THE VARIABLE ANNUITY CONTRACT
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
This prospectus describes the bonus variable annuity contract with a Fixed
Account offered by Allianz Life Insurance Company of North America (Allianz
Life).
The annuity has 37 Sub-Accounts, each of which invests in one of the Portfolios
listed below, and a Fixed Account of Allianz Life. You can select up to 10
Investment Options (which includes any of the Sub-Accounts and the Fixed
Account). The Fixed Account may not be available in your state.
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
DAVIS VARIABLE ACCOUNT FUND, INC.:
Davis VA Financial Portfolio
Davis VA Real Estate Portfolio
Davis VA Value Portfolio
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST#:
Franklin Growth and Income Securities Fund*
Franklin Rising Dividends Securities Fund
Franklin Small Cap Fund
Franklin U.S. Government Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Templeton Developing Markets Securities Fund*
Templeton Growth Securities Fund*
Templeton Pacific Growth Securities Fund*
#Effective May 1, 2000, the funds of Templeton Variable Products Series Fund
were merged into similar funds of Franklin Templeton Variable Insurance Products
Trust.
JP MORGAN SERIES TRUST II:
J.P. Morgan International Opportunities Portfolio
J.P. Morgan U.S. Disciplined Equity Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Global Securities Fund/VA
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
PIMCO VARIABLE INSURANCE TRUST:
PIMCO VIT High Yield Bond Portfolio
PIMCO VIT StocksPLUS Growth and Income Portfolio
PIMCO VIT Total Return Bond Portfolio
SELIGMAN PORTFOLIOS, INC.:
Seligman Global Technology Portfolio*
Seligman Small-Cap Value Portfolio
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund
USAllianz VIP Fixed Income Fund
USAllianz VIP Global Opportunities Fund
USAllianz VIP Growth Fund
USAllianz VIP Money Market Fund
VAN KAMPEN LIFE INVESTMENT TRUST:
Van Kampen LIT Enterprise Portfolio
Van Kampen LIT Growth and Income Portfolio
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.
<PAGE>
Expenses for a bonus Contract may be higher than expenses for a Contract without
a bonus. The amount of the bonus credit may be more than offset by any
additional fees and/or charges associated with the bonus.
Please read this prospectus before investing and keep it for future reference.
It contains important information about the variable annuity contract with a
Fixed Account.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated May 1, 2000. 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 33 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) 542-5427 or write us at: 1750 Hennepin Avenue, Minneapolis,
Minnesota 55403-2195.
THE 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
This prospectus is not an offering of the securities in any state, country, or
jurisdiction in which we are not authorized to sell the Contracts. You should
rely only on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
Dated: May 1, 2000, as amended August 11, 2000.
<PAGE>
3
TABLE OF CONTENTS
Index of Terms 4
Summary 5
Fee Table 7
1.The Variable Annuity Contract 15
Ownership 15
Contract Owner 15
Joint Owner 15
Annuitant 15
Beneficiary 15
Assignment 16
2. Annuity Payments (The Payout Phase) 16
Income Date 16
Annuity Payments 16
Annuity Options 16
3. Purchase 18
Purchase Payments 18
Bonus 18
Automatic Investment Plan 19
Allocation of Purchase Payments 19
Free Look 19
Rewards Value and Contract Value 19
Accumulation Units 19
4. Investment Options 20
Transfers 22
Telephone Transfers 22
Dollar Cost Averaging Program 22
Flexible Rebalancing 23
Financial Advisers -
Asset Allocation Programs 23
Voting Privileges 23
Substitution 23
5. Expenses 23
Insurance Charges 23
Mortality and Expense Risk Charge 24
Administrative Charge 24
Distribution Expense Charge 24
Contract Maintenance Charge 24
Contingent Deferred Sales Charge 24
Partial Surrender Privilege 25
Waiver of Contingent Deferred
Sales Charge Benefits 25
Reduction or Elimination of the
Contingent Deferred Sales Charge 25
Commutation Fee 25
Transfer Fee 26
Premium Taxes 26
Income Taxes 26
Portfolio Expenses 26
6. Taxes 26
Annuity Contracts in General 26
Qualified and Non-Qualified Contracts 27
Multiple Contracts 27
Surrenders-- Non-Qualified Contracts 27
Surrenders-- Qualified Contracts 27
Surrenders-- Tax-Sheltered Annuities 28
Diversification 28
7. Access to Your Money 28
Systematic Withdrawal Program 29
Minimum Distribution Program 29
Suspension of Payments or Transfers 30
8. Performance 30
9. Death Benefit 30
Upon Your Death 30
Death Benefit Amount During the
Accumulation Phase 30
Death of Annuitant 32
10. Other Information 32
Allianz Life 32
The Separate Account 32
Distribution 32
Administration 33
Financial Statements 33
Table of Contents of the Statement of
Additional Information 33
<PAGE>
INDEX OF TERMS
----------------------------------------------------------------------------
This prospectus is written in plain English to make it as understandable as
possible. However, there are some technical words or 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 15
Accumulation Unit 19
Annuitant 15
Annuity Options 16
Annuity Payments 16
Annuity Unit 20
Beneficiary 15
Contract 15
Contract Owner 15
Contract Value 19
Fixed Account 15
Page
Income Date 16
Investment Option 20
Joint Owner 15
Non-Qualified 27
Payout Phase 15
Portfolio 20
Purchase Payment 18
Qualified 27
Rewards Value 19
Sub-Account 20
Tax Deferral 15
Underlying Mutual Fund 20
<PAGE>
5
SUMMARY
--------------------------------------------------------------------------------
The sections in this summary correspond to sections in this prospectus which
discuss the topics in more detail.
THE VARIABLE ANNUITY CONTRACT: The annuity contract offered by Allianz Life
provides a means for investing on a tax-deferred basis in the Investment Options
which consist of 37 Sub-Accounts and the Allianz Life Fixed Account. The
Contract is intended for retirement savings or other long-term investment
purposes.
ANNUITY PAYMENTS: If you want to receive regular income from your annuity, you
can choose an Annuity Option. Under most Annuity Options, you can choose whether
to have payments come from our general account, the available Sub-Accounts or
both. If you choose to have any part of your payments come from the
Sub-Accounts, the dollar amount of your payments may go up or down based on the
performance of the Portfolios the Sub-Accounts invest in.
PURCHASE: You can buy the Contract with $15,000 or more. You can add $250 or
more (or $100 if you select our automatic
investment plan) any time you like during the Accumulation Phase.
BONUS: For all Purchase Payments you make prior to your 81st birthday, Allianz
Life will credit your Contract with a bonus at the time of contribution to the
Contract. The amount of the bonus will be based on the total amount of Purchase
Payments you have made at the time of the contribution, less any surrenders you
have made (and assessed contingent deferred sales charges). Bonus amounts are
available for surrender, annuitization or payment of a death benefit only when
the bonus becomes vested (which varies depending upon how long Allianz Life has
had your Purchase Payment).
Contract charges are deducted from the total value of your Contract. Therefore,
when we credit your Contract with a bonus, your Contract incurs expenses on the
total Rewards Value, which includes the vested and unvested portions of the
bonus. When you cancel your Contract during the Free Look period, or if you make
a surrender, annuitize or when a death benefit is payable in the first 3 years
from any Purchase Payment date, you will forfeit all or some of your bonus.
Since charges will have been assessed against the higher amount (Purchase
Payment plus bonus), it is possible that upon surrender, particularly in a
declining market, you will receive less money back than you would have if you
had not received the bonus or not purchased a bonus Contract. You may alleviate
this risk by allocating the bonus amounts to the USAllianz VIP Money Market
Fund. We expect to profit from certain charges assessed under the Contract
(i.e., the contingent deferred sales charge and the mortality and expense risk
charge) associated with the bonus.
INVESTMENT OPTIONS: You can put your money in the Sub-Accounts and/or you can
invest in the Allianz Life Fixed Account (together, these are the "Investment
Options"). Each Sub-Account invests in an underlying Portfolio. The investment
returns on the Portfolios are not guaranteed. You can lose money. You can make
transfers between Investment Options.
EXPENSES: The contract has insurance features and investment features, and
there are costs related to each.
Each year, Allianz Life deducts a $40 contract maintenance charge from your
Contract. Allianz Life currently waives this charge if the Rewards Value of your
Contract is at least $75,000.
Allianz Life deducts a mortality and expense risk charge which varies depending
upon whether you select the traditional death benefit or the enhanced death
benefit. The charge is equal, on an annual basis, to 1.50% of the average daily
value of the Contract invested in a Sub-Account if you select the traditional
death benefit and 1.70% of the average daily value of the Contract invested in a
Sub-Account if you select the enhanced death benefit. Allianz Life also deducts
an administrative charge which is equal, on an annual basis, to 0.15% of the
value of the Contract invested in a Sub-Account.
