File Nos. 33-76190
811-05618
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 8 (X)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 40 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
-------------------------------
(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
-----------------------------------------------
(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403
------------------------------------- ---------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 347-6596
Name and Address of Agent for Service
-------------------------------------
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph(b) of Rule 485
___ on (date) pursuant to paragraph (b) of Rule 485
_X_ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Registered:
Individual Immediate Variable Annuity Contracts
CROSS REFERENCE SHEET
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
<S> <C> <C>
PART A
Item 1. Cover Page. . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . . . Index of Terms
Item 3. Synopsis or Highlights. . . . . . . . . . . . . Profile
Item 4. Condensed Financial Information . . . . . . . . Appendix
Item 6. Deductions. . . . . . . . . . . . . . . . . . . Expenses
Item 7. General Description of Variable Annuity
Contracts . . . . . . . . . . . . . . . . . . . The Franklin
Templeton Valuemark
Income Plus Immediate
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 . . . . . . . . . . . . . . . Not Applicable
Item 14. Table of Contents of the Statement of
Additional Information. . . . . . . . . . . . . Table of Contents of
the Statement of Ad-
ditional Information
</TABLE>
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
<S> <C> <C>
PART B
Item 15. Cover Page. . . . . . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . . . The Company
Item 18. Services. . . . . . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered. . . . . . Not Applicable
Item 20. Underwriters. . . . . . . . . . . . . . . . . . Distributor
Item 21. Calculation of Performance Data . . . . . . . . Calculation of
Performance Data
Item 22. Annuity Payments. . . . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements. . . . . . . . . . . . . . Financial
Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.
<PAGE>
January 25, 1999
PROFILE OF THE FRANKLIN TEMPLETON VALUEMARK INCOME PLUS
IMMEDIATE VARIABLE ANNUITY CONTRACT
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
MAY 1, 1999
This profile is a summary of some of the more important points that you should
consider and know before purchasing the Franklin Templeton Valuemark Income Plus
immediate variable annuity contract. The contract is more fully described in the
prospectus which accompanies this profile. Please read the prospectus carefully.
1. THE FRANKLIN TEMPLETON VALUEMARK INCOME PLUS
IMMEDIATE VARIABLE ANNUITY CONTRACT
The Franklin Templeton Valuemark Income Plus immediate variable annuity contract
with variable and fixed payment options (Contract) is a contract between you,
the owner, and Allianz Life Insurance Company of North America (Allianz Life),
an insurance company. In this profile and the prospectus, "we," "us" and "our"
refers to Allianz Life. In return for your one time payment, the Contract
provides for income to you and another person (if elected) under a payment plan
you select.
The variable payment options offer a choice of 18 Class 1 portfolios of Franklin
Valuemark Funds which are listed in Section 4. Depending on market conditions
and the portfolios you choose, payments may go up or down. No minimum payment is
guaranteed under a variable payment option. The variable payment option is
designed to offer a better return than the fixed payment option. However, this
is not guaranteed.
The fixed payment option offers fixed annuity payments that are guaranteed by
Allianz Life. Any portion of your purchase payment allocated to the fixed
payment option will be temporarily allocated to the Money Market Fund on the day
we allocate your purchase payment. It will then be allocated to the fixed
payment option when you begin receiving annuity payments from your Contract (if
you choose a fixed payout).
You can allocate your money in up to ten variable options and the fixed payment
option. We may limit the number of variable options which you may invest in at
any one time (except in Texas). The requested allocation to each variable option
and the fixed payment option must be made in whole percentages and each must be
at least 10%.
2. ANNUITY PAYMENTS
Under this Contract, you are the owner and the annuitant. You may name a joint
annuitant, if you choose. You select an income date when you buy the Contract.
The income date must not be later than 60 days after we allocate your purchase
payment.
You can receive annuity payments from your Contract by selecting one of the
following annuity options:
(1) payments for your life;
(2) payments for your life, but if you die before payments have been made for
the guaranteed period you selected, payments will continue to the
beneficiary for the remainder of the guaranteed period (5, 10, 15, 20
years);
(3) payments during the joint lifetime of you and the joint annuitant - when
either of you die, payments will continue as long as the survivor lives;
(4) payments during the joint lifetime of you and the joint annuitant, but if
you and the joint annuitant die before payments have been made for the
guaranteed period you selected, payments will continue for the remainder of
the guaranteed period (5, 10, 15 or 20 years);
(5) payments for your life and ending with the last payment due prior to your
death with a guarantee that at your death, the beneficiary will receive a
single cash payment as set forth in the Contract; and
(6) payments for a specified period of time (5 -30 years) with payments
continuing to the beneficiary for the remainder of the period certain if
you and any joint annuitant die before the end of the specified period.
Under certain circumstances, if you selected annuity option 6, you can exchange
it for a life contingent payout (options 1-5). Annuity payments can be based on
the available portfolios (variable payout) and/or the fixed payment option
(fixed payout) under all annuity options except annuity payments under Option 6.
Annuity payments under Option 6 may only come from the portfolios (variable
payout). If you choose to have any part of your payments based on the
performance of the portfolios (i.e., variable payout), the dollar amount of your
annuity payments may go up or down, depending on the investment performance of
the portfolio(s) you choose.
3. PURCHASE
You can buy the Contract with $35,000 or more under most circumstances. You
cannot add to your Contract at a later date (i.e., it is a single purchase
payment contract). Your investment representative can help you complete the
appropriate forms.
4. INVESTMENT OPTIONS
You may invest in the Allianz Life fixed payment option and/or the following
Class 1 portfolios of Franklin Valuemark Funds listed below. Franklin Valuemark
Funds are managed by Franklin Advisers, Inc. and its Templeton and Franklin
affiliates.
PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
PORTFOLIO SEEKING CURRENT
INCOME:
High Income Fund
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
PORTFOLIOS SEEKING
CAPITAL GROWTH
Capital Growth Fund
Mutual Discovery Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International
Smaller Companies Fund
Templeton Pacific Growth Fund
Value Securities Fund
The portfolios are fully described in the attached prospectus for Franklin
Valuemark Funds. Your income will fluctuate up or down based on the portfolios'
performance. No minimum dollar payment is guaranteed.
5. EXPENSES
The Contract has insurance features and investment features, and there are costs
related to each.
- The annual insurance charges consist of the Mortality and Expense Risk
Charge and the Administrative Expense Charge. Together these charges
total 1.40% of the average daily value of your Contract allocated to
the variable options.
- If you choose Annuity Options 2 or 4 and make a liquidation, a
commutation fee of 5% in Contract year 2, reducing by 1% each year
until it is 1% for Contract year 6 and thereafter will apply. If you
choose Annuity Option 6 and make a liquidation, a commutation fee of 5%
in Contract years 1 and 2, reducing by 1% each year until it is 1% for
Contract year 6 and thereafter will apply. (If you bought your Contract
before May 1, 1998, the commutation fee under Option 6 is 1% in the
first Contract year.)
- There are also annual portfolio operating expenses, which vary
depending upon the portfolios you select. In 1998, these expenses
ranged from ___% to ____% of the average daily value of the Class 1
portfolios.
- Allianz Life may assess a stat premium tax charge which ranges from 0%
to 3.5% of your purchase payment (depending upon the state).
<TABLE>
<CAPTION>
We have provided the following chart to help you understand the expenses in your
Contract.
- - The column "Total Annual Expenses" shows the 1.40% insurance charges and the total annual
portfolio expenses for 1998 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 liquidate all your money: (1) at the end of year 1, and (2) at the end of year 10. The
examples assume that you selected Annuity Option 6 and chose a 15 year specified period certain
annuity option and a 5% assumed investment return. For year 1, the Total Annual Expenses are
assessed as well as the commutation fee. For year 10, the example shows the total of all the
annual expenses for the 10 years, but there is no commutation fee.
- - The premium tax is assumed to be 0% in both examples.
- - The examples are purely hypothetical. They should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those shown.
EXAMPLES:
1998
TOTAL
TOTAL ANNUAL TOTAL ANNUAL
ANNUAL CLASS 1 TOTAL EXPENSES AT END OF
INSURANCE PORTFOLIO ANNUAL (1) (2)
PORTFOLIO CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
- - --------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S>
Capital Growth 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Global Utilities Securities 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Growth and Income 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
High Income 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Income Securities 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Money Market 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Mutual Discovery Securities 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Mutual Shares Securities 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Real Estate Securities 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Rising Dividends 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Small Cap 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Templeton Developing Markets Equity 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Templeton Global Asset Allocation 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Templeton Global Growth 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Templeton International Equity 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Templeton International Smaller
Companies 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Templeton Pacific Growth 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
Value Securities 1.40% ____% ____% ____ _____
- - --------------------------------------------------------------------------------------------------
For more detailed information, see the Fee Table in the prospectus for the
Contract.
</TABLE>
6. TAXES
For federal tax purposes, annuity payments will be treated as partly a return of
your original investment. That part of each payment is not taxable as income. If
the Contract is tax-qualified, the entire payment may be taxable. If you make a
partial liquidation, the earnings come out first and are taxed as income. If you
are younger than 59 1/2 when you make a liquidation, you may be charged a 10%
federal tax penalty on the taxable amount you withdraw. You should consult your
tax counsel or other tax adviser regarding any liquidations.
7. ACCESS TO YOUR MONEY
Generally, you may not make liquidations from your contract. However, under
certain circumstances, you may make one liquidation (withdrawal) each Contract
year after the income date if you selected annuity options 2, 4 or 6. The amount
that you may liquidate is set forth in your Contract and is described in the
prospectus for the Contract. There may be a fee assessed when you make a
liquidation (commutation fee). Also, there may be adverse tax consequences,
leading to lower annuity payments than those that would have been paid without
the partial liquidation (during the period certain). You may not make any
liquidations before your income date.
<PAGE>
8. PERFORMANCE
<TABLE>
<CAPTION>
If you choose to receive variable payments, your payments will vary up or down. The increase or decrease
will depend on whether the Variable Options you choose perform better or worse than the "benchmark" Assumed
Investment Return (3%, 5% or 7% per year) you choose.
The following chart shows total returns for the periods shown. Performance is not shown for the Value
Securities Fund because it was first offered for sale on May 1, 1998. These numbers reflect the insurance
charges and the operating expenses of the portfolios, but are not adjusted for the Assumed Investment
Return. Past performance does not guarantee or predict future results.
