File Nos. 333-
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 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. ( )
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 38 (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
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Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
==============================================================================
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
CROSS REFERENCE SHEET
(Required by Rule 495)
<TABLE>
<CAPTION>
<S> <C> <C>
Item No. Location
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PART A
Item 1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . Index of Terms
Item 3. Synopsis or Highlights. . . . . . . . . . . Profile
Item 4. Condensed Financial Information. . . . . . . Not Applicable
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies. . . . . . . . . . . . Other Information-
The Separate Account,
Allianz Life,
Investment Options
Item 6. Deductions. . . . . . . . .. . . . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . .The Charter
Variable Annuity
Contract
Item 8. Annuity Period. . .. . . . . . . . . . . . . . Annuity Payments
(The Payout Phase)
Item 9. Death Benefit. . . . . . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value. . . . . . . . . .Purchase
Item 11. Redemptions. . . . . . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information. . . . . . . . . . . Table of Contents
of the Statement of
Additional Information
</TABLE>
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
<TABLE>
<CAPTION>
<S> <C> <C>
Item No. Location
- -------- --------------------
PART B
Item 15. Cover Page. . . . . . . . .. . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . Insurance Company
Item 18. Services. . . . . . . . . . . . .. . . . . Not Applicable
Item 19. Purchase of Securities Being Offered. . . . Not Applicable
Item 20. Underwriters. . . . . . . . . . . . . . . . Distributor
Item 21. Calculation of Performance Data. . . . . . Calculation of
Performance Data
Item 22. Annuity Payments. . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements. . . . . . . . . . . Financial Statements
</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.
PART A
Profile of the
Charter Variable Annuity Contract
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
___________, 1998
This profile is a summary of some of the more important points that you should
consider and know before purchasing the Charter Variable Annuity Contract with a
fixed option. The Contract is more fully described in the prospectus which
accompanies this profile. Please read the prospectus carefully.
1. THE CHARTER VARIABLE ANNUITY CONTRACT
The variable annuity contract with a fixed option offered by Allianz Life
Insurance Company of North America (Allianz Life) is a contract between you, the
owner, and Allianz Life, an insurance company. The Contract provides a means for
investing on a tax-deferred basis. The Contract is intended for retirement
savings or other long-term investment purposes and provides for a death benefit
and guaranteed annuity income options.
The Contract has 25 variable investment options -- each of which invests in a
portfolio of Franklin Valuemark Funds and a fixed option of Allianz Life. The
portfolios are managed by Franklin Advisers, Inc. and its Templeton and Franklin
affiliates. A list of the available portfolios is contained in Section 4.
Depending upon market conditions, you can make or lose money in the Contract
based on the portfolios' investment performance. The portfolios are designed to
offer a better return than the fixed option, however, this is not guaranteed.
The fixed option offers an interest rate that is guaranteed by Allianz Life.
Your initial interest rate is set on the date when your money is invested in the
fixed option and remains effective for one year. Initial interest rates are
declared monthly. If you select the fixed option, your money will be held in our
general account with principal and interest backed by Allianz Life.
Allianz Life reserves the right to limit the number of portfolios which you may
invest in at any one time (now or in the future). Currently, you can put your
money in 10 options at one time (which includes any of the 25 portfolios listed
in Section 4 and the Allianz Life fixed option).
Like all deferred annuity contracts, your Contract has two phases: the
accumulation phase and the payout phase. During the accumulation phase, your
earnings accumulate on a tax-deferred basis and are based on the investment
performance of the portfolio(s) you selected and/or the interest rate earned on
the money you have in the fixed option. During the accumulation phase, the
earnings are taxed as income only when you make a surrender. The payout phase
occurs when you begin receiving regular payments from your Contract. The amount
of the payments you may receive during the payout phase depends in part upon the
amount of money you are able to accumulate in your Contract during the
accumulation phase.
2. ANNUITY PAYMENTS
(THE PAYOUT PHASE)
You can receive monthly annuity payments from your Contract by selecting one of
the following annuity options (all of these options assume you are the owner and
the annuitant):
(1) payments for your life;
(2) payments for your life, but if you die before payments have been made for
the guaranteed period you selected, payments will continue for the
remainder of the guaranteed period (5, 10, 15 or 20 years);
(3) payments during the joint lifetime of you and the joint annuitant - - when
either of you die, payments will continue as long as the survivor lives;
(4) payments during the joint lifetime of you and the joint annuitant, but if
you 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); and
(5) payments during your life ending with the last payment due prior to your
death with a guarantee that at your death Allianz Life will make a refund,
as described in the Contract, to your beneficiary.
Once you begin receiving regular annuity payments, you cannot change your
annuity option or surrender your Contract.
During the payout phase, you may select from the portfolios available or the
fixed option for your investment choices. You may elect to receive annuity
payments as a variable payout, a fixed payout, or a combination of both. If you
choose to have any part of your payments based on portfolio performance (i.e.,
variable payout), the dollar amount of your annuity payments may go up or down,
depending on the investment performance.
3. PURCHASE
You can buy the Contract with $25,000 or more. You can add $250 or more any time
you like during the accumulation phase. Contact your registered representative
to help you fill out the proper forms. You and the annuitant cannot be older
than 85 years old at the time you buy the Contract. This product is not
appropriate for market timers.
4. INVESTMENT OPTIONS
You may select the Allianz Life fixed option and/or variable investment options
which invest in the following portfolios of Franklin Valuemark Funds:
PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME:
Money Market Fund
PORTFOLIOS SEEKING
CURRENT INCOME:
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005 and 2010
PORTFOLIOS SEEKING
GROWTH AND INCOME:
Global Utilities Securities Fund
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Value Securities Fund
PORTFOLIOS SEEKING
CAPITAL GROWTH:
Capital Growth Fund
Global Health Care Securities Fund
Mutual Discovery Securities Fund
Natural Resources 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
The portfolios are fully described in the attached prospectus for Franklin
Valuemark Funds. You can make or lose money based on the portfolios'
performance.
5. EXPENSES
The Contract has insurance features and investment features, and there are costs
related to each.
The annual insurance charges for your Contract depend on the death benefit
(traditional or enhanced) that you select when you buy the Contract. The annual
insurance charges total 1.15% (traditional death benefit) or 1.35% (enhanced
death benefit) of the average daily value of your Contract allocated to the
portfolios. Each year Allianz Life also deducts a $40 contract maintenance
charge from your Contract. Allianz Life currently waives this charge if the
cumulative value of all your Charter Contracts (registered with the same social
security number) are at least $100,000. There are also annual portfolio
operating expenses, which vary depending upon the portfolios you select. These
expenses range from .70% to 1.72% of the average daily value of the portfolios'
Class 2 shares.
You can transfer between investment options up to 12 times a year without
charge. After 12 transfers, the charge is $25 or 2% of the amount transferred,
whichever is less. Market timing transfers may not be permitted.
Allianz Life does not assess a surrender charge, or a contingent deferred sales
charge if you make a surrender (partial or total) from the Contract.
Allianz Life may assess a state premium tax charge which ranges from 0%-3.5%
(depending upon the state) when you die, start receiving annuity payments, or
make a complete surrender.
We have provided the following charts to help you understand the expenses in
your Contract. Chart 1 is for Contracts with the traditional death benefit
option. Chart 2 is for Contracts with the enhanced death benefit option. The
column "Total Annual Expenses" shows the total of the $40 contract maintenance
charge (which has been converted to a percentage and is represented as .10%
below), the insurance charges (which either total 1.15% or 1.35%, depending upon
the death benefit you selected) and the total annual portfolio expenses for each
portfolio.
The next two columns show you two examples of the expenses, in dollars, you
would pay under a Contract. The examples assume that you invested $1,000 in a
Contract which earns 5% annually and that you surrender your Contract: (1) at
the end of year 1, and (2) at the end of year 10. The premium tax is assumed to
be 0% in both examples. These are just examples. They do not represent past or
future expenses. Actual expenses may be higher or lower than those shown.
<TABLE>
<CAPTION>
CHART 1 - EXPENSES FOR CONTRACTS WITH TRADITIONAL DEATH BENEFIT:
Total
Total Annual EXAMPLES:
Annual Class 2 Total Expenses at
Insurance Portfolio Annual end of:
Portfolio Option Charges Expenses Expenses 1 Year 10 Years
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth 1.25% 1.07% 2.32% $24 $265
Global Health Care
Securities 1.25% 1.16% 2.41% $24 $275
Global Utilities
Securities 1.25% .80% 2.05% $21 $237
Growth and Income 1.25% .79% 2.04% $21 $236
High Income 1.25% .83% 2.08% $21 $241
Income Securities 1.25% .80% 2.05% $21 $237
Money Market 1.25% .83% 2.08% $21 $241
Mutual Discovery
Securities 1.25% 1.36% 2.61% $26 $295
Mutual Shares Securities 1.25% 1.10% 2.35% $24 $268
Natural Resources
Securities 1.25% .99% 2.24% $23 $257
Real Estate Securities 1.25% .84% 2.09% $21 $242
Rising Dividends 1.25% 1.04% 2.29% $23 $262
Small Cap 1.25% 1.07% 2.32% $24 $265
Templeton Developing
Markets Equity 1.25% 1.72% 2.97% $30 $329
Templeton Global Asset
Allocation 1.25% 1.24% 2.49% $25 $283
Templeton Global Growth 1.25% 1.18% 2.43% $25 $277
Templeton Global Income
Securities 1.25% .92% 2.17% $22 $250
Templeton International
Equity 1.25% 1.19% 2.44% $25 $278
Templeton International
Smaller Companies 1.25% 1.36% 2.61% $26 $295
Templeton Pacific
Growth 1.25% 1.33% 2.58% $26 $292
U.S. Government
Securities 1.25% .80% 2.05% $21 $237
Value Securities 1.25% 1.11% 2.36% $24 $270
Zero Coupon 2000 1.25% .70% 1.95% $20 $227
Zero Coupon 2005 1.25% .70% 1.95% $20 $227
Zero Coupon 2010 1.25% .70% 1.95% $20 $227
</TABLE>
<TABLE>
<CAPTION>
CHART 2 - EXPENSES FOR CONTRACTS WITH ENHANCED DEATH BENEFIT:
EXAMPLES:
Total
Total Annual
Annual Class 2 Total Expenses at
Insurance Portfolio Annual end of:
Portfolio Option Charges Expenses Expenses 1 Year 10 Years
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth 1.45% 1.07% 2.52% $26 $286
Global Health Care
Securities 1.45% 1.16% 2.61% $26 $295
Global Utilities
Securities 1.45% .80% 2.25% $23 $258
Growth and Income 1.45% .79% 2.24% $23 $257
High Income 1.45% .83% 2.28% $23 $261
Income Securities 1.45% .80% 2.25% $23 $258
Money Market 1.45% .83% 2.28% $23 $261
Mutual Discovery
Securities 1.45% 1.36% 2.81% $28 $314
Mutual Shares Securities 1.45% 1.10% 2.55% $26 $289
Natural Resources
Securities 1.45% .99% 2.44% $25 $278
Real Estate Securities 1.45% .84% 2.29% $23 $262
Rising Dividends 1.45% 1.04% 2.49% $25 $283
Small Cap 1.45% 1.07% 2.52% $26 $286
Templeton Developing
Markets Equity 1.45% 1.72% 3.17% $32 $348
Templeton Global Asset
Allocation 1.45% 1.24% 2.69% $27 $302
Templeton Global Growth 1.45% 1.18% 2.63% $27 $297
Templeton Global Income
Securities 1.45% .92% 2.37% $24 $271
Templeton International
Equity 1.45% 1.19% 2.64% $27 $298
Templeton International
Smaller Companies 1.45% 1.36% 2.81% $28 $314
Templeton Pacific
Growth 1.45% 1.33% 2.78% $28 $311
U.S. Government
Securities 1.45% .80% 2.25% $23 $258
Value Securities 1.45% 1.11% 2.56% $26 $290
Zero Coupon 2000 1.45% .70% 2.15% $22 $248
Zero Coupon 2005 1.45% .70% 2.15% $22 $248
Zero Coupon 2010 1.45% .70% 2.15% $22 $248
</TABLE>
The expenses for the newly formed Class 2 shares of each portfolio have been
estimated. Estimates are based on the Class 2 Rule 12b-1 Plan and each
portfolio's historical Class 1 share expenses or, for the new Global Health Care
Securities and Value Securities Funds, estimated Class 1 share expenses. The
expenses for the Zero Coupon Funds also reflect current fee waiver arrangements.
For more detailed information, see the Fee Table in the prospectus for the
Contract.
6. TAXES
Any earnings are not taxed until you take them out. In most cases, if you take
money out, earnings come out first and are taxed as income. If you are younger
than 59 1/2 when you take money out, you may be charged a 10% federal tax
penalty on the taxable amounts surrendered. Payments during the payout phase are
considered partly a return of your original investment. That part of each
payment is not taxable as income. If the Contract is tax-qualified, the entire
payment may be taxable.
7. ACCESS TO YOUR MONEY
You may make a surrender at any time during the accumulation phase. Any partial
surrender must be for at least $500. You may request a surrender or elect the
Systematic Withdrawal Program or Minimum Distribution Program which are briefly
described in Section 10 of this Profile. Of course, you may also have to pay
income taxes and a tax penalty on any money you take out of the Contract.
8. PERFORMANCE
The value of the Contract will vary up or down depending upon the performance of
the portfolio(s) you choose.
The following charts show total returns for the Contracts for the periods shown.
Chart 1 shows the performance for Contracts with the traditional death benefit
and Chart 2 shows performance for Contracts with the enhanced death benefit.
Performance is not shown for the Global Health Care Securities Fund and the
Value Securities Fund because they began operations on May 1, 1998. These
numbers reflect the insurance charges, the contract maintenance charge and the
operating expenses of the portfolios. Although the Contracts are new, the
performance assumes your Contract was invested in the portfolios for the periods
shown. Because the portfolios' Class 2 shares are new, the performance is based
on the historical performance of the portfolios' Class 1 shares. Class 2 shares
have 12b-1 plan expenses of up to 0.30% per year which will affect future
performance. Past performance is not a guarantee of future results.
<TABLE>
<CAPTION>
CHART 1
Calendar Year
Portfolio Option 1997 1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth _____% ____% _____% _____% ____% ____% _____% ____%
Global Utilities
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Growth and Income _____% ____% _____% _____% ____% ____% _____% ____%
High Income _____% ____% _____% _____% ____% ____% _____% ____%
Income Securities _____% ____% _____% _____% ____% ____% _____% ____%
Money Market _____% ____% _____% _____% ____% ____% _____% ____%
Mutual Discovery
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Mutual Shares
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Natural Resources
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Real Estate
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Rising Dividends _____% ____% _____% _____% ____% ____% _____% ____%
Small Cap _____% ____% _____% _____% ____% ____% _____% ____%
Templeton
Developing
Markets Equity _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Global
Asset Allocation _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Global
Growth _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Global
Income Securities _____% ____% _____% _____% ____% ____% _____% ____%
Templeton
International
Equity _____% ____% _____% _____% ____% ____% _____% ____%
Templeton
International
Smaller
Companies _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Pacific
Growth _____% ____% _____% _____% ____% ____% _____% ____%
U.S. Government
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Zero Coupon 2000 _____% ____$ _____% _____% ____% ____% _____% ____%
Zero Coupon 2005 _____% ____% _____% _____% ____% ____% _____% ____%
Zero Coupon 2010 _____% ____% _____% _____% ____% ____% _____% ____%
</TABLE>
<TABLE>
<CAPTION>
CHART 2
Calendar Year
Portfolio Option 1997 1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth _____% ____% _____% _____% ____% ____% _____% ____%
Global Utilities
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Growth and Income _____% ____% _____% _____% ____% ____% _____% ____%
High Income _____% ____% _____% _____% ____% ____% _____% ____%
Income Securities _____% ____% _____% _____% ____% ____% _____% ____%
Money Market _____% ____% _____% _____% ____% ____% _____% ____%
Mutual Discovery
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Mutual Shares
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Natural Resources
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Real Estate
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Rising Dividends _____% ____% _____% _____% ____% ____% _____% ____%
Small Cap _____% ____% _____% _____% ____% ____% _____% ____%
Templeton
Developing
Markets Equity _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Global
Asset Allocation _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Global
Growth _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Global
Income Securities _____% ____% _____% _____% ____% ____% _____% ____%
Templeton
International
Equity _____% ____% _____% _____% ____% ____% _____% ____%
Templeton
International
Smaller
Companies _____% ____% _____% _____% ____% ____% _____% ____%
Templeton Pacific
Growth _____% ____% _____% _____% ____% ____% _____% ____%
U.S. Government
Securities _____% ____% _____% _____% ____% ____% _____% ____%
Zero Coupon 2000 _____% ____$ _____% _____% ____% ____% _____% ____%
Zero Coupon 2005 _____% ____% _____% _____% ____% ____% _____% ____%
Zero Coupon 2010 _____% ____% _____% _____% ____% ____% _____% ____%
</TABLE>
9. DEATH BENEFIT
If you die during the accumulation phase, the person you have selected as your
beneficiary will receive a death benefit. At the time you purchase the Contract,
you must select either the traditional death benefit option or the enhanced
death benefit option. Once selected, you cannot change it.
If you select the traditional death benefit option, the amount of death benefit
will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) any payments you have made, less any surrenders and applicable premium
taxes.
If you select the enhanced death benefit option, the amount of the death benefit
will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) the guaranteed minimum death benefit, less any applicable premium tax.
The guaranteed minimum death benefit is the greater of:
(a) the sum of all payments you have made, less any surrenders; or
(b) the greatest value of your Contract Anniversaries prior to your 86th
birthday (your Contract Anniversaries equal the value of your Contract
on a Contract anniversary, increased by the amount of any payments you
have made since that anniversary, less the amount of any surrenders
you have made since that anniversary).
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. This may be more or less
than your original payment. (Some states require that we return your payment.)
No Probate. In most cases, when you die, your beneficiary will receive the death
benefit without going through probate.
Purchasing Considerations. The Charter Variable Annuity Contract is designed for
people seeking long-term tax deferred accumulation of assets, generally for
retirement or other long-term purposes. The tax deferred feature is most
attractive to people in high federal and state tax brackets. You should not buy
this Contract if you are looking for a short-term investment or if you cannot
accept the risk of getting back less money than you put in.
Additional Features
The Contract offers additional features which you might be interested in. These
include:
Automatic Investment Plan - You can automatically add to your Contract on a
monthly or quarterly basis for as little as $100 by electronic transfer of
monies from your savings or checking account.
Dollar Cost Averaging Program - You can arrange to have a regular amount of
money automatically transferred from selected portfolios to other portfolios
each month. Theoretically this can give you a lower average cost per unit over
time than a single one time purchase. However, there are no guarantees that this
will take place.
Flexible Rebalancing - Allianz Life will automatically readjust your Contract
value among the portfolios to maintain your specified allocation mix. This can
be done quarterly, semi-annually or annually.
Systematic Withdrawal Program - You can elect to receive monthly or quarterly
payments from Allianz Life while your Contract is in the accumulation phase. Of
course, you may have to pay tax penalties and income taxes on the money you
receive.
Minimum Distribution Program - You can arrange to have money sent to you each
month or quarter to meet certain required distribution requirements imposed by
the Internal Revenue Code generally after age 70 1/2.
These features are not available in all states and may not be suitable for your
particular situation.
11. INQUIRIES
If you have any questions about your Contract or need more information, please
contact us at:
Valuemark Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
(800) 624-0197
THE CHARTER VARIABLE ANNUITY CONTRACT
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
This prospectus describes the Charter Variable Annuity Contract with a Fixed
Option offered by Allianz Life Insurance Company of North America (Allianz
Life).
The annuity has 25 variable options, each of which invests in one of the
Portfolios of Franklin Valuemark Funds listed below and a Fixed Option of
Allianz Life. You can select up to 10 options (which includes any of the
Portfolio options listed below and the Fixed Option). The Fixed Option may not
be available in your state.
PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
PORTFOLIOS SEEKING CURRENT INCOME
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005 and 2010
PORTFOLIOS SEEKING GROWTH AND INCOME
Global Utilities Securities Fund
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Value Securities Fund
PORTFOLIOS SEEKING CAPITAL GROWTH
Capital Growth Fund
Global Health Care Securities Fund
Mutual Discovery Securities Fund
Natural Resources 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
Please read this prospectus before investing and keep it for future reference.
It contains important information about the Charter Variable Annuity Contract
with a Fixed Option.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated _________, 1998. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
incorporated by reference into this prospectus. The Table of Contents of the SAI
is on Page ___ of this prospectus. 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.
For a free copy of the SAI, call us at (800) 342-3863 or write us at: 1750
Hennepin Avenue, Minneapolis, Minnesota 55403-2195.
The Charter Variable Annuity Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to possible loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This prospectus is not an offering of the securities in any state, country, or
jurisdiction in which we are not authorized to sell these securities. You should
rely only on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
Dated: ___________, 1998
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Page
INDEX OF TERMS ...................................
FEE TABLE ........................................
1. THE CHARTER
VARIABLE ANNUITY CONTRACT ........................
Contract Owner ...............................
Joint Owner ..................................
Annuitant ....................................
Beneficiary ..................................
Assignment ..................................
2. ANNUITY PAYMENTS
(THE PAYOUT PHASE) ...............................
Annuity Options ..............................
3. PURCHASE .....................................
Purchase Payments ............................
Automatic Investment Plan ....................
Allocation of Purchase Payments ..............
Free Look ....................................
Accumulation Units ...........................
