120, 180 or 240 month period as elected, then annuity payments
will be continued thereafter to the Beneficiary for the remainder of the
guaranteed period. The Beneficiary may elect to have the present value
(determined as set forth in the Contract) of the guaranteed annuity payments
remaining commuted and paid in a lump sum, less the applicable commutation fee
of 5% of the proceeds in Contract Years 1 and 2 reducing by 1% per year until it
is 1% for Contract Year 6 and thereafter (subject to applicable state law and
regulation). Variable payments will be commuted at the Assumed Investment
Return. Fixed payments will be commuted using an indexed rate. The Company will
require the return of the Contract and proof of death prior to the payment of
any commuted values.
Option 3 - Joint and Last Survivor Annuity. Monthly annuity payments are paid
during the joint lifetime of the Annuitant and the Joint Annuitant. Upon the
death of the Annuitant, if the Joint Annuitant is then living, payments will be
paid thereafter during the remaining lifetime of the Joint Annuitant at a level
of 100%, 75% or 50% of the original level as elected. Monthly payments cease
with the final annuity payment due prior to the last surviving Annuitant's
death.
Option 4 - Joint and Last Survivor Annuity with 60, 120, 180 or 240 Monthly
Payments Guaranteed. Monthly annuity payments are paid during the joint lifetime
of the Annuitant and the Joint Annuitant. Monthly payments are paid thereafter
during the remaining lifetime of the Joint Annuitant at 100% of the original
level. If, after the death of both the Annuitant and the Joint Annuitant,
annuity payments have been made for less than a 60, 120, 180 or 240 month period
as elected, then annuity payments will be continued thereafter to the
Beneficiary for the remainder of the guaranteed period. The Beneficiary may
elect to have the present value (determined as set forth in the Contract) of the
guaranteed annuity payments remaining commuted and paid in a lump sum, less the
applicable commutation fee of 5% of the proceeds in Contract Years 1 and 2
reducing by 1% per year until it is 1% for Contract Year 6 and thereafter
(subject to applicable state law and regulation). Variable payments will be
commuted at the Assumed Investment Return. Fixed payments will be commuted using
an indexed rate. The Company will require the return of the Contract and proof
of death prior to the payment of any commuted values.
Option 5 - Refund Life Annuity. Monthly annuity payments are paid during the
life of the Annuitant ceasing with the last annuity payment due prior to the
Annuitant's death with a guarantee that at the Annuitant's death, the
Beneficiary will receive a single cash payment (refund) equal to the sum of (a)
and (b) (if positive), where (a) is the dollar value of the number of Annuity
Units equal to the total Annuity Units purchased in the Variable Account on the
Effective Date, minus the total number of Annuity Units which have been
transferred to the Fixed Payment Annuity or paid as annuity payments; and (b) is
the dollar value of the portion of the Net Purchase Payment allocated to the
Fixed Payment Annuity, plus the amounts transferred from the Variable Account to
the Fixed Payment Annuity, minus the sum of the annuity payments made from the
Fixed Payment Annuity. This calculation assumes that the allocation of Annuity
Units actually in force at the time of the Annuitant's death had been the
allocation of Annuity Units at issue and at all times thereafter.
Option 6 - Specified Period Certain Annuity. Monthly annuity payments are paid
for a specified period of time. The Specified Period Certain is elected by the
Contract Owner and must be specified as a whole number of years from 5 to 30. If
at the time of the death of the last Annuitant and any Joint Annuitant, the
annuity payments actually made have been for less than the Specified Period
Certain, then annuity payments will be continued thereafter to the Beneficiary
for the remainder of the Specified Period Certain. OPTION 6 MAY NOT BE AVAILABLE
IN ALL STATES. Option 6 is only available when the entire annuity payment is
allocated to the Variable Account.
After the first Contract Anniversary, an Option 6 payout can be exchanged for a
life contingent payout (Options 1-5) if the Total Withdrawal Value is at least
$25,000 and in the case of a Non-Qualified Contract the Contract Owner has
attained age 591/2 and in the case of a Qualified Contract the exchange is made
after the later of the Contract Owner attaining age 591/2 or 5 years from the
date of the first annuity payment, and prior to the year in which the Contract
Owner reaches age 701/2. The annuity purchase rates used will be those that were
in effect as of the original Effective Date of the Option 6 Contract. A new
Contract will be exchanged for the existing Contract which must be returned to
the Company. The Contract Owner/Annuitant and Joint Annuitant, if any, must be
the same under both Contracts.
CONTRACT WITHDRAWALS (LIQUIDATIONS)
Annuity Options 2 and 4
If the Contract Owner has selected Annuity Option 2 or 4 and has a portion of
the annuity payments coming from the Variable Account, partial withdrawals from
the Contract may be made after the first Contract Year as follows. During the
lifetime of the Annuitant(s) and while the number of annuity payments made is
less than the guaranteed number of payments elected, the Contract Owner may once
each Contract Year request a withdrawal representing a partial liquidation of
the Total Withdrawal Value. The Total Withdrawal Value is equal to the present
value of the remaining guaranteed annuity payments from the Variable Account, to
the end of the period certain, commuted at the Assumed Investment Return less a
commutation fee of 5% of the amount withdrawn in Contract Years 1 and 2 and
reducing by 1% per year until it is 1% for Contract Year 6 and thereafter. The
commutation fee is a charge collected by the Company equal to a percentage of
the Total Withdrawal Value liquidated. Partial liquidations will be processed on
the next Annuity Calculation Date following the Contract Owner's written
request. After a partial liquidation, the subsequent monthly annuity payment
during the guaranteed period certain originating from the Variable Account will
be reduced by the percentage of the variable portion of the Total Withdrawal
Value liquidated, including the commutation fee. After the guaranteed number of
payments has been paid, the number of Annuity Units used in calculating the
monthly payments will be restored to their original value as if no liquidations
had taken place. The total amount allowed to be liquidated as a cumulative
percentage of the Total Withdrawal Value is guaranteed to be not less than 25%.
Currently, you may liquidate up to 75% of the Total Withdrawal Value, which
amount may be changed by the Company. The minimum allowable partial liquidation
is the lesser of $2,500 or the remaining portion of the Total Withdrawal Value
available to be liquidated. PARTIAL WITHDRAWALS MAY NOT BE AVAILABLE IN ALL
STATES.
Annuity Option 6
If the Contract Owner has selected Annuity Option 6, withdrawals from the
Contract may be made as follows. Currently, Contract Owners are permitted one
withdrawal per Contract Year up to the Total Withdrawal Value in the Contract.
For Contracts issued on or after May 1, 1998, the Total Withdrawal Value is
equal to the present value of the remaining annuity payments, to the end of the
Specified Period Certain, commuted at the Assumed Investment Return, less a
commutation fee of 5% of the amount withdrawn in Contract Years 1 and 2 and
reducing by 1% per year until it is 1% for Contract Year 6 and thereafter. For
Contracts issued prior to May 1, 1998, the Total Withdrawal Value is equal to
the present value of the remaining annuity payments, to the end of the Specified
Period Certain, commuted at the Assumed Investment Return, less a commutation
fee of 1% of the amount withdrawn in the first Contract Year. The Company
reserves the right to restrict the amount of a partial withdrawal to a minimum
of $2,500. The Company may require a complete withdrawal if the remaining Total
Withdrawal Value after a requested partial withdrawal would be less than
$35,000. Partial withdrawals will be processed on the next Annuity Calculation
Date following the Contract Owner's written request. The Company will require
the return of the Contract prior to the payment of the entire commuted value.
See "Tax Status - Tax Treatment of Distributions - Non-Qualified Contracts" and
"Tax Status - Tax Treatment of Distributions - IRA Contracts" for a discussion
of the tax treatment of withdrawals from the Contracts.
DETERMINATION OF VARIABLE ANNUITY PAYMENTS
On the Annuity Calculation Date, a fixed number of Annuity Units will be
purchased, determined as follows:
The first annuity payment is equal to the Contract Value allocated to the
Variable Account divided first by $1,000 and then multiplied by the appropriate
annuity payment amount for each $1,000 of value for the Annuity Option selected.
In each Contract Sub-Account, the fixed number of Annuity Units is determined by
dividing the amount of the initial annuity payment determined for each Contract
Sub-Account by the Annuity Unit value on the Annuity Calculation Date.
Thereafter, the number of Annuity Units in each Contract Sub-Account remains
unchanged unless the Contract Owner elects to transfer between Contract
Sub-Accounts. All calculations will appropriately reflect the annuity payment
frequency selected.
On each subsequent annuity payment date, the total annuity payment is the sum of
the annuity payments determined for each Contract Sub-Account. The annuity
payment in each Contract Sub-Account is determined by multiplying the number of
Annuity Units then allocated to such Contract Sub-Account by the Annuity Unit
value for that Contract Sub-Account.
For each Contract Sub-Account, the value of an Annuity Unit was initially
established at $1.00. On each subsequent Valuation Date the value of an Annuity
Unit is determined in the following way:
FIRST: The Net Investment Factor is determined by dividing (a) by (b) and adding
(c) to the result, where:
a. is the net increase or decrease in the Net Asset Value per share of the
Portfolio (or other Eligible Investment) plus the per share amount of any
dividend or capital gain distribution paid by the Portfolio (or Eligible
Investment) during the Valuation Period, plus or minus a per share charge or
credit for any taxes incurred by or reserved for in the Contract Sub-Account as
of the end of the current Valuation Period which the Company determines to have
resulted from maintenance of the Contract Sub-Account; and
b. is the Net Asset Value per share of the Portfolio (or other Eligible
Investment) at the beginning of the Valuation Period, plus or minus a per share
charge or credit for any taxes incurred by or reserved for in the Contract
Sub-Account as of the end of the immediately preceding Valuation Period which
the Company determines to have resulted from maintenance of the Contract
Sub-Account; and
c. is the net result of 1.000 less the Valuation Period deduction for the
charges to the Contract Sub-Account.
The Net Investment Factor may be more or less than one.
SECOND: The value of an Annuity Unit for a Valuation Date is equal to:
a. the value of the Annuity Unit on the immediately preceding Valuation Date;
b. multiplied by the Net Investment Factor for the Valuation Period ending on
the current Valuation Date;
c. divided by the Assumed Net Investment Factor (see below) for the Valuation
Period.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular Valuation Period. For example, with a 5%
Assumed Investment Return, the Assumed Net Investment Factor for a one-year
Valuation Period would be 1.05. For a one-day Valuation Period, the Assumed Net
Investment Factor would be 1.00013368062.