CALENDAR YEAR
VARIABLE OPTION 1998 1997 1996 1995 1994 1993 1992 1991 1990
<C> <S> <S> <S> <S> <S> <S> <S> <S> <S>
Capital Growth 16.66% 12.54% NA NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Global Utilities
Securities 25.00% 5.57% 29.53% -12.79% 9.00% 7.20% 22.87% 0.44%
- -----------------------------------------------------------------------------------------------------------
Growth and Income 25.97% 12.59% 30.99% -3.38% 8.77% 5.22% 21.09% -3.70%
- -----------------------------------------------------------------------------------------------------------
High Income
- -----------------------------------------------------------------------------------------------------------
Income Securities 15.46% 9.72% 20.70% -7.57% 16.96% 11.65% 37.98% -8.73%
- -----------------------------------------------------------------------------------------------------------
Money Market 3.78% 3.69% 4.29% 2.39% 1.12% 1.62% 4.02% 6.12%
- -----------------------------------------------------------------------------------------------------------
Mutual Discovery
Securities 17.71% 1.80% NA NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Mutual Shares Securities 16.10% 3.30% NA NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Real Estate Securities 19.02% 30.96% 15.90% 1.46% 17.36% 10.53% 31.65% -13.20%
- -----------------------------------------------------------------------------------------------------------
Rising Dividends 31.18% 22.44% 27.94% -5.41% -4.80% 8.48% NA NA
- -----------------------------------------------------------------------------------------------------------
Small Cap 15.79% 27.26% 1.46% NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Templeton Developing
Markets Equity -9.99% 19.89% 1.35% -5.46% NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Templeton Global
Asset Allocation 10.16% 18.16% 5.91% NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Templeton Global Growth 11.92% 19.58% 11.16% 2.01% NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Templeton International
Equity 10.14% 21.25% 9.06% -0.53% 26.79% -3.58% NA NA
- -----------------------------------------------------------------------------------------------------------
Templeton International
Smaller Companies -2.87% 11.45% NA NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
Templeton Pacific Growth -36.84% 9.55% 6.47% -10.06% 45.82% -2.39% NA NA
- -----------------------------------------------------------------------------------------------------------
</TABLE>
9. DEATH BENEFIT
If you die before the income date and there is no joint annuitant, the Contract
will be treated as if it had never been issued. We will return your purchase
payment to your estate. If you have chosen an annuity option with a joint
annuitant and either you or the joint annuitant dies before the income date, the
annuity option will be changed to option 2 (with 10 years of payments guaranteed
or 5 years of payments guaranteed if the survivor's life expectancy is less than
10 years).
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 back the value of
your Contract on the day we receive your request, less any benefits paid in
states where permitted (this may be more or less than your original payment). In
certain states or if you have purchased the Contract as an IRA, we may be
required to return your purchase payment if you decide to cancel your Contract
within 10 days after receiving it (or the period required in your state).
PURCHASING CONSIDERATIONS. The Franklin Templeton Valuemark Income Plus
immediate variable annuity contract is designed for people seeking a medium to
long-term periodic payment plan. Many options provide for payments guaranteed
for as long as you live. We do not recommend buying this Contract if you cannot
accept the risk of getting back less money than you put in. Since certain
payment options do not permit you to liquidate (withdraw) money, and all options
limit payments to your heirs, we generally recommend you set other money aside
for non-routine expenses and bequests.
11. INQUIRIES
If you have any questions about your Contract or need more information, please
contact us at:
VIP Service Center
P.O. Box 30343
Tampa, Florida 33630-3343
(800) 774-5001
<PAGE>
THE FRANKLIN TEMPLETON VALUEMARK INCOME PLUS
IMMEDIATE VARIABLE ANNUITY CONTRACT
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
This prospectus describes the Franklin Templeton Valuemark Income Plus Immediate
Variable Annuity Contract with a Fixed Payment Option. The Contract is offered
by Allianz Life Insurance Company of North America (Allianz Life).
The annuity has 19 investment choices - the 18 Variable Options which invest in
one Class 1 Portfolio of Franklin Valuemark Funds and a Fixed Payment Option of
Allianz Life. You can select up to 10 investment choices (which includes any of
the Variable Options and the Fixed Payment Option).
FRANKLIN VALUEMARK FUNDS:
PORTFOLIO SEEKING STABILITY OF PRINCIPAL AND INCOME
Money Market Fund
PORTFOLIO SEEKING CURRENT INCOME
High Income Fund
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
Mutual Discovery Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
Please read this prospectus before investing and keep it for future reference.
It contains important information about the Franklin Templeton Valuemark Income
Plus Immediate Variable Annuity Contract with a Fixed Payment Option.
To learn more about the annuity offered by this prospectus, you can receive a
copy of the Statement of Additional Information (SAI) dated May 1, 1999. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is legally
a part of 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
companies that file electronically with the SEC. For a free copy of the SAI,
call or write us at the VIP Service Center at the address and telephone number
listed in the Profile.
The Franklin Templeton Valuemark Income Plus Immediate 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 loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities nor has it 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 the Contracts. 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.
In the state of Oregon, all references to Franklin Templeton Valuemark Income
Plus refer to Valuemark Income Plus.
Dated: May 1, 1999
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEX OF TERMS ...................................
FEE TABLE ........................................
1. THE FRANKLIN TEMPLETON VALUEMARK INCOME PLUS
IMMEDIATE VARIABLE ANNUITY CONTRACT .........
Ownership ....................................
Contract Owner/Annuitant .................
Joint Owner ..............................
Beneficiary ..............................
Assignment ..................................
2. ANNUITY PAYMENTS
(THE PAYOUT PHASE) ..........................
Income Date ..................................
Annuity Payments .............................
Assumed Investment Return ....................
Annuity Options ..............................
3. PURCHASE .....................................
Purchase Payment .............................
Allocation of Purchase Payment ...............
Free Look ....................................
VIP Units ....................................
4. INVESTMENT OPTIONS ...........................
Transfers ....................................
Telephone Transfers ......................
Voting Privileges ............................
Substitution .................................
5. EXPENSES .....................................
Insurance Charges ............................
Mortality and Expense Risk Charge ...........
Administrative Charge .......................
Commutation Fee ..............................
Premium Taxes ................................
Income Taxes .................................
Portfolio Expenses ...........................
6. TAXES ........................................
Annuity Contracts in General .................
Qualified and Non-Qualified Contracts ........
Multiple Contracts ...........................
Liquidations - Non-Qualified Contracts .........
Liquidations - Qualified Contracts .............
Diversification ..............................
7. ACCESS TO YOUR MONEY .........................
Suspension of Payments or Transfers ..........
8. PERFORMANCE ..................................
9. DEATH BENEFIT ................................
10. OTHER INFORMATION ............................
Allianz Life .................................
Year 2000 ....................................
The Separate Account .........................
Distribution .................................
Administration ...............................
Financial Statements .........................
APPENDIX A - Condensed Financial Information .
APPENDIX B - Illustration of Annuity Income..
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 in this prospectus.
Page
Annuitant ........................................
Annuity Calculation Date .........................
Annuity Options ..................................
Annuity Payments .................................
Annuity Unit .....................................
Assumed Investment Return (AIR) ..................
Beneficiary ......................................
Contract .........................................
Contract Owner ...................................
Fixed Payment Option .............................
Income Date ......................................
Joint Annuitant ..................................
Joint Owner ......................................
Non-Qualified ....................................
Payout Phase .....................................
Portfolios .......................................
Purchase Payment .................................
Qualified ........................................
Tax Deferral .....................................
Total Liquidation Value ..........................
Variable Option ..................................
VIP Unit .........................................
FEE TABLE
The purpose of this Fee Table is to help you understand the costs of investing
in the Contract. It reflects expenses of the separate account as well as the
Class 1 Portfolios.
We have provided "Illustrations of Annuity Income" in Appendix B to show you the
effects of the charges, expenses and investment performance on annuity income.
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION FEES
COMMUTATION FEE *
(as a percentage of the amount taken out (liquidated))
Contract Year Charge
------------- ------
1 5%
2 5%
3 4%
4 3%
5 2%
6 (& thereafter) 1%
* After the first Contract year, you may make one liquidation from your Contract
each year if you have selected Annuity Options 2 or 4. If you have selected
Annuity Option 6, you may make a liquidation once each year beginning in the
first year. If you have chosen Annuity Option 6 and bought your Contract before
May 1, 1998, the commutation fee is 1% of the amount liquidated in the first
Contract year.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge .................... 1.25%
Administrative Charge.................................... .15%
------
Total Separate Account Annual Expenses................... 1.40%
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES: CLASS 1 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. See the prospectus for Franklin Valuemark Funds for more
information.
The "Management and Portfolio Administration Fees" below are the amounts that were paid to the
Managers and Portfolio administrators for the 1998 calendar year except for Portfolios with fee
waivers or newer Portfolios without a full year of operations as of December 31, 1998.
MANAGEMENT AND
PORTFOLIO TOTAL ANNUAL
ADMINISTRATION FEES1 OTHER EXPENSES EXPENSES
<S> <C> <C> <C>
Capital Growth Fund ...................... .75% .02% .77%
Global Utilities Securities Fund.......... .47% .03% .50%
Growth and Income Fund ................... .47% .02% .49%
High Income Fund ......................... .50% .03% .53%
Income Securities Fund ................... .47% .03% .50%
Money Market Fund ........................ .51% .02% .53%
Mutual Discovery Securities Fund ......... .80% .26% 1.06%
Mutual Shares Securities Fund ............ .60% .20% .80%
Real Estate Securities Fund .............. .51% .03% .54%
Rising Dividends Fund .................... .72% .02% .74%
Small Cap Fund ........................... .75% .02% .77%
Templeton Developing Markets Equity Fund . 1.25% .17% 1.42%
Templeton Global Asset Allocation Fund ... .65% .29% .94%
Templeton Global Growth Fund ............. .83% .05% .88%
Templeton International Equity Fund ...... .80% .09% .89%
Templeton International Smaller Companies Fund.. .85% .21% 1.06%
Templeton Pacific Growth Fund ............ .92% .11% 1.03%
Value Securities Fund .................... .75% .06% .81%
<FN>
1 The Portfolio Administration Fee is a direct expense for the Mutual Discovery Securities
Fund, the Mutual Shares Securities Fund, the Templeton Global Asset Allocation Fund, the
Templeton International Smaller Companies Fund and the Value Securities Fund. Other Portfolios
pay for similar services indirectly through the Management Fee. See the Franklin Valuemark
Funds prospectus for further information regarding these fees.
</FN>
</TABLE>
EXAMPLES
$ The examples below should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
$ Premium taxes are not reflected in the tables. Premium taxes may apply.
$ The examples assume you invested $1,000 with annual payments based on a 15
year period certain payout under Annuity Option 6 with a 5% Assumed Investment
Return.
$ For additional information, see Section 5 - "Expenses" and the Franklin
Valuemark Funds prospectus.
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money (compounded annually) if you surrender your Contract
under Annuity Option 6 at the end of each time period:
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth 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
Real Estate Securities Fund
Rising Dividends Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Asset Allocation Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
Value Securities Fund*
*Annualized
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money (compounded annually) if your Contract is not
surrendered:
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------------
Capital Growth 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
Real Estate Securities Fund
Rising Dividends Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Asset Allocation Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
Value Securities Fund*
<FN>
*Annualized
See Appendix A for VIP Unit Values - Condensed Financial Information.
