Profile of the Franklin Valuemark IV
Variable Annuity Contract
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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May 1, 1999, as supplemented July 6, 1999
This profile is a summary of some of the more important points that you should
consider and know before purchasing the Franklin Valuemark IV variable annuity
contract with a fixed account. The Contract is more fully described in the
prospectus which accompanies this profile. Please read the prospectus carefully.
1. THE FRANKLIN VALUEMARK IV VARIABLE ANNUITY CONTRACT
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The Franklin Valuemark IV variable annuity contract with a fixed account offered
by Allianz Life Insurance Company of North America (Allianz Life) is a contract
between you, the owner, and Allianz Life, an insurance company. In this profile
and the prospectus, "we", "us" and "our" refers to Allianz Life. The Contract
provides a means for investing on a tax-deferred basis. The Contract is intended
for retirement savings or other long-term investment purposes. The Contract
provides for a death benefit and guaranteed annuity income options.
The Contract has 25 variable options -- each of which invests in a portfolio of
Franklin Templeton Variable Insurance Products Trust, and a fixed account of
Allianz Life. Prior to July 1, 1999 Franklin Templeton Variable Insurance
Products Trust was known as Franklin Valuemark Funds. The portfolios are managed
by Franklin Advisers, Inc. and its Templeton and Franklin affiliates. A list of
the available portfolios is contained in Section 4. Depending upon market
conditions, you can make or lose money in the Contract based on the portfolios'
investment performance. The portfolios are designed to offer a better return
than the fixed account, however, this is not guaranteed.
The fixed account offers an interest rate that is guaranteed by Allianz Life.
Your initial interest rate is set on the date when your money is invested in the
fixed account and remains effective for one year. Initial interest rates are
declared monthly. If you select the fixed account, your money will be held in
our general account with principal and interest backed by Allianz Life.
Currently, you can put your money in 10 investment choices (which includes any
of the 25 variable options and the Allianz Life fixed account). Allianz Life has
the right to limit the number of variable options which you may invest in at any
one time (now or in the future).
Like all deferred annuity contracts, your Contract has two phases: the
accumulation phase and the payout phase. During the accumulation phase, your
earnings accumulate on a tax-deferred basis and are based on the investment
performance of the portfolio(s) you select and/or the interest rate earned on
the money you have in the fixed account. During the accumulation phase, the
earnings are taxed as income only when you make a withdrawal. The payout phase
occurs when you begin receiving regular payments from your Contract. The amount
of the payments you may receive during the payout phase depends, in part, upon
the amount of money you are able to accumulate in your Contract during the
accumulation phase.
2. ANNUITY PAYMENTS
(THE PAYOUT PHASE)
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You can receive monthly annuity payments from your Contract by selecting one of
the following annuity options (all of these options assume you are the owner and
the annuitant):
(1) payments for your life;
(2) payments for your life, but if you die before payments have been made for
the guaranteed period you selected, payments will continue to you or any person
you designate for the remainder of the guaranteed period (5, 10, 15 or 20
years);
(3) payments during the joint lifetime of you and the joint annuitant -- when
either of you die, payments will continue as long as the survivor lives;
(4) payments during the joint lifetime of you and the joint annuitant, but if
you and the joint annuitant die before payments have been made for the
guaranteed period you selected, payments will continue to you or any person you
designate for the remainder of the guaranteed period (5, 10, 15 or 20 years);
and
(5) payments during your life ending with the last payment due prior to your
death with a guarantee that at your death Allianz Life will make a refund to
your beneficiary if the value of the payments made is less than the amount
applied to the annuity option.
Once you begin receiving regular annuity payments, you cannot change your
annuity option or surrender your contract.
During the payout phase, you may select from the variable options available or
the fixed account for your investment choices. You may elect to receive annuity
payments as a variable payout, a fixed payout, or a combination of both. If you
choose to have any part of your payments based on portfolio performance (i.e.,
variable payout), the dollar amount of your annuity payments may go up or down,
depending on the investment performance of the portfolios you choose.
3. PURCHASE
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You can purchase the Contract with $5,000 or more under most circumstances. You
can add $250 or more any time during the accumulation phase. Your registered
representative can help you complete the proper forms. You and the annuitant
cannot be older than 85 years old at the time you purchase the Contract. This
product is not appropriate for market timers.
4. INVESTMENT OPTIONS
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You may select the Allianz Life fixed account and/or the variable options which
invest in Class 1 shares of the portfolios of Franklin Templeton Variable
Insurance Products Trust listed below. Franklin Templeton Variable Insurance
Products Trust has two classes of shares. You may only invest in Class 1 shares
with this Contract.
PORTFOLIO SEEKING CAPITAL PRESERVATION AND INCOME:
Money Market Fund
PORTFOLIOS SEEKING INCOME:
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005 and 2010
PORTFOLIOS SEEKING GROWTH AND INCOME:
Global Utilities Securities Fund
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Value Securities Fund
PORTFOLIOS SEEKING CAPITAL GROWTH:
Capital Growth Fund
Global Health Care Securities Fund
Mutual Discovery Securities Fund
Natural Resources Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
The portfolios are fully described in the attached Franklin Templeton Variable
Insurance Products Trust prospectus. You can make or lose money based on the
portfolios' performance.
5. EXPENSES
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The Contract has insurance and investment features, and there are costs related
to each.
o The annual insurance charges total 1.49% of the average daily value of your
Contract allocated to the variable options during the accumulation phase (1.40%
during the payout phase).
o Each year Allianz Life also deducts a $30 contract maintenance charge from
your Contract. Allianz Life currently waives this charge if the cumulative value
of all your Franklin Valuemark IV Contracts (registered with the same social
security number) are at least $50,000 (except in New Jersey).
o There are also annual portfolio operating expenses, which vary depending upon
the portfolio(s) you select. These expenses range from .49% to 1.41% of the
average daily value of the portfolios' Class 1 shares.
o You can transfer between investment choices up to 12 times a year without
charge. After 12 transfers, the charge is $25 or 2% of the amount transferred,
whichever is less. Market timing transfers may not be permitted.
o If you make a withdrawal from the Contract, Allianz Life may assess a
contingent deferred sales charge (withdrawal charge). The amount of the charge
depends upon the length of time since you made your purchase payment. Each
purchase payment you add to your Contract has its own 7 year contingent deferred
sales charge period. The charge is:
Contingent deferred
sales charge
Years since (as a percentage
purchase payment of purchase payments)
-------------------------------------------------
0-1 6%
1-2 6%
2-3 6%
3-4 5%
4-5 4%
5-6 3%
6-7 2%
7+ 0%
Each year after the first Contract year, you can make partial withdrawals of up
to a total of 15% of the value of your Contract and Allianz Life will not deduct
the contingent deferred sales charge.
Under certain circumstances, after the first year, Allianz Life will permit you
to access your money in the Contract without deducting a contingent deferred
sales charge:
1) if you become confined to a nursing home;
2) if you become terminally ill; or
3) if you become disabled.
Also, if you are unemployed for at least 90 consecutive days, you can take up to
50% of your money out of the Contract without incurring a contingent deferred
sales charge.
These options vary from state to state and may not be available in all states.
o Allianz Life may assess a state premium tax charge which ranges from 0%- 3.5%
(depending upon the state) when you die, start receiving annuity payments, or
make a complete withdrawal.
We have provided the following chart to help you understand the expenses in your
Contract. The column "Total Annual Expenses" shows the total of the $30 contract
maintenance charge (which has been converted to a percentage and is represented
as .10% below), the 1.49% insurance charges and the total annual portfolio
expenses for each portfolio.