The Assumed Investment Return is the investment return upon which annuity
payments are based. Income will increase from one annuity Income Date to the
next if the annualized Net Rate of Return during that time is greater than the
Assumed Investment Return and will decrease if the annualized Net Rate of Return
is less than the Assumed Investment Return.
A Contract Owner may choose either a 7%, 5% or a 3% Assumed Investment Return.
If the Contract Owner does not choose one, the 5% Assumed Investment Return
automatically applies. Choosing a higher Assumed Investment Return will result
in a higher initial amount of income, but income will increase more slowly
during periods of good investment performance of the Trust and decrease more
rapidly during periods of poor investment performance. THE 7% ASSUMED INVESTMENT
RETURN IS NOT AVAILABLE IN ALL STATES UNTIL APPROVED BY THE STATE INSURANCE
DEPARTMENTS. (CHECK WITH YOUR AGENT REGARDING AVAILABILITY).
The variable annuity benefits provided for under the Contract are based upon:
(a) the 1983(a) Blended Unisex Mortality Table with 50% female content,
projected to the year 2000 with Projection Scale G; (b) the Assumed Investment
Return, and (c) any applicable taxes.
DETERMINATION OF FIXED ANNUITY PAYMENTS
On the Annuity Calculation Date, a stream of annuity payments is purchased. The
amount of the fixed annuity payment will be the value in the Contract allocated
to the Fixed Payment Annuity, divided by $1,000, then multiplied by the
appropriate factor for the Annuity Option selected.
THE CONTRACTS
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OWNERSHIP
The Annuitant is the Contract Owner. The Contract Owner exercises all the rights
of the Contract, subject to the rights of (1) any assignee under an assignment
filed with the Company's VIP Service Center, and (2) any irrevocably named
Beneficiary.
Upon the death of the Contract Owner, the Joint Annuitant, if not already a
Joint Owner, will become the Contract Owner. On or after the Income Date, if
there is no Joint Annuitant or upon the death of the Joint Annuitant, the
Beneficiary(ies) become the Owner(s) of their respective shares.
IF THE CONTRACT OWNER DIES BEFORE THE INCOME DATE AND THERE IS NO JOINT
ANNUITANT, THE CONTRACT WILL BE TREATED AS IF IT HAD NEVER BEEN ISSUED AND THE
COMPANY WILL RETURN THE SINGLE PURCHASE PAYMENT TO THE CONTRACT OWNER'S ESTATE.
ASSIGNMENT
The Contract Owner may assign the Contract. A copy of any assignment must be
filed with the Company's VIP Service Center. The Company is not responsible for
the validity of any assignment. If the Contract is assigned, the Contract
Owner's rights and those of any revocably-named person will be subject to the
assignment. An assignment will not affect any payments the Company may make or
actions it may take before such assignment has been recorded at its VIP Service
Center.
If the Contract is issued pursuant to a qualified plan, it may not be assigned,
pledged or otherwise transferred except as may be allowed under applicable law.
BENEFICIARY
One or more Beneficiaries and/or Contingent Beneficiaries are named by the
Contract Owner and are entitled to receive any death benefits to be paid.
CHANGE OF BENEFICIARY
The Contract Owner may change a Beneficiary or Contingent Beneficiary by filing
a written request with the Company at its VIP Service Center unless an
irrevocable Beneficiary designation was previously filed. After the change is
recorded, it will take effect as of the date the request was signed. If the
request reaches the VIP Service Center after the Contract Owner dies but before
any payment to a Beneficiary is made, the change will be valid. The Company will
not be liable for any payment made or action taken before it records the change.
DEATH OF BENEFICIARY
Unless the Contract Owner provided otherwise, any amount payable after his/her
death and that of any Joint Annuitant will be payable:
(1) in equal shares to such Beneficiaries as are then living;
(2) if no Beneficiary is then living, payment will be made in equal shares to
such Contingent Beneficiaries as are then living;
(3) if no Beneficiary or Contingent Beneficiary is then living, payment will
be made to the Contract Owner's estate.
ANNUITANT
The Annuitant is the primary person upon whose continuation of life any annuity
payment involving life contingencies depends. The Contract Owner is the
Annuitant. A Joint Annuitant is a person other than the Annuitant on whose life
annuity payments may also be based. The Annuitant, and any Joint Annuitant, must
be a natural person.
PROCEEDS PAYABLE AT DEATH
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IF THE CONTRACT OWNER DIES BEFORE THE INCOME DATE AND THERE IS NO JOINT
ANNUITANT, THE CONTRACT WILL BE TREATED AS IF IT HAD NEVER BEEN ISSUED AND THE
COMPANY WILL RETURN THE SINGLE PURCHASE PAYMENT TO THE CONTRACT OWNER'S ESTATE.
If the Contract Owner has chosen either Option 3, Option 4 or Option 6 with a
Joint Annuitant and either the Contract Owner or the Joint Annuitant dies before
the Income Date, the Annuity Option will be changed to Option 2 with 120 monthly
payments guaranteed. If the life expectancy of the survivor is less than 120
months, the period of guaranteed payments will be 60 months.
If the Contract Owner or Joint Annuitant die on or after the Income Date, the
death benefit, if any, will be payable under the selected Annuity Option. The
Company will require proof of death. Payment of the death benefit may be delayed
due to consent from the Department of Taxation when applicable.
PURCHASE PAYMENTS AND CONTRACT VALUE
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SINGLE PURCHASE PAYMENT
The Single Purchase Payment is paid to the Company at its VIP Service Center.
The minimum purchase payment the Company will accept is $35,000. Contract Owners
can acquire more than one Contract and the Single Purchase Payment for each need
not be $35,000 if the average purchase payment for each Contract is $35,000 or
more. Neither the Variable Account nor the Trust is designed for professional
market timing organizations, other entities, or persons using programmed, large,
or frequent transfers.
NET PURCHASE PAYMENT
The Net Purchase Payment is equal to the Single Purchase Payment less any taxes
levied on the purchase payment.
ALLOCATION OF NET PURCHASE PAYMENT
The Net Purchase Payment is allocated to one or more of the Contract
Sub-Accounts of the Variable Account on the Effective Date. Any portion of the
Net Purchase Payment selected to be allocated to the Fixed Payment Annuity will
temporarily be allocated to the Money Market Sub-Account on the Effective Date
and will be allocated to the Fixed Payment Annuity on the Annuity Calculation
Date. The requested allocation to each Contract Sub-Account and the Fixed
Payment Annuity is made in percentages of the Net Purchase Payment. Whole
percentages must be used and each must be at least 10%. The Company has the
right to allocate the Net Purchase Payment to the Money Market Sub-Account until
the expiration of the Free-Look Period. Thereafter, the allocations will be made
to one or more of the Contract Sub-Accounts as selected by the Contract Owner.
The Company reserves the right to limit the number of Contract Sub-Accounts that
a Contract Owner may invest in at any one time (except in Texas). Currently, the
Contract Owner may initially select up to nine Contract Sub-Accounts, and may
only be invested in a maximum of ten Contract Sub-Accounts at any one time
throughout the life of the Contract.
When all forms required to issue the Contract are received and in good order,
the Company will apply the Net Purchase Payment to the Variable Account and
credit the Contract with VIP Units within two business days of receipt.
In addition to the underwriting requirements of the Company, good order means
that the Company has received federal funds (monies credited to a bank's account
with its regional Federal Reserve Bank). The Company requires proof,
satisfactory to it, of the Age of the Annuitant and any Joint Annuitant. The
Company will not issue a Contract if either the Annuitant or the Joint Annuitant
are over Age 90. If the required forms for the Contract are not in good order,
the Company will attempt to get them in good order or the Company will return
the form(s) and the purchase payment within five business days. The Company will
not retain the Net Purchase Payment for more than five business days while
processing incomplete forms unless it has been so authorized by the purchaser.
CONTRACT VALUE
The Net Purchase Payment is allocated among the various Contract Sub-Accounts
within the Variable Account. For each Contract Sub-Account, the Net Purchase
Payment is converted into VIP Units. The Contract Value on or before the Annuity
Calculation Date is the sum of the values for the Contract within each Contract
Sub-Account. The value within each Contract Sub-Account is determined by
multiplying the number of VIP Units attributable to the Contract in the Contract
Sub-Account by the VIP Unit value for the Contract Sub-Account. On the Annuity
Calculation Date, the Contract Value is converted to annuity payments.
VIP UNIT
When the Net Purchase Payment is allocated to the Variable Account, the amount
allocated to each Contract Sub-Account is converted to VIP Units. The number of
VIP Units credited to each Contract Sub-Account is determined by dividing the
portion of the Net Purchase Payment that is allocated to the Contract
Sub-Account by the value of the VIP Unit for the Contract Sub-Account as of the
Effective Date. The VIP Unit value for each Contract Sub-Account was arbitrarily
set initially. The VIP Unit value for any later Valuation Period on or before
the Annuity Calculation Date is determined by subtracting (b) from (a) and
dividing the result by (c) where:
a. is the net result of
1) the assets of the Contract Sub-Account attributable to VIP Units
i.e., the aggregate value of the underlying Eligible Investments held at the
end of such Valuation Period); plus or minus
2) the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation of the Contract
Sub-Account;
b. is the cumulative unpaid charge for the Mortality and Expense Risk Charge
and for the Administrative Expense Charge (See "Charges and Deductions"); and
c. is the number of VIP Units outstanding at the end of such Valuation
Period.
The VIP Unit value may increase or decrease from Valuation Period to Valuation
Period.
TRANSFERS
The Contract Owner may transfer all or part of the Contract Owner's interest in
a Contract Sub-Account to another Contract Sub-Account without the imposition of
any fee or charge. No transfers may take place from the Fixed Payment Annuity to
the Variable Account.
Neither the Variable Account nor the Trust is designed for professional market
timing organizations, other entities, or persons using programmed, large, or
frequent transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Portfolio and may be refused. Accounts under
common ownership or control may be aggregated for purposes of transfer limits.