</FN>
</TABLE>
<PAGE>
1. THE FRANKLIN TEMPLETON VALUEMARK INCOME PLUS
IMMEDIATE VARIABLE ANNUITY CONTRACT
This prospectus describes an immediate variable annuity contract with a Fixed
Payment Option (Contract) 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. The Annuity
Payments must begin on a designated date that is no later than 60 days after we
allocate your Purchase Payment. This is called the Income Date.
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 17
Variable Options, and depending upon market conditions, your payments can go up
or down based on the Portfolios' investment performance. The Portfolios are
designed to offer a better return than the Fixed Payment Option. However, this
is not guaranteed. If you select the variable annuity portion of the Contract,
your payments may go up or down based on the investment performance of the
Portfolio(s) you select.
The Contract also contains a Fixed Payment Option (referred to in the Contract
as the "Fixed Account"). The Fixed Payment Option offers an interest rate that
is guaranteed by Allianz Life. If you select the Fixed Payment Option, your
money will be placed with the other general assets of Allianz Life. Any portion
of your Purchase Payment allocated to the Fixed Payment Option will be
temporarily allocated to the Money Market Fund on the day we allocate your
Purchase Payment. It will then be allocated to the Fixed Payment Option when you
begin receiving Annuity Payments from your Contract.
We will not make any changes to your Contract without your permission except as
may be required by law. We may, however, add endorsements to your Contract from
time to time.
OWNERSHIP
Contract Owner/Annuitant
You are the Contract Owner and the Annuitant. 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.
An Annuitant is the natural person on whose life we base Annuity Payments.
Joint Owner/Joint Annuitant
If there is more than one Contract Owner, each Contract Owner is a Joint Owner
of the Contract. Joint Owners have equal ownership rights. You both must
authorize those ownership rights unless otherwise allowed by Allianz Life. You
can name a Joint Annuitant. Each Joint Owner must be either an Annuitant or
Joint Annuitant.
IF YOU DIE BEFORE THE INCOME DATE AND THERE IS NO JOINT ANNUITANT, WE WILL TREAT
THE CONTRACT AS IF WE NEVER ISSUED IT AND WILL RETURN THE PURCHASE PAYMENT TO
YOUR ESTATE.
If you die while the Contract is in force, the Joint Annuitant (if not already a
Joint Owner) will become the Contract Owner. On or after the Income Date, if
there is no Joint Annuitant or when the Joint Annuitant dies, the
Beneficiary(ies) will be the Owner(s) of their respective shares.
Beneficiary
The Beneficiary is the person(s) or entity you name to receive any death
benefit. You can also name a contingent Beneficiary. The contingent Beneficary
will receive any death benefit if the Beneficiary is not alive when you and any
Joint Annuitant die. 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 transfer ownership (assign) the Contract at any time during your
lifetime. We will not be liable for any payment we make, or other action we
take, in accordance with the Contract before we receive written notice of the
assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the Contract is issued under a Qualified plan, you may be unable to assign
the Contract.
2. ANNUITY PAYMENTS (THE PAYOUT PHASE)
Income Date
You can receive regular income payments under your Contract as long as you and
any Joint Annuitant are alive on the Income Date. We call the date that you
receive your first Annuity Payment the Income Date. We ask you to choose your
Income Date when you purchase the Contract. Your Income Date must be the first
or fifteenth day of a calendar month and must not be later than 60 days from the
day we allocate your Purchase Payment.
Annuity Payments
Under Annuity Options 1-5, you may elect to receive your Annuity Payments as a
variable payout, a fixed payout, or a combination of both. Under Annuity Option
6, Annuity Payments will come from the Variable Options only (variable payout).
If you choose a Fixed Payment Option, 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 Variable Options.
If you choose to receive variable payments, we determine the amount of your
first variable payment based on:
1) your contract value on the Annuity Calculation Date (no more than 10
days before the first payment),
2) your age and the age of any Joint Annuitant on the Annuity Calculation
Date (except in Option 6);
3) the Assumed Investment Return (AIR), a benchmark you select, and
4) the Annuity Option you select.
We credit your Contract with a fixed number of Annuity Units for each Variable
Option you select. We do this by allocating the first payment amount among the
Variable Options according to your instructions, and dividing the amount
allocated to each Variable Option by the Annuity Unit Value on the Annuity
Calculation Date. The number of Annuity Units in your contract remains the same
unless you make a liquidation or transfer.
After the first payment, your payments will change based on the change in value
of the Annuity Units credited to your contract. The amount of each change will
depend on how the Annuity Units in your Contract perform as compared to your AIR
benchmark.
You can choose the frequency of Annuity Payments (for example, monthly,
quarterly, semi-annually or annually).
The SAI contains a discussion of how we calculate Annuity Unit values.
Assumed Investment Return
We base your Annuity Payments on the Assumed Investment Return. You can choose
either a 7%, 5% or 3% AIR. The 7% AIR is not available in all states (check with
your registered representative for availability). If you do not choose one, the
5% AIR will automatically apply. If the actual performance exceeds the AIR you
chose, your Annuity Payments will increase. Similarly, if the actual rate is
less than the AIR you chose, your Annuity Payments will decrease. If you choose
a higher AIR, the initial amount of income will be higher, but income will
increase more slowly during periods of good investment performance and decrease
faster during periods of poor investment performance.
Annuity Options
You can choose among income plans. We call those Annuity Options. Except for
Annuity Option 6, once you select an Annuity Option you may not change it.
You can choose one of the following Annuity Options. You can also choose any
other Annuity Option you want as long as Allianz Life agrees to provide it.
OPTION 1. LIFE ANNUITY. Under this option, we will make periodic Annuity
Payments so long as the Annuitant is alive. After the Annuitant dies, we will
stop making Annuity Payments.
OPTION 2. LIFE ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under
this option, we will make periodic 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 the Beneficiary for the
rest of the guaranteed period. If the Beneficiary does not want to receive
Annuity Payments after the Annuitant=s death, he or she can ask us for a single
lump sum. The amount of the lump sum payment is described in your Contract.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
periodic Annuity Payments during the joint lifetime of you and the Joint
Annuitant. When you die, if the Joint Annuitant is still alive, we will continue
to make Annuity Payments during the Joint Annuitant's life. The amount of the
Annuity Payments we will make can be equal to 100%, 75% or 50% of the amount
that was being paid when both you and the Joint Annuitant were alive. You choose
this percentage when you apply for the Contract. 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 periodic Annuity Payments
during the joint lifetime of you and the Joint Annuitant. When you die, if the
Joint Annuitant is still alive, we will continue to make Annuity Payments during
the life of the surviving Annuitant. The payments will be 100% of the amount
that was being paid when you were both alive. If, when the last death occurs, we
have made Annuity Payments for less than the selected guaranteed period, we will
continue to make Annuity Payments to the Beneficiary for the rest of the
guaranteed period. If the Beneficiary does not want to receive Annuity Payments,
he or she can ask us for a single lump sum. The amount of the lump sum payment
is described in your Contract.
OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make periodic
Annuity Payments during your lifetime. The last Annuity Payment will be made
before you die. If the value of the Annuity Payments is less than the value
applied to the Annuity Option, then the Beneficiary will receive a refund as set
forth in the Contract.
OPTION 6. SPECIFIED PERIOD CERTAIN ANNUITY. Under this option, we will make
periodic Annuity Payments for a specified period that you choose. The period can
be from 5 to 30 years (you must use whole numbers of years). If at the time both
you and any Joint Annuitant die, we have made Annuity Payments for less than the
selected guaranteed period, we will continue to make Annuity Payments to the
Beneficiary for the rest of the guaranteed period. This option may not be
available in all states. This option can only be elected as a variable payout.
After the first Contract anniversary, you can exchange an Annuity Option 6
payout for a payout under Annuity Options 1-5. You can do this if the Total
Liquidation Value of your Contract is at least $25,000. Furthermore, if you own
a Non-Qualified Contract you must be 59 2 or older. If you own a Qualified
Contract you may make the exchange after the later of your reaching age 59 2 or
5 years from the date of the first Annuity Payment and prior to the year in
which you reach age 70 2. A new Contract will be issued to you for your existing
Contract. You must return your existing Contract to us. The Contract
Owner/Annuitant and Joint Annuitant (if any) must be the same under both
Contracts.
3. PURCHASE
Purchase Payment
The Purchase Payment is the money you put into the Contract. The minimum payment
Allianz Life will accept is $35,000. The Contract is a single payment Contract.
This means that you cannot add to your Contract after you buy it. If you buy
more than one Contract, the Purchase Payment for each Contract does not need to
be $35,000 if the average payment for each Contract is $35,000 or more. When you
make your Purchase Payment, we will deduct any premium taxes that you owe before
we allocate it to the Variable Options.
This product is not designed for market timers.
Allocation of Purchase Payment
When you purchase a Contract, we will allocate your Purchase Payment to one or
more of the Variable Options you have selected. If you want any portion of the
Purchase Payment to be allocated to the Fixed Annuity Option, we will
temporarily allocate it to the Money Market Fund. It will be moved to the Fixed
Annuity Option on the day we calculate your first Annuity Payment (Annuity
Calculation Date). The Annuity Calculation Date will be no more than 10 business
days before the Income Date. We ask that you allocate your money in whole
percentages. Each allocation must be at least 10%.
Currently, you may invest in 10 investment choices (which includes the Variable
Options and the Fixed Payment Option). We may, in the future, limit the number
of Variable Options that you may invest in at one time (except in Texas).
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 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. 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 the value of your Contract 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 the period required in your state). If that is
the case, we reserve the right to allocate your Purchase Payment to the Money
Market Fund for 15 days after we receive it. (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
Variable Option(s) you have selected.
VIP Units
The value of the portion of your Contract allocated to the Variable Options will
go up or down based upon the investment performance of the Variable Option(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 prior to the
Annuity Calculation Date, we use a measurement called a VIP Unit (which is like
a share of a mutual fund). On and after the Annuity Calculation Date, we call it
an Annuity Unit.
Every business day we determine the value of a VIP Unit for each Variable Option
by:
1. determining the total amount of money invested in the particular
Variable Option;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding VIP Units.
The value of a VIP Unit may go up or down from day to day.
When you make the Purchase Payment, we credit your Contract with VIP Units. The
number of VIP Units we credit your Contract with is determined by dividing the
amount of the Purchase Payment allocated to a Variable Option by the value of
the corresponding VIP Unit.
We calculate the value of each VIP Unit after the New York Stock Exchange closes
each day and then credit your Contract.
