File Nos. 33-72046
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. 10 (X)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 53 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
-------------------------------
(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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(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 Deferred 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. . . . . . . . . . . . Summary
Item 4. Condensed Financial Information. . . . . . . . Appendix - Condensed
Financial Information
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies. . . . . . . . . . . . The Separate Account;
Allianz Life; Invest-
ment Options
Item 6. Deductions. . . . . . . . .. . . . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . The Franklin Valuemark
II and Franklin
Valuemark III Variable
Annuity Contracts
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 Table of Contents of
Additional Information. . . . . . . . . . . . the Statement of
Additional Informa-
tion
</TABLE>
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C> <C>
PART B
Item 15. Cover Page. . . . . . . . .. . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . . The Company
Item 18. Services. . . . . . . . . . . . .. . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered. . . . Not Applicable
Item 20. Underwriters. . . . . . . . . . . . . . . . Distributor
Item 21. Calculation of Performance Data. . . . . . . Calculation of
Performance Data
Item 22. Annuity Payments. . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements. . . . . . . . . . . . Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.
<PAGE>
PART A
THE FRANKLIN(R) VALUEMARK(R) II AND THE FRANKLIN(R) VALUEMARK(R) III
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
This prospectus describes the Franklin Valuemark II and the Franklin Valuemark
III Variable Annuity Contracts, each with a Fixed Account (Contracts) offered by
Allianz Life Insurance Company of North America (Allianz Life). All references
to "we," "us" and "our" refer to Allianz Life. This prospectus describes two
variable annuity contracts. All references to the Contract refer to both
contracts except where noted otherwise.
The annuity offers the Variable Options listed below and the Fixed Account of
Allianz Life. Each Variable Option invests in a Portfolio of the corresponding
fund company listed below. You can select up to 10 investment choices for
additional Purchase Payments you make (which includes any of the Variable
Options and the Fixed Account). The Fixed Account and some of the Variable
Options may not be available in your state.
VARIABLE OPTIONS:
AIM VARIABLE INSURANCE FUNDS, INC.:
Portfolio Seeking Capital Growth
AIM V.I. Growth Fund
THE ALGER AMERICAN FUND:
Portfolios Seeking Capital Growth
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
Portfolio Seeking Capital Preservation And Income
Franklin Money Market Fund
Portfolios Seeking Income
Franklin High Income Fund
Franklin U.S. Government Securities Fund
Franklin Zero Coupon Funds - 2000, 2005 and 2010
Templeton Global Income Securities Fund
Portfolios Seeking Growth And Income
Franklin Global Utilities Securities Fund*
Franklin Growth and Income Fund
Franklin Income Securities Fund
Franklin Mutual Shares Securities Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Value Securities Fund
Templeton Global Asset Allocation Fund
Portfolios Seeking Capital Growth
Franklin Capital Growth Fund
Franklin Global Health Care Securities Fund
Franklin Mutual Discovery Securities Fund
Franklin Natural Resources Securities Fund
Franklin S&P 500 Index Fund
Franklin 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
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:
Portfolio Seeking Capital Growth
USAllianz VIP Growth Fund
Portfolios Seeking Growth and Income
USAllianz VIP Diversified Assets Fund
USAllianz VIP Intermediate Fixed Income Fund
* Effective November 15, 1999, Franklin Global Utilities Securities Fund's name
will be changed to Franklin Global Communications Securities Fund.
Please read this prospectus before investing and keep it for future reference.
It contains important information about the Franklin Valuemark II and the
Franklin Valuemark III Variable Annuity Contracts each with a Fixed Account.
To learn more about the Contracts offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated October 25, 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 us at (800) 342-3863 or write us at: 1750 Hennepin Avenue, Minneapolis,
Minnesota 55403-2195.
THE FRANKLIN VALUEMARK II AND FRANKLIN VALUEMARK III VARIABLE ANNUITY CONTRACTS:
O ARE NOT BANK DEPOSITS
O ARE NOT FEDERALLY INSURED
O ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
O ARE NOT GUARANTEED AND MAY BE SUBJECT TO LOSS OF PRINCIPAL
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is not an offering of the securities in any state, country, or
jurisdiction in which we are not authorized to sell 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 Valuemark II refer to
Valuemark II and all references to Franklin Valuemark III refer to Valuemark
III.
Dated: October 25, 1999
<PAGE>
TABLE OF CONTENTS
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Index of Terms 3
Summary 4
Fee Table 7
The Franklin Valuemark II
and the Franklin Valuemark III
Variable Annuity Contracts 12
Contract Owner 12
Contingent Owner
(Franklin Valuemark II Contracts only) 12
Joint Owner 12
Annuitant 12
Beneficiary 13
Assignment 13
Annuity Payments (The Payout Phase) 13
Annuity Options 13
Purchase 14
Purchase Payments 14
Automatic Investment Plan 14
Allocation of Purchase Payments 14
Accumulation Units 14
Investment Options 15
Transfers 15
Dollar Cost Averaging Program 16
Flexible Rebalancing 17
Voting Privileges 17
Substitution 17
Expenses 17
Insurance Charges 17
Mortality and Expense Risk Charge 17
Administrative Expense Charge 17
Contract Maintenance Charge 17
Contingent Deferred Sales Charge 18
Reduction or Elimination of the
Contingent Deferred Sales Charge 18
Transfer Fee 18
Premium Taxes 18
Income Taxes 19
Portfolio Expenses 19
Taxes 19
Annuity Contracts in General 19
Qualified and Non-Qualified Contracts 19
Multiple Contracts 19
Withdrawals - Non-Qualified Contracts 19
Withdrawals - Qualified Contracts 20
Withdrawals - Tax-Sheltered Annuities 20
Diversification 20
Access to Your Money 20
Systematic Withdrawal Program 21
Minimum Distribution Program 21
Suspension of Payments or Transfers 21
Performance 21
Death Benefit 22
Death of Contract Owner 22
Death of Annuitant 23
Other Information 23
Allianz Life 23
Year 2000 23
The Separate Account 23
Distribution 23
Administration 24
Financial Statements 24
Table of Contents of the
Statement of Additional Information 24
Appendix 25
INDEX OF TERMS
- -------------------------------------------------------------------------------
This prospectus is written in plain English. However, there are some technical
terms used which are capitalized in the prospectus. The page that is indicated
below is where you will find the definition for the word or term.
Page Page
Accumulation Phase 12 Income Date 13
Accumulation Unit 14 Joint Owner 12
Annuitant 12 Non-Qualified 19
Annuity Options 13 Payout Phase 13
Annuity Payments 13 Portfolios 15
Annuity Unit 14 Purchase Payment 14
Beneficiary 13 Qualified 19
Contract 12 Tax Deferral 19
Contract Owner 12 Variable Option 12
Fixed Account 12
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
The sections in this summary correspond to sections in this prospectus which
discuss the topics in more detail.
The Variable Annuity Contract: The annuity contract offered by Allianz Life
provides a means for investing on a tax-deferred basis in Variable Options and
the Allianz Life Fixed Account for retirement savings or other long-term
investment purposes. The Contract provides a guaranteed death benefit.
Annuity Payments: If you want to receive regular income from your annuity, you
can choose an Annuity Option. You can choose whether to have payments come from
our general account, the available Variable Options or both. If you choose to
have any part of your payments come from the Variable Options, the dollar amount
of your payments may go up or down based on the performance of the Portfolios.
Purchase: The Contracts are no longer available for sale. However, you can add
$250 ($100 if you select the automatic investment plan) or more any time you
like during the Accumulation Phase.
Investment Options: You can put your money in the Variable Options and/or you
can invest in the Allianz Life Fixed Account. The investment returns on the
Portfolios are not guaranteed. You can make or lose money. You can make
transfers between investment choices.
Expenses: The Contracts have insurance features and investment features, and
there are costs related to each.
Each year, Allianz Life deducts a $30 contract maintenance charge from your
Contract. Allianz Life currently waives this charge if the value of your
Contract is at least $100,000.
Allianz Life deducts a mortality and expense risk charge which is equal, on an
annual basis, to 1.25% of the average daily value of the Contract invested in a
Variable Option. Allianz Life also deducts an administrative charge which is
equal, on an annual basis, to .15% of the average daily value of the Contract
invested in a Variable Option.
If you take money out of the Contract, Allianz Life may assess a contingent
deferred sales charge against each Purchase Payment withdrawn. The contingent
deferred sales charge starts at 5% in the first year and declines to 0% after 5
years for the Franklin Valuemark II Contract. For the Franklin Valuemark III
Contract, the contingent deferred sales charge starts at 6% in the first year
and declines to 0% after 5 years.
You can make 12 free transfers each year. After that, Allianz Life deducts $25
or 2% of the amount transferred, whichever is less, for each additional
transfer.
There are also daily investment charges which range, on an annual basis, from
.49% to 1.41% of the average daily value of the Portfolio, depending upon the
Portfolio.
Taxes: Your earnings are not taxed until you take them out. If you take money
out during the Accumulation Phase, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty.
Access to Your Money: You can take money out of your Contract during the
Accumulation Phase. Withdrawals during the Accumulation Phase may be subject to
a contingent deferred sales charge. You may also have to pay income tax and a
tax penalty on any money you take out.
Death Benefit: If you die before moving to the Payout Phase, the person you have
chosen as a Beneficiary will receive a death benefit.
<PAGE>
FEE TABLE
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The purpose of this Fee Table is to help you understand the costs of investing,
directly or indirectly, in the Contract. It reflects expenses of the Separate
Account as well as the Portfolios.
Contract Owner Transaction Fees
Contingent Deferred Sales Charge*
(as a percentage of Purchase Payments)
FRANKLIN VALUEMARK II: FRANKLIN VALUEMARK III:
YEARS SINCE YEARS SINCE
PURCHASE PURCHASE
PAYMENT CHARGE PAYMENT CHARGE
------------------------------ ---------------------------
0-1 5% 0-1 6%
1-2 5% 1-2 5%
2-3 4% 2-3 4%
3-4 3% 3-4 3%
4-5 1.5% 4-5 1.5%
5+ 0% 5+ 0%
Transfer Fee** First 12 transfers in a Contract year are free.
Thereafter, the fee is $25 or 2% of the amount
transferred, if less).Dollar Cost Averaging
transfers and Flexible Rebalancing transfers
are not counted.
CONTRACT MAINTENANCE CHARGE*** $30 per Contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge .15%
-------
Total Separate Account Annual Expenses 1.40%
*Once each Contract year, you may make a partial withdrawal of up to 15% of the
Purchase Payments you have made (less prior withdrawals) and no contingent
deferred sales charge will be assessed. If you do not make a withdrawal in a
Contract year, you may take that 15% in future years. See "Access to Your Money"
for additional options.
**The Contract provides that if more than three transfers have been made in a
Contract year, Allianz Life may deduct a transfer fee. Currently, Allianz Life
permits you to make 12 free transfers each year. Market timing transfers may not
be permitted.
***During the Accumulation Phase, the charge is waived if the value of your
Contract or the Purchase Payments you have made (less withdrawals) is at least
$100,000. Currently, the charge is also waived during the Payout Phase if the
value of your Contract at the Income Date is at least $100,000.
<PAGE>
<TABLE>
<CAPTION>
FUND ANNUAL EXPENSES
(as a percentage of the funds' average net assets)
See the accompanying fund prospectuses for more information.
Management
and Portfolio 12b-1 Other Total Annual
Administration Fees1 Fees Expenses Expenses
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund .64% -- .08% .72%
Alger American Growth Portfolio .75% -- .04% .79%
Alger American Leveraged AllCap Portfolio .85% -- .11% 2 .96%
Franklin Capital Growth Fund .75% -- .02% .77%
Franklin Global Health Care Securities Fund 3 .75% -- .09% .84%
Franklin Global Utilities Securities Fund 4 .47% -- .03% .50%
Franklin Growth and Income Fund .47% -- .02% .49%
Franklin High Income Fund .50% -- .03% .53%
Franklin Income Securities Fund .47% -- .02% .49%
Franklin Money Market Fund .51% -- .02% .53%
Franklin Mutual Discovery Securities Fund .95% -- .05% 1.00%
Franklin Mutual Shares Securities Fund .74% -- .03% .77%
Franklin Natural Resources Securities Fund .62% -- .02% .64%
Franklin Real Estate Securities Fund .52% -- .02% .54%
Franklin Rising Dividends Fund .70% -- .02% .72%
Franklin S&P 500 Index Fund 5 ___% -- ___% ___%
Franklin Small Cap Fund .75% -- .02% .77%
Franklin U.S. Government Securities Fund .48% -- .02% .50%
Franklin Value Securities Fund 3 .75% -- .08% .83%
Franklin Zero Coupon Fund - 2000 .63% -- .03% .66%
Franklin Zero Coupon Fund - 2005 .63% -- .03% .66%
Franklin Zero Coupon Fund - 2010 .62% -- .04% .66%
Templeton Developing Markets Equity Fund 1.25% -- .16% 1.41%
Templeton Global Asset Allocation Fund .80% -- .04% .84%
Templeton Global Growth Fund .83% -- .05% .88%
Templeton Global Income Securities Fund .57% -- .06% .63%
Templeton International Equity Fund .80% -- .08% .88%
Templeton International Smaller Companies Fund 1.00% -- .10% 1.10%
Templeton Pacific Growth Fund .99% -- .11% 1.10%
USAllianz VIP Diversified Assets Fund 5 ___% ___% ___% ___%
USAllianz VIP Growth Fund 5 ___% ___% ___% ___%
USAllianz VIP Intermediate Fixed Income Fund 5 ___% ___% ___% ___%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
1. The Portfolio Administration Fee is a direct expense for the Franklin Global Health Care Securities Fund, the Franklin Mutual
Discovery Securities Fund, the Franklin Mutual Shares Securities Fund, the Franklin Value Securities Fund, the Templeton Global
Asset Allocation Fund, and the Templeton International Smaller Companies Fund. Other Portfolios pay for similar services
indirectly through the Management Fee. See the accompanying fund prospectuses for further information regarding these fees.
2. Other Expenses for the Alger American Leveraged AllCap Portfolio include 0.03% of interest expense.
3. The Franklin Global Health Care Securities Fund and the Franklin Value Securities Fund commenced operations May 1, 1998. The
expenses shown for these Portfolios are therefore estimated for 1999.
4. Effective November 15, 1999, Franklin Global Utilities Securities Fund's name will be changed to Franklin Global Communications
Securities Fund.