4. INVESTMENT OPTIONS ...........................
Transfers ....................................
Dollar Cost Averaging Program ................
Flexible Rebalancing .........................
Financial Advisers-Asset Allocation Programs..
Voting Privileges ............................
Substitution .................................
5. EXPENSES .....................................
Insurance Charges ............................
Mortality and Expense Risk Charge ...........
Administrative Charge .......................
Contract Maintenance Charge ..................
Transfer Fee .................................
Premium Taxes ................................
Income Taxes .................................
Portfolio Expenses ...........................
6. TAXES ........................................
Annuity Contracts in General .................
Qualified and Non-Qualified Contracts ........
Multiple Contracts ...........................
Surrenders - Non-Qualified Contracts .........
Surrenders - Qualified Contracts .............
Surrenders - Tax-Sheltered Annuities .........
Diversification ..............................
7. ACCESS TO YOUR MONEY .........................
Systematic Withdrawal Program ................
Minimum Distribution Program .................
Suspension of Payments or Transfers ..........
8. PERFORMANCE ..................................
9. DEATH BENEFIT ................................
Upon Your Death ..............................
Death of Annuitant ...........................
10. OTHER INFORMATION ............................
Allianz Life .................................
Year 2000 ....................................
The Separate Account .........................
Distribution .................................
Administration ...............................
Financial Statements .........................
APPENDIX .....................................
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION .......................
INDEX OF TERMS
This prospectus is written in plain English to make it as understandable as
possible. However, there are some technical terms used which are capitalized in
the prospectus. The page that is indicated below is where you will find the
definition for the word or term.
Page
Accumulation Phase ...............................
Accumulation Unit ................................
Annuitant ........................................
Annuity Options ..................................
Annuity Payments .................................
Annuity Unit .....................................
Beneficiary ......................................
Contract .........................................
Contract Owner ...................................
Fixed Option .....................................
Income Date ......................................
Joint Owner ......................................
Non-Qualified ....................................
Payout Phase .....................................
Portfolios .......................................
Purchase Payment .................................
Qualified ........................................
Tax Deferral .....................................
FEE TABLE
The purpose of this Fee Table is to help you understand the costs of investing,
directly or indirectly, in the Contract. The Fee Table reflects expenses of the
Separate Account as well as the Portfolios.
- ------------------------------------------------------------------------------
Contract Owner Transaction Fees
Contingent Deferred Sales Charge None
Transfer Fee*........................................ First 12 transfers in a
Contract year are free. Thereafter, the fee is $25 or 2% of the amount
transferred, if less. Dollar Cost Averaging transfers and Flexible Rebalancing
transfers are not counted.
Contract Maintenance Charge**........................ $40 per Contract per
year
Separate Account Annual Expenses
(as a percentage of average account value) Contracts
Contracts with with
Traditional Enhanced
Death Benefit Death Benefit
------------- --------------
Mortality and Expense Risk Charge........... 1.00% 1.20%
Administrative Charge....................... .15% .15%
------- -------
Total Separate Account Annual Expenses 1.15% 1.35%
* The Contract provides that if more than three transfers have been made in a
Contract year, Allianz Life reserves the right to deduct a transfer fee.
Market timing transfers may not be permitted.
** During the Accumulation Phase, the charge is waived if the value of your
Contract is at least $100,000. If you own more than one Charter Contract
(registered with the same social security number), we will determine the
total value of all your Contracts. If the total value of all your Contracts
is at least $100,000, the charge is waived.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES: CLASS 2 SHARES
(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. Class 2 shares have a distribution
plan which is referred to as a Rule 12b-1 plan. See the accompanying prospectus
for Franklin Valuemark Funds for a description of these fees and the Rule 12b-1
plan. Because Class 2 shares are new, the figures below (other than 12b-1 fees)
are estimates based on the historical expenses of each portfolio's Class 1
shares, except as noted. Future Portfolio expenses may differ.
Management
and Portfolio 12b-1 Total Annual
Administration Fees 1 Fees Other Expenses Expenses
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth Fund .75% .30% .02% 1.07%
Global Health Care Securities Fund 2 .75% .30% .11% 1.16%
Global Utilities Securities Fund .47% .30% .03% .80%
Growth and Income Fund .47% .30% .02% .79%
High Income Fund .50% .30% .03% .83%
Income Securities Fund .47% .30% .03% .80%
Money Market Fund 3 .51% .30% .02% .83%
Mutual Discovery Securities Fund .95% .30% .11% 1.36%
Mutual Shares Securities Fund .75% .30% .05% 1.10%
Natural Resources Securities Fund .62% .30% .07% .99%
Real Estate Securities Fund .51% .30% .03% .84%
Rising Dividends Fund .72% .30% .02% 1.04%
Small Cap Fund .75% .30% .02% 1.07%
Templeton Developing Markets Equity Fund 1.25% .30% .17% 1.72%
Templeton Global Asset Allocation Fund .80% .30% .14% 1.24%
Templeton Global Growth Fund .83% .30% .05% 1.18%
Templeton Global Income Securities Fund .56% .30% .06% .92%
Templeton International Equity Fund .80% .30% .09% 1.19%
Templeton International Smaller
Companies Fund 1.00% .30% .06% 1.36%
Templeton Pacific Growth Fund .92% .30% .11% 1.33%
U.S. Government Securities Fund .48% .30% .02% .80%
Value Securities Fund 2 .75% .30% .06% 1.11%
Zero Coupon Fund - 2000 4 .37% .30% .03% .70%
Zero Coupon Fund - 2005 4 .37% .30% .03% .70%
Zero Coupon Fund - 2010 4 .37% .30% .03% .70%
<FN>
1. The Portfolio Administration Fee is a direct expense for the Global Health
Care Securities Fund, 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
the accompanying Franklin Valuemark Funds prospectus for further information
regarding these fees.
2. The Global Health Care Securities Fund and the Value Securities Fund
commenced operations May 1, 1998. The expenses shown above for these Portfolios
are therefore estimated for 1998. Franklin Advisers, Inc. and Franklin Templeton
Services, Inc. have agreed in advance to waive or limit their Management and
Portfolio Administration Fees and to assume as their own expense certain
expenses otherwise payable by the new Global Health Care Securities and Value
Securities Funds as necessary so that through at least December 31, 1998, Total
Annual Expenses of each of these portfolios' Class 1 shares do not exceed 1.00%
of their average net assets.
3. Franklin Advisers, Inc. agreed to waive a portion of its Management Fee and
to pay certain expenses of the Money Market Fund during 1997. It is currently
continuing this arrangement in 1998. This arrangement may be terminated at any
time. With this reduction, the actual total annual expenses of this Portfolio's
Class 1 shares were .45% of the average daily net assets in 1997.
4. Although not obligated to, Franklin Advisers, Inc. has agreed to waive a
portion of its Management Fees and to pay certain expenses of the three Zero
Coupon Funds through at least December 31, 1998 so that the total expenses of
each Zero Coupon Fund's Class 1 shares will not exceed 0.40% of its net assets.
Absent the management fee waivers, for the year ended December 31, 1997, the
Total Annual Expenses and the Management and Portfolio Administration Fees of
the Portfolios' Class 1 shares would have been as follows: Zero Coupon Fund -
2000, .63% and .60%; Zero Coupon Fund - 2005, .65% and .62%; and Zero Coupon
Fund - 2010, .65% and .62%. There were no expense reimbursements during 1997 for
the Zero Coupon Funds.
</FN>
</TABLE>
EXAMPLES
There are two sets of examples below. The examples in Chart 1 assume you have
selected the traditional death benefit. The examples in Chart 2 assume you have
selected the enhanced death benefit. The examples below should not be considered
a representation of past or future expenses. Actual expenses may be greater or
less than those shown. The $40 contract maintenance charge is included in the
Examples as a prorated charge of $1. Since the average Contract size is greater
than $1,000, the contract maintenance charge is reduced accordingly. Premium
taxes are not reflected in the tables. Premium taxes may apply. For additional
information, see Section 5 - "Expenses" and the Franklin Valuemark Funds
prospectus.
<TABLE>
<CAPTION>
CHART 1 - CONTRACTS WITH TRADITIONAL DEATH BENEFIT OPTION
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money regardless of whether you surrender your Contract at
the end of each time period:
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth Fund $24 $72 $124 $265
Global Health Care Securities Fund* $24 $75 $129 $275
Global Utilities Securities Fund $21 $64 $110 $237
Growth and Income Fund $21 $64 $110 $236
High Income Fund $21 $65 $112 $241
Income Securities Fund $21 $64 $110 $237
Money Market Fund $21 $65 $112 $241
Mutual Discovery Securities Fund $26 $81 $139 $295
Mutual Shares Securities Fund $24 $73 $125 $268
Natural Resources Securities Fund $23 $70 $120 $257
Real Estate Securities Fund $21 $65 $112 $242
Rising Dividends Fund $23 $72 $122 $262
Small Cap Fund $24 $72 $124 $265
Templeton Developing Markets
Equity Fund $30 $92 $156 $329
Templeton Global Asset Allocation Fund $25 $78 $133 $283
Templeton Global Growth Fund $25 $76 $130 $277
Templeton Global Income
Securities Fund $22 $68 $116 $250
Templeton International Equity Fund $25 $76 $130 $278
Templeton International Smaller
Companies Fund $26 $81 $139 $295
Templeton Pacific Growth Fund $26 $80 $137 $292
U.S. Government Securities Fund $21 $64 $110 $237
Value Securities Fund* $24 $74 $126 $270
Zero Coupon Fund - 2000++ $20 $61 $105 $227
Zero Coupon Fund - 2005++ $20 $61 $105 $227
Zero Coupon Fund - 2010++ $20 $61 $105 $227
<FN>
*Estimated
++Calculated with waiver of fees
</FN>
</TABLE>
<TABLE>
<CAPTION>
CHART 2- CONTRACTS WITH ENHANCED DEATH BENEFIT OPTION
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money regardless of whether you surrender your Contract at
the end of each time period:
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth Fund $26 $78 $134 $286
Global Health Care Securities Fund* $26 $81 $139 $295
Global Utilities Securities Fund $23 $70 $120 $258
Growth and Income Fund $23 $70 $120 $257
High Income Fund $23 $71 $122 $261
Income Securities Fund $23 $70 $120 $258
Money Market Fund $23 $71 $122 $261
Mutual Discovery Securities Fund $28 $87 $148 $314
Mutual Shares Securities Fund $26 $79 $136 $289
Natural Resources Securities Fund $25 $76 $130 $278
Real Estate Securities Fund $23 $72 $122 $262
Rising Dividends Fund $25 $78 $133 $283
Small Cap Fund $26 $78 $134 $286
Templeton Developing Markets
Equity Fund $32 $98 $166 $348
Templeton Global Asset Allocation Fund $27 $84 $143 $302
Templeton Global Growth Fund $27 $82 $140 $297
Templeton Global Income
Securities Fund $24 $74 $127 $271
Templeton International Equity Fund $27 $82 $140 $298
Templeton International Smaller
Companies Fund $28 $87 $148 $314
Templeton Pacific Growth Fund $28 $86 $147 $311
U.S. Government Securities Fund $23 $70 $120 $258
Value Securities Fund* $26 $80 $136 $290
Zero Coupon Fund - 2000++ $22 $67 $115 $248
Zero Coupon Fund - 2005++ $22 $67 $115 $248
Zero Coupon Fund - 2010++ $22 $67 $115 $248
<FN>
*Estimated
++Calculated with waiver of fees
</FN>
</TABLE>
1. THE CHARTER VARIABLE ANNUITY CONTRACT
This prospectus describes a variable deferred annuity contract with a Fixed
Option offered by Allianz Life.
An annuity is a contract between you, the owner, and an insurance company (in
this case Allianz Life), where the insurance company promises to pay you (or
someone else you choose) an income, in the form of Annuity Payments, beginning
on a designated date that is at least two years in the future. Until you decide
to begin receiving Annuity Payments, your annuity is in the Accumulation Phase.
Once you begin receiving Annuity Payments, your Contract switches to the Payout
Phase. The Contract benefits from Tax Deferral.
Tax Deferral means that you are not taxed on any earnings or appreciation on the
assets in your Contract until you take money out of your Contract.
The Contract is called a variable annuity because you can choose among 25
Portfolios and, depending upon market conditions, you can make or lose money in
the Contract based on the Portfolios' investment performance. The Portfolios are
designed to offer a better return than the Fixed Option, however, this is not
guaranteed. If you select the variable annuity portion of the Contract, the
amount of money you are able to accumulate in your Contract during the
Accumulation Phase depends in large part upon the investment performance of the
Portfolio(s) you select. The amount of the Annuity Payments you receive during
the Payout Phase from the variable annuity portion of the Contract also depends
in large part upon the investment performance of the Portfolios you select for
the Payout Phase.
The Contract also contains a Fixed Option (referred to in the Contract as the
"Fixed Account"). The Fixed Option offers an interest rate that is guaranteed by
Allianz Life for all deposits made within the twelve month period. Your initial
interest rate is set on the date when your money is invested in the Fixed Option
and remains effective for one year. Initial interest rates are declared monthly.
Allianz Life guarantees that the interest credited to the Fixed Option will not
be less than 3% per year. If you select the Fixed Option, your money will be
placed with the other general assets of Allianz Life. Allianz Life may change
the terms of the Fixed Option in the future - please contact Allianz Life for
the most current terms.
If you select the Fixed Option, the amount of money you are able to accumulate
in your Contract during the Accumulation Phase depends upon the total interest
credited to your Contract.
We will not make any changes to your Contract without your permission except as
may be required by law.
Contract Owner
You, as the Contract Owner, have all the rights under the Contract. The Contract
Owner is as designated at the time the Contract is issued, unless changed. You
may change Contract Owners at any time. This may be a taxable event. You should
consult with your tax adviser before doing this.
Joint Owner
The Contract can be owned by Joint Owners. Any Joint Owner must be the spouse of
the other Contract Owner (except in Pennsylvania, Oregon and New Jersey). Upon
the death of either Joint Owner, the surviving Joint Owner will be the
designated Beneficiary. Any other Beneficiary designation at the time the
Contract was issued or as may have been later changed will be treated as a
contingent Beneficiary unless otherwise indicated.
Annuitant
The Annuitant is the natural person on whose life we base Annuity Payments. You
name an Annuitant. You may change the Annuitant at any time before the Income
Date unless the Contract is owned by a non-individual (for example, a
corporation).
Beneficiary
The Beneficiary is the person(s) or entity you name to receive any death
benefit. The Beneficiary is named at the time the Contract is issued unless
changed at a later date. Unless an irrevocable Beneficiary has been named, you
can change the Beneficiary or contingent Beneficiary.
Assignment
You can assign the Contract at any time during your lifetime. Allianz Life will
not be bound by the assignment until it receives the written notice of the
assignment. Allianz Life will not be liable for any payment or other action we
take in accordance with the Contract before we receive notice of the assignment.
Any assignment made after the death benefit has become payable can only be done
with our consent. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the Contract is issued pursuant to a Qualified plan, there may be limitations
on your ability to assign the Contract.
2. ANNUITY PAYMENTS
(THE PAYOUT PHASE)
You can receive regular monthly income payments under your Contract. You can
choose the month and year in which those payments begin. We call that date the
Income Date. Your Income Date must be the first day of a calendar month and must
be at least 2 years after you buy the Contract. You can also choose among income
plans. We call those Annuity Options.
We ask you to choose your Income Date when you purchase the Contract. You can
change it at any time before the Income Date with 30 days notice to us. Annuity
Payments must begin by the Annuitant's 85th birthday or 10 years (5 years in
Pennsylvania) from the date the Contract was issued, whichever is later. This
limitation may not apply when the Contract is issued to a charitable remainder
trust. You (or someone you designate) will receive the Annuity Payments. You
will receive tax reporting on those payments.
If you do not choose an Annuity Option prior to the Income Date, we will assume
that you selected Option 2 which provides a life annuity with 5 years of
guaranteed payments.
You may elect to receive your Annuity Payments as a variable payout, a fixed
payout, or a combination of both. Under a fixed payout, all of the Annuity
Payments will be the same dollar amount (equal installments). If you choose a
variable payout, you can select from the available Portfolios. If you do not
tell us otherwise, your Annuity Payments will be based on the investment
allocations that were in place on the Income Date.
If you choose to have any portion of your Annuity Payments based on the
investment performance of the Portfolio(s), the dollar amount of your payments
will depend upon three things: 1) the value of your Contract in the Portfolio(s)
on the Income Date, 2) the assumed investment rate (AIR) used in the annuity
table for the Contract, and 3) the performance of the Portfolio(s) you selected.
You can choose a 3%, 5% or 7% AIR. If the actual performance exceeds the 3%, 5%
or 7% AIR you selected, your Annuity Payments will increase. Similarly, if the
actual rate is less than 3%, 5% or 7% (you selected), your Annuity Payments will
decrease.
Annuity Options
You can choose one of the following Annuity Options or any other Annuity Option
you want and that Allianz Life agrees to provide. After Annuity Payments begin,
you cannot change the Annuity Option.
OPTION 1. LIFE ANNUITY. Under this option, we will make monthly Annuity Payments
so long as the Annuitant is alive. After the Annuitant dies, we stop making
Annuity Payments.
OPTION 2. LIFE ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under this
option, we will make monthly Annuity Payments so long as the Annuitant is alive.
However, if the Annuitant dies before the end of the selected guaranteed period,
we will continue to make Annuity Payments to you or any person you designate for
the rest of the guaranteed period. If you do not want to receive Annuity
Payments after the Annuitant's death, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
monthly Annuity Payments during the joint lifetime of the Annuitant and the
joint Annuitant. When the Annuitant dies, if the joint Annuitant is still alive,
we will continue to make Annuity Payments, so long as the joint Annuitant
continues to live. The amount of the Annuity Payments we will make to the
Contract Owner can be equal to 100%, 75% or 50% of the amount that was being
paid when both Annuitants were alive. The monthly Annuity Payments will end when
the last surviving Annuitant dies.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS
GUARANTEED. Under this option, we will make monthly Annuity Payments during the
joint lifetime of the Annuitant and the joint Annuitant. When the Annuitant
dies, if the joint Annuitant is still alive, we will continue to make Annuity
Payments, so long as the surviving Annuitant continues to live, at 100% of the
amount that was being paid when both were alive. If, when the last death occurs,
we have made Annuity Payments for less than the selected guaranteed period, we
will continue to make Annuity Payments to you or any person you designate for
the rest of the guaranteed period. If you do not want to receive Annuity
Payments after the Annuitant's death, you can ask us for a single lump sum.
OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make monthly Annuity
Payments during the Annuitant's lifetime. The last Annuity Payment will be made
before the Annuitant dies and if the value of the Annuity Payments is less than
the value annuitized, then the Contract Owner will receive a refund as set forth
in the Contract.
3. PURCHASE
Purchase Payments
A Purchase Payment is the money you invest in the Contract. The minimum payment
Allianz Life will accept is $25,000. The maximum we will accept without our
prior approval is $1 million. You can make additional Purchase Payments of $250
or more (or as low as $100 if you have selected the Automatic Investment Plan).
Allianz Life may, at its sole discretion, waive the minimum payment
requirements. We reserve the right to decline any Purchase Payment. At the time
you buy the Contract, you and the Annuitant cannot be older than 85 years old.
This product is not designed for professional market timing organizations, other
entities, or persons using programmed, large or frequent transfers.
Automatic Investment Plan
The Automatic Investment Plan (AIP) is a program which allows you to make
additional Purchase Payments to your Contract on a monthly or quarterly basis by
electronic transfer of monies from your savings or checking account. You may
participate in this program by completing the appropriate form. We must receive
your form by the first of the month in order for AIP to begin that same month.
Investments will take place on the 20th of the month, or the next business day.
The minimum investment that can be made by AIP is $100. You may stop AIP at any
time you want. We need to be notified by the first of the month in order to stop
or change AIP that month. If AIP is used for a Qualified Contract, you should
consult your tax adviser for advice regarding maximum contributions.
Allocation of Purchase Payments
When you purchase a Contract, we will allocate your Purchase Payment to the
Fixed Option and/or one or more of the Portfolios you have selected. We ask that
you allocate your money in either whole percentages or round dollars. The Fixed
Option may not be available in your state (check with your registered
representative). You can instruct us how to allocate additional Purchase
Payments you make. If you do not instruct us, we will allocate them in the same
way as your previous instructions to us. Allianz Life reserves the right to
limit the number of Portfolios that you may invest in at one time. Currently,
you may invest in up to 10 options at one time (which includes any of the 25
Portfolios of Franklin Valuemark Funds listed in Section 4 and the Allianz Life
Fixed Option). We may change this in the future. However, we will always allow
you to invest in at least five Portfolios.
Once we receive your Purchase Payment, the necessary information and federal
funds (federal funds means monies credited to a bank's account with its regional
federal reserve bank), we will issue your Contract and allocate your first
Purchase Payment within 2 business days. If you do not give us all of the
information we need, we will contact you or your registered representative to
get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you make additional
Purchase Payments, we will credit these amounts to your Contract within one
business day. Our business day closes when the New York Stock Exchange closes,
which is usually at 4:00 p.m. Eastern time.
Free Look
If you change your mind about owning the Contract, you can cancel it within 10
days after receiving it (or the period required in your state). You will receive
back whatever your Contract is worth on the day we receive your request. In
certain states or if you have purchased the Contract as an IRA, we may be
required to give you back your Purchase Payment if you decide to cancel your
Contract within 10 days after receiving it (or whatever period is required in
your state). If that is the case, we reserve the right to allocate your initial
Purchase Payment in the Money Market Fund for 15 days after we receive your
first Purchase Payment. (In some states, the period may be longer.) At the end
of that period, we will re-allocate your money as you selected. Currently,
however, we will directly allocate your money to the Portfolios and/or the Fixed
Option as you have selected.
