Profile of the
Franklin
Valuemark Charter Variable Annuity Contract
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
January 5, 1999
This profile is a summary of some of the more important points that you should
consider and know before purchasing the Franklin Valuemark Charter Variable
Annuity Contract with a fixed account option. The Contract is more fully
described in the prospectus which accompanies this profile. Please read the
prospectus carefully.
1. THE FRANKLIN VALUEMARK CHARTER VARIABLE ANNUITY CONTRACT
The Franklin Valuemark Charter 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. 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 22 variable options -- each of which invests in a portfolio of
Franklin Valuemark Funds and a fixed account of Allianz Life. The portfolios are
managed by Franklin Advisers, Inc. and its Templeton and Franklin affiliates. A
list of the available portfolios is contained in Section 4. Depending upon
market conditions, you can make or lose money in the Contract based on the
portfolios' investment performance. The portfolios are designed to offer a
better return than the fixed 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 at any one time
(which includes any of the 22 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 surrender. The payout phase
occurs when you begin receiving regular payments from your Contract. The amount
of the payments you may receive during the payout phase depends in part upon the
amount of money you are able to accumulate in your Contract during the
accumulation phase.
2. ANNUITY PAYMENTS
(THE PAYOUT PHASE)
You can receive monthly annuity payments from your Contract by selecting one of
the following annuity options (all of these options assume you are the owner and
the annuitant):
(1) payments for your life;
(2) payments for your life, but if you die before payments have been made for
the guaranteed period you selected, payments will continue for the remainder of
the guaranteed period (5, 10, 15 or 20 years);
(3) payments during the joint lifetime of you and the joint annuitant -- when
either of you die, payments will continue as long as the survivor lives;
(4) payments during the joint lifetime of you and the joint annuitant, but if
you and the joint annuitant die before payments have been made for the
guaranteed period you selected, payments will continue for the remainder of the
guaranteed period (5, 10, 15 or 20 years); and
(5) payments during your life ending with the last payment due prior to your
death with a guarantee that at your death Allianz Life will make a refund 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
You can buy the Contract with $25,000 or more. You can add $250 or more any time
you like during the accumulation phase. Your registered representative can help
you fill out the proper forms. You and the annuitant cannot be older than 85
years old at the time you buy the Contract. This product is not appropriate for
market timers.
4. INVESTMENT OPTIONS
You may select the Allianz Life fixed account and/or the variable options which
invest in Class 2 shares of the following portfolios of Franklin Valuemark
Funds:
PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME:
Money Market Fund
PORTFOLIOS SEEKING
CURRENT INCOME:
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
PORTFOLIOS SEEKING
GROWTH AND INCOME:
Global Utilities Securities Fund
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Value Securities Fund
PORTFOLIOS SEEKING
CAPITAL GROWTH:
Capital Growth Fund
Global Health Care Securities Fund
Mutual Discovery Securities Fund
Natural Resources Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
The portfolios are fully described in the attached prospectus for Franklin
Valuemark Funds. You can make or lose money based on the portfolios'
performance.
5. EXPENSES
The Contract has insurance features and investment features, and there are costs
related to each.
o The annual insurance charges for your Contract depend on the death benefit
(traditional or enhanced) that you select when you buy the Contract. The annual
insurance charges total 1.15% (traditional death benefit) or 1.35% (enhanced
death benefit) of the average daily value of your Contract allocated to the
variable options.
o Each year Allianz Life also deducts a $40 contract maintenance charge from
your Contract. Allianz Life currently waives this charge if the cumulative value
of all your Franklin Valuemark Charter Contracts (registered with the same
social security number) are at least $100,000.
o There are also annual portfolio operating expenses, which vary depending upon
the portfolios you select. These expenses range from .70% to 1.72% of the
average daily value of the portfolios' Class 2 shares.
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 Allianz Life does not assess a surrender charge, or a contingent deferred
sales charge if you make a surrender (partial or total) from the Contract.
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 surrender.
We have provided the following charts to help you understand the expenses in
your Contract. Chart 1 is for Contracts with the traditional death benefit
option. Chart 2 is for Contracts with the enhanced death benefit option. The
column "Total Annual Insurance Charges" includes the $40 contract maintenance
charge which has been converted to a percentage and is represented as .10%
below. The column "Total Annual Expenses" shows the total of the $40 contract
maintenance charge (which has been converted to a percentage and is represented
as .10% below), the insurance charges (which either total 1.15% or 1.35%,
depending upon the death benefit you selected) and the total annual portfolio
expenses for each portfolio.
The next two columns show you two examples of the expenses, in dollars, you
would pay under a Contract. The examples assume that you invested $1,000 in a
Contract which earns 5% annually and that you surrender your Contract: (1) at
the end of year 1, and (2) at the end of year 10.
The premium tax is assumed to be 0% in both examples.
These are just examples. They do not represent past or future expenses. Actual
expenses may be higher or lower than those shown.