5. The Franklin S&P 500 Index Fund, the USAllianz VIP Diversified Assets Fund, the USAllianz VIP Growth Fund, and the USAllianz
VIP Intermediate Fixed Income Fund commenced operations on October 25, 1999. The expenses shown for these Portfolios are therefore
estimated for 1999.
</FN>
</TABLE>
<PAGE>
EXAMPLES
o The examples on the following pages should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than those
shown.
o The $30 contract maintenance charge is included in the examples as a prorated
charge of $1. Since the average Contract size is greater than $1,000, the
contract maintenance charge is reduced accordingly.
o Premium taxes are not reflected in the tables. Premium taxes may apply.
o For additional information, see "Expenses" and the accompanying fund
prospectuses.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK II CONTRACTS:
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if you surrender your
Contract at the end of each time period:
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund $__ $__ $___ $___
Alger American Growth Portfolio $__ $__ $___ $___
Alger American Leveraged AllCap Portfolio $__ $__ $___ $___
Franklin Capital Growth Fund $66 $ 93 $125 $260
Franklin Global Health Care Securities Fund* $66 $ 95 $129 $267
Franklin Global Utilities Securities Fund $63 $ 85 $111 $232
Franklin Growth and Income Fund $63 $ 84 $111 $231
Franklin High Income Fund $63 $ 86 $113 $235
Franklin Income Securities Fund $63 $ 84 $111 $231
Franklin Money Market Fund $63 $ 86 $113 $235
Franklin Mutual Discovery Securities Fund $68 $100 $137 $284
Franklin Mutual Shares Securities Fund $66 $ 93 $125 $260
Franklin Natural Resources Securities Fund $64 $ 89 $119 $247
Franklin Real Estate Securities Fund $63 $ 86 $113 $236
Franklin Rising Dividends Fund $65 $ 91 $123 $255
Franklin S&P 500 Index Fund* $__ $__ $___ $___
Franklin Small Cap Fund $66 $ 93 $125 $260
Franklin U.S. Government Securities Fund $63 $ 85 $111 $232
Franklin Value Securities Fund* $66 $ 95 $128 $266
Franklin Zero Coupon Fund - 2000 $64 $ 90 $120 $249
Franklin Zero Coupon Fund - 2005 $64 $ 90 $120 $249
Franklin Zero Coupon Fund - 2010 $64 $ 90 $120 $249
Templeton Developing Markets Equity Fund $72 $112 $157 $324
Templeton Global Asset Allocation Fund $66 $ 95 $129 $267
Templeton Global Growth Fund $67 $ 96 $131 $272
Templeton Global Income Securities Fund $64 $ 89 $118 $246
Templeton International Equity Fund $67 $ 96 $131 $272
Templeton International Smaller Companies Fund $69 $103 $142 $294
Templeton Pacific Growth Fund $69 $103 $142 $294
USAllianz VIP Diversified Assets Fund* $__ $__ $___ $___
USAllianz VIP Growth Fund* $__ $__ $___ $___
USAllianz VIP Intermediate Fixed Income Fund* $__ $__ $___ $___
<FN>
*Estimated
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK III CONTRACTS:
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if you surrender your
Contract at the end of each time period:
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund $__ $__ $___ $___
Alger American Growth Portfolio $__ $__ $___ $___
Alger American Leveraged AllCap Portfolio $__ $__ $___ $___
Franklin Capital Growth Fund $74 $ 93 $125 $260
Franklin Global Health Care Securities Fund* $75 $ 95 $129 $267
Franklin Global Utilities Securities Fund $71 $ 85 $111 $232
Franklin Growth and Income Fund $71 $ 84 $111 $231
Franklin High Income Fund $72 $ 86 $113 $235
Franklin Income Securities Fund $71 $ 84 $111 $231
Franklin Money Market Fund $72 $ 86 $113 $235
Franklin Mutual Discovery Securities Fund $76 $100 $137 $284
Franklin Mutual Shares Securities Fund $74 $ 93 $125 $260
Franklin Natural Resources Securities Fund $73 $ 89 $119 $247
Franklin Real Estate Securities Fund $72 $ 86 $113 $236
Franklin Rising Dividends Fund $74 $ 91 $123 $255
Franklin S&P 500 Index Fund* $__ $__ $___ $___
Franklin Small Cap Fund $74 $ 93 $125 $260
Franklin U.S. Government Securities Fund $71 $ 85 $111 $232
Franklin Value Securities Fund* $75 $ 95 $128 $266
Franklin Zero Coupon Fund - 2000 $73 $ 90 $120 $249
Franklin Zero Coupon Fund - 2005 $73 $ 90 $120 $249
Franklin Zero Coupon Fund - 2010 $73 $ 90 $120 $249
Templeton Developing Markets Equity Fund $80 $112 $157 $324
Templeton Global Asset Allocation Fund $75 $ 95 $129 $267
Templeton Global Growth Fund $75 $ 96 $131 $272
Templeton Global Income Securities Fund $73 $ 89 $118 $246
Templeton International Equity Fund $75 $ 96 $131 $272
Templeton International Smaller Companies Fund $77 $103 $142 $294
Templeton Pacific Growth Fund $77 $103 $142 $294
USAllianz VIP Diversified Assets Fund* $__ $___ $___ $___
USAllianz VIP Growth Fund* $__ $___ $___ $___
USAllianz VIP Intermediate Fixed Income Fund* $__ $___ $___ $___
<FN>
*Estimated
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK II AND FRANKLIN VALUEMARK III CONTRACTS:
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if you do not surrender
your Contract or if you apply the Contract value to an Annuity Option:
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund $__ $__ $___ $___
Alger American Growth Portfolio $__ $__ $___ $___
Alger American Leveraged AllCap Portfolio $__ $__ $___ $___
Franklin Capital Growth Fund $23 $71 $121 $260
Franklin Global Health Care Securities Fund* $24 $73 $125 $267
Franklin Global Utilities Securities Fund $20 $63 $108 $232
Franklin Growth and Income Fund $20 $62 $107 $231
Franklin High Income Fund $21 $64 $109 $235
Franklin Income Securities Fund $20 $62 $107 $231
Franklin Money Market Fund $21 $64 $109 $235
Franklin Mutual Discovery Securities Fund $25 $78 $133 $284
Franklin Mutual Shares Securities Fund $23 $71 $121 $260
Franklin Natural Resources Securities Fund $22 $67 $115 $247
Franklin Real Estate Securities Fund $21 $64 $110 $236
Franklin Rising Dividends Fund $23 $69 $119 $255
Franklin S&P 500 Index Fund* $__ $__ $___ $___
Franklin Small Cap Fund $23 $71 $121 $260
Franklin U.S. Government Securities Fund $20 $63 $108 $232
Franklin Value Securities Fund* $24 $73 $124 $266
Franklin Zero Coupon Fund -2000 $22 $68 $116 $249
Franklin Zero Coupon Fund -2005 $22 $68 $116 $249
Franklin Zero Coupon Fund - 2010 $22 $68 $116 $249
Templeton Developing Markets Equity Fund $29 $90 $153 $324
Templeton Global Asset Allocation Fund $24 $73 $125 $267
Templeton Global Growth Fund $24 $74 $127 $272
Templeton Global Income Securities Fund $22 $67 $114 $246
Templeton International Equity Fund $24 $74 $127 $272
Templeton International Smaller Companies Fund $26 $81 $138 $294
Templeton Pacific Growth Fund $26 $81 $138 $294
USAllianz VIP Diversified Assets Fund* $__ $___ $___ $___
USAllianz VIP Growth Fund* $__ $___ $___ $___
USAllianz VIP Intermediate Fixed Income Fund* $__ $___ $___ $___
<FN>
*Estimated
</FN>
</TABLE>
See the Appendix for Accumulation Unit Values - Condensed Financial Information.
<PAGE>
THE FRANKLIN VALUEMARK II AND
THE FRANKLIN VALUEMARK III
VARIABLE ANNUITY CONTRACTS
This prospectus describes two variable deferred annuity contracts, each with a
Fixed Account which are issued by Allianz Life. The Contracts are no longer
offered for sale. However, you can make additional Purchase Payments to your
Contract.
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 at least one month after we
issue your Contract. Until you decide to begin receiving Annuity Payments, your
annuity is in the Accumulation Phase. Once you begin receiving Annuity Payments,
your Contract switches to the Payout Phase.
The Contract benefits from Tax Deferral. Tax Deferral means that you are not
taxed on any earnings or appreciation on the assets in your Contract until you
take money out of your Contract.
Your investment choices include Variable Options and the Fixed Account of
Allianz Life. The Contract is called a variable annuity because you can choose
among the Variable Options and, depending upon market conditions, you can make
or lose money in the Contract based on the investment performance of the
Portfolios. The Portfolios are designed to offer a better return than the Fixed
Account. However, this is not guaranteed. If you select the variable annuity
portion of the Contract, the amount of money you are able to accumulate in your
Contract during the Accumulation Phase depends in large part upon the investment
performance of the Portfolio(s) you select. The amount of the Annuity Payments
you receive during the Payout Phase from the variable annuity portion of the
Contract also depends in large part upon the investment performance of the
Portfolios you select for the Payout Phase.
The Contract also contains a Fixed Account. The Fixed Account offers an interest
rate that is guaranteed by Allianz Life for all deposits made within the
twelve-month period. Your initial interest rate is set on the date when your
money is invested in the Fixed Account and remains effective for one year.
Initial interest rates are declared monthly. Allianz Life guarantees that the
interest credited to the Fixed Account will not be less than 3% per year. If you
select the Fixed Account, your money will be placed with the other general
assets of Allianz Life. Allianz Life may change the terms of the Fixed Account
in the future - please contact Allianz Life for the most current terms. If you
select the Fixed Account, the amount of money you are able to accumulate in your
Contract during the Accumulation Phase depends upon the total interest credited
to your Contract.
We will not make any changes to your Contract without your permission except as
may be required by law.
Contract Owner
You, as the Contract Owner, have all the rights under the Contract. The Contract
Owner is as designated at the time the Contract is issued, unless changed. The
Contract Owner remains the Contract Owner after the Income Date. You may change
Contract Owners (or Contingent Owners with respect to Franklin Valuemark II
Contracts) at any time. This may be a taxable event. You should consult with
your tax adviser before doing this.
Contingent Owner
(Franklin Valuemark II Contracts Only)
In Contracts containing Contingent Owner provisions, you can name a Contingent
Owner. Any Contingent Owner must be the spouse of the other Contract Owner.
Joint Owner
In Contracts containing Joint Owner provisions, the Contract can be owned by
Joint Owners. Any Joint Owner must be the spouse of the other Contract Owner
(except in Pennsylvania). Upon the death of either Joint Owner, the surviving
Joint Owner will be the designated Beneficiary. Any other Beneficiary
designation at the time the Contract was issued or as may have been later
changed will be treated as a contingent Beneficiary unless otherwise indicated.
With respect to Franklin Valuemark II Contracts, if a Contingent Owner is named,
upon the death of the Contract Owner before the Income Date, the Contingent
Owner, if any, becomes the designated Beneficiary and we will treat any other
Beneficiary named as a contingent Beneficiary unless otherwise indicated.
Annuitant
The Annuitant is the natural person on whose life we base Annuity Payments. You
name an Annuitant. The Annuitant cannot be older than 85 years old when we issue
a Contract. Joint Annuitants are allowed during the Payout Phase. You may change
the Annuitant at any time before the Income Date unless the Contract is owned by
a non-individual (for example, a corporation).
Beneficiary
The Beneficiary is the person(s) or entity you name to receive any death
benefit. The Beneficiary is named at the time the Contract is issued unless
changed at a later date. Unless an irrevocable Beneficiary has been named, you
can change the Beneficiary or contingent Beneficiary.
Assignment
You can transfer ownership (assign) the Contract at any time during your
lifetime. Allianz Life will not be bound by the assignment until it receives the
written notice of the assignment. Allianz Life will not be liable for any
payment or other action it takes in accordance with the Contract before it
receives notice of the assignment. Any assignment made after the death benefit
has become payable can only be done with our consent. An assignment may be a
taxable event.
If the Contract is issued pursuant to a Qualified plan, you may be unable to
assign the Contract.
ANNUITY PAYMENTS
(THE PAYOUT PHASE)
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You can receive regular monthly income payments under your Contract. You can
choose the month and year in which those payments begin. We call that date the
Income Date. Your Income Date must be the first day of a calendar month. The
Income Date cannot be later than the month following the Annuitant's 85th
birthday or 10 years (8 years in Pennsylvania) from the day we issue your
Contract, if later. With respect to Franklin Valuemark II Contracts, if you do
not select an Income Date, the Income Date will be the later of the Annuitant's
65th birthday (or 85th birthday for certain Contracts) or 10 years from the day
we issue your Contract. You can also choose among income plans. We call those
Annuity Options.
We ask you to choose your Income Date when you purchase the Contract. You can
change it at any time before the Income Date with 30 days notice to us. You (or
someone you designate) will receive the Annuity Payments. You will receive tax
reporting on those payments.
If you do not choose an Annuity Option prior to the Income Date, we will assume
that you selected Option 2, which provides a life annuity with 5 years of
guaranteed payments.
You may elect to receive your Annuity Payments as a variable payout, a fixed
payout, or a combination of both. Under a fixed payout, all of the Annuity
Payments will be the same dollar amount (equal installments). If you choose a
variable payout, you can select from the available Variable Options. If you do
not tell us otherwise, your Annuity Payments will be based on the investment
allocations that were in place on the Income Date.
If you choose to have any portion of your Annuity Payments based on the
investment performance of the Variable Option(s), the dollar amount of your
payments will depend upon three things:
1) the value of your Contract in the Variable Option(s) on the Income Date,
2) the 5% assumed investment rate used in the annuity table for the Contract,
and
3) the performance of the Variable Option(s) you selected.
If the actual performance exceeds the 5% assumed investment rate, your Annuity
Payments will increase. Similarly, if the actual rate is less than 5%, your
Annuity Payments will decrease.
Annuity Options
You can choose one of the following Annuity Options or any other Annuity Option
you want and that Allianz Life agrees to provide. After Annuity Payments begin,
you cannot change the Annuity Option.
OPTION 1. LIFE ANNUITY. Under this option, we will make monthly Annuity Payments
so long as the Annuitant is alive. After the Annuitant dies, we stop making
Annuity Payments.
OPTION 2. LIFE ANNUITY WITH 5, 10, 15 OR 20 YEAR PAYMENTS GUARANTEED. Under this
option, we will make monthly Annuity Payments so long as the Annuitant is alive.