The next two columns show you two examples of the expenses, in dollars, you
would pay under a Contract. The examples assume that you invested $1,000 in a
Contract which earns 5% annually and that you surrender your Contract: (1) at
the end of year 1, and (2) at the end of year 10. For year 1, the Total Annual
Expenses are assessed as well as the contingent deferred sales charge. For year
10, the Total Annual Expenses are assessed but no contingent deferred sales
charge is deducted.
The premium tax is assumed to be 0% in both examples.
<PAGE>
<TABLE>
<CAPTION>
These are just examples. They do not represent past or future expenses or returns. Actual expenses may be higher or lower than
those shown.
EXAMPLES:
Total Annual Total Annual
Insurance Class 1 Portfolio Total Annual Expenses at end of:
Variable Option Charges Expenses Expenses 1 Year 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth 1.59% .77% 2.36% $84 $270
Global Health Care Securities1 1.59% .84% 2.43% $85 $277
Global Utilities Securities 1.59% .50% 2.09% $81 $242
Growth and Income 1.59% .49% 2.08% $81 $241
High Income 1.59% .53% 2.12% $82 $245
Income Securities 1.59% .49% 2.08% $81 $241
Money Market 1.59% .53% 2.12% $82 $245
Mutual Discovery Securities 1.59% 1.00% 2.59% $86 $293
Mutual Shares Securities 1.59% .77% 2.36% $84 $270
Natural Resources Securities 1.59% .64% 2.23% $83 $256
Real Estate Securities 1.59% .54% 2.13% $82 $246
Rising Dividends 1.59% .72% 2.31% $83 $264
Small Cap 1.59% .77% 2.36% $84 $270
Templeton Developing Markets Equity 1.59% 1.41% 3.00% $90 $332
Templeton Global Asset Allocation 1.59% .84% 2.43% $85 $277
Templeton Global Growth 1.59% .88% 2.47% $85 $281
Templeton Global Income Securities 1.59% .63% 2.22% $83 $255
Templeton International Equity 1.59% .88% 2.47% $85 $281
Templeton International Smaller Companies 1.59% 1.10% 2.69% $87 $302
Templeton Pacific Growth 1.59% 1.10% 2.69% $87 $302
U.S. Government Securities 1.59% .50% 2.09% $81 $242
Value Securities1 1.59% .83% 2.42% $85 $276
Zero Coupon 2000 1.59% .66% 2.25% $83 $258
Zero Coupon 2005 1.59% .66% 2.25% $83 $258
Zero Coupon 2010 1.59% .66% 2.25% $83 $258
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<FN>
1. Estimated for 1999
</FN>
</TABLE>
For more detailed information, see the Fee Table in the prospectus for the
Contract.
<PAGE>
6. TAXES
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You do not have to pay taxes on any earnings until you withdraw money from your
Contract. In most cases, if you make a withdrawal, earnings come out first and
are taxed as income. If you are younger than 591/2 when you make a withdrawal,
you may be charged a 10% federal tax penalty on the taxable amounts withdrawn.
Payments during the payout phase are considered partly a return of your original
investment. That part of each payment is not taxable as income. If the Contract
is tax-qualified, the entire payment may be taxable.
7. ACCESS TO YOUR MONEY
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You may make a withdrawal at any time during the accumulation phase. Any partial
withdrawal must be for at least $500. You may request a withdrawal or elect the
Systematic Withdrawal Program or Minimum Distribution Program which are briefly
described in Section 10 of this profile. After the first year, you can make
multiple withdrawals up to a total of 15% of the value of your Contract each
year without charge from Allianz Life. Withdrawals in excess of that amount will
be subject to a 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. Withdrawals in excess of the 15% free
withdrawal will be charged a contingent deferred sales charge which declines
from 6% to 0% depending upon the number of complete years we have had your
payment. After Allianz Life has had a payment for 7 years, there is no charge
for withdrawals related to that payment. Each purchase payment you add to your
Contract has its own 7 year contingent deferred sales charge period. Of course,
you may also have to pay income tax and a tax penalty on any money you take out
of the Contract.
<PAGE>
8. PERFORMANCE
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The value of the Contract will vary up or down depending upon the performance of
the portfolio(s) you choose.
<TABLE>
<CAPTION>
The following chart shows total returns for the portfolios' Class 1 shares for the periods shown. Performance is not shown for the
Global Health Care Securities Fund and the Value Securities Fund because they were first offered for sale on May 1, 1998. These
numbers reflect the insurance charges, the contract maintenance charge and the Class 1 portfolio operating expenses. These numbers
do not reflect any contingent deferred sales charges, which if applied, would reduce the performance. Past performance is not a
guarantee of future results.
Calendar Year
Variable Option 1998 1997 1996 1995 1994 1993 1992 1991 1990
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth 18.41% 16.46% NA NA NA NA NA NA NA
Global Utilities Securities 9.44% 24.79% 5.47% 29.32% -12.97% 8.80% 7.00% 22.66% 0.25%
Growth and Income 6.63% 25.76% 12.39% 30.77% -3.57% 8.58% 5.03% 21.69% -3.89%
High Income -.67% 9.80% 12.10% 17.90% -3.80% 13.94% 14.43% 28.12% -10.12%
Income Securities .04% 15.26% 9.52% 20.49% -7.75% 16.76% 11.45% 37.76% -8.91%
Money Market 3.56% 3.59% 3.50% 4.09% 2.20% 0.93% 1.43% 3.82% 5.93%
Mutual Discovery Securities -6.50% 17.50% NA NA NA NA NA NA NA
Mutual Shares Securities -1.49% 15.89% NA NA NA NA NA NA NA
Natural Resources Securities -26.58% -20.27% 2.35% 0.74% -3.54% 53.23% -11.56% 2.19% -15.36%
Real Estate Securities -18.15% 18.81% 30.74% 15.69% 1.27% 17.16% 10.33% 31.43% -13.37%
Rising Dividends 5.24% 30.96% 22.23% 27.73% -5.59% -4.98% NA NA NA
Small Cap -2.54% 15.59% 27.05% NA NA NA NA NA NA
Templeton Developing
Markets Equity -22.87% -10.17% 19.68% 1.16% NA NA NA NA NA
Templeton Global Asset Allocation-1.62% 9.96% 17.95% NA NA NA NA NA NA
Templeton Global Growth 7.26% 11.72% 19.38% 10.96% NA NA NA NA NA
Templeton Global Income Securities5.40% 0.86% 7.91% 12.88% -6.49% 14.86% -1.96% 10.53% 8.06%
Templeton International Equity 3.90% 9.94% 21.04% 8.86% -0.72% 26.58% NA NA NA
Templeton International
Smaller Companies -13.67% -3.06% NA NA NA NA NA NA NA
Templeton Pacific Growth -14.52% -37.00% 9.35% 6.28% -10.24% 45.59% NA NA NA
U.S. Government Securities 5.75% 7.59% 1.97% 17.60% -6.06% 7.99% 5.97% 14.07% 7.21%
Zero Coupon 2000 5.81% 5.42% 0.80% 18.79% -8.22% 14.34% 7.35% 18.35% 4.23%
Zero Coupon 2005 10.77% 9.62% -2.09% 29.71% -11.01% 20.33% 9.07% 18.50% 1.02%
Zero Coupon 2010 12.65% 14.75% -4.24% 40.59% -12.38% 23.48% 8.61% 18.16% -1.02%
</TABLE>
<PAGE>
9. DEATH BENEFIT
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If you die during the accumulation phase, the person you have selected as your
beneficiary will receive a death benefit. If you purchase the Contract on or
after July 6, 1999, you may choose at the time of application, one of the two
death benefit options listed below. If you purchased your Contract before July
6, 1999, Death Benefit Option 2 is not available. Once you make the selection,
it cannot be changed.