There are also daily investment charges which range, on an annual basis, from
0.60% to 1.81% of the average daily value of the Portfolio, depending upon the
Portfolio.
You can make 12 free transfers each year. After that, Allianz Life deducts a $25
transfer fee for each additional transfer.
If you take money out of the Contract, Allianz Life may assess a contingent
deferred sales charge against each Purchase Payment withdrawn. The contingent
deferred sales charge starts at 8.5% in the first year and declines to 0% after
10 complete years.
ACCESS TO YOUR MONEY: You can take money out of your Contract during the
Accumulation Phase. Surrenders during the Accumulation Phase may be subject to a
contingent deferred sales charge. You may also have to pay income tax and a tax
penalty on any money you take out. Under certain circumstances, you can also
take money out during the Payout Phase if you select Annuity Option 2, 4 or 6.
Money you take out during the Payout Phase under Annuity Option 2 or 4 is
subject to a commutation fee.
<PAGE>
6
TAXES: Your earnings are not taxed until you take them out. If you take money
out during the Accumulation Phase, for tax purposes earnings come out first and
are taxed as income. If you are younger than 591/2 when you take money out, you
may be subject to a 10% federal tax penalty on the earnings withdrawn.
DEATH BENEFIT: If you die before moving to the Payout Phase, the person you have
chosen as a Beneficiary will receive a death benefit. The amount of the death
benefit depends on whether you select the traditional death benefit or the
enhanced death benefit.
FREE-LOOK: You can cancel the contract within 10 days after receiving it (or
whatever period is required in your state). Allianz Life will refund the
Contract Value on the day it receives your request to cancel the Contract. This
may be more or less than your original payment. In certain states, or if you
have purchased the Contract as an individual retirement annuity, Allianz Life
will refund the Purchase Payment.
INQUIRIES: If you have any questions about your Contract or need more
information, please contact us at:
USAllianz Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-003
<PAGE>
7
FEE TABLE
The purpose of this Fee Table is to help you understand the costs of investing,
directly or indirectly, in the Contract. It reflects expenses of the Separate
Account as well as the Portfolios.
CONTRACT OWNER TRANSACTION FEES
Contingent Deferred Sales Charge*
(as a percentage of purchase payments)
NUMBER OF COMPLETE CONTRACT YEARS
SINCE RECEIPT OF PURCHASE PAYMENT CHARGE
--------------------------------- ------
0-1 8.5%
1-2 8.5%
2-3 8.5%
3-4 8.5%
4-5 8.0%
5-6 7.0%
6-7 6.0%
7-8 5.0%
8-9 4.0%
9-10 3.0%
10 or more 0.0%
Commutation Fee (as a percentage of amount liquidated under Annuity Option 2
or 4)
YEARS SINCE
INCOME DATE CHARGE
----------- ------
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
over 6 1%
Transfer Fee First 12 transfers in a Contract year are currently free.
Thereafter, the fee is $25. Dollar Cost Averaging transfers and
Flexible Rebalancing transfers are not currently counted.
CONTRACT MAINTENANCE CHARGE** $40 per Contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily account value)
TRADITIONAL ENHANCED
DEATH BENEFIT DEATH BENEFIT
Mortality and Expense Risk Charge 1.50% 1.70%
Administrative Charge .15% .15%
Distribution Expense Charge*** 0% 0%
------ ------
Total Separate Account 1.65% 1.85%
Annual Expenses
* Each year, on a non-cumulative basis (less any previous surrenders you make in
the current Contract year which are not subject to a contingent deferred sales
charge), you may make partial surrenders of up to a total of 10% of Purchase
Payments and no contingent deferred sales charge will be assessed. See "Access
to Your Money" for additional options.
** The charge is waived if the Rewards Value of your Contract is at least
$75,000. If you own more than one Contract offered under this Prospectus
(registered with the same social security number), we will determine the total
Rewards Value of all your Contracts. If the total Rewards Value of all your
Contracts is at least $75,000, the charge is waived on all your Contracts.
*** The maximum Distribution Expense Charge is .30%. The current Distribution
Expense Charge is 0%.
<PAGE>
8
<TABLE>
<CAPTION>
1999 ANNUAL FUND EXPENSES
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(as a percentage of a Portfolio's average daily net assets for the most recent
fiscal year). See the accompanying fund prospectuses for more information.
TOTAL FUND
OTHER EXPENSES EXPENSES
(AFTER WAIVERS/ (AFTER WAIVERS/
REIMBURSEMENTS, REIMBURSEMENTS,
MANAGEMENT 12B-1 IF ANY, AS IF ANY, AS
PORTFOLIO FEES FEES NOTED) NOTED)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund .62% - .11% .73%
AIM V.I. Growth Fund .63% - .10% .73%
AIM V.I. International Equity Fund .75% - .22% .97%
AIM V.I. Value Fund .61% - .15% .76%
Alger American Growth Portfolio .75% - .04% .79%
Alger American Leveraged AllCap Portfolio1 .85% - .08% .93%
Alger American MidCap Growth Portfolio .80% - .05% .85%
Alger American Small Capitalization Portfolio .85% - .05% .90%
Davis VA Financial Portfolio2 .75% - .25% 1.00%
Davis VA Real Estate Portfolio2 .75% - .25% 1.00%
Davis VA Value Portfolio2 .75% - .25% 1.00%
Franklin Growth and Income Securities Fund, Class 23.47% .25% .02% .74%
Franklin Rising Dividends Securities Fund, Class 23 .73% .25% .02% 1.00%
Franklin Small Cap Fund, Class 23/4/5 .55% .25% .27% 1.07%
Franklin U.S. Government Fund, Class 23 .49% .25% .02% .76%
J.P. Morgan International Opportunities Portfolio6 .60% - .60% 1.20%
J.P. Morgan U.S. Disciplined Equity Portfolio6 .35% - .50% .85%
Mutual Discovery Securities Fund, Class 23/5 .80% .25% .21% 1.26%
Mutual Shares Securities Fund, Class 23/5/7 .60% .25% .19% 1.04%
Oppenheimer Global Securities Fund/VA .67% - .02% .69%
Oppenheimer High Income Fund/VA .74% - .01% .75%
Oppenheimer Main Street Growth & Income Fund/VA .73% - .05% .78%
PIMCO VIT High Yield Bond Portfolio8 .25% - .50% .75%
PIMCO VIT StocksPLUS Growth and Income Portfolio8 .40% - .25% .65%
PIMCO VIT Total Return Bond Portfolio8 .25% - .40% .65%
Seligman Global Technology Portfolio9 1.00% - .40% 1.40%
Seligman Small-Cap Value Portfolio9 1.00% - .00% 1.00%
Templeton Developing Markets Securities Fund,
Class 23/5/10 1.25% .25% .31% 1.81%
Templeton Growth Securities Fund, Class 23/11 .83% .25% .05% 1.13%
Templeton Pacific Growth Securities Fund, Class 23 1.00% .25% .08% 1.33%
USAllianz VIP Diversified Assets Fund12 .55% .25% .20% 1.00%
USAllianz VIP Fixed Income Fund12 .50% .25% .00% .75%
USAllianz VIP Global Opportunities Fund12 95% .25% .31% 1.51%
USAllianz VIP Growth Fund12 .65% .25% .00% .90%
USAllianz VIP Money Market Fund12 .35% .25% .30% .90%
Van Kampen LIT Enterprise Portfolio13 .48% - .12% .60%
Van Kampen LIT Growth & Income13 .43% - .32% .75%
<PAGE>
9
<FN>
1. The Alger American Leveraged AllCap Portfolio's "Other Expenses"
includes .01% of interest expense.
2. Without reimbursement, other expenses and total operating expenses would have
been 3.49% and 4.24%, respectively for the Davis VA Financial Portfolio, 10.95%
and 11.70%, respectively for the Davis VA Real Estate Portfolio, and 1.54% and
2.29%, respectively for the Davis VA Value Portfolio.
3. For the Portfolios of Franklin Templeton Variable Insurance Products Trust,
Class 2 shares have a distribution plan which is referred to as a rule 12b-1
plan. While the maximum amount payable under the fund's Class 2 rule 12b-1 plan
is 0.35% per year of the fund's average daily net assets, the Board of Trustees
of Franklin Templeton Variable Insurance Products Trust has set the current rate
at 0.25% per year. See "Fund Account Policies" in the accompanying Franklin
Templeton Variable Insurance Products Trust prospectus for more information
about the rule 12b-1 plan.
4. On 2/8/00, a merger and reorganization was approved that combined the assets
of the fund with a similar fund of the Templeton Variable Products Series Fund,
effective 5/1/00. On 2/8/00, fund shareholders approved new management fees,
which apply to the combined fund effective 5/1/00. The table shows restated
total expenses based on the new fees and assets of the fund as of 12/31/99, and
not the assets of the combined fund. However, if the table reflected both the
new fees and the combined assets, the fund's expenses after 5/1/00 would be
estimated as: Management Fees 0.55%, Distribution and Service Fees (12b-1 fees)
0.25%, Other Expenses 0.27%, and Total Fund Operating Expenses 1.07%.