However, if the Annuitant dies before the end of the selected guaranteed period,
we will continue to make Annuity Payments to you for the rest of the guaranteed
period. If you do not want to receive Annuity Payments after the Annuitant's
death, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
monthly Annuity Payments during the joint lifetime of the Annuitant and the
joint Annuitant. When the Annuitant dies, if the joint Annuitant is still alive,
we will continue to make Annuity Payments, so long as the joint Annuitant
continues to live. The amount of the Annuity Payments we will make to the
Contract Owner can be equal to 100%, 75% or 50% of the amount that was being
paid when both Annuitants were alive. The monthly Annuity Payments will end when
the last surviving Annuitant dies.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 5, 10, 15 OR 20 YEAR PAYMENTS
GUARANTEED. Under this option, we will make monthly Annuity Payments during the
joint lifetime of the Annuitant and the joint Annuitant. When the Annuitant
dies, if the joint Annuitant is still alive, we will continue to make Annuity
Payments, so long as the surviving Annuitant continues to live, at 100% of the
amount that was being paid when both were alive. If, when the last death occurs,
we have made Annuity Payments for less than the selected guaranteed period, we
will continue to make Annuity Payments to you for the rest of the guaranteed
period. If you do not want to receive Annuity Payments after the Annuitant's
death, you can ask us for a single lump sum.
OPTION 5. Refund Life Annuity. Under this option, we will make monthly Annuity
Payments during the Annuitant's lifetime. The last Annuity Payment will be made
before the Annuitant dies and if the value of the Annuity Payments made is less
than the value applied to the Annuity Option, then you will receive a refund as
set forth in the Contract.
PURCHASE
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Purchase Payments
A Purchase Payment is the money you invest in the Contract. You can make
additional Purchase Payments of $250 or more (or as low as $100 if you have
selected the Automatic Investment Plan). The maximum amount we will accept
without our prior approval is $1 million. We reserve the right to decline any
Purchase Payments. This product is not designed for professional market timing
organizations, other entities, or persons using programmed, large or frequent
transfers.
Automatic Investment Plan
The Automatic Investment Plan (AIP) is a program that allows you to make
additional Purchase Payments to your Contract on a monthly or quarterly basis by
electronic transfer of monies from your savings or checking account. You may
participate in this program by completing the appropriate form. We must receive
your form by the first of the month in order for AIP to begin that same month.
Investments will take place on the 20th of the month, or the next business day.
The minimum investment that can be made by AIP is $100. You may stop AIP at any
time you want. We need to be notified by the first of the month in order to stop
or change AIP that month. If AIP is used for a Qualified Contract, you should
consult your tax adviser for advice regarding maximum contributions.
Allocation of Purchase Payments
We ask that you allocate your money in either whole percentages or round
dollars. Transfers do not change the allocation instructions for payments. You
can instruct us how to allocate additional Purchase Payments you make. If you do
not instruct us, we will allocate them in the same way as your previous
instructions to us. You may change the allocation of future payments without
fee, penalty or other charge upon written notice or telephone instructions to
the Valuemark Service Center. A change will be effective for payments received
on or after we receive your notice or instructions. Allianz Life reserves the
right to limit the number of Variable Options that you may invest in at one
time. Currently, you may invest in up to 10 investment choices for the
additional Purchase Payments you make at any one time (which includes any of the
Variable Options and the Allianz Life Fixed Account). In Washington, the Fixed
Account is not available. We may change this in the future. However, we will
always allow you to invest in at least five Variable Options.
If you make additional Purchase Payments, we will credit these amounts to your
Contract within one business day. Our business day closes when the New York
Stock Exchange closes, which is usually at 4:00 p.m. Eastern Time.
Accumulation 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, we use a
measurement called an Accumulation Unit (which is like a share of a mutual
fund). During the Payout Phase of the Contract we call it an Annuity Unit.
Every business day we determine the value of an Accumulation Unit for each
Variable Option by multiplying the Accumulation Unit value for the previous
period by a factor for the current period. The factor is determined by:
1. dividing the value of a Portfolio at the end of the current period by the
value of a Portfolio for the previous period; and 2. multiplying it by one minus
the daily amount of the insurance charges and any charges for taxes.
The value of an Accumulation Unit may go up or down from day to day.
When you make a Purchase Payment, we credit your Contract with Accumulation
Units for any portion of your Purchase Payment allocated to a Variable Option.
The number of Accumulation 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 Accumulation Unit.
We calculate the value of each Accumulation Unit after the New York Stock
Exchange closes each day and then credit your Contract.
Example:
On Wednesday we receive an additional Purchase Payment of $3,000 from you. You
have told us you want this to go to the Franklin Growth and Income Fund. When
the New York Stock Exchange closes on that Wednesday, we determine that the
value of an Accumulation Unit based on an investment in the Franklin Growth and
Income Fund is $12.50. We then divide $3,000 by $12.50 and credit your Contract
on Wednesday night with 240 Accumulation Units.
INVESTMENT OPTIONS
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The Contract offers Variable Options which invest in Portfolios of AIM Variable
Insurance Funds, Inc., The Alger American Fund, Franklin Templeton Variable
Insurance Products Trust, and USAllianz Variable Insurance Products Trust. The
Contract also offers a Fixed Account of Allianz Life. Additional Portfolios may
be available in the future.
You should read the accompanying fund prospectuses (which are attached to this
prospectus) carefully before investing.
AIM Variable Insurance Funds, Inc., The Alger American Fund, Franklin Templeton
Variable Insurance Products Trust, and USAllianz Variable Insurance Products
Trust are the mutual funds underlying your Contract. Each Portfolio has its own
investment objective.
The Franklin Templeton Variable Insurance Products Trust (formerly, Franklin
Valuemark Funds) issues two classes of shares which are described in the
attached prospectus for Franklin Templeton Variable Insurance Products Trust.
Only Class 1 shares are available with your Contract.
Investment advisers for each Portfolio are listed in the table below and are as
follows: A I M Advisors, Inc., Allianz of America, Inc., Fred Alger Management,
Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual
Advisers, LLC, Templeton Asset Management Ltd., Templeton Global Advisors
Limited, and Templeton Investment Counsel, Inc. Certain advisers have retained
one or more subadvisers to help them manage the Portfolios.
The investment objectives and policies of certain Portfolios are similar to the
investment objectives and policies of other mutual funds that certain of the
investment advisers manage. Although the objectives and policies may be similar,
the investment results of the Portfolios may be higher or lower than the results
of such other mutual funds. The investment advisers cannot guarantee, and make
no representation, that the investment results of similar funds will be
comparable even though the funds have the same investment advisers.
The following is a list of the Portfolios available under the Contract:
<TABLE>
<CAPTION>
AVAILABLE PORTFOLIOS INVESTMENT ADVISERS
- ------------------------------------------------------------------------------------------------
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC.:
Portfolio Seeking Capital Growth
AIM V.I. Growth Fund AIM Advisors, Inc.
THE ALGER AMERICAN FUND:
Portfolios Seeking Capital Growth
Alger American Growth Portfolio Fred Alger Management, Inc.
Alger American Leveraged AllCap Portfolio Fred Alger Management, Inc.
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST:
Portfolio Seeking Capital Preservation And Income
Franklin Money Market Fund Franklin Advisers, Inc.
Portfolios Seeking Income
Franklin High Income Fund Franklin Advisers, Inc.
Franklin U.S. Government Securities Fund Franklin Advisers, Inc.
Franklin Zero Coupon Funds - 2000, 2005 and 2010 Franklin Advisers, Inc
Templeton Global Income Securities Fund Franklin Advisers, Inc
Portfolios Seeking Growth And Income
Franklin Global Utilities Securities Fund * Franklin Advisers, Inc
Franklin Growth and Income Fund Franklin Advisers, Inc
Franklin Income Securities Fund Franklin Advisers, Inc
Franklin Mutual Shares Securities Fund Franklin Mutual Advisers, Inc.
Franklin Real Estate Securities Fund Franklin Advisers, Inc
Franklin Rising Dividends Fund Franklin Advisory Services, Inc.
Franklin Value Securities Fund Franklin Advisory Services, Inc.
Templeton Global Asset Allocation Fund Templeton Global Advisors Limited
Portfolios Seeking Capital Growth
Franklin Capital Growth Fund Franklin Advisers, Inc.
Franklin Global Health Care Securities Fund Franklin Advisers, Inc.
Franklin Mutual Discovery Securities Fund Franklin Mutual Advisers, Inc.
Franklin Natural Resources Securities Fund Franklin Advisers, Inc.
Franklin S&P 500 Index Fund Franklin Advisers, Inc.
Franklin Small Cap Fund Franklin Advisers, Inc.
Templeton Developing Markets Equity Fund Templeton Asset Management Ltd.
Templeton Global Growth Fund Templeton Global Advisors Limited
Templeton International Equity Fund Franklin Advisers, Inc.
Templeton International Smaller Companies Fund Templeton Investment Counsel, Inc.
Templeton Pacific Growth Fund Franklin Advisers, Inc.
USALLIANZ VARIABLE
INSURANCE PRODUCTS TRUST:
Portfolio Seeking Capital Growth
USAllianz VIP Growth Fund Allianz of America, Inc.
Portfolios Seeking Growth and Income
USAllianz VIP Diversified Assets Fund Allianz of America, Inc.
USAllianz VIP Intermediate Fixed Income Fund Allianz of America, Inc.
<FN>
* Effective November 15, 1999, Franklin Global Utilities Securities Fund's name
will be changed to Franklin Global Communications Securities Fund.
</FN>
</TABLE>
Shares of the funds may be offered in connection with certain variable annuity
contracts and variable life insurance policies of various insurance companies,
which may or may not be affiliated with Allianz Life. Certain funds may also be
sold directly to qualified plans. The funds believe that offering their shares
in this manner will not be disadvantageous to you.
Allianz Life may enter into certain arrangement under which it is reimbursed by
the funds' advisers, distributors and/or affiliates for the administrative
services, which it provides to the portfolios.
Transfers
You can transfer money among the Variable Options and/or the Fixed Account.
Allianz Life currently allows you to make as many transfers as you want to each
year. Allianz Life may change this practice in the future. However, this product
is not designed for professional market timing organizations or other persons
using programmed, large, or frequent transfers. Such activity may be disruptive
to a Portfolio. We reserve the right to reject any specific Purchase Payment
allocation or transfer request from any person, if in the Portfolio managers'
judgment, a Portfolio would be unable to invest effectively in accordance with
its investment objectives and policies, or would otherwise potentially be
adversely affected.
Your Contract provides that you can make 3 transfers every year without charge.
However, currently Allianz Life permits you to make 12 transfers every year
without charge. We measure a year from the anniversary of the day we issued your
Contract. You can make a transfer to or from the Fixed Account and to or from
any Variable Option. If you make more than 12 transfers in a year, there is a
transfer fee deducted. The fee is $25 per transfer or, if less, 2% of the amount
transferred. After the Income Date, if you selected a variable payout, you can
make transfers. Allianz Life reserves the right to charge for transfers after
the Income Date.
The following applies to any transfer:
1. The minimum amount which you can transfer is $1,000 or your entire value in
the Variable Option and/or the Fixed Account, if less.
2. You cannot make a partial transfer if the value remaining in the Variable
Option or the Fixed Account would be less than $1,000.
3. Your request for a transfer must clearly state which Variable Option(s) or
the Fixed Account is involved in the transfer.
4. Your request for a transfer must clearly state how much the transfer is for.
5. You cannot make any transfers within 7 calendar days prior to the date your
first Annuity Payment is due.
6. During the Payout Phase, you may not make a transfer from a fixed Annuity
Option to a variable Annuity Option.
7. During the Payout Phase, you can make at least one transfer from a variable
Annuity Option to a fixed Annuity Option.
8. During the Payout Phase, you cannot make a transfer if it would result in any
Variable Option or the Fixed Account providing less than 10% of the annuity
benefits under the Contract.
Allianz Life reserves the right at any time and without prior notice to any
party to modify, terminate or suspend the transfer provisions above, subject to
applicable state law.
You can make transfers by telephone. We may allow you to authorize someone else
to make transfers by telephone on your behalf. If you own the Contract with a
Joint Owner, unless you instruct Allianz Life otherwise, we will accept
instructions from either one of you. Allianz Life will use reasonable procedures
to confirm that instructions given to us by telephone are genuine. If we do not
use such procedures, we may be liable for any losses due to unauthorized or
fraudulent instructions. Allianz Life tape records all telephone instructions.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount of money each month or quarter from any one Variable Option or the Fixed
Account to up to eight of the other Variable Options. The Variable Option(s) you
transfer from may not be the Variable Option(s) you transfer to in this program.
By allocating amounts on a regularly scheduled basis, as opposed to allocating
the total amount at one particular time, you may be less susceptible to the
impact of market fluctuations. You may only participate in this program during
the Accumulation Phase.
There are two Dollar Cost Averaging options. The first option is the Dollar Cost
Averaging Fixed Option. It is available for additional Purchase Payments you
make to your existing Contract. You may choose to dollar cost average over a 6
month or 12 month period. You will receive a special fixed rate guaranteed for
one year by Allianz Life. Dollar cost averaging will take place over six or
twelve months from the DCA Fixed Account into the target Portfolio of your
choice. The required minimum investment is $6,000. The Dollar Cost Averaging
Fixed Option may not be available in your state.
The second option is the Standard Dollar Cost Averaging Option. It requires a
$3,000 minimum investment and participation for at least six months (or two
quarters).
All Dollar Cost Averaging transfers will be made on the 10th day of the month
unless that day is not a business day. If it is not, then the transfer will be
made the next business day. You may elect either program by properly completing
the Dollar Cost Averaging form provided by Allianz Life.
Your participation in the program will end when any of the following occurs:
1. the number of desired transfers have been made;
2. you do not have enough money in the Variable Option(s) or the Fixed Account
to make the transfer (if less money is available, that amount will be dollar
cost averaged and the program will end);
3. you request to terminate the program (your request must be received by us by
the first of the month to terminate that month); or
4. the Contract is terminated.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
You may not participate in the Dollar Cost Averaging Program and Flexible
Rebalancing at the same time.
Flexible Rebalancing
Once your money has been invested, the performance of the Variable Options may
cause your chosen allocation to shift. Flexible Rebalancing is designed to help
you maintain your specified allocation mix among the different Variable Options.