In coordination with the Trust, the Company reserves the right to restrict the
transfer privilege or reject any specific purchase payment allocation request
for any person, if, in the Portfolio manager's judgment, a Portfolio would be
unable to invest effectively in accordance with its investment objectives and
policies, or would otherwise potentially be adversely affected.
All transfers are subject to the following:
a. no partial transfer will be made if it would result in any selected
Contract Sub-Account or the Fixed Payment Annuity providing less than 10% of the
benefits under the Contract.
b. transfers will be effected during the Valuation Period next following
receipt by the Company of a written transfer request (or by telephone, if
authorized) containing all required information. No transfers may occur until
the end of the Free-Look Period. (See "Highlights.")
c. any transfer direction must clearly specify the new allocation
percentage(s) and the Contract Sub-Accounts and/or the Fixed Payment Annuity
which are to be re-allocated.
d. at least one allocation to the Fixed Payment Annuity is permitted. Both
the initial allocation to the Fixed Payment Annuity and each transfer to the
Fixed Payment Annuity will be treated as an allocation.
e. the Company reserves the right to limit the number of transfers among
Contract Sub-Accounts to not fewer than 6 transfers per calendar year. The
Company also reserves the right at any time and without prior notice to any
party to modify the transfer provisions described above, subject to applicable
state law and regulation.
A Contract Owner may elect to make transfers by telephone. To elect this option
the Contract Owner must do so in writing to the Company. If there are Joint
Owners, unless the Company is informed to the contrary, instructions will be
accepted from either one of the Joint Owners. The Company will use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If it does not, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. The Company tape records all telephone instructions.
DISTRIBUTOR
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NALAC Financial Plans, LLC ("NFP"), 1750 Hennepin Avenue, Minneapolis,
Minnesota, 55403, acts as the distributor of the Contracts. NFP is a
wholly-owned subsidiary of the Company. The Contracts are offered on a
continuous basis. NFP has subcontracted with Franklin Advisers, Inc.
("Advisers") for it and/or certain of its affiliates to provide certain
marketing support services and NFP compensates these entities for their
services.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions at the time of purchase up to 4% of the
Single Purchase Payment. Broker-dealers are also paid a trail commission of up
to 40 basis points on the net single premium reserve for the Contract. The
Company, by agreement with the broker-dealer, pays commissions as a combination
of a certain percentage amount at the time of sale and a trail commission (which
when combined could exceed 4% of the Single Purchase Payment). In addition,
under certain circumstances, the Company and/or Advisers or certain of its
affiliates, under a marketing support agreement with NFP, may pay certain
sellers for other services not directly related to the sale of the Contracts
such as special marketing support allowances.
DELAY OF PAYMENTS
The Company reserves the right to suspend or postpone payments 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 securities held in the
Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Contract Owners.
The applicable rules and regulations of the Securities and Exchange Commission
will govern as to whether the conditions described in 2 and 3 exist.
The Company reserves the right to postpone withdrawals from the Fixed Payment
Annuity for a period of up to six months.
ADMINISTRATION OF THE CONTRACTS
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While the Company has primary responsibility for all administration of the
Contracts, it has retained the services of Templeton Funds Annuity Company
("TFAC" or "VIP Service Center") (in California d.b.a. Templeton Funds Life &
Annuity Insurance Company) pursuant to an Administration Agreement. Such
administrative services include issuance of the Contracts and maintenance of
Contract Owners' records. The Company pays all fees and charges of TFAC. TFAC is
an indirect wholly-owned subsidiary of Franklin Resources, Inc. which is also
the ultimate parent of all managers to the Trust. TFAC has also entered into a
reinsurance agreement with the Company with respect to certain risks under the
Contracts.
PERFORMANCE DATA
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MONEY MARKET SUB-ACCOUNT
From time to time, the Company or NFP may advertise the "yield" and "effective
yield" of the Money Market Sub-Account. Both yield figures will be based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Money Market Sub-Account refers to the income generated by
Contract Values in the Money Market Sub-Account over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the Contract Values in the Money Market Sub-Account. The
"effective yield" is calculated similarly but, when annualized, the income
earned by Contract Values in the Money Market Sub-Account is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The computation
of the yield calculation includes a deduction for the Mortality and Expense Risk
Charge and Administrative Expense Charge.
OTHER CONTRACT SUB-ACCOUNTS
From time to time, the Company or NFP may publish the current yields and total
returns of the other Contract Sub-Accounts in sales literature, advertisements
and communications to Contract Owners. The current yield for each Contract
Sub-Account will be calculated by dividing the annualization of the interest
income earned by the underlying Portfolio during a recent 30-day period by the
maximum VIP Unit value at the end of such period. Total return information will
include the Contract Sub-Account's average annual total return over the most
recent four calendar quarters, and, for Contract Sub-Accounts in existence for
five years or more, for five years or since the Contract Sub-Account's
inception. The average annual total return is based upon the value of the VIP
Units acquired through a hypothetical $1,000 investment of the VIP Unit value at
the beginning of the specified period and the value of the VIP Unit at the end
of such period, assuming reinvestment of all distributions and the deduction of
the Mortality and Expense Risk Charge and the Administrative Expense Charge.
Each Contract Sub-Account may also advertise cumulative and total return
information over different periods of time. The performance of the Contract
Sub-Accounts reflects results achieved prior to the date the Contracts first
invested in the Contract Sub-Accounts.
The Company or NFP may, in addition, advertise or present yield or total return
performance information computed on a different basis, or for the Portfolios.
Contract Owners should note that the investment results will fluctuate over
time, and any presentation of current yield or total return for any prior period
should not be considered as a representation of what an investment may earn or
what a Contract Owner's yield or total return may be in any future period.
Hypothetical performance illustrations for a hypothetical contract may be
prepared for sales literature or advertisements. See "Calculation of Performance
Data" in the Statement of Additional Information.
PERFORMANCE RANKING
The performance based on each or all of the Contract Sub-Accounts of the
Variable Account may be compared in its advertising and sales literature to the
performance of other variable annuity issuers in general or to the performance
of particular types of variable annuities investing in mutual funds, or series
of mutual funds with investment objectives similar to each of the Contract
Sub-Accounts of the Variable Account or indices. Lipper Analytical Services,
Inc. ("Lipper") and the Variable Annuity Research and Data Service ("VARDS") are
independent services which monitor and rank the performance of variable annuity
issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS rankings compare only variable annuity issuers. The performance
analyses prepared by Lipper and VARDS rank such issuers on the basis of total
return, assuming reinvestment of distributions, but do not take sales charges,
redemption fees or certain expense deductions at the separate account level into
consideration. In addition, VARDS prepares risk adjusted rankings, which
consider the effects of market risk on total return performance. This type of
ranking may address the question as to which portfolios provide the highest
total return with the least amount of risk. Other ranking services may be used
as sources of performance comparison, such as CDA/Weisenberger and Morningstar.
TAX STATUS
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NOTE: The following description is based upon the Company's understanding of
current federal income tax law applicable to annuities in general. The Company
cannot predict the probability that any changes in such laws will be made.
Purchasers are cautioned to seek competent tax advice regarding the possibility
of such changes. The Company does not guarantee the tax status of the Contracts.
Purchasers bear the complete risk that the Contracts may not be treated as
"annuity contracts" under federal income tax laws. It should be further
understood that the following discussion is not exhaustive and that special
rules not described in this Prospectus 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. A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as annuity payments under the Annuity Option elected.
For annuity payments, the portion of a payment includable in income equals the
excess of the payment over the exclusion amount. The exclusion amount for
payments based on a variable annuity option is determined by dividing the
investment in the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid (determined
by Treasury Regulations). The exclusion amount for payments based on a fixed
annuity option is determined by multiplying the payment by the ratio that the
cost basis of the Contract (adjusted for any period certain or refund guarantee)
bears to the expected return under the Contract. Payments received after the
investment in the Contract has been recovered (i.e. 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 rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries
under the Contracts should seek competent financial advice about the tax
consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity contract would result in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Portfolios of the Trust underlying the Contracts
will be managed by the Managers for the Trust in such a manner as to comply with
these diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the investments of the Variable Account will cause the Contract Owner to be
treated as the owner of the assets of the Variable Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Contract Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Contract Owner's ability to transfer
among investment choices or the number and type of investment choices available,
would cause the Contract Owner to be considered as the owner of the assets of
the Variable Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Contract Owner being
retroactively determined to be the owner of the assets of the Variable Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
Section 72(e)(11) of the Code provides that multiple non-qualified annuity
contracts which are issued within a calendar year period to the same contract
owner by one company or its affiliates are treated as one annuity contract for
purposes of determining the tax consequences of any distribution. Such treatment
may result in adverse tax consequences, including more rapid taxation of the
distributed amounts from such combination of contracts. The legislative history
of Section 72(e)(11) indicates that it was not intended to apply to immediate
annuities. However, the legislative history also states that no inference is
intended as to whether the Treasury Department, under its authority to prescribe
rules to enforce the tax laws, may treat the combination purchase of a deferred
annuity contract with an immediate annuity contract as a single contract for
purposes of determining the tax consequences of any distribution.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 591/2; (b) after the death of the Contract Owner;
(c) if the taxpayer is totally disabled (for this purpose disability is as
defined in Section 72(m)(7) of the Code); (d) in a series of substantially equal
periodic payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer and his Beneficiary; (e) as an annuity payment under
an immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Distributions -IRA Contracts.")
The availability of total or partial withdrawals from an immediate annuity is
not expressly provided for in the Code or Treasury Regulations. The only tax
guidance currently available for such issue is a Private Letter Ruling holding
that the right to make withdrawals does not prevent a contract from qualifying
as an immediate annuity. However, the Private Letter Ruling does not address the
issue of whether the making of a withdrawal would adversely affect the favorable
tax treatment of annuity payments made before or after such partial withdrawal
because of the requirement that all immediate annuity payments must be
"substantially equal". The loss of favorable tax treatment would mean that the
income portion of each annuity payment received prior to the taxpayer's
attaining age 591/2 would be subject to a 10% penalty tax unless another
exception to the penalty tax applies. While the Company currently believes that
such withdrawals will not adversely affect the favorable tax treatment of
annuity payments received before or after a withdrawal and the Company intends
to perform its tax reporting functions accordingly, there can be no assurance
that the Internal Revenue Service will not take a contrary position. Contract
Owners should obtain competent tax advice prior to making a partial or total
withdrawal.