Accumulation Units
The value of the portion of your Contract allocated to the Portfolios will go up
or down based upon the investment performance of the Portfolio(s) you choose.
The value of your Contract will also depend on the expenses of the Contract. In
order to keep track of the value of your Contract, we use a measurement called
an Accumulation Unit (which is like a share of a mutual fund). During the Payout
Phase of the Contract we call it an Annuity Unit.
Every business day we determine the value of an Accumulation Unit by multiplying
the Accumulation Unit value for the previous period by a factor for the current
period. The factor is determined by:
1. dividing the value of a Portfolio Accumulation Unit at the end of the current
period by the value of a Portfolio Accumulation Unit for the previous period;
and
2. multiplying it by one minus the daily amount of the insurance charges and any
charges for taxes.
The value of an Accumulation Unit may go up or down from day to day. When you
make a Purchase Payment, we credit your Contract with Accumulation Units for any
portion of your Purchase Payment allocated to a Portfolio. The number of
Accumulation Units credited is determined by dividing the amount of the Purchase
Payment allocated to a Portfolio by the value of the corresponding Accumulation
Unit.
We calculate the value of each Accumulation Unit after the New York Stock
Exchange closes each day and then credit your Contract.
Example:
On Wednesday we receive an additional Purchase Payment of $3,000 from you. You
have told us you want this to go to the Growth and Income Fund. When the New
York Stock Exchange closes on that Wednesday, we determine that the value of an
Accumulation Unit based on an investment in the Growth and Income Fund is
$12.50. We then divide $3,000 by $12.50 and credit your Contract on Wednesday
night with 240 Accumulation Units.
4. INVESTMENT OPTIONS
- ------------------------------------------------------------------------------
The Contract offers variable investment options, which invest in Class 2 shares
of 25 Portfolios of Franklin Valuemark Funds and a Fixed Option of Allianz Life.
Additional Portfolios may be available in the future.
YOU SHOULD READ THE FRANKLIN VALUEMARK FUNDS PROSPECTUS (WHICH IS ATTACHED TO
THIS PROSPECTUS) CAREFULLY BEFORE INVESTING.
Franklin Valuemark Funds (Trust) is the mutual fund underlying your Contract.
Each Portfolio has its own investment objective. The Trust issues two classes of
shares which are described in the accompanying Trust prospectus. Only Class 2
shares are available in connection with the Charter Variable Annuity Contract.
Class 2 shares have Rule 12b-1 Plan expenses. 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 to help them manage the
Portfolios.
The following is a list of the Portfolios available under the Contract:
<TABLE>
<CAPTION>
Investment
Available Portfolios Managers
- ----------------------------------------------------------------------------
<S> <C>
Portfolio Seeking Stability of Principal and Income
Money Market Fund ........................... FA
Portfolios Seeking Current Income
High Income Fund ............................ FA
Templeton Global Income Securities Fund ..... FA
U.S. Government Securities Fund ............. FA
Zero Coupon Funds - 2000, 2005, 2010 ........ FA
Portfolios Seeking Growth and Income
Global Utilities Securities 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
Global Health Care Securities Fund .......... FA
Mutual Discovery Securities Fund ............ FMA
Natural Resources Securities Fund ........... FA
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>
Franklin Valuemark Funds serves as the underlying mutual fund for variable life
insurance policies offered by Allianz Life and other variable annuity contracts
offered by Allianz Life and its affiliates. Franklin Valuemark Funds does not
believe that offering its shares in this manner will be disadvantageous to you.
Transfers
You can transfer money among the 25 Portfolios (Class 2 shares) and/or the Fixed
Option. Allianz Life currently allows you to make as many transfers as you want
to each year. Allianz Life may change this practice in the future. However, this
product is not designed for professional market timing organizations or other
persons using programmed, large, or frequent transfers. Such activity may be
disruptive to a Portfolio. We reserve the right to reject any specific Purchase
Payment allocation or transfer request from any person, if in the Portfolio
managers' judgment, a Portfolio would be unable to invest effectively in
accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected.
Your Contract provides that you can make 3 transfers every year without charge.
However, currently Allianz Life permits you to make 12 transfers every year
without charge. We measure a year from the anniversary of the day we issued your
Contract. You can make a transfer to or from the Fixed Option and to or from any
Portfolio. If you make more than 12 transfers in a year, there is a transfer fee
deducted. The fee is $25 per transfer or, if less, 2% of the amount transferred.
The following applies to any transfer:
1. The minimum amount which you can transfer is $1,000 or your entire value in
the Portfolio or Fixed Option, if less. This requirement is waived if the
transfer is in connection with the Dollar Cost Averaging Program or Flexible
Rebalancing (which are described below).
2. We may not allow you to make transfers during the free look period.
3. Your request for a transfer must clearly state which Portfolio(s) or the
Fixed Option is involved in the transfer.
4. Your request for a transfer must clearly state how much the transfer is for.
5. You cannot make any transfers within 7 calendar days prior to the date your
first Annuity Payment is due.
6. During the Payout Phase, you may not make a transfer from a fixed Annuity
Option to a variable Annuity Option.
7. During the Payout Phase, you can make at least one transfer from a variable
Annuity Option to a fixed Annuity Option.
Allianz Life has reserved the right to modify the transfer provisions subject to
the guarantees described above and subject to applicable state law.
You can make transfers by telephone. We may allow you to authorize someone else
to make transfers by telephone on your behalf. If you own the Contract with a
Joint Owner, unless Allianz Life is instructed otherwise, Allianz Life will
accept instructions from either one of you. Allianz Life will use reasonable
procedures to confirm that instructions given to us by telephone are genuine. If
we do not use such procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions. Allianz Life tape records all telephone
instructions.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount of money each month or quarter from any one Portfolio or the Fixed Option
to up to eight of the other Portfolios. By allocating amounts on a regularly
scheduled basis, as opposed to allocating the total amount at one particular
time, you may be less susceptible to the impact of market fluctuations. You may
only participate in this program during the Accumulation Phase.
Dollar Cost Averaging requires a $3,000 minimum investment and participation for
at least six months (or two quarters). All Dollar Cost Averaging transfers will
be made on the 10th day of the month unless that day is not a business day. If
it is not, then the transfer will be made the next business day. You may elect
either program by properly completing the Dollar Cost Averaging form provided by
Allianz Life. The Portfolio(s) you transfer from may not be the Portfolio(s) you
transfer to in this program.
Your participation in the program will end when any of the following occurs: (1)
the number of desired transfers have been made; (2) you do not have enough money
in the Portfolio(s) or Fixed Option to make the transfer (if less money is
available, that amount will be transferred under the program and the program
will end); (3) you request to terminate the program (your request must be
received by us by the first of the month to terminate that month); or (4) the
Contract is terminated.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
You may not participate in the Dollar Cost Averaging Program and Flexible
Rebalancing at the same time.
Flexible Rebalancing
Once your money has been invested, the performance of the Portfolios may cause
your chosen allocation to shift. Flexible Rebalancing is designed to help you
maintain your specified allocation mix among the different Portfolios. You can
direct us to readjust your Contract value on a quarterly, semi-annual or annual
basis to return to your original Portfolio allocations. Flexible Rebalancing
transfers will be made on the 20th day of the month unless that day is not a
business day. If it is not, then the transfer will be made on the previous day.
If you participate in Flexible Rebalancing, the transfers made under the program
are not taken into account in determining any transfer fee. The Fixed Option is
not permitted to be part of Flexible Rebalancing.
Financial Advisers - Asset Allocation Programs
Allianz Life understands the importance of advice from a financial adviser
regarding your investments in the Contract (asset allocation program). Certain
investment advisers have made arrangements with us to make their services
available to you. Allianz Life has not made any independent investigation of
these advisers and is not endorsing such programs. You may be required to enter
into an advisory agreement with your investment adviser to have the fees paid
out of your Contract during the Accumulation Phase.
Allianz Life will, pursuant to an agreement with you, make a partial withdrawal
from the value of your Contract to pay for the services of the investment
adviser. If the Contract is Non-Qualified, the withdrawal will be treated like
any other distribution and may be included in gross income for federal tax
purposes and, if you are under age 59 1/2, may be subject to a tax penalty. If
the Contract is Qualified, the withdrawal for the payment of fees may not be
treated as a taxable distribution if certain conditions are met. You should
consult a tax adviser regarding the tax treatment of the payment of investment
adviser fees from your Contract.
Voting Privileges
Allianz Life is the legal owner of the Trust's Class 2 Portfolio shares.
However, when a Portfolio solicits proxies in conjunction with a shareholder
vote, Allianz Life will obtain from you and other Contract Owners instructions
as to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. This will also
include any shares that Allianz Life owns on its own behalf. Should Allianz Life
determine that it is no longer required to comply with the above, we will vote
the shares in our own right.
Substitution
Allianz Life may substitute one of the Portfolios you have selected with another
Portfolio. We would not do this without the prior approval of the Securities and
Exchange Commission. We will give you notice of our intention to do this.
5. EXPENSES
- ------------------------------------------------------------------------------
There are charges and other expenses associated with the Contract that will
reduce your investment return. These charges and expenses are:
Insurance Charges
Each day, Allianz Life makes a deduction for its insurance charges. Allianz Life
does this as part of its calculation of the value of the Accumulation Units and
the Annuity Units. The insurance charge has two parts: 1) the mortality and
expense risk charge and 2) the administrative charge.
Mortality and Expense Risk Charge. The amount of the Mortality and Expense Risk
Charge for your Contract depends upon the death benefit option you select when
you buy the Contract. If you choose the traditional death benefit option, this
charge is equal, on an annual basis, to 1.00% of the average daily value of the
Contract invested in a Portfolio, after the deduction of expenses. If you choose
the enhanced death benefit option, this charge is equal, on an annual basis, to
1.20% of the average daily value of the Contract invested in a Portfolio, after
the deduction of expenses. This charge compensates us for all the insurance
benefits provided by your Contract (for example, the guarantee of annuity rates,
the death benefits, certain expenses related to the Contract, and for assuming
the risk (expense risk) that the current charges will be insufficient in the
future to cover the cost of administering the Contract).
Administrative Charge. This charge is equal, on an annual basis, to .15% of the
average daily value of the Contract invested in a Portfolio, after the deduction
of expenses. This charge, together with the contract maintenance charge (which
is explained below), is for all the expenses associated with the administration
of the Contract. Some of these expenses include: preparation of the Contract,
confirmations, annual reports and statements, maintenance of contract records,
personnel costs, legal and accounting fees, filing fees, and computer and
systems costs.
Contract Maintenance Charge
Every year on the anniversary of the date when your Contract was issued, Allianz
Life deducts $40 from your Contract as a contract maintenance charge. (In South
Carolina, if your Contract is in force on the 20th Contract anniversary, we will
waive the contract maintenance charge that is to be deducted after the 20th
Contract anniversary). This charge is for administrative expenses (see above).
This charge can not be increased.
However, during the Accumulation Phase, if the value of your Contract is at
least $100,000 when the deduction for the charge is to be made, Allianz Life
will not deduct this charge. If you own more than one Charter Contract, Allianz
Life will determine the total value of all your Charter Contracts. If the total
value of all Charter Contracts registered under the same social security number
is at least $100,000, Allianz Life will not assess the contract maintenance
charge. If the Contract is owned by a non-natural person (e.g., a corporation),
Allianz Life will look to the Annuitant to determine if it will assess the
charge.
If you make a complete surrender from your Contract, the contract maintenance
charge will also be deducted. During the Payout Phase, the charge will be
collected monthly out of each Annuity Payment.
Transfer Fee
You can make 12 free transfers every year. We measure a year from the day we
issue your Contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred, whichever is less,
for each additional transfer. If the transfer is part of the Dollar Cost
Averaging Program or Flexible Rebalancing, it will not count in determining the
transfer fee.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Allianz Life is responsible for the payment of
these taxes and will make a deduction from the value of the Contract for them.
Some of these taxes are due when the Contract is issued, others are due when
Annuity Payments begin. It is Allianz Life's current practice to not charge you
for these taxes until you die, Annuity Payments begin or a complete surrender is
made. Allianz Life may some time in the future discontinue this practice and
assess the charge when the tax is due. Premium taxes generally range from 0% to
3.5% of the Purchase Payment, depending on the state.
Income Taxes
Allianz Life reserves the right to deduct from the Contract for any income taxes
which it may incur because of the Contract. Currently, Allianz Life is not
making any such deductions.
Portfolio Expenses
There are deductions from the assets of the various Portfolios for operating
expenses (including management fees), which are described in the Fee Table in
this prospectus and the accompanying prospectus for Franklin Valuemark Funds.
6. TAXES
- ------------------------------------------------------------------------------
NOTE: ALLIANZ LIFE HAS PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE. YOU SHOULD CONSULT
YOUR OWN TAX ADVISER ABOUT YOUR OWN CIRCUMSTANCES. ALLIANZ LIFE HAS INCLUDED
ADDITIONAL INFORMATION REGARDING TAXES IN THE STATEMENT OF ADDITIONAL
INFORMATION.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Basically, these rules provide that you will not be taxed on any earnings on the
money held in your annuity Contract until you take the money out. This is
referred to as Tax Deferral. There are different rules regarding how you will be
taxed depending upon how you take the money out and the type of Contract
- -Qualified or Non-Qualified (see following sections).
You, as the Contract Owner, will not be taxed on increases in the value of your
Contract until a distribution occurs - either as a surrender or as Annuity
Payments. When you make a surrender you are taxed on the amount of the surrender
that is earnings. For Annuity Payments, different rules apply. A portion of each
Annuity Payment you receive will be treated as a partial return of your Purchase
Payments and will not be taxed. The remaining portion of the Annuity Payment
will be treated as ordinary income. How the Annuity Payment is divided between
taxable and non-taxable portions depends upon the period over which the Annuity
Payments are expected to be made. Annuity Payments received after you have
received all of your Purchase Payments are fully includible in income.
When a Non-Qualified Contract is owned by a non-natural person (e.g., a
corporation or certain other entities other than tax-qualified trusts), the
Contract will generally not be treated as an annuity for tax purposes. This
means that the Contract may not receive the benefits of Tax Deferral. Income may
be taxed as ordinary income every year.
Qualified and Non-Qualified Contracts
If you purchase the Contract under a Qualified plan, your Contract is referred
to as a Qualified Contract. Examples of Qualified plans are: Individual
Retirement Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as
403(b) contracts), H.R. 10 Plans (sometime referred to as Keogh Plans), and
pension and profit-sharing plans, which include 401(k) plans. If you do not
purchase the Contract under a Qualified plan, your Contract is referred to as a
Non-Qualified Contract.
Multiple Contracts
The Code provides that multiple Non-Qualified annuity contracts which are issued
within a calendar year period to the same Contract Owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination of contracts. You should consult a tax adviser prior to purchasing
more than one Non-Qualified annuity contract in any calendar year period.
Surrenders - Non-Qualified Contracts
If you make a surrender from your Contract, the Code treats such a surrender as
first coming from earnings and then from your Purchase Payments. In most cases,
such surrendered earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a tax penalty. The amount of the penalty
is equal to 10% of the amount that is includible in income. Some surrenders will
be exempt from the penalty. They include any amounts: (1) paid on or after the
taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer
becomes totally disabled (as that term is defined in the Code); (4) paid in a
series of substantially equal payments made annually (or more frequently) for
the life or life expectancy of the taxpayer; (5) paid under an immediate
annuity; or (6) which come from purchase payments made prior to August 14, 1982.
Surrenders - Qualified Contracts
The above information describing the taxation of Non-Qualified Contracts does
not apply to Qualified Contracts. There are special rules that govern Qualified
Contracts. A more complete discussion of surrenders from Qualified Contracts is
contained in the Statement of Additional Information.
Surrenders - Tax-Sheltered Annuities
The Code limits the surrender of Purchase Payments made by Contract Owners from
certain Tax-Sheltered Annuities. Surrenders can only be made when a Contract
Owner: (1) reaches age 59 1/2; (2) leaves his/her job; (3) dies; (4) becomes
disabled (as that term is defined in the Code); or (5) in the case of hardship.
However, in the case of hardship, the Contract Owner can only surrender the
Purchase Payments and not any earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Allianz Life believes that the Portfolios are being managed so
as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Allianz Life,
would be considered the owner of the shares of the Portfolios. If this occurs,
it will result in the loss of the favorable tax treatment for the Contract. It
is unknown to what extent under federal tax law Contract Owners are permitted to
select Portfolios, to make transfers among the Portfolios or the number and type
of Portfolios Contract Owners may select from. If any guidance is provided which
is considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean that you, as the owner of the
Contract, could be treated as the owner of the Portfolios.
Due to the uncertainty in this area, Allianz Life reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
- ------------------------------------------------------------------------------
You can have access to the money in your Contract:
(1) by making a surrender (either a partial or a total surrender);
(2) by receiving Annuity Payments; or
(3) when a death benefit is paid to your Beneficiary. Surrenders can only be
made during the Accumulation Phase.
When you make a complete surrender you will receive the value of the Contract on
the day you made the surrender less any premium tax and less any contract
maintenance charge. (See Section 5 - "Expenses" for a discussion of the
charges.)
Any partial surrender must be for at least $500 and, unless you instruct Allianz
Life otherwise, will be made pro-rata from all the Portfolios and the Fixed
Option you selected. Allianz Life requires that after you make a partial
surrender the value of your Contract must be at least $5,000.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY SURRENDER
YOU MAKE.
There are limits to the amount you can surrender from a Qualified plan referred
to as a 403(b) plan. For a more complete explanation see Section 6 - "Taxes" and
the discussion in the SAI.
Systematic Withdrawal Program
Allianz Life offers a program which provides automatic monthly or quarterly
payments to you each year. All systematic withdrawals will be made on the 9th
day of the month unless that day is not a business day. If it is not, then the
surrender will be made the previous business day.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO SYSTEMATIC WITHDRAWALS.
Minimum Distribution Program
If you own a Contract that is an Individual Retirement Annuity (IRA), you may
select the Minimum Distribution Program. Under this program, Allianz Life will
make payments to you from your Contract that are designed to meet the applicable
minimum distribution requirements imposed by the Code for IRAs. If the value of
your Contract is at least $25,000, Allianz Life will make payments to you on a
monthly or quarterly basis.
Suspension of Payments or Transfers
Allianz Life may be required to suspend or postpone payments for surrenders or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of the Portfolio shares is
not reasonably practicable or Allianz Life cannot reasonably value the Portfolio
shares;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Contract Owners.
Allianz Life has reserved the right to defer payment for a surrender or transfer
from the Fixed Option for the period permitted by law but not for more than six
months.
8. PERFORMANCE
-----------------------------------------------------------------------------
Allianz Life periodically advertises performance of the various Accumulation
Units. Allianz Life will calculate performance by determining the percentage
change in the value of an Accumulation Unit by dividing the increase (decrease)
for that unit by the value of the Accumulation Unit at the beginning of the
period. This performance number reflects the deduction of the insurance charges.
It may not reflect the deduction of any applicable contract maintenance charge.
The deduction of any applicable contract maintenance charge would reduce the
percentage increase or make greater any percentage decrease. Any advertisement
will also include average annual total return figures which reflect the
deduction of the insurance charges, contract maintenance charge and the expenses
of the Portfolios. Allianz Life may also advertise cumulative total return
information. Cumulative total return is determined the same way except that the
results are not annualized. Performance information for the underlying
Portfolios may also be advertised; see the Franklin Valuemark Funds prospectus
for more information.
Certain Portfolios have been in existence for some time and have investment
performance history. However, the Contracts are new. In order to demonstrate how
the historical investment experience of the Portfolios may affect your
Accumulation Unit values, Allianz Life has prepared performance information
which can be found in the SAI. There is performance shown which is based on the
historical performance of the Portfolios' Class 1 shares, modified to reflect
the current charges and expenses of your Contract as if the Contract had been in
existence for the time periods shown. Class 2 shares are new and have Rule 12b-1
plan expenses of up to .30% per year which will affect future performance. The
information is based upon the historical experience of the Portfolios' Class 1
shares and does not represent past performance or predict future performance.
Allianz Life may in the future also advertise yield information. If it does, it
will provide you with information regarding how yield is calculated. More
detailed information regarding how performance is calculated is found in the
SAI.
Any performance advertised will be based on historical data and does not
guarantee future results of the Portfolios.
9. DEATH BENEFIT
- -----------------------------------------------------------------------------
Upon Your Death
If you die during the Accumulation Phase, Allianz Life will pay a death benefit
to your Beneficiary (see below). No death benefit is paid if you die during the
Payout Phase.
The amount of the death benefit depends upon which death benefit option you
select. You must choose a death benefit option (traditional death benefit or
enhanced death benefit) when you purchase the Contract. Once selected, you
cannot change the death benefit option. The Mortality and Expense Risk Charge
for Contracts with the enhanced death benefit option is higher than for
Contracts with the traditional death benefit option.
If you select the traditional death benefit option, the amount of the death
benefit will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) any payments you have made, less any surrenders and applicable premium
taxes.
If you select the enhanced death benefit option, the amount of the death benefit
will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) the guaranteed minimum death benefit less any applicable premium taxes.
