V2 *P2
Supplement dated January 15, 1999
to the Prospectus Dated May 1, 1998
of
FRANKLIN(R) VALUEMARK(R) II
Flexible Payment Variable Annuity
Allianz Life Variable Account B
I. YEAR 2000 Allianz Life has initiated programs to ensure that all of the
computer systems utilized to provide services and administer policies will
function properly in the year 2000. An assessment of the total expected costs
specifically related to the year 2000 conversion has been completed; the total
amounts to be expensed over the next two years are not expected to have a
significant effect on Allianz Life's financial position or results of
operations. Allianz Life believes it has taken steps that are reasonably
designed to address the potential failure of computer systems used by its
service providers and to ensure its year 2000 program is completed on a timely
basis.
II. The following changes are made to the section entitled "Franklin Valuemark
Funds' Annual Expenses":
a) The following chart restates information about certain Portfolios, as
indicated below.
Management Total
and Portfolio Other Annual
Portfolio Administration Fees Expenses Expenses
- --------------------------------------------------------------------------------
Mutual Discovery Securities Fund ...... .95%* .11% 1.06%
Mutual Shares Securities Fund ......... .75%* .05% .80%
Templeton Global Asset Allocation Fund .80%* .14% .94%
Templeton International Smaller
Companies Fund ............... 1.00%* .06% 1.06%
Zero Coupon Fund - 20005 ............. .60% .03% .63%
Zero Coupon Fund - 20055 ............. .62% .03% .65%
Zero Coupon Fund - 20105 ............. .62% .03% .65%
*Includes a .15% Administration Fee which is a direct expense of the Portfolio.
b) The following footnotes are restated as follows:
4For the year ended December 31, 1997, Franklin Advisers, Inc. ("Advisers")
agreed in advance to waive a portion of its management fees and, if
necessary, to pay certain expenses of the Fund. With this reduction,
management fees and total annual expenses, including management and portfolio
administration fees, paid by the Portfolio represented .43% and .45% of the
Portfolio's average net assets, respectively. The voluntary expense reduction
was discontinued by Advisers effective January 1, 1999.
5For the year ended December 31, 1997, Advisers agreed in advance to waive a
portion of its management fees and, if necessary, to pay certain expenses of
the Fund. With this reduction, management fees and total annual expenses,
including management and portfolio administration fees, represented .37% and
.40% of each Portfolio's average net assets, respectively. The voluntary
expense reduction was discontinued by Advisers effective January 1, 1999.
c) The Examples shown on pages 8 and 9 are restated for the Portfolios listed
below:
Examples
If the Contract is fully surrendered at the end of the applicable time period
and no prior surrenders have occurred, the Contract Owner would have incurred
the following expenses on a $1,000 investment, assuming a 5% rate of return
on assets compounded annually:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Zero Coupon Fund - 2000 ..... $64 $89 $118 $246
Zero Coupon Fund - 2005 ..... $64 $89 $119 $248
Zero Coupon Fund - 2010 ..... $64 $89 $119 $248
Ifthe Contract is not surrendered at the end of the applicable time period and
no prior surrenders have occurred or is annuitized, the Contract Owner would
have incurred the following expenses on a $1,000 investment, assuming a 5%
annual return on assets compounded annually:
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Zero Coupon Fund - 2000 .... $22 $67 $114 $246
Zero Coupon Fund - 2005 ..... $22 $67 $115 $248
Zero Coupon Fund - 2010 ..... $22 $67 $115 $248
III. The following replaces the first sentence under "Franklin Valuemark Funds":
Each of the Contract Sub-Accounts of the Variable Account is invested solely
in Class 1 shares of one of the Portfolios of Franklin Valuemark Funds
("Trust").