5. The Franklin Small Cap Fund, the Mutual Discovery Securities Fund, the Mutual
Shares Securities Fund, and the Templeton Developing Markets Securities Fund
incur a portfolio administration fee as a direct expense of the portfolio which
is shown under Expenses". Other Portfolios of Franklin Templeton Variable
Insurance Products Trust pay for similar services indirectly through the
Management Fee.
6. Without reimbursement, other expenses and total operating expenses would
have been 1.38% and 1.98%, respectively for
the J.P. Morgan International Opportunities Portfolio and 0.52% and 0.87%,
respectively for the J.P. Morgan U.S. Disciplined Equity Portfolio.
7. On 2/8/00, a merger and reorganization was approved that combined the fund
with a similar fund of Templeton Variable Products Series Fund, effective
5/1/00. The table shows restated total expenses based on the fund's assets as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected combined assets, the fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.60%, Distribution and Service Fees (12b-1 fees) 0.25%,
Other Expenses 0.19%, and Total Fund Operating Expenses 1.04%.
8. "Other Expenses" reflect a 0.35% administrative fee for the PIMCO High Yield
Bond Portfolio, a 0.10% administrative fee for the PIMCO StocksPLUS Growth and
Income Portfolio, and a 0.25% administrative fee and 0.04% representing
organizational expenses and pro rata Trustees' fees for the Total Return Bond
Portfolio. PIMCO has contractually agreed to reduce total annual portfolio
operating expenses to the extent they would exceed, due to the payment of
organi- zational expenses and Trustees' fees, 0.75%, 0.65% and 0.65%,
respectively, of average daily net assets for the PIMCO High Yield, StocksPLUS
Growth and Income and Total Return Bond Portfolios. Without such reductions,
Total Annual Expenses for the fiscal year ended December 31, 1999 would have
been 0.75%, 0.65% and 0.69%, respectively. Under the Expense Limitation
Agreement, PIMCO may recoup these waivers and reimbursements in future periods,
not exceeding three years, provided total expenses, including such recoupment,
do not exceed the annual expense limit.
9. J. & W. Seligman & Co. Incorporated ("Seligman") voluntarily agreed to
reimburse expenses of Seligman Global
Technology Portfolio, other than the manage-ment fee, which exceed .40%, and to
reimburse all expenses of Seligman Small-Cap Value Portfolio, other than
management fees. Without reimbursement, other expenses and total operating
expenses would have been 0.41% and 1.41%, respectively, for Seligman Global
Technology Portfolio, and 0.41% and 1.41%, respectively, for Seligman Small-Cap
Value Portfolio. There is no assurance that Seligman will continue this policy
in the future.
10. On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton Developing Markets Equity Fund, effective 5/1/00.
The shareholders of that fund had approved new management fees, which apply to
the combined fund effective 5/1/00. The table shows restated total expenses
based on the new fees and the assets of the fund as of 12/31/99, and not the
assets of the combined fund. However, if the table reflected both the new fees
and the combined assets, the fund's expenses after 5/1/00 would be estimated as:
Management Fees 1.25%, Distribution and Service Fees (12b-1 fees) 0.25%, Other
Expenses 0.29%, and Total Fund Operating Expenses 1.79%.
11. On 2/8/00, a merger and reorganization was approved that combined the fund
with a similar fund of Templeton Variable Products Series Fund, effective
5/1/00. The table shows restated total expenses based on the fund's assets as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected combined assets, the fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.80%, Distribution and Service Fees (12b-1 fees) 0.25%,
Other Expenses 0.05%, and Total Fund Operating Expenses 1.10%.
12. Certain expenses of the USAllianz VIP Funds have been assumed by the
Adviser. Had those expenses not been assumed, total return would have been lower
and total fund expenses would have been 3.80% for the Diversified Assets Fund,
3.77% for the Fixed Income Fund, 2.59% for the Global Opportunities Fund
(estimated for 2000), 3.90% for the Growth Fund, and 1.91% for the Money Market
Fund (estimated for 2000). The USAllianz VIP Diversified Assets Fund, USAllianz
VIP Fixed Income Fund and the USAllianz VIP Growth Fund commenced operations on
November 12, 1999, and the USAllianz VIP Global Opportunities Fund and the
USAllianz VIP Money Market Fund commenced operations on January 13, 2000. The
expenses shown for these portfolios are therefore estimated for the current
fiscal year.
13. If certain expenses had not been assumed by the Adviser, total return would
have been lower and total fund expenses would have been .62% for the Van Kampen
LIT Enterprise Portfolio and .92% for the Van Kampen LIT Growth and Income
Portfolio.
</FN>
</TABLE>
<TABLE>
<CAPTION>
EXAMPLES
-------------------------------------------------------------------------------
o The examples below should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
o The $40 contract maintenance charge is included in the examples as a prorated
charge of $1. Since the average Con- tract 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 The current Distribution Expense Charge of 0% is reflected in the examples.
The maximum Distribution Expense Charge is .30%.
o For additional information, see "Expenses."
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money if you surrender your Contract at the end of each
time period for Contracts with:
(a) the traditional death benefit
(b) the enhanced death benefit
<PAGE>
10
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund (a)$111 (a)$166 (a)$218 (a)$325
(b) 113 (b) 172 (b) 229 (b) 346
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AIM V.I. Growth Fund (a) 111 (a) 166 (a) 218 (a) 325
(b) 113 (b) 172 (b) 229 (b) 346
---------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund (a) 114 (a) 174 (a) 231 (a) 350
(b) 116 (b) 180 (b) 241 (b) 370
---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund (a) 112 (a) 167 (a) 220 (a) 328
(b) 114 (b) 173 (b) 230 (b) 349
---------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio (a) 112 (a) 168 (a) 222 (a) 332
(b) 114 (b) 174 (b) 232 (b) 352
---------------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio (a) 113 (a) 172 (a) 229 (a) 346
(b) 116 (b) 179 (b) 239 (b) 366
---------------------------------------------------------------------------------------------------------------------------
Alger American MidCap Growth Portfolio (a) 113 (a) 170 (a) 225 (a) 338
(b) 115 (b) 176 (b) 235 (b) 358
---------------------------------------------------------------------------------------------------------------------------
Alger American Small Capitalization Portfolio (a) 113 (a) 171 (a) 227 (a) 343
(b) 115 (b) 178 (b) 238 (b) 363
---------------------------------------------------------------------------------------------------------------------------
Davis VA Financial Portfolio (a) 114 (a) 174 (a) 233 (b) 353
(b) 116 (b) 181 (b) 243 (b) 373
---------------------------------------------------------------------------------------------------------------------------
Davis VA Real Estate Portfolio (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
---------------------------------------------------------------------------------------------------------------------------
Davis VA Value Portfolio (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
---------------------------------------------------------------------------------------------------------------------------
Franklin Growth and Income Securities Fund (a) 111 (a) 166 (a) 219 (a) 326
(b) 114 (b) 173 (b) 229 (b) 347
---------------------------------------------------------------------------------------------------------------------------
Franklin Rising Dividends Securities Fund (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
---------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund (a) 115 (a) 177 (a) 236 (a) 360
(b) 117 (b) 183 (b) 246 (b) 380
---------------------------------------------------------------------------------------------------------------------------
Franklin U.S. Government Fund (a) 112 (a) 167 (a) 220 (a) 328
(b) 114 (b) 173 (b) 230 (b) 349
---------------------------------------------------------------------------------------------------------------------------
J.P. Morgan International Opportunities Portfolio (a) 116(a) 181(a) 243(a) 373
(b) 118 (b) 187 (b) 253 (b) 393
---------------------------------------------------------------------------------------------------------------------------
J.P. Morgan U.S. Disciplined Equity Portfolio (a) 113 (a) 170 (a) 225 (a) 338
(b) 115 (b) 176 (b) 235 (b) 358
---------------------------------------------------------------------------------------------------------------------------
<PAGE>
11
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------
Mutual Discovery Securities Fund (a) $117 (a) $183 (a) $246 (a) $379
(b) 119 (b) 189 (b) 256 (b) 399
---------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund (a) 115 (a) 176 (a) 235 (a) 357
(b) 117 (b) 182 (b) 245 (b) 377
---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA (a) 111 a) 165 (a) 216 (a) 321
(b) 113 (b) 171 (b) 227 (b) 342
---------------------------------------------------------------------------------------------------------------------------
Oppenheimer High Income Fund/VA (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA (a) 112 (a) 168 (a) 221 (a) 330
(b) 114 (b) 174 (b) 231 (b) 351
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT High Yield Bond Portfolio (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth & Income Portfolio (a) 110 (a) 163 (a) 214 (a) 317
(b) 113 (b) 170 (b) 225 (b) 338
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT Total Return Bond Portfolio (a) 110 (a) 163 (a) 214 (a) 317
(b) 113 (b) 170 (b) 225 (b) 338
---------------------------------------------------------------------------------------------------------------------------