Example:
On Monday we receive your Purchase Payment of $35,000. You have told us you want
this to go to the Growth and Income Fund. When the New York Stock Exchange
closes on that Tuesday, we determine that the value of a VIP Unit based on an
investment in the Growth and Income Fund is $12.50. We then divide $35,000 by
$12.50 and credit your Contract on Tuesday night with 2800 VIP Units.
4. INVESTMENT OPTIONS
The Contract offers Variable Options, which invest in Class 1 shares of 18
Portfolios of Franklin Valuemark Funds. The Contract also offers a Fixed Payment
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 attached Trust prospectus. Only Class 1 shares
are available with your Contract. 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:
Investment
Available Portfolios Managers
- --------------------------------------------------------------------------------
Portfolio Seeking Stability of Principal and Income
Money Market Fund .................................. FA
Portfolio Seeking Current Income
High Income Fund .................................. 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
Mutual Discovery Securities Fund ................... FMA
Small Cap Fund ..................................... FA
Templeton Developing Markets
Equity Fund ....................................... TAM
Templeton Global Growth Fund ....................... TGA
Templeton International Equity Fund ................ FA
Templeton International Smaller
Companies Fund .................................... TIC
Templeton Pacific Growth Fund ...................... FA
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 believes
that offering its shares in this manner will not be disadvantageous to you.
Transfers
You can transfer money among the 18 Variable Options. You cannot make transfers
from the Fixed Payment Option to the Variable Options.
We currently allow you to make as many transfers as you want each year. We may
limit this in the future. However, you will always be allowed at least 6
transfers each year. 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 may 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 if the Portfolio
would be potentially adversely affected.
The following applies to any transfer:
1. You cannot make transfers during the free look period.
2. Your request for a transfer must clearly state which Variable
Options or the Fixed Payment Option are involved in the transfer.
3. Your request for a transfer must clearly state how much the transfer
is for.
4. You cannot make a transfer if it would cause any Variable Option or
the Fixed Payment Option to provide less than 10% of the benefits under your
Contract.
5. You can make at least one allocation to the Fixed Payment Option.
Both your initial allocation to the Fixed Payment Option and each transfer to
the Fixed Payment Option will be treated as an allocation.
Telephone Transfers
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, we will accept instructions from either one of you unless you
instruct us otherwise. We 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. We tape record all telephone instructions.
Voting Privileges
We are the legal owner of the Trust's Class 1 Portfolio shares. However, when a
Portfolio solicits proxies in conjunction with a shareholder vote which affects
your investment, we 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 we own on our own behalf. If we determine that we are 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 Variable Options you have selected with
another Variable Option. We will 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, we make a deduction for insurance charges. We do this as part of our
calculation of the value of the VIP Units and the Annuity Units. The insurance
charge has two parts: 1) the mortality and expense risk charge and 2) the
administrative charge.
- - Mortality and Expense Risk Charge. During the Accumulation Phase, this charge
is equal, on an annual basis, to 1.25% of the average daily value of the
Contract invested in a Variable Option, 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, 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 Variable Option after the
deduction of expenses. This charge 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.
Commutation Fee
Under certain circumstances, you can liquidate (withdraw) all or part of a
variable option of the Contract. When you make a liquidation, the amount you
receive will be reduced by the commutation fee. The commutation fee is a
percentage of the amount withdrawn. The commutation fee is equal to:
Contract Year Charge
------------- ------
1 5%
2 5%
3 4%
4 3%
5 2%
6 (& thereafter) 1%
If you have chosen Annuity Option 6 and you bought your Contract before May 1,
1998, the commutation fee is 1% of the amount liquidated in Contract year 1.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for the payment of these
taxes. We 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. Premium taxes generally range from 0% to 3.5% of the Purchase
Payment, depending on the state. For information regarding premium taxes in your
state, contact your agent or our VIP Service Center.
Income Taxes
We reserve the right to deduct from the Contract any income taxes which it may
incur because of the Contract. Currently, we are 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 above in the Fee Table
and in the attached prospectus for Franklin Valuemark Funds.
6. TAXES
NOTE: Allianz Life has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Allianz
Life has included in the Statement of Additional Information an additional
discussion regarding taxes.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs and for
providing a series of periodic payments for life or a fixed number of years.
Congress recognized how important saving for retirement was and provided special
rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as Tax-Deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of Contract
- --Qualified or Non-Qualified (see following sections).
You, as the Owner, will not be taxed on increases in the value of your Contract
until a distribution occurs -either as a 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 is treated as a partial return of your Purchase Payment 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
Payment are fully includible in income.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the Contract as an individual and not as an individual
retirement annuity, your Contract is referred to as a Non-Qualified Contract.
If you purchase the Contract as an individual retirement annuity, your Contract
is referred to as a Qualified Contract.
LIQUIDATIONS -- NON-QUALIFIED CONTRACTS
If the value of your Contract exceeds your Purchase Payment, any withdrawals
will be included in taxable income to the extent of earnings in your Contract.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some distributions will
be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity;
(5) paid as annuity payments under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
The Code does not specifically address withdrawals (liquidations) from immediate
annuity contracts. A Private Letter Ruling issued by the Internal Revenue
Service concludes that the ability to make withdrawals does not prevent a
contract from qualifying as an immediate annuity. However, the Ruling does not
address the issue of whether a withdrawal would affect the tax treatment of the
annuity payments made before and after the withdrawal under of the requirement
that all immediate annuity payment must be substantially equal. The loss of
favorable tax treatment would mean that the income portion of each annuity
payment received prior to your attaining age 59 1/2 would be subject to a 10%
penalty tax unless another exception to the penalty tax applies. While Allianz
Life currently believes that such withdrawals will not adversely affect the
favorable tax treatment of annuity payments received before or after a
withdrawal and Allianz Life intends to perform its tax reporting functions
accordingly, there can be no assurance that the Internal Revenue Service will
not take a contrary position. You should obtain competent tax advice prior to
making a partial or total liquidation.
LIQUIDATIONS -- QUALIFIED CONTRACTS
If you make a withdrawal under an IRA Contract, a portion of the amount is
taxable, generally based on the ratio of your cost basis to the total accrued
benefit under the contract. Often in the case of IRA's, there is not cost basis
resulting in the full amount of the withdrawal to be included in taxable income.
The Code imposes a 10% penalty tax on the taxable portion of any distributions
from qualified retirement plans, including IRA Contracts. The penalty tax will
not apply to the following distributions:
(a) distributions made on or after the date you reach age 59 1/2;
(b) distributions following your death or disability (for this purpose
disability is as defined in Section 72(m)(7) of the Code);
(c) distributions that are part of a series of substantially equal periodic
payments made at least yearly for your life (or life expectancy) or the joint
lives (or joint life expectancies) of you and your designated Beneficiary;
(d)distributions made to you to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 for amounts paid during
the taxable year for medical care;
(e) distributions for the purchase of medical insurance (as described in Section
213(d)(1)(D) of the Code) for you and your spouse and dependents if you have
received unemployment compensation for at least 12 weeks (this exception will no
longer apply after you have been re-employed for at least 60 days);
(f) distributions made to you to the extent such distributions do not exceed
your qualified higher education expenses (as defined in Section 72(t)(7) of the
Code) for the taxable year; and
(g) distributions which are qualified first time home buyer distributions (as
defined in Section 72(t)(8) of the Code).
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first annuity payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used. A partial liquidation may result in the
modification of the series of annuity payments made after such liquidation and
therefore could result in the imposition of the 10% penalty tax and interest for
the period as described above. You should obtain competent tax advice before you
make any liquidations from an IRA Contract. Any amounts distributed will only be
paid to you, your Annuitant or your Beneficiary. Allianz Life will not transfer
or pay such amounts to another IRA or tax qualified plan.
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 of Franklin
Valuemark Funds are being managed so as to comply with the requirements. Neither
the Code nor the Internal Revenue Service Regulations issued to date provide
guidance as to the circumstances under which you, because of the degree of
control you exercise over the underlying investments, and not Allianz Life would
be considered the owner of the shares of the Portfolios. If this occurs, it will
result in the loss of the favorable tax treatment for the Contract. It is
unknown to what extent 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 Contracts in an attempt to
maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
If you have chosen Annuity Options 2, 4 or 6 you may make liquidations
(withdrawals) from your Contract under the certain circumstances described
below.
- - Annuity Options 2 and 4: If you have selected Annuity Option 2 or 4
and a portion of your payments come from the Variable Options, you may
make partial liquidations (withdrawals) from your Contract. You can
only make liquidations after the first Contract year. During the
lifetime of the Annuitant(s) and while the number of Annuity Payments
made is less than the guaranteed number of payments elected under the
Annuity Option, you can request a liquidation once each year. You can
liquidate a portion of the Total Liquidation Value.(Total Liquidation
Value is referred to as ATotal Withdrawal Value@ in your Contract and
endorsement.) The Total Liquidation Value is equal to the present value
of the remaining guaranteed Annuity Payments (allocated to the Variable
Options) to the end of the period certain commuted at the AIR, less a
commutation fee. The total amount you can liquidate is guaranteed to
not be less than 25% of the Total Liquidation Value. Currently, you may
liquidate up to 75% of the Total Liquidation Value. Allianz Life may
change this amount in the future. The minimum amount you can liquidate
is the lesser of $2,500 or the remaining portion of the Total
Liquidation Value available to be liquidated. Partial liquidations may
not be available in your state.
After a partial liquidation, the subsequent monthly Annuity Payment
during the guaranteed period certain will be reduced by the percentage
of the Total Liquidation Value liquidated, including the commutation
fee.
- - Annuity Option 6: If you have selected Annuity Option 6, you can
currently make one liquidation each year. You may liquidate the Total
Liquidation Value of your Contract. The Total Liquidation Value is
equal to the present value of the remaining Annuity Payments to the end
of the period certain commuted at the AIR less a commutation fee. The
amount of the commutation depends on whether you bought your Contract
before May 1, 1998. Allianz Life may restrict the amount of a partial
liquidation to a minimum of $2,500. We may require a complete
liquidation of your Contract if the remaining Total Liquidation Value
after you request a partial liquidation would be less than $35,000.
Allianz Life will require you to return your Contract before we pay the
entire commuted value.
We will process partial liquidations on the next Annuity Calculation Date after
your written request for a liquidation.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
LIQUIDATION YOU MAKE.
Suspension of Payments or Transfers
We may be required to suspend or postpone payments for liquidations 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 we 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.
8. PERFORMANCE
We periodically advertise performance. We will calculate performance by
determining the percentage change in the value of a VIP Unit by dividing the
increase (decrease) for that unit by the value of the VIP Unit at the beginning
of the period. This performance number reflects the deduction of the insurance
charges. We 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.
We may in the future also advertise yield information. If we do, we will provide
you with information regarding how yield is calculated. More detailed
information regarding how performance is calculated is found in the SAI.
We base any performance advertised on historical data. This performance does not
guarantee future results of the Portfolios.