Death Benefit Option 1
- ----------------------
The death benefit will be the greater of:
1) the current value of your Contract, less any taxes, on the day all claim
proofs and payment election forms are received by Allianz Life at the Valuemark
Service Center; or
2) (if applicable) the guaranteed minimum death benefit, less any taxes, as of
the day you die. During the first year, the guaranteed minimum death benefit is
equal to the payments you have made, less any money you have taken out and any
charges paid on the money you have taken out. After the first year and before
your 81st birthday (76th birthday for deaths occurring in Washington, or in most
other states before 11/1/98), the guaranteed minimum death benefit as of the
date of death is the greater of:
A) payments you have made, less any money you have taken out and charges
paid on the money you have taken out, increased by 5% per year on each Contract
anniversary; or
B) the highest of the Contract values for each six year Contract anniversary
determined by the Contract value on such six year anniversary plus any payments
made, less any money taken out since that Contract anniversary, and charges paid
on the money you have taken out.
Different rules will apply after your 81st birthday (76th birthday for deaths
occurring in Washington, or in most other states before 11/1/98).
Death Benefit Option 2
- -------------------------
The death benefit will be the greater of:
1) the current value of your Contract, less any taxes, on the day all claim
proofs and payment election forms are received by Allianz Life at the Valuemark
Service Center; or
2) (if applicable) the guaranteed minimum death benefit, less any taxes, on the
day all claim proofs and payment election forms are received by Allianz Life at
the Valuemark Service Center.
The guaranteed minimum death benefit is the greater of:
o payments you have made, less any money you have taken out and any charges paid
on the money you have taken out.
o the greatest "anniversary value". The "anniversary value" is the value of the
Contract on a Contract anniversary, increased by payments you have made since
that anniversary and decreased by any money you have taken out and any charges
paid on the money you have taken out since that anniversary. Allianz Life will
not take into consideration any Contract anniversaries which occur on or after
your 81st birthday or date of death in determining this benefit.
In certain states, the above death benefit may not be available. Check your
Contract and Endorsement for your applicable death benefit.
10. OTHER INFORMATION
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Free Look. If you cancel the Contract within 10 days after receiving it (or
whatever period is required in your state), we will send your money back without
assessing a contingent deferred sales charge. You will receive whatever your
Contract is worth on the day we receive your request. This may be more or less
than your original payment. (Some states require that we return your payment.)
No Probate. In most cases, when you die, your beneficiary will receive the death
benefit without going through probate.
Purchasing Considerations. The Franklin Valuemark IV Variable Annuity Contract
is designed for people seeking long-term tax deferred accumulation of assets,
generally for retirement or other long-term purposes. The tax deferred feature
is most attractive to people in high federal and state tax brackets. You should
not buy this Contract if you are looking for a short-term investment or if you
cannot accept the risk of getting back less money than you put in.
Additional Features
The Contract offers additional features which you might be interested in. These
include:
o Automatic Investment Plan - You can automatically add to your Contract on a
monthly or quarterly basis for as little as $100. You can do this by
electronically transferring money from your savings or checking account.
o Dollar Cost Averaging Program - You can arrange to have a regular amount of
money automatically transferred from selected variable options or the fixed
account to other variable options each month. Theoretically this can give you
a lower average cost per unit over time than a single one time purchase.
However, there are no guarantees that this will take place.
o Flexible Rebalancing - Allianz Life will automatically readjust your Contract
value among the variable options to maintain your specified allocation mix.
This can be done quarterly, semi-annually or annually.
o Systematic Withdrawal Program - You can elect to receive monthly or quarterly
payments from Allianz Life while your Contract is in the accumulation phase.
Of course, you may have to pay tax penalties and income taxes on the money
you receive.
o Minimum Distribution Program - You can arrange to have money sent to you each
month or quarter to meet certain required distribution requirements imposed
by the Internal Revenue Code generally after age 701/2.
These features are not available in all states and may not be suitable for your
particular situation.
11. INQUIRIES
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If you have any questions about your Contract or need more information, please
contact us at:
Valuemark Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
(800) 624-0197
<PAGE>
THE FRANKLIN VALUEMARK(R) IV VARIABLE ANNUITY CONTRACT
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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This prospectus describes the Franklin Valuemark IV Variable Annuity Contract
with a Fixed Account offered by Allianz Life Insurance Company of North America
(Allianz Life).
The annuity has 25 Variable Options, each of which invests in one of the
Portfolios of Franklin Templeton Variable Insurance Products Trust listed below,
and a Fixed Account of Allianz Life. You can select up to 10 investment choices
(which includes any of the Variable Options and the Fixed Account). The Fixed
Account may not be available in your state.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
PORTFOLIO SEEKING CAPITAL PRESERVATION AND INCOME
Money Market Fund
PORTFOLIOS SEEKING INCOME
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005 and 2010
PORTFOLIOS SEEKING GROWTH AND INCOME
Global Utilities Securities Fund
Growth andIncome Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate
Securities Fund
Rising Dividends Fund Templeton
Global Asset Allocation Fund
Value Securities Fund
PORTFOLIOS SEEKING CAPITAL GROWTH
Capital Growth Fund
Global Health Care Securities Fund
Mutual Discovery Securities Fund
Natural Resources Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
Please read this prospectus before investing and keep it for future reference.
It contains important information about the Franklin Valuemark IV Variable
Annuity Contract with a Fixed Account.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated May 1, 1999. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is legally
a part of this prospectus. The Table of Contents of the SAI is on page 21 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 IV 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 IV refer to
Valuemark IV.
Dated: May 1, 1999, as supplemented July 6, 1999
<PAGE>
TABLE OF CONTENTS
Index of Terms 3
Fee Table 4
1. The Franklin Valuemark IV
Variable Annuity Contract 8
Contract Owner 8
Joint Owner 8
Annuitant 8
Beneficiary 8
Assignment 8
2. Annuity Payments (The Payout Phase) 9
Annuity Options 9
3. Purchase 10
Purchase Payments 10
Automatic Investment Plan 10
Allocation of Purchase Payments 10
Free Look 10
Accumulation Units 10
4. Investment Options 11
Transfers 12
Dollar Cost Averaging Program 12
Flexible Rebalancing 13
Voting Privileges 13
Substitution 13
5. Expenses 13
Insurance Charges 13
Mortality and Expense Risk Charge 13
Administrative Charge 13
Contract Maintenance Charge 14
Contingent Deferred Sales Charge 14
Waiver of Contingent Deferred
Sales Charge Benefits 14
Reduction or Elimination of the
Contingent Deferred Sales Charge 15
Transfer Fee 15
Premium Taxes 15
Income Taxes 15
Portfolio Expenses 15
6. Taxes 15
Annuity Contracts in General 15
Qualified and Non-Qualified Contracts 16
Multiple Contracts 16
Withdrawals - Non-Qualified Contracts 16
Withdrawals - Qualified Contracts 16
Withdrawals - Tax-Sheltered Annuities 16
Diversification 16
7. Access to Your Money 17
Systematic Withdrawal Program 17
Minimum Distribution Program 17
Suspension of Payments or Transfers 17
8. Performance 18
9. Death Benefit 18
Upon Your Death 18
Death of Annuitant 20
10. Other Information 20
Allianz Life 20
Year 2000 20
The Separate Account 20
Distribution 20
Administration 21
Financial Statements 21
Table of Contents of the
Statement of Additional Information 21
Appendix 22
<PAGE>
INDEX OF TERMS
- --------------------------------------------------------------------------------
This prospectus is written in plain English to make it as understandable as
possible. However, there are some technical terms used which are capitalized in
the prospectus. The page that is indicated below is where you will find the
definition for the word or term.