Seligman Global Technology Portfolio (a) 118 (a) 187 (a) 253 (a) 393
(b) 120 (b) 193 (b) 263 (b) 413
---------------------------------------------------------------------------------------------------------------------------
Seligman Small-Cap Value Portfolio (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
---------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund (a) 123 (a) 200 (a) 274 (a) 433
(b) 125 (b) 206 (b) 284 (b) 451
---------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (a) 116 (a) 179 (a) 239 (a) 366
(b) 118 (b) 185 (b) 250 (b) 386
---------------------------------------------------------------------------------------------------------------------------
Templeton Pacific Growth Securities Fund (a) 118 (a) 185 (a) 250 (a) 386
(b) 120 (b) 191 (b) 260 (b) 406
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Diversified Assets Fund (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Fixed Income Fund (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Global Opportunities Fund (a) 119 (a) 190 (a) 259 (a) 404
(b) 122 (b) 196 (b) 269 (b) 423
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Growth Fund (a) 113 (a) 171 (a) 227 (a) 343
(b) 115 (b) 178 (b) 238 (b) 363
---------------------------------------------------------------------------------------------------------------------------
<PAGE>
12
---------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Money Market Fund (a) $113 (a) $171 (a)$227 (a) $343
(b) 115 (b) 178 (b) 238 (b) 363
---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Enterprise Portfolio (a) 110 (a) 162 (a) 212 (a) 311
(b) 112 (b) 168 (b) 222 (b) 333
---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth & Income Portfolio (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money if your Contract is not surrendered or if you apply
your Contract value to an Annuity Option for Contracts with:
(a) the traditional death benefit
(b) the enhanced death benefit
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund (a)$26 (a) $81 (a)$138 (a)$295
(b) 28 (b) 87 (b) 149 (b) 316
---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund (a) 26 (a) 81 (a) 138 (a) 295
(b) 28 (b) 87 (b) 149 (b) 316
---------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund (a) 29 (a) 89 (a) 151 (a) 320
(b) 31 (b) 95 (b) 161 (b) 340
---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund (a) 27 (a) 82 (a) 140 (a) 298
(b) 29 (b) 88 (b) 150 (b) 319
---------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio (a) 27 (a) 83 (a) 142 (a) 302
(b) 29 (b) 89 (b) 152 (b) 322
---------------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio (a) 28 (a) 87 (a) 149 (a) 316
(b) 31 (b) 94 (b) 159 (b) 336
---------------------------------------------------------------------------------------------------------------------------
Alger American MidCap Growth Portfolio (a) 28 (a) 85 (a) 145 (a) 308
(b) 30 (b) 91 (b) 155 (b) 328
---------------------------------------------------------------------------------------------------------------------------
Alger American Small Capitalization Portfolio (a) 28 (a) 86 (a) 147 (a) 313
(b) 30 (b) 93 (b) 158 (b) 333
---------------------------------------------------------------------------------------------------------------------------
Davis VA Financial Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
---------------------------------------------------------------------------------------------------------------------------
Davis VA Real Estate Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
---------------------------------------------------------------------------------------------------------------------------
Davis VA Value Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
---------------------------------------------------------------------------------------------------------------------------
<PAGE>
13
---------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------
Franklin Growth and Income Securities Fund (a) $26 (a) $81 (a) $139 (a) $296
(b) 29 (b) 88 (b) 149 (b) 317
---------------------------------------------------------------------------------------------------------------------------
Franklin Rising Dividends Securities Fund (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
---------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund (a) 30 (a) 92 (a) 156 (a) 330
(b) 32 (b) 98 (b) 166 (b) 350
---------------------------------------------------------------------------------------------------------------------------
Franklin U.S. Government Fund (a) 27 (a) 82 (a) 140 (a) 298
(b) 29 (b) 88 (b) 150 (b) 319
---------------------------------------------------------------------------------------------------------------------------
J.P. Morgan International Opportunities Portfolio (a) 31(a) 96 (a) 163(a) 343
(b) 33 (b) 102 (b) 173 (b) 363
---------------------------------------------------------------------------------------------------------------------------
J.P. Morgan U.S. Disciplined Equity Portfolio (a) 28 (a) 85 (a) 145 (a) 308
(b) 30 (b) 91 (b) 155 (b) 328
---------------------------------------------------------------------------------------------------------------------------
Mutual Discovery Securities Fund (a) 32 (a) 98 (a) 166 (a) 349
(b) 34 (b) 104 (b) 176 (b) 369
---------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund (a) 30 (a) 91 (a) 155 (a) 327
(b) 32 (b) 97 (b) 165 (b) 347
---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA (a) 26 (a) 80 (a) 136 (a) 291
(b) 28 (b) 86 (b) 147 (b) 312
---------------------------------------------------------------------------------------------------------------------------
Oppenheimer High Income Fund/VA (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA (a) 27 (a) 83 (a) 141 (a) 300
(b) 29 (b) 89 (b) 151 (b) 321
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT High Yield Bond Portfolio (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth &Income Portfolio (a) 25 (a) 78 (a) 134 (a) 287
(b) 28 (b) 85 (b) 145 (b) 308
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT Total Return Bond Portfolio (a) 25 (a) 78 (a) 134 (a) 287
(b) 28 (b) 85 (b) 145 (b) 308
---------------------------------------------------------------------------------------------------------------------------
Seligman Global Technology Portfolio (a) 33 (a) 102 (a) 173 (a) 363
(b) 35 (b) 108 (b) 183 (b) 383
---------------------------------------------------------------------------------------------------------------------------
Seligman Small-Cap Value Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
---------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund (a) 38 (a) 115 (a) 194 (a) 403
(b) 40 (b) 121 (b) 204 (b) 421
---------------------------------------------------------------------------------------------------------------------------
<PAGE>
14
---------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (a) $31 (a) $94 (a) $159 (a) $336
(b) 33 (b) 100 (b) 170 (b) 356
---------------------------------------------------------------------------------------------------------------------------
Templeton Pacific Growth Securities Fund (a) 33 (a) 100 (a) 170 (a) 356
(b) 35 (b) 106 (b) 180 (b) 376
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Diversified Assets Fund (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Fixed Income Fund (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Global Opportunities Fund (a) 34 (a) 105 (a) 179 (a) 374
(b) 37 (b) 111 (b) 189 (b) 393
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Growth Fund (a) 28 (a) 86 (a) 147 (a) 313
(b) 30 (b) 93 (b) 158 (b) 333
---------------------------------------------------------------------------------------------------------------------------
USAllianz VIP Money Market Fund (a) 28 (a) 86 (a) 147 (a) 313
(b) 30 (b) 93 (b) 158 (b) 333
---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Enterprise Portfolio (a) 25 (a) 77 (a) 132 (a) 281
(b) 27 (b) 83 (b) 142 (b) 303
---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth & Income Portfolio (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
15
1.THE VARIABLE
ANNUITY CONTRACT
-------------------------------------------------------------------------------
This prospectus describes a flexible purchase payment variable deferred annuity
contract with a Fixed Account offered by Allianz Life. All references in this
prospectus to "we, us, our" refer to Allianz Life.
o Flexible Purchase Payments means that you may choose to make Purchase Payments
at any time during the Accumulation Phase, in whatever amount you choose,
subject to certain minimum and maximum requirements.
o A deferred annuity contract means that Annuity Pay- ments do not begin for a
specified period of time in the future (usually when you retire) or until you
reach a certain age.
o A variable annuity is one in which Contract values and the variable Annuity
Payments vary depending on the performance of the Portfolios of the Underlying
Mutual Funds.
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 three years after we
issue the Contract. Until you decide to begin receiving Annuity Payments, your
annuity is in the Accumulation Phase. Once you begin receiving Annuity Payments,
your Contract switches to the Payout Phase.
The Contract benefits from Tax Deferral. Tax Deferral means that you are not
taxed on any earnings or appreciation on the assets in your Contract until you
take money out of your Contract.
You have 38 Investment Options - the 37 Sub-Accounts, each of which invests in
one Portfolio of an Underlying Mutual Fund, and the Fixed Account of Allianz
Life. Depending upon market conditions, you can make or lose money in the
Contract based on the investment performance of the Portfolios. The Portfolios
are designed to offer a better return than the Fixed Account. However, this is
not guaranteed.
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 also depends in large part upon the investment performance of
the Portfolios you select for the Payout Phase.