9. DEATH BENEFIT
IF YOU DIE BEFORE THE INCOME DATE AND THERE IS NO JOINT ANNUITANT, WE WILL TREAT
YOUR CONTRACT AS IF WE HAD NEVER ISSUED IT. WE WILL RETURN THE PURCHASE PAYMENT
TO YOUR ESTATE.
If you have chosen either Annuity Option 3, 4 or 6 with a Joint Annuitant and
either you or the Joint Annuitant dies before the Income Date, the Annuity
Option will be changed to Option 2 with 10 years of payments guaranteed. If the
survivor's life expectancy is less than 10 years, the period of guaranteed
payments will be 5 years instead.
If you or the Joint Annuitant dies on or after the Income Date, the death
benefit, if any, will be paid under the Annuity Option selected. We will require
proof of death. We may delay paying the death benefit until we receive any tax
consents and/or forms from a state.
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. These costs are expensed as
incurred and total costs are not expected to have a significant effect on
Allianz Life's financial position or results of operations. Allianz Life
believes it is taking 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. There can be no
assurance, however, that the steps taken by Allianz Li fe will be adequate to
avoid any adverse impact.
The Separate Account
Allianz Life established a separate account named Allianz Life Variable Account
B (Separate Account). The Separate Account holds the assets that underlie the
Contracts (except assets allocated to the Fixed Payment 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 Variable Options (also known as sub-accounts). Each Variable
Option 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. NFP compensates these entities for their services.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions at the time of purchase up to 4.0% of
the Purchase Payment. Broker-dealers are also paid a trail commission of up to
40 basis points on the portion of Purchase Payment reserve invested in the
Portfolios. We (by agreement with the broker-dealer) pay commissions as a
combination of a certain percentage amount at the time of sale and a trail
commission (which when combined could be more than 4% of the Purchase Payment).
In addition, Allianz Life and Advisers and/or its affiliates may pay certain
sellers for other services not directly related to the sale of the Contracts
(such as special marketing support allowances).
Administration
We have hired Templeton Funds Annuity Company (in California, doing business as
"Templeton Funds Life & Annuity Insurance Company") (VIP Service Center) to
perform certain administrative services regarding the Contracts. The
administrative services include issuance of the Contracts and maintenance of
Contract Owner's records. Templeton Funds Annuity Company has entered into a
reinsurance agreement with us regarding certain risks under the Contracts.
Financial Statements
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
The consolidated financial statements of Allianz Life Insurance Company of North America and the financial statements of Allianz
Life Variable Account B may be found in the SAI.
The table below gives per VIP Unit information about the financial history of each Contract Sub-Account from the inception of each
to December 31, 1998.+
This information should be read in conjunction with the financial statements and related notes to the Variable Account included in
the SAI.
(NUMBER OF UNITS IN THOUSANDS)
GLOBAL MUTUAL MUTUAL REAL
CAPITAL UTILITIES GROWTH & HIGH INCOME MONEY DISCOVERY SHARES ESTATE RISING
CONTRACT SUB-ACCOUNTS: GROWTH SECURITIES INCOME INCOME SECURITIES MARKET SECURITIES SECURITIES SECURITIES DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DEC. 31, 1998
Unit value at beginning of period..
Unit value at end of period .......
Number of units outstanding
at end of period..................
YEAR ENDED DEC. 31, 1997
Unit value at beginning of period.. $11.254 $20.654 $19.490 $21.708 $13.359 $10.180 $10.330 $23.668 $15.303
Unit value at end of period ....... $13.130 $25.818 $24.551 $25.065 $13.865 $11.983 $11.993 $28.169 $20.074
Number of units outstanding
at end of period ................. 5,673 39,623 46,962 49,812 20,982 9,940 18,744 13,445 33,250
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period.. $10.000* $19.565 $17.310 $19.785 $12.883 $10.000* $10.000* $18.073 $12.498
Unit value at end of period ....... $11.254 $20.654 $19.490 $21.708 $13.359 $10.180 $10.330 $23.668 $15.303
Number of units outstanding
at end of period ................. 3,722 53,086 50,027 57,504 28,060 1,471 2,613 12,757 35,569
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period.. NA $15.104 $13.215 $16.392 $12.354 NA NA $15.594 $9.769
Unit value at end of period ....... NA $19.565 $17.310 $19.785 $12.883 NA NA $18.073 $12.498
Number of units outstanding
at end of period ................. NA 66,669 46,893 59,309 31,040 NA NA 10,998 33,789
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period.. NA $17.319 $13.677 $17.734 $12.066 NA NA $15.369 $10.327
Unit value at end of period ....... NA $15.104 $13.215 $16.392 $12.354 NA NA $15.594 $9.769
Number of units outstanding
at end of period ................. NA 70,082 35,695 56,569 39,437 NA NA 11,645 28,778
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period.. NA $15.889 $12.574 $15.163 $11.932 NA NA $13.095 $10.848
Unit value at end of period ....... NA $17.319 $13.677 $17.734 $12.066 NA NA $15.369 $10.327
Number of units outstanding
at end of period ................. NA 84,217 24,719 38,967 10,247 NA NA 5,589 26,256
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period.. NA $14.821 $11.949 $13.580 $11.742 NA NA $11.848 $10.000*
Unit value at end of period ....... NA $15.889 $12.574 $15.163 $11.932 NA NA $13.095 $10.848
Number of units outstanding
at end of period ................. NA 39,387 17,144 11,397 6,951 NA NA 1,052 8,388
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period.. NA $12.062 $ 9.803 $9.842 $11.288 NA NA $ 9.000 NA
Unit value at end of period ....... NA $14.821 $11.949 $13.580 $11.742 NA NA $11.848 NA
Number of units outstanding
at end of period ................. NA 16,188 9,671 4,472 5,682 NA NA 394 NA
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period.. NA $12.010 $10.180 $10.783 $10.637 NA NA $10.368 NA
Unit value at end of period ....... NA $12.062 $9.803 $9.842 $11.288 NA NA $ 9.000 NA
Number of units outstanding
at end of period ................. NA 6,300 5,356 3,011 5,768 NA NA 200 NA
PERIOD FROM INCEPTION**
TO DEC. 31, 1989
Unit value at beginning of period.. NA $10.000 $10.000 $10.000 $10.000 NA NA $10.000 NA
Unit value at end of period ....... NA $12.010 $10.180 $10.783 $10.637 NA NA $10.368 NA
Number of units outstanding
at end of period ................. NA 1,173 1,662 1,508 1,199 NA NA 57 NA
<PAGE>
(NUMBER OF UNITS IN THOUSANDS)
TEMPLETON TEMPLETON TEMPLETON TEMPLETON TEMPLETON TEMPLETON
SMALL DEVELOPING GLOBAL ASSET GLOBAL INTERNATIONAL INTERNATIONAL PACIFIC VALUE
CONTRACT SUB-ACCOUNTS: CAP MARKETS EQUITY ALLOCATION GROWTH EQUITY SMALLER COS GROWTH SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DEC. 31, 1998
Unit value at beginning of period..
Unit value at end of period .......
Number of units outstanding
at end of period.................
YEAR ENDED DEC. 31, 1997
Unit value at beginning of period ...... $12.913 $11.487 $12.514 $13.560 $16.081 $11.145 $14.932 NA
Unit value at end of period ............ $14.952 $10.340 $13.786 $15.176 $17.711 $10.825 $ 9.431 NA
Number of units outstanding
at end of period ...................... 16,924 23,007 5,229 41,432 58,179 1,998 15,833 NA
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period ...... $10.146 $ 9.582 $10.591 $11.339 $13.263 $10.000** $13.630 NA
Unit value at end of period ............ $12.913 $11.487 $12.514 $13.560 $16.081 $11.145 $14.932 NA
Number of units outstanding
at end of period ...................... 12,784 22,423 4,104 40,327 64,375 1,388 22,061 NA
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period ...... $10.000* $ 9.454 $10.000* $10.201 $12.161 NA $12.802 NA
Unit value at end of period ............ $10.146 $ 9.582 $10.591 $11.339 $13.263 NA $13.630 NA
Number of units outstanding
at end of period ...................... 1,302 15,618 1,338 28,309 59,883 NA 22,483 NA
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period ...... NA $10.000* NA $10.000* $12.226 NA $14.233 NA
Unit value at end of period ............ NA $ 9.454 NA $10.201 $12.161 NA $12.802 NA
Number of units outstanding
at end of period ...................... NA 9,774 NA 14,637 60,464 NA 27,231 NA
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period ...... NA NA NA NA $ 9.642 NA $ 9.761 NA
Unit value at end of period ............ NA NA NA NA $12.226 NA $14.233 NA
Number of units outstanding
at end of period ...................... NA NA NA NA 24,026 NA 14,240 NA
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period ...... NA NA NA NA $10.000* NA $10.000* NA
Unit value at end of period ............ NA NA NA NA $ 9.642 NA $ 9.761 NA
Number of units outstanding
at end of period ...................... NA NA NA NA 1,329 NA 534 NA
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period ...... NA NA NA NA NA NA NA NA
Unit value at end of period ............ NA NA NA NA NA NA NA NA
Number of units outstanding
at end of period ...................... NA NA NA NA NA NA NA NA
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period ...... NA NA NA NA NA NA NA NA
Unit value at end of period ............ NA NA NA NA NA NA NA NA
Number of units outstanding
at end of period ...................... NA NA NA NA NA NA NA NA
PERIOD FROM INCEPTION*
TO DEC. 31, 1989
Unit value at beginning of period ...... NA NA NA NA NA NA NA NA
Unit value at end of period ............ NA NA NA NA NA NA NA NA
Number of units outstanding
at end of period ...................... NA NA NA NA NA NA NA NA
<FN>
*Unit Value at inception was $10.00.
The VIP Unit Value at inception was $10.00 for each Contract Sub-Account. Inception was 1/24/89 for the Global Utilities
Securities, Growth and Income, High Income, Income Securities, Money Market, and Real Estate Securities Sub-Accounts; 1/27/92 for
the Rising Dividends, Templeton International Equity, and Templeton Pacific Growth Sub-Accounts; 3/15/94 for the Templeton
Developing Markets Equity, and Templeton Global Growth Sub-Accounts; 5/1/95 for the Templeton Global Asset Allocation Sub-Account;
11/1/95 for the Small Cap Sub-Account; 5/1/96 for the Capital Growth, and Templeton International Smaller Companies Sub-Accounts;
11/8/96 for the Mutual Discovery Securities, and Mutual Shares Securities Sub-Accounts; and 5/1/98 for the Value Securities
Sub-Account.