Page
Accumulation Phase 8
Accumulation Unit 10
Annuitant 8
Annuity Options 9
Annuity Payments 9
Annuity Unit 11
Beneficiary 8
Contract 8
Contract Owner 8
Fixed Account 8
Page
Income Date 9
Joint Owner 8
Non-Qualified . 16
Payout Phase 8
Portfolios 11
Purchase Payment 10
Qualified 16
Tax Deferral 8
Variable Option 8
<PAGE>
FEE TABLE
The purpose of this Fee Table is to help you understand the costs of investing,
directly or indirectly, in the Variable Options under 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)
Years Since
Purchase Payment Charge
- -----------------------------------------------------------------
0-1 6%
1-2 6%
2-3 6%
3-4 5%
4-5 4%
5-6 3%
6-7 2%
7 + 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 arenot 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*** 1.34%
Administrative Charge .15%
--------
Total Separate Account Annual Expenses 1.49%
*Each year after the first Contract year, you may make multiple partial
withdrawals of up to a total of 15% of the value of your Contract and no
contingent deferred sales charge will be assessed. See Section 7 - "Access to
Your Money" for additional options. **During the Accumulation Phase, the charge
is waived if the value of your Contract is at least $50,000. If you own more
than one Franklin Valuemark IV Contract (registered with the same social
security number), we will determine the total value of all your Contracts. If
the total value of all your Contracts is at least $50,000, the charge is waived
(except in New Jersey). Currently, the charge is also waived during the Payout
Phase if the value of your Contract at the Income Date is at least $50,000
(except in New Jersey). ***The Mortality and Expense Risk Charge is 1.25% during
the Payout Phase.
<PAGE>
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ANNUAL EXPENSES: CLASS 1 SHARES
(as a percentage of Franklin Templeton Variable Insurance Products Trust average net assets)
The Management and Portfolio Administration Fees and Total Annual Expenses for each Portfolio are based on a percentage of that
Portfolio's average net assets for the most recent fiscal year. See the prospectus for Franklin Templeton Variable Insurance
Products Trust for more information.
Management
and Portfolio Total Annual
Administration Fees1 Other Expenses Expenses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Growth Fund .75% .02% .77%
Global Health Care Securities Fund2 .75% .09% .84%
Global Utilities Securities Fund .47% .03% .50%
Growth and Income Fund .47% .02% .49%
High Income Fund .50% .03% .53%
Income Securities Fund .47% .02% .49%
Money Market Fund .51% .02% .53%
Mutual Discovery Securities Fund .95% .05% 1.00%
Mutual Shares Securities Fund .74% .03% .77%
Natural Resources Securities Fund .62% .02% .64%
Real Estate Securities Fund .52% .02% .54%
Rising Dividends Fund .70% .02% .72%
Small Cap Fund .75% .02% .77%
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%
U.S. Government Securities Fund .48% .02% .50%
Value Securities Fund2 .75% .08% .83%
Zero Coupon Fund - 2000 .63% .03% .66%
Zero Coupon Fund - 2005 .63% .03% .66%
Zero Coupon Fund - 2010 .62% .04% .66%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
1. The Portfolio Administration Fee is a direct expense for the Global Health Care Securities Fund, the Mutual Discovery
Securities Fund, the Mutual Shares Securities Fund, the Templeton Global Asset Allocation Fund, the Templeton International
Smaller Companies Fund, and the Value Securities Fund. Other Portfolios pay for similar services indirectly through the Management
Fee. See the Franklin Templeton Variable Insurance Products Trust prospectus for further information regarding these fees.
2. The Global Health Care Securities Fund and the Value Securities Fund commenced operations May 1, 1998. The expenses shown above
for these Portfolios are therefore estimated for 1999.
</FN>
</TABLE>
<PAGE>
EXAMPLES
<TABLE>
<CAPTION>
o The examples below 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 Section 5 - "Expenses" and the Franklin Templeton Variable Insurance Products Trust prospectus.
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>
Capital Growth Fund $84 $125 $160 $270
Global Health Care Securities Fund* $85 $127 $164 $277
Global Utilities Securities Fund $81 $116 $146 $242
Growth and Income Fund $81 $116 $146 $241
High Income Fund $82 $117 $148 $245
Income Securities Fund $81 $116 $146 $241
Money Market Fund $82 $117 $148 $245
Mutual Discovery Securities Fund $86 $132 $172 $293
Mutual Shares Securities Fund $84 $125 $160 $270
Natural Resources Securities Fund $83 $121 $153 $256
Real Estate Securities Fund $82 $118 $148 $246
Rising Dividends Fund $83 $123 $157 $264
Small Cap Fund $84 $125 $160 $270
Templeton Developing Markets Equity Fund $90 $144 $192 $332
Templeton Global Asset Allocation Fund $85 $127 $164 $277
Templeton Global Growth Fund $85 $128 $166 $281
Templeton Global Income Securities Fund $83 $120 $153 $255
Templeton International Equity Fund $85 $128 $166 $281
Templeton International Smaller Companies Fund $87 $135 $177 $302
Templeton Pacific Growth Fund $87 $135 $177 $302
U.S. Government Securities Fund $81 $116 $146 $242
Value Securities Fund* $85 $126 $163 $276
Zero Coupon Fund - 2000 $83 $121 $154 $258
Zero Coupon Fund - 2005 $83 $121 $154 $258
Zero Coupon Fund - 2010 $83 $121 $154 $258
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
*Estimate
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if your Contract is not
surrendered or if you apply your Contract value to an Annuity Option:
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth Fund $24 $74 $126 $270
Global Health Care Securities Fund* $25 $76 $130 $277
Global Utilities Securities Fund $21 $65 $112 $242
Growth and Income Fund $21 $65 $112 $241
High Income Fund $22 $66 $114 $245
Income Securities Fund $21 $65 $112 $241
Money Market Fund $22 $66 $114 $245
Mutual Discovery Securities Fund $26 $81 $138 $293
Mutual Shares Securities Fund $24 $74 $126 $270
Natural Resources Securities Fund $23 $70 $119 $256
Real Estate Securities Fund $22 $67 $114 $246
Rising Dividends Fund $23 $72 $123 $264
Small Cap Fund $24 $74 $126 $270
Templeton Developing Markets Equity Fund $30 $93 $158 $332
Templeton Global Asset Allocation Fund $25 $76 $130 $277
Templeton Global Growth Fund $25 $77 $132 $281
Templeton Global Income Securities Fund $23 $69 $119 $255
Templeton International Equity Fund $25 $77 $132 $281
Templeton International Smaller Companies Fund $27 $84 $143 $302
Templeton Pacific Growth Fund $27 $84 $143 $302
U.S. Government Securities Fund $21 $65 $112 $242
Value Securities Fund* $25 $75 $129 $276
Zero Coupon Fund - 2000 $23 $70 $120 $258
Zero Coupon Fund - 2005 $23 $70 $120 $258
Zero Coupon Fund - 2010 $23 $70 $120 $258
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
*Estimated
</FN>
</TABLE>
See the Appendix for Accumulation Unit Values - Condensed Financial Information.