The guaranteed minimum death benefit is the greater of:
(a) the sum of all payments you have made, less any surrenders; or
(b) the greatest value of your Contract Anniversaries prior to your 86th
birthday (your Contract Anniversaries equal the value of your Contract
on a Contract anniversary, increased by the amount of any payments you
have made since that anniversary, less the amount of any surrenders
you have made since that anniversary).
If you have a Joint Owner, the age of the oldest Contract Owner will be used to
determine the guaranteed minimum death benefit. The guaranteed minimum death
benefit will be reduced by any amounts surrendered after the date of death. If
the Contract is owned by a non-natural person, then all references to you mean
the Annuitant.
The death benefits described above may not be available in your state. In
addition, only one of the options may be approved in your state. If neither
death benefit is available, the death benefit will be equal to the value of your
Contract (less any premium taxes) on the close of the business day that Allianz
Life receives proof of the death and payment instructions.
In the case of Joint Owners, if a Joint Owner dies, the surviving Joint Owner
will be considered the Beneficiary. Joint Owners must be spouses (except in
Pennsylvania, Oregon and New Jersey).
A Beneficiary may request that the death benefit be paid in one of the following
ways: (1) payment of the entire death benefit within 5 years of the date of
death; or (2) payment of the death benefit under an Annuity Option. The death
benefit payable under an Annuity Option must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payment must begin within one year of the date of death. If the Beneficiary is
the spouse of the Contract Owner, he/she can choose to continue the Contract in
his/her own name at the then current value, or if greater, the death benefit
value. If a lump sum payment is elected and all the necessary requirements,
including any required tax consent from some states, are met, the payment will
be made within 7 days. Payment of the death benefit may be delayed pending
receipt of any applicable tax consents and/or forms from a state.
If you (or any Joint Owner) die during the Payout Phase and you are not the
Annuitant, any payments which are remaining under the Annuity Option selected
will continue at least as rapidly as they were being paid at your death. If you
die during the Payout Phase, the Beneficiary becomes the Contract Owner.
Death of Annuitant
If the Annuitant, who is not a Contract Owner or Joint Owner, dies during the
Accumulation Phase, you can name a new Annuitant. If a new Annuitant is not
named within 30 days of the death of the Annuitant, you will become the
Annuitant. However, if the Contract Owner is a non-natural person (e.g., a
corporation), then the death of the Annuitant will be treated as the death of
the Contract Owner, and a new Annuitant may not be named.
If the Annuitant dies after Annuity Payments have begun, the remaining amounts
payable, if any, will be as provided for in the Annuity Option selected. The
remaining amounts payable will be paid to the Contract Owner at least as rapidly
as they were being paid at the Annuitant's death.
10. OTHER INFORMATION
- ------------------------------------------------------------------------------
Allianz Life
Allianz Life Insurance Company of North America (Allianz Life), 1750 Hennepin
Avenue, Minneapolis, Minnesota 55403, was organized under the laws of the state
of Minnesota in 1896. Allianz Life offers fixed and variable life insurance and
annuities and group life, accident and health insurance. Allianz Life is
licensed to do business in 49 states and the District of Columbia. Allianz Life
is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding.
Year 2000
Allianz Life has initiated programs to ensure that all of the computer systems
utilized to provide services and administer policies will function properly in
the year 2000. An assessment of the total expected costs specifically related to
the year 2000 conversion has been completed; the total amounts to be expensed
over the next two years are not expected to have a significant effect on Allianz
Life's financial position or results of operations. Allianz Life believes it has
taken steps that are reasonably designed to address the potential failure of
computer systems used by its service providers and to ensure its year 2000
program is completed on a timely basis.
The Separate Account
Allianz Life established a separate account, Allianz Life Variable Account B
(Separate Account), to hold the assets that underlie the Contracts, except
assets allocated to the Fixed Option. The Board of Directors of Allianz Life
adopted a resolution to establish the Separate Account under Minnesota insurance
law on May 31, 1985. Allianz Life has registered the Separate Account with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The Separate Account is divided into Contract
sub-accounts. Each Contract sub-account invests in one Class of shares of a
Portfolio.
The assets of the Separate Account are held in Allianz Life's name on behalf of
the Separate Account and legally belong to Allianz Life. However, those assets
that underlie the variable Contracts are not chargeable with liabilities arising
out of any other business Allianz Life may conduct. All the income, gains and
losses (realized or unrealized) resulting from these assets are credited to or
charged against the Contracts and not against any other contracts Allianz Life
may issue.
Distribution
NALAC Financial Plans, LLC (NFP), 1750 Hennepin Avenue, Minneapolis, MN 55403,
acts as the distributor of the Contracts. NFP is a wholly-owned subsidiary of
Allianz Life. 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 up to 2.00% of Purchase Payments and
quarterly trail commissions at an annual rate of 1% beginning 13 months after
the Contract is issued. In addition, Allianz Life and Advisers and/or their
affiliates may pay certain sellers for other services not directly related to
the sale of the Contracts (such as special marketing support allowances).
Commissions may be recovered from a broker-dealer if a surrender occurs within
12 months of a Purchase Payment.
Administration
Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300
Berwyn Park, Berwyn, Pennsylvania, to perform certain administrative services
regarding the Contracts. The administrative services include issuance of the
Contracts and maintenance of Contract Owner's records.
Financial statements
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Insurance Company.................................
Experts ..........................................
Legal Opinions ...................................
Distributor ......................................
Calculation of Performance Data ..................
Federal Tax Status ...............................
Annuity Provisions................................
Mortality and Expense Risk Guarantee .............
Financial Statements .............................
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
__________, 1998
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
INSURANCE COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195, (800)
342-3863.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED _________,
1998, AND AS MAY BE AMENDED FROM TIME TO TIME.
Table of Contents
Contents Page
Insurance Company ..............................
Experts ........................................
Legal Opinions .................................
Distributor ....................................
Calculation of Performance Data ................
Federal Tax Status .............................
Annuity Provisions .............................
Mortality and Expense Risk Guarantee ...........
Financial Statements ...........................
Insurance Company
Allianz Life Insurance Company of North America (the "Insurance Company") is a
stock life insurance company organized under the laws of the state of Minnesota
in 1896. The Insurance Company is a wholly-owned subsidiary of Allianz
Versicherungs-AG Holding ("Allianz"). Allianz is headquartered in Munich,
Germany, and has sales outlets throughout the world. The Insurance Company
offers fixed and variable life insurance and annuities, and group life, accident
and health insurance. On April 1, 1993, the Insurance Company changed its name
from North American Life and Casualty Company to its present name.
The Insurance Company is rated A+ (Superior) by A.M. BEST, an independent
analyst of the insurance industry. The financial strength of an insurance
company may be relevant insofar as the ability of a company to make fixed
annuity payments from its general account.
On May 1, 1998, the Insurance Company contributed initial capital of $250,000
each to the Value Securities Fund and Global Health Care Securities Fund
Sub-Accounts of Allianz Life Variable Account B ("Variable Account"). As of June
30, 1998, the capital contributed to these Sub-Accounts by the Insurance Company
represented ___% of the total assets of each Sub-Account, respectively. The
Insurance Company currently intends to remove these assets from the Sub-Accounts
on a prorata basis in proportion to money invested in the Sub-Accounts by
Contract Owners.
Experts
- -----------------------------------------------------------------------------
The financial statements of Allianz Life Variable Account B and the consolidated
financial statements of the Insurance Company as of and for the year ended
December 31, 1997 included in this Statement of Additional Information have been
audited by _______________, 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
- -----------------------------------------------------------------------------
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
Distributor
- ------------------------------------------------------------------------------
NALAC Financial Plans, LLC, a subsidiary of the Insurance Company, acts as the
distributor. The offering is on a continuous basis.
Calculation of Performance Data
- -----------------------------------------------------------------------------
Total Return
From time to time, the Insurance Company may advertise the performance data for
the Contract's accumulation unit values in sales literature, advertisements,
personalized hypothetical illustrations, and Contract Owner communications. Such
data will show the percentage change in the value of an accumulation unit based
on the performance of a Portfolio over a stated period of time which is
determined by dividing the increase (or decrease) in value for that unit by the
accumulation unit value at the beginning of the period.
Any such 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 the Mortality and Expense Risk Charge, the
Administrative Charge, the operating expenses of the underlying Portfolios and
any applicable Contract Maintenance Charge ("Standardized Total Return"). Two
sets of standardized total returns will be presented (one calculated with a
1.00% mortality and expense risk charge and the other with a 1.20% mortality and
expense risk charge). The Contract Maintenance Charge deductions are calculated
assuming a Contract is surrendered at the end of the reporting period.
The hypothetical value of a Contract purchased for the time periods described
will be determined by using the actual accumulation unit values for an initial
$1,000 purchase payment, and deducting any applicable Contract Maintenance
Charges to arrive at the ending hypothetical value. The average annual total
return is then determined by computing the fixed interest rate that a $1,000
purchase payment would have to earn annually, compounded annually, to grow to
the hypothetical value at the end of the time periods described. The formula
used in these calculations is:
n
P (1 + T) = ERV
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 payment made at the
beginning of the time periods used at the end of such time periods (or
fractional portion thereof).
The Insurance Company may also advertise performance data which will be
calculated in the same manner as described above but which will not reflect the
deduction of the Contract Maintenance Charge. The Insurance Company may also
advertise cumulative and average total return information over different periods
of time. The Company may also present performance information computed on a
different basis ("Non-Standardized Total Return").
Cumulative total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that no sales load is
deducted from the initial $1,000 payment at the time it is allocated to the
Portfolios and assumes that the income earned by the investment in the Portfolio
is reinvested.
Contract Owners should note that investment results will fluctuate over time,
and any presentation of total return for any period should not be considered as
a representation of what an investment may earn or what a Contract Owner's total
return may be in any future period.
Yield
The Money Market Sub-Account. The Insurance 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 Charge and the Contract Maintenance Charge and,
in certain instances, the value of the underlying Portfolio's investment
securities. The fact that the Portfolio's current yield will fluctuate and that
the principal is not guaranteed should be taken into consideration when using
the Portfolio'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 accumulation unit
for a particular period of time (generally seven days). The return is determined
by dividing the net change (exclusive of any capital changes) in such
accumulation unit by its beginning value, and then multiplying it by 365/7 to
get the annualized current yield. The calculation of net change reflects the
value of additional shares purchased with the dividends paid by the Portfolio,
and the deduction of the Mortality and Expense Risk Charge, the Administrative
Charge and Contract Maintenance Charge. The effective yield reflects the effects
of compounding and represents an annualization of the current return with all
dividends reinvested. (Effective yield = [(Base Period Return + 1)365/7] - 1.)
For the seven-day period ending on 6/30/98, the Money Market Sub-Account had a
current yield of ____% and an effective yield of ____%. The yield information
assumes that the Contract Sub-Account was invested in the Money Market Fund for
the time period shown.
Other Sub-Accounts. The Insurance Company may also quote yield in sales
literature, advertisements, personalized hypothetical illustrations, and
Contract Owner communications for the other Sub-Accounts. Each 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
accumulation unit earned during the period (minus the deduction for the
Mortality and Expense Risk Charge, Administrative Charge and Contract
Maintenance Charge) by the accumulation unit value on the last day of the period
and annualizing the resulting figure, according to the following formula:
6
Yield = 2 [((a-b) + 1) - 1]
------
cd
where:
a = net investment income earned during the period by the 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 accumulation units outstanding during the
period;
d = the maximum offering price per accumulation unit on the last day of the
period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods (or one month) identified in the sales literature,
advertisement, or communication. Yield calculations assume no sales load. The
Insurance Company does not currently advertise yield information for any
Portfolio (other than the Money Market Fund).
Performance Ranking
Total return may be compared to relevant indices, including U.S. domestic and
international 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
Franklin Valuemark Funds - Existing Portfolios. The Portfolios of Franklin
Valuemark Funds have been in existence for some time and have investment
performance history (except the Global Health Care Securities and Value
Securities Funds). In order to show how investment performance of the Portfolios
affects accumulation unit values, the following performance information was
developed.
The charts below show accumulation unit performance which assume that the
accumulation units were invested in each of the Portfolios for the same periods.
Because the Portfolios' Class 2 shares (in which the Contract invests) are new,
the performance below is based on the historical performance of the Portfolios'
Class 1 shares. Class 2 shares have Rule 12b-1 plan expenses of up to .30% per
year, which will affect future performance. The performance figures in Chart I
represent performance figures for the accumulation units which reflects the
deduction of the Mortality and Expense Risk Charge of 1.00% (for Contracts with
the traditional death benefit option), Administrative Charge, and the operating
expenses of the Portfolios. Chart II presents performance figures for the
accumulation units which are identical to Chart I except the Mortality and
Expense Risk Charge is calculated as 1.20% (for Contracts with the enhanced
death benefit option). Chart III represents performance figures for the
accumulation units which reflects the Mortality and Expense Risk Charge (of
1.00%), Administrative Charge, the contract maintenance charge and the operating
expenses of the Portfolios. Chart IV presents performance figures for the
accumulation units which are identical to Chart III except the Mortality and
Expense Risk Charge is calculated as 1.20%. Past performance does not guarantee
future results.
Total Return for the periods ended June 30, 1998:
<TABLE>
<CAPTION>
Chart I - Contracts with traditional
death benefit (reflects mortality
and expense risk charge, administrative
charge and portfolio expenses.)
------------------------------
Inception One Three Five Since
Portfolio Date Year Years Years Inception
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth ______ _____% _____% _____% _____%
Global Utilities Securities _______ _____% _____% _____% _____%
Growth and Income _______ _____% _____% _____% _____%
High Income _______ _____% _____% ______% _____%
Income Securities _______ _____% _____% ______% _____%
Money Market+ _______ _____% _____% _____% _____%
Mutual Discovery
Securities _______ _____% _____% ______% _____%
Mutual Shares
Securities _______ _____% _____% ______% _____%
Natural Resources
Securities _______ _____% _____% ______% ______
Real Estate Securities _______ _____% _____% _____% _____%
Rising Dividends _______ _____% _____% _____% _____%
Small Cap _______ _____% _____% _____% _____%
Templeton Developing
Markets Equity _______ ______% _____% _____% _____%
Templeton Global
Asset Allocation ______ _____% _____% _____% _____%
Templeton Global
Growth _______ _____% _____% _____% _____%
Templeton Global
Income Securities _______ _____% _____% _____% _____%
Templeton
International Equity _______ _____% _____% _____% _____%
Templeton International
Smaller Companies ______ _____% _____% _____% _____%
Templeton Pacific
Growth _______ _____% _____% _____% _____%
U.S. Government
Securities _______ _____% _____% _____% _____%
Zero Coupon - 2000+ _______ ______% _____% _____% _____%
Zero Coupon - 2005+ _______ ______% _____% _____% _____%
Zero Coupon - 2010+ _______ ______% _____% _____% _____%
<FN>
+Calculated with waiver of fees.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Chart II - Contracts with
enhanced death benefit (reflects
mortality and expense risk
charge, administrative charge and
portfolio expenses.)
------------------------------
Since
One Three Five Since
Portfolio Year Years Years Inception
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth ______ _____% _____% _____% _____%
Global Utilities Securities _______ _____% _____% _____% _____%
Growth and Income _______ _____% _____% _____% _____%
High Income _______ _____% _____% ______% _____%
Income Securities _______ _____% _____% ______% _____%
Money Market+ _______ _____% _____% _____% _____%
Mutual Discovery
Securities _______ _____% _____% ______% _____%
Mutual Shares
Securities _______ _____% _____% ______% _____%
Natural Resources
Securities _______ _____% _____% ______% ______
Real Estate Securities _______ _____% _____% _____% _____%
Rising Dividends _______ _____% _____% _____% _____%
Small Cap _______ _____% _____% _____% _____%
Templeton Developing
Markets Equity _______ ______% _____% _____% _____%
Templeton Global
Asset Allocation ______ _____% _____% _____% _____%
Templeton Global
Growth _______ _____% _____% _____% _____%
Templeton Global
Income Securities _______ _____% _____% _____% _____%
Templeton
International Equity _______ _____% _____% _____% _____%
Templeton International
Smaller Companies ______ _____% _____% _____% _____%
Templeton Pacific
Growth _______ _____% _____% _____% _____%
U.S. Government
Securities _______ _____% _____% _____% _____%
Zero Coupon - 2000+ _______ ______% _____% _____% _____%
Zero Coupon - 2005+ _______ ______% _____% _____% _____%
Zero Coupon - 2010+ _______ ______% _____% _____% _____%
<FN>
+Calculated with waiver of fees.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Chart III - Contracts with traditional death
benefit (reflects mortality and expense
risk charge, administrative charge, contract
maintenance charge and portfolio expenses.)
------------------------------
One Three Five Since
Portfolio Year Years Years Inception
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth ______ _____% _____% _____% _____%
Global Utilities Securities _______ _____% _____% _____% _____%
Growth and Income _______ _____% _____% _____% _____%
High Income _______ _____% _____% ______% _____%
Income Securities _______ _____% _____% ______% _____%
Money Market+ _______ _____% _____% _____% _____%
Mutual Discovery
Securities _______ _____% _____% ______% _____%
Mutual Shares
Securities _______ _____% _____% ______% _____%
Natural Resources
Securities _______ _____% _____% ______% ______
Real Estate Securities _______ _____% _____% _____% _____%
Rising Dividends _______ _____% _____% _____% _____%
Small Cap _______ _____% _____% _____% _____%
Templeton Developing
Markets Equity _______ ______% _____% _____% _____%
Templeton Global
Asset Allocation ______ _____% _____% _____% _____%
Templeton Global
Growth _______ _____% _____% _____% _____%
Templeton Global
Income Securities _______ _____% _____% _____% _____%
Templeton
International Equity _______ _____% _____% _____% _____%
Templeton International
Smaller Companies ______ _____% _____% _____% _____%
Templeton Pacific
Growth _______ _____% _____% _____% _____%
U.S. Government
Securities _______ _____% _____% _____% _____%
Zero Coupon - 2000+ _______ ______% _____% _____% _____%
Zero Coupon - 2005+ _______ ______% _____% _____% _____%
Zero Coupon - 2010+ _______ ______% _____% _____% _____%
<FN>
+Calculated with waiver of fees.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Chart IV - Contracts with enhanced death
benefit (reflects mortality and expense risk
charge, administrative charge, contract
maintenance charge and portfolio expenses.)
------------------------------
One Three Five Since
Portfolio Year Years Years Inception
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth ______ _____% _____% _____% _____%
Global Utilities Securities _______ _____% _____% _____% _____%
Growth and Income _______ _____% _____% _____% _____%
High Income _______ _____% _____% ______% _____%
Income Securities _______ _____% _____% ______% _____%
Money Market+ _______ _____% _____% _____% _____%
Mutual Discovery
Securities _______ _____% _____% ______% _____%
Mutual Shares
Securities _______ _____% _____% ______% _____%
Natural Resources
Securities _______ _____% _____% ______% ______
Real Estate Securities _______ _____% _____% _____% _____%
Rising Dividends _______ _____% _____% _____% _____%
Small Cap _______ _____% _____% _____% _____%
Templeton Developing
Markets Equity _______ ______% _____% _____% _____%
Templeton Global
Asset Allocation ______ _____% _____% _____% _____%
Templeton Global
Growth _______ _____% _____% _____% _____%
Templeton Global
Income Securities _______ _____% _____% _____% _____%
Templeton
International Equity _______ _____% _____% _____% _____%
Templeton International
Smaller Companies ______ _____% _____% _____% _____%
Templeton Pacific
Growth _______ _____% _____% _____% _____%
U.S. Government
Securities _______ _____% _____% _____% _____%
Zero Coupon - 2000+ _______ ______% _____% _____% _____%
Zero Coupon - 2005+ _______ ______% _____% _____% _____%
Zero Coupon - 2010+ _______ ______% _____% _____% _____%
<FN>
The Global Health Care Securities and the Value Securities Sub-Accounts
commenced operations on May 1, 1998.
+Calculated with waiver of fees.
</FN>
</TABLE>
Federal Tax Status
- ------------------------------------------------------------------------------
Note: The following description is based upon the Insurance Company's
understanding of current federal income tax law applicable to annuities in
general. The Insurance Company cannot predict the probability that any changes
in such laws will be made. Purchasers are cautioned to seek competent tax advice
regarding the possibility of such changes. The Insurance Company does not
guarantee the tax status of the Contracts. Purchasers bear the complete risk
that the Contracts may not be treated as "annuity contracts" under federal
income tax laws. It should be further understood that the following discussion
is not exhaustive and that special rules not described herein may be applicable
in certain situations. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
General
Section 72 of the Internal Revenue Code of 1986, as amended ("Code") governs
taxation of annuities in general. A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as annuity payments under the Annuity Option elected. For a lump
sum payment received as a total surrender (total redemption) or death benefit,
the recipient is taxed on the portion of the payment that exceeds the cost basis
of the Contract. For Non-Qualified Contracts, this cost basis is generally the
purchase payments, while for Qualified Contracts there may be no cost basis. The
taxable portion of the lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includable in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract. The exclusion amount
for payments based on a variable annuity option is determined by dividing the
cost basis of the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid. Payments
received after the investment in the Contract has been recovered (i.e. when the
total of the excludable amounts equal the investment in the Contract) are fully
taxable. The taxable portion is taxed at ordinary income rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries
under the Contracts should seek competent financial advice about the tax
consequences of any distributions.
The Insurance Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity from
the Insurance Company, and its operations form a part of the Insurance Company.