<TABLE>
<CAPTION>
CHART 1 - EXPENSES FOR CONTRACTS WITH TRADITIONAL DEATH BENEFIT:
Total
Total Annual EXAMPLES:
Annual Class 2 Total
Insurance Portfolio Annual Expenses at end of:
Variable Option Charges Expenses Expenses 1 Year 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth 1.25% 1.07% 2.32% $24 $265
Global Health Care Securities 1.25% 1.16% 2.41% $24 $275
Global Utilities Securities 1.25% .80% 2.05% $21 $237
Growth and Income 1.25% .79% 2.04% $21 $236
High Income 1.25% .83% 2.08% $21 $241
Income Securities 1.25% .80% 2.05% $21 $237
Money Market 1.25% .83% 2.08% $21 $241
Mutual Discovery Securities 1.25% 1.36% 2.61% $26 $295
Mutual Shares Securities 1.25% 1.10% 2.35% $24 $268
Natural Resources Securities 1.25% .99% 2.24% $23 $257
Real Estate Securities 1.25% .84% 2.09% $21 $242
Rising Dividends 1.25% 1.04% 2.29% $23 $262
Small Cap 1.25% 1.07% 2.32% $24 $265
Templeton Developing Markets Equity 1.25% 1.72% 2.97% $30 $329
Templeton Global Asset Allocation 1.25% 1.24% 2.49% $25 $283
Templeton Global Growth 1.25% 1.18% 2.43% $25 $277
Templeton Global Income Securities 1.25% .92% 2.17% $22 $250
Templeton International Equity 1.25% 1.19% 2.44% $25 $278
Templeton International Smaller Companies 1.25% 1.36% 2.61% $26 $295
Templeton Pacific Growth 1.25% 1.33% 2.58% $26 $292
U.S. Government Securities 1.25% .80% 2.05% $21 $237
Value Securities 1.25% 1.11% 2.36% $24 $270
</TABLE>
<TABLE>
<CAPTION>
CHART 2 - EXPENSES FOR CONTRACTS WITH ENHANCED DEATH BENEFIT:
Total
Total Annual EXAMPLES:
Annual Class 2 Total
Insurance Portfolio Annual Expenses at end of:
Variable Option Charges Expenses Expenses 1 Year 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Growth 1.45% 1.07% 2.52% $26 $286
Global Health Care Securities 1.45% 1.16% 2.61% $26 $295
Global Utilities Securities 1.45% .80% 2.25% $23 $258
Growth and Income 1.45% .79% 2.24% $23 $257
High Income 1.45% .83% 2.28% $23 $261
Income Securities 1.45% .80% 2.25% $23 $258
Money Market 1.45% .83% 2.28% $23 $261
Mutual Discovery Securities 1.45% 1.36% 2.81% $28 $314
Mutual Shares Securities 1.45% 1.10% 2.55% $26 $289
Natural Resources Securities 1.45% .99% 2.44% $25 $278
Real Estate Securities 1.45% .84% 2.29% $23 $262
Rising Dividends 1.45% 1.04% 2.49% $25 $283
Small Cap 1.45% 1.07% 2.52% $26 $286
Templeton Developing Markets Equity 1.45% 1.72% 3.17% $32 $348
Templeton Global Asset Allocation 1.45% 1.24% 2.69% $27 $302
Templeton Global Growth 1.45% 1.18% 2.63% $27 $297
Templeton Global Income Securities 1.45% .92% 2.37% $24 $271
Templeton International Equity 1.45% 1.19% 2.64% $27 $298
Templeton International Smaller Companies 1.45% 1.36% 2.81% $28 $314
Templeton Pacific Growth 1.45% 1.33% 2.78% $28 $311
U.S. Government Securities 1.45% .80% 2.25% $23 $258
Value Securities 1.45% 1.11% 2.56% $26 $290
</TABLE>
The expenses for the newly formed Class 2 shares of each portfolio have been
estimated. Estimates are based on the Class 2 Rule 12b-1 Plan and each
portfolio's historical Class 1 share expenses or, for the new Global Health Care
Securities and Value Securities Funds, estimated Class 1 share expenses. For
more detailed information, see the Fee Table in the prospectus for the Contract.
6. TAXES
You do not have to pay taxes on any earnings until you withdraw money from your
Contract. In most cases, if you take money out, earnings come out first and are
taxed as income. If you are younger than 591/2 when you take money out, you may
be charged a 10% federal tax penalty on the taxable amounts surrendered.
Payments during the payout phase are considered partly a return of your original
investment. That part of each payment is not taxable as income. If the Contract
is tax-qualified, the entire payment may be taxable.
7. ACCESS TO YOUR MONEY
You may make a surrender at any time during the accumulation phase. Any partial
surrender must be for at least $500. You may request a surrender or elect the
Systematic Withdrawal Program or the Minimum Distribution Program which are
briefly described in Section 10 of this Profile. Of course, you may also have to
pay income taxes and a tax penalty on any money you take out of the Contract.
8. PERFORMANCE
The value of the Contract will vary up or down depending upon the performance of
the portfolio(s) you choose.
The following charts show total returns for the Contracts for the periods shown.
Chart 1 shows the performance for Contracts with the traditional death benefit
and Chart 2 shows performance for Contracts with the enhanced death benefit.
Performance is not shown for the Global Health Care Securities Fund and the
Value Securities Fund because they began operations on May 1, 1998. These
numbers reflect the insurance charges, the contract maintenance charge and the
operating expenses of the portfolios. Although the Contracts are new, the
performance assumes your Contract was invested in the portfolios for the periods
shown. Because the portfolios' Class 2 shares are new, the performance is based
on the historical performance of the portfolios' Class 1 shares. Class 2 shares
have 12b-1 plan expenses currently equal to .30% per year which will affect
future performance. Past performance is not a guarantee of future results.
<TABLE>
<CAPTION>
CHART 1
Calendar Year
- ---------------------------------------------------------------------------------------------------------------------------
Variable Option 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth 16.86% N/A N/A N/A N/A N/A N/A N/A
Global Utilities Securities 25.21% 5.74% 29.76% -12.67% 9.17% 7.37% 23.08% 0.59%
Growth and Income 26.18% 12.78% 31.22% -3.24% 8.95% 5.39% 22.10% -3.56%
High Income 10.17% 12.49% 18.30% -3.47% 14.32% 14.82% 28.55% -9.81%
Income Securities 15.65% 9.90% 20.90% -7.44% 17.15% 11.83% 38.23% -8.60%
Money Market 3.94% 3.85% 4.45% 2.54% 1.27% 1.78% 4.18% 6.29%
Mutual Discovery Securities 17.90% N/A N/A N/A N/A N/A N/A N/A
Mutual Shares Securities 16.29% N/A N/A N/A N/A N/A N/A N/A
Natural Resources Securities -20.00% 2.70% 1.08% -3.21% 53.75% -11.26% 2.54% -15.07%
Real Estate Securities 19.22% 31.19% 16.08% 1.62% 17.55% 10.71% 31.88% -13.08%
Rising Dividends 31.41% 22.65% 28.16% -5.27% -4.66% N/A N/A N/A
Small Cap 15.98% 27.49% N/A N/A N/A N/A N/A N/A
Templeton Developing
Markets Equity -9.86% 20.09% 1.50% N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CHART 1 (cont.)