<PAGE>
1. THE FRANKLIN VALUEMARK IVVARIABLE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
This prospectus describes a variable deferred annuity contract with a Fixed
Account offered by Allianz Life.
An annuity is a contract between you, the owner, and an insurance company (in
this case Allianz Life), where the insurance company promises to pay you (or
someone else you choose) an income, in the form of Annuity Payments. The Annuity
Payments must begin on a designated date that is at least two years in the
future. Until you decide to begin receiving Annuity Payments, your annuity is in
the Accumulation Phase. Once you begin receiving Annuity Payments, your Contract
switches to the Payout Phase.
The Contract benefits from Tax Deferral. Tax Deferral means that you are not
taxed on any earnings or appreciation on the assets in your Contract until you
take money out of your Contract.
You have 26 investment choices - the 25 Variable Options each of which invests
in one of the Portfolios of Franklin Templeton Variable Insurance Products Trust
and the Fixed Account of Allianz Life. The Contract is called a variable annuity
because you can choose among 25 Variable Options and, depending upon market
conditions, you can make or lose money in the Contract based on the investment
performance of the Portfolios of Franklin Templeton Variable Insurance Products
Trust. 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. You
may change Contract Owners at any time. This may be a taxable event. You should
consult with your tax adviser before doing this.
Joint Owner
The Contract can be owned by Joint Owners. Any Joint Owner must be the spouse of
the other Contract Owner (except in Pennsylvania, Oregon and New Jersey). Upon
the death of either Joint Owner, the surviving Joint Owner will be the
designated Beneficiary. Any other Beneficiary designation at the time the
Contract was issued or as may have been later changed will be treated as a
contingent Beneficiary unless otherwise indicated.
Annuitant
The Annuitant is the natural person on whose life we base Annuity Payments. You
name an Annuitant. You may change the Annuitant at any time before the Income
Date unless the Contract is owned by a non-individual (for example, a
corporation).
Beneficiary
The Beneficiary is the person(s) or entity you name to receive any death
benefit. The Beneficiary is named at the time the Contract is issued unless
changed at a later date. Unless an irrevocable Beneficiary has been named, you
can change the Beneficiary or contingent Beneficiary.
Assignment
You can 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 we take in accordance with the Contract before we
receive notice of the assignment. Any assignment made after the death benefit
has become payable can only be done with our consent. An assignment may be a
taxable event.
If the Contract is issued pursuant to a Qualified plan, you may be unable to
assign the Contract.
2. ANNUITY PAYMENTS (THE PAYOUT PHASE)
- --------------------------------------------------------------------------------
You can receive regular monthly income payments under your Contract. You can
choose the month and year in which those payments begin. We call that date the
Income Date. Your Income Date must be the first day of a calendar month and must
be at least 2 years after you buy the Contract. You can also choose among income
plans. We call those Annuity Options.
We ask you to choose your Income Date when you purchase the Contract. You can
change it at any time before the Income Date with 30 days notice to us. Annuity
Payments must begin by the Annuitant's 85th birthday or 10 years (5 years in
Pennsylvania) from the date the Contract was issued, whichever is later. This
limitation may not apply when the Contract is issued to a charitable remainder
trust. You (or someone you designate) will receive the Annuity Payments. You
will receive tax reporting on those payments.
If you do not choose an Annuity Option prior to the Income Date, we will assume
that you selected Option 2 which provides a life annuity with 5 years of
guaranteed payments.
You may elect to receive your Annuity Payments as a variable payout, a fixed
payout, or a combination of both. Under a fixed payout, all of the Annuity
Payments will be the same dollar amount (equal installments). If you choose a
variable payout, you can select from the available 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 or any person you choose 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 you can be
equal to 100%, 75% or 50% of the amount that was being paid when both Annuitants
were alive. The monthly Annuity Payments will end when the last surviving
Annuitant dies.
OPTION 4. Joint and Last Survivor Annuity with 5, 10, 15 or 20 Year Payments
Guaranteed. Under this option, we will make monthly Annuity Payments during the
joint lifetime of the Annuitant and the joint Annuitant. When the Annuitant
dies, if the joint Annuitant is still alive, we will continue to make Annuity
Payments, so long as the surviving Annuitant continues to live, at 100% of the
amount that was being paid when both were alive. If, when the last death occurs,
we have made Annuity Payments for less than the selected guaranteed period, we
will continue to make Annuity Payments to you or any person you choose 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.
3. PURCHASE
- ------------------------------------------------------------------------------
Purchase Payments
A Purchase Payment is the money you invest in the Contract. The minimum payment
Allianz Life will accept is $5,000 when the Contract is bought as a
Non-Qualified Contract. If you enroll in the Automatic Investment Plan (which is
described below), your Purchase Payment can be $2,000. If you are buying the
Contract as part of an IRA (Individual Retirement Annuity), 401(k) or other
Qualified plan, the minimum amount we will accept is $2,000. The maximum amount
we will accept without our prior approval is $1 million. You can make additional
Purchase Payments of $250 (or as low as $100 if you have selected the Automatic
Investment Plan) or more to either type of Contract. Allianz Life may, at its
sole discretion, waive the minimum payment requirements. We reserve the right to
decline any Purchase Payments. At the time you buy the Contract, you and the
Annuitant cannot be older than 85 years old. This product is not designed for
professional market timing organizations, other entities, or persons using
programmed, large or frequent transfers.
Automatic Investment Plan
The Automatic Investment Plan (AIP) is a program which allows you to make
additional Purchase Payments to your Contract on a monthly or quarterly basis by
electronic transfer of monies from your savings or checking account. You may
participate in this program by completing the appropriate form. We must receive
your form by the first of the month in order for AIP to begin that same month.
Investments will take place on the 20th of the month, or the next business day.
The minimum investment that can be made by AIP is $100. You may stop AIP at any
time you want. We need to be notified by the first of the month in order to stop
or change AIP that month. If AIP is used for a Qualified Contract, you should
consult your tax adviser for advice regarding maximum contributions.
Allocation of Purchase Payments
When you purchase a Contract, we will allocate your Purchase Payment to the
Fixed Account and/or one or more of the Variable Options you have selected. We
ask that you allocate your money in either whole percentages or round dollars.
The Fixed Account may not be available in your state (check with your registered
representative). 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 10 investment choices at any
one time (which includes any of the 25 Variable Options which invest in a
Portfolio of Franklin Templeton Variable Insurance Products Trust listed in
Section 4 and the Allianz Life Fixed Account). We may change this in the future.
However, we will always allow you to invest in at least five Variable Options.
Once we receive your Purchase Payment and the necessary information, we will
issue your Contract and allocate your first Purchase Payment within 2 business
days. If you do not give us all of the information we need, we will contact you
or your registered representative to get it. If for some reason we are unable to
complete this process within 5 business days, we will either send back your
money or get your permission to keep it until we get all of the necessary
information. If you make additional Purchase Payments, we will credit these
amounts to your Contract within one business day. Our business day closes when
the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern time.