The Contract also contains a Fixed Account. The Fixed Account offers an interest
rate that is guaranteed by Allianz Life for all deposits made within the 12
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.
Allianz Life will not make any changes to your Contract without your permission
except as may be required by law.
OWNERSHIP
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. The change
will become effective as of the date the request is signed. This may be a
taxable event. Allianz Life is not responsible for any tax consequences of any
such change. You should consult with your tax adviser before requesting a
change.
JOINT OWNER. The Contract can be owned by Joint Owners. Any Joint Owner must be
the spouse of the other Contract Owner (this requirement may not apply in
certain states). Upon the death of either Joint Owner, the surviving Joint Owner
will be the primary 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 (subject to our underwriting rules then in
effect). 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
<PAGE>
16
a later date. Unless an irrevocable Beneficiary has been named, you can change
the Beneficiary or contingent Beneficiary.
ASSIGNMENT. You can transfer ownership of (assign) the Contract at any time
during your lifetime. Allianz Life will not be liable for any payment or other
action we take in accordance with the Contract before we record 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)
-------------------------------------------------------------------------------
INCOME DATE
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 3 years after we issue the Contract.
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. Your
Income Date must not be later than the Annuitant's 90th birthday or 10 years
from the date the Contract was issued (if later), or the maximum date permitted
under state law.
ANNUITY PAYMENTS
You may elect to receive your Annuity Payments as:
o a variable payout,
o a fixed payout, or
o a combination of both.
Annuity payments under Option 6 are only available as a fixed payout (unless you
bought your Contract before June 16, 2000, in which case you can also elect a
variable payout).
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 Sub-Accounts. 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. There is no minimum required Annuity Payment.
If you choose to have any portion of your Annuity Payments based on the
investment performance of the Sub-Account(s), the dollar amount of your payments
will depend upon three factors:
1) the value of your Contract in the Sub-Account(s) on the Income Date,
2) the assumed investment rate used in the annuity table for the Contract, and
3) the performance of the Sub-Account(s) you selected.
The assumed investment rate (AIR) is 5%. However, we may agree with you to use a
different value. The AIR will never exceed 7%. The 7% AIR is not available in
all states. If the actual performance exceeds the AIR, your Annuity Payments
will increase. Similarly, if the actual rate is less than the AIR, your Annuity
Payments will decrease.
You (or someone you designate) will receive the Annuity Payments. You will
receive tax reporting on those payments.
ANNUITY OPTIONS
You can choose among income plans. We call those Annuity Options. You can choose
one of the Annuity Options described below. Allianz Life may make available
other Annuity Options. You may, at any time prior to the Income Date, 30 days in
advance, select and/or change the Annuity Option. After Annuity Payments begin,
you cannot change the Annuity Option. 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 10 years of monthly payments guaranteed.
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 MONTHLY PAYMENTS OVER 10, 15 OR 20 YEARS GUARANTEED.
Under this option, we will make monthly Annuity Payments so long as the
Annuitant is alive. However, if the Annuitant dies before the end of the
selected guaranteed period, we will continue to make Annuity Payments to you or
any person you choose for the rest of the guaranteed period. Alternatively, if
you do not want to receive Annuity Payments after the Annuitant's death, you can
ask us for a single lump sum equal to the present value of the guaranteed
monthly Annuity Payments remaining, as of the date Allianz Life receives notice
of the Annuitant's death, commuted as set forth in the Contract.
<PAGE>
17
During the lifetime of the Annuitant, and while the number of Annuity Payments
made is less than the guaranteed number of payments elected, and if you elected
to receive payments on a variable basis, you may request a surrender (partial
liquidation). You will be allowed to make a partial liquidation at least once
per Contract year after the Income Date. The liquidation value is equal to the
present value of the remaining guaranteed Annuity Payments, to the end of the
period certain, commuted at the AIR. The total of all partial liquidations,
measured as a percentage of the liquidation value, cannot exceed 75% of the
liquidation value, less any previously liquidated amounts. A commutation fee
will be subtracted from the amount liquidated before the proceeds are paid out.
Partial liquidations will be processed on the next Annuity Payment date
following your written request. The minimum allowable partial liquidation will
be the lesser of $500 or the remaining portion of the liquidation value
available.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
monthly Annuity Payments during the joint lifetime of the Annuitant and the
joint Annuitant. When the Annuitant dies, if the joint Annuitant is still alive,
we will continue to make Annuity Payments so long as the joint Annuitant
continues to live. The amount of the Annuity Payments we will make to you can be
equal to 100%, 75% or 50% (as selected) 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 MONTHLY PAYMENTS OVER 10, 15 OR
20 YEARS GUARANTEED. Under this option, we will make monthly Annuity Payments
during the joint lifetime of the Annuitant and the joint Annuitant. When the
Annuitant dies, if the joint Annuitant is still alive, we will continue to make
Annuity Payments, so long as the surviving Annuitant continues to live, at 100%
of the amount that was being paid when both were alive. If, when the last death
occurs, we have made Annuity Payments for less than the selected guaranteed
period, we will continue to make Annuity Payments to you or any person you
choose for the rest of the guaranteed period. Alternatively, if you do not want
to receive Annuity Payments after the Annuitant's death, you can ask us for a
single lump sum equal to the present value of the guaranteed monthly Annuity
Payments remaining, as of the date Allianz Life receives notice of the
Annuitant's death, commuted as set forth in the Contract.
During the lifetime of the Annuitant or joint Annuitant, and while the number of
Annuity Payments made is less than the guaranteed number of payments elected,
and if you elected to receive payments on a variable basis, you may request a
surrender (partial liquidation). You will be allowed to make a partial
liquidation at least once per Contract year after the Income Date. The
liquidation value is equal to the present value of the remaining guaranteed
Annuity Payments, to the end of the period certain, commuted at the AIR. The
total of all partial liquidations, measured as a percentage of the liquidation
value, cannot exceed 75% of the liquidation value, less any previously
liquidated amounts. A commutation fee will be subtracted from the amount
liquidated before the proceeds are paid out. Partial liquidations will be
processed on the next Annuity Payment date following your written request. The
minimum allowable partial liquidation will be the lesser of $500 or the
remaining portion of the liquidation value available.
OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make monthly Annuity
Payments during the Annuitant's lifetime. If at the time of death of the
Annuitant the value of the Annuity Payments made is less than the value applied
to the Annuity Option, then you will receive a refund.
For a fixed Annuity Option, the amount of the refund will be any excess of the
amount applied to this Annuity Option over the total of all Annuity Payments
made under this option. For a variable Annuity Option, the amount of the refund
will be the then value of the number of Annuity Units equal to (1) the value
applied to this Annuity Option divided by the value of the Annuity Unit used to
determine the first Annuity Payment, minus (2) the product of the number of
Annuity Units of each Annuity Payment and the number of payments made.
OPTION 6. SPECIFIED PERIOD CERTAIN ANNUITY. Under this option, we will make
monthly Annuity Payments for a specified period of time. You elect the specified
period which must be a whole number of years from 10 to 30. Payments under this
option are only available as a fixed payout. If at the time of the death of the
last Annuitant and any joint Annuitant, Annuity Payments have been made for less
than the specified period certain, then we will continue to make Annuity
Payments to you for the rest of the period certain. If you bought your Contract
before June 16, 2000 you may elect to receive payments under a Variable Annuity
Option. Under the variable payout, you may make a surrender representing a
partial liquidation at least once each Contract year of up to 100% of the
liquidation value in the Contract. The liquidation will be processed on the next
Annuity Payment date after your written request is received as set forth in the
Contract.
<PAGE>
18
3.PURCHASE
-------------------------------------------------------------------------------
PURCHASE PAYMENTS
A Purchase Payment is the money you invest in the Contract. The Purchase
Payment requirements are:
o the minimum initial payment Allianz Life will accept without our prior
approval to establish a Contract is $15,000.
o the maximum amount we will accept without our prior approval is $1 million.
o you can make additional Purchase Payments of $250 (or as low as $100 if
you have selected the Automatic Investment Plan) or more. (In Connecticut, no
purchase payments may be made on or after the Contract Owner's 81st birthday).
Allianz Life may, at its sole discretion, waive the minimum payment
requirements. We reserve the right to decline any Purchase Payments. At the time
you buy the Contract, you and the Annuitant cannot be older than 80 years old.
This product is not designed for professional market timing organizations, other
entities, or persons using programmed, large or frequent transfers.