QUALIFIED PLANS
The Contracts offered by this Prospectus may also be used with a plan qualified
under Section 408(b) of the Code ("IRA Contracts"). Contract Owners, Annuitants
and Beneficiaries are cautioned that benefits under an IRA 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. The following
discussion of IRA Contracts is not exhaustive and is for general informational
purposes only. The tax rules regarding IRA Contracts are very complex and will
have differing applications depending on individual facts and circumstances.
Each purchaser should obtain competent tax advice prior to purchasing IRA
Contracts.
IRA Contracts include special provisions restricting Contract provisions that
may otherwise be available as described in this Prospectus. Generally, IRA
Contracts are not transferable except upon surrender or annuitization. Various
penalty and excise taxes may apply to contributions or distributions made in
violation of applicable limitations. Furthermore, certain withdrawal penalties
and restrictions may apply to distributions from IRA Contracts. (See "Tax
Treatment of Distributions - IRA Contracts".)
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. IRA Contracts will utilize annuity tables which do
not differentiate on the basis of sex because of the use of the IRA Contracts in
a Simplified Employee Pension. Such annuity tables will also be available for
use in connection with certain non-qualified deferred compensation plans.
Under applicable limitations, certain amounts may be contributed to an IRA
Contract which will be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Distributions - IRA Contracts".) Under
certain conditions, distributions from other IRAs and other qualified plans may
be rolled over or transferred on a tax-deferred basis into an IRA Contract.
Sales of Contracts for use as IRA Contracts are subject to special requirements
imposed by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers of
Contracts to be qualified as Individual Retirement Annuities should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
TAX TREATMENT OF DISTRIBUTIONS - IRA CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract.
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including IRA Contracts. To
the extent amounts are not includible in gross income because they have been
rolled over to an IRA or to another eligible qualified plan, no tax penalty will
be imposed. The tax penalty will not apply to the following distributions: (a)
if distribution is made on or after the date on which the Annuitant reaches age
591/2; (b) distributions following the death or disability of the Annuitant (for
this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of a series of substantially equal periodic payments
made not less frequently than annually for the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the Annuitant and
his or her designated Beneficiary; (d) distributions made to the Annuitant to
the extent such distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Annuitant for amounts paid during the taxable year
for medical care; (e) distributions from an IRA Contract for the purchase of
medical insurance (as described in Section 213(d)(1)(D) of the Code) for the
Annuitant and his or her spouse and dependents if the Annuitant has received
unemployment compensation for at least 12 weeks (this exception will no longer
apply after the Annuitant has been re-employed for at least 60 days.); (f)
distributions from an Individual Retirement Annuity made to the Annuitant to the
extent such distributions do not exceed the qualified higher education expenses
(as defined in Section 72(t)(7) of the Code) of the Annuitant for the taxable
year; and (g) distributions from an Individual Retirement Annuity made to the
Annuitant which are qualified first-time home buyer distributions (as defined in
Section 72(t)(8) of the Code). With respect to (c) above, if the series of
substantially equal periodic payments is modified before the later of the
Annuitant attaining age 591/2 or 5 years from the date of the first annuity
payment, then the tax for the year of the modification is increased by an amount
equal to the tax which would have been imposed (the 10% penalty tax) but for the
exception, plus interest for the tax years in which the exception was used. A
partial withdrawal may result in the modification of the series of annuity
payments made after such withdrawal and therefore could result in the imposition
of the 10% penalty tax and interest for the period as described above. Competent
tax advice should be obtained prior to making any withdrawals from an IRA
Contract. Any amounts distributed will only be paid to the Annuitant, Joint
Annuitant or Beneficiary. The Company will not transfer or pay such amounts to
another IRA or tax qualified plan.
Generally, distributions from an IRA Contract must commence no later than April
1 of the calendar year, following the year in which the employee attains age
701/2. Generally, required distributions must be 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% penalty tax is imposed as to
the amount not distributed.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign their
Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Contract Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Contract Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Audited consolidated financial statements of the Company and audited financial
statements of the Variable Account as of and for the year ended December 31,
1997 are included in the Statement of Additional Information.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Variable Account or the Distributor
is a party or to which the assets of the Variable Account are subject. The
Company is not involved in any litigation that is of material importance in
relation to its total assets or that relates to the Variable Account.
APPENDIX
- --------------------------------------------------------------------------------
ILLUSTRATION OF VALUES
The following tables have been prepared to show how investment performance
affects variable annuity income over time. The variable annuity income amounts
reflect three different assumptions for a constant investment return before all
expenses: 0%, 6% and 12%. These are hypothetical rates of return and, of course,
the Company does not guarantee that the Contract will earn these returns for any
one year or any sustained period of time. The tables are for illustrative
purposes only and do not represent past or future investment returns.
The variable annuity income may be more or less than the income shown if the
actual returns of the Eligible Investments are different than those illustrated.
Since it is very likely that investment returns will fluctuate over time, the
amount of variable annuity income will also fluctuate. The total amount of
annuity income ultimately received will depend on cumulative investment returns
and how long the Annuitant lives and the option chosen.
Another factor which determines the amount of variable annuity income is the
Assumed Investment Return. Income will increase from one annuity Income Date to
the next if the annualized Net Rate of Return during that time is greater than
the Assumed Investment Return, and will decrease if the annualized Net Rate of
Return is less than the Assumed Investment Return.
Three illustrations follow. The first is based on a 3% Assumed Investment
Return, the second is based on a 5% Assumed Investment Return, and the third is
based on a 7% Assumed Investment Return. THE 7% ASSUMED INVESTMENT RETURN IS NOT
AVAILABLE IN ALL STATES UNTIL APPROVED BY THE STATE INSURANCE DEPARTMENTS.
(CHECK WITH YOUR AGENT REGARDING AVAILABILITY).
The income amounts shown reflect the deduction of all fees and expenses. Actual
Trust fees and expenses will vary from year to year and from Portfolio to
Portfolio and may thus be higher or lower than the assumed rate. The
illustrations assume that each Portfolio of the Trust will incur expenses at an
annual rate of 0.77% of the average daily net assets of the Portfolio. This is
the average in 1997, weighted by Portfolio net assets as of 12/31/97. The
Mortality and Expense Risk Charge and Administrative Expense Charge are
calculated, in the aggregate, at an annual rate of 1.40% of the average daily
net assets of the Variable Account. After taking these expenses and charges into
consideration, the illustrated gross investment returns of 0%, 6% and 12% are
approximately equal to net rates of -2.15%, 3.72% and 9.60%, respectively.
<PAGE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/29 EFFECTIVE DATE: 12/1/98
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/99
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 3%
The amount of monthly variable annuity income shown in the table below and the graph that follows assumes a constant
annual investment return. The amount of variable annuity income that is actually received will depend on the investment
performance of the underlying Portfolio(s) selected. The variable annuity income can go up or down and no minimum dollar
amount of variable annuity income is guaranteed. The amounts shown are based on a 3% Assumed Investment Return. Income
will remain constant at $625 per month when the annualized net rate of return after expenses is 3%.
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -2.15% 3.72% 9.60%
- -------------------- ---- ------------------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
January 1, 1999 70 $622 $625 $628
January 1, 2000 71 591 629 668
January 1, 2001 72 561 634 711
January 1, 2002 73 533 638 757
January 1, 2003 74 507 643 805
January 1, 2008 79 392 666 1,098
January 1, 2013 84 303 689 1,498
January 1, 2018 89 235 714 2,043
January 1, 2023 94 182 740 2,786
</TABLE>
<PAGE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
The following table summarizes Annuity Income with an Assumed Investment Return
of 3%. This table is presented graphically in the printed prospectus.
Monthly Payment Amount
------------------------------------------------------------
-2.15% 3.72% 9.60%
Annual Rate Annual Rate Annual Rate
of Return of Return of Return
Year After Expenses After Expenses After Expenses
- ---------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 622 $ 625 $ 628
2 591 629 668
3 561 634 711
4 533 638 757
5 507 643 805
6 481 647 857
7 457 652 912
8 434 656 970
9 413 661 1,032
10 392 666 1,098
11 372 670 1,168
12 354 675 1,243
13 336 680 1,323
14 319 685 1,408
15 303 689 1,498
16 288 694 1,594
17 274 699 1,696
18 260 704 1,804
19 247 709 1,920
20 235 714 2,043
21 223 719 2,174
22 212 724 2,313
23 201 729 2,461
24 191 734 2,619
25 182 740 2,786
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/29 EFFECTIVE DATE: 12/1/98
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/99
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 5%
The amount of monthly variable annuity income shown in the table below and the graph that follows assumes a constant
annual investment return. The amount of variable annuity income that is actually received will depend on the investment
performance of the underlying Portfolio(s) selected. The variable annuity income can go up or down and no minimum dollar
amount of variable annuity income is guaranteed. The amounts shown are based on a 5% Assumed Investment Return. Income
will remain constant at $742 per month when the annual rate of return after expenses is 5%.
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -2.15% 3.72% 9.60%
- -------------------- ---- ------------------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
January 1, 1999 70 $738 $741 $745
January 1, 2000 71 687 732 778
January 1, 2001 72 641 723 812
January 1, 2002 73 597 715 847
January 1, 2003 74 556 706 884
January 1, 2008 79 391 664 1,096
January 1, 2013 84 275 625 1,357
January 1, 2018 89 193 588 1,682
January 1, 2023 94 136 553 2,083
</TABLE>
<PAGE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
The following table summarizes Annuity Income with an Assumed Investment Return
of 5%. This table is presented graphically in the printed prospectus.
Monthly Payment Amount
------------------------------------------------------------
-2.15% 3.72% 9.60%
Annual Rate Annual Rate Annual Rate
of Return of Return of Return
Year After Expenses After Expenses After Expenses
- ---------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 738 $ 741 $ 745
2 687 732 778
3 641 723 812
4 597 715 847
5 556 706 884
6 519 697 923
7 483 689 963
8 450 681 1,006
9 420 672 1,050
10 391 664 1,096
11 365 656 1,144
12 340 648 1,194
13 317 640 1,246
14 295 632 1,300
15 275 625 1,357
16 256 617 1,417
17 239 610 1,479
18 223 602 1,543
19 207 595 1,611
20 193 588 1,682
21 180 581 1,755
22 168 574 1,832
23 156 567 1,912
24 146 560 1,996
25 136 553 2,083
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/29 EFFECTIVE DATE: 12/1/98
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/99
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 7%
The amount of monthly variable annuity income shown in the table below and the graph that follows assumes a constant
annual investment return. The amount of variable annuity income that is actually received will depend on the investment
performance of the underlying Portfolio(s) selected. The variable annuity income can go up or down and no minimum dollar
amount of variable annuity income is guaranteed. The amounts shown are based on a 7% Assumed Investment Return. Income
will remain constant at $861 per month when the annual rate of return after expenses is 7%.