Free Look
If you change your mind about owning the Contract, you can cancel it within 10
days after receiving it (or the period required in your state). When you cancel
the Contract within this time period, Allianz Life will not assess a contingent
deferred sales charge. You will receive back whatever your Contract is worth on
the day we receive your request. In certain states, or if you have purchased the
Contract as an IRA, we may be required to give you back your Purchase Payment if
you decide to cancel your Contract within 10 days after receiving it (or
whatever period is required in your state). If that is the case, we reserve the
right to allocate your initial Purchase Payment to the Money Market Fund for 15
days after we receive it. (In some states, the period may be longer.) At the end
of that period, we will re-allocate your money as you selected. Currently,
however, we will directly allocate your money to the Variable Options and/or the
Fixed Account as you have selected.
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 Growth and Income Fund. When the New
York Stock Exchange closes on that Wednesday, we determine that the value of an
Accumulation Unit based on an investment in the Growth and Income Fund is
$12.50. We then divide $3,000 by $12.50 and credit your Contract on Wednesday
night with 240 Accumulation Units.
4. INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The Contract offers Variable Options, which invest in Class 1 shares of 25
Portfolios of Franklin Templeton Variable Insurance Products Trust. Prior to
July 1, 1999 Franklin Templeton Variable Insurance Products Trust was known as
Franklin Valuemark Funds. The Contract also offers a Fixed Account of Allianz
Life. Additional Portfolios may be available in the future.
You should read the Franklin Templeton Variable Insurance Products Trust
prospectus (which is attached to this prospectus) carefully before investing.
Franklin Templeton Variable Insurance Products Trust (Trust) is the mutual fund
underlying your Contract. Each Portfolio has its own investment objective. The
Trust issues two classes of shares which are described in the attached Trust
prospectus. Only Class 1 shares are available with your Contract. Investment
managers for each Portfolio are listed in the table below and are as follows:
Franklin Advisers, Inc. (FA), Franklin Advisory Services, LLC (FAS), Franklin
Mutual Advisers, LLC (FMA), Templeton Asset Management Ltd. (TAM), Templeton
Global Advisors Limited (TGA), and Templeton Investment Counsel, Inc. (TIC).
Certain managers have retained one or more affiliated subadvisers to help them
manage the Portfolios.
The following is a list of the Portfolios available under the Contract:
Investment
Available Portfolios Managers
- -------------------------------------------------------------
PORTFOLIO SEEKING CAPITAL PRESERVATION AND INCOME
Money Market Fund FA
PORTFOLIOS SEEKING INCOME
High Income Fund FA
Templeton Global Income Securities Fund FA
U.S. Government Securities Fund FA
Zero Coupon Funds - 2000, 2005, 2010 FA
PORTFOLIOS SEEKING GROWTH AND INCOME
Global Utilities Securities Fund FA
Growth and Income Fund FA
Income Securities Fund FA
Mutual Shares Securities Fund FMA
Real Estate Securities Fund FA
Rising Dividends Fund FAS
Templeton Global Asset Allocation Fund TGA
Value Securities Fund FAS
PORTFOLIOS SEEKING CAPITAL GROWTH
Capital Growth Fund FA
Global Health Care Securities Fund FA
Mutual Discovery Securities Fund FMA
Natural Resources Securities Fund FA
Small Cap Fund FA
Templeton Developing Markets Equity Fund TAM
Templeton Global Growth Fund TGA
Templeton International Equity Fund FA
Templeton International Smaller Companies Fund TIC
Templeton Pacific Growth Fund FA
Franklin Templeton Variable Insurance Products Trust serves as the underlying
mutual fund for variable life insurance policies offered by Allianz Life and
other variable annuity contracts offered by Allianz Life and its affiliates.
Franklin Templeton Variable Insurance Products Trust believes that offering its
shares in this manner will not be disadvantageous to you.
Transfers
You can transfer money among the 25 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 manager's
judgment, a Portfolio would be unable to invest effectively in accordance with
its investment objectives and policies, or would otherwise potentially be
adversely affected.
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. The following applies to any transfer:
1. The minimum amount which you can transfer is $1,000 ($500 in New Jersey) or
your entire value in the Variable Option or Fixed Account, if less. This
requirement is waived if the transfer is in connection with the Dollar Cost
Averaging Program or Flexible Rebalancing (which are described below).
2. We may not allow you to make transfers during the free look period.
3. Your request for a transfer must clearly state which 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.
Allianz Life has reserved the right to modify the transfer provisions subject to
the guarantees described above and subject to applicable state law.
You can make transfers by telephone. We may allow you to authorize someone else
to make transfers by telephone on your behalf. If you own the Contract with a
Joint Owner, unless 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 new Contracts and additional
Purchase Payments to new and existing Contracts. You will receive a special
fixed rate guaranteed for one year by Allianz Life. Dollar cost averaging will
take place over 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 will be made on the 20th day of the month unless that day
is not a business day. If it is not, then the transfer will be made on the
previous day. If you participate in Flexible Rebalancing, the transfers made
under the program are not taken into account in determining any transfer fee.
The Fixed Account is not permitted to be part of Flexible Rebalancing.
Voting Privileges
Allianz Life is the legal owner of the Trust's Class 1 Portfolio shares.
However, when a Portfolio solicits proxies in conjunction with a shareholder
vote which affects your investment, 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.
5. 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 charge.
Mortality and Expense Risk Charge. During the Accumulation Phase, this charge is
equal, on an annual basis, to 1.34% of the average daily value of the Contract
invested in a Variable Option, after the deduction of expenses. During the
Payout Phase, the 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). The amount of
the mortality and expense risk charge is less during the Payout Phase because
Allianz Life does not pay a death benefit if you die during the Payout Phase.
Administrative Charge. This charge is equal, on an annual basis, to .15% of the
average daily value of the Contract invested in a Variable Option, after the
deduction of expenses. This charge, 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, at each Contract anniversary, Allianz Life deducts $30 from your
Contract as a contract maintenance charge. The fee is assessed on the last day
of each Contract year. (In South Carolina, if your Contract is in force on the
20th Contract anniversary, we will waive the contract maintenance charge that is
to be deducted after the 20th Contract anniversary.) This charge is for
administrative expenses (see above). This charge can not be increased.
However, during the Accumulation Phase, if the value of your Contract is at
least $50,000 when the deduction for the charge is to be made, Allianz Life will
not deduct this charge. If you own more than one Franklin Valuemark IV Contract,
Allianz Life will determine the total value of all your Franklin Valuemark IV
Contracts. If the total value of all Franklin Valuemark IV Contracts registered
under the same social security number is at least $50,000, Allianz Life will not
assess the contract maintenance charge (except in New Jersey). Currently, the
charge is also waived during the Payout Phase if the value of your Contract at
the Income Date is at least $50,000 (except in New Jersey). If the Contract is
owned by a non-natural person (e.g., a corporation), Allianz Life will look to
the Annuitant to determine if it will assess the charge.
If you make a complete 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
Withdrawals 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. The charge is:
Contingent deferred
sales charge
Years since (as a percentage
Purchase Payment of Purchase Payments)
-------------------------------------------------
0-1 6%
1-2 6%
2-3 6%
3-4 5%
4-5 4%
5-6 3%
6-7 2%
7+ 0%
However, after Allianz Life has had a Purchase Payment for 7 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. Allianz Life does not assess the contingent
deferred sales charge on any payments paid out as Annuity Payments or as death
benefits.
In the state of Washington, the contingent deferred sales charge will be waived
beginning with the later of the first Contract anniversary after your attaining
age 70 or the 10th Contract anniversary.
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 (referred to in sales literature as "15% Withdrawal
Privilege") - Each year after the first Contract year, you can make multiple
withdrawals up to 15% of the value of your Contract and no contingent deferred
sales charge will be deducted from the 15% you take out. (This amount may be
increased when the Contract is issued to a charitable remainder trust.) If you
make a withdrawal of more than the free 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 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 Section 7 - "Access to Your Money" for a description of the
Systematic Withdrawal Program and the Minimum Distribution Program.