You can direct us to readjust your Contract value on a quarterly, semi-annual or
annual basis to return to your original Variable Option allocations. Flexible
Rebalancing transfers are done on calendar quarters only and will be made on the
20th day of the month unless that day is not a business day. If it is not, then
the transfer will be made on the previous day. We must receive a request to
participate in the program by the 8th of the month for Flexible Rebalancing to
begin that month. If you participate in Flexible Rebalancing, the transfers made
under the program are not taken into account in determining any transfer fee.
The Fixed Account is not permitted to be part of Flexible Rebalancing.
Voting Privileges
Allianz Life is the legal owner of the Portfolio shares. However, when a
Portfolio solicits proxies in conjunction with a shareholder vote which affects
your investment, Allianz Life will obtain from you and other affected Contract
Owners instructions as to how to vote those shares. When we receive those
instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that Allianz Life owns on its
own behalf. Should Allianz Life determine that it is no longer required to
comply with the above, we will vote the shares in our own right.
Substitution
Allianz Life may substitute one of the Variable Options you have selected with
another Variable Option. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intention to
do this. We may also limit further investment in a Variable Option if we deem
the investment inappropriate.
EXPENSES
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There are charges and other expenses associated with the Contract that will
reduce your investment return. These charges and expenses are:
Insurance Charges
Each day, Allianz Life makes a deduction for its insurance charges. Allianz Life
does this as part of its calculation of the value of the Accumulation Units and
the Annuity Units. The insurance charge has two parts: 1) the mortality and
expense risk charge, and 2) the administrative expense charge.
MORTALITY AND EXPENSE RISK CHARGE. 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, our contractual
obligation to make Annuity Payments, the death benefits, certain expenses
related to the Contract, and for assuming the risk (expense risk) that the
current charges will be insufficient in the future to cover the cost of
administering the Contract).
ADMINISTRATIVE EXPENSE 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, together with the contract maintenance
charge (which is explained below), is for all the expenses associated with the
administration of the Contract. Some of these expenses include: preparation of
the Contract, confirmations, annual statements, maintenance of Contract records,
personnel costs, legal and accounting fees, filing fees, and computer and
systems costs.
Contract Maintenance Charge
Every year on the anniversary of the date when your Contract was issued, Allianz
Life deducts $30 from your Contract as a contract maintenance charge. This
charge is for administrative expenses (see above). This charge can not be
increased.
However, during the Accumulation Phase, if the value of your Contract or
Purchase Payments (less withdrawals) is at least $100,000 when the deduction for
the charge is to be made, Allianz Life will not deduct this charge. Currently,
Allianz Life also waives the charge during the Payout Phase if the value of your
Contract at the Income Date is at least $100,000.
If you make a complete withdrawal from your Contract, the contract maintenance
charge will also be deducted. During the Payout Phase, if the contract
maintenance charge is deducted, the charge will be collected monthly out of each
Annuity Payment.
Contingent Deferred Sales Charge
If you make a withdrawal, it may be subject to a contingent deferred sales
charge. During the Accumulation Phase, you can make withdrawals from your
Contract. Allianz Life keeps track of each Purchase Payment you make. The amount
of the contingent deferred sales charge depends upon the length of time since
you made your Purchase Payment. This charge reimburses Allianz Life for expenses
associated with the promotion, sale and distribution of the Contracts.
For a partial withdrawal, we will deduct the charge from the amount remaining in
the Contract, if sufficient. Otherwise, we will deduct it from the amount you
withdraw. We will deduct the charge pro-rata from the Variable Options and/or
the Fixed Account unless you instruct us otherwise. The charge may be different
depending upon whether you own a Franklin Valuemark II Contract or a Franklin
Valuemark III Contract. The charge is:
FRANKLIN VALUEMARK II: FRANKLIN VALUEMARK III:
YEARS SINCE CONTINGENT YEARS SINCE CONTINGENT
PURCHASE DEFERRED PURCHASE DEFERRED
PAYMENT SALES CHARGE PAYMENT SALES CHARGE
-------------------------- ---------------------------
0-1 5% 0-1 6%
1-2 5% 1-2 5%
2-3 4% 2-3 4%
3-4 3% 3-4 3%
4-5 1.5% 4-5 1.5%
5+ 0% 5+ 0%
However, after Allianz Life has had a Purchase Payment for 5 full years, there
is no charge when you withdraw that Purchase Payment. For purposes of the
contingent deferred sales charge, Allianz Life treats withdrawals as coming from
the oldest Purchase Payments first.
Note: For tax purposes, withdrawals are considered to have come from the last
money you put into the Contract. Thus, for tax purposes, earnings are considered
to come out first.
Free Withdrawal Amount. Once each Contract year, you can make a withdrawal of up
to 15% of Purchase Payments you have made (less any prior withdrawals) and no
contingent deferred sales charge will be deducted from the 15% you take out. If
you make a withdrawal of more than the free withdrawal amount, it will be
subject to the contingent deferred sales charge. If you do not withdraw the full
15% in any one Contract year, you may not carry over the remaining percentage
amount to another year. You may only carry over to the next year the full 15% if
you do not make any withdrawal in a Contract year. Allianz Life does not assess
the contingent deferred sales charge from Purchase Payments which have been held
under the Contract for more than 5 years or as paid out as Annuity Payment.
You may also elect to participate in the Systematic Withdrawal Program or the
Minimum Distribution Program. These programs allow you to make withdrawals
without the deduction of the contingent deferred sales charge under certain
circumstances. See "Access to Your Money" for a description of the Systematic
Withdrawal Program and the Minimum Distribution Program.
REDUCTION OR ELIMINATION OF THE
CONTINGENT DEFERRED SALES CHARGE
Allianz Life will reduce or eliminate the amount of the contingent deferred
sales charge when the Contract is sold under circumstances which reduce its
sales expenses. Some examples are: if there is a large group of individuals that
will be purchasing the Contract or a prospective purchaser already had a
relationship with Allianz Life. Allianz Life may not deduct a contingent
deferred sales charge under a Contract issued to an officer, director or
employee of Allianz Life or any of its affiliates. Also, Allianz Life may reduce
or not deduct a contingent deferred sales charge when a Contract is sold by an
agent of Allianz Life to any members of his or her immediate family and the
commission is waived. We require our prior approval for any reduction or
elimination of the contingent deferred sales charge.
Transfer Fee
Prior to the Income Date, you can make 12 free transfers every year. We measure
a year from the day we issue your Contract. If you make more than 12 transfers a
year, we will deduct a transfer fee of $25 or 2% of the amount that is
transferred, whichever is less, for each additional transfer. If the transfer is
part of the Dollar Cost Averaging Program or Flexible Rebalancing, it will not
count in determining the transfer fee.
Allianz Life reserves the right to charge a fee for all transfers you make after
the Income Date.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Allianz Life is responsible for the payment of
these taxes. 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. It is Allianz Life's current practice to not charge you
for these taxes until you die, Annuity Payments begin or you make a complete
withdrawal. Allianz Life may discontinue this practice in the future and assess
the charge when the tax is due. Premium taxes generally range from 0% to 3.5% of
the Purchase Payment, depending on the state.
Income Taxes
Allianz Life reserves the right to deduct from the Contract for any income taxes
which it may incur because of the Contract. Currently, Allianz Life is not
making any such deductions.
Portfolio Expenses
There are deductions from the assets of the various Portfolios for operating
expenses (including management fees), which are described in the Fee Table in
this prospectus and the accompanying fund prospectuses.
TAXES
- -------------------------------------------------------------------------------
NOTE: Allianz Life has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice. You should consult
your own tax adviser about your own circumstances. Allianz Life has included
additional information regarding taxes in the Statement of Additional
Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Basically, these rules provide that you will not be taxed on any earnings on the
money held in your annuity Contract until you take the money out. This is
referred to as Tax Deferral. There are different rules regarding how you will be
taxed depending upon how you take the money out and the type of Contract -
Qualified or Non-Qualified (see following sections).
You, as the Contract Owner, will not be taxed on increases in the value of your
Contract until a distribution occurs either as a withdrawal or as Annuity
Payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. For Annuity Payments, different rules apply. A
portion of each Annuity Payment you receive will be treated as a partial return
of your Purchase Payments and will not be taxed. The remaining portion of the
Annuity Payment will be treated as ordinary income. How the Annuity Payment is
divided between taxable and non-taxable portions depends upon the period over
which the Annuity Payments are expected to be made. Annuity Payments received
after you have received all of your Purchase Payments are fully includible in
income.
When a Non-Qualified Contract is owned by a non-natural person (e.g., a
corporation or certain other entities other than a trust holding the Contract as
an agent for a natural person), the Contract will generally not be treated as an
annuity for tax purposes. This means that the Contract may not receive the
benefits of Tax Deferral. Income may be taxed as ordinary income every year.
Qualified and Non-Qualified Contracts
If you purchase the Contract under a Qualified plan, your Contract is referred
to as a Qualified Contract. Examples of Qualified plans are: Individual
Retirement Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as
403(b) contracts), and pension and profit-sharing plans, which include 401(k)
plans and H.R. 10 plans. If you do not purchase the Contract under a Qualified
plan, your Contract is referred to as a Non-Qualified Contract.
Multiple Contracts
The Code provides that multiple Non-Qualified annuity contracts which are issued
within a calendar year period to the same Contract Owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange. You
should consult a tax adviser prior to purchasing more than one Non-Qualified
annuity contract in any calendar year period.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your Contract, the Code treats such a withdrawal
as first coming from earnings and then from your Purchase Payments. In most
cases, such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract, which
is included in income, may be subject to a tax penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts:
1. paid on or after the taxpayer reaches age 591/2;
2. paid after you die;
3. paid if the taxpayer becomes totally disabled (as that term is defined in the
Code);
4. paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
5. paid under an immediate annuity; or
6. which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
The above information describing the taxation of Non-Qualified Contracts does
not apply to Qualified Contracts. There are special rules that govern Qualified
Contracts. A more complete discussion of withdrawals from Qualified Contracts is
contained in the Statement of Additional Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of Purchase Payments made by Contract Owners from
certain Tax-Sheltered Annuities. Withdrawals can only be made when a Contract
Owner:
1. reaches age 591/2;
2. leaves his/her job;
3. dies;
4. becomes disabled (as that term is defined in the Code); or
5. in the case of hardship. However, in the case of hardship, the Contract Owner
can only withdraw the Purchase Payments and not any earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Allianz Life believes that the Portfolios are being managed so
as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Allianz Life,
would be considered the owner of the shares of the Portfolios. If you are
considered the owner of the shares, it will result in the loss of the favorable
tax treatment for the Contract. It is unknown to what extent under federal tax
law Contract Owners are permitted to select Portfolios, to make transfers among
the Portfolios or the number and type of Portfolios Contract Owners may select
from without being considered the owner of the shares. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as the
owner of the Contract, could be treated as the owner of the Portfolios.
Due to the uncertainty in this area, Allianz Life reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
- -------------------------------------------------------------------------------
You can have access to the money in your Contract:
(1) by making a withdrawal (either a partial or a total withdrawal);
(2) by receiving Annuity Payments; or
(3) when a death benefit is paid to your Beneficiary.
Withdrawals can only be made during the Accumulation Phase.
When you make a complete withdrawal you will receive the value of the Contract
on the day you made the withdrawal, less any applicable contingent deferred
sales charge, less any premium tax and less any contract maintenance charge.
(See "Expenses" for a discussion of the charges.)
Unless you instruct Allianz Life otherwise, a partial withdrawal will be made
pro-rata from all the Variable Options and the Fixed Account you selected.
We will pay the amount of any withdrawal from the Variable Options within seven
(7) days of when we receive your request in good order unless the Suspension of
Payments or Transfers provision is in effect (see below).
Income taxes, tax penalties and certain restrictions may apply to any withdrawal
you make.
There are limits to the amount you can withdraw from a Qualified plan referred
to as a 403(b) plan. For a more complete explanation see "Taxes" and the
discussion in the SAI.
Systematic Withdrawal Program
If the value of your Contract is at least $25,000, Allianz Life offers a program
which provides automatic monthly or quarterly payments to you each year. The
total systematic withdrawals which you can make each year without Allianz Life
deducting a contingent deferred sales charge is limited to 9% of the value of
your Contract. However, we may increase the 9% limit to allow you to make
systematic withdrawals to meet the applicable minimum distribution requirements
for Qualified Contracts. If you make withdrawals under this program, you may not
also use the 15% free withdrawal amount that year. For a discussion of the
contingent deferred sales charge and the 15% free withdrawal amount, see
"Expenses." Allianz Life reserves the right to modify the eligibility rules of
this program at any time without notice.
Income taxes, tax penalties and certain restrictions may apply to systematic
withdrawals.
Minimum Distribution Program
If you own a Contract that is an Individual Retirement Annuity (IRA), you may
select the Minimum Distribution Program. Under this program, Allianz Life will
make payments to you from your Contract that are designed to meet the applicable
minimum distribution requirements imposed by the Code for IRAs. If the value of
your Contract is less than $25,000, Allianz Life will make payments to you on an
annual basis. If the value of your Contract is at least $25,000, Allianz Life
will make payments to you on a monthly or quarterly basis. The payments will not
be subject to the contingent deferred sales charge and will be instead of the
15% free withdrawal amount.
Suspension of Payments or Transfers
Allianz Life may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of the Portfolio shares are
not reasonably practicable or Allianz Life cannot reasonably value the Portfolio
shares;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Contract Owners.
Allianz Life has reserved the right to defer payment for a withdrawal or
transfer from the Fixed Account for the period permitted by law but not for more
than six months.
PERFORMANCE
- --------------------------------------------------------------------------------
Allianz Life periodically advertises performance of the Variable Options.
Allianz Life will calculate performance by determining the percentage change in
the value of an Accumulation Unit by dividing the increase (decrease) for that
unit by the value of the Accumulation Unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges and the
expenses of the Portfolios. It may not reflect the deduction of any applicable
contingent deferred sales charge and contract maintenance charge. The deduction
of any applicable contract maintenance charge and contingent deferred sales
charges would reduce the percentage increase or make greater any percentage
decrease. Any advertisement will also include average annual total return
figures, which reflect the deduction of the insurance charges, contract
maintenance charge, contingent deferred sales charges and the expenses of the
Portfolios. Allianz Life may also advertise cumulative total return information.
Cumulative total return is determined the same way except that the results are
not annualized. Performance information for the underlying Portfolios may also
be advertised; see the accompanying fund prospectuses for more information.
Allianz Life may in the future also advertise yield information. If it does, it
will provide you with information regarding how yield is calculated. More
detailed information regarding how performance is calculated is found in the
SAI.