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -2.15% 3.72% 9.60%
- -------------------- ---- ------------------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
January 1, 1999 70 $859 $864 $868
January 1, 2000 71 786 837 889
January 1, 2001 72 719 812 911
January 1, 2002 73 657 787 933
January 1, 2003 74 601 763 955
January 1, 2008 79 385 653 1,077
January 1, 2013 84 246 559 1,214
January 1, 2018 89 157 478 1,369
January 1, 2023 94 101 410 1,543
</TABLE>
<PAGE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
The following table summarizes Annuity Income with an Assumed Investment Return
of 7%. This table is presented graphically in the printed prospectus.
Monthly Payment Amount
------------------------------------------------------------
-2.15% 3.72% 9.60%
Annual Rate Annual Rate Annual Rate
of Return of Return of Return
Year After Expenses After Expenses After Expenses
- ---------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 859 $ 864 $ 868
2 786 837 889
3 719 812 911
4 657 787 933
5 601 763 955
6 550 739 979
7 503 717 1,002
8 460 695 1,027
9 420 674 1,052
10 385 653 1,077
11 352 633 1,103
12 322 614 1,130
13 294 595 1,157
14 269 577 1,185
15 246 559 1,214
16 225 542 1,244
17 206 525 1,274
18 188 509 1,305
19 172 494 1,336
20 157 478 1,369
21 144 464 1,402
22 132 450 1,436
23 120 436 1,471
24 110 423 1,507
25 101 410 1,543
</TABLE>
<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
- ---------------------------------------------------------
ITEM PAGE
Company...........................................
Experts ..........................................
Legal Opinions ...................................
Distributor.......................................
Calculation of Performance Data ..................
Total Return ....................................
Yield ...........................................
Performance Ranking .............................
Performance Information .........................
Annuity Income ..................................
Annuity Provisions ...............................
Variable Annuity Payout .........................
Fixed Annuity Payout ............................
Financial Statements .............................
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL IMMEDIATE
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
MAY 1, 1998
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL IMMEDIATE VARIABLE
ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195, (800) 542-5427.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED MAY 1,
1998, AND AS MAY BE AMENDED FROM TIME TO TIME.
TABLE OF CONTENTS
CONTENTS PAGE
Company .........................................
Experts .........................................
Legal Opinions ..................................
Distributor .....................................
Calculation of Performance Data .................
Total Return ...................................
Yield ..........................................
Performance Ranking ............................
Performance Information ........................
Annuity Income .................................
Annuity Provisions ..............................
Variable Annuity Payout ........................
Fixed Annuity Payout ...........................
Financial Statements ............................
VIP SAI 05/98
<PAGE>
COMPANY
- --------------------------------------------------------------------------------
Information regarding Allianz Life Insurance Company of North America (the
"Company") and its ownership is contained in the Prospectus. On April 1, 1993,
the Company changed its name from North American Life and Casualty Company to
its present name. The Company is rated A+ (Superior) by A.M. BEST, an
independent analyst of the insurance industry. The financial strength of an
insurance company may be relevant insofar as the ability of a company to make
fixed annuity payments from its general account.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of Allianz Life Variable Account B and the consolidated
financial statements of the Company as of and for the year ended December 31,
1997, included in this Statement of Additional Information have been audited by
KPMG Peat Marwick LLP, independent auditors, as indicated in their reports
included in this Statement of Additional Information and are included herein in
reliance upon such reports and upon the authority of said firm as experts in
accounting and auditing.
LEGAL OPINIONS
- --------------------------------------------------------------------------------
Legal matters in connection with the Contracts described herein are being passed
upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
- --------------------------------------------------------------------------------
NALAC Financial Plans, LLC, a subsidiary of the Company, acts as the
distributor. The offering is on a continuous basis.
CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
Total Return
From time to time, the Company may advertise the performance data for the
Contract Sub-Accounts in sales literature, advertisements, personalized
hypothetical illustrations, and Contract Owner communications. Such data will
show the percentage change in the value of a VIP Unit based on the performance
of a Contract Sub-Account over a stated period of time which is determined by
dividing the increase (or decrease) in value for that unit by the VIP Unit Value
at the beginning of the period.
Any such performance data will include total return figures for the one,
five, and ten year (or since inception) time periods indicated. Such total
return figures will reflect the deduction of a 1.25% Mortality and Expense Risk
Charge, a 0.15% Administrative Expense Charge and the operating expenses of the
underlying Portfolios.
The hypothetical value of a Contract purchased for the time periods
described will be determined by using the actual VIP Unit Values for an initial
$1,000 purchase payment. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years;
ERV = ending redeemable value of a hypothetical $1,000 purchase payment made at
the beginning of the period at the end of the period.
The Company may also advertise cumulative and total return information over
different periods of time. Cumulative total return is calculated in a similar
manner as described above except that the results are not annualized.
Yield
The Money Market Sub-Account. The Company may advertise yield information
for the Money Market Sub-Account. The Money Market Sub-Account's current yield
may vary each day, depending upon, among other things, the average maturity of
the underlying Portfolio's investment securities and changes in interest rates,
operating expenses, the deduction of the Mortality and Expense Risk Charge, the
Administrative Expense Charge and, in certain instances, the value of the
underlying Portfolio's investment securities. The fact that the Contract
Sub-Account's current yield will fluctuate and that the principal is not
guaranteed should be taken into consideration when using the Contract
Sub-Account's current yield as a basis for comparison with savings accounts or
other fixed-yield investments. The yield at any particular time is not
indicative of what the yield may be at any other time.
The Money Market Sub-Account's current yield is computed on a base period
return of a hypothetical Contract having a beginning balance of one VIP Unit for
a particular period of time (generally seven days). The return is determined by
dividing the net change (exclusive of any capital changes) in such VIP Unit by
its beginning value, and then multiplying it by 365/7 to get the annualized
current yield. The calculation of net change reflects the value of additional
shares purchased with the dividends paid by the Portfolio, and the deduction of
the Mortality and Expense Risk Charge and the Administrative Expense Charge.
The effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. (Effective
yield = [(Base Period Return + 1)365/7]-1.)
For the seven-day period ending on 12/31/97, the Money Market Sub-Account
had a current yield of 3.88% and an effective yield of 3.95%.
Other Contract Sub-Accounts. The Company may also quote yield in sales
literature, advertisements, personalized hypothetical illustrations, and
Contract Owner communications for the other Contract Sub-Accounts. Each Contract
Sub-Account (other than the Money Market Sub-Account) will publish standardized
total return information with any quotation of current yield.
The yield computation is determined by dividing the net investment income
per VIP Unit earned during the period (minus the deduction for the Mortality and
Expense Risk Charge and Administrative Expense Charge) by the VIP Unit Value on
the last day of the period and annualizing the resulting figure, according to
the following formula:
Yield = 2 [((a-b) + 1)6 - 1]
- --------------------------------------------------------------------------------
cd
where:
a = net investment income earned during the period by the Portfolio
attributable to shares owned by the Contract Sub-Account;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of VIP Units outstanding during the period;
d = the maximum offering price per VIP Unit on the last day of the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods (or one month) identified in the sales literature,
advertisement, or communication. The Company does not currently advertise yield
information for any Contract Sub-Account (other than the Money Market
Sub-Account).
Performance Ranking
Total return information for the Contract Sub-Accounts and the Portfolios
may be compared to relevant indices, including U.S. domestic and international
bond indices and data from Lipper Analytical Services, Inc., Standard & Poor's
Indices, or VARDS(R).
From time to time, evaluation of performance by independent sources may also
be used.
Performance Information
Total returns reflect all aspects of a Contract Sub-Account's return,
including the automatic reinvestment by Allianz Life Variable Account B of all
distributions and any change in a Contract Sub-Account's value over the period.
The performance of the Contract Sub-Accounts reflects results achieved prior to
the date the Contracts first invested in the Contract Sub-Accounts.
The returns reflect the deduction of the Mortality and Expense Risk Charge,
Administrative Expense Charge and the operating expenses of each Portfolio. Past
performance does not guarantee future results.