Calendar Year
- ---------------------------------------------------------------------------------------------------------------------------
Variable Option 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Templeton Global Asset Allocation 10.34% 18.35% N/A N/A N/A N/A N/A N/A
Templeton Global Growth 12.10% 19.79% 11.33% N/A N/A N/A N/A N/A
Templeton Global Income Securities 1.20% 8.28% 13.27% -6.17% 15.25% -1.62% 10.91% 8.43%
Templeton International Equity 10.31% 21.46% 9.23% -0.38% 27.01% N/A N/A N/A
Templeton International
Smaller Companies -2.73% N/A N/A N/A N/A N/A N/A N/A
Templeton Pacific Growth -36.78% 9.72% 6.64% -9.93% 46.08% N/A N/A N/A
U.S. Government Securities 7.96% 2.32% 18.00% -5.74% 8.36% 6.33% 14.46% 7.57%
</TABLE>
<TABLE>
<CAPTION>
CHART 2
Calendar Year
- ---------------------------------------------------------------------------------------------------------------------------
Variable Option 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth 16.62% N/A N/A N/A N/A N/A N/A N/A
Global Utilities Securities 24.96% 5.52% 29.50% -12.85% 8.96% 7.15% 22.84% 0.39%
Growth and Income 25.93% 12.55% 30.95% -3.43% 8.73% 5.18% 21.86% -3.75%
High Income 9.95% 12.26% 18.06% -3.66% 14.10% 14.59% 28.30% -9.99%
Income Securities 15.42% 9.67% 20.66% -7.62% 16.92% 11.61% 37.95% -8.78%
Money Market 3.74% 3.64% 4.24% 2.34% 1.07% 1.57% 3.97% 6.08%
Mutual Discovery Securities 17.67% N/A N/A N/A N/A N/A N/A N/A
Mutual Shares Securities 16.05% N/A N/A N/A N/A N/A N/A N/A
Natural Resources Securities -20.16% 2.49% 0.88% -3.40% 53.45% -11.44% 2.33% -15.24%
Real Estate Securities 18.98% 30.92% 15.85% 1.42% 17.32% 10.48% 31.62% -13.25%
Rising Dividends 31.14% 22.40% 27.91% -5.46% -4.85% N/A N/A N/A
Small Cap 15.75% 27.23% N/A N/A N/A N/A N/A N/A
Templeton Developing
Markets Equity -10.04% 19.85% 1.30% N/A N/A N/A N/A N/A
Templeton Global Asset Allocation 10.12% 18.12% N/A N/A N/A N/A N/A N/A
Templeton Global Growth 11.88% 19.54% 11.11% N/A N/A N/A N/A N/A
Templeton Global Income Securities 1.00% 8.06% 13.04% -6.36% 15.02% -1.82% 10.69% 8.21%
Templeton International Equity 10.09% 21.21% 9.01% -0.58% 26.75% N/A N/A N/A
Templeton International
Smaller Companies -2.92% N/A N/A N/A N/A N/A N/A N/A
Templeton Pacific Growth -36.91% 9.50% 6.43% -10.11% 45.79% N/A N/A N/A
U.S. Government Securities 7.74% 2.11% 17.76% -5.93% 8.14% 6.12% 14.23% 7.36%
</TABLE>
9. DEATH BENEFIT
If you die during the accumulation phase, the person you have selected as your
beneficiary will receive a death benefit. At the time you purchase the Contract,
you must select either the traditional death benefit option or the enhanced
death benefit option. Once selected, you cannot change it.
If you select the traditional death benefit option, the amount of death benefit
will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) any payments you have made, less any surrenders and applicable premium
taxes.
If you select the enhanced death benefit option, the amount of the death benefit
will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) the guaranteed minimum death benefit, less any applicable premium tax.
The guaranteed minimum death benefit is the greater of:
(a) the sum of all payments you have made, less any surrenders; or
(b) the greatest value of your Contract Anniversaries prior to your 86th
birthday (your Contract Anniversaries equal the value of your Contract on a
Contract anniversary, increased by the amount of any payments you have made
since that anniversary, less the amount of any surrenders you have made since
that anniversary).
10. OTHER INFORMATION
Free Look. If you cancel the Contract within 10 days after receiving it (or
whatever period is required in your state), you will receive whatever your
Contract is worth on the day we receive your request. This may be more or less
than your original payment. (Some states require that we return your payment.)
No Probate. In most cases, when you die, your beneficiary will receive the death
benefit without going through probate.
Purchasing Considerations. The Franklin
Valuemark Charter Variable Annuity Contract is designed for people seeking
long-term tax deferred accumulation of assets, generally for retirement or other
long-term purposes. The tax deferred feature is most attractive to people in
high federal and state tax brackets. You should not buy this Contract if you are
looking for a short-term investment or if you cannot accept the risk of getting
back less money than you put in.
Additional Features
The Contract offers additional features which you might be interested in. These
include:
Automatic Investment Plan - You can automatically add to your Contract on a
monthly or quarterly basis for as little as $100. You can do this by
electronically transferring monies from your savings or checking account.
Dollar Cost Averaging Program - You can arrange to have a regular amount of
money automatically transferred from selected variable options 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.
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.
Systematic Withdrawal Program - You can elect to receive monthly or quarterly
payments from Allianz Life while your Contract is in the accumulation phase. Of
course, you may have to pay tax penalties and income taxes on the money you
receive.
Minimum Distribution Program - You can arrange to have money sent to you each
month or quarter to meet certain required distribution requirements imposed by
the Internal Revenue Code generally after age 701/2.
These features are not available in all states and may not be suitable for your
particular situation.
11. INQUIRIES
If you have any questions about your Contract or need more information, please
contact us at:
Valuemark Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
(800) 624-0197
THE FRANKLINVALUEMARK CHARTER VARIABLE ANNUITY CONTRACT
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
This prospectus describes the Franklin Valuemark Charter Variable Annuity
Contract with a Fixed Account offered by Allianz Life Insurance Company of North
America (Allianz Life).
The annuity has 22 Variable Options, each of which invests in one of the
Portfolios of Franklin Valuemark Funds 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 VALUEMARK FUNDS:
PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
PORTFOLIOS SEEKING CURRENT INCOME
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
PORTFOLIOS SEEKING
GROWTH AND INCOME
Global Utilities Securities Fund
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Value Securities Fund
PORTFOLIOS SEEKING CAPITAL GROWTH
Capital Growth Fund
Global Health Care Securities Fund
Mutual Discovery Securities Fund
Natural Resources Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
Please read this prospectus before investing and keep it for future reference.
It contains important information about the Franklin Valuemark Charter 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 January 5, 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
19 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 Charter 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 these securities. You should
rely only on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
Dated: January 5, 1999
TABLE OF CONTENTS
Page
INDEX OF TERMS ................................... 3
FEE TABLE ........................................ 4
1. THE FRANKLIN VALUEMARK CHARTER
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 ........................... 11
4. INVESTMENT OPTIONS ........................... 11
Transfers .................................... 12
Dollar Cost Averaging Program ................ 12
Flexible Rebalancing ......................... 13
Financial Advisers -
Asset Allocation Programs ........................ 13
Voting Privileges ............................ 13
Substitution ................................. 13
5. EXPENSES ..................................... 13
Insurance Charges ............................ 13
Mortality and Expense Risk Charge ........... 13
Administrative Charge ....................... 14
Contract Maintenance Charge .................. 14
Transfer Fee ................................. 14
Premium Taxes ................................ 14
Income Taxes ................................. 14
Portfolio Expenses ........................... 14
6. TAXES ........................................ 14
Annuity Contracts in General ................. 15
Qualified and Non-Qualified Contracts ........ 15
Multiple Contracts ........................... 15
Surrenders - Non-Qualified Contracts ......... 15
Surrenders - Qualified Contracts ............. 15
Surrenders - Tax-Sheltered Annuities ......... 15
Diversification .............................. 16
7. ACCESS TO YOUR MONEY ......................... 16
Systematic Withdrawal Program ................ 16
Minimum Distribution Program ................. 16
Suspension of Payments or Transfers .......... 16
8. PERFORMANCE .................................. 17
9. DEATH BENEFIT ................................ 17
Upon Your Death .............................. 17
Death of Annuitant ........................... 18
10. OTHER INFORMATION ............................ 18
Allianz Life ................................. 18
Year 2000 .................................... 18
The Separate Account ......................... 18
Distribution ................................. 19
Administration ............................... 19
Financial Statements ......................... 19
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION ........................... 19
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 ................................ 11
Annuitant ........................................ 8
Annuity Options .................................. 9
Annuity Payments ................................. 9
Annuity Unit ..................................... 11
Beneficiary ...................................... 8
Contract ......................................... 8
Contract Owner ................................... 8
Fixed Account .................................... 8
Income Date ...................................... 9
Joint Owner ...................................... 8
Non-Qualified .................................... 15
Payout Phase ..................................... 8
Portfolios ....................................... 11
Purchase Payment ................................. 10
Qualified ........................................ 15
Tax Deferral ..................................... 15
Variable Option .................................. 8
FEE TABLE
- ----------------------------------------------------------------------------
The purpose of this Fee Table is to help you understand the costs of investing,
directly or indirectly, in the Contract. The Fee Table reflects expenses of the
Separate Account as well as the Portfolios.