Any performance advertised will be based on historical data. It does not
guarantee future results of the Portfolios.
DEATH BENEFIT
- -------------------------------------------------------------------------------
Death of Contract Owner
If you die during the Accumulation Phase, Allianz Life will pay a death benefit
to your Beneficiary (see below). No death benefit is paid if you die during the
Payout Phase. We will determine the value of the death benefit as of the end of
the business day we receive both due proof of death and a payment election at
our Valuemark Service Center.
The value of the death benefit at the time we process the election option is
guaranteed to be at least the larger of the surrender value or the guaranteed
minimum death benefit (described below).
- - The surrender value is the Contract value as of the end of the business day
when we receive the written request for a withdrawal which is reduced by the sum
of: (i) any applicable premium taxes which we have not previously deducted; (ii)
any applicable contract maintenance charge; and (iii) any applicable contingent
deferred sales charge.
- - The guaranteed minimum death benefit will be the greater of (a) or (b) below:
(a) the sum of all Purchase Payments you have made, less any withdrawals (and
any contingent deferred sales charge paid on the withdrawals), increased by 5%
each Contract anniversary prior to the earlier of your 81st birthday or the date
of death.
(b) the greatest sixth Contract anniversary value for Contract anniversaries
prior to the earlier of your 81st birthday or the date of death. The sixth
Contract anniversary value is equal to the Contract value on a sixth Contract
anniversary, plus any Purchase Payments you have made since that anniversary,
less the amount of any withdrawals (and applicable contingent deferred sales
charges paid on the withdrawals) since that anniversary.
On the earlier of your 81st birthday or the date of death and thereafter,
the guaranteed minimum death benefit will only be increased by subsequent
Purchase Payments and decreased by subsequent withdrawals (and applicable
contingent deferred sales charges paid on the withdrawals).
If there are Joint Owners, the age of the oldest Owner will be used to determine
the guaranteed minimum death benefit.
The Beneficiary may, at any time before the end of a sixty (60) day period after
Allianz Life receives proof of death, elect the death benefit to be paid under
one of the following options:
A. Lump sum payment of the death benefit. The value of the death benefit is
equal to the greater of the guaranteed minimum death benefit or the surrender
value as of the end of the business day we receive both due proof of death and a
payment election. We will reduce any distribution of such death benefit by the
sum of any applicable premium taxes, contract maintenance charges and contingent
deferred sales charges.
B. The payment of the entire death benefit within 5 years of the date of the
Contract Owner's death. We determine the value of the death benefit under Option
B by comparing the guaranteed minimum death benefit to the Contract value as of
the end of the business day we receive both due proof of death and a payment
election. If the Contract value is greater, it will be the death benefit. We
will reduce any distribution of such death benefit by the sum of any applicable
premium taxes, contract maintenance charges and contingent deferred sales
charges. If the guaranteed minimum death benefit is greater, it will be the
death benefit. After the death benefit is calculated, it will be subject to
market risk. We will not accept any additional Purchase Payments after the
Contract Owner dies.
C. Payment over the lifetime of the designated Beneficiary or over a period not
extending beyond the life expectancy of the designated Beneficiary with
distribution beginning within one year of the date of death of the Contract
Owner (see "Annuity Payments (The Payout Phase) - Annuity Options"). We
determine the value of the death benefit under Option C by comparing the
guaranteed death benefit to the Contract value as of the end of the business day
we receive both due proof of death and a payment election. We will reduce any
distribution of such death benefit by the sum of any applicable premium taxes,
contract maintenance charges and contingent deferred sales charges. If the
Contract value is greater, we will treat it as the death benefit. If the
guaranteed minimum death benefit is greater, it will be the death benefit.
D. If the Beneficiary is your spouse, he/she can continue the Contract in
his/her own name. We determine the value of the death benefit under Option D by
comparing the guaranteed minimum death benefit to the Contract value as of the
end of the business day we receive both due proof of death and a payment
election. If the Contract value is greater, it will remain the Contract value.
If the guaranteed minimum death benefit is greater, it will become the new
Contract value. Any distribution to the new Contract Owner will be reduced by
the sum of any applicable premium taxes, contract maintenance charges and
contingent deferred sales charges.
Upon the death of the Contract Owner, the Contingent Owner or surviving Joint
Owner, as applicable, may elect to keep the Contract in force and become the new
Contract Owner (if they are the spouse of the Contract Owner).
If the Beneficiary does not elect a payment option, we will make a single sum
settlement at the end of the sixty (60) day period following the date we receive
proof of death. We may delay paying a death benefit pending receipt of any
applicable tax consents and/or forms from a state.
In the case of Joint Owners, if a Joint Owner dies, the surviving Joint Owner
will be considered the Beneficiary. Joint Owners must be spouses (except in
Pennsylvania).
If you (or any Joint Owner) die during the Payout Phase and you are not the
Annuitant, any payments which are remaining under the Annuity Option selected
will continue at least as rapidly as they were being paid at your death. If you
die during the Payout Phase, the Beneficiary becomes the Contract Owner.
Death of Annuitant
If the Annuitant, who is not a Contract Owner or Joint Owner, dies before the
Income Date, you will become the Annuitant unless you designate a new Annuitant
(subject to our underwriting rules then in effect). However, if the Contract
Owner is a non-natural person (e.g., a corporation), then the death of the
Annuitant will be treated as the death of the Contract Owner, and a new
Annuitant may not be named.
If the Annuitant dies on or after the Income Date, the remaining amounts
payable, if any, will be as provided for in the Annuity Option selected. The
remaining amounts payable will be paid at least as rapidly as they were being
paid at the Annuitant's death.
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 Life 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) to hold the assets that underlie the Contracts, except
assets allocated to the Fixed Account. 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.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions up to 6.0% of Purchase Payments.
Sometimes, Allianz Life enters into an agreement with the broker-dealer to pay
the broker-dealer commissions as a combination of a certain amount of the
commission at the time of sale and a trail commission (which when totaled could
exceed 6.0% of Purchase Payments). In addition, Allianz Life may pay certain
sellers for other services not directly related to the sale of the Contracts
(such as special marketing support allowances). Commissions may be recovered
from a broker-dealer if a withdrawal occurs within 12 months of a Purchase
Payment.
Administration
Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300
Berwyn Park, Berwyn, Pennsylvania, to perform certain administrative services
regarding the Contracts. The administrative services include issuance of the
Contracts and maintenance of Contract Owner's records.
Financial statements
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL
INFORMATION
- -------------------------------------------------------------------------------
Insurance Company 2
Experts 2
Legal Opinions 2
Distributor 2
Reduction or Elimination of the
Contingent Deferred Sales Charge 2
Calculation of Performance Data 2
Federal Tax Status 6
Annuity Provisions 11
Financial Statements 11
<PAGE>
APPENDIX
- -------------------------------------------------------------------------------
Condensed Financial Information
The consolidated financial statements of Allianz Life Insurance Company of North
America and the financial statements of Allianz Life Variable Account B may be
found in the Statement of Additional Information.
The table on the following pages includes Accumulation Unit values for the
periods indicated.
This information should be read in conjunction with the financial statements and
related notes of the Separate Account included in the Statement of Additional
Information.
<PAGE>
<TABLE>
<CAPTION>
(NUMBER OF UNITS IN THOUSANDS)
FRANKLIN**FRANKLINFRANKLIN FRANKLIN
FRANKLIN GLOBAL GLOBAL GROWTH FRANKLINFRANKLIN FRANKLIN MUTUAL
CAPITALHEALTH CAREUTILITIES AND HIGH INCOME MONEY DISCOVERY
VARIABLE OPTIONS: GROWTHSECURITIESSECURITIESINCOME INCOMESECURITIES MARKET SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Ended June 30, 1999
Unit value at beginning of period
Unit value at end of period
Number of units outstanding at end of period
Year Ended Dec. 31, 1998
Unit value at beginning of period $13.130 $10.000*$25.818 $24.551 $21.312 $25.065 $13.865 $11.983
Unit value at end of period $15.574 $10.610 $28.308 $26.226 $21.208 $25.122 $14.386 $11.226
Number of units outstanding at end of period 8,454 586 30,851 40,480 14,987 39,420 22,032 9,718
Year Ended Dec. 31, 1997
Unit value at beginning of period $11.254 NA $20.654 $19.490 $19.375 $21.708 $13.359 $10.180
Unit value at end of period $13.130 NA $25.818 $24.551 $21.312 $25.065 $13.865 $11.983
Number of units outstanding at end of period 5,673 NA 39,623 46,962 18,871 49,812 20,982 9,940
Year Ended Dec. 31, 1996
Unit value at beginning of period $10.000* NA $19.565 $17.310 $17.252 $19.785 $12.883 $10.000*
Unit value at end of period $11.254 NA $20.654 $19.490 $19.375 $21.708 $13.359 $10.180
Number of units outstanding at end of period 3,722 NA 53,086 50,027 20,736 57,504 28,060 1,471
Year Ended Dec. 31, 1995
Unit value at beginning of period NA NA $15.104 $13.215 $14.608 $16.392 $12.354 NA
Unit value at end of period NA NA $19.565 $17.310 $17.252 $19.785 $12.883 NA
Number of units outstanding at end of period NA NA 66,669 46,893 18,756 59,309 31,040 NA
Year Ended Dec. 31, 1994
Unit value at beginning of period NA NA $17.319 $13.677 $15.155 $17.734 $12.066 NA
Unit value at end of period NA NA $15.104 $13.215 $14.608 $16.392 $12.354 NA
Number of units outstanding at end of period NA NA 70,082 35,695 15,679 56,569 39,437 NA
Year Ended Dec. 31, 1993
Unit value at beginning of period NA NA $15.889 $12.574 $13.278 $15.163 $11.932 NA
Unit value at end of period NA NA $17.319 $13.677 $15.155 $17.734 $12.066 NA
Number of units outstanding at end of period NA NA 84,217 24,719 11,787 38,967 10,247 NA
Year Ended Dec. 31, 1992
Unit value at beginning of period NA NA $14.821 $11.949 $11.583 $13.580 $11.742 NA
Unit value at end of period NA NA $15.889 $12.574 $13.278 $15.163 $11.932 NA
Number of units outstanding at end of period NA NA 39,387 17,144 4,780 11,397 6,951 NA
Year Ended Dec. 31, 1991
Unit value at beginning of period NA NA $12.062 $ 9.803 $ 9.026 $ 9.842 $11.288 NA
Unit value at end of period NA NA $14.821 $11.949 $11.583 $13.580 $11.742 NA
Number of units outstanding at end of period NA NA 16,188 9,671 1,923 4,472 5,682 NA
Year Ended Dec. 31, 1990
Unit value at beginning of period NA NA $12.010 $10.180 $10.021 $10.783 $10.637 NA
Unit value at end of period NA NA $12.062 $ 9.803 $ 9.026 $ 9.842 $11.288 NA
Number of units outstanding at end of period NA NA 6,300 5,356 1,056 3,011 5,768 NA
Period from Inception* to Dec. 31, 1989
Unit value at beginning of period NA NA $10.000 $10.000 $10.000 $10.000 $10.000 NA
Unit value at end of period NA NA $12.010 $10.180 $10.021 $10.783 $10.637 NA
Number of units outstanding at end of period NA NA 1,173 1,662 612 1,508 1,199 NA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(NUMBER OF UNITS IN THOUSANDS)
FRANKLIN FRANKLINFRANKLIN FRANKLIN FRANKLIN
MUTUAL NATURAL REAL FRANKLIN FRANKLIN U.S. FRANKLIN** ZERO
SHARES RESOURCES ESTATE RISING SMALLGOVERNMENT VALUE COUPON
VARIABLE OPTIONS: SECURITIESSECURITIESSECURITIESDIVIDENDSCAP SECURITIES SECURITIES 2000
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Ended June 30, 1999
Unit value at beginning of period
Unit value at end of period
Number of units outstanding at end of period
Year Ended Dec. 31, 1998
Unit value at beginning of period $11.993 $11.559 $28.169 $20.074 $14.952 $17.947 $10.000* $19.512
Unit value at end of period $11.837 $ 8.505 $23.107 $21.165 $14.600 $19.014 $7.717 $20.684
Number of units outstanding at end of period 18,133 4,453 9,639 27,683 14,856 30,500 719 3,595
Year Ended Dec. 31, 1997
Unit value at beginning of period $10.330 $14.467 $23.668 $15.303 $12.913 $16.650 NA $18.475
Unit value at end of period $11.993 $11.559 $28.169 $20.074 $14.952 $17.947 NA $19.512
Number of units outstanding at end of period 18,744 5,709 13,445 33,249 16,925 36,347 NA 4,523
Year Ended Dec. 31, 1996
Unit value at beginning of period $10.000*$14.109 $18.073 $12.498 $10.146 $16.298 NA $18.294
Unit value at end of period $10.330 $14.467 $23.668 $15.303 $12.913 $16.650 NA $18.475
Number of units outstanding at end of period 2,613 6,998 12,757 35,569 12,784 44.598 NA 5,636
Year Ended Dec. 31, 1995
Unit value at beginning of period NA $13.979 $15.594 $ 9.769 $10.000* $13.835 NA $15.373
Unit value at end of period NA $14.109 $18.073 $12.498 $10.146 $16.298 NA $18.294
Number of units outstanding at end of period NA 6,919 10,998 33,789 1,302 34,313 NA 6,066
Year Ended Dec. 31, 1994
Unit value at beginning of period NA $14.464 $15.369 $10.327 NA $14.698 NA $16.717
Unit value at end of period NA $13.979 $15.594 $ 9.769 NA $13.835 NA $15.373
Number of units outstanding at end of period NA 8,285 11,645 28,778 NA 36,490 NA 4,953
Year Ended Dec. 31, 1993
Unit value at beginning of period NA $ 9.424 $13.095 $10.848 NA $13.586 NA $14.595
Unit value at end of period NA $14.464 $15.369 $10.327 NA $14.698 NA $16.717
Number of units outstanding at end of period NA 4,685 5,589 26,256 NA 40,402 NA 3,787
Year Ended Dec. 31, 1992
Unit value at beginning of period NA $10.635 $11.848 $10.000* NA $12.798 NA $13.570
Unit value at end of period NA $ 9.424 $13.095 $10.848 NA $13.586 NA $14.595
Number of units outstanding at end of period NA 1,419 1,052 8,388 NA 25,054 NA 2,886
Year Ended Dec. 31, 1991
Unit value at beginning of period NA $10.387 $ 9.000 NA NA $11.199 NA $11.446
Unit value at end of period NA $10.635 $11.848 NA NA $12.798 NA $13.570
Number of units outstanding at end of period NA 833 394 NA NA 14,426 NA 2,012
Year Ended Dec. 31, 1990
Unit value at beginning of period NA $12.247 $10.368 NA NA $10.427 NA $10.961
Unit value at end of period NA $10.387 $ 9.000 NA NA $11.199 NA $11.446