<TABLE>
<CAPTION>
STANDARDIZED TOTAL RETURN
Average Annual Total Return for the periods ended December 31, 1997
Inception One Five Since
Contract Sub-Account Date Year Year Inception
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth......................................................... 5/1/96 16.66% NA 17.73%
Global Utilities Securities............................................ 1/24/89 25.00% 10.20% 11.19%
Growth and Income...................................................... 1/24/89 25.97% 14.32% 10.57%
Income Securities...................................................... 1/24/89 15.46% 10.58% 10.83%
Money Market........................................................... 1/24/89 3.78% 3.05% 3.72%
Mutual Discovery Securities............................................ 11/8/96 17.71% NA 17.11%
Mutual Shares Securities............................................... 11/8/96 16.10% NA 17.20%
Real Estate Securities................................................. 1/24/89 19.02% 16.56% 12.28%
Rising Dividends....................................................... 1/27/92 31.18% 13.10% 12.47%
Small Cap.............................................................. 11/1/95 15.79% NA 20.40%
Templeton Developing Markets Equity.................................... 3/15/94 -9.99% NA .88%
Templeton Global Asset Allocation...................................... 5/1/95 10.16% NA 12.77%
Templeton Global Growth................................................ 3/15/94 11.92% NA 11.60%
Templeton International Equity......................................... 1/27/92 10.14% 12.93% 10.12%
Templeton International Smaller Companies.............................. 5/1/96 -2.87% NA 4.87%
Templeton Pacific Growth............................................... 1/27/92 -36.84% -.69% -.98%
<FN>
As of December 31, 1997, the Value Securities Sub-Account had not yet commenced operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED TOTAL RETURN
Total Return for the periods ended December 31, 1997
Annual Total Return Cumulative Total Return
------------------------------------ ------------------------------------
Inception One Three Five Since Three Five Since
Contract Sub-Account Date Year Years Years Inception Years Years Inception
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth...................... 5/1/96 16.66% NA NA 17.73% NA NA 31.30%
Global Utilities Securities......... 1/24/89 25.00% 19.57% 10.20% 11.19% 70.94% 62.50% 158.18%
Growth and Income................... 1/24/89 25.97% 22.93% 14.32% 10.57% 85.78% 95.26% 145.51%
Income Securities................... 1/24/89 15.46% 15.21% 10.58% 10.83% 52.91% 65.31% 150.65%
Money Market........................ 1/24/89 3.78% 3.92% 3.05% 3.72% 12.23% 16.20% 38.65%
Mutual Discovery Securities......... 11/8/96 17.71% NA NA 17.11% NA NA 19.83%
Mutual Shares Securities............ 11/8/96 16.10% NA NA 17.20% NA NA 19.93%
Real Estate Securities.............. 1/24/89 19.02% 21.79% 16.56% 12.28% 80.64% 115.11% 181.69%
Rising Dividends.................... 1/27/92 31.18% 27.14% 13.10% 12.47% 105.50% 85.06% 100.74%
Small Cap........................... 11/1/95 15.79% NA NA 20.40% NA NA 49.52%
Templeton Developing
Markets Equity..................... 3/15/94 -9.99% 3.03% NA .88% 9.37% NA 3.4%
Templeton Global
Asset Allocation................... 5/1/95 10.16% NA NA 12.77% NA NA 37.86%
Templeton Global Growth............. 3/15/94 11.92% 14.16% NA 11.60% 48.77% NA 51.76%
Templeton International Equity...... 1/27/92 10.14% 13.35% 12.93% 10.12% 45.64% 83.68% 77.11%
Templeton International
Smaller Companies.................. 5/1/96 -2.87% NA NA 4.87% NA NA 8.25%
Templeton Pacific Growth............ 1/27/92 -36.84% -9.68% -.69% -.98% -26.33% -3.38% -5.69%
<FN>
As of December 31, 1997, the Value Securities Sub-Account had not yet commenced operations.
</FN>
</TABLE>
The Company may also present performance information computed on a different
basis.
Contract Owners should note that investment results will fluctuate over time,
and any presentation of total return for any period should not be considered as
a representation of what an investment may earn or what a Contract Owner's total
return may be in any future period.
Annuity Income
Periodic annuity income amounts may be illustrated using the historical
performance of the Contract Sub-Accounts, the Standard & Poor's 500 Composite
Stock Price Index or other recognized investment benchmark portfolios. All
illustrations will reflect the 1.25% annual Mortality and Expense Risk Charge
and the 0.15% Administrative Expense Charge and actual or assumed Portfolio
expenses.
ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
Variable Annuity Payout
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable Contract Sub-Account(s) of the Variable Account. Annuity
payments also depend upon the Age of the Annuitant and any Joint Annuitant and
the Assumed Net Investment Factor utilized. On the Annuity Calculation Date, the
Contract Value in each Contract Sub-Account will be applied to the applicable
Annuity Tables. The Annuity Table used will depend upon the Annuity Option
chosen. Unisex Annuity Tables are utilized by the Company. The dollar amount of
annuity payments after the first is determined as follows:
1. The dollar amount of the first annuity payment is divided by the value
of an Annuity Unit as of the Annuity Calculation Date. This establishes the
number of Annuity Units for each monthly payment. The number of Annuity Units
remains fixed during the annuity payment period.
2. For each Contract Sub-Account, the fixed number of Annuity Units is
multiplied by the Annuity Unit value on each subsequent annuity payment date.
This result is the dollar amount of the payment for each Contract Sub-Account.
3. The total dollar amount of each Variable Annuity variable payout is the
sum of all Contract Sub-Account Variable Annuity payments. Fixed Annuity Payout
Annuity payments from the Fixed Payment Annuity will be equal payments unless
otherwise specified by the Annuity Option selected.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited consolidated financial statements of the Company as of and for the
year ended December 31, 1997 included herein should be considered only as
bearing upon the ability of the Company to meet its obligations under the
Contracts. The audited financial statements of the Variable Account as of and
for the year ended December 31, 1997 are also included herein.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
To be filed by amendment
b. Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account*
2. Not Applicable
3. Principal Underwriter Agreement***
4. Individual Immediate Variable Annuity Contract***
4. (i) Individual Immediate Variable Annuity Contract
Endorsements***
5. Application for Individual Immediate Variable Annuity**
6. (i) Copy of Articles of Incorporation of the Company*
(ii) Copy of the Bylaws of the Company*
7. Not Applicable
8. Form of Fund Participation Agreement**
9. Opinion and Consent of Counsel#
10. Independent Auditors' Consent#
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information
14. Company Organizational Chart***
27. Not Applicable
* Incorporated by reference to Registrant's Post-Effective Amendment No.
2 to Form N-4 which was electronically filed on November 1, 1995.
** Incorporated by reference to Registrant's Post-Effective Amendment No.
3 to Form N-4 which was electronically filed on April 24, 1996.
*** Incorporated by reference to Registrant's Post-Effective Amendment No.
5 to Form N-4 which was electronically filed on April 29, 1997.
# To be filed by amendment
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- --------------------------- -----------------------------------------
<S> <C>
Lowell C. Anderson Chairman, President, Chief
1750 Hennepin Avenue Executive Officer and Director
Minneapolis, MN 55403
Herbert F. Hansmeyer Director
777 San Marin Drive
Novato, CA 94998
Michael P. Sullivan Director
7505 Metro Blvd.
Minneapolis, MN 55439
Dr. Jerry E. Robertson Director
220-13E-29/3M Center
St. Paul, MN 55144
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 17
D - 70178
Stuttgart, Germany
Edward J. Bonach Senior Vice President, Chief Financial
1750 Hennepin Avenue Officer and Treasurer
Minneapolis, MN 55403
Michael T. Westermeyer Vice President-Law & Secretary
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert S. James President-Individual Marketing
1750 Hennepin Avenue
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Reverend Dennis J. Dease Director
c/o University of St.Thomas
2115 Summit Avenue
Box AQU100
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
The Company organizational chart is incorporated by reference to Post-Effective
Amendment No. 5 to Form N-4 which was electronically filed on April 29, 1997
(File No. 811-05618).
Item 27. Number of Contract Owners
As of February 19, 1998, there were 229 qualified Contract Owners and 139
non-qualified Contract Owners with Contracts in the Separate Account.
Item 28. Indemnification
The Bylaws of the Company provide that:
Each person (and the heirs, executors, and administrators of such person) made
or threatened to be made a party to any action, civil or criminal, by reason of
being or having been a Director, officer, or employee of the corporation (or by
reason of serving any other organization at the request of the corporation)
shall be indemnified to the extent permitted by the laws of the State of
Minnesota, and in the manner prescribed therein.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the 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 Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
a. NALAC Financial Plans, LLC is the principal underwriter for the
Contracts. It also is the principal underwriter for:
Allianz Life Variable Account A
Preferred Life Variable Account C
b. The following are the officers and directors of NALAC Financial
Plans, LLC:
<TABLE>
<CAPTION>
Name & Principal Positions and Offices
Business Address with Underwriter
- ----------------------- -----------------------------
<S> <C>
Alan A. Grove Director
1750 Hennepin Avenue
Minneapolis, MN 55403
James P. Kelso Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Edward J. Bonach Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael J. Yates Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
c. Not Applicable
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota,
maintains physical possession of the accounts, books or documents of the
Variable Account required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated thereunder.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant has caused this registration statement to be
signed on its behalf in the City of Minneapolis and State of Minnesota, on this
20th day of February, 1998.