Contract Owner Transaction Fees
Transfer Fee* ........................................... First 12 transfers in
a Contract year are free. Thereafter, the fee is $25 or 2% of the amount
transferred, if less. Dollar Cost Averaging transfers and Flexible Rebalancing
transfers are not counted.
Contract Maintenance Charge** ........................... $40 per Contract per
year
Separate Account Annual Expenses
(as a percentage of average account value)
Contracts with Contracts with
Traditional Enhanced
Death Benefit Death Benefit
--------------------------------
Mortality and Expense Risk Charge ....... 1.00% 1.20%
Administrative Charge ................... .15% .15%
----------- ---------
Total Separate Account Annual Expenses .. 1.15% 1.35%
*The Contract provides that if more than three transfers have been made in a
Contract year, Allianz Life reserves the right to deduct a transfer fee. Market
timing transfers may not be permitted.
**During the Accumulation Phase, the charge is waived if the value of your
Contract is at least $100,000. If you own more than one Franklin Valuemark
Charter Contract (registered with the same social security number), we will
determine the total value of all your Contracts. If the total value of all your
Contracts is at least $100,000, the charge is waived.
<TABLE>
<CAPTION>
Franklin Valuemark Funds' Annual Expenses: Class 2 Shares
(as a percentage of Franklin Valuemark Funds' average net assets)
The Management and Portfolio Administration Fees for each Portfolio are based on a percentage of that Portfolio's net assets.
Class 2 shares have a distribution plan which is referred to as a Rule 12b-1 plan. See the accompanying prospectus for Franklin
Valuemark Funds for a description of these fees and the Rule 12b-1 plan. While the maximum amount payable under each Portfolio's
Class 2 Rule 12b-1 plan is .35% per year of the Portfolio's average daily net assets, the Board of Trustees of Franklin Valuemark
Funds has set the current rate at .30% per year. Because Class 2 shares are new, the figures below (other than 12b-1 fees) are
estimates based on the historical expenses of each portfolio's Class 1 shares, except as noted. Future Portfolio expenses may
differ.
Management
and Portfolio Total Annual
Administration Fees112b-1 FeesOther Expenses Expenses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth Fund ............................................. .75% .30% .02% 1.07%
Global Health Care Securities Fund2 ............................. .75% .30% .22% 1.27%
Global Utilities Securities Fund ................................ .47% .30% .03% .80%
Growth and Income Fund .......................................... .47% .30% .02% .79%
High Income Fund ................................................ .50% .30% .03% .83%
Income Securities Fund .......................................... .47% .30% .03% .80%
Money Market Fund ............................................... .51% .30% .02% .83%
Mutual Discovery Securities Fund ................................ .95% .30% .11% 1.36%
Mutual Shares Securities Fund ................................... .75% .30% .05% 1.10%
Natural Resources Securities Fund ............................... .62% .30% .07% .99%
Real Estate Securities Fund ..................................... .51% .30% .03% .84%
Rising Dividends Fund ........................................... .72% .30% .02% 1.04%
Small Cap Fund .................................................. .75% .30% .02% 1.07%
Templeton Developing Markets Equity Fund ........................ 1.25% .30% .17% 1.72%
Templeton Global Asset Allocation Fund .......................... .80% .30% .14% 1.24%
Templeton Global Growth Fund .................................... .83% .30% .05% 1.18%
Templeton Global Income Securities Fund ......................... .56% .30% .06% .92%
Templeton International Equity Fund ............................. .80% .30% .09% 1.19%
Templeton International Smaller Companies Fund .................. 1.00% .30% .06% 1.36%
Templeton Pacific Growth Fund ................................... .92% .30% .11% 1.33%
U.S. Government Securities Fund ................................. .48% .30% .02% .80%
Value Securities Fund2 .......................................... .75% .30% .19% 1.24%
<FN>
1The Portfolio Administration Fee is a direct expense for the Global Health Care Securities Fund, the Mutual Discovery Securities
Fund, the Mutual Shares Securities Fund, the Templeton Global Asset Allocation Fund, the Templeton International Smaller Companies
Fund, and the Value Securities Fund; other Portfolios pay for similar services indirectly through the Management Fee. See the
accompanying Franklin Valuemark Funds prospectus for further information regarding these fees.
2The Global Health Care Securities Fund and the Value Securities Fund commenced operations May 1, 1998. The expenses shown above
for these Portfolios are therefore estimated for 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Examples o There are two sets of examples below. The examples in Chart 1 assume you have selected the traditional death benefit.
The examples in Chart 2 assume you have selected the enhanced death benefit. The examples below should not be considered a
representation of past or future expenses. Actual expenses may be greater or less than those shown.
o The $40 contract maintenance charge is included in the Examples as a prorated charge of $1. Since the average Contract size is
greater than $1,000, the contract maintenance charge is reduced accordingly.
o Premium taxes are not reflected in the tables. Premium taxes may apply.
o For additional information, see Section 5 - "Expenses" and the Franklin Valuemark Funds prospectus.