BONUS
Allianz Life will credit each Purchase Payment you make prior to your and any
Joint Owner's 81st birthday with a bonus at the time it is made. The bonus rate
will be based on the total amount of Purchase Payments made at the time of the
contribution, less any surrenders you have made (and assessed contingent
deferred sales charges). The bonus rates are:
4% of the Purchase Payment with total Purchase Payments (less surrenders and
related contingent deferred sales charges) of under $25,000;
5% of the Purchase Payment with total Purchase Payments (less surrenders and
related contingent deferred sales charges) of $25,000-$99,999;
6% of the Purchase Payment with total Purchase Payments (less surrenders and
related contingent deferred sales charges) of $100,000-$999,999;
7% of the Purchase Payment with total Purchase Payments (less surrenders and
related contingent deferred sales charges) of $1,000,000-$4,999,999;
8% of the Purchase Payment with total Purchase Payments (less surrenders and
related contingent deferred sales charges) of $5,000,000 or greater.
The bonus will be credited to your Contract subject to the following terms:
1) Bonus amounts are available for surrender, annuitiza-tion or payment of a
death benefit only when such amounts become vested as follows:
0% - up through 12 completed months from the date of Purchase Payment;
35% - at least 12 and through 24 completed months from date of Purchase
Payment;
70% - at least 24 months and through 36 completed months from date of
Purchase Payment;
100% - at least 36 completed months from date of Pur-chase Payment.
2) All bonus amounts and any gains or losses attrib- utable to such amounts are
treated as earnings under the Contract and are treated as such for purposes of
the contingent deferred sales charge.
3) All gains and losses attributable to the bonus are part of your Contract
Value and are always 100% vested.
4) If Joint Owners are named, the age of the older Joint Owner will be used and
if the Contract Owner is a non-natural person, then the age of the Annuitant
will be used to determine whether a bonus applies.
All bonus amounts are paid from the general account assets of Allianz Life.
Contract charges are deducted from the total value of your Contract. Therefore,
your Contract incurs expenses on the total Rewards Value, which includes all
vested and unvested portions of the bonus. When you cancel your Contract during
the Free Look period, or if you make a surrender, annuitize or when a death
benefit is payable in the first 3 years from any Purchase Payment date, you will
forfeit all or some of your bonus. Since charges will have been assessed against
the higher amount (Purchase Payment plus bonus), it is possible that upon
surrender, particularly in a declining market, you will receive less money back
than you would have if you had not received the bonus or not purchased a bonus
Contract. You may alleviate this risk by allocating the bonus amounts to the
USAllianz VIP Money Market Fund. We expect to profit from certain charges
assessed under the Contract (i.e., the contingent deferred sales charge and the
mortality and expense risk charge) associated with the bonus.
Allianz Life has applied to the Securities and Exchange Commission for an
exemption from certain provisions of the Investment Company Act of 1940 so it
can recapture
<PAGE>
19
any unvested bonus amounts applied to a Contract, as described above. Until such
time as it receives approval of its exemptive request, Allianz Life will not
recapture any bonus amounts.
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, checking or brokerage 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 and bonus
amounts to the Fixed Account and/or one or more of the Sub-Accounts 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 and bonus amounts. If you do not instruct us, we will allocate
them in the same way as your previous instructions to us. If you select the
USAllianz VIP Money Market Fund for your bonus allocation, that will be the
default allocation for the bonus unless otherwise specified. If you do not
select the USAllianz VIP Money Market Fund for your bonus allocation, then the
bonus will be allocated the same way as the corresponding Purchase Payment. You
may change the allocation of future payments without fee, penalty or other
charge upon written notice or telephone instructions to the USAllianz 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 Sub-Accounts that you may
invest in at one time. Currently, you may invest in 10 Investment Options, which
include the Sub-Accounts 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
Sub-Accounts.
Once we receive your Purchase Payment and the necessary information, we will
issue your Contract and allocate your first Purchase Payment within 2 business
days. If you do not give us all of the information we need, we will contact you
or your registered representative to get it. If for some reason we are unable to
complete this process within 5 business days, we will either send back your
money or get your permission to keep it until we get all of the necessary
information. If you make additional Purchase Payments, we will credit these
amounts to your Contract within one business day. Our business day closes when
the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern time.
FREE LOOK
If you change your mind about owning the Contract, you can cancel it within 10
days after receiving it (or the period required in your state). When you cancel
the Contract within this time period, Allianz Life will not assess a contingent
deferred sales charge. Allianz Life will refund your Contract Value as of the
day we receive your request. This includes any gains or losses associated with
the bonus. In certain states, or if you have purchased the Contract as an IRA,
we may be required to give you back your Purchase Payment if you decide to
cancel your Contract within 10 days after receiving it (or whatever period is
required in your state). If that is the case, we reserve the right to allocate
your initial Purchase Payment to the USAllianz VIP Money Market Fund for 15 days
after we receive it. (In some states, the period may be longer.) At the end of
that period, we will re-allocate your money as you selected. Currently, however,
we will directly allocate your money to the Sub-Accounts and/or the Fixed
Account as you have selected.
REWARDS VALUE AND CONTRACT VALUE
The Rewards Value of your Contract is the dollar value as of any business day of
all amounts accumulated under your Contract including all vested and unvested
bonus amounts and gains and losses attributable to all bonus amounts.
The Contract Value is the Rewards Value of your Contract as of any business day
less any unvested bonus.
ACCUMULATION UNITS
The value of the portion of your Contract allocated to the Sub-Accounts will go
up or down based upon the investment performance of the Sub-Account(s) you
choose. The value of your Contract will also depend on the expenses of the
Contract. In order to keep track of the value of your Contract, we use a
measurement called an Accumulation
<PAGE>
20
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
Sub-Account by multiplying the Accumulation Unit value for the previous period
by a factor for the current period. The factor is determined by:
o dividing the value of a Portfolio at the end of the current period by the
value of Portfolio for the previous period; and
o multiplying it by one minus the daily amount of the mortality and expense risk
charge, administrative charge and distribution expense charge and any charges
for taxes.
The value of an Accumulation Unit may go up or down from business day to
business day.
When you make a Purchase Payment, we credit your Contract with Accumulation
Units for any portion of your Purchase Payment and bonus amount allocated to a
Sub-Account. The number of Accumulation Units we credit your Contract with is
determined by dividing the amount of the Purchase Payment and bonus amount
allocated to a Sub-Account 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 and
assume the bonus rate is 4%. You have told us you want this to go to the Alger
American Growth Portfolio. 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 Alger American Growth Portfolio is $13.25. We then divide
$3,120 ($3,000 Purchase Payment plus $120 bonus amount) by $13.25 and credit
your Contract on Wednesday night with 235.47 Accumulation Units.
If you select the USAllianz VIP Money Market Fund for your bonus allocation,
that will be the default allocation for the bonus unless otherwise specified. If
you do not select the USAllianz VIP Money Market Fund for your bonus allocation,
then the bonus will be allocated the same way as the corresponding Purchase
Payment.
4.INVESTMENT OPTIONS
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The Contract offers Sub-Accounts. Each Sub-Account invests in one of the
Portfolios of the Underlying Mutual Funds listed below. Each Portfolio has its
own investment objective. Additional Portfolios may be available in the future.
The Contract also offers a Fixed Account of Allianz Life.
YOU SHOULD READ THE FUND PROSPECTUSES (WHICH ARE ATTACHED TO THIS PROSPECTUS)
CAREFULLY BEFORE INVESTING.
Franklin Templeton Variable Insurance Products Trust (formerly, Franklin
Valuemark Funds) issues two classes of shares. Only Class 2 shares are available
in connection with your Contract. Class 2 shares have Rule 12b-1 plan expenses.
Effective May 1, 2000, the funds of Templeton Variable Products Series Fund were
merged into similar funds of Franklin Templeton Variable Insurance Products
Trust.
Investment advisers for each Portfolio are listed in the table located on page
21. Certain advisers have retained one or more subadvisers to help them manage
the Portfolios. The investment objectives and policies of certain Portfolios are
similar to the investment objectives and policies of other mutual funds that
certain of the investment advisers manage. Although the objectives and policies
may be similar, the investment results of the Portfolios may be higher or lower
than the results of such other mutual funds. The investment advisers cannot
guarantee, and make no representation, that the investment results of similar
funds will be comparable even though the Portfolios have the same investment
advisers.
A Portfolio's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a Portfolio with a small asset base.
A Portfolio may not experience similar performance as its assets grow.
<TABLE>
<CAPTION>
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21
The following is a list of the Portfolios available under the Contract and
investment advisers for each Portfolio:
AVAILABLE PORTFOLIOS INVESTMENT ADVISERS
---------------------------------------------------------------------------------------------------------------------------
<S> <C>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Capital Appreciation Fund A I M Advisors, Inc.
AIM V.I. Growth Fund A I M Advisors, Inc.
AIM V.I. International Equity Fund A I M Advisors, Inc.
AIM V.I. Value Fund A I M Advisors, Inc.
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio Fred Alger Management, Inc.
Alger American Leveraged AllCap Portfolio Fred Alger Management, Inc.
(seeks long term capital appreciation)
Alger American MidCap Growth Portfolio Fred Alger Management, Inc.