Diversification
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity contract would result in imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Insurance Company intends that all Portfolios of Franklin Valuemark Funds
underlying the Contracts will be managed by the managers for Franklin Valuemark
Funds in such a manner as to comply with these diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the investments of the Separate Account will cause the Contract Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Contract Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Contract Owner's ability to transfer
among investment choices or the number and type of investment choices available,
would cause the Contract Owner to be considered as the owner of the assets of
the Separate Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Contract Owner being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, the Insurance Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year period to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination of contracts. Contract Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year
period.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on purchase payments
for the Contracts will be taxed currently to the Contract Owner if the Owner is
a non-natural person, e.g., a corporation or certain other entities. Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust or
other entity as an agent for a natural person nor to Contracts held by qualified
plans. Purchasers should consult their own tax counsel or other tax adviser
before purchasing a Contract to be owned by a non-natural person.
Tax Treatment of Assignments
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign or
pledge their Contracts.
Income Tax Withholding
All distributions or the portion thereof which is includable in the gross income
of the Contract Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Contract Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
(c) the portion of the distributions not includible in gross income (i.e.
returns of after-tax contributions). Participants should consult their own tax
counsel or other tax adviser regarding withholding requirements.
Tax Treatment of Surrenders -
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 surrendered 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 59 1/2; (b) after the death of the Contract
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Surrenders - Qualified Contracts.")
Qualified Plans
The Contracts offered by the Prospectus are designed to be suitable for use
under various types of Qualified Plans. Because of the minimum purchase payment
requirements, these Contracts may not be appropriate for some periodic payment
retirement plans. Taxation of participants in each Qualified Plan varies with
the type of plan and terms and conditions of each specific plan. Contract
Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified Plan may be subject to the terms and conditions of the plan regardless
of the terms and conditions of the Contracts issued pursuant to the plan. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the Insurance Company's administrative procedures. Contract
Owners, participants and Beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law. Following are general descriptions of the
types of Qualified Plans with which the Contracts may be used. Such descriptions
are not exhaustive and are for general informational purposes only. The tax
rules regarding Qualified Plans are very complex and will have differing
applications, depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Insurance Company in
connection with Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables will also be available
for use in connection with certain non-qualified deferred compensation plans.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described in
this Statement of Additional Information. Generally, Contracts issued pursuant
to Qualified Plans are not transferable except upon surrender or annuitization.
Various penalty and excise taxes may apply to contributions or distributions
made in violation of applicable limitations. Furthermore, certain surrender
penalties and restrictions may apply to surrenders from Qualified Contracts.
(See "Tax Treatment of Surrenders - Qualified Contracts.")
a. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish Qualified
Plans for themselves and their employees, commonly referred to as "H.R. 10" or
"Keogh" plans. Contributions made to the Plan for the benefit of the employees
will not be included in the gross income of the employees until distributed from
the Plan. The tax consequences to participants may vary, depending upon the
particular Plan design. However, the Code places limitations and restrictions on
all Plans, including on such items as: amounts of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions and surrenders. (See "Tax
Treatment of Surrenders Qualified Contracts.") Purchasers of Contracts for use
with an H.R. 10 Plan should obtain competent tax advice as to the tax treatment
and suitability of such an investment.
b. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includable in the gross income of the employee until the
employee receives distributions from the Contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Surrenders - Qualified Contracts" and "Tax-Sheltered Annuities -
Surrender Limitations.") Employee loans are not allowed under these Contracts.
Any employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
c. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which may be deductible from the individual's gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Surrenders - Qualified Contracts.") Under
certain conditions, distributions from other IRAs and other Qualified Plans may
be rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
Roth IRAs
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Purchase payments for a Roth IRA are limited to a maximum
of $2,000 per year. Lower maximum limitations apply to individuals with adjusted
gross incomes between $95,000 and $110,000 in the case of single taxpayers,
between $150,000 and $160,000 in the case of married taxpayers filing joint
returns, and between $0 and $10,000 in the case of married taxpayers filing
separately. An overall $2,000 annual limitation continues to apply to all of a
taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
d. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the Contracts to provide benefits under the Plan.
Contributions to the Plan for the benefit of employees will not be includible in
the gross income of the employee until distributed from the Plan. The tax
consequences to participants may vary, depending upon the particular Plan
design. However, the Code places limitations and restrictions on all Plans,
including on such items as: amount of allowable contributions; form, manner and
timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions and surrenders.
Participant loans are not allowed under the Contracts purchased in connection
with these Plans. (See "Tax Treatment of Surrenders - Qualified Contracts.")
Purchasers of Contracts for use with Corporate Pension or Profit-Sharing Plans
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
Tax Treatment of Surrenders -
Qualified Contracts
In the case of a surrender under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (H.R. 10 and Corporate Pension and
Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities) and 408(b) (Individual
Retirement Annuities). To the extent amounts are not includible in gross income
because they have been properly rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply
to the following distributions: (a) if distribution is made on or after the date
on which the Contract Owner or Annuitant (as applicable) reaches age 59 1/2 ;
(b) distributions following the death or disability of the Contract Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Contract Owner or Annuitant
(as applicable) or the joint lives (or joint life expectancies) of such Contract
Owner or Annuitant (as applicable) and his or her designated beneficiary; (d)
distributions to a Contract Owner or Annuitant (as applicable) who has separated
from service after he or she has attained age 55; (e) distributions made to the
Contract Owner or Annuitant (as applicable) to the extent such distributions do
not exceed the amount allowable as a deduction under Code Section 213 to the
Contract Owner or Annuitant (as applicable) for amounts paid during the taxable
year for medical care; (f) distributions made to an alternate payee pursuant to
a qualified domestic relations order; (g) distributions from an Individual
Retirement Annuity for the purchase of medical insurance (as described in
Section 213(d)(1)(D) of the Code) for the Contract Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Contract Owner or
Annuitant (as applicable) has received unemployment compensation for at least 12
weeks (this exception no longer applies after the Contract Owner or Annuitant
(as applicable) has been re-employed for at least 60 days); (h) distributions
from an Individual Retirement Annuity made to the Owner or Annuitant (as
applicable) 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 Owner or
Annuitant (as applicable) for the taxable year; and (i) distributions from an
Individual Retirement Annuity made to the Owner or Annuitant (as applicable)
which are qualified first-time home buyer distributions (as defined in Section
72(t)(8) of the Code). The exceptions stated in items (d) and (f) above do not
apply in the case of an Individual Retirement Annuity. The exception stated in
item (c) applies to an Individual Retirement Annuity without the requirement
that there be a separation from service.
Generally, distributions from a Qualified Plan must commence no later than April
1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2, or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
Tax-Sheltered Annuities - Surrender Limitations
The Code limits the surrender of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Contract Owner: (1) attains age 59 1/2;
(2) separates from service; (3) dies; (4) becomes disabled (within the meaning
of Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
surrenders for hardship are restricted to the portion of the Contract Owner's
Contract Value which represents contributions by the Contract Owner and does not
include any investment results. The limitations on surrenders became effective
on January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, and to income attributable to such contributions and to
income attributable to amounts held as of December 31, 1988. The limitations on
surrenders do not affect rollovers and transfers between certain Qualified
Plans. Contract Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
Annuity Provisions
- ------------------------------------------------------------------------------
Fixed Annuity Payout
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Insurance Company and do not vary with the investment experience
of a Portfolio. The Fixed Account value on the day immediately preceding the
Income Date will be used to determine the Fixed Annuity monthly payment. The
monthly Annuity Payment will be based upon the Contract Value at the time of
annuitization, the Annuity Option selected, the age of the Annuitant and any
joint Annuitant and the sex of the Annuitant and joint Annuitant where allowed.
Variable Annuity Payout
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable Portfolio(s).
Annuity Unit Value
On the Income Date, a fixed number of Annuity Units will be purchased as
follows:
The first Annuity Payment is equal to the Adjusted Contract Value, divided first
by $1,000 and then multiplied by the appropriate Annuity Payment amount for each
$1,000 of value for the Annuity Option selected. In each Portfolio the fixed
number of Annuity Units is determined by dividing the amount of the initial
Annuity Payment determined for each Portfolio by the Annuity Unit value on the
Income Date. Thereafter, the number of Annuity Units in each Portfolio remains
unchanged unless the Contract Owner elects to transfer between Portfolios. All
calculations will appropriately reflect the Annuity Payment frequency selected.
On each subsequent Annuity Payment date, the total Annuity Payment is the sum of
the Annuity Payments for each Portfolio. The Annuity Payment in each Portfolio
is determined by multiplying the number of Annuity Units then allocated to such
Portfolio by the Annuity Unit value for that Portfolio.
On each subsequent Valuation Date, the value of an Annuity Unit is determined in
the following way:
First: The Net Investment Factor is determined as described in the Prospectus
under "Purchase - Accumulation Units."
Second: The value of an Annuity Unit for a Valuation Period is equal to:
a. the value of the Annuity Unit for the immediately preceding Valuation Period.
b. multiplied by the Net Investment Factor for the current Valuation Period;
c. divided by the Assumed Net Investment Factor (see below) for the Valuation
Period.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular Valuation Period. You may choose a 3%, 5% or
7% Assumed Investment Return. The Insurance Company may agree to use a different
value.
Mortality and Expense Risk Guarantee
- ------------------------------------------------------------------------------
The Insurance Company guarantees that the dollar amount of each annuity payment
after the first annuity payment will not be affected by variations in mortality
and expense experience.
Financial Statements
- ------------------------------------------------------------------------------
The audited consolidated financial statements of the Insurance Company as of and
for the year ended December 31, 1997, included herein should be considered only
as bearing upon the ability of the Insurance Company to meet its obligations
under the Contracts. The audited financial statements of the Separate Account as
of and for the year ended December 31, 1997 are also included herein.
[Financial Statements will be filed by amendment]
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
The financial statements of the Separate Account and the Company will 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's Agreement**
4. Individual Variable Annuity Contract
4. (i) Enhanced Death Benefit Endorsements
4. (ii) Charitable Remainder Trust Endorsement
5. Application for Individual Variable Annuity Contract
6. (i) Copy of Articles of Incorporation of the Company*
(ii) Copy of the Bylaws of the Company*
7. Not Applicable
8. Form of Fund Participation Agreement*
9. Opinion and Consent of Counsel (to be filed by Amendment)
10. Independent Auditors' Consent (to be filed by Amendment)
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Data (to be filed by Amendment)
14. Company Organizational Chart**
27. Not Applicable
* Incorporated by reference to Registrant's Form N-4 (File Nos. 333-06709 and
811-05618) electronically filed on June 24, 1996.
** Incorporated by reference to Pre-Effective Amendment No. 1 to Registrant's
Form N-4 (File Nos. 333-06709 and 811-05618) electronically filed on December
13, 1996.
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Insurance Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
- - ---------------------------- ---------------------------------
Lowell C. Anderson Chairman, President, Chief
1750 Hennepin Avenue Executive Officer and Director
Minneapolis, MN 55403
Herbert F. Hansmeyer Director
777 San Marin Drive
Novato, CA 94998
Michael P. Sullivan Director
7505 Metro Boulevard
Minneapolis, MN 55439
Dr. Jerry E. Robertson Director
220-13E-29/3M Center
St. Paul, MN 55144
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 19
D-70178
Stuttgart, Germany
Edward J. Bonach Senior Vice President, Chief
1750 Hennepin Avenue Financial Officer and Treasurer
Minneapolis, MN 55403
Robert S. James President - Individual
1750 Hennepin Avenue Division
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Rev. Dennis Dease Director
c/o University of St. Thomas
215 Summit Avenue
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Corp.
Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116
Robert M. Kimmitt Director
Wilmer, Cutler & Pickering
2445 M Street NW
Washington, DC 20037-1420
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
The Company organizational chart is incorporated by reference to Pre-Effective
Amendment No. 1 (File Nos.333-06709 and 811-05618).
Item 27. Number of Contract Owners
Not Applicable.
Item 28. Indemnification
The Bylaws of the Insurance Company provide that:
Each person (and the heirs, executors, and administrators of such person) made
or threatened to be made a party to any action, civil or criminal, by reason of
being or having been a Director, officer, or employee of the corporation (or by
reason of serving any other organization at the request of the corporation)
shall be indemnified to the extent permitted by the laws of the State of
Minnesota, and in the manner prescribed therein.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Insurance Company pursuant to the foregoing, or otherwise, the Insurance Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Insurance Company of expenses
incurred or paid by a director, officer or controlling person of the Insurance
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters
a. NALAC Financial Plans, LLC is the principal underwriter for the
Contracts. It also is the principal underwriter for:
Allianz Life Variable Account A
Preferred Life Variable Account C
b. The following are the officers (managers) and directors (Board of
Governors) of NALAC Financial Plans, LLC:
<TABLE>
<CAPTION>
<S> <C>
Positions and Offices
Business Address with Underwriter
- - ---------------------- ----------------------
James P. Kelso Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford Chief Manager and Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael J. Yates Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Edward J. Bonach Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota,
maintains physical possession of the accounts, books or documents of the
Variable Account required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated thereunder.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Insurance Company hereby represents that it is relying upon a No Action
Letter issued to the American Council of Life Insurance, dated November 28, 1988
(Commission ref. IP-6-88), and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it has caused this Registration
Statement to be signed on its behalf in the City of Minneapolis and State of
Minnesota, on this 16th day of September, 1998.
ALLIANZ LIFE VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /S/ MICHAEL T. WESTERMEYER
--------------------------------
Michael T. Westermeyer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /S/ MICHAEL T. WESTERMEYER
------------------------------
Michael T. Westermeyer
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
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board, 9-16-98
Lowell C. Anderson* President _______
Lowell C. Anderson and Chief Executive Officer Date
Herbert F. Hansmeyer* Director 9-16-98
Herbert F. Hansmeyer _______
Date
Michael P. Sullivan* Director 9-16-98
Michael P. Sullivan _______
Date
Dr. Jerry E. Robertson* Director 9-16-98
Dr. Jerry E. Robertson _______
Date
Dr. Gerhard Rupprecht* Director 9-16-98
Dr. Gerhard Rupprecht _______
Date
Edward J. Bonach* Chief Financial Officer 9-16-98
Edward J. Bonach _______
Date
Rev. Dennis J. Dease* Director 9-16-98
Rev. Dennis J. Dease _______
Date
James R. Campbell* Director 9-16-98
James R. Campbell ________
Date
Robert M. Kimmitt* Director 9-16-98
Robert M. Kimmitt ________
Date
</TABLE>
*By: Power of Attorney
By: /S/ MICHAEL T. WESTERMEYER
--------------------------------
Michael T. Westermeyer
Attorney-in-Fact
ALLIANZ LIFE VARIABLE ACCOUNT B
REGISTRATION STATEMENT ON FORM N-4
INDEX TO EXHIBITS
EX-99.B.4 Individual Variable Annuity Contract
EX-99.B.4(i) Enhanced Death Benefit Endorsements
EX-99.B.4(ii) Charitable Remainder Trust Endorsement
EX-99.B.5 Application for Individual Variable Annuity Contract
Allianz Life Insurance Company of North America
1750 Hennepin Avenue (Allianz Logo)
Minneapolis, MN 55403-2195
A Stock Company
This is a legal Contract between the Contract Owner (referred to in this
Contract as you and your) and Allianz Life Insurance Company of North America
(herein referred to as we, us and our). We will make Annuity Payments as set
forth in this Contract beginning on the Income Date.
This Contract is issued in consideration of the payment of the initial Purchase
Payment.
READ YOUR CONTRACT CAREFULLY
RIGHT TO EXAMINE: THIS CONTRACT MAY BE RETURNED WITHIN 10 DAYS AFTER YOU RECEIVE
IT. IT CAN BE MAILED OR DELIVERED TO EITHER US OR THE AGENT WHO SOLD IT. RETURN
OF THIS CONTRACT BY MAIL IS EFFECTIVE ON BEING POSTMARKED, PROPERLY ADDRESSED
AND POSTAGE PREPAID. THE RETURNED CONTRACT WILL BE TREATED AS IF WE HAD NEVER
ISSUED IT. WE WILL PROMPTLY REFUND THE CONTRACT VALUE IN STATES WHERE PERMITTED.
THIS MAY BE MORE OR LESS THAN THE PURCHASE PAYMENTS. WE HAVE THE RIGHT TO
ALLOCATE PAYMENTS TO THE MONEY MARKET FUND UNTIL THE EXPIRATION OF THE RIGHT TO
EXAMINE PERIOD. IF WE SO ALLOCATE PAYMENTS, WE WILL REFUND THE GREATER OF THE
PURCHASE PAYMENTS, LESS ANY SURRENDERS, OR THE CONTRACT VALUE.
Benefits available under this Contract are not less than those required by
statute of the state in which this Contract is delivered.
This is a Variable Annuity Contract with Annuity Payments and Contract Values
increasing or decreasing depending on the experience of the Variable Account
which is set forth in the Contract Schedule.
Signed for Allianz Life Insurance Company of North America by:
/s/ Alan A Grove /s/Lowell C. Anderson
Vice President and Secretary Chairman of the Board, President, and CEO
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY
NON-PARTICIPATING
TABLE OF CONTENTS
RIGHT TO EXAMINE......................................................1
CONTRACT SCHEDULE.....................................................i
DEFINITIONS...........................................................2
PURCHASE PAYMENTS.....................................................4
PURCHASE PAYMENTS...............................................4
CHANGE IN PURCHASE PAYMENTS.....................................4
NO DEFAULT......................................................4
ALLOCATION OF PURCHASE PAYMENTS.................................4
VARIABLE ACCOUNT......................................................4
THE VARIABLE ACCOUNT............................................4
VALUATION OF ASSETS.............................................5
ACCUMULATION UNITS..............................................5
ACCUMULATION UNIT VALUE.........................................5
NET INVESTMENT FACTOR...........................................5
MORTALITY AND EXPENSE RISK CHARGE...............................5
ADMINISTRATIVE CHARGE...........................................5
DISTRIBUTION EXPENSE CHARGE.....................................6
MORTALITY AND EXPENSE GUARANTEE.................................6
CONTRACT VALUE........................................................6
CONTRACT MAINTENANCE CHARGE...........................................6
SURRENDER PROVISIONS..................................................6
SURRENDERS......................................................7
CONTINGENT DEFERRED SALES CHARGE................................7
PROCEEDS PAYABLE ON DEATH.............................................7
DEATH OF CONTRACT OWNER DURING THE ACCUMULATION PERIOD..........8
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD.............8
DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD............8
DEATH OF CONTRACT OWNER DURING THE ANNUITY PERIOD...............8
DEATH OF ANNUITANT..............................................8
PAYMENT OF DEATH BENEFIT........................................8
BENEFICIARY.....................................................9
CHANGE OF BENEFICIARY...........................................9
SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION..........................9
CONTRACT OWNER, ANNUITANT, ASSIGNMENT PROVISIONS.....................10
CONTRACT OWNER..................................................10
JOINT OWNER.....................................................10
ANNUITANT.......................................................10
ASSIGNMENT OF A CONTRACT........................................10
ANNUITY PROVISIONS...................................................11
GENERAL........................................................11
INCOME DATE....................................................11
SELECTION OF AN ANNUITY OPTION.................................11
ANNUITY OPTIONS................................................11
OPTION 1 - LIFE ANNUITY....................................11
OPTION 2 - LIFE ANNUITY WITH 120 OR 240 MONTHLY ANNUITY
PAYMENTS GUARANTEED........................................11
OPTION 3 - JOINT AND LAST SURVIVOR ANNUITY.................11
OPTION 4 - JOINT AND LAST SURVIVOR ANNUITY WITH
120 OR 240 MONTHLY ANNUITY PAYMENTS GUARANTEED.............11
OPTION 5 - REFUND LIFE ANNUITY.............................12
ANNUITY........................................................12
FIXED ANNUITY..................................................12
VARIABLE ANNUITY...............................................15
GENERAL PROVISIONS...................................................18
THE CONTRACT...................................................18
NON-PARTICIPATING IN SURPLUS...................................18
INCONTESTABILITY...............................................18
MISSTATEMENT OF AGE OR SEX.....................................18
CONTRACT SETTLEMENT............................................18
REPORTS........................................................18
TAXES..........................................................18
EVIDENCE OF SURVIVAL...........................................18
PROTECTION OF PROCEEDS.........................................18
MODIFICATION OF CONTRACT.......................................18
CONTRACT SCHEDULE
CONTRACT OWNER: [John Doe] CONTRACT NUMBER: [DA687456]
JOINT OWNER: [Jane Doe] ISSUE DATE: [04/15/96]
ANNUITANT: [John Doe] INCOME DATE: [04/15/06]
PURCHASE PAYMENTS:
INITIAL PURCHASE PAYMENT: [$25,000]
MINIMUM SUBSEQUENT
PURCHASE PAYMENT: [$250 or $100 if you have selected AIP]
MAXIMUM TOTAL
PURCHASE PAYMENTS: [$1 million; higher amounts may be accepted
with our prior approval]
ALLOCATION GUIDELINES:
[1. Currently, you can select 10 of the Funds including the
Fixed Account, at any one time.
2. If allocations are made in percentages, whole numbers must
be used.
3. If the initial Purchase Payment and the forms required to
issue a Contract are in good order, the initial
Purchase Payment will be credited to your Contract
within two (2) business days after receipt at the
Valuemark Service Center. Additional Purchase Payments
will be credited to your Contract as of the Valuation
Period when they are received in good order.]