Chart 1 - Contracts with Traditional Death Benefit Option
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money regardless of whether you
surrender your Contract at the end of each time period:
Variable Option 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth ................................................................. $24 $72 $124 $265
Global Health Care Securities* ................................................. $26 $78 $134 $286
Global Utilities Securities .................................................... $21 $64 $110 $237
Growth and Income .............................................................. $21 $64 $110 $236
High Income .................................................................... $21 $65 $112 $241
Income Securities .............................................................. $21 $64 $110 $237
Money Market ................................................................... $21 $65 $112 $241
Mutual Discovery Securities .................................................... $26 $81 $139 $295
Mutual Shares Securities ....................................................... $24 $73 $125 $268
Natural Resources Securities ................................................... $23 $70 $120 $257
Real Estate Securities ......................................................... $21 $65 $112 $242
Rising Dividends ............................................................... $23 $72 $122 $262
Small Cap ...................................................................... $24 $72 $124 $265
Templeton Developing Markets Equity ............................................ $30 $92 $156 $329
Templeton Global Asset Allocation .............................................. $25 $78 $133 $283
Templeton Global Growth ........................................................ $25 $76 $130 $277
Templeton Global Income Securities ............................................. $22 $68 $116 $250
Templeton International Equity ................................................. $25 $76 $130 $278
Templeton International Smaller Companies ...................................... $26 $81 $139 $295
Templeton Pacific Growth ....................................................... $26 $80 $137 $292
U.S. Government Securities ..................................................... $21 $64 $110 $237
Value Securities* .............................................................. $25 $78 $133 $283
<FN>
*Estimated
</FN>
</TABLE>
<TABLE>
<CAPTION>
Chart 2 - Contracts with Enhanced Death Benefit Option
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money regardless of whether you
surrender your Contract at the end of each time period:
Variable Option 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth ................................................................. $26 $78 $134 $286
Global Health Care Securities* ................................................. $28 $84 $144 $305
Global Utilities Securities .................................................... $23 $70 $120 $258
Growth and Income .............................................................. $23 $70 $120 $257
High Income .................................................................... $23 $71 $122 $261
Income Securities .............................................................. $23 $70 $120 $258
Money Market ................................................................... $23 $71 $122 $261
Mutual Discovery Securities .................................................... $28 $87 $148 $314
Mutual Shares Securities ....................................................... $26 $79 $136 $289
Natural Resources Securities ................................................... $25 $76 $130 $278
Real Estate Securities ......................................................... $23 $72 $122 $262
Rising Dividends ............................................................... $25 $78 $133 $283
Small Cap ...................................................................... $26 $78 $134 $286
Templeton Developing Markets Equity ............................................ $32 $98 $166 $348
Templeton Global Asset Allocation .............................................. $27 $84 $143 $302
Templeton Global Growth ........................................................ $27 $82 $140 $297
Templeton Global Income Securities ............................................. $24 $74 $127 $271
Templeton International Equity ................................................. $27 $82 $140 $298
Templeton International Smaller Companies ...................................... $28 $87 $148 $314
Templeton Pacific Growth ....................................................... $28 $86 $147 $311
U.S. Government Securities ..................................................... $23 $70 $120 $258
Value Securities* .............................................................. $27 $84 $143 $302
<FN>
*Estimated
</FN>
</TABLE>
1. THE FRANKLIN VALUEMARK CHARTER VARIABLE 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 23 investment choices - the 22 Variable Options each of which invests
in one of the Portfolios of Franklin Valuemark Funds and the Fixed Account of
Allianz Life. The Contract is called a variable annuity because you can choose
among 22 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 Valuemark Funds. 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 you make within a
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 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 assumed investment rate (AIR) used in the annuity table for the Contract,
and
3) the performance of the Variable Option(s) you selected.
You can choose a 3%, 5% or 7% AIR. If the actual performance exceeds the 3%, 5%
or 7% AIR you selected, your Annuity Payments will increase. Similarly, if the
actual rate is less than 3%, 5% or 7% (you selected), your Annuity Payments will
decrease.
Annuity Options
You can choose one of the following Annuity Options or any other Annuity Option
you want and that Allianz Life agrees to provide. After Annuity Payments begin,
you cannot change the Annuity Option.
OPTION 1. LIFE ANNUITY. Under this option, we will make monthly Annuity Payments
so long as the Annuitant is alive. After the Annuitant dies, we stop making
Annuity Payments.
OPTION 2. LIFE ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under this
option, we will make monthly Annuity Payments so long as the Annuitant is alive.
However, if the Annuitant dies before the end of the selected guaranteed period,
we will continue to make Annuity Payments to you or any person you designate for
the rest of the guaranteed period. If you do not want to receive Annuity
Payments after the Annuitant's death, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
monthly Annuity Payments during the joint lifetime of the Annuitant and the
joint Annuitant. When the Annuitant dies, if the joint Annuitant is still alive,
we will continue to make Annuity Payments, so long as the joint Annuitant
continues to live. The amount of the Annuity Payments we will make to the
Contract Owner can be equal to 100%, 75% or 50% of the amount that was being
paid when both Annuitants were alive. The monthly Annuity Payments will end when
the last surviving Annuitant dies.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS
GUARANTEED. Under this option, we will make monthly Annuity Payments during the
joint lifetime of the Annuitant and the joint Annuitant. When the Annuitant
dies, if the joint Annuitant is still alive, we will continue to make Annuity
Payments, so long as the surviving Annuitant continues to live, at 100% of the
amount that was being paid when both were alive. If, when the last death occurs,
we have made Annuity Payments for less than the selected guaranteed period, we
will continue to make Annuity Payments to you or any person you designate for
the rest of the guaranteed period. If you do not want to receive Annuity
Payments after the Annuitant's death, you can ask us for a single lump sum.
OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make monthly Annuity
Payments during the Annuitant's lifetime. The last Annuity Payment will be made
before the Annuitant dies and if the value of the Annuity Payments is less than
the value annuitized, then the Contract Owner will receive a refund as set forth
in the Contract.
3. PURCHASE
- -------------------------------------------------------------------------------
Purchase Payments
A Purchase Payment is the money you invest in the Contract. The minimum payment
Allianz Life will accept is $25,000. The maximum amount we will accept without
our prior approval is $1 million. You can make additional Purchase Payments of
$250 or more (or as low as $100 if you have selected the Automatic Investment
Plan). Allianz Life may, at its sole discretion, waive the minimum payment
requirements. We reserve the right to decline any Purchase Payment. At the time
you buy the Contract, you and the Annuitant cannot be older than 85 years old.
This product is not designed for professional market timing organizations, other
entities, or persons using programmed, large or frequent transfers.
Automatic Investment Plan
The Automatic Investment Plan (AIP) is a program which allows you to make
additional Purchase Payments to your Contract on a monthly or quarterly basis by
electronic transfer of monies from your savings or checking account. You may
participate in this program by completing the appropriate form. We must receive
your form by the first of the month in order for AIP to begin that same month.
Investments will take place on the 20th of the month, or the next business day.