</FN>
</TABLE>
<PAGE>
APPENDIX B
- --------------------------------------------------------------------------------
ILLUSTRATION OF ANNUITY INCOME
We have prepared the following tables to show you how investment performance
affects variable annuity income over time. The variable annuity income amounts
reflect three different assumptions for a constant investment return before all
expenses: 0%, 6% and 12%. These are hypothetical rates of return. Allianz Life
does not guarantee that the Contract will earn these returns for any one year or
any sustained period of time. The tables are for illustrative purposes only.
They do not represent past or future investment returns.
Your variable annuity income may be more or less than the income shown if the
actual returns of the Portfolios you select are different than those shown
below. Since it is very likely that investment returns will fluctuate over time,
the amount of variable annuity income you will receive will also fluctuate. The
total amount of annuity income you actually receive will depend on the
cumulative investment returns of the Portfolios you choose, how long you live
and the Annuity Option you choose.
Another factor which will affect the amount of variable annuity income you will
receive is the Assumed Investment Return (AIR). Income will increase from one
Income Date to the next if the annualized net rate of return during that time is
greater than the AIR you choose. It will decrease if the annualized net rate of
return is less than the AIR.
There are three illustrations. The first is based on a 3% AIR, the second is
based on a 5% AIR, and the third is based on a 7% AIR. The 7% AIR may not be
available in your state. (Check with your registered representative regarding
availability).
The income amounts shown reflect the deduction of all fees and expenses. Actual
Portfolio fees and expenses will vary from year to year and from Portfolio to
Portfolio. Actual expenses may be higher or lower than the rate used in the
illustrations. The illustrations assume that each Portfolio will incur expenses
at an annual rate of _____% of the average daily net assets of the Portfolio.
This is the average in 1998, weighted by Portfolio net assets as of 12/31/98.
The insurance charges are calculated at an annual rate of 1.40% of the average
daily net assets of the Separate Account. After taking these expenses and
charges into consideration, the illustrated gross investment returns of 0%, 6%
and 12% are approximately equal to net rates (which means after expenses have
been deducted) of ____%, ____% and ____%, respectively.
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/29 EFFECTIVE DATE: 12/1/98
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/99
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 3%
The amount of monthly variable annuity income shown in the table below and the graph that
follows assumes a constant annual investment return. The amount of variable annuity income that
you actually receive will depend on the investment performance of the Portfolio(s) you choose.
The variable annuity income can go up or down. No minimum dollar amount of variable annuity
income is guaranteed. The amounts shown are based on a 3% AIR. Income will remain constant at
$625 per month when the net rate of return after expenses is 3% (annually).
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -_.__% _.__% _.__%
- -------------------- ---- -------------------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
January 1, 1999 70 $___ $___ $ ___
January 1, 2000 71 ___ ___ ___
January 1, 2001 72 ___ ___ ___
January 1, 2002 73 ___ ___ ___
January 1, 2003 74 ___ ___ ___
January 1, 2008 79 ___ ___ _,___
January 1, 2013 84 ___ ___ _,___
January 1, 2018 89 ___ ___ _,___
January 1, 2023 94 ___ ___ _,___
The investment rates of return shown are hypothetical only. You should not consider them to
represent past or future investment performance. Actual rates of return may be more or less
than those shown and will depend on a number of factors.
</TABLE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/29 EFFECTIVE DATE: 12/1/98
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/99
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 5%
The amount of monthly variable annuity income shown in the table below and the graph that
follows assumes a constant annual investment return. The amount of variable annuity income that
you actually receive will depend on the investment performance of the Portfolio(s) you choose.
The variable annuity income can go up or down. No minimum dollar amount of variable annuity
income is guaranteed. The amounts shown are based on a 5% AIR. Income will remain constant at
$742 per month when the net rate of return after expenses is 5% (annually).
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -_.__% _.__% _.__%
- -------------------- ---- -------------------------------------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
January 1, 1999 70 $___ $___ $ ___
January 1, 2000 71 ___ ___ ___
January 1, 2001 72 ___ ___ ___
January 1, 2002 73 ___ ___ ___
January 1, 2003 74 ___ ___ ___
January 1, 2008 79 ___ ___ _,___
January 1, 2013 84 ___ ___ _,___
January 1, 2018 89 ___ ___ _,___
January1, 2023 94 ___ ___ _,___
The investment rates of return shown are hypothetical only. You should not consider them to
represent past or future investment performance. Actual rates of return may be more or less
than those shown and will depend on a number of factors.
</TABLE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/29 EFFECTIVE DATE: 12/1/98
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/99
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 7%
The amount of monthly variable annuity income shown in the table below and the graph that
follows assumes a constant annual investment return. The amount of variable annuity income that
you actually receive will depend on the investment performance of the Portfolio(s) you choose.
The variable annuity income can go up or down. No minimum dollar amount of variable annuity
income is guaranteed. The amounts shown are based on a 7% AIR. Income will remain constant at
$861 per month when the net rate of return after expenses is 7% (annually).
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -_.__% _.__% _.__%
- -------------------- ---- -------------------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
January 1, 1999 70 $___ $___ $ ___
January 1, 2000 71 ___ ___ ___
January 1, 2001 72 ___ ___ ___
January 1, 2002 73 ___ ___ ___
January 1, 2003 74 ___ ___ ___
January 1, 2008 79 ___ ___ _,___
January 1, 2013 84 ___ ___ _,___
January 1, 2018 89 ___ ___ _,___
January 1, 2023 94 ___ ___ _,___
The investment rates of return shown are hypothetical only. You should not consider them to
represent past or future investment performance. Actual rates of return may be more or less
than those shown and will depend on a number of factors.
</TABLE>
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 .............................
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL IMMEDIATE
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
MAY 1, 1999
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL IMMEDIATE VARIABLE
ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195, (800) 542-5427.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED MAY 1,
1999, AND AS MAY BE AMENDED FROM TIME TO TIME.
TABLE OF CONTENTS
CONTENTS PAGE
Company..........................................
Experts..........................................
Legal Opinions...................................
Distributor......................................
Calculation of Performance Data..................
Total Return....................................
Yield...........................................
Performance Ranking.............................
Performance Information.........................
Annuity Income..................................
Federal Tax Status...............................
Annuity Provisions...............................
Variable Annuity Payout.........................
Fixed Annuity Payout............................
Financial Statements.............................
COMPANY
Information regarding Allianz Life Insurance Company of North America (the
"Company") and its ownership is contained in the Prospectus. On April 1, 1993,
the Company changed its name from North American Life and Casualty Company to
its present name. The Company is rated A+ (Superior) by A.M. BEST, an
independent analyst of the insurance industry. The financial strength of an
insurance company may be relevant insofar as the ability of a company to make
fixed annuity payments from its general account.
EXPERTS
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The financial statements of Allianz Life Variable Account B and the consolidated
financial statements of the Company as of and for the year ended December 31,
1998, 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
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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
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NALAC Financial Plans, LLC, a subsidiary of the Company, acts as the
distributor. The offering is on a continuous basis.
CALCULATION OF PERFORMANCE DATA
Total Return
From time to time, the Company may advertise the performance data for the
Contract Sub-Accounts in sales literature, advertisements, personalized
hypothetical illustrations, and Contract Owner communications. Such data will
show the percentage change in the value of a VIP Unit based on the performance
of a Contract Sub-Account over a stated period of time which is determined by
dividing the increase (or decrease) in value for that unit by the VIP Unit Value
at the beginning of the period.
Any such performance data will include total return figures for the one, five,
and ten year (or since inception) time periods indicated. Such total return
figures will reflect the deduction of a 1.25% Mortality and Expense Risk Charge,
a 0.15% Administrative Expense Charge and the operating expenses of the
underlying Portfolios.
The hypothetical value of a Contract purchased for the time periods described
will be determined by using the actual VIP Unit Values for an initial $1,000
purchase payment. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years;
ERV = ending redeemable value of a hypothetical $1,000 purchase payment made at
the beginning of the period at the end of the period.
The Company may also advertise cumulative and total return information over
different periods of time. Cumulative total return is calculated in a similar
manner as described above except that the results are not annualized.
Yield
The Money Market Sub-Account. The Company may advertise yield information for
the Money Market Sub-Account. The Money Market Sub-Account's current yield may
vary each day, depending upon, among other things, the average maturity of the
underlying Portfolio's investment securities and changes in interest rates,
operating expenses, the deduction of the Mortality and Expense Risk Charge, the
Administrative Expense Charge and, in certain instances, the value of the
underlying Portfolio's investment securities. The fact that the Contract
Sub-Account's current yield will fluctuate and that the principal is not
guaranteed should be taken into consideration when using the Contract
Sub-Account's current yield as a basis for comparison with savings accounts or
other fixed-yield investments. The yield at any particular time is not
indicative of what the yield may be at any other time.
The Money Market Sub-Account's current yield is computed on a base period
return of a hypothetical Contract having a beginning balance of one VIP Unit for
a particular period of time (generally seven days). The return is determined by
dividing the net change (exclusive of any capital changes) in such VIP Unit by
its beginning value, and then multiplying it by 365/7 to get the annualized
current yield. The calculation of net change reflects the value of additional
shares purchased with the dividends paid by the Portfolio, and the deduction of
the Mortality and Expense Risk Charge and the Administrative Expense Charge.
The effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. (Effective
yield = [(Base Period Return + 1)365/7]-1.)
For the seven-day period ending on 12/31/97, the Money Market Sub-Account had a
current yield of 3.88% and an effective yield of 3.95%.
Other Contract Sub-Accounts. The Company may also quote yield in sales
literature, advertisements, personalized hypothetical illustrations, and
Contract Owner communications for the other Contract Sub-Accounts. Each Contract
Sub-Account (other than the Money Market Sub-Account) will publish standardized
total return information with any quotation of current yield.
The yield computation is determined by dividing the net investment income per
VIP Unit earned during the period (minus the deduction for the Mortality and
Expense Risk Charge and Administrative Expense Charge) by the VIP Unit Value on
the last day of the period and annualizing the resulting figure, according to
the following formula:
Yield = 2 [((a-b) + 1)6 - 1]
------------------------------
cd
where:
a = net investment income earned during the period by the Portfolio attributable
to shares owned by the Contract Sub-Account;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of VIP Units outstanding during the period;
d = the maximum offering price per VIP Unit on the last day of the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods (or one month) identified in the sales literature,
advertisement, or communication. The Company does not currently advertise yield
information for any Contract Sub-Account (other than the Money Market
Sub-Account).
Performance Ranking
The performance based on each or all of the Contract Sub-Accounts of the
Variable Account may be compared in its advertising and sales literature to the
performance of other variable annuity issuers in general or to the performance
of particular types of variable annuities investing in mutual funds, or series
of mutual funds with investment objectives similar to each of the Contract
Sub-Accounts of the Variable Account or indices. Lipper Analytical Services,
Inc. ("Lipper") and the Variable Annuity Research and Data Service ("VARDS") are
independent services which monitor and rank the performance of variable annuity
issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS rankings compare only variable annuity issuers. The performance
analyses prepared by Lipper and VARDS rank such issuers on the basis of total
return, assuming reinvestment of distributions, but do not take sales charges,
redemption fees or certain expense deductions at the separate account level into
consideration. In addition, VARDS prepares risk adjusted rankings, which
consider the effects of market risk on total return performance. This type of
ranking may address the question as to which portfolios provide the highest
total return with the least amount of risk. Other ranking services may be used
as sources of performance comparison, such as CDA/Weisenberger and Morningstar.