VARIABLE ACCOUNT: [Allianz Life Variable Account B]
ELIGIBLE INVESTMENTS:
[Franklin Valuemark Funds:]
[CAPITAL GROWTH FUND]
[GLOBAL HEALTH CARE SECURITIES FUND]
[GLOBAL UTILITIES SECURITIES FUND]
[GROWTH AND INCOME FUND]
[HIGH INCOME FUND]
[INCOME SECURITIES FUND]
[MONEY MARKET FUND]
[MUTUAL DISCOVERY SECURITIES FUND]
[MUTUAL SHARES SECURITIES FUND]
[NATURAL RESOURCES SECURITIES FUND]
[REAL ESTATE SECURITIES FUND]
[RISING DIVIDENDS FUND]
[SMALL CAP FUND]
[TEMPLETON DEVELOPING MARKETS EQUITY FUND]
[TEMPLETON GLOBAL ASSET ALLOCATION FUND]
[TEMPLETON GLOBAL INCOME SECURITIES FUND]
[TEMPLETON GLOBAL GROWTH FUND]
[TEMPLETON INTERNATIONAL EQUITY FUND]
[TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND]
[TEMPLETON PACIFIC GROWTH FUND]
[U.S. GOVERNMENT SECURITIES FUND]
[VALUE SECURITIES FUND]
[ZERO COUPON FUND 2000]
[ZERO COUPON FUND 2005]
[ZERO COUPON FUND 2010]
[Allianz Life General Account:]
[ALLIANZ LIFE FIXED ACCOUNT]
MORTALITY AND EXPENSE RISK CHARGE: During the Accumulation and Annuity Periods,
the Mortality and Expense Risk Charge is equal on an annual basis to [1.20%] of
the average daily net asset value of the Variable Account. We may decrease this
charge, but we may not increase it.
ADMINISTRATIVE CHARGE: Equal on an annual basis to [.15%] of the average daily
net asset value of the Variable Account.
DISTRIBUTION EXPENSE CHARGE: [None]
CONTRACT MAINTENANCE CHARGE: The Contract Maintenance Charge is currently
[$40.00] each Contract Year. The Contract Maintenance Charge will be deducted
from the Contract Value on each Contract Anniversary while this Contract is in
force. However, during the Accumulation Period, if your Contract Value on a
Contract Anniversary is at least [$100,000], then no Contract Maintenance Charge
is deducted. If a total surrender is made on other than a Contract Anniversary
and your Contract Value for the Valuation Period during which the total
surrender is made is less than [$100,000], the full Contract Maintenance Charge
will be deducted at the time of the total surrender. The Contract Maintenance
Charge will be deducted from the Funds [and the Fixed Account] in the same
proportion that the amount of the Contract Value in each Fund [and/or Fixed
Account] bears to the total Contract Value. During the Annuity Period, the
Contract Maintenance Charge will be collected pro rata from each Annuity
Payment. We may decrease this charge, but we may not increase it. In the event
you own more than one Contract, we will determine the total Contract Value for
all of the Contracts. If the total Contract Value is at least [$100,000], we
will not assess the Contract Maintenance Charge. If the Contract Owner is not a
natural person, we will look to the Annuitant in determining the foregoing.
TRANSFERS:
NUMBER OF FREE TRANSFERS PERMITTED: Currently, there are no limits on
the number of transfers that can be made. We reserve the right to
change this, but you will always be allowed at least 3 free transfers
in any Contract Year. Currently, you are allowed [12] free transfers
each Contract Year. This applies to transfers prior to and after the
Income Date.
TRANSFER FEE: For each transfer in excess of the Free Transfers
Permitted, the Transfer Fee is the lesser of [$25] or 2% of the amount
transferred. Transfers made at the end of the Right to Examine period
by us and any transfers made pursuant to a regularly scheduled transfer
will not be counted in determining the application of the Transfer Fee.
MINIMUM AMOUNT TO BE TRANSFERRED: [$1,000 (from any Fund or the Fixed
Account) or your entire interest in the Fund or the Fixed Account, if
less.] This requirement is waived if the transfer is pursuant to a
pre-scheduled transfer.
SURRENDERS:
CONTINGENT DEFERRED SALES CHARGE: [None]
FREE SURRENDER AMOUNT: [All withdrawals are free of Contingent
Deferred Sales Charges.
Systematic Withdrawals are available on a monthly or quarterly basis.
We reserve the right to modify the eligibility rules at any time,
without notice.
If you have a Qualified Contract, you can elect the Minimum
Distribution Program with respect to your Contract. Withdrawals will be
made on a monthly or quarterly basis. Such payments will be designed to
meet the applicable minimum distribution requirements imposed by the
Internal Revenue Code on Qualified Contracts. You cannot elect both the
Systematic Withdrawal Option and the Minimum Distribution Program in
the same Contract Year.]
MINIMUM PARTIAL SURRENDER: [$500]
MINIMUM CONTRACT VALUE WHICH MUST REMAIN IN THE CONTRACT AFTER A
PARTIAL SURRENDER: [$5,000]
FIXED ACCOUNT INITIAL RATE: [3%]
We guarantee this rate for one year from the Issue Date.
RIDERS:
[Individual Retirement Annuity Endorsement]
[Roth Individual Retirement Annuity Endorsement]
[403 (b) Endorsement]
[Enhanced Death Benefit Endorsement]
[Charter Enhanced Death Benefit Endorsement]
[Unisex Endorsement]
[Declared Interest Rate Fixed Account Endorsement]
[Group Pension Plan Death Benefit Endorsement]
[Charitable Remainder Trust Endorsement]
SERVICE OFFICE: VALUEMARK SERVICE CENTER
[300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
800-624-0197]
DEFINITIONS
ACCUMULATION UNIT: An accounting unit of measure used to calculate the Contract
Value prior to the Income Date.
ACCUMULATION PERIOD: The period prior to the Income Date during which you can
make Purchase Payments.
ADJUSTED CONTRACT VALUE: The Contract Value less any applicable Premium Tax.
This amount is applied to the applicable Annuity Table to determine the initial
Annuity Payment.
AGE: Age last birthday unless otherwise specified.
ANNUITANT: The natural person upon whose continuation of life any Annuity
Payment involving life contingencies depends. You may change the Annuitant at
any time prior to the Income Date unless the Contract Owner is a non-individual.
On or after the Income Date, any reference to Annuitant shall also include any
Joint Annuitant.
ANNUITY OPTION: An arrangement under which Annuity Payments are made under this
Contract.
ANNUITY PAYMENTS: The series of payments made to you or any named payee after
the Income Date under the Annuity Option selected.
ANNUITY PERIOD: The period of time beginning on the Income Date during which
Annuity Payments are made.
ANNUITY RESERVE: The assets which support the Annuity Option you have selected
during the Annuity Period.
ANNUITY UNIT: An accounting unit of measure used to calculate Annuity Payments
after the Income Date.
AUTHORIZED REQUEST: A request, in a form satisfactory to the Company, which is
received by the Valuemark Service Center.
BENEFICIARY: The person(s) or entity(ies) who will receive any death benefit
payable under this Contract.
COMPANY: Allianz Life Insurance Company of North America.
CONTRACT ANNIVERSARY: An anniversary of the Issue Date of this Contract.
CONTRACT OWNER: The person(s) or entity(ies) entitled to the ownership rights
stated in this Contract. If Joint Owners are named, all references to Contract
Owner shall mean the Joint Owners.
CONTRACT SURRENDER VALUE: The Contract Value less any applicable Premium Tax,
less any Contingent Deferred Sales Charge and less any applicable Contract
Maintenance Charge.
CONTRACT VALUE: The dollar value as of any Valuation Date of all amounts
accumulated under this Contract.
CONTRACT YEAR: Any period of twelve (12) months commencing with the Issue Date
and each Contract Anniversary thereafter.
ELIGIBLE INVESTMENT(S): Those investments available under the Contract. Current
Eligible Investments are shown on the Contract Schedule.
FUND: A segment of an Eligible Investment which constitutes a separate and
distinct class of interests under an Eligible Investment.
GENERAL ACCOUNT: Our general investment account which contains all the assets of
the Company with the exception of the Variable Account and other segregated
asset accounts.
INCOME DATE: The date on which Annuity Payments are to begin.
ISSUE DATE: The date shown on the Contract Schedule on which the first Contract
Year begins.
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 us. Any Joint Owner must be the spouse of the other Contract Owner.
PREMIUM TAX: Any premium taxes owed to any governmental entity and assessed
against Purchase Payments or Contract Value.
PURCHASE PAYMENT: A payment made toward this Contract.
SUB-ACCOUNT: Variable Account assets are divided into Sub-Accounts. Assets of
each Sub-Account will be invested in shares of an Eligible Investment or Fund.
In this Contract, "Fund" may also refer to the Sub-Accounts from which the Fund
investment is made.
VALUATION DATE: The Variable Account will be valued each day that the New York
Stock Exchange is open for trading.
VALUATION PERIOD: The period commencing 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.
VALUEMARK SERVICE CENTER: The office indicated on the Contract Schedule of this
Contract to which notices, requests and Purchase Payments must be sent. All sums
payable to us under the Contract are payable only at the Valuemark Service
Center.
VARIABLE ACCOUNT: A separate account maintained by us in which a portion of our
assets has been allocated for this and certain other contracts. It has been
designated on the Contract Schedule.
PURCHASE PAYMENTS
PURCHASE PAYMENTS: Purchase Payments are payable according to the frequency and
in the amount selected by you. The initial Purchase Payment is due on the Issue
Date. We reserve the right to decline any Purchase Payment. The Minimum
Subsequent Purchase Payment and the Maximum Total Purchase Payments allowed are
shown on the Contract Schedule.
CHANGE IN PURCHASE PAYMENTS: You may elect to increase or decrease or to change
the frequency of Purchase Payments.
NO DEFAULT: Unless surrendered, this Contract remains in force and will not be
in default if no additional Purchase Payments are made.
ALLOCATION OF PURCHASE PAYMENTS: Purchase Payments are allocated to one or more
of the Funds of the Variable Account in accordance with your selection. The
allocation of the initial Purchase Payment is made in accordance with your
selection made at the Issue Date. Unless you inform us otherwise, subsequent
Purchase Payments are allocated in the same manner as the initial Purchase
Payment. However, the Company has reserved the right to allocate the initial
Purchase Payment to the Money Market Fund until the expiration of the Right to
Examine period. All allocations of Purchase Payments are subject to the
Allocation Guidelines shown on the Contract Schedule. We guarantee that you will
be allowed to select at least five Funds for allocation of Purchase Payments.
VARIABLE ACCOUNT
THE VARIABLE ACCOUNT: The Variable Account is designated on the Contract
Schedule. It consists of assets we have set aside and have kept separate from
the rest of our assets and those of our other separate accounts. The assets of
the Variable Account, equal to reserves and other liabilities of your Contract
and those of other Contract Owners, will not be charged with liabilities arising
out of any other business we may conduct.
The Variable Account assets are divided into Funds. The Funds which are
available under this Contract are listed on the Contract Schedule. The assets of
the Fund are allocated to the Eligible Investments (and/or the Funds, if any,
within an Eligible Investment) shown on the Contract Schedule. We may add
additional Eligible Investments or Funds to those shown. You may be permitted to
transfer your Contract Value or allocate Purchase Payments to the additional
Fund(s). However, the right to make such transfers or allocations will be
limited by any terms and conditions we may impose.
Should the shares of any Eligible Investment(s), or any Fund(s) within an
Eligible Investment, become unavailable for investment by the Variable Account,
or our Board of Directors deems further investment in the shares inappropriate,
we may limit further purchase of such shares or substitute shares of another
Eligible Investment or Fund for shares already purchased.
VALUATION OF ASSETS: Assets of Eligible Investments within each Fund will be
valued at their net asset value on each Valuation Date.
ACCUMULATION UNITS: Accumulation Units shall be used to account for all amounts
allocated to or withdrawn from the Funds of the Variable Account as a result of
Purchase Payments, surrenders, transfers, or fees and charges. We will determine
the number of Accumulation Units of a Sub-Account purchased or canceled. This
will be done by dividing the amount allocated to (or the amount withdrawn from)
the Sub-Account by the dollar value of one Accumulation Unit of the Sub-Account
as of the end of the Valuation Period during which the transaction is processed
at the Valuemark Service Center.
ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Fund was
arbitrarily set initially at $10. Subsequent Accumulation Unit Values for each
Fund are determined by multiplying the Accumulation Unit Value for the
immediately preceding Valuation Period by the Net Investment Factor for the Fund
for the current period.
The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period.
NET INVESTMENT FACTOR: The Net Investment Factor for each Fund is determined by
dividing A by B and multiplying by (1 - C) where:
A is (i) the net asset value per share of the Eligible Investment or
the Fund of an Eligible Investment held by the Fund at the end
of the current Valuation Period; plus
(ii) any dividend or capital gains per share declared on behalf of
such Eligible Investment or Fund that has an ex-dividend date
within the current Valuation Period.
B is the net asset value per share of the Eligible Investment or Fund
held by the Fund for the immediately preceding Valuation Period.
C is (i) the Valuation Period equivalent of the daily Mortality and
Expense Risk Charge, for the Administrative Charge and for the
Distribution Expense Charge, if any, which are shown on the
Contract Schedule; plus
(ii) a charge factor, if any, for any taxes or any tax reserve
we have established as a result of the operation or maintenance of
the Fund.
MORTALITY AND EXPENSE RISK CHARGE: Each Valuation Period, we deduct a Mortality
and Expense Risk Charge from the Variable Account which is equal, on an annual
basis, to the amount shown on the Contract Schedule. The Mortality and Expense
Risk Charge compensates us for assuming the mortality and expense risks under
this Contract.
ADMINISTRATIVE CHARGE: Each Valuation Period, we deduct an Administrative Charge
from the Variable Account which is equal, on an annual basis, to the amount
shown on the Contract Schedule. The Administrative Charge compensates us for the
costs associated with the administration of this Contract and the Variable
Account.
DISTRIBUTION EXPENSE CHARGE: Each Valuation Period, we deduct a Distribution
Expense Charge from the Separate Account which is equal, on an annual basis, to
the amount shown on the Contract Schedule. The Distribution Expense Charge
compensates the Company for costs associated with the distribution of Contracts.
MORTALITY AND EXPENSE GUARANTEE: We guarantee that the dollar amount of each
annuity payment after the first will not be affected by variations in mortality
or expense experience.
CONTRACT VALUE
The Contract Value for any Valuation Period is equal to the total dollar value
accumulated under this Contract. The Contract Value in a Fund of the Variable
Account is determined by multiplying the number of Accumulation Units allocated
to the Contract Value for the Fund by the Accumulation Unit Value. Purchase
Payments, surrenders and transfers from or to a Fund will result in the addition
of or the cancellation of Accumulation Units in a Fund.
CONTRACT MAINTENANCE CHARGE
We deduct an annual Contract Maintenance Charge shown on the Contract Schedule.
Prior to the Income Date, this will be deducted from the Contract Value by
canceling Accumulation Units to reimburse us for expenses relating to
maintenance of this Contract. The number of Accumulation Units to be canceled
will be from each applicable Fund is the ratio that the value of each Fund bears
to the total Contract Value.
TRANSFERS
You may transfer all or a part of your interest in a Fund to another Fund. We
reserve the right to charge for transfers if there are more than the number of
free transfers shown on the Contract Schedule. All transfers are subject to the
following:
1. The deduction of any Transfer Fee that may be imposed as shown on the
Contract Schedule. The Transfer Fee will be deducted from the Fund from
which the transfer is made. If the entire amount in the Fund is
transferred, then the Transfer Fee will be deducted from the amount
transferred. If there are multiple source Funds, it will be treated as a
single transfer. Any Transfer Fee will be deducted proportionally from the
source Funds if less than the entire amount in the Fund is transferred.
2. We reserve the right to limit transfers until the expiration of the Right
to Examine period.
3. The minimum amount which can be transferred is shown on the Contract
Schedule.
4. No transfer will be effective within seven calendar days prior to the date
on which the first Annuity Payment is due.
5. Any transfer direction must clearly specify:
a. the amount which is to be transferred; and
b. the Funds which are to be affected.
6. After the Income Date, transfers may not be made from a fixed annuity
option to a variable annuity option.
7. After the Income Date, you can make at least one transfer from a variable
annuity option to a fixed annuity option. The number of Annuity Units
canceled from the variable annuity option will be equal in value to the
amount of the Annuity Reserve transferred out of the Variable Account. The
amount transferred will purchase fixed annuity payments under the Annuity
Option in effect and based on the age and sex of the Annuitant at the time
of the transfer where allowed.
8. We reserve the right to establish policies that limit or discourage
excessive trading that may be disruptive to the Fund, which may result in
limitations being placed on the Contract Owner's right to make transfers.
9. We reserve the right at any time and without prior notice to any party to
modify the transfer provisions described above. However, if we do modify
these provisions we guarantee that they will not be any more restrictive
than the above.
If you elect to use this transfer privilege, we will not be liable for transfers
made in accordance with your instructions. All amounts and Accumulation Units
will be determined as of the end of the Valuation Period during which the
request for transfer is received at the Valuemark Service Center.
SURRENDER PROVISIONS
SURRENDERS: During the Accumulation Period, you may, upon Authorized Request,
make a total or partial surrender of the Contract Surrender Value. Surrenders
will result in the cancellation of Accumulation Units from each Fund in the
ratio that the value of each Fund bears to the total Contract Value. You must
specify, by Authorized Request, which Accumulation Units are to be canceled if
other than the above mentioned method of cancellation is desired.
The Company will pay the amount of any surrender from the Variable Account
within seven (7) days of receipt of a request in good order unless the
Suspension or Deferral of Payments Provision is in effect.
Each partial surrender must be for an amount which is not less than the amount
shown on the Contract Schedule. The minimum Contract Value which must remain in
the Contract after a partial surrender is shown on the Contract Schedule.
CONTINGENT DEFERRED SALES CHARGE: Upon a surrender of Contract Value a
Contingent Deferred Sales Charge as set forth on the Contract Schedule be
assessed. Under certain circumstances, we allow surrenders without the
Contingent Deferred Sales Charge as set forth on the Contract Schedule.
PROCEEDS PAYABLE ON DEATH
DEATH OF CONTRACT OWNER DURING THE ACCUMULATION PERIOD: Upon the death of the
Contract Owner, or any Joint Owner, during the Accumulation Period, the death
benefit will be paid to the Beneficiary(ies) designated by the Contract Owner.
Upon the death of a Joint Owner, the surviving Joint Owner, if any, will be
treated as the primary Beneficiary. Any other Beneficiary designation on record
at the time of death will be treated as a contingent Beneficiary.
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD: The death benefit will be
the Adjusted Contract Value determined as of the end of the Valuation Period
during which the Company receives both due proof of death and an election for
the payment method.
DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD: Beneficiary may request
that the death benefit be paid under one of the Death Benefit Options below. In
addition, if the Beneficiary is the spouse of the Contract Owner, he or she may
elect to continue the Contract in his or her own name and exercise all the
Contract Owner's rights under the Contract. In this event, the Contract Value
for the Valuation Period during which this election is implemented will be
adjusted to equal the death benefit.
Option A - lump sum payment of the death benefit; or
Option B - the payment of the entire death benefit within 5 years of the
date of the death of the Contract Owner or any Joint Owner; or
Option C - payment of the death benefit under an Annuity Option over the
lifetime of the Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary with distribution beginning within one year
of the date of death of the Contract Owner or any Joint Owner.
Any portion of the death benefit not applied under Option C within one year of
the date of the Contract Owners' death, must be distributed within five years of
the date of death.
If a lump sum payment is requested, the amount will be paid within seven (7)
days of receipt of proof of death and the election, unless the Suspension or
Deferral of Payments Provision is in effect.
Payment to the Beneficiary, other than in a lump sum, may only be elected during
the sixty-day period beginning with the date of receipt of proof of death.
DEATH OF CONTRACT OWNER DURING THE ANNUITY PERIOD: If you, or any Joint Owner,
dies during the Annuity Period, and you are not an Annuitant, any remaining
payments under the Annuity Option elected will continue at least as rapidly as
under the method of distribution in effect at such Contract Owner's death. Upon
your death during the Annuity Period, the Beneficiary becomes the Contract
Owner.
DEATH OF ANNUITANT: Upon the death of an Annuitant, who is not the Contract
Owner, during the Accumulation Period, you may designate a new Annuitant,
subject to our underwriting rules then in effect. If no designation is made
within 30 days of the death of the Annuitant, you will become the Annuitant. If
the Contract Owner is a non-individual, the death of the Annuitant will be
treated as the death of the Contract Owner and a new Annuitant may not be
designated.
Upon the death of the Annuitant during the Annuity Period, the death benefit, if
any, will be as specified in the Annuity Option elected. Death benefits will be
paid at least as rapidly as under the method of distribution in effect at the
Annuitant's death.
PAYMENT OF DEATH BENEFIT: The Company will require due proof of death before any
death benefit is paid. Due proof of death will be:
1. a certified death certificate; or
2. a certified decree of a court of competent jurisdiction as to the
finding of death; or
3. any other proof satisfactory to the Company.
All death benefits will be paid in accordance with applicable law or regulations
governing death benefit payments.
BENEFICIARY: The Beneficiary designation in effect on the Issue Date will remain
in effect until changed. The Beneficiary is entitled to receive the benefits to
be paid at your death.
Unless you provide otherwise, the death benefit will be paid in equal shares to
the survivor(s) as follows:
1. to the primary Beneficiary(ies) who survive you and/or the Annuitant's
death, as applicable; or if there are none
2. to the contingent Beneficiary(ies) who survive you and/or the
Annuitant's death, as applicable; or if there are none
3. to your estate.
CHANGE OF BENEFICIARY: Subject to the rights of any irrevocable
Beneficiary(ies),you may change the primary Beneficiary(ies) or contingent
Beneficiary(ies). A change may be made by Authorized Request. The change will
take effect as of the date the Authorized Request is signed. The Company will
not be liable for any payment made or action taken before it records the change.
SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION
The Company reserves the right to suspend or postpone payments from the Variable
Account for a surrender or transfer 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;
provided that applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (2) and (3)
exist.
CONTRACT OWNER, ANNUITANT, ASSIGNMENT PROVISIONS
CONTRACT OWNER: As the Contract Owner you have all the interest and rights under
this Contract. The Contract Owner is the person designated as such on the Issue
Date, unless changed.
You may change Owners of the Contract at any time by Authorized Request. A
change of Contract Owner will automatically revoke any prior designation of
Contract Owner. The change will become effective as of the date the Authorized
Request is signed. We will not be liable for any payment made or action taken
before the change is recorded.
JOINT OWNER: A Contract may be owned by Joint Owners. If Joint Owners are named,
any Joint Owner must be the spouse of the other Contract Owner. Upon the death
of either Contract Owner, the surviving spouse will be the primary Beneficiary.
Any other Beneficiary designation will be treated as a contingent Beneficiary
unless otherwise indicated in an Authorized Request.
ANNUITANT: The Annuitant is the person on whose life Annuity Payments are based.
The Annuitant is the person designated by you subject to our underwriting rules
then in effect. The Annuitant may not be changed in a Contract which is owned by
a non-individual.
ASSIGNMENT OF A CONTRACT: An Authorized Request specifying the terms of an
assignment of a Contract must be provided to the Valuemark Service Center. We
will not be liable for any payment made or action taken before we record the
assignment.
We will not be responsible for the validity or tax consequences of any
assignment. Any assignment made after the death benefit has become payable will
be valid only with our consent.
If the Contract is assigned, your rights may only be exercised with the consent
of the assignee of record.
ANNUITY PROVISIONS
GENERAL: On the Income Date, the Adjusted Contract Value will be applied under
the Annuity Option you have selected. You may elect to have the Adjusted
Contract Value applied to provide a Fixed Annuity, a Variable Annuity or a
combination Fixed and Variable Annuity. If a combination is elected, you must
specify what part of the Adjusted Contract Value is to be applied to the Fixed
and Variable Annuity Options.
INCOME DATE: You select an Income Date at the time of issue. The Income Date
must always be the first day of a calendar month. The earliest Income Date you
can select is two years after the Issue Date. The latest Income Date you can
select is the later of the first day of the first calendar month following the
Annuitant's 85th birthday or 10 years from the Issue Date, or the maximum date
permitted under state law. You may, at any time prior to the Income Date, change
the Income Date by Authorized Request 30 days in advance.
SELECTION OF AN OF AN ANNUITY OPTION: You can select an Annuity Option by
Authorized Request. If no Annuity Option is selected, Option 2, with 120 Monthly
Payments Guaranteed, will automatically be applied. You may, at any time prior
to the Income Date, by Authorized Request 30 days in advance, select and/or
change the Annuity Option.
ANNUITY OPTIONS: This Contract provides for Annuity Payments under one of the
Annuity Options described below. Any other Annuity Option acceptable to us may
be selected.
OPTION 1 - LIFE ANNUITY. We will make monthly Annuity Payments during the life
of the Annuitant and ceasing with the last Annuity Payment due prior to the
Annuitant's death.
OPTION 2 - LIFE ANNUITY WITH 60, 120, 180 OR 240 MONTHLY ANNUITY PAYMENTS
GUARANTEED. We will make monthly Annuity Payments during the life of the
Annuitant with a guarantee that if at the Annuitant's death there have been less
than 60, 120, 180 or 240 monthly Annuity Payments made as selected, monthly
Annuity Payments will continue for the remainder of the guaranteed period. You
may elect to have the present value of the guaranteed monthly Annuity Payments
remaining, as of the date notice of the Annuitant's death is received at the
Valuemark Service Center, commuted at the Assumed Investment Return selected for
a Variable Annuity or for a Fixed Annuity the Statutory Calendar Year Interest
Rate based on the NAIC Standard Valuation Law for Single Premium Immediate
Annuities corresponding to the Income Date. We will require the return of this
Contract and proof of death prior to the payment of any commuted values.
OPTION 3 - JOINT AND LAST SURVIVOR ANNUITY. We will make monthly Annuity
Payments during the joint lifetime of the Annuitant and the Joint Annuitant.
Upon the death of the Annuitant, if the Joint Annuitant is then living, Annuity
Payments will continue to be paid during the remaining lifetime of the Joint
Annuitant at a level of 100%, 75% or 50% of the previous level, selected.
Monthly Annuity Payments cease with the final Annuity Payment due prior to the
last survivor's death.
OPTION 4 - JOINT AND LAST SURVIVOR ANNUITY WITH 120 OR 240 MONTHLY ANNUITY
PAYMENTS GUARANTEED. We will make monthly Annuity Payments during the joint
lifetime of the Annuitant and the Joint Annuitant. Monthly Annuity Payments will
continue to be paid during the remaining lifetime of the Joint Annuitant at 100%
of the previous level, as selected. If at the last death of the Annuitant and
the Joint Annuitant, there have been less than 120 or 240 monthly Annuity
Payments made as selected, monthly Annuity Payments will continue to be made for
the remainder of the guaranteed period. You or your designated payee may elect
to have the present value of the guaranteed monthly Annuity Payments remaining,
as of the date notice of the Annuitant's death is received by us, commuted at
the Assumed Investment Return selected for a Variable Annuity or for a Fixed
Annuity the Statutory Calendar Year Interest Rate based on the NAIC Standard
Valuation Law for Single Premium Immediate Annuities corresponding to the Income
Date. We will require the return of this Contract and proof of death prior to
the payment of any commuted values.
OPTION 5 - REFUND LIFE ANNUITY. We will make monthly Annuity Payments during the
lifetime 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, you will
receive a refund. For a Fixed Annuity the amount of the refund will be any
excess of the amount of the Adjusted Contract Value applied under this Option
over the total of all Annuity Payments made under this Option. For a Variable
Annuity the amount of the refund will be the then dollar value of the number of
Annuity Units equal to (1) the Adjusted Contract Value applied to this Option
divided by the Annuity Unit value used to determine the first Annuity Payment,
minus (2) the product of the number of the Annuity Units represented by each
monthly Annuity Payment and the number of payments made. This calculation will
be based upon the assumption 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. If the refund calculated above is
not greater than zero there will be no refund paid.
ANNUITY: If you select a Fixed Annuity, the Adjusted Contract Value is allocated
to the General Account and the Annuity is paid as a Fixed Annuity. If you select
a Variable Annuity, the Adjusted Contract Value will be allocated to the Funds
of the Variable Account in accordance with your selection, and the Annuity will
be paid as a Variable Annuity. Unless you designate another payee, you will be
the payee of the Annuity Payments. The Adjusted Contract Value will be applied
to the applicable Annuity Table contained in this Contract based upon the
Annuity Option you have selected. We may offer more favorable rates than those
guaranteed here at the time your first annuity payment is calculated. Where
permitted, Annuity Payments will depend on the Age and sex of the Annuitant.
FIXED ANNUITY: You may elect to have the Adjusted Contract Value applied to
provide a Fixed Annuity. The dollar amount of each Fixed Annuity Payment shall
be determined in accordance with Annuity Tables contained in this Contract which
are based on the minimum guaranteed interest rate of 2 1/2% per year.
<TABLE>
<CAPTION>
Guaranteed Monthly Payment Per $1,000 of Proceeds
Fixed Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Opt 2 Opt 2 Opt 2 Opt 2 Opt 2 Opt 2 Opt 2 Opt 2
5 Yr 5 Yr 10 Yr 10 Yr 15 Yr 15 Yr 20 Yr 20 Yr
Opt 1 Opt 1 Minim Minim Minim Minim Minim Minim Minim Minim Opt 5 Opt 5
Age* M F M F M F M F M F M F
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
30 2.84 2.71 2.84 2.71 2.84 2.71 2.84 2.71 2.83 2.71 2.82 2.71
31 2.87 2.74 2.87 2.73 2.87 2.73 2.84 2.73 2.86 2.73 2.84 2.73
32 2.90 2.76 2.90 2.76 2.89 2.76 2.86 2.75 2.88 2.75 2.87 2.75
33 2.92 2.78 2.92 2.78 2.92 2.78 2.89 2.78 2.91 2.77 2.89 2.77
34 2.95 2.80 2.95 2.80 2.95 2.80 2.92 2.80 2.94 2.80 2.92 2.79
35 2.98 2.83 2.98 2.83 2.98 2.83 2.95 2.82 2.97 2.82 2.95 2.81
36 3.02 2.85 3.02 2.85 3.01 2.85 2.98 2.85 3.00 2.85 2.98 2.84
37 3.05 2.88 3.05 2.88 3.05 2.88 3.01 2.88 3.03 2.87 3.01 2.86
38 3.09 2.91 3.09 2.91 3.08 2.91 3.04 2.91 3.06 2.90 3.04 2.89
39 3.12 2.94 3.12 2.94 3.12 2.94 3.08 2.93 3.10 2.93 3.07 2.92
40 3.16 2.97 3.16 2.97 3.16 2.97 3.11 2.96 3.13 2.96 3.10 2.95
41 3.20 3.00 3.20 3.00 3.20 3.00 3.15 3.00 3.17 2.99 3.14 2.97
42 3.25 3.04 3.24 3.04 3.24 3.03 3.19 3.03 3.21 3.02 3.17 3.01
43 3.29 3.07 3.29 3.07 3.28 3.07 3.23 3.06 3.25 3.06 3.21 3.04
44 3.34 3.11 3.33 3.11 3.33 3.10 3.27 3.10 3.29 3.09 3.25 3.07
45 3.39 3.15 3.38 3.15 3.37 3.14 3.31 3.14 3.33 3.13 3.29 3.10
46 3.44 3.19 3.43 3.19 3.42 3.18 3.36 3.18 3.38 3.16 3.33 3.14
47 3.49 3.23 3.49 3.23 3.48 3.22 3.41 3.22 3.42 3.20 3.38 3.18
48 3.55 3.27 3.54 3.27 3.53 3.27 3.45 3.26 3.47 3.24 3.42 3.22
49 3.60 3.32 3.60 3.32 3.58 3.31 3.51 3.30 3.52 3.29 3.47 3.26
50 3.66 3.37 3.66 3.37 3.64 3.36 3.56 3.35 3.57 3.33 3.52 3.30
51 3.73 3.42 3.72 3.42 3.71 3.41 3.62 3.40 3.62 3.38 3.57 3.34
52 3.80 3.47 3.79 3.47 3.77 3.46 3.67 3.45 3.68 3.42 3.62 3.39
53 3.87 3.53 3.86 3.53 3.84 3.52 3.73 3.50 3.74 3.48 3.68 3.44
54 3.94 3.59 3.93 3.59 3.91 3.58 3.80 3.56 3.79 3.53 3.74 3.49
55 4.02 3.65 4.01 3.65 3.98 3.64 3.86 3.62 3.85 3.58 3.80 3.54
56 4.10 3.72 4.09 3.71 4.06 3.70 3.93 3.68 3.91 3.64 3.86 3.60
57 4.19 3.79 4.18 3.78 4.14 3.77 4.00 3.74 3.98 3.70 3.93 3.65
58 4.28 3.86 4.27 3.86 4.23 3.84 4.16 3.81 4.04 3.76 4.00 3.71
59 4.38 3.94 4.37 3.93 4.32 3.91 4.24 3.88 4.11 3.82 4.07 3.78
60 4.49 4.02 4.47 4.02 4.42 3.99 4.32 3.95 4.17 3.88 4.14 3.84
61 4.60 4.11 4.58 4.10 4.52 4.08 4.41 4.03 4.24 3.95 4.23 3.91
62 4.72 4.20 4.69 4.19 4.63 4.16 4.50 4.11 4.31 4.02 4.31 3.99
63 4.84 4.30 4.82 4.29 4.74 4.26 4.59 4.19 4.38 4.09 4.39 4.06
64 4.98 4.41 4.95 4.39 4.86 4.36 4.69 4.28 4.44 4.16 4.49 4.14
65 5.12 4.52 5.09 4.50 4.98 4.46 4.79 4.37 4.51 4.23 4.58 4.23
66 5.28 4.64 5.24 4.62 5.11 4.57 4.89 4.47 4.58 4.31 4.68 4.31
67 5.44 4.76 5.39 4.75 5.24 4.69 4.99 4.57 4.64 4.38 4.78 4.41
68 5.61 4.90 5.56 4.88 5.38 4.81 5.09 4.67 4.70 4.45 4.89 4.50
69 5.80 5.04 5.73 5.02 5.53 4.94 5.19 4.78 4.76 4.53 5.01 4.60
70 6.00 5.20 5.92 5.17 5.68 5.07 5.30 4.88 4.82 4.60 5.13 4.72
71 6.21 5.37 6.12 5.34 5.84 5.22 5.40 4.99 4.88 4.67 5.25 4.83
72 6.43 5.55 6.32 5.51 6.00 5.37 5.50 5.11 4.93 4.74 5.38 4.95
73 6.66 5.75 6.54 5.70 6.16 5.53 5.60 5.22 4.97 4.80 5.51 5.07
74 6.91 5.96 6.77 5.90 6.33 5.69 5.70 5.34 5.02 4.86 5.66 5.20
75 7.18 6.18 7.01 6.11 6.50 5.87 5.79 5.45 5.06 4.92 5.82 5.35
76 7.49 6.43 7.28 6.34 6.69 6.05 5.89 5.56 5.09 4.97 5.97 5.49
77 7.80 6.69 7.55 6.58 6.86 6.23 5.97 5.67 5.12 5.01 6.14 5.65
78 8.13 6.97 7.83 6.84 7.04 6.42 6.05 5.78 5.15 5.06 6.31 5.81
79 8.49 7.27 8.13 7.11 7.22 6.61 6.13 5.88 5.17 5.09 6.50 5.97
80 8.87 7.60 8.44 7.40 7.39 6.81 6.20 5.97 5.20 5.13 6.69 6.15
81 9.27 7.95 8.77 7.71 7.57 7.01 6.26 6.06 5.21 5.15 6.89 6.34
82 9.70 8.33 9.10 8.03 7.73 7.21 6.32 6.14 5.23 5.18 7.10 6.53
83 10.16 8.74 9.45 8.38 7.90 7.40 6.37 6.21 5.24 5.20 7.32 6.74
84 10.65 9.18 9.81 8.74 8.05 7.59 6.42 6.28 5.25 5.22 7.55 6.95
85 11.18 9.66 10.19 9.12 8.20 7.77 6.46 6.34 5.26 5.23 7.80 7.17
<FN>
*Age equals age of annuitant nearest birthday when first payment is made
</FN>
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Monthly Payment per $1,000 of Proceeds
Fixed Payout
Option 3
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 2.61 2.70 2.77 2.81 2.83 2.84
40 2.66 2.82 2.96 3.06 3.12 3.15
50 2.69 2.89 3.14 3.36 3.52 3.61
60 2.70 2.94 3.26 3.65 4.03 4.30
70 2.71 2.96 3.32 3.86 4.56 5.27
80 2.71 2.97 3.35 3.96 4.94 6.32
</TABLE>
<TABLE>
<CAPTION>
Option 4
5 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 2.61 2.70 2.77 2.81 2.83 2.84
40 2.66 2.82 2.96 3.06 3.12 3.15
50 2.69 2.89 3.14 3.36 3.52 3.61
60 2.70 2.94 3.26 3.65 4.03 4.30
70 2.71 2.96 3.32 3.86 4.56 5.26
80 2.71 2.97 3.35 3.96 4.93 6.30
</TABLE>
<TABLE>
<CAPTION>
Option 4
10 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 2.61 2.70 2.77 2.81 2.83 2.84
40 2.66 2.82 2.96 3.06 3.12 3.14
50 2.69 2.89 3.14 3.36 3.52 3.60
60 2.70 2.94 3.26 3.65 4.03 4.29
70 2.71 2.96 3.32 3.86 4.55 5.22
80 2.71 2.96 3.35 3.95 4.90 6.13
</TABLE>
<TABLE>
<CAPTION>
Option 4
15 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 2.61 2.70 2.77 2.81 2.83 2.84
40 2.66 2.82 2.96 3.06 3.12 3.14
50 2.69 2.89 3.13 3.36 3.52 3.59
60 2.70 2.94 3.26 3.65 4.01 4.24
70 2.71 2.96 3.32 3.84 4.50 5.05
80 2.71 2.96 3.34 3.93 4.79 5.70
</TABLE>
<TABLE>
<CAPTION>
Option 4
20 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 2.61 2.70 2.77 2.81 2.83 2.83
40 2.66 2.82 2.96 3.06 3.11 3.13
50 2.69 2.89 3.13 3.35 3.50 3.56
60 2.70 2.94 3.25 3.63 3.97 4.14
70 2.71 2.95 3.31 3.81 4.38 4.74
80 2.71 2.96 3.33 3.87 4.57 5.06
</TABLE>
VARIABLE ANNUITY: You may elect to have the Adjusted Contract Value applied to
provide a Variable Annuity. Variable Annuity Payments reflect the investment
performance of the Variable Account in accordance with the allocation of the
Adjusted Contract Value to the Funds during the Annuity Period. Variable Annuity
Payments are not guaranteed as to dollar amount.
On the Income Date a fixed number of Annuity Units will be purchased as follows:
The first Annuity Payment is equal to the Adjusted Contract Value, divided first
by $1000 and then multiplied by the appropriate Annuity Payment amount for each
$1000 of value for the Annuity Option selected. In each Fund the fixed number of
Annuity Units is determined by dividing the amount of the initial Annuity
Payment determined for each Fund by the Annuity Unit value on the Income Date.
Thereafter, the number of Annuity Units in each Fund remains unchanged unless
you elect to transfer between Funds. All calculations will appropriately reflect
the Annuity Payment frequency selected.
On each subsequent Annuity Payment date, the total Annuity Payment is the sum of
the Annuity Payments for each Fund. The Annuity Payment in each Fund is
determined by multiplying the number of Annuity Units then allocated to such
Fund by the Annuity Unit value for that Fund.
On each subsequent Valuation Date, the value of an Annuity Unit is determined in
the following way:
First: The Net Investment Factor is determined as described under "Variable
Account - Net Investment Factor" above.
Second: The value of an Annuity Unit for a Valuation Period is equal to:
a. the value of the Annuity Unit for the immediately preceding Valuation
Period;
b. multiplied by the Net Investment Factor for the current Valuation
Period;
c. divided by the Assumed Net Investment Factor (see below) for the
Valuation Period.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular Valuation Period. The Assumed Investment
Return that we will use is 5%. However, we may agree with you to use a different
value.