Waiver of Contingent Deferred Sales Charge Benefits
Under certain circumstances, after the first year, Allianz Life will permit you
to take your money out of the Contract without deducting a contingent deferred
sales charge:
1) if you become confined to a nursing home;
2) if you become terminally ill, which is defined as life expectancy of 12
months or less (a full withdrawal of the Contract will be required); or
3) if you become totally disabled for at least 90 consecutive days.
The waiver will not apply if any of the above conditions existed on the date
your Contract was issued.
Also, after the first year, if you become unemployed for at least 90 consecutive
days, you can take up to 50% of your money out of the Contract without incurring
a contingent deferred sales charge. This benefit is available only once during
the life of the Contract. You may not use both this benefit and the 15% free
withdrawal amount in the same Contract year.
These benefits vary from state to state or may not be available in your state.
(Check with your registered representative.)
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
You can make 12 free transfers every year. We measure a year from the day we
issue your Contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred, whichever is less,
for each additional transfer. If the transfer is part of the Dollar Cost
Averaging Program or Flexible Rebalancing, it will not count in determining the
transfer fee.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Allianz Life is responsible for the payment of
these taxes. 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 prospectus for Franklin Templeton Variable
Insurance Products Trust.
6. TAXES
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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.
7. ACCESS TO YOUR MONEY
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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 Section 5 - "Expenses" for a discussion of the charges.)
Any partial withdrawal must be for at least $500. Unless you instruct Allianz
Life otherwise, the partial withdrawal will be made pro-rata from all the
Variable Options and the Fixed Account you selected. After you make a partial
withdrawal the value of your Contract must be at least $2,000.
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 Section 6 - "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 15% of the value of
your Contract. This is determined on the last business day prior to the day your
request is received. You may withdraw any amount you want under this program if
your payments are no longer subject to the contingent deferred sales charge. 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 Section 5 - "Expenses." All
systematic withdrawals will be made on the 9th day of the month unless that day
is not a business day. If it is not, then the withdrawal will be made the
previous business day.
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 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 is
not reasonably practicable or Allianz Life cannot reasonably value the Portfolio
shares;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Contract Owners.
Allianz Life has reserved the right to defer payment for a withdrawal or
transfer from the Fixed Account for the period permitted by law but not for more
than six months.
8. PERFORMANCE
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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
Portfolio expenses. 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 Franklin Templeton Variable Insurance Products Trust
prospectus for more information.
Certain Portfolios have been in existence for some time and have investment
performance history. However, the Contracts have been available only since
February 3, 1997. In order to demonstrate how the actual investment experience
of the Portfolios may affect your Accumulation Unit values, Allianz Life has
prepared performance information which can be found in the SAI. There is
performance shown which is based on the historical performance of the
Portfolios, modified to reflect the current charges and expenses of your
Contract as if the Contract had been in existence for the time periods shown.
The information is based upon the historical experience of the Portfolios and
does not represent past performance or predict future performance.
Allianz Life may in the future also advertise yield information. If it does, it
will provide you with information regarding how yield is calculated. More
detailed information regarding how performance is calculated is found in the
SAI.
Any performance advertised will be based on historical data. It does not
guarantee future results of the Portfolios.
9. DEATH BENEFIT
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Upon Your Death
If you die during the Accumulation Phase, Allianz Life will pay a death benefit
to your Beneficiary (see below). No death benefit is paid if you die during the
Payout Phase. If you purchase the Contract on or after July 6, 1999, you may
choose Death Benefit Option 1 or Death Benefit Option 2 below at the time of
application. Once you make the selection, you may not change it. If you
purchased the Contract before July 6, 1999, Death Benefit Option 2 is not
available.
I. Contracts That Receive An Enhanced Death Benefit Endorsement
Contracts that are owned individually, or jointly with another person, or as
agent for an individual person, will receive an enhanced death benefit
endorsement for Death Benefit Option 1 or Death Benefit Option 2. For these
Contracts, the death benefit options are:
Death Benefit Option 1
------------------------
The death benefit will be the greater of (1) or (2) below:
1) The current value of your Contract, less any taxes owed. This amount is
determined as of the day that all claim proofs and payment election forms are
received at the Valuemark Service Center.
2) The guaranteed minimum death benefit (as explained below and in the
enhanced death benefit endorsement to your Contract), as of the day you die.
A. During the first year of all such Contracts and if you are age 81 or
older (76 or older for deaths occurring in Washington, or in most other
states before 11/1/98) at the time of purchase, the following guaranteed
minimum death benefit will apply:
o payments you have made,
o less any money you have taken out,
o less any applicable charges paid on money taken out,
o less any premium taxes owed.
B. After the first Contract year, for Contracts issued before your 81st
birthday (76th birthday for deaths occurring before 11/1/98), and until
you reach age 81 (age 76 for deaths occurring before 11/1/98), the
greater of (a) or (b) below will be your guaranteed minimum death
benefit:
a) 5% Increase
o payments you have made,
o less any money you have taken out,
o less any applicable charges paid on money taken out,
o plus 5% on each Contract anniversary,
o less any premium taxes owed.
b) Highest 6th Year Contract Value
o highest Contract value on any six year Contract anniversary,
o plus any payments made since that Contract anniversary,
o less any money you have taken out since that anniversary,
o less any applicable charges paid on money taken out since
that anniversary,
o less any premium taxes owed.
C. After your 81st birthday (76th birthday for deaths occurring before
11/1/98), the following guaranteed minimum death benefit will apply:
o your guaranteed minimum death benefit on the Contract anniversary
prior to your 81st birthday (76th birthday for deaths occurring before
11/1/98),
o plus any payments you have made since then,
o less any money you have taken out since then,
o less any applicable charges paid on money taken out since then,
o less any premium taxes owed.
Death Benefit Option 2
-------------------------
The death benefit will be the greater of:
1) the current value of your Contract, less any taxes, on the day all claim
proofs and payment election forms are received by Allianz Life at the
Valuemark Service Center; or
2) (if applicable) the guaranteed minimum death benefit, less any taxes, on
the day all claim proofs and payment election forms are received by Allianz
Life at the Valuemark Service Center.
The guaranteed minimum death benefit is the greater of:
o payments you have made, less any money you have taken out and any charges
paid on the money you have taken out.
o the greatest "anniversary value". The "anniversary value" is the value of
the Contract on a Contract anniversary, increased by payments you have made
since that anniversary and decreased by any money you have taken out and any
charges paid on the money you have taken out since that anniversary. Allianz
Life will not take into consideration any Contract anniversaries which occur
on or after your 81st birthday or date of death in determining this benefit.
In certain states, the above death benefit may not be available. Check your
Contract and Endorsement for your applicable death benefit.
II. Contracts That Do Not Receive An Enhanced Death Benefit Endorsement
For all Contracts that do not receive an enhanced death benefit endorsement, the
death benefit will be:
the current value of your Contract, less any taxes owed. This amount is
determined as of the day that all claim proofs and payment election forms are
received at the Valuemark Service Center.
III. Additional Provisions
If you have a Joint Owner, the age of the oldest Contract Owner will be used to
determine the guaranteed minimum death benefit. The guaranteed minimum death
benefit will be reduced by any amounts withdrawn after the date of death. If the
Contract is owned by a non-natural person, then all references to you mean the
Annuitant.