<TABLE>
<CAPTION>
<S> <C>
ALLIANZ LIFE
VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/ MICHAEL T. WESTERMEYER
------------------------------
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By: /s/ MICHAEL T. WESTERMEYER
------------------------------
</TABLE>
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature and Title
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board,
Lowell C. Anderson President and Chief 02/20/98
Executive Officer Date
Herbert F. Hansmeyer* Director 02/20/98
Herbert F. Hansmeyer Date
Michael P. Sullivan* Director 02/20/98
Michael P. Sullivan Date
Dr. Jerry E. Robertson* Director 02/20/98
Dr. Jerry E. Robertson Date
Dr. Gerhard Rupprecht* Director 02/20/98
Dr. Gerhard Rupprecht Date
Edward J. Bonach* Chief Financial Officer 02/20/98
Edward J. Bonach Date
Rev. Dennis J. Dease* Director 02/20/98
Rev. Dennis J. Dease Date
James R. Campbell* Director 02/20/98
James R. Campbell Date
* By /s/ MICHAEL T. WESTERMEYER
---------------------------
Attorney-in-Fact
</TABLE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
EX-99.B13 Calculation of Performance Information
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON VALUEMARK INCOME PLUS
ALLIANZ LIFE VARIABLE ACCOUNT B
CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
ORIGINAL PURCHASE AS OF DECEMBER 31, 1997
VALUATION DATE AS OF DECEMBER 31, 1996
Dollar Units This Accum Accum
Date Transaction Amount Unit Value Trans Units Value
---- ----------- ------ ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
12-31-96 Purchase $1,000.00 $11.25417490 88.856 88.856 $1,000.00
12-31-97 Current Value 13.12966406 0.000 88.856 1,166.65
Cumulative and Average Annual Total Returns 16.66% A
GLOBAL UTILITIES SECURITIES
12-31-96 Purchase $1,000.00 $20.65439774 48.416 48.416 $1,000.00
12-31-97 Current Value 25.81831690 0.000 48.416 1,250.02
Cumulative and Average Annual Total Returns 25.00% A
GROWTH AND INCOME
12-31-96 Purchase $1,000.00 $19.48959860 51.309 51.309 $1,000.00
12-31-97 Current Value 24.55079561 0.000 51.309 1,259.69
Cumulative and Average Annual Total Returns 25.97% A
INCOME SECURITIES
12-31-96 Purchase $1,000.00 $21.70827863 46.065 46.065 $1,000.00
12-31-97 Current Value 25.06461193 0.000 46.065 1,154.61
Cumulative and Average Annual Total Returns 15.46% A
MONEY MARKET
12-31-96 Purchase $1,000.00 $13.35923111 74.855 74.855 $1,000.00
12-31-97 Current Value 13.86472844 0.000 74.855 1,037.84
Cumulative and Average Annual Total Returns 3.78% A
MUTUAL DISCOVERY SECURITIES
12-31-96 Purchase $1,000.00 $10.18045638 8.227 98.227 $1,000.00
12-31-97 Current Value 11.98316359 0.000 98.227 1,177.08
Cumulative and Average Annual Total Returns 17.71% A
MUTUAL SHARES SECURITIES
12-31-96 Purchase $1,000.00 $10.33016898 96.804 96.804 $1,000.00
12-31-97 Current Value 11.99296726 0.000 96.804 1,160.97
Cumulative and Average Annual Total Returns 16.10% A
REAL ESTATE SECURITIES
12-31-96 Purchase $1,000.00 $23.66770609 42.252 42.252 $1,000.00
12-31-97 Current Value 28.16943249 0.000 42.252 1,190.21
Cumulative and Average Annual Total Returns 19.02% A
RISING DIVIDENDS
12-31-96 Purchase $1,000.00 $15.30299222 65.347 65.347 $1,000.00
12-31-97 Current Value 20.07430239 0.000 65.347 1,311.79
Cumulative and Average Annual Total Returns 31.18% A
SMALL CAP
12-31-96 Purchase $1,000.00 $12.91274591 77.443 77.443 $1,000.00
12-31-97 Current Value 14.95194471 0.000 77.443 1,157.92
Cumulative and Average Annual Total Returns 15.79% A
TEMPLETON DEVELOPING MARKETS EQUITY
12-31-96 Purchase $1,000.00 $11.48724479 87.053 87.053 $1,000.00
12-31-97 Current Value 10.34011278 0.000 87.053 900.14
Cumulative and Average Annual Total Returns (9.99%) A
TEMPLETON GLOBAL ASSET ALLOCATION
12-31-96 Purchase $1,000.00 $12.51416879 79.909 79.909 $1,000.00
12-31-97 Current Value 13.78572229 0.000 79.909 1,101.61
Cumulative and Average Annual Total Returns 10.16% A
TEMPLETON GLOBAL GROWTH
12-31-96 Purchase $1,000.00 $13.55953972 73.749 73.749 $1,000.00
12-31-97 Current Value 15.17626475 0.000 73.749 1,119.23
Cumulative and Average Annual Total Returns 11.92% A
TEMPLETON INTERNATIONAL EQUITY
12-31-96 Purchase $1,000.00 $16.08142393 62.184 62.184 $1,000.00
12-31-97 Current Value 17.71128511 0.000 62.184 1,101.35
Cumulative and Average Annual Total Returns 10.14% A
TEMPLETON INTERNATIONAL SMALLER COMPANIES
12-31-96 Purchase $1,000.00 $11.14519961 89.725 89.725 $1,000.00
12-31-97 Current Value 10.82516357 0.000 89.725 971.28
Cumulative and Average Annual Total Returns (2.87%) A
TEMPLETON PACIFIC GROWTH
12-31-96 Purchase $1,000.00 $14.93159316 66.972 66.972 $1,000.00
12-31-97 Current Value 9.43102016 0.000 66.972 631.62
Cumulative and Average Annual Total Returns (36.84%) A
<FN>
A = (Accumulated Value as of December 31, 1997 - Accum. Value at Purch.)/Accum. Value at Purch.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL PURCHASE AS OF DECEMBER 31, 1994
VALUATION DATE AS OF DECEMBER 31, 1997
Dollar Units This Accum Accum
Date Transaction Amount Unit Value Trans Units Value
---- ----------- ------ ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
GLOBAL UTILITIES SECURITIES
12-31-94 Purchase $1,000.00 $15.10395032 66.208 66.208 $1,000.00
12-31-95 Current Value 19.56451758 0.000 66.208 1,295.32
12-31-96 Current Value 20.65439774 0.000 66.208 1,367.48
12-31-97 Current Value 25.81831690 0.000 66.208 1,709.38
Cumulative Total Return 70.94% A
Average Annual Total Return 19.57% B
GROWTH AND INCOME
12-31-94 Purchase $1,000.00 $13.21462941 75.674 75.674 $1,000.00
12-31-95 Current Value 17.30965999 0.000 75.674 1,309.89
12-31-96 Current Value 19.48959860 0.000 75.674 1,474.85
12-31-97 Current Value 24.55079561 0.000 75.674 1,857.85
Cumulative Total Return 85.78% A
Average Annual Total Return 22.93% B
INCOME SECURITIES
12-31-94 Purchase $1,000.00 $16.39171653 61.006 61.006 $1,000.00
12-31-95 Current Value 19.78534185 0.000 61.006 1,207.03
12-31-96 Current Value 21.70827863 0.000 61.006 1,324.34
12-31-97 Current Value 25.06461193 0.000 61.006 1,529.10
Cumulative Total Return 52.91% A
Average Annual Total Return 15.21% B
MONEY MARKET
12-31-94 Purchase $1,000.00 $12.35398427 80.946 80.946 $1,000.00
12-31-95 Current Value 12.88349436 0.000 80.946 1,042.86
12-31-96 Current Value 13.35923111 0.000 80.946 1,081.37
12-31-97 Current Value 13.86472844 0.000 80.946 1,122.29
Cumulative Total Return 12.23% A
Average Annual Total Return 3.92% B
REAL ESTATE SECURITIES
12-31-94 Purchase $1,000.00 $15.59407180 64.127 64.127 $1,000.00
12-31-95 Current Value 18.07282328 0.000 64.127 1,158.95
12-31-96 Current Value 23.66770609 0.000 64.127 1,517.74
12-31-97 Current Value 28.16943249 0.000 64.127 1,806.42
Cumulative Total Return 80.64% A
Average Annual Total Return 21.79% B
RISING DIVIDENDS
12-31-94 Purchase $1,000.00 $9.76873744 102.367 102.367 $1,000.00
12-31-95 Current Value 12.49836348 0.000 102.367 1,279.42
12-31-96 Current Value 15.30299222 0.000 102.367 1,566.53
12-31-97 Current Value 20.07430239 0.000 102.367 2,054.95
Cumulative Total Return 105.50% A
Average Annual Total Return 27.14% B
TEMPLETON DEVELOPING MARKETS EQUITY
12-31-94 Purchase $1,000.00 $9.45424664 105.773 105.773 $1,000.00
12-31-95 Current Value 13.26267921 0.000 105.773 1,013.48
12-31-96 Current Value 16.08142393 0.000 105.773 1,215.04
12-31-97 Current Value 17.71128511 0.000 105.773 1,093.70
Cumulative Total Return 9.37% A
Average Annual Total Return 3.03% B
TEMPLETON GLOBAL GROWTH
12-31-94 Purchase $1,000.00 $10.20085584 98.031 98.031 $1,000.00
12-31-95 Current Value 11.33894840 0.000 98.031 1,111.57
12-31-96 Current Value 13.55953972 0.000 98.031 1,329.26
12-31-97 Current Value 15.17626475 0.000 98.031 1,487.74
Cumulative Total Return 48.77% A
Average Annual Total Return 14.16% B
TEMPLETON INTERNATIONAL EQUITY
12-31-94 Purchase $1,000.00 $12.16131942 82.228 82.228 $1,000.00
12-31-95 Current Value 13.26267921 0.000 82.228 1,090.56
12-31-96 Current Value 16.08142393 0.000 82.228 1,322.34
12-31-97 Current Value 17.71128511 0.000 82.228 1,456.36
Cumulative Total Return 45.64% A
Average Annual Total Return 13.35% B
TEMPLETON PACIFIC GROWTH
12-31-94 Purchase $1,000.00 $12.80173310 78.114 78.114 $1,000.00
12-31-95 Current Value 13.63037545 0.000 78.114 1,064.73
12-31-96 Current Value 14.93159316 0.000 78.114 1,166.37
12-31-97 Current Value 9.43102016 0.000 78.114 736.70
Cumulative Total Return -26.33% A
Average Annual Total Return -9.68% B
<FN>
A = (Accumulated Value as of December 31, 1997 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+1)^(1/3 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL PURCHASE AS OF DECEMBER 31, 1992
VALUATION DATE AS OF DECEMBER 31, 1997
Dollar Units This Accum Accum
Date Transaction Amount Unit Value Trans Units Value
---- ----------- ------ ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
GLOBAL UTILITIES SECURITIES
12-31-92 Purchase $1,000.00 $15.88865152 62.938 62.938 $1,000.00
12-31-93 Current Value 17.31879581 0.000 62.938 1,090.01
12-31-94 Current Value 15.10395032 0.000 62.938 950.61
12-31-95 Current Value 19.56451758 0.000 62.938 1,231.35
12-31-96 Current Value 20.65439774 0.000 62.938 1,299.95
12-31-97 Current Value 25.81831690 0.000 62.938 1,624.95
Cumulative Total Return 62.50% A
Average Annual Total Return 10.20% B
GROWTH AND INCOME
12-31-92 Purchase $1,000.00 $12.57361730 79.532 79.532 $1,000.00
12-31-93 Current Value 13.67694811 0.000 79.532 1,087.75
12-31-94 Current Value 13.21462941 0.000 79.532 1,050.98