<TABLE>
<CAPTION>
Guaranteed Initial Monthly Payment Per $1,000 of Proceeds
Variable Payouts Based on 5% AIR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Opt 2 Opt 2 Opt 2 Opt 2 Opt 2 Opt 2 Opt 2 Opt 2
5 Yr 5 Yr 10 Yr 10 Yr 15 Yr 15 Yr 20 Yr 20 Yr
Opt 1 Opt 1 Minim Minim Minim Minim Minim Minim Minim Minim Opt 5 Opt 5
Age* M F M F M F M F M F M F
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
30 4.46 4.36 4.46 4.36 4.46 4.35 4.45 4.35 4.44 4.35 4.46 4.36
31 4.48 4.37 4.48 4.37 4.48 4.37 4.47 4.37 4.46 4.36 4.48 4.38
32 4.50 4.39 4.50 4.39 4.50 4.38 4.49 4.38 4.48 4.38 4.50 4.39
33 4.52 4.40 4.52 4.40 4.52 4.40 4.51 4.40 4.50 4.39 4.52 4.41
34 4.55 4.42 4.55 4.42 4.54 4.42 4.53 4.41 4.52 4.41 4.54 4.43
35 4.57 4.44 4.57 4.44 4.57 4.44 4.56 4.43 4.55 4.43 4.57 4.44
36 4.60 4.46 4.60 4.46 4.59 4.45 4.58 4.45 4.57 4.45 4.59 4.46
37 4.63 4.48 4.63 4.48 4.62 4.48 4.61 4.47 4.60 4.46 4.62 4.48
38 4.66 4.50 4.66 4.50 4.65 4.50 4.64 4.49 4.62 4.49 4.64 4.50
39 4.69 4.52 4.69 4.52 4.68 4.52 4.67 4.51 4.65 4.51 4.67 4.52
40 4.72 4.55 4.72 4.55 4.71 4.54 4.70 4.54 4.68 4.53 4.70 4.55
41 4.76 4.57 4.75 4.57 4.75 4.57 4.73 4.56 4.71 4.55 4.73 4.57
42 4.79 4.60 4.79 4.60 4.78 4.60 4.76 4.59 4.74 4.58 4.76 4.60
43 4.83 4.63 4.83 4.63 4.82 4.62 4.80 4.62 4.77 4.60 4.80 4.62
44 4.88 4.66 4.87 4.66 4.86 4.65 4.84 4.64 4.80 4.63 4.83 4.65
45 4.92 4.69 4.91 4.69 4.90 4.69 4.87 4.68 4.84 4.66 4.87 4.68
46 4.97 4.73 4.96 4.73 4.94 4.72 4.91 4.71 4.88 4.69 4.91 4.71
47 5.01 4.76 5.01 4.76 4.99 4.75 4.96 4.74 4.92 4.72 4.95 4.75
48 5.06 4.80 5.06 4.80 5.04 4.79 5.00 4.78 4.96 4.76 4.99 4.78
49 5.12 4.84 5.11 4.84 5.09 4.83 5.05 4.81 5.00 4.79 5.04 4.82
50 5.17 4.88 5.16 4.88 5.14 4.87 5.10 4.85 5.04 4.83 5.08 4.85
51 5.23 4.93 5.22 4.93 5.19 4.91 5.15 4.89 5.09 4.87 5.13 4.89
52 5.30 4.98 5.28 4.97 5.25 4.96 5.20 4.94 5.13 4.91 5.19 4.94
53 5.36 5.03 5.35 5.02 5.31 5.01 5.26 4.98 5.18 4.95 5.24 4.98
54 5.43 5.08 5.42 5.08 5.38 5.06 5.32 5.03 5.23 4.99 5.30 5.03
55 5.51 5.14 5.49 5.13 5.45 5.11 5.38 5.08 5.28 5.04 5.37 5.08
56 5.58 5.20 5.57 5.19 5.52 5.17 5.44 5.14 5.33 5.09 5.43 5.13
57 5.67 5.26 5.65 5.26 5.60 5.23 5.51 5.19 5.39 5.14 5.50 5.19
58 5.76 5.33 5.74 5.32 5.68 5.30 5.58 5.25 5.44 5.19 5.57 5.25
59 5.85 5.41 5.83 5.40 5.76 5.37 5.65 5.32 5.50 5.24 5.65 5.31
60 5.95 5.48 5.93 5.47 5.85 5.44 5.73 5.38 5.56 5.30 5.73 5.38
61 6.06 5.57 6.03 5.55 5.95 5.52 5.81 5.45 5.62 5.36 5.81 5.45
62 6.18 5.65 6.15 5.64 6.05 5.60 5.89 5.52 5.67 5.42 5.90 5.52
63 6.30 5.75 6.27 5.73 6.16 5.68 5.97 5.60 5.73 5.48 6.00 5.60
64 6.44 5.85 6.40 5.83 6.27 5.78 6.06 5.68 5.79 5.54 6.10 5.69
65 6.58 5.96 6.53 5.94 6.38 5.87 6.15 5.76 5.85 5.60 6.20 5.77
66 6.74 6.07 6.68 6.05 6.51 5.98 6.24 5.85 5.91 5.67 6.31 5.87
67 6.90 6.20 6.83 6.17 6.63 6.09 6.33 5.94 5.96 5.73 6.43 5.97
68 7.08 6.33 7.00 6.30 6.77 6.20 6.42 6.03 6.02 5.80 6.55 6.07
69 7.27 6.47 7.17 6.44 6.91 6.32 6.52 6.13 6.07 5.86 6.67 6.18
70 7.46 6.63 7.35 6.59 7.05 6.45 6.61 6.23 6.12 5.92 6.81 6.30
71 7.68 6.80 7.55 6.75 7.20 6.59 6.70 6.33 6.17 5.98 6.95 6.43
72 7.90 6.98 7.75 6.92 7.35 6.74 6.79 6.43 6.21 6.04 7.10 6.56
73 8.14 7.18 7.97 7.11 7.50 6.89 6.88 6.54 6.25 6.10 7.26 6.70
74 8.39 7.39 8.19 7.30 7.66 7.05 6.97 6.64 6.29 6.15 7.42 6.85
75 8.66 7.62 8.43 7.52 7.82 7.21 7.06 6.74 6.32 6.20 7.60 7.01
76 8.99 7.87 8.70 7.74 8.00 7.38 7.14 6.85 6.35 6.24 7.78 7.18
77 9.30 8.13 8.97 7.98 8.16 7.56 7.22 6.94 6.38 6.28 7.97 7.35
78 9.64 8.42 9.25 8.24 8.33 7.74 7.29 7.04 6.40 6.32 8.18 7.54
79 9.99 8.72 9.54 8.51 8.49 7.92 7.36 7.13 6.42 6.35 8.39 7.74
80 10.38 9.06 9.84 8.80 8.65 8.11 7.42 7.21 6.44 6.38 8.61 7.95
81 10.79 9.41 10.16 9.10 8.82 8.29 7.48 7.29 6.46 6.41 8.85 8.17
82 11.23 9.80 10.49 9.43 8.97 8.48 7.53 7.36 6.47 6.43 9.09 8.40
83 11.69 10.22 10.83 9.77 9.12 8.66 7.58 7.43 6.48 6.45 9.36 8.65
84 12.19 10.68 11.19 10.13 9.27 8.83 7.62 7.49 6.49 6.46 9.63 8.91
85 12.73 11.17 11.55 10.50 9.41 9.00 7.66 7.54 6.50 6.47 9.92 9.17
<FN>
*Age equals age of annuitant nearest birthday when first payment is made
</FN>
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Initial Monthly Payment per $1,000 of Proceeds
Variable Payout Based on 5% AIR
Option 3
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 4.26 4.33 4.38 4.41 4.44 4.45
40 4.30 4.40 4.51 4.60 4.66 4.70
50 4.32 4.47 4.65 4.84 4.99 5.09
60 4.34 4.51 4.76 5.09 5.44 5.72
70 4.35 4.53 4.82 5.29 5.93 6.63
80 4.35 4.54 4.86 5.40 6.31 7.65
</TABLE>
<TABLE>
<CAPTION>
Option 4
5 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 4.26 4.33 4.38 4.41 4.44 4.45
40 4.30 4.40 4.51 4.60 4.66 4.70
50 4.32 4.47 4.65 4.84 4.99 5.09
60 4.34 4.51 4.76 5.09 5.44 5.72
70 4.35 4.53 4.82 5.29 5.93 6.62
80 4.35 4.54 4.86 5.40 6.31 7.63
</TABLE>
<TABLE>
<CAPTION>
Option 4
10 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 4.26 4.33 4.38 4.41 4.44 4.45
40 4.30 4.40 4.51 4.60 4.66 4.69
50 4.32 4.47 4.65 4.84 4.99 5.09
60 4.34 4.50 4.76 5.09 5.43 5.70
70 4.35 4.53 4.82 5.28 5.91 6.56
80 4.35 4.54 4.86 5.39 6.26 7.43
</TABLE>
<TABLE>
<CAPTION>
Option 4
15 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 4.26 4.33 4.38 4.41 4.44 4.45
40 4.30 4.40 4.51 4.60 4.66 4.69
50 4.32 4.47 4.65 4.83 4.98 5.07
60 4.34 4.50 4.75 5.08 5.42 5.64
70 4.35 4.53 4.82 5.27 5.86 6.37
80 4.35 4.54 4.84 5.36 6.13 6.96
</TABLE>
<TABLE>
<CAPTION>
Option 4
20 Years Minimum
<S> <C> <C> <C> <C> <C> <C>
Female Age 30 40 50 60 70 80
Male Age ________ ________ ________ ________ ________ ________
30 4.26 4.33 4.38 4.41 4.43 4.44
40 4.30 4.40 4.51 4.60 4.65 4.67
50 4.32 4.46 4.64 4.83 4.97 5.03
60 4.34 4.50 4.75 5.06 5.36 5.52
70 4.34 4.52 4.80 5.23 5.72 6.04
80 4.35 4.53 4.82 5.29 5.89 6.32
</TABLE>
GENERAL PROVISIONS
THE CONTRACT: The entire Contract consists of this Contract, and any attached
application endorsements or riders. This Contract may be changed or altered only
by our President or Secretary. Any change, modification or waiver must be made
in writing.
NON-PARTICIPATING IN SURPLUS. This Contract does not share in any distribution
of our profits or surplus.
INCONTESTABILITY: We will not contest this Contract from its Issue Date.
MISSTATEMENT OF AGE OR SEX: We may require proof of Age of the Annuitant before
making any life contingent Annuity Payment provided for by this Contract. If the
Age or sex of the Annuitant has been misstated the amount payable will be the
amount that the Contract Value would have provided at the true Age or sex.
Once Annuity Payments have begun, any underpayments will be made up in one sum
with the next Annuity Payment, and overpayments will be deducted from the future
Annuity Payments until the total is repaid.
CONTRACT SETTLEMENT: This Contract must be returned to us upon any settlement.
Prior to any settlement as a death claim, due proof of death must be submitted
to us. Any paid-up annuity, cash surrender or death benefits that may be
available are not less than the minimum benefits required by statute.
REPORTS: We will furnish you with a report showing the Contract Value at least
once each calendar year. This report will be sent to your last known address.
TAXES: Any taxes paid to any governmental entity will be charged against the
Contract Value. We will, in our sole discretion, determine when taxes have
resulted from: the investment experience of the Variable Account; receipt by us
of the Purchase Payment(s); or commencement of Annuity Payments. We may, at our
discretion, pay taxes when due and deduct that amount from the Contract Value at
a later date. Payment at an earlier date does not waive any right we may have to
deduct amounts at a later date. We reserve the right to establish a provision
for federal income taxes if we determine, in our sole discretion, that we will
incur a tax as a result of the operation of the Variable Account. We 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. The Company will deduct any withholding taxes required by applicable
law.
EVIDENCE OF SURVIVAL: Where any benefits under this Contract are contingent upon
the recipient being alive on a given date, we may require proof satisfactory to
us that the condition has been met.
PROTECTION OF PROCEEDS: No Beneficiary may commute, encumber, alienate or assign
any payments under this Contract before they are due. To the extent permitted by
law, no payments will be subject to the debts, contracts or engagements of any
Beneficiary or to any judicial process to levy upon or attach the same for
payment thereof.
MODIFICATION OF CONTRACT: This Contract may not be modified by us without your
consent except as may be required by applicable law.
ENHANCED DEATH BENEFIT ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
Effective Date is the Issue Date shown on the Contract Schedule of the Contract
to which this Endorsement is attached. In the case of a conflict with any
provision in the Contract, the provisions of this Endorsement will control. The
following hereby amends and supersedes the section of the Contract captioned
"Proceeds Payable On Death - Death Benefit Amount During The Accumulation
Period."
PROCEEDS PAYABLE ON DEATH
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD: The death benefit will be
the greater of:
1. The Contract Value, less any applicable Premium Tax; or
2. The Guaranteed Death Benefit equal to the Purchase Payments
less any surrenders, any Contingent Deferred Sales Charge paid
on such surrenders and any applicable Premium Tax.
The Death Benefit is determined as of the end of the Valuation Period during
which we received at the Valuemark Service Center both due proof of death and an
election of the payment method.
If the Contract is owned by a non-natural person, then Contract Owner shall
mean Annuitant.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
/s/Alan A. Grove /s/ Lowell C Anderson
Vice President and Secretary Chairman of the Board, President, and CEO
S20156
_______________________________________________________________________________
S20195
[CHARTER] ENHANCED DEATH BENEFIT ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
Effective Date is the Issue Date shown on the Contract Schedule of the Contract
to which this Endorsement is attached. In the case of a conflict with any
provision in the Contract, the provisions of this Endorsement will control. The
following hereby amends and supersedes the section of the Contract captioned
"Proceeds Payable On Death - Death Benefit Amount During The Accumulation
Period."
PROCEEDS PAYABLE ON DEATH
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD: The death benefit will be
the greater of:
1. The Contract Value, less any applicable Premium Tax,
determined as of the end of the Valuation Period during which
we received at the Valuemark Service Center both due proof of
death and an election of the payment method; or
2. The Guaranteed Minimum Death Benefit as defined below, less
any applicable Premium Tax, determined as of the date of
death.
The Guaranteed Minimum Death Benefit is the greater of (a) or (b) below:
a) The sum of all Purchase Payments made less any surrenders.
b) The greatest Anniversary Value for Contract Anniversaries
prior to the Owner's attained age 86. The Anniversary Value is
equal to the Contract Value on a Contract Anniversary,
increased by the dollar amount of any Purchase Payments made
since that Anniversary and decreased by the dollar amount of
any surrenders since that Anniversary.
If Joint Owners are named, the Age of the older Owner will be used to determine
the Guaranteed Minimum Death Benefit. If the Contract is owned by a non-natural
person, then Contract Owner shall mean Annuitant.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
/s/Michael T Westermeyer /s/ Lowell C Anderson
Vice President and Secretary Chairman of the Board, President, and CEO
CHARITABLE REMAINDER TRUST ENDORSEMENT
This Endorsement modifies and forms a part of the Contract to which it is
attached. The Effective Date is the Issue Date shown on the Contract Schedule of
the Contract to which this Endorsement is attached. In the case of a conflict
with any provision in the Contract, the provisions of this Endorsement will
control.
The following hereby amends and supersedes the section of the Contract captioned
"ANNUITY PROVISIONS - INCOME DATE".
ANNUITY PROVISIONS
INCOME DATE: You select an Income Date at the time of issue. The Income Date
must always be the first day of a calendar month. The earliest Income Date you
can select is two years after the Issue Date. The latest Income Date you can
select is the earlier of the first day of the first calendar month following the
Annuitant's 100th birthday, or the maximum date permitted under law. You may, at
any time prior to the Income Date, change the Income Date by authorized request
30 days in advance.
The following hereby replaces the first paragraph of the section of the Contract
Schedule Page captioned "SURRENDERS: FREE SURRENDER AMOUNT".
SURRENDERS
FREE SURRENDER AMOUNT: No Contingent Deferred Sales Charge will be assessed on
surrenders not exceeding the greater of:
1) After the first Contract Year, on a non-cumulative basis, 15% of the
Contract Value, less any previous Free Surrender Amount withdrawn during
that Contract Year; or
2) Each Contract Year, any amount of the Contract Value in excess of the total
Net Purchase Payment(s) less surrenders and any applicable charges.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
[GRAPHIC OMITTED]
Franklin Valuemark Charter A Flexible Premium Variable Annuity
Issued by Allianz Life Insurance Company of North America DA__________
______________________________________________________________________________
1.OWNER Must be age 85 or younger
Name Last First Middle
________________________________________________________________________
(If the Owner is a trust, please include Trust Name, Trust Date, and the
Trust Beneficial Owner(s))
Address Street Address Apartment Number
City State Zip Code
Social Security Number Date of Birth Sex ____Female
(If the owner is a trust, ____Male
Daytime Telephone ( ) list the date(s) of birth
for the beneficial owner(s))
______________________________________________________________________________
2.JOINT OWNER(Optional)Must be the Spouse of the Owner-Must be age 85 or younger
Name Last First Middle
Social Security Number Date of Birth Sex ____Female
____Male
Daytime Telephone ( )
______________________________________________________________________________
3.ANNUITANT Must be age 85 or younger. Must complete if different than owner.
Name Last First Middle
Address Street Address Apartment Number
City State Zip Code
Social Security Number Date of Birth Sex ____Female
____Male
______________________________________________________________________________
4.BENEFICIARY(IES) DESIGNATION
Primary Beneficiary(ies):
(In the event of death of Name Relationship to Owner
the Owner, the surviving
Joint Owner becomes the Name Relationship to Owner
Primary Beneficiary.)
Contingent Beneficiary(ies) Name Relationship to Owner
Name Relationship to Owner
______________________________________________________________________________
5. REPLACEMENT
Is this Annuity intended to replace or change existing life insurance or
annuity? ___Yes ____No
If checked yes, please include the appropriate forms.
______________________________________________________________________________
6. TAX QUALIFIED PLANS
Is this annuity part of a Tax For Tax Qualified Plans, please
Qualified Plan? ____ Yes ____No indicate one of the following:
___IRA ___403(b)TSA
___Roth IRA ___401 (Corporate Plan)
___SEP IRA ___Other _______________
______________________________________________________________________________
7.PURCHASE PAYMENT
____Purchase Payment Enclosed with Application
Purchase Payment Amount $_____________________
____This contract will be funded by a 1035 Exchange, Tax Qualified
Transfer/Rollover, CD or Mutual Fund Redemption. (If checked, please
attach the appropriate forms).
______________________________________________________________________________
8.PURCHASE PAYMENT ALLOCATION
You may select up to 10 funds. Use whole percentages. The allocations
you indicate below will become your allocations on all future payments
until you notify us of a change.
CAPITAL GROWTH FIXED
___%Capital Growth Fund ___%Allianz Life Fixed Account
___%Global Health Care
Securities Fund INCOME
___%Mutual Discovery Securities Fund ___%High Income Fund
___%Natural Resources Securities Fund ___%Templeton Global Income Securities
___%Small Cap Fund Fund
___%Templeton Developing Markets ___%U.S. Government Securities Fund
Equity Fund ___%Zero Coupon Fund 2000
___%Templeton Global Growth Fund ___%Zero Coupon Fund 2005
___%Templeton International Equity ___%Zero Coupon Fund 2010
Fund
___%Templeton International Smaller CAPITAL PRESERVATION AND INCOME
Companies Fund ___%Money Market Fund
___%Templeton Pacific Growth Fund
GROWTH AND INCOME
___%Global Utilities Securities Fund ___TOTAL (Must Equal 100%)
___%Growth and Income Fund
___%Income Securities Fund
___%Mutual Shares Securities Fund
___%Real Estate Securities Fund
___%Rising Dividends Fund
___%Templeton Global Asset Allocation
Fund
___%Value Securities Fund
______________________________________________________________________________
9. Death Benefit Election
Franklin Valuemark Charter automatically includes a "Traditional Death Benefit
that is applicable to contracts owned for the benefit of an individual. The
Traditional Death Benefit is equal to the greater of : 1)Contract Value or 2)
Premiums less surrenders.
Check the following box if you want to choose the "Enhanced Death Benefit". An
additional charge is assessed to the Owner for this feature. Upon making this
selection, it cannot be changed. This selection can only be made at the time of
initial premium payment. Refer to the Prospectus for additional information.
___Enhanced Death Benefit is equal to the greater of: 1)Contract Value or 2)
Premiums less surrenders or 3) The highest Anniversary Value prior to the
Owner's 86th birthday. The Anniversary Value is the Contract Value on a contract
anniversary adjusted by subsequent premiums and surrenders.
______________________________________________________________________________
10. INCOME DATE
Selected Income Date ___- 01 -___ The Income Date (Annuitization Date) may be
no earlier than two full contract years
after the issue date. (If no date is
selected, the Income Date will default to
the later of one month after the Annuitants
85th birthday or the 10th Contract
Anniversary.)
______________________________________________________________________________
11.TELEPHONE AUTHORIZATION
___ I/We authorize Allianz Life Insurance Company of North America (Allianz
Life) to honor telephone instructions from the Contract Owner(s) to transfer
contract values among the sub-accounts and the fixed account and to disburse
partial surrenders.
___ I/We authorize Allianz Life Insurance Company of North America (Allianz
Life) to accept telephone instructions from the Registered Rep/Agent of Record
for this contract and/or the Representative's Assistant(s)to transfer contract
values among the sub-accounts and the fixed account.
If no selection is indicated, telephone access authorization will be permitted
for the Contract Owner only. This authorization is subject to the terms and
provisions in the contract and Prospectus. Allianz Life will employ reasonable
procedures to confirm that telephone instructions are genuine. If Allianz Life
does not, it may be liable for any losses due to unauthorized or fraudulent
transfers.
For partial surrenders, Allianz Life's sole responsibility is to send a check
payable to the Owner(s) address, or wire the proceeds to the Owner's account at
a commercial bank (a savings bank may not be used) or to the Owner's account at
a member firm of a national securities exchange.
______________________________________________________________________________
12. BY SIGNING BELOW, THE OWNER UNDERSTANDS THAT OR AGREES TO
I received a Prospectus and have determined that the variable annuity applied
for is not unsuitable for my insurance investment objectives, financial
situation, and financial needs. It is a long term commitment to meet insurance
needs and financial goals. I understand that the annuity value for payments
allocated to the variable sub-accounts may increase or decrease depending on the
contract's investment results, and that no minimum cash value is guaranteed on
the variable sub-accounts. To the best of my knowledge and belief, all
statements and answers in this application are complete and true. It is further
agreed that these statements and answers will become a part of any contract to
be issued. No representative is authorized to modify this agreement or waive any
of Allianz Life's rights or requirements.
___________________________________ ______________________________________
Owner's Signature(or Trustee, if Joint Owner's Signature (or Trustee,
applicable) if applicable)
___________________________________ ______________________________________
Signed At (City, State) Date Signed
____Please send me a Statement of Additional Information
______________________________________________________________________________
13.BY SIGNING BELOW, THE REGISTERED REPRESENTATIVE/AGENT CERTIFIES THAT
- -I am NASD registered and state licensed for variable annuity contracts in the
state where this application is written and delivered; and
- -I provided the Owner(s) with the most current Prospectus; and
- -To the best of my knowledge and belief, this application ___DOES___DOES NOT
involve replacement of existing life insurance or annuities. If replacement,
attach a copy of each disclosure statement and list of companies involved.
___________________________________ ______________________________________
Registered Representative Name (Print) Registered Representative Name (Print)
___________________________________ ______________________________________
Registered Representative Signature Registered Representative Signature
___________________________________ ______________________________________
Broker Dealer Name Authorized signature of Broker Dealer
if required
______________________________________________________________________________
Branch Address Branch Telephone Number
______________________________________________________________________________
14.MAIL APPLICATIONS TO
Allianz Life-Valuemark Service Center For Overnight Delivery:
c/o PNC Bank Allianz Life Valuemark Service Center
Box 824240 c/o PNC Bank
Philadelphia, PA 19182-4240 Attn: Box 4240
Route 38 and East Gate Drive
Moorestown, NJ 08057-4240
______________________________________________________________________________
15.HOME OFFICE USE ONLY (EXCEPT IN WV)
If Allianz Life Insurance Company of North America makes a change in this space
in order to correct any apparent errors or omissions, it will be approved by
acceptance of this contract by the Owner(s); however, any material change must
be accepted in writing by the Owner(s).