Performance Information
Total returns reflect all aspects of a Contract Sub-Account's return, including
the automatic reinvestment by Allianz Life Variable Account B of all
distributions and any change in a Contract Sub-Account's value over the period.
The performance of the Contract Sub-Accounts reflects results achieved prior to
the date the Contracts first invested in the Contract Sub-Accounts.
The returns reflect the deduction of the Mortality and Expense Risk Charge,
Administrative Expense Charge and the operating expenses of each Portfolio. Past
performance does not guarantee future results.
<TABLE>
<CAPTION>
STANDARDIZED TOTAL RETURN
Average Annual Total Return for the periods ended December 31, 1998
Inception One Five Since
Contract Sub-Account Date Year Years Inception
- - ------------------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S>
Capital Growth ........................................................ _______ _____% _____% _____%
Global Utilities Securities .......................................... _______ _____% _____% _____%
Growth and Income ..................................................... _______ _____% _____% _____%
High Income............................................................ _______ _____% _____% _____%
Income Securities ..................................................... _______ _____% _____% _____%
Money Market .......................................................... _______ _____% _____% _____%
Mutual Discovery Securities ........................................... _______ _____% _____% _____%
Mutual Shares Securities .............................................. _______ _____% _____% _____%
Real Estate Securities ................................................ _______ _____% _____% _____%
Rising Dividends ...................................................... _______ _____% _____% _____%
Small Cap ............................................................. _______ _____% _____% _____%
Templeton Developing Markets Equity ................................... _______ _____% _____% _____%
Templeton Global Asset Allocation ..................................... _______ _____% _____% _____%
Templeton Global Growth ............................................... _______ _____% _____% _____%
Templeton International Equity ........................................ _______ _____% _____% _____%
Templeton International Smaller Companies ............................. _______ _____% _____% _____%
Templeton Pacific Growth .............................................. _______ _____% _____% _____%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED TOTAL RETURN
Total Return for the periods ended December 31, 1998
Annual Total Return Cumulative Total Return
______________________ ___________________________
Inception Three Three Five Since
Contract Sub-Account Date Years Years Years Inception
- - ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S>
Capital Growth ..................... _______ _____% _____% _____% _____%
Global Utilities Securities ....... _______ _____% _____% _____% _____%
Growth and Income .................. _______ _____% _____% _____% _____%
High Income......................... _______ _____% _____% _____% _____%
Income Securities .................. _______ _____% _____% _____% _____%
Money Market ....................... _______ _____% _____% _____% _____%
Mutual Discovery Securities ........ _______ _____% _____% _____% _____%
Mutual Shares Securities ........... _______ _____% _____% _____% _____%
Real Estate Securities ............. _______ _____% _____% _____% _____%
Rising Dividends ................... _______ _____% _____% _____% _____%
Small Cap .......................... _______ _____% _____% _____% _____%
Templeton Developing
Markets Equity ................... _______ _____% _____% _____% _____%
Templeton Global
Asset Allocation .................. _______ _____% _____% _____% _____%
Templeton Global Growth............ _______ _____% _____% _____% _____%
Templeton International Equity...... _______ _____% _____% _____% _____%
Templeton International
Smaller Companies ................. _______ _____% _____% _____% _____%
Templeton Pacific Growth ........... _______ _____% _____% _____% _____%
</TABLE>
The Company may also present performance information computed on a different
basis.
Contract Owners should note that investment results will fluctuate over time,
and any presentation of total return for any period should not be considered as
a representation of what an investment may earn or what a Contract Owner's total
return may be in any future period.
Annuity Income
Periodic annuity income amounts may be illustrated using the historical
performance of the Contract Sub-Accounts, the Standard & Poor's 500 Composite
Stock Price Index or other recognized investment benchmark portfolios. All
illustrations will reflect the 1.25% annual Mortality and Expense Risk Charge
and the 0.15% Administrative Expense Charge and actual or assumed Portfolio
expenses.
FEDERAL TAX STATUS
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NOTE: The following description is based upon the Company's understanding of
current federal income tax law applicable to annuities in general. The Company
cannot predict the probability that any changes in such laws will be made.
Purchasers are cautioned to seek competent tax advice regarding the possibility
of such changes. The Company does not guarantee the tax status of the Contracts.
Purchasers bear the complete risk that the Contracts may not be treated as
"annuity contracts" under federal income tax laws. It should be further
understood that the following discussion is not exhaustive and that special
rules not described in this Prospectus may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state or other tax
laws.
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code") governs
taxation of annuities in general. A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as annuity payments under the Annuity Option elected.
For annuity payments, the portion of a payment includable in income equals the
excess of the payment over the exclusion amount. The exclusion amount for
payments based on a variable annuity option is determined by dividing the
investment in the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid (determined
by Treasury Regulations). The exclusion amount for payments based on a fixed
annuity option is determined by multiplying the payment by the ratio that the
cost basis of the Contract (adjusted for any period certain or refund guarantee)
bears to the expected return under the Contract. Payments received after the
investment in the Contract has been recovered (i.e. the total of the excludable
amounts equal the investment in the Contract) are fully taxable. The taxable
portion of an annuity payment is taxed at ordinary income rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries
under the Contracts should seek competent financial advice about the tax
consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity contract would result in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Portfolios of the Trust underlying the Contracts
will be managed by the managers for the Trust in such a manner as to comply with
these diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the investments of the Variable Account will cause the Contract Owner to be
treated as the owner of the assets of the Variable Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Contract Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Contract Owner's ability to transfer
among investment choices or the number and type of investment choices available,
would cause the Contract Owner to be considered as the owner of the assets of
the Variable Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Contract Owner being
retroactively determined to be the owner of the assets of the Variable Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
Section 72(e)(11) of the Code provides that multiple non-qualified annuity
contracts which are issued within a calendar year period to the same contract
owner by one company or its affiliates are treated as one annuity contract for
purposes of determining the tax consequences of any distribution. Such treatment
may result in adverse tax consequences, including more rapid taxation of the
distributed amounts from such combination of contracts. For purposes of this
rule, contracts received in a Section 1035 exchange will be considered issued in
the year of the exchange. The legislative history of Section 72(e)(11) indicates
that it was not intended to apply to immediate annuities. However, the
legislative history also states that no inference is intended as to whether the
Treasury Department, under its authority to prescribe rules to enforce the tax
laws, may treat the combination purchase of a deferred annuity contract with an
immediate annuity contract as a single contract for purposes of determining the
tax consequences of any distribution.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 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 and his Beneficiary; (e) as an annuity payment
under an immediate annuity; or (f) which are allocable to purchase payments made
prior to August 14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Distributions -IRA Contracts.")
The availability of total or partial withdrawals from an immediate annuity is
not expressly provided for in the Code or Treasury Regulations. The only tax
guidance currently available for such issue is a Private Letter Ruling holding
that the right to make withdrawals does not prevent a contract from qualifying
as an immediate annuity. However, the Private Letter Ruling does not address the
issue of whether the making of a withdrawal would adversely affect the favorable
tax treatment of annuity payments made before or after such partial withdrawal
because of the requirement that all immediate annuity payments must be
"substantially equal." The loss of favorable tax treatment would mean that the
income portion of each annuity payment received prior to the taxpayer's
attaining age 59 1/2 would be subject to a 10% penalty tax unless another
exception to the penalty tax applies. While the Company currently believes that
such withdrawals will not adversely affect the favorable tax treatment of
annuity payments received before or after a withdrawal and the Company intends
to perform its tax reporting functions accordingly, there can be no assurance
that the Internal Revenue Service will not take a contrary position. Contract
Owners should obtain competent tax advice prior to making a partial or total
withdrawal.
QUALIFIED PLANS
The Contracts offered by this Prospectus may also be used with a plan qualified
under Section 408(b) of the Code ("IRA Contracts"). Contract Owners, Annuitants
and Beneficiaries are cautioned that benefits under an IRA Contract may be
subject to the terms and conditions of the plan regardless of the terms and
conditions of the Contracts issued pursuant to the plan. The following
discussion of IRA Contracts is not exhaustive and is for general informational
purposes only. The tax rules regarding IRA Contracts are very complex and will
have differing applications depending on individual facts and circumstances.
Each purchaser should obtain competent tax advice prior to purchasing IRA
Contracts.
IRA Contracts include special provisions restricting Contract provisions that
may otherwise be available as described in this Prospectus. Generally, IRA
Contracts are not transferable except upon surrender or annuitization.
Various penalty and excise taxes may apply to contributions or distributions
made in violation of applicable limitations. Furthermore, certain withdrawal
penalties and restrictions may apply to distributions from IRA Contracts. (See
"Tax Treatment of Distributions - IRA Contracts.")
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. IRA Contracts will utilize annuity tables which do
not differentiate on the basis of sex because of the use of the IRA Contracts in
a Simplified Employee Pension. Such annuity tables will also be available for
use in connection with certain non-qualified deferred compensation plans.
Under applicable limitations, certain amounts may be contributed to an IRA
Contract which will be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Distributions - IRA Contracts.") Under
certain conditions, distributions from other IRAs and other qualified plans may
be rolled over or transferred on a tax-deferred basis into an IRA Contract.
Sales of Contracts for use as IRA Contracts are subject to special requirements
imposed by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers of
Contracts to be qualified as Individual Retirement Annuities should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
TAX TREATMENT OF DISTRIBUTIONS - IRA CONTRACTS
In the case of a withdrawal under an IRA Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract.