12-31-95 Current Value 17.30965999 0.000 79.532 1,376.67
12-31-96 Current Value 19.48959860 0.000 79.532 1,550.04
12-31-97 Current Value 24.55079561 0.000 79.532 1,952.56
Cumulative Total Return 95.26% A
Average Annual Total Return 14.32% B
INCOME SECURITIES
12-31-92 Purchase $1,000.00 $15.16252410 65.952 65.952 $1,000.00
12-31-93 Current Value 17.73437317 0.000 65.952 1,169.62
12-31-94 Current Value 16.39171653 0.000 65.952 1,081.07
12-31-95 Current Value 19.78534185 0.000 65.952 1,304.88
12-31-96 Current Value 21.70827863 0.000 65.952 1,431.71
12-31-97 Current Value 25.06461193 0.000 65.952 1,653.06
Cumulative Total Return 65.31% A
Average Annual Total Return 10.58% B
MONEY MARKET
12-31-92 Purchase $1,000.00 $11.93209752 83.808 83.808 $1,000.00
12-31-93 Current Value 12.06579747 0.000 83.808 1,011.21
12-31-94 Current Value 12.35398427 0.000 83.808 1,035.36
12-31-95 Current Value 12.88349436 0.000 83.808 1,079.73
12-31-96 Current Value 13.35923111 0.000 83.808 1,119.60
12-31-97 Current Value 13.86472844 0.000 83.808 1,161.97
Cumulative Total Return 16.20% A
Average Annual Total Return 3.05% B
REAL ESTATE SECURITIES
12-31-92 Purchase $1,000.00 $13.09547341 76.362 76.362 $1,000.00
12-31-93 Current Value 15.36898235 0.000 76.362 1,173.61
12-31-94 Current Value 15.59407180 0.000 76.362 1,190.80
12-31-95 Current Value 18.07282328 0.000 76.362 1,380.08
12-31-96 Current Value 23.66770609 0.000 76.362 1,807.32
12-31-97 Current Value 28.16943249 0.000 76.362 2,151.08
Cumulative Total Return 115.11% A
Average Annual Total Return 16.56% B
RISING DIVIDENDS
12-31-92 Purchase $1,000.00 $10.84771473 92.185 92.185 $1,000.00
12-31-93 Current Value 15.36898235 0.000 92.185 952.05
12-31-94 Current Value 15.59407180 0.000 92.185 900.53
12-31-95 Current Value 18.07282328 0.000 92.185 1,152.17
12-31-96 Current Value 23.66770609 0.000 92.185 1,410.71
12-31-97 Current Value 28.16943249 0.000 92.185 1,850.56
Cumulative Total Return 85.06% A
Average Annual Total Return 13.10% B
TEMPLETON INTERNATIONAL EQUITY
12-31-92 Purchas $1,000.00 $9.64241309 103.708 103.708 $1,000.00
12-31-93 Current Value 12.22565227 0.000 103.708 1,267.90
12-31-94 Current Value 12.16131942 0.000 103.708 1,261.23
12-31-95 Current Value 13.26267921 0.000 103.708 1,375.45
12-31-96 Current Value 16.08142393 0.000 103.708 1,667.78
12-31-97 Current Value 17.71128511 0.000 103.708 1,836.81
Cumulative Total Return 83.68% A
Average Annual Total Return 12.93% B
TEMPLETON PACIFIC GROWTH
12-31-92 Purchase $1,000.00 $9.76096735 102.449 102.449 $1,000.00
12-31-93 Current Value 14.23330574 0.000 102.449 1,458.19
12-31-94 Current Value 12.80173310 0.000 102.449 1,311.52
12-31-95 Current Value 13.63037545 0.000 102.449 1,396.42
12-31-96 Current Value 14.93159316 0.000 102.449 1,529.72
12-31-97 Current Value 9.43102016 0.000 102.449 966.20
Cumulative Total Return -3.38% A
Average Annual Total Return -0.69% B
<FN>
A = (Accumulated Value as of December 31, 1997 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+1)^(1/5 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL PURCHASE AS OF SUB-ACCOUNT INCEPTION
VALUATION DATE AS OF DECEMBER 31, 1997
Dollar Units This Accum Accum
Date Transaction Amount Unit Value Trans Units Value
---- ----------- ------ ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-97 Current Value 13.12966406 0.000 100.000 1,312.97
Cumulative Total Return 31.30% A
Average Annual Total Return 17.73% B
GLOBAL UTILITIES SECURITIES
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 11.48396786 0.000 100.000 1,148.40
1-24-91 Current Value 11.97256112 0.000 100.000 1,197.26
1-24-92 Current Value 14.23979461 0.000 100.000 1,423.98
1-24-93 Current Value 15.97559846 0.000 100.000 1,597.56
1-24-94 Current Value 16.50535338 0.000 100.000 1,650.54
1-24-95 Current Value 15.57082971 0.000 100.000 1,557.08
1-24-96 Current Value 19.81799066 0.000 100.000 1,981.80
12-31-97 Current Value 25.81831690 0.000 100.000 2,581.83
Cumulative Total Return 158.18% A
Average Annual Total Return 11.19% B
GROWTH AND INCOME
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 9.60621064 0.000 100.000 960.62
1-24-91 Current Value 10.04911751 0.000 100.000 1,004.91
1-24-92 Current Value 12.19460473 0.000 100.000 1,219.46
1-24-93 Current Value 12.62194644 0.000 100.000 1,262.19
1-24-94 Current Value 14.16249217 0.000 100.000 1,416.25
1-24-95 Current Value 13.34952632 0.000 100.000 1,334.95
1-24-96 Current Value 17.36302808 0.000 100.000 1,736.30
12-31-97 Current Value 24.55079561 0.000 100.000 2,455.08
Cumulative Total Return 145.51% A
Average Annual Total Return 10.57% B
INCOME SECURITIES
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.71309911 0.000 100.000 1,071.31
1-24-91 Current Value 9.95244729 0.000 100.000 995.24
1-24-92 Current Value 14.03346495 0.000 100.000 1,403.35
1-24-93 Current Value 15.36060973 0.000 100.000 1,536.06
1-24-94 Current Value 17.72926867 0.000 100.000 1,772.93
1-24-95 Current Value 16.36456157 0.000 100.000 1,636.46
1-24-96 Current Value 20.20965612 0.000 100.000 2,020.97
12-31-97 Current Value 25.06461193 0.000 100.000 2,506.46
Cumulative Total Return 150.65% A
Average Annual Total Return 10.83% B
MONEY MARKET
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.67978818 0.000 100.000 1,067.98
1-24-91 Current Value 11.32877884 0.000 100.000 1,132.88
1-24-92 Current Value 11.75876120 0.000 100.000 1,175.88
1-24-93 Current Value 11.94119334 0.000 100.000 1,194.12
1-24-94 Current Value 12.07592840 0.000 100.000 1,207.59
1-24-95 Current Value 12.38828249 0.000 100.000 1,238.83
1-24-96 Current Value 12.92030455 0.000 100.000 1,292.03
12-31-97 Current Value 13.86472844 0.000 100.000 1,386.47
Cumulative Total Return 38.65% A
Average Annual Total Return 3.72% B
MUTUAL DISCOVERY SECURITIES
11-8-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-97 Current Value 11.98316359 0.000 100.000 1,198.32
Cumulative Total Return 19.83% A
Average Annual Total Return 17.11% B
MUTUAL SHARES SECURITIES
11-8-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-97 Current Value 11.99296726 0.000 100.000 1,199.30
Cumulative Total Return 19.93% A
Average Annual Total Return 17.20% B
REAL ESTATE SECURITIES
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.13988901 0.000 100.000 1,013.99
1-24-91 Current Value 9.37706788 0.000 100.000 937.71
1-24-92 Current Value 12.28427530 0.000 100.000 1,228.43
1-24-93 Current Value 13.54478625 0.000 100.000 1,354.48
1-24-94 Current Value 15.37525910 0.000 100.000 1,537.53
1-24-95 Current Value 15.00928122 0.000 100.000 1,500.93
1-24-96 Current Value 18.15857148 0.000 100.000 1,815.86
12-31-97 Current Value 28.16943249 0.000 100.000 2,816.94
Cumulative Total Return 181.69% A
Average Annual Total Return 12.28% B
RISING DIVIDENDS
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 10.69831588 0.000 100.000 1,069.83
1-27-94 Current Value 10.38483458 0.000 100.000 1,038.48
1-27-95 Current Value 9.97357882 0.000 100.000 997.36
1-27-96 Current Value 12.53425589 0.000 100.000 1,253.43
12-31-97 Current Value 20.07430239 0.000 100.000 2,007.43
Cumulative Total Return 100.74% A
Average Annual Total Return 12.47% B
SMALL CAP
11-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
11-1-96 Current Value 12.15810442 0.000 100.000 1,215.81
12-31-97 Current Value 14.95194471 0.000 100.000 1,495.19
Cumulative Total Return 49.52% A
Average Annual Total Return 20.40% B
TEMPLETON DEVELOPING MARKETS EQUITY
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Current Value 8.62834892 0.000 100.000 862.83
3-15-96 Current Value 10.29583833 0.000 100.000 1,029.58
12-31-97 Current Value 10.34011278 0.000 100.000 1,034.01
Cumulative Total Return 3.40% A
Average Annual Total Return .88% B
TEMPLETON GLOBAL ASSET ALLOCATION
5-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 1,000.00
5-1-96 Current Value 11.25238520 0.000 100.000 1,125.24
12-31-97 Current Value 13.78572229 0.000 100.000 1,378.57
Cumulative Total Return 37.86% A
Average Annual Total Return 12.77% B
TEMPLETON GLOBAL GROWTH
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Current Value 10.10361218 0.000 100.000 1,010.36
3-15-96 Current Value 11.81545835 0.000 100.000 1,181.55
12-31-97 Current Value 15.17626475 0.000 100.000 1,517.63
Cumulative Total Return 51.76% A
Average Annual Total Return 11.60% B
TEMPLETON INTERNATIONAL EQUITY
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 9.54360836 0.000 100.000 954.36
1-27-94 Current Value 12.87738433 0.000 100.000 1,287.74
1-27-95 Current Value 11.94433728 0.000 100.000 1,194.43
1-27-96 Current Value 13.57666972 0.000 100.000 1,357.67
12-31-97 Current Value 17.71128511 0.000 100.000 1,771.13
Cumulative Total Return 77.11% A
Average Annual Total Return 10.12% B
TEMPLETON INTERNATIONAL SMALLER COMPANIES
5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-97 Current Value 10.82516357 0.000 100.000 1,082.52
Cumulative Total Return 8.25% A
Average Annual Total Return 4.87% B
TEMPLETON PACIFIC GROWTH
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 9.92851087 0.000 100.000 992.85
1-27-94 Current Value 14.10178760 0.000 100.000 1,410.18
1-27-95 Current Value 11.94769270 0.000 100.000 1,194.77
1-27-96 Current Value 14.49670523 0.000 100.000 1,449.67
12-31-97 Current Value 9.43102016 0.000 100.000 943.10
Cumulative Total Return -5.69% A
Average Annual Total Return -0.98% B
<FN>
A = (Accumulated Value as of December 31, 1997 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+1)^(1/Years since Inception)]-1
</FN>
</TABLE>