The minimum investment that can be made by AIP is $100. You may stop AIP at any
time you want. We need to be notified by the first of the month in order to stop
or change AIP that month. If AIP is used for a Qualified Contract, you should
consult your tax adviser for advice regarding maximum contributions.
Allocation of Purchase Payments
When you purchase a Contract, we will allocate your Purchase Payment to the
Fixed 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 up to 10 investment choices
at any one time (which includes any of the 22 Variable Options which invest in
the Portfolios of Franklin Valuemark Funds 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, the necessary information and federal
funds (federal funds means monies credited to a bank's account with its regional
federal reserve bank), we will issue your Contract and allocate your first
Purchase Payment within 2 business days. If you do not give us all of the
information we need, we will contact you or your registered representative to
get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you make additional
Purchase Payments, we will credit these amounts to your Contract within one
business day. Our business day closes when the New York Stock Exchange closes,
which is usually at 4:00 p.m. Eastern time.
Free Look
If you change your mind about owning the Contract, you can cancel it within 10
days after receiving it (or the period required in your state). You will receive
back whatever your Contract is worth on the day we receive your request. In
certain states, or if you have purchased the Contract as an IRA, we may be
required to give you back your Purchase Payment if you decide to cancel your
Contract within 10 days after receiving it (or whatever period is required in
your state). If that is the case, we reserve the right to allocate your initial
Purchase Payment in the Money Market Fund for 15 days after we receive your
first Purchase Payment. (In some states, the period may be longer.) At the end
of that period, we will re-allocate your money as you selected. Currently,
however, we will directly allocate your money to the 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 Options 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 credited 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 2 shares of 22
Portfolios of 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 VALUEMARK FUNDS PROSPECTUS (WHICH IS ATTACHED TO
THIS PROSPECTUS) CAREFULLY BEFORE INVESTING.
Franklin Valuemark Funds (Trust) is the mutual fund underlying your Contract.
Each Portfolio has its own investment objective. The Trust issues two classes of
shares which are described in the accompanying Trust prospectus. Only Class 2
shares are available in connection with the Franklin Valuemark Charter Variable
Annuity Contract. Class 2 shares have Rule 12b-1 Plan expenses. Investment
managers for each Portfolio are listed in the table below and are as follows:
Franklin Advisers, Inc. (FA), Franklin Advisory Services, Inc. (FAS), Franklin
Mutual Advisers, Inc. (FMA), Templeton Asset Management Ltd. (TAM), Templeton
Global Advisors Limited (TGA), and Templeton Investment Counsel, Inc. (TIC).
Certain managers have retained one or more affiliated subadvisers to help them
manage the Portfolios.
The following is a list of the Portfolios available under the Contract:
<TABLE>
<CAPTION>
Investment
Available Portfolios Managers
- -------------------------------------------------------------------------------
<S> <C>
Portfolio Seeking Stability
of Principal and Income
Money Market Fund ........................... FA
Portfolios Seeking
Current Income
High Income Fund ............................ FA
Templeton Global Income Securities Fund ..... FA
U.S. Government Securities Fund ............. FA
Portfolios Seeking
Growth and Income
Global Utilities Securities Fund ............ FA
Growth and Income Fund ...................... FA
Income Securities Fund ...................... FA
Mutual Shares Securities Fund ............... FMA
Real Estate Securities Fund ................. FA
Rising Dividends Fund ....................... FAS
Templeton Global Asset Allocation Fund ...... TGA
Value Securities Fund ....................... FAS
Portfolios Seeking
Capital Growth
Capital Growth Fund ......................... FA
Global Health Care Securities Fund .......... FA
Mutual Discovery Securities Fund ............ FMA
Natural Resources Securities Fund ........... FA
Small Cap Fund .............................. FA
Templeton Developing Markets
Equity Fund ................................ TAM
Templeton Global Growth Fund ................ TGA
Templeton International Equity Fund ......... FA
Templeton International Smaller
Companies Fund ............................. TIC
Templeton Pacific Growth Fund ............... FA
- -------------------------------------------------------------------------------
</TABLE>
Franklin Valuemark Funds serves as the underlying mutual fund for variable life
insurance policies offered by Allianz Life and other variable annuity contracts
offered by Allianz Life and its affiliates. Franklin Valuemark Funds does not
believe that offering its shares in this manner will be disadvantageous to you.
Transfers
You can transfer money among the 22 Variable Options and/or the Fixed Account.
Allianz Life currently allows you to make as many transfers as you want to each
year. Allianz Life may change this practice in the future. However, this product
is not designed for professional market timing organizations or other persons
using programmed, large, or frequent transfers. Such activity may be disruptive
to a Portfolio. We reserve the right to reject any specific Purchase Payment
allocation or transfer request from any person, if in the Portfolio managers'
judgment, a Portfolio would be unable to invest effectively in accordance with
its investment objectives and policies, or would otherwise potentially be
adversely affected.
Your Contract provides that you can make 3 transfers every year without charge.
However, currently Allianz Life permits you to make 12 transfers every year
without charge. We measure a year from the anniversary of the day we issued your
Contract. You can make a transfer to or from the Fixed Account and to or from
any Variable Option. If you make more than 12 transfers in a year, there is a
transfer fee deducted. The fee is $25 per transfer or, if less, 2% of the amount
transferred. The following applies to any transfer:
1. The minimum amount which you can transfer is $1,000 or your entire value in
the Variable Option 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 Allianz Life is instructed otherwise, Allianz Life will
accept instructions from either one of you. Allianz Life will use reasonable
procedures to confirm that instructions given to us by telephone are genuine. If
we do not use such procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions. Allianz Life tape records all telephone
instructions.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount of money each month or quarter from any one 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.
Dollar Cost Averaging requires a $3,000 minimum investment and participation for
at least six months (or two quarters). All Dollar Cost Averaging transfers will
be made on the 10th day of the month unless that day is not a business day. If
it is not, then the transfer will be made the next business day. You may elect
this 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 Fixed Account to make the transfer (if less money
is available, that amount will be transferred under the program and the program
will end); (3) you request to terminate the program (your request must be
received by us by the first of the month to terminate that month); or (4) the
Contract is terminated.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
You may not participate in the Dollar Cost Averaging Program and Flexible
Rebalancing at the same time.
Flexible Rebalancing
Once your money has been invested, the performance of the Portfolios may cause
your chosen allocation to shift. Flexible Rebalancing is designed to help you
maintain your specified allocation mix among the different 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.
Financial Advisers -
Asset Allocation Programs
Allianz Life understands the importance of advice from a financial adviser
regarding your investments in the Contract (asset allocation program). Certain
investment advisers have made arrangements with us to make their services
available to you. Allianz Life has not made any independent investigation of
these advisers and is not endorsing such programs. You may be required to enter
into an advisory agreement with your investment adviser to have the fees paid
out of your Contract during the Accumulation Phase.