Alger American Small Capitalization Portfolio Fred Alger Management, Inc.
DAVIS VARIABLE ACCOUNT FUND, INC.:
Davis VA Financial Portfolio Davis Selected Advisers, LP
Davis VA Real Estate Portfolio Davis Selected Advisers, LP
Davis VA Value Portfolio Davis Selected Advisers, LP
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST#:
Franklin Growth and Income Securities Fund Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund Franklin Advisory Services, LLC
Franklin Small Cap Fund Franklin Advisers, Inc.
Franklin U.S. Government Fund Franklin Advisers, Inc.
Mutual Discovery Securities Fund (capital appreciation) Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund Franklin Mutual Advisers, LLC
(capital appreciation with income as a secondary goal)
Templeton Developing Markets Securities Fund Templeton Asset Management Ltd.
Templeton Growth Securities Fund Templeton Global Advisors Limited
Templeton Pacific Growth Securities Fund Franklin Advisers, Inc.
#Effective May 1, 2000, Templeton Variable Products Series Fund was merged into
Franklin Templeton Variable Insurance Products Trust.
JP MORGAN SERIES TRUST II:
J.P. Morgan International Opportunities Portfolio J.P. Morgan Investment Management Inc.
J.P. Morgan U.S. Disciplined Equity Portfolio J.P. Morgan Investment Management Inc.
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Global Securities Fund/VA OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA OppenheimerFunds, Inc.
Oppenheimer Main Street Growth & Income Fund/VA OppenheimerFunds, Inc.
PIMCO VARIABLE INSURANCE TRUST:
PIMCO VIT High Yield Bond Portfolio Pacific Investment Management Company
PIMCO VIT StocksPLUS Growth and Income Portfolio Pacific Investment Management Company
PIMCO VIT Total Return Bond Portfolio Pacific Investment Management Company
SELIGMAN PORTFOLIOS, INC.:
Seligman Global Technology Portfolio J. & W. Seligman & Co. Incorporated
Seligman Small-Cap Value Portfolio J. & W. Seligman & Co. Incorporated
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund Allianz of America, Inc.
USAllianz VIP Fixed Income Fund Allianz of America, Inc.
USAllianz VIP Global Opportunities Fund Allianz of America, Inc.
USAllianz VIP Growth Fund Allianz of America, Inc.
USAllianz VIP Money Market Fund Allianz of America, Inc.
VAN KAMPEN LIFE INVESTMENT TRUST:
Van Kampen LIT Enterprise Portfolio
(seeks capital appreciation) Van Kampen Asset Management Inc.
Van Kampen LIT Growth and Income Portfolio Van Kampen Asset Management Inc.
</TABLE>
<PAGE>
22
Shares of the Underlying Mutual Funds may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various
insurance companies which may or may not be affiliated with Allianz Life.
Certain Underlying Mutual Funds may also be sold directly to qualified plans.
The Underlying Mutual Funds believe that offering their shares in this manner
will not be disadvantageous to you.
Allianz Life may enter into certain arrangements under which it is reimbursed by
the Underlying Mutual Funds' advisers, distributors and/or affiliates for the
administrative services and benefits which it provides to the Portfolios.
TRANSFERS
You can transfer money among the Investment Options. Transfers may be subject to
a transfer fee. 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 investment manager's judgment, a Portfolio would be unable to
invest effectively in accordance with its investment objectives and policies, or
would otherwise potentially be adversely affected.
The following applies to any transfer:
1. We may not allow you to make transfers during the free look period.
2. Your request for a transfer must clearly state:
o which Sub-Account(s) and/or the Fixed Account is involved in the
transfer; and
o how much the transfer is for.
3. You cannot make any transfers within 7 calendar days prior to the date your
first Annuity Payment is due.
4. After the Income Date, you may not make a transfer from a fixed Annuity
Option to a variable Annuity Option.
5. After the Income Date, you can make transfers from a variable Annuity
Option to a fixed Annuity Option.
6. Your right to make transfers is subject to modificationif we determine in
our sole opinion that the service of the right by one or more Contract
Owners is, or would be, to the disadvantage of other Contract Owners.
Restrictions may be applied in any manner reasonably designed to prevent any
use of the transfer right which we consider to be to the disadvantage of
other Contract Owners. A modificationcould be applied to transfers to or
from one or more of the Sub-Accounts and could include, but is
not limited to:
o the requirement of a minimum time period between each transfer;
o not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one Contract Owner; or
o limiting the dollar amount that may be transferred between the
Sub-Accounts by a Contract Owner at any one time.
Allianz Life has reserved the right at any time without prior notice to any
party to modify the transfer provisions subject to the guarantees described
above and subject to applicable state law.
TELEPHONE TRANSFERS. You can make transfers by telephone. We may allow you to
authorize someone else to make transfers by telephone on your behalf. If you own
the Contract with a Joint Owner, unless you instruct Allianz Life otherwise, we
will accept instructions from either one of you. Allianz Life will use
reasonable procedures to confirm that instructions given to us by telephone are
genuine. If we do not use such procedures, we may be liable for any losses due
to unauthorized or fraudulent instructions. Allianz Life tape records all
telephone instructions.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount of money each month or quarter from any one Sub-Account or the Fixed
Account to up to eight of the other Sub-Accounts. The Sub-Account(s) you
transfer from may not be the Sub-Account(s) you transfer to in this program. You
cannot dollar cost average to the Fixed Account. 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.
Generally, the Dollar Cost Averaging Program requires a minimum transfer of $500
per month (or $1,500 per quarter). You must have a $3,000 minimum allocation to
participate in the program.
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
<PAGE>
23
day. You may elect either program by properly completing the Dollar Cost
Averaging form provided by Allianz Life.
Your participation in the program will end when any of the following occurs:
o the number of desired transfers have been made;
o you do not have enough money in the Sub-Account(s) or the Fixed Account to
make the transfer (if less money is available, that amount will be dollar cost
averaged and the program will end);
o you request to terminate the program (your request must be received by us
by the first of the month to ter-
minate that month); or
o the Contract is terminated.
Allianz Life may, from time to time, offer special Dollar Cost Averaging
programs.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not currently 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 Sub-Accounts may cause
your chosen allocation to shift. Flexible Rebalancing is designed to help you
maintain your specified allocation mix among the different Sub-Accounts. The
Fixed Account is not part of Flexible Rebalancing. You can direct us to readjust
your Rewards Value on a quarterly, semi-annual or annual basis to return to your
original Sub-Account 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 business day. If you participate
in Flexible Rebalancing, the transfers made under the program are not currently
taken into account in determining any transfer fee.
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 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 Sub-Accounts you have selected with
another Sub-Account. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intention to
do this. We may also limit further investment in a Sub-Account if we deem the
investment inappropriate.
5.EXPENSES
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There are charges and other expenses associated with the Contract that will
reduce your investment return. These charges and expenses are:
INSURANCE CHARGES
Each day, Allianz Life makes a deduction for its insurance charges. Allianz Life
does this as part of its calculation of the value of the Accumulation Units and
the Annuity Units. The insurance charge consists of:
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24
1) the mortality and expense risk charge,
2) the administrative charge, and
3) the distribution expense charge.
MORTALITY AND EXPENSE RISK CHARGE. The amount of the mortality and expense risk
charge depends on whether you select the traditional death benefit or the
enhanced death benefit.
o Traditional Death Benefit. The charge is equal, on an annual basis, to
1.50% of the average daily value of the
Contract invested in a Sub-Account.
o Enhanced Death Benefit: The charge is equal, on an annual basis, to 1.70%
of the average daily value of the
Contract invested in a Sub-Account.
This charge compensates us for all the insurance benefits provided by your
Contract (for example, our contractual obligation to make Annuity Payments, the
death benefits, certain expenses related to the Contract, and for assuming the
risk (expense risk) that the current charges will be insufficient in the future
to cover the cost of administering the Contract). Allianz Life may use any
profits it makes from this charge to pay for the costs of distributing the
Contract.
ADMINISTRATIVE CHARGE. This charge is equal, on an annual basis, to 0.15% of the
average daily value of the Contract invested in a Sub-Account. This charge,
together with the contract maintenance charge (which is explained below), is for
all the expenses associated with the administration of the Contract. Some of
these expenses include: preparation of the Contract, confirmations, annual
statements, maintenance of Contract records, personnel costs, legal and
accounting fees, filing fees, and computer and systems costs.
DISTRIBUTION EXPENSE CHARGE. Currently, Allianz Life is compensated for certain
of its costs associated with distributing the Contract from certain Funds
through their Rule 12b-1 plans. Allianz Life does not currently deduct a
Distribution Expense Charge. In the event that Allianz Life is no longer
compensated for its distribution expenses through the Funds, it may, in its sole
discretion, charge a Distribution Expense Charge. The charge is guaranteed not
to exceed 0.30% of the average daily net asset value of the Contract invested in
a Sub-Account.