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including IRA Contracts. To
the extent amounts are not includible in gross income because they have been
rolled over to an IRA or to another eligible qualified plan, no tax penalty will
be imposed. The tax penalty will not apply to the following distributions: (a)
if distribution is made on or after the date on which the Annuitant reaches age
59 1/2; (b) distributions following the death or disability of the Annuitant
(for this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of a series of substantially equal periodic payments
made not less frequently than annually for the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the Annuitant and
his or her designated Beneficiary; (d) distributions made to the Annuitant to
the extent such distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Annuitant for amounts paid during the taxable year
for medical care; (e) distributions from an IRA Contract for the purchase of
medical insurance (as described in Section 213(d)(1)(D) of the Code) for the
Annuitant and his or her spouse and dependents if the Annuitant has received
unemployment compensation for at least 12 weeks (this exception will no longer
apply after the Annuitant has been re-employed for at least 60 days.); (f)
distributions from an Individual Retirement Annuity made to the Annuitant to the
extent such distributions do not exceed the qualified higher education expenses
(as defined in Section 72(t)(7) of the Code) of the Annuitant for the taxable
year; and (g) distributions from an Individual Retirement Annuity made to the
Annuitant which are qualified first-time home buyer distributions (as defined in
Section 72(t)(8) of the Code). With respect to (c) above, if the series of
substantially equal periodic payments is modified before the later of the
Annuitant attaining age 59 1/2 or 5 years from the date of the first annuity
payment, then the tax for the year of the modification is increased by an amount
equal to the tax which would have been imposed (the 10% penalty tax) but for the
exception, plus interest for the tax years in which the exception was used. A
partial withdrawal may result in the modification of the series of annuity
payments made after such withdrawal and therefore could result in the imposition
of the 10% penalty tax and interest for the period as described above. Competent
tax advice should be obtained prior to making any withdrawals from an IRA
Contract. Any amounts distributed will only be paid to the Annuitant, Joint
Annuitant or Beneficiary. The Company will not transfer or pay such amounts to
another IRA or tax qualified plan.
Generally, distributions from an IRA Contract must commence no later than April
1 of the calendar year, following the 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. Generally, required distributions must be over a period not exceeding
the life or life expectancy of the individual or the joint lives or life
expectancies of the individual and his or her designated beneficiary. If the
required minimum distributions are not made, a 50% penalty tax is imposed as to
the amount not distributed.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign their
Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Contract Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Contract Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.
ANNUITY PROVISIONS
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Variable Annuity Payout
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable Contract Sub-Account(s) of the Variable Account. Annuity
payments also depend upon the Age of the Annuitant and any Joint Annuitant and
the Assumed Net Investment Factor utilized. On the Annuity Calculation Date,
a fixed number of Annuity Units will be purchased, determined as follows:
The first annuity payment is equal to the Contract Value allocated to the
Variable Account divided first by $1,000 and then multiplied by the appropriate
annuity payment amount for each $1,000 of value for the Annuity Option selected.
In each Contract Sub-Account, the fixed number of Annuity Units is determined by
dividing the amount of the initial annuity payment determined for each Contract
Sub-Account by the Annuity Unit value on the Annuity Calculation Date.
Thereafter, the number of Annuity Units in each Contract Sub-Account remains
unchanged unless the Contract Owner elects to transfer between Contract
Sub-Accounts. All calculations will appropriately reflect the annuity payment
frequency selected.
On each subsequent annuity payment date, the total annuity payment is the sum of
the annuity payments determined for each Contract Sub-Account. The annuity
payment in each Contract Sub-Account is determined by multiplying the number of
Annuity Units then allocated to such Contract Sub-Account by the Annuity Unit
value for that Contract Sub-Account.
For each Contract Sub-Account, the value of an Annuity Unit was initially
established at $1.00. On each subsequent Valuation Date the value of an Annuity
Unit is determined in the following way:
FIRST: The Net Investment Factor is determined by dividing (a) by (b) and adding
(c) to the result, where:
a. is the net increase or decrease in the Net Asset Value per share of
the Portfolio (or other Eligible Investment) plus the per share amount
of any dividend or capital gain distribution paid by the Portfolio (or
Eligible Investment) during the Valuation Period, plus or minus a per
share charge or credit for any taxes incurred by or reserved for in
the Contract Sub-Account as of the end of the current Valuation Period
which the Company determines to have resulted from maintenance of the
Contract Sub-Account; and
b. is the Net Asset Value per share of the Portfolio (or other Eligible
Investment) at the beginning of the Valuation Period, plus or minus a
per share charge or credit for any taxes incurred by or reserved for
in the Contract Sub-Account as of the end of the immediately preceding
Valuation Period which the Company determines to have resulted from
maintenance of the Contract Sub-Account; and
c. is the net result of 1.000 less the Valuation Period deduction for the
charges to the Contract Sub-Account.
The Net Investment Factor may be more or less than one.
SECOND: The value of an Annuity Unit for a Valuation Date is equal to:
a. the value of the Annuity Unit on the immediately preceding Valuation
Date;
b. multiplied by the Net Investment Factor for the Valuation Period
ending on the current Valuation Date;
c. divided by the Assumed Net Investment Factor (see below) for the
Valuation Period.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular Valuation Period. For example, with a 5%
Assumed Investment Return, the Assumed Net Investment Factor for a one-year
Valuation Period would be 1.05. For a one-day Valuation Period, the Assumed Net
Investment Factor would be 1.00013368062.
The Assumed Investment Return is the investment return upon which annuity
payments are based. Income will increase from one annuity Income Date to the
next if the annualized Net Rate of Return during that time is greater than the
Assumed Investment Return and will decrease if the annualized Net Rate of Return
is less than the Assumed Investment Return.
A Contract Owner may choose either a 7%, 5% or a 3% Assumed Investment Return.
If the Contract Owner does not choose one, the 5% Assumed Investment Return
automatically applies. Choosing a higher Assumed Investment Return will result
in a higher initial amount of income, but income will increase more slowly
during periods of good investment performance of the Trust and decrease more
rapidly during periods of poor investment performance. THE 7% ASSUMED INVESTMENT
RETURN IS NOT AVAILABLE IN ALL STATES UNTIL APPROVED BY THE STATE INSURANCE
DEPARTMENTS. (CHECK WITH YOUR REGISTERED REPRESENTATIVE REGARDING AVAILABILITY).
The variable annuity benefits provided for under the Contract are based upon:
(a) the 1983(a) Blended Unisex Mortality Table with 50% female content,
projected to the year 2000 with Projection Scale G; (b) the Assumed Investment
Return, and (c) any applicable taxes.
Fixed Annuity Payout
Annuity payments from the Fixed Payment Annuity will be equal payments unless
otherwise specified by the Annuity Option selected.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited consolidated financial statements of the Company as of and for the
year ended December 31, 1998 included herein should be considered only as
bearing upon the ability of the Company to meet its obligations under the
Contracts. The audited financial statements of the Variable Account as of and
for the year ended December 31, 1998 are also included herein.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
To be filed by amendment
b. Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account (1)
2. Not Applicable
3. Principal Underwriter Agreement (3)
4. Individual Immediate Variable Annuity Contract (3)
4. (i) Individual Immediate Variable Annuity Contract
Endorsements (3)
5. Application for Individual Immediate Variable Annuity (2)
6. (i) Copy of Articles of Incorporation of the Company (1)
(ii) Copy of the Bylaws of the Company (1)
7. Not Applicable
8. Form of Fund Participation Agreement (2)
9. Opinion and Consent of Counsel*
10. Independent Auditors' Consent*
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information*
14. Company Organizational Chart(3)
27. Not Applicable
(1) Incorporated by reference to Registrant's Post-Effective Amendment No.
2 to Form N-4 which was electronically filed on November 1, 1995.
(2) Incorporated by reference to Registrant's Post-Effective Amendment No. 3
to Form N-4 which was electronically filed on April 24, 1996.
(3) Incorporated by reference to Registrant's Post-Effective Amendment No. 5
to Form N-4 which was electronically filed on April 29, 1997.
* To be filed by amendment
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- --------------------------- --------------------------------------
<S> <C>
Lowell C. Anderson Chairman, President, Chief
1750 Hennepin Avenue Executive Officer and Director
Minneapolis, MN 55403
Herbert F. Hansmeyer Director
777 San Marin Drive
Novato, CA 94998
Michael P. Sullivan Director
7505 Metro Blvd.
Minneapolis, MN 55439
Dr. Jerry E. Robertson Director
220-13E-29/3M Center
St. Paul, MN 55144
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 17
D - 70178
Stuttgart, Germany
Edward J. Bonach Senior Vice President, Chief Financial
1750 Hennepin Avenue Officer and Treasurer
Minneapolis, MN 55403
Michael T. Westermeyer Vice President-Law & Secretary
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert S. James President-Individual Marketing
1750 Hennepin Avenue
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Reverend Dennis J. Dease Director
c/o University of St.Thomas
2115 Summit Avenue
Box AQU100
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116
Robert M. Kimmitt Director
c/o Wilmer, Cutler & Pickering
2445 M Street, N.W.
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 Post-Effective
Amendment No. 5 to Form N-4 which was electronically filed on April 29, 1997
(File No. 811-05618).
Item 27. Number of Contract Owners
As of January 28, 1999, there were 275 qualified Contract Owners and 202
non-qualified Contract Owners with Contracts in the Separate Account.
Item 28. Indemnification
The Bylaws of the Company provide that:
Each person (and the heirs, executors, and administrators of such person) made
or threatened to be made a party to any action, civil or criminal, by reason of
being or having been a Director, officer, or employee of the corporation (or by
reason of serving any other organization at the request of the corporation)
shall be indemnified to the extent permitted by the laws of the State of
Minnesota, and in the manner prescribed therein.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
a. NALAC Financial Plans, LLC is the principal underwriter for the
Contracts. It also is the principal underwriter for:
Allianz Life Variable Account A
Preferred Life Variable Account C
b. The following are the officers and directors of NALAC Financial Plans,
LLC:
<TABLE>
<CAPTION>
Name & Principal Positions and Offices
Business Address with Underwriter
- ----------------------- -----------------------------
<S> <C>
James P. Kelso Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Edward J. Bonach Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael J. Yates Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
c. Not Applicable
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota,
maintains physical possession of the accounts, books or documents of the
Variable Account required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated thereunder.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant has caused this Registration Statement to be
signed on its behalf in the City of Minneapolis and State of Minnesota, on this
27th day of January, 1999.
<TABLE>
<CAPTION>
<S> <C>
ALLIANZ LIFE
VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/ MICHAEL T. WESTERMEYER
------------------------------
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By: /s/ MICHAEL T. WESTERMEYER
------------------------------
</TABLE>
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature and Title
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board,
Lowell C. Anderson President and Chief 01/27/99
Executive Officer Date
Herbert F. Hansmeyer* Director 01/27/99
Herbert F. Hansmeyer Date
Michael P. Sullivan* Director 01/27/99
Michael P. Sullivan Date
Dr. Jerry E. Robertson* Director 01/27/99
Dr. Jerry E. Robertson Date
Dr. Gerhard Rupprecht* Director 01/27/99
Dr. Gerhard Rupprecht Date
Edward J. Bonach* Chief Financial Officer 01/27/99
Edward J. Bonach Date
Rev. Dennis J. Dease* Director 01/27/99
Rev. Dennis J. Dease Date
James R. Campbell* Director 01/27/99
James R. Campbell Date
Robert M. Kimmitt* Director 01/27/99
Robert M. Kimmitt Date
*By Power of Attorney
By: /s/ MICHAEL T. WESTERMEYER
-----------------------------
Michael T. Westermeyer
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 8
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
To be filed by amendment