Allianz Life will, pursuant to an agreement with you, make a partial withdrawal
from the value of your Contract to pay for the services of the investment
adviser. If the Contract is Non-Qualified, the withdrawal will be treated like
any other distribution and may be included in gross income for federal tax
purposes and, if you are under age 591/2, may be subject to a tax penalty. If
the Contract is Qualified, the withdrawal for the payment of fees may not be
treated as a taxable distribution if certain conditions are met. You should
consult a tax adviser regarding the tax treatment of the payment of investment
adviser fees from your Contract.
Voting Privileges
Allianz Life is the legal owner of the Trust's Class 2 Portfolio shares.
However, when a Portfolio solicits proxies in conjunction with a shareholder
vote 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.
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. The amount of the Mortality and Expense Risk
Charge for your Contract depends upon the death benefit option you select when
you buy the Contract. If you choose the traditional death benefit option, this
charge is equal, on an annual basis, to 1.00% of the average daily value of the
Contract invested in a Variable Option, after the deduction of expenses. If you
choose the enhanced death benefit option, this charge is equal, on an annual
basis, to 1.20% of the average daily value of the Contract invested in a
Variable Option, after the deduction of expenses. This charge compensates us for
all the insurance benefits provided by your Contract (for example, the guarantee
of annuity rates, the death benefits, certain expenses related to the Contract,
and for assuming the risk (expense risk) that the current charges will be
insufficient in the future to cover the cost of administering the Contract).
Administrative Charge. This charge is equal, on an annual basis, to .15% of the
average daily value of the Contract invested in a 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 reports and statements, maintenance of
contract records, personnel costs, legal and accounting fees, filing fees, and
computer and systems costs.
Contract Maintenance Charge
Every year on the anniversary of the date when your Contract was issued, Allianz
Life deducts $40 from your Contract as a contract maintenance charge. (In South
Carolina, if your Contract is in force on the 20th Contract anniversary, we will
waive the contract maintenance charge that is to be deducted after the 20th
Contract anniversary). This charge is for administrative expenses (see above).
This charge can not be increased.
However, during the Accumulation Phase, if the value of your Contract is at
least $100,000 when the deduction for the charge is to be made, Allianz Life
will not deduct this charge. If you own more than one Franklin Valuemark Charter
Contract, Allianz Life will determine the total value of all your Franklin
Valuemark Charter Contracts. If the total value of all Franklin Valuemark
Charter Contracts registered under the same social security number is at least
$100,000, Allianz Life will not assess the contract maintenance charge. If the
Contract is owned by a non-natural person (e.g., a corporation), Allianz Life
will look to the Annuitant to determine if it will assess the charge.
If you make a complete surrender from your Contract, the contract maintenance
charge will also be deducted. During the Payout Phase, the charge will be
collected monthly out of each Annuity Payment.
Transfer Fee
You can make 12 free transfers every year. We measure a year from the day we
issue your Contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred, whichever is less,
for each additional transfer. If the transfer is part of the Dollar Cost
Averaging Program or Flexible Rebalancing, it will not count in determining the
transfer fee.
Premium Taxes
Some states and other governmental entities (e.g.,
municipalities) charge premium taxes or similar taxes. Allianz Life is
responsible for the payment of these taxes and will make a deduction from the
value of the Contract for them. Some of these taxes are due when the Contract is
issued, others are due when Annuity Payments begin. It is Allianz Life's current
practice to not charge you for these taxes until you die, Annuity Payments begin
or a complete surrender is made. Allianz Life may some time in the future
discontinue this practice and assess the charge when the tax is due. Premium
taxes generally range from 0% to 3.5% of the Purchase Payment, depending on the
state.
Income Taxes
Allianz Life reserves the right to deduct from the Contract for any income taxes
which it may incur because of the Contract. Currently, Allianz Life is not
making any such deductions.
Portfolio Expenses
There are deductions from the assets of the various Portfolios for operating
expenses (including management fees), which are described in the Fee Table in
this prospectus and the accompanying prospectus for Franklin Valuemark Funds.
6. TAXES
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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 surrender or as Annuity
Payments. When you make a surrender you are taxed on the amount of the surrender
that is earnings. For Annuity Payments, different rules apply. A portion of each
Annuity Payment you receive will be treated as a partial return of your Purchase
Payments and will not be taxed. The remaining portion of the Annuity Payment
will be treated as ordinary income. How the Annuity Payment is divided between
taxable and non-taxable portions depends upon the period over which the Annuity
Payments are expected to be made. Annuity Payments received after you have
received all of your Purchase Payments are fully includible in income.
When a Non-Qualified Contract is owned by a non-natural person (e.g., a
corporation or certain other entities other than 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.
Surrenders - Non-Qualified Contracts
If you make a surrender from your Contract, the Code treats such a surrender as
first coming from earnings and then from your Purchase Payments. In most cases,
such surrendered earnings are includible in income. The Code also provides that
any amount received under an annuity contract which is included in income may be
subject to a tax penalty. The amount of the penalty is equal to 10% of the
amount that is includible in income. Some surrenders will be exempt from the
penalty. They include any amounts: (1) paid on or after the taxpayer reaches age
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.
Surrenders - Qualified Contracts
The above information describing the taxation of Non-Qualified Contracts does
not apply to Qualified Contracts. There are special rules that govern Qualified
Contracts. A more complete discussion of surrenders from Qualified Contracts is
contained in the Statement of Additional Information.
Surrenders - Tax-Sheltered Annuities
The Code limits the surrender of Purchase Payments made by Contract Owners from
certain Tax-Sheltered Annuities. Surrenders can only be made when a Contract
Owner: (1) reaches age 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 surrender the
Purchase Payments and not any earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Allianz Life believes that the Portfolios are being managed so
as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Allianz Life,
would be considered the owner of the shares of the Portfolios. If 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 surrender (either a partial or a total surrender);
(2) by receiving Annuity Payments; or
(3) when a death benefit is paid to your Beneficiary.
Surrenders can only be made during the Accumulation Phase.
When you make a complete surrender you will receive the value of the Contract on
the day you made the surrender less any premium tax and less any contract
maintenance charge. (See Section 5 - "Expenses" for a discussion of the
charges.)
Any partial surrender must be for at least $500 and, unless you instruct Allianz
Life otherwise, will be made pro-rata from all the Variable Options and the
Fixed Account you selected. Allianz Life requires that after you make a partial
surrender the value of your Contract must be at least $5,000.
We will pay the amount of any surrender 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 SURRENDER
YOU MAKE.
There are limits to the amount you can surrender from a Qualified plan referred
to as a 403(b) plan. For a more complete explanation see Section 6 - "Taxes" and
the discussion in the SAI.