Number of units outstanding at end of period NA 1,015 200 NA NA 5,450 NA 1,041
Period from Inception* to Dec. 31, 1989
Unit value at beginning of period NA $10.000 $10.000 NA NA $10.000 NA $10.000
Unit value at end of period NA $12.247 $10.368 NA NA $10.427 NA $10.961
Number of units outstanding at end of period NA 167 57 NA NA 1,102 NA 162
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(NUMBER OF UNITS IN THOUSANDS)
FRANKLINFRANKLIN TEMPLETON TEMPLETON TEMPLETON
ZERO ZERO DEVELOPING GLOBAL TEMPLETON GLOBAL TEMPLETONTEMPLETONTEMPLETON
COUPON COUPON MARKETS ASSET GLOBAL INCOMEINTERNAT'LINTERNAT'LPACIFIC
VARIABLE OPTIONS: 2005 2010 EQUITY ALLOCATION GROWTH SECURITIESEQUITYSMALLER COS.GROWTH
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Ended June 30, 1999
Unit value at beginning of period
Unit value at end of period
Number of units outstanding at end of period
Year Ended Dec. 31, 1998
Unit value at beginning of period $22.532 $24.740 $10.340 $13.786 $15.176 $16.957 $17.711 $10.825 $ 9.431
Unit value at end of period $25.003 $27.920 $ 7.993 $13.589 $16.309 $17.905 $18.437 $ 9.364
$ 8.078
Number of units outstanding at end of period 2,635 2,582 15,989 4,056 34,226 6,976 44,256 1,533 10,669
Year Ended Dec. 31, 1997
Unit value at beginning of period $20.517 $21.522 $11.487 $12.514 $13.560 $16.780 $16.081 $11.145 $14.932
Unit value at end of period $22.532 $24.740 $10.340 $13.786 $15.176 $16.957 $17.711 $10.825 $ 9.431
Number of units outstanding at end of period 2,910 2,998 23,005 5,229 41,433 9,434 58,179 1,998 15,833
Year Ended Dec. 31, 1996
Unit value at beginning of period $20.914 $22.431 $ 9.582 $10.591 $11.339 $15.522 $13.263$10.000* $13.630
Unit value at end of period $20.517 $21.522 $11.487 $12.514 $13.560 $16.781 $16.081 $11.145 $14.932
Number of units outstanding at end of period 3,579 3,297 22,423 4,104 40,327 11,857 64,375 1,388 22,061
Year Ended Dec. 31, 1995
Unit value at beginning of period $16.096 $15.930 $ 9.454 $10.000* $10.201 $13.726 $12.161 NA $12.802
Unit value at end of period $20.914 $22.431 $ 9.582 $10.591 $11.339 $15.522 $13.263 NA $13.630
Number of units outstanding at end of period 3,504 3,437 15,618 1,338 28,309 14,181 59,883 NA 22,483
Year Ended Dec. 31, 1994
Unit value at beginning of period $18.050 $18.144 $10.000* NA $10.000* $14.650 $12.226 NA $14.233
Unit value at end of period $16.096 $15.930 $ 9.454 NA $10.201 $13.726 $12.161 NA $12.802
Number of units outstanding at end of period 2,780 2,589 9,774 NA 14,637 16,855 60,464 NA 27,231
Year Ended Dec. 31, 1993
Unit value at beginning of period $14.975 $14.670 NA NA NA $12.733 $ 9.642 NA $ 9.761
Unit value at end of period $18.050 $18.144 NA NA NA $14.650 $12.226 NA $14.233
Number of units outstanding at end of period 2,020 1,405 NA NA NA 13,054 24,026 NA 14,240
Year Ended Dec. 31, 1992
Unit value at beginning of period $13.705 $13.482 NA NA NA $12.962 $10.000* NA $10.000*
Unit value at end of period $14.975 $14.670 NA NA NA $12.733 $ 9.642 NA $ 9.761
Number of units outstanding at end of period 1,090 849 NA NA NA 5,487 1,329 NA 534
Year Ended Dec. 31, 1991
Unit value at beginning of period $11.545 $11.390 NA NA NA $11.706 NA NA NA
Unit value at end of period $13.705 $13.482 NA NA NA $12.962 NA NA NA
Number of units outstanding at end of period 795 1,150 NA NA NA 2,979 NA NA NA
Year Ended Dec. 31, 1990
Unit value at beginning of period $11.406 $11.486 NA NA NA $10.813 NA NA NA
Unit value at end of period $11.545 $11.390 NA NA NA $11.706 NA NA NA
Number of units outstanding at end of period 406 581 NA NA NA 1,322 NA NA NA
Period from Inception* to Dec. 31, 1989
Unit value at beginning of period $10.000 $10.000 NA NA NA $10.000 NA NA NA
Unit value at end of period $11.406 $11.486 NA NA NA $10.813 NA NA NA
Number of units outstanding at end of period 86 194 NA NA NA 278 NA NA NA
<FN>
* Unit Value at inception was $10.00.
** The Franklin Global Health Care Securities and the Franklin Value Securities
Variable Options commenced operations May 1, 1998.
</FN>
</TABLE>
Accumulation Unit Value at the inception was $10.00 for each Variable Option.
Inception was 1/24/89 for the Franklin Growth and Income, Franklin High Income,
Franklin Income Securities, Franklin Money Market, Franklin Natural Resources
Securities, Franklin Real Estate Securities, Templeton Global Income Securities,
and Franklin Global Utilities Securities Sub-Accounts; 3/14/89 for the Franklin
U.S. Government Securities and the three Franklin Zero Coupon Sub-Accounts;
1/27/92 for the Franklin 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 Franklin Small
Cap Sub-Account; 5/1/96 for the Franklin Capital Growth and Templeton
International Smaller Companies Sub-Accounts; 11/8/96 for the Franklin Mutual
Discovery Securities and Franklin Mutual Shares Securities Sub-Accounts; and
5/1/98 for the Franklin Global Health Care Securities and Franklin Value
Securities Sub-Accounts. There are no Accumulation Unit Values shown for the AIM
V.I. Growth, Alger American Growth, Alger American Leveraged AllCap, Franklin
S&P 500 Index, USAllianz VIP Diversified Assets, USAllianz VIP Growth, and
USAllianz VIP Intermediate Fixed Income Variable Options because they commenced
operations as of the date of this prospectus and therefore had no assets as of
June 30, 1999.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
FRANKLIN VALUEMARK II AND FRANKLIN VALUEMARK III
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
October 25, 1999
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195, (800) 542-5427.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED OCTOBER
25, 1999, AND AS MAY BE AMENDED FROM TIME TO TIME.
<PAGE>
Table of Contents
CONTENTS PAGE
Company ......................................... 2
Experts ......................................... 2
Legal Opinions .................................. 2
Distributor ..................................... 2
Reduction or Elimination of the Contingent
Deferred Sales Charge .......................... 2
Calculation of Performance Data ................. 2
Federal Tax Status .............................. 6
Annuity Provisions .............................. 11
Financial Statements ............................ 11
VMII/III SAI 10/99
<PAGE>
Company
- --------------------------------------------------------------------------------
Information regarding Allianz Life Insurance Company of North America (the
"Company") and its ownership is contained in the Prospectus. On April 1, 1993,
the Company changed its name from North American Life and Casualty Company to
its present name. The Company is rated A+ (Superior) by A.M. BEST, an
independent analyst of the insurance industry. The financial strength of an
insurance company may be relevant insofar as the ability of a company to make
fixed annuity payments from its general account.
Experts
- --------------------------------------------------------------------------------
The financial statements of Allianz Life Variable Account B and the consolidated
financial statements of the Company as of and for the year ended December 31,
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
- --------------------------------------------------------------------------------
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
Distributor
- --------------------------------------------------------------------------------
NALAC Financial Plans, LLC, a wholly-owned subsidiary of the Company, acts as
the distributor. The offering is on a continuous basis.
Reduction or Elimination of the
Contingent Deferred Sales Charge
- --------------------------------------------------------------------------------
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals or to
a group of individuals in a manner that results in savings of sales expenses.
The entitlement to a reduction of the Contingent Deferred Sales Charge will be
determined by the Insurance Company after examination of the following factors:
1) the size of the group; 2) the total amount of purchase payments expected to
be received from the group; 3) the nature of the group for which the Contracts
are purchased, and the persistency expected in that group; 4) the purpose for
which the Contracts are purchased and whether that purpose makes it likely that
expenses will be reduced; and 5) any other circumstances which the Company
believes to be relevant to determining whether reduced sales or administrative
expenses may be expected. None of the reductions in charges for sales is
contractually guaranteed.
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of the Company or any of its
affiliates. The Contingent Deferred Sales Charge may be reduced or eliminated
when the Contract is sold by an agent of the Company to any members of his or
her immediate family and the commission is waived. In no event will any
reduction or elimination of the Contingent Deferred Sales Charge be permitted
where the reduction or elimination will be unfairly discriminatory to any
person.
Calculation of Performance Data
- --------------------------------------------------------------------------------
Total Return
From time to time, the Company may advertise the performance data for the
Variable Options (also known as Sub-Accounts) in sales literature,
advertisements, personalized hypothetical illustrations, and Contract Owner
communications. Such data will show the percentage change in the value of an
accumulation unit based on the performance of a Variable Option over a stated
period of time which is determined by dividing the increase (or decrease) in
value for that unit by the accumulation unit value at the beginning of the
period.
Any such performance data will include total return figures for the one, five,
and ten year (or since inception) time periods indicated. Such total return
figures will reflect the deduction of a 1.25% Mortality and Expense Risk Charge,
a 0.15% Administrative Expense Charge, the operating expenses of the underlying
Portfolios and any applicable Contingent Deferred Sales Charge and Contract
Maintenance Charge ("Standardized Total Return"). The Contingent Deferred Sales
Charge and Contract Maintenance Charge deductions are calculated assuming a
Contract is surrendered at the end of the reporting period.
The hypothetical value of a Contract purchased for the time periods described
will be determined by using the actual accumulation unit values for an initial
$1,000 purchase payment, and deducting any applicable Contingent Deferred Sales
Charge and Contract Maintenance Charge to arrive at the ending hypothetical
value. The average annual total return is then determined by computing the fixed
interest rate that a $1,000 purchase payment would have to earn annually,
compounded annually, to grow to the hypothetical value at the end of the time
periods described. The formula used in these calculations is:
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 performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of the
Contingent Deferred Sales Charge and the Contract Maintenance Charge. Cumulative
total return is calculated in a similar manner as described above except that
the results are not annualized. The Company may also advertise cumulative and
total return information over different periods of time. The Company may also
present performance information computed on a different basis ("Non-Standardized
Total Return").
Yield
The Franklin Money Market Sub-Account. The Company may advertise yield
information for the Franklin Money Market Sub-Account. The Franklin 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 the
Contract Maintenance Charge and, in certain instances, the value of the
underlying Portfolio's investment securities. The fact that the Sub-Account's
current yield will fluctuate and that the principal is not guaranteed should be
taken into consideration when using the 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 Franklin Money Market Sub-Account's current yield is computed on a base
period return of a hypothetical Contract having a beginning balance of one
accumulation unit for a particular period of time (generally seven days). The
return is determined by dividing the net change (exclusive of any capital
changes) in such accumulation unit by its beginning value, and then multiplying
it by 365/7 to get the annualized current yield. The calculation of net change
reflects the value of additional shares purchased with the dividends paid by the
Portfolio, and the deduction of the Mortality and Expense Risk Charge,
Administrative Expense Charge and Contract Maintenance Charge.
The effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. (Effective
yield = [(Base Period Return + 1)365/7] -1.)
For the seven-day period ending on 12/31/98, the Money Market Sub-Account had a
current yield of 3.38% and an effective yield of 3.44%.
Other Sub-Accounts. The Company may also quote yield in sales literature,
advertisements, personalized hypothetical illustrations, and Contract Owner
communications for the other Sub-Accounts. Each Sub-Account (other than the
Franklin Money Market Sub-Account) will publish standardized total return
information with any quotation of current yield.
The yield computation is determined by dividing the net investment income per
accumulation unit earned during the period (minus the deduction for the
Mortality and Expense Risk Charge, Administrative Expense Charge and Contract
Maintenance Charge) by the accumulation unit value on the last day of the period
and annualizing the resulting figure, according to the following formula:
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 Sub-Account;
b = expenses accrued for the period (net of reimbursements, if applicable);
c = the average daily number of accumulation units outstanding during the
period;
d = the maximum offering price per accumulation unit on the last day of the
period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods (or one month) identified in the sales literature,
advertisement, or communication. Yield calculations assume that no Contingent
Deferred Sales Charges have been deducted (see the Prospectus for information
regarding the Contingent Deferred Sales Charge). The Company does not currently
advertise yield information for any Sub-Account (other than the Franklin Money
Market Sub-Account).
Performance Ranking
Total return information for the Sub-Accounts and the Portfolios may be compared
to relevant indices, including U.S. domestic and international indices and data
from Lipper Analytical Services, Inc., Standard & Poor's Indices, or VARDS(R).
From time to time, evaluation of performance by independent sources may also be
used.
<PAGE>
<TABLE>
<CAPTION>
Performance Information
Total returns reflect all aspects of a Sub-Account's return, including the
automatic reinvestment by Allianz Life Variable Account B of all distributions
and any change in a Sub-Account's value over the period.
The returns reflect the deduction of the Mortality and Expense Risk Charge,
Administrative Expense Charge and the operating expenses of each Portfolio and
are shown both with and without the deduction of the Contingent Deferred Sales
Charge and Contract Maintenance Charge. Past performance does not guarantee
future results.