In the case of Joint Owners, if a Joint Owner dies, the surviving Joint Owner
will be considered the Beneficiary. Joint Owners must be spouses (except in
Pennsylvania, Oregon and New Jersey).
A Beneficiary may request that the death benefit be paid in one of the following
ways: (1) payment of the entire death benefit within 5 years of the date of
death; or (2) payment of the death benefit under an Annuity Option. The death
benefit payable under an Annuity Option must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payment must begin within one year of the date of death. If the Beneficiary is
the spouse of the Contract Owner, he/she can choose to continue the Contract in
his/her own name at the then current value, or if greater, the death benefit
value. If a lump sum payment is elected and all the necessary requirements,
including any required tax consent from some states, are met, the payment will
be made within 7 days. Payment of the death benefit may be delayed pending
receipt of any applicable tax consents and/or forms from a state.
If you (or any Joint Owner) die during the Payout Phase and you are not the
Annuitant, any payments which are remaining under the Annuity Option selected
will continue at least as rapidly as they were being paid at your death. If you
die during the Payout Phase, the Beneficiary becomes the Contract Owner.
Death of Annuitant
If the Annuitant, who is not a Contract Owner or Joint Owner, dies during the
Accumulation Phase, you can name a new Annuitant. If you do not name a new
Annuitant within 30 days of the death of the Annuitant, you will become the
Annuitant. However, if the Contract Owner is a non-natural person (e.g., a
corporation), then the death of the Annuitant will be treated as the death of
the Contract Owner, and a new Annuitant may not be named.
If the Annuitant dies after Annuity Payments have begun, the remaining amounts
payable, if any, will be as provided for in the Annuity Option selected. The
remaining amounts payable will be paid to the Contract Owner at least as rapidly
as they were being paid at the Annuitant's death.
10. OTHER INFORMATION
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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. NFP has subcontracted with Franklin Advisers, Inc. for it and/or
certain of its affiliates to provide certain marketing support services and NFP
compensates these entities for their services.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions up to 7.5% 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 7.5% of Purchase Payments). In addition, Allianz Life and Franklin
Advisers, Inc. and/or its affiliates may pay certain sellers for other services
not directly related to the sale of the Contracts (such as special marketing
support allowances). 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.
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 4
Annuity Provisions 9
Mortality and Expense Risk Guarantee 10
Financial Statements 10
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
Condensed Financial Information
<TABLE>
<CAPTION>
The consolidated financial statements of Allianz Life Insurance Company of North
America and the financial statements of Allianz Life Variable Account B may be
found in the Statement of Additional Information.
The table below 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.
(Number of units in thousands)
Period from
Year or Period Inception
Ended (2/3/97) to
Sub-Accounts: Dec. 31, 1998Dec. 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Growth
Unit value at beginning of period $13.110 $11.247
Unit value at end of period $15.537 $13.110
Number of units
outstanding at end of period 4,502 1,957
Global Health Care Securities*
Unit value at beginning of period $10.000 NA
Unit value at end of period $10.604 NA
Number of units
outstanding at end of period 224 NA
Global Utilities Securities
Unit value at beginning of period $25.635 $20.526
Unit value at end of period $28.082 $25.635
Number of units
outstanding at end of period 1,006 310
Growth and Income
Unit value at beginning of period $24.354 $19.351
Unit value at end of period $25.993 $24.354
Number of units
outstanding at end of period 5,185 2,376
High Income
Unit value at beginning of period $21.141 $19.237
Unit value at end of period $21.020 $21.141
Number of units
outstanding at end of period 4,191 2,202
Income Securities
Unit value at beginning of period $24.864 $21.554
Unit value at end of period $24.898 $24.864
Number of units
outstanding at end of period 4,239 2,094
Money Market
Unit value at beginning of period $13.756 $13.266
Unit value at end of period $14.260 $13.756
Number of units
outstanding at end of period 4,342 3,214
Mutual Discovery Securities
Unit value at beginning of period $11.971 $10.179
Unit value at end of period 11.205 $11.971
Number of units
outstanding at end of period 8,822 5,461
Mutual Shares Securities
Unit value at beginning of period $11.981 $10.329
Unit value at end of period $11.814 $11.981
Number of units
outstanding at end of period 19,834 11,394
</TABLE>
<TABLE>
<CAPTION>
(Number of units in thousands)
Period from
Year or Period Inception
Ended (2/3/97) to
Sub-Accounts: Dec. 31, 1998Dec. 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Natural Resources Securities
Unit value at beginning of period $11.466 $14.364
Unit value at end of period $8.430 $11.466
Number of units
outstanding at end of period 514 304
Real Estate Securities
Unit value at beginning of period $27.944 $23.499
Unit value at end of period $22.901 $27.944
Number of units
outstanding at end of period 1,823 1,217
Rising Dividends
Unit value at beginning of period $19.968 $15.235
Unit value at end of period $21.034 $19.968
Number of units
outstanding at end of period 4,428 1,991
Small Cap
Unit value at beginning of period $14.923 $12.899
Unit value at end of period $14.558 $14.923
Number of units
outstanding at end of period 5,492 2,965
Templeton Developing Markets Equity
Unit value at beginning of period $10.305 $11.458
Unit value at end of period $7.958 $10.305
Number of units
outstanding at end of period 3,425 2,663
Templeton Global Asset Allocation
Unit value at beginning of period $13.752 $12.495
Unit value at end of period $13.543 $13.752
Number of units
outstanding at end of period 1,491 1,008
Templeton Global Growth
Unit value at beginning of period $15.124 $13.525
Unit value at end of period $16.238 $15.124
Number of units
outstanding at end of period 8,864 5,525
Templeton Global Income Securities
Unit value at beginning of period $16.821 $16.661
Unit value at end of period $17.746 $16.821
Number of units
outstanding at end of period 651 393
Templeton International Equity
Unit value at beginning of period $17.617 $16.010
Unit value at end of period $18.322 $17.617
Number of units
outstanding at end of period 4,427 3,122
Number of units in thousands)
</TABLE>
<TABLE>
<CAPTION>
Period from
Year or Period Inception
Ended (2/3/97) to
Sub-Accounts: Dec. 31, 1998Dec. 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Templeton International Smaller Companies
Unit value at beginning of period $10.809 $11.138
Unit value at end of period $9.342 $10.809
Number of units
outstanding at end of period 967 792
Templeton Pacific Growth
Unit value at beginning of period $9.381 $14.866
Unit value at end of period $8.028 $9.381
Number of units
outstanding at end of period 655 379
U.S. Government Securities
Unit value at beginning of period $17.805 $16.533
Unit value at end of period $18.847 $17.805
Number of units
outstanding at end of period 3,040 1,359
Value Securities*
Unit value at beginning of period $10.000 NA
Unit value at end of period $7.713 NA
Number of units
outstanding at end of period 367 NA
Zero Coupon 2000
Unit value at beginning of period $19.358 $18.345
Unit value at end of period $20.502 $19.358
Number of units
outstanding at end of period 188 94
Zero Coupon 2005
Unit value at beginning of period $22.357 $20.375
Unit value at end of period $24.786 $22.357
Number of units
outstanding at end of period 380 161
Zero Coupon 2010
Unit value at beginning of period $24.544 $21.371
Unit value at end of period $27.674 $24.544
Number of units
outstanding at end of period 478 150
<FN>
*The Global Health Care Securities and the Value Securities Sub-Accounts commenced operations May 1, 1998.
</FN>
</TABLE>