Systematic Withdrawal Program
Allianz Life offers a program which provides automatic monthly or quarterly
payments to you each year. All systematic withdrawals will be made on the 9th
day of the month unless that day is not a business day. If it is not, then the
surrender will be made the previous business day.
INCOME TAXES, 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.
Suspension of Payments or Transfers
Allianz Life may be required to suspend or postpone payments for surrenders or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of the Portfolio shares is
not reasonably practicable or Allianz Life cannot reasonably value the Portfolio
shares;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Contract Owners.
Allianz Life has reserved the right to defer payment for a surrender or transfer
from the Fixed 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. It may not
reflect the deduction of any applicable contract maintenance charge. The
deduction of any applicable contract maintenance charge would reduce the
percentage increase or make greater any percentage decrease. Any advertisement
will also include average annual total return figures which reflect the
deduction of the insurance charges, contract maintenance charge and the expenses
of the Portfolios. Allianz Life may also advertise cumulative total return
information. Cumulative total return is determined the same way except that the
results are not annualized. Performance information for the underlying
Portfolios may also be advertised; see the Franklin Valuemark Funds prospectus
for more information.
Certain Portfolios have been in existence for some time and have investment
performance history. However, the Contracts are new. In order to demonstrate how
the historical investment experience of the Portfolios may affect your
Accumulation Unit values, Allianz Life has prepared performance information
which can be found in the SAI. There is performance shown which is based on the
historical performance of the Portfolios' Class 1 shares, modified to reflect
the current charges and expenses of your Contract as if the Contract had been in
existence for the time periods shown. Class 2 shares are new and currently have
Rule 12b-1 plan expenses of .30% per year which will affect future performance.
The information is based upon the historical experience of the Portfolios' Class
1 shares and does not represent past performance or predict future performance.
Allianz Life may in the future also advertise yield information. If it does, it
will provide you with information regarding how yield is calculated. More
detailed information regarding how performance is calculated is found in the
SAI. Any performance advertised will be based on historical data and does not
guarantee future results of the Portfolios.
9. DEATH BENEFIT
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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.
The amount of the death benefit depends upon which death benefit option you
select. You must choose a death benefit option (traditional death benefit or
enhanced death benefit) when you purchase the Contract. Once selected, you
cannot change the death benefit option. The Mortality and Expense Risk Charge
for Contracts with the enhanced death benefit option is higher than for
Contracts with the traditional death benefit option.
If you select the traditional death benefit option, the amount of the death
benefit will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) any payments you have made, less any surrenders and applicable premium
taxes.
If you select the enhanced death benefit option, the amount of the death benefit
will be the greater of:
(1) the value of your Contract, less any applicable premium taxes; or
(2) the guaranteed minimum death benefit less any applicable premium taxes.
The guaranteed minimum death benefit is the greater of:
(a) the sum of all payments you have made, less any surrenders; or
(b) the greatest value of your Contract Anniversaries prior to your 86th
birthday (your Contract Anniversaries equal the value of your Contract on a
Contract anniversary, increased by the amount of any payments you have made
since that anniversary, less the amount of any surrenders you have made since
that anniversary).
If you have a Joint Owner, the age of the oldest Contract Owner will be used to
determine the guaranteed minimum death benefit. The guaranteed minimum death
benefit will be reduced by any amounts surrendered after the date of death. If
the Contract is owned by a non-natural person, then all references to you mean
the Annuitant.
The death benefits described above may not be available in your state. In
addition, only one of the options may be approved in your state. If neither
death benefit is available, the death benefit will be equal to the value of your
Contract (less any premium taxes) on the close of the business day that Allianz
Life receives proof of the death and payment instructions.
In the case of Joint Owners, if a Joint Owner dies, the surviving Joint Owner
will be considered the Beneficiary. Joint Owners must be spouses (except in
Pennsylvania, Oregon and New Jersey).
A Beneficiary may request that the death benefit be paid in one of the following
ways: (1) payment of the entire death benefit within 5 years of the date of
death; or (2) payment of the death benefit under an Annuity Option. The death
benefit payable under an Annuity Option must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payment must begin within one year of the date of death. If the Beneficiary is
the spouse of the Contract Owner, he/she can choose to continue the Contract in
his/her own name at the then current value, or if greater, the death benefit
value. If a lump sum payment is elected and all the necessary requirements,
including any required tax consent from some states, are met, the payment will
be made within 7 days. Payment of the death benefit may be delayed pending
receipt of any applicable tax consents and/or forms from a state.
If you (or any Joint Owner) die during the Payout Phase and you are not the
Annuitant, any payments which are remaining under the Annuity Option selected
will continue at least as rapidly as they were being paid at your death. If you
die during the Payout Phase, the Beneficiary becomes the Contract Owner.
Death of Annuitant
If the Annuitant, who is not a Contract Owner or Joint Owner, dies during the
Accumulation Phase, you can name a new Annuitant. If a new Annuitant is not
named within 30 days of the death of the Annuitant, you will become the
Annuitant. However, if the Contract Owner is a non-natural person (e.g., a
corporation), then the death of the Annuitant will be treated as the death of
the Contract Owner, and a new Annuitant may not be named.
If the Annuitant dies after Annuity Payments have begun, the remaining amounts
payable, if any, will be as provided for in the Annuity Option selected. The
remaining amounts payable will be paid to the Contract Owner at least as rapidly
as they were being paid at the Annuitant's death.
10. OTHER INFORMATION
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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; the total amounts to be expensed
over the next two years are not expected to have a significant effect on Allianz
Life's financial position or results of operations. Allianz Life believes it has
taken steps that are reasonably designed to address the potential failure of
computer systems used by its service providers and to ensure its year 2000
program is completed on a timely basis.
The Separate Account
Allianz Life established a separate account, Allianz Life Variable Account B
(Separate Account), to hold the assets that underlie the Contracts, except
assets allocated to the Fixed 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 2.00% of Purchase Payments and
quarterly trail commissions at an annual rate of 1% beginning 13 months after
the Contract is issued. In addition, Allianz Life and Franklin Advisers, Inc.
and/or their affiliates may pay certain sellers for other services not directly
related to the sale of the Contracts (such as special marketing support
allowances). Commissions may be recovered from a broker-dealer if a surrender
occurs within 12 months of a Purchase Payment.
Administration
Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300
Berwyn Park, Berwyn, Pennsylvania, to perform certain administrative services
regarding the Contracts. The administrative services include issuance of the
Contracts and maintenance of Contract Owner's records.
Financial statements
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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Insurance Company.................................
Experts ..........................................
Legal Opinions ...................................
Distributor ......................................
Calculation of Performance Data ..................
Federal Tax Status ...............................
Annuity Provisions................................
Mortality and Expense Risk Guarantee .............
Financial Statements .............................