Standardized Total Return Franklin Valuemark II/III
Average Annual Total Return for the periods ended June 30, 1999: with Contingent Deferred Sales Charge and other charges
Franklin Valuemark II Franklin Valuemark III
- ------------------------------------------------------------------------------------------------------------------------------------
Separate
Account
Inception One Five Since One Five Since
Sub-Account Date Year Years Inception Year Years Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Franklin Capital Growth 5/1/96 14.27% NA 17.33% 13.42% NA 17.33%
Franklin Global Health Care Securities 5/1/98 NA NA 2.63% NA NA 1.35%
Franklin Global Utilities Securities 1/24/89 5.29% 10.18% 10.97% 4.44% 10.18% 10.97%
Franklin Growth and Income 1/24/89 2.48% 13.78% 10.11% 1.63% 13.78% 10.11%
Franklin High Income 1/24/89 -4.83% 6.81% 7.78% -5.68% 6.81% 7.78%
Franklin Income Securities 1/24/89 -4.12% 7.07% 9.64% -4.97% 7.07% 9.64%
Franklin Money Market+ 1/24/89 -0.59% 3.42% 3.64% -1.44% 3.42% 3.64%
Franklin Mutual Discovery Securities 11/8/96 -10.67% NA 4.44% -11.52% NA 4.44%
Franklin Mutual Shares Securities 11/8/96 -5.65% NA 7.11% -6.50% NA 7.11%
Franklin Natural Resources Securities 1/24/89 -30.77% -10.30% -1.70% -31.62% -10.30% -1.70%
Franklin Real Estate Securities 1/24/89 -22.32% 8.36% 8.72% -23.17% 8.36% 8.72%
Franklin Rising Dividends 1/27/92 1.09% 15.31% 11.34% 0.24% 15.31% 11.34%
Franklin Small Cap 11/1/95 -6.71% NA 12.29% -7.56% NA 12.29%
Franklin U.S. Government Securities 3/14/89 1.60% 5.13% 6.70% 0.75% 5.13% 6.70%
Franklin Value Securities 5/1/98 NA NA -37.77% NA NA -38.86%
Franklin Zero Coupon - 2000+ 3/14/89 1.66% 4.19% 7.62% 0.81% 4.19% 7.62%
Franklin Zero Coupon - 2005+ 3/14/89 6.62% 6.58% 9.73% 5.77% 6.58% 9.73%
Franklin Zero Coupon - 2010+ 3/14/89 8.51% 8.86% 10.97% 7.66% 8.86% 10.97%
Templeton Developing Markets Equity 3/15/94 -27.05% NA -4.76% -27.90% NA -4.76%
Templeton Global Asset Allocation 5/1/95 -5.78% NA 8.36% -6.63% NA 8.36%
Templeton Global Growth 3/15/94 3.11% NA 10.59% 2.26% NA 10.59%
Templeton Global Income Securities 1/24/89 1.24% 3.94% 5.96% 0.39% 3.94% 5.96%
Templeton International Equity 1/27/92 -0.26% 8.42% 9.15% -1.11% 8.42% 9.15%
Templeton International Smaller Companies 5/1/96 -17.84% NA -3.40% -18.69% NA -3.40%
Templeton Pacific Growth 1/27/92 -18.69% -10.94% -3.12% -19.54% -10.94% -3.12%
<FN>
The Global Health Care Securities and the Value Securities Sub-Accounts
commenced operations on May 1, 1998.
The Franklin S&P 500, USAllianz VIP Diversified Assets, USAllianz VIP Growth,
and USAllianz VIP Intermediate Fixed Income Sub-Accounts commenced operations on
October 25, 1999.
+ Calculated with waiver of fees
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Total Return Franklin Valuemark II/III
Total Return for the periods ended June 30, 1999: without Contingent Deferred Sales Charge or Contract Maintenance Charge
Annual Total Return Cumulative Total Return
- ------------------------------------------------------------------------------------------------------------------------------------
Separate
Account
Inception One Three Five Since Three Five Since
Sub-Account Date Year Years Years Inception Years Years Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Capital Growth 5/1/96 18.62% NA NA 18.06% NA NA 55.74%
Franklin Global Health Care Securities 5/1/98 NA NA NA 9.27% NA NA 6.10%
Franklin Global Utilities Securities 1/24/89 9.64% 13.10% 10.33% 11.04% 44.69% 63.45% 183.08%
Franklin Growth and Income 1/24/89 6.83% 14.86% 13.91% 10.19% 51.51% 91.76% 162.26%
Franklin High Income 1/24/89 -0.48% 7.13% 6.95% 7.86% 22.93% 39.94% 112.08%
Franklin Income Securities 1/24/89 0.23% 8.29% 7.21% 9.71% 26.97% 41.66% 151.22%
Franklin Money Market+ 1/24/89 3.76% 3.74% 3.58% 3.73% 11.66% 19.23% 43.86%
Franklin Mutual Discovery Securities 11/8/96 -6.32% NA NA 5.54% NA NA 12.26%
Franklin Mutual Shares Securities 11/8/96 -1.30% NA NA 8.18% NA NA 18.37%
Franklin Natural Resources Securities 1/24/89 -26.42% -15.52% -10.07% -1.62% -39.71% -41.19% -14.95%
Franklin Real Estate Securities 1/24/89 -17.97% 8.54% 8.50% 8.79% 27.85% 50.35% 131.07%
Franklin Rising Dividends 1/27/92 5.44% 19.20% 15.43% 11.42% 69.35% 104.95% 111.65%
Franklin Small Cap 11/1/95 -2.36% 12.90% NA 12.69% 43.89% NA 46.00%
Franklin U.S. Government Securities 3/14/89 5.95% 5.27% 5.28% 6.77% 16.67% 29.36% 90.14%
Franklin Value Securities 5/1/98 NA NA NA -32.13% NA NA -22.83%
Franklin Zero Coupon - 2000+ 3/14/89 6.01% 4.18% 4.35% 7.69% 13.07% 23.73% 106.84%
Franklin Zero Coupon - 2005+ 3/14/89 10.97% 6.13% 6.73% 9.80% 19.55% 38.52% 150.03%
Franklin Zero Coupon - 2010+ 3/14/89 12.86% 7.57% 9.00% 11.04% 24.47% 53.88% 179.20%
Templeton Developing Markets Equity 3/15/94 -22.70% -5.87% NA -4.56% -16.58% NA -20.07%
Templeton Global Asset Allocation 5/1/95 -1.43% 8.66% NA 8.71% 28.30% NA 35.89%
Templeton Global Growth 3/15/94 7.46% 12.88% NA 10.73% 43.83% NA 63.09%
Templeton Global Income Securities 1/24/89 5.59% 4.88% 4.09% 6.04% 15.35% 22.22% 79.05%
Templeton International Equity 1/27/92 4.09% 11.60% 8.56% 9.23% 39.01% 50.80% 84.37%
Templeton International Smaller Companies 5/1/96 -13.49% NA NA -2.43% NA NA -6.36%
Templeton Pacific Growth 1/27/92 -14.34% -16.00% -10.71% -3.03% -40.73% -43.24% -19.22%
<FN>
The Global Health Care Securities and the Value Securities Sub-Accounts
commenced operations on May 1, 1998.
The Franklin S&P 500, USAllianz VIP Diversified Assets, USAllianz VIP Growth,
and USAllianz VIP Intermediate Fixed Income Sub-Accounts commenced operations on
October 25, 1999.
+ Calculated with waiver of fees
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Total Return Franklin Valuemark III
Total Return for the periods ended June 30, 1999: with Contingent Deferred Sales Charge and other charges
Annual Total Return Cumulative Total Return
- ------------------------------------------------------------------------------------------------------------------------------------
Separate
Account
Inception One Three Five Since Three Five Since
Sub-Account Date Year Years Years Inception Years Years Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Capital Growth 5/1/96 13.42% NA NA 17.33% NA NA 53.20%
Franklin Global Health Care Securities 5/1/98 NA NA NA 1.35% NA NA 0.90%
Franklin Global Utilities Securities 1/24/89 4.44% 12.44% 10.18% 10.97% 42.14% 62.40% 181.38%
Franklin Growth and Income 1/24/89 1.63% 14.21% 13.78% 10.11% 48.97% 90.69% 160.43%
Franklin High Income 1/24/89 -5.68% 6.39% 6.81% 7.78% 20.43% 38.99% 110.59%
Franklin Income Securities 1/24/89 -4.97% 7.57% 7.07% 9.64% 24.46% 40.68% 149.65%
Franklin Money Market+ 1/24/89 -1.44% 2.96% 3.42% 3.64% 9.15% 18.31% 42.69%
Franklin Mutual Discovery Securities 11/8/96 -11.52% NA NA 4.44% NA NA 9.76%
Franklin Mutual Shares Securities 11/8/96 -6.50% NA NA 7.11% NA NA 15.87%
Franklin Natural Resources Securities 1/24/89 -31.62% -16.68% -10.30% -1.70% -42.15% -41.92% -15.69%
Franklin Real Estate Securities 1/24/89 -23.17% 7.83% 8.36% 8.72% 25.37% 49.42% 129.52%
Franklin Rising Dividends 1/27/92 0.24% 18.60% 15.31% 11.34% 66.80% 103.84% 110.53%
Franklin Small Cap 11/1/95 -7.56% 12.23% NA 12.29% 41.38% NA 44.37%
Franklin U.S. Government Securities 3/14/89 0.75% 4.51% 5.13% 6.70% 14.15% 28.42% 88.80%
Franklin Value Securities 5/1/98 NA NA NA -38.86% NA NA -28.03%
Franklin Zero Coupon - 2000+ 3/14/89 0.81% 3.40% 4.19% 7.62% 10.55% 22.79% 105.48%
Franklin Zero Coupon - 2005+ 3/14/89 5.77% 5.38% 6.58% 9.73% 17.02% 37.54% 148.47%
Franklin Zero Coupon - 2010+ 3/14/89 7.66% 6.83% 8.86% 10.97% 21.93% 52.86% 177.47%
Templeton Developing Markets Equity 3/15/94 -27.90% -6.80% NA -4.76% -19.03% NA -20.86%
Templeton Global Asset Allocation 5/1/95 -6.63% 7.95% NA 8.36% 25.79% NA 34.27%
Templeton Global Growth 3/15/94 2.26% 12.21% NA 10.59% 41.30% NA 62.10%
Templeton Global Income Securities 1/24/89 0.39% 4.11% 3.94% 5.96% 12.84% 21.29% 77.78%
Templeton International Equity 1/27/92 -1.11% 10.93% 8.42% 9.15% 36.49% 49.82% 83.42%
Templeton International Smaller Companies 5/1/96 -18.69% NA NA -3.40% NA NA -8.82%
Templeton Pacific Growth 1/27/92 -19.54% -17.17% -10.94% -3.12% -43.17% -43.98% -19.73%
<FN>
The Global Health Care Securities and the Value Securities Sub-Accounts
commenced operations on May 1, 1998.
The Franklin S&P 500, USAllianz VIP Diversified Assets, USAllianz VIP Growth,
and USAllianz VIP Intermediate Fixed Income Sub-Accounts commenced operations on
October 25, 1999.
+ Calculated with waiver of fees
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Total Return Franklin Valuemark II
Total Return for the periods ended June 30, 1999: with Contingent Deferred Sales Charge and other charges
Annual Total Return Cumulative Total Return
- ------------------------------------------------------------------------------------------------------------------------------------
Separate
Account
Inception One Three Five Since Three Five Since
Sub-Account Date Year Years Years Inception Years Years Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Capital Growth 5/1/96 14.27% NA NA 17.33% NA NA 53.20%
Franklin Global Health Care Securities 5/1/98 NA NA NA 2.63% NA NA 1.75%
Franklin Global Utilities Securities 1/24/89 5.29% 12.4% 10.18% 10.97% 42.14% 62.40% 181.38%
Franklin Growth and Income 1/24/89 2.48% 14.21% 13.78% 10.11% 48.97% 90.69% 160.43%
Franklin High Income 1/24/89 -4.83% 6.39% 6.81% 7.78% 20.43% 38.99% 110.59%
Franklin Income Securities 1/24/89 -4.12% 7.57% 7.07% 9.64% 24.46% 40.68% 149.65%
Franklin Money Market+ 1/24/89 -0.59% 2.96% 3.42% 3.64% 9.15% 18.31% 42.69%
Franklin Mutual Discovery Securities 11/8/96 -10.67% NA NA 4.44% NA NA 9.76%
Franklin Mutual Shares Securities 11/8/96 -5.65% NA NA 7.11% NA NA 15.87%
Franklin Natural Resources Securities 1/24/89 -30.77% -16.68% -10.30% -1.70% -42.15% -41.92% -15.69%
Franklin Real Estate Securities 1/24/89 -22.32% 7.83% 8.36% 8.72% 25.37% 49.42% 129.52%
Franklin Rising Dividends 1/27/92 1.09% 18.60% 15.31% 11.34% 66.80% 103.84% 110.53%
Franklin Small Cap 11/1/95 -6.71% 12.23% NA 12.29% 41.38% NA 44.37%
Franklin U.S. Government Securities 3/14/89 1.60% 4.51% 5.13% 6.70% 14.15% 28.42% 88.80%
Franklin Value Securities 5/1/98 NA NA NA -37.77% NA NA -27.18%
Franklin Zero Coupon - 2000+ 3/14/89 1.66% 3.40% 4.19% 7.62% 10.55% 22.79% 105.48%
Franklin Zero Coupon - 2005+ 3/14/89 6.62% 5.38% 6.58% 9.73% 17.02% 37.54% 148.47%
Franklin Zero Coupon - 2010+ 3/14/89 8.51% 6.83% 8.86% 10.97% 21.93% 52.86% 177.47%
Templeton Developing Markets Equity 3/15/94 -27.05% -6.80% NA -4.76% -19.03% NA -20.86%
Templeton Global Asset Allocation 5/1/95 -5.78% 7.95% NA 8.36% 25.79% NA 34.27%
Templeton Global Growth 3/15/94 3.11% 12.21% NA 10.59% 41.30% NA 62.10%
Templeton Global Income Securities 1/24/89 1.24% 4.11% 3.94% 5.96% 12.84% 21.29% 77.78%
Templeton International Equity 1/27/92 -0.26% 10.93% 8.42% 9.15% 36.49% 49.82% 83.42%
Templeton International Smaller Companies 5/1/96 -17.84% NA NA -3.40% NA NA -8.82%
Templeton Pacific Growth 1/27/92 -18.69% -17.17% -10.94% -3.12% -43.17% -43.98% -19.73%
<FN>
The Global Health Care Securities and the Value Securities Sub-Accounts
commenced operations on May 1, 1998.
The Franklin S&P 500, USAllianz VIP Diversified Assets, USAllianz VIP Growth,
and USAllianz VIP Intermediate Fixed Income Sub-Accounts commenced operations on
October 25, 1999.
+ Calculated with waiver of fees
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The chart below shows hypothetical accumulation unit performance based on the
historical performance of the AIM V.I. Growth Fund, the Alger American Growth
Fund and the Alger American Leveraged AllCap Fund. The performance figures
assume that your Contract was invested in each of the Portfolios commencing from
the inception date of the Portfolio. The performance figures in Column I reflect
the deduction of the Mortality and Expense Risk Charge, Administrative Charge
and the operating expenses of the Portfolios. The performance figures in Column
II reflect the deduction of the Mortality and Expense Risk Charge,
Administrative Charge, the Contract Maintenance Charge, the operating expenses
of the Portfolios and assumes that you make a withdrawal at the end of the
period (and therefore the Contingent Deferred Sales Charge is reflected). Past
performance does not guarantee future results.
Total Return for the periods ended June 30, 1999
Column I Column II
================================================================================================================================
Portfolio One Three Five 10 Years/ One Three Five 10 Years/
Portfolio Inception Year Years Years Since Year Years Years Since
Date Inception Inception
- --------------- ----------- ------------ ------------ ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I.
Growth
Alger
AmericanGrowth
Alger
American
Leveraged
AllCap
</TABLE>
You 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 your total return may be
in any future period.
Federal Tax Status
- --------------------------------------------------------------------------------
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 herein may be applicable in certain situations. Moreover, no
attempt has been made to consider any applicable state or other tax laws.
General
Section 72 of the Internal Revenue Code of 1986, as amended ("Code") governs
taxation of annuities in general. A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as annuity payments under the Annuity Option elected. For a lump
sum payment received as a total surrender (total redemption) or death benefit,
the recipient is taxed on the portion of the payment that exceeds the cost basis
of the Contract. For Non-Qualified Contracts, this cost basis is generally the
purchase payments, while for Qualified Contracts there may be no cost basis. The
taxable portion of the lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract. The exclusion amount
for payments based on a variable annuity option is determined by dividing the
cost basis of the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid. Payments
received after the investment in the Contract has been recovered (i.e. when the
total of the excludable amounts equal the investment in the Contract) are fully
taxable. The taxable portion is taxed at ordinary income rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Contract Owners, annuitants and beneficiaries
under the Contracts should seek competent financial advice about the tax
consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
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 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 underlying the Contracts will be managed
by the investment advisers in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the investments of the Separate Account will cause the Contract Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Contract Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Contract Owner's ability to transfer
among investment choices or the number and type of investment choices available,
would cause the Contract Owner to be considered as the owner of the assets of
the Separate Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Contract Owner being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year period to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Contract Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year period.
Contracts Owned by
Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on purchase payments
for the Contracts will be taxed currently to the Contract Owner if the Owner is
a non-natural person, e.g., a corporation or certain other entities. Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust or
other entity as an agent for a natural person nor to Contracts held by qualified
plans. Purchasers should consult their own tax counsel or other tax adviser
before purchasing a Contract to be owned by a non-natural person.
Tax Treatment of Assignments
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign or
pledge their Contracts.
Death Benefits
Any death benefits paid under the Contract are taxable to the
beneficiary. The rules governing the taxation of payments from an annuity
contract, as discussed above, generally apply to the payment of death benefits
and depend on whether the death benefits are paid as a lump sum or as annuity
payments. Estate taxes may also apply.
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.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
(c) the portion of the distributions not includible in gross income (i.e.
returns of after-tax contributions) or (d) hardship withdrawals. Participants
should consult their own tax counsel or other tax adviser regarding withholding
requirements.
Tax Treatment of Withdrawals -
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 includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 591/2; (b) after the death of the Contract Owner;
(c) if the taxpayer is totally disabled (for this purpose disability is as
defined in Section 72(m)(7) of the Code); (d) in a series of substantially equal
periodic payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer or for the joint lives (or joint life expectancies)
of the taxpayer and his Beneficiary; (e) under an immediate annuity; or (f)
which are allocable to purchase payments made prior to August 14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 591/2 or 5 years
from the date of the first periodic 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.
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 Withdrawals - Qualified Contracts.")
Qualified Plans
The Contracts offered by the Prospectus are designed to be suitable for use
under various types of Qualified Plans. Because of the minimum purchase payment
requirements, these Contracts may not be appropriate for some periodic payment
retirement plans. Taxation of participants in each Qualified Plan varies with
the type of plan and terms and conditions of each specific plan. Contract
Owners, annuitants and beneficiaries are cautioned that benefits under a
Qualified Plan may be subject to the terms and conditions of the plan regardless
of the terms and conditions of the Contracts issued pursuant to the plan. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Contract Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law. Following are general descriptions of the
types of Qualified Plans with which the Contracts may be used. Such descriptions
are not exhaustive and are for general informational purposes only. The tax
rules regarding Qualified Plans are very complex and will have differing
applications, depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described in
this Statement of Additional Information. Generally, Contracts issued pursuant
to Qualified Plans are not transferable except upon surrender or annuitization.
Various penalty and excise taxes may apply to contributions or distributions
made in violation of applicable limitations. Furthermore, certain withdrawal
penalties and restrictions may apply to withdrawals from Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts.")
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employee until the
employee receives distributions from the Contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations.") Employee loans are not allowed under these Contracts.
Any employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which may be deductible from the individual's taxable income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts.") Under
certain conditions, distributions from other IRAs and other Qualified Plans may
be rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 591/2, on the individual's death or disability, or as
a qualified first-time home purchase, subject to a $10,000 lifetime maximum, for
the individual, a spouse, child, grandchild, or ancestor. Any distribution which
is not a qualified distribution is taxable to the extent of earnings in the
distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year periods beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employee until distributed from the
Plan. The tax consequences to participants may vary, depending upon the
particular Plan design. However, the Code places limitations and restrictions on
all Plans, including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions and withdrawals.
Participant loans are not allowed under the Contracts purchased in connection
with these Plans. (See "Tax Treatment of Withdrawals - Qualified Contracts.")
Purchasers of Contracts for use with Pension or Profit-Sharing Plans should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.
Tax Treatment of Withdrawals -
Qualified Contracts
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b) (Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been properly rolled over to an IRA or to another eligible Qualified
Plan, no tax penalty will be imposed. The tax penalty will not apply to the
following distributions: (a) if distribution is made on or after the date on
which the Contract Owner or Annuitant (as applicable) reaches age 591/2; (b)
distributions following the death or disability of the Contract Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Contract Owner or Annuitant
(as applicable) or the joint lives (or joint life expectancies) of such Contract
Owner or Annuitant (as applicable) and his or her designated beneficiary; (d)
distributions to a Contract Owner or Annuitant (as applicable) who has separated
from service after he or she has attained age 55; (e) distributions made to the
Contract Owner or Annuitant (as applicable) to the extent such distributions do
not exceed the amount allowable as a deduction under Code Section 213 to the
Contract Owner or Annuitant (as applicable) for amounts paid during the taxable
year for medical care; (f) distributions made to an alternate payee pursuant to
a qualified domestic relations order; (g) distributions from an Individual
Retirement Annuity for the purchase of medical insurance (as described in
Section 213(d)(1)(D) of the Code) for the Contract Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Contract Owner or
Annuitant (as applicable) has received unemployment compensation for at least 12
weeks (this exception no longer applies after the Contract Owner or Annuitant
(as applicable) has been re-employed for at least 60 days); (h) distributions
from an Individual Retirement Annuity made to the Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the qualified higher
education expenses (as defined in Section 72(t)(7) of the Code) of the Owner or
Annuitant (as applicable) for the taxable year; and (i) distributions from an
Individual Retirement Annuity made to the Owner or Annuitant (as applicable)
which are qualified first-time home buyer distributions (as defined in Section
72(t)(8) of the Code). The exceptions stated in items (d) and (f) above do not
apply in the case of an Individual Retirement Annuity. The exception stated in
item (c) applies to an Individual Retirement Annuity without the requirement
that there be a separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 591/2 or 5 years
from the date of the first periodic 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.
Generally, distributions from a Qualified Plan must commence no later than April
1 of the calendar year following the later of: (a) the year in which the
employee attains age 701/2, or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
Tax-Sheltered Annuities -
Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Contract Owner: (1) attains age 591/2;
(2) separates from service; (3) dies; (4) becomes disabled (within the meaning
of Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Contract Owner's
Contract Value which represents contributions by the Contract Owner and does not
include any investment results. The limitations on withdrawals became effective
on January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, and to income attributable to such contributions and to
income attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers and transfers between certain Qualified
Plans. Contract Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
Annuity Provisions
- --------------------------------------------------------------------------------
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 Sub-Account(s) of the Variable Account.
At the Income Date, the Contract Value in each Sub-Account will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. Both sex distinct and unisex Annuity Tables are utilized
by the Company, depending on the state and type of Contract. If, as of the
Income Date, the then current Annuity Option rates applicable to this class of
Contracts provide a larger income than that guaranteed for the same form of
annuity under the Contract, the larger amount will be paid. The dollar amount of
annuity payments after the first is determined as follows:
1. The dollar amount of the first annuity payment is divided by the value of an
Annuity Unit as of the Income Date. This establishes the number of Annuity Units
for each monthly payment. The number of Annuity Units remains fixed during the
annuity payment period.
2. The fixed number of Annuity Units is multiplied by the Annuity Unit value for
the last Valuation Period of the month preceding the month for which the payment
is due. This result is the dollar amount of the payment.
3. The total dollar amount of each Variable Annuity variable payout is the sum
of all Sub-Account Variable Annuity payments, reduced by the Contract
Maintenance Charge.
Annuity Unit Value
The value of an Annuity Unit for a Sub-Account is determined (see below) by
subtracting (2) from (1), dividing the result by (3) and multiplying the result
by .999866337248 (.999866337248 is the daily factor to neutralize the assumed
net investment rate of 5% per annum which is built into the annuity rate table)
where:
1. is the net result of
a. the assets of the Sub-Account attributable to the Annuity Units; plus or
minus
b. the cumulative charge or credit for taxes reserved which is determined by the
Company to have resulted from the operation of the Sub-Account;
2. is the cumulative unpaid charge for the Mortality and Expense Risk Charge and
for the Administrative Expense Charge; and
3. is the number of Annuity Units outstanding at the end of the Valuation
Period.
The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.
Fixed Annuity Payout
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Company and do not vary with the investment experience of the
Variable Account. The Fixed Option value on the day immediately preceding the
Annuity Date will be used to determine the Fixed Annuity monthly payment. The
monthly Annuity Payment will be based upon the Contract Value at the time of
annuitization, the Annuity Option selected, the age of the annuitant and any
joint annuitant and the sex of the annuitant and any joint annuitant where
allowed.
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 Separate Account as of and
for the year ended December 31, 1998 and the unaudited financial statements of
the Separate Account as of and for the period ended June 30, 1999 are also
included herein.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
The financial statements of the Company and the Variable Account will
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 Variable Annuity Contract (2)
5. Application for Individual Variable Annuity Contract (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)&(4)
9. Opinion and Consent of Counsel (4)
10. Independent Auditors' Consent (4)
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information (4)
14. Company Organizational Chart (3)
27. Not Applicable
(1)Incorporated by reference to Post-Effective Amendment No. 2 to Registrant's
Form N-4 electronically filed on October 24, 1995.
(2)Incorporated by reference to Post-Effective Amendment No.3 to Registrant's
Form N-4 electronically filed on April 18, 1996
(3)Incorporated by reference to Post-Effective Amendment No.5 to Registrant's
Form N-4 electronically filed on April 25, 1997
(4)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 of the Board, President,
1750 Hennepin Avenue Chief Executive Officer and Director
Minneapolis, MN 55403
Herbert F. Hansmeyer Director
777 San Marin Drive
Novato, CA 94998
Michael P. Sullivan Director
7505 Metro Boulevard
Minneapolis, MN 55439
Dr. Gerhard G. Rupprecht Director
Reinsburgstrasse 19
D-70178
Stuttgart, Germany
Edward J. Bonach Executive Vice President, Chief Financial
1750 Hennepin Avenue Officer and Treasurer
Minneapolis, MN 55403
Michael T. Westermeyer Vice President, Corporate Legal Officer
1750 Hennepin Avenue and Secretary
Minneapolis, MN 55403
Robert S. James President-Individual Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Paul M. Howman Vice President, Underwriting
1750 Hennepin Avenue
Minneapolis, MN 55403
Rev. Dennis J. Dease Director
c/o Univer of St.Thomas
Box AQU100
2115 Summit Avenue
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Corp.
Norwest Center
Sixth + Marquette
Minneapolis, MN 55479-0116
Robert M. Kimmitt Director
Wilmer, Cutler & Pickering
2445 M Street NW
Washington, DC 20037-1420
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
The Company Organizational chart is incorporated by reference to Post-Effective
Amendment No. 5 (File No. 811-05618)
Item 27. Number of Contract Owners
As of July 30, 1999, there were 14,362 qualified Contract Owners and 33,498
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 (managers) and directors (Board of
Governors) of NALAC Financial Plans, LLC:
<TABLE>
<CAPTION>
Name & Principal Positions and Offices
Business Address with Underwriter
- ---------------- ---------------------
<S> <C>
Christopher H. Pinkerton Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford Chief Manager and Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael J. Yates Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403
Edward J. Bonach Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota,
maintains physical possession of the accounts, books or documents of the
Variable Account required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated thereunder.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter issued
to the American Council of Life Insurance, dated November 28, 1988 (Commission
ref. IP-6-88), and that the following provisions have been complied with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it has caused this Registration
Statement to be signed on its behalf in the City of Minneapolis and State of
Minnesota, on this 19th day of August, 1999.
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
(Depositor)
By: /s/MICHAEL T. WESTERMEYER
-------------------------
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature and Title
<TABLE>
<CAPTION>
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board, 08/19/99
Lowell C. Anderson President and Chief
Executive Officer
Herbert F. Hansmeyer* Director 08/19/99
Herbert F. Hansmeyer
Michael P. Sullivan* Director 08/19/99
Michael P. Sullivan
Dr. Gerhard G. Rupprecht* Director 08/19/99
Dr. Gerhard G. Rupprecht
Edward J. Bonach* Executive Vice President 08/19/99
Edward J. Bonach and Chief Financial Officer
Rev. Dennis J. Dease* Director 08/19/99
Rev. Dennis J. Dease
James R. Campbell* Director 08/19/99
James R. Campbell
Robert M. Kimmitt* Director 08/19/99
Robert M. Kimmitt
</TABLE>
*By Power of Attorney
By:/s/MICHAEL T. WESTERMEYER
-------------------------
Attorney-in-Fact
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 10
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
INDEX TO EXHIBITS
Exhibit Page
To be filed by Amendment