CONTRACT MAINTENANCE CHARGE
At each Contract anniversary, Allianz Life deducts $40 from the Rewards Value of
your Contract as a contract maintenance charge. The fee is assessed on the last
day of each Contract year. The charge is deducted pro rata from the Sub-Accounts
and the Fixed Account. The charge is for administrative expenses (see above).
This charge cannot be increased. However, if the Rewards Value of your Contract
is at least $75,000 when the deduction for the charge is to be made, Allianz
Life will not deduct this charge. If you own more than one Contract offered
under this prospectus, Allianz Life will determine the total Rewards Value of
all your Contracts. If the total Rewards Value of all Contracts registered under
the same social security number is at least $75,000, Allianz Life will not
assess the contract maintenance charge (except in New Jersey). If the Contract
is owned by a non-natural person (e.g., a corporation), Allianz Life will look
to the Annuitant to determine if it will assess the charge.
If you make a complete surrender from your Contract other than on a Contract
anniversary and your Rewards Value is less than $75,000, Allianz Life will
deduct the full contract maintenance charge. During the Payout Phase, the charge
will be collected monthly out of each Annuity Payment.
CONTINGENT DEFERRED SALES CHARGE
Surrenders may be subject to a contingent deferred sales charge. During the
Accumulation Phase, you can make surrenders from your Contract. Allianz Life
keeps track of each Purchase Payment you make. The amount of the contingent
deferred sales charge depends upon the length of time since you made your
Purchase Payment. The charge is:
NUMBER OF COMPLETE CONTRACT
YEARS SINCE RECEIPT
OF PURCHASE PAYMENT CHARGE
0-1 8.5%
1-2 8.5%
2-3 8.5%
3-4 8.5%
4-5 8.0%
5-6 7.0%
6-7 6.0%
7-8 5.0%
8-9 4.0%
9-10 3.0%
10 years or more 0.0%
<PAGE>
25
However, after Allianz Life has had a Purchase Payment for 10 full years, there
is no charge when you surrender that Purchase Payment. The charge is calculated
at the time of each surrender. For partial surrenders, the charge is deducted
from the remaining Rewards Value and is deducted pro rata from the Sub-Accounts
and Fixed Account. For purposes of the contingent deferred sales charge, Allianz
Life treats surrenders as coming from the oldest Purchase Payments first and
from all Purchase Payments first. Bonuses and any earnings thereon are treated
as earnings under the Contract for purposes of the contingent deferred sales
charge. Allianz Life does not assess the contingent deferred sales charge on any
payments paid out as Annuity Payments or as death benefits. The contingent
deferred sales charge compensates Allianz Life for expenses associated with
selling the Contract. (In Connecticut, there is no contingent deferred sales
charge assessed after 9 complete contract years).
NOTE: FOR TAX PURPOSES, SURRENDERS ARE CONSIDERED TO HAVE COME FROM THE LAST
MONEY YOU PUT INTO THE CONTRACT. THUS, FOR
TAX PURPOSES, EARNINGS ARE CONSIDERED TO COME OUT FIRST.
PARTIAL SURRENDER PRIVILEGE. Each Contract year, on a non-cumulative basis you
can make multiple surrenders up to 10% of Purchase Payments (less any previous
surrenders taken in the current Contract year which were not subject to a
contingent deferred sales charge) and no contingent deferred sales charge will
be deducted from the 10% you take out. If you make a surrender of more than the
free amount, the amount over the 10% free amount will be subject to the
contingent deferred sales charge. Purchase Payment surrendered under the Partial
Surrender Privilege without a contingent deferred sales charge will be subject
to the applicable contingent deferred sales charge upon full surrender of the
Contract. The Partial Surrender Privilege is not available for full surrenders.
The 10% free available for each Purchase Payment taken by a partial surrender
will reduce the remaining free amount available.
You may also elect to participate in the Systematic Withdrawal Program or the
Minimum Distribution Program. These programs allow you to make surrenders
without the deduction of the contingent deferred sales charge under certain
circumstances. See "Access to Your Money" for a description of the Systematic
Withdrawal Program and the Minimum Distribution Program.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE BENEFITS. Under certain
circumstances, Allianz Life will permit you to take your money out of the
Contract without deducting a contingent deferred sales charge: 1) if after the
third year of the Contract, you or the Joint Owner become confined to a nursing
home or hospital for 90 consecutive days; or
2) if after the first year of the Contract, you or the JointOwner become
terminally ill, which is defined as life
expectancy of 12 months or less (a full withdrawal of the Contract will be
required).
The waiver will not apply if any of the above conditions existed on the date
your Contract was issued.
Also, after the first year, if you or the Joint Owner become unemployed for at
least 90 consecutive days, you can take up to 50% of your money out of the
Contract without incurring a contingent deferred sales charge. Only one partial
surrender is available under this benefit during the life of the Contract. You
may not use both this benefit and the 10% Partial Surrender Privilege in the
same Contract year.
THESE BENEFITS VARY FROM STATE TO STATE OR MAY NOT BE AVAILABLE IN YOUR STATE.
(CHECK WITH YOUR REGISTERED REPRESENTATIVE.)
Surrenders may be subject to a 10% tax penalty in addition to any income taxes
due.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE. Allianz Life
may reduce or eliminate the amount of the contingent deferred sales charge when
the Contract is sold under circumstances which reduce its sales expenses. Some
examples are: if there is a large group of individuals that will be purchasing
the Contract or a prospective purchaser already had a relationship with Allianz
Life. Allianz Life may not deduct a contingent deferred sales charge under a
Contract issued to an officer, director or employee of Allianz Life or any of
its affiliates. Also, Allianz Life may reduce or not deduct a contingent
deferred sales charge when a Contract is sold by an agent of Allianz Life to any
members of his or her immediate family and the commission is waived. We require
our prior approval for any reduction or elimination of the contingent deferred
sales charge.
COMMUTATION FEE
If you elect Annuity Option 2, 4 or 6 and make a liquidation, a commutation fee
will be assessed against the amount liquidated. The commutation fee is a
percentage of the amount liquidated and is equal to:
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26
YEARS SINCE COMMUTATION
INCOME DATE FACTOR
0 - 1 7%
1 - 2 6%
2 - 3 5%
3 - 4 4%
4 - 5 3%
5 - 6 2%
Over 6 1%
TRANSFER FEE
Currently, 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 for each additional transfer. The transfer fee will
be deducted from the Investment Option (Sub-Account(s) or Fixed Account) from
which the transfer is made. If the entire amount in the account is transferred,
then the transfer fee will be deducted from the amount transferred. If the
transfer is from or to multiple accounts, it will be treated as a single
transfer. Any transfer fee will be deducted proportionally from the source
account if less than the entire amount in the account is transferred. If the
transfer is part of the Dollar Cost Averaging Program or Flexible Rebalancing,
it will not currently count in determining the transfer fee.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Allianz Life is responsible for the payment of
these taxes. We will make a deduction from the value of the Contract for them.
Some of these taxes are due when the Contract is issued, others are due when
Annuity Payments begin. It is Allianz Life's current practice to not charge you
for these taxes until you die, Annuity Payments begin or you make a complete
withdrawal. Allianz Life may discontinue this practice in the future and assess
the charge when the tax is due. Premium taxes generally range from 0% to 3.5% of
the Purchase Payment, depending on the state.
INCOME TAXES
Allianz Life reserves the right to deduct from the Contract for any income taxes
which it may incur because of the Contract. Currently, Allianz Life is not
making any such deductions.
PORTFOLIO EXPENSES
There are deductions from the assets of the various Portfolios for operating
expenses (including management fees), which are described in the Fee Table in
this prospectus and the prospectuses for the 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 from a Non-Qualified Contract you are taxed
on the amount of the surrender that is earnings. For Annuity Payments, different
rules apply. A portion of each Annuity Payment from a Non-Qualified Contract
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.
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27
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 including Roth IRAs (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.
A Qualified Contract will not provide any necessary or additional Tax Deferral
if it is used to fund a qualified plan that is Tax Deferred. However, the
Contract has features and benefits other than Tax Deferral that may make it an
appropriate investment for a qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing a 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.
With respect to (4) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 591/2 or 5 years
from the date of the first Annuity Payment, then the tax for the year of the
modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the tax years in which the exception
was used. A partial liquidation (surrender) during the Payout Phase may result
in the modification of the series of Annuity Payments made after such
liquidation and therefore could result in the imposition of the 10% penalty tax
and interest for the period as described above unless another exception to the
penalty tax applies. You should obtain competent tax advice before you make any
liquidations from your Contract.
SURRENDERS - QUALIFIED CONTRACTS
If you make a surrender from your Qualified Contract, a portion of the surrender
is treated as taxable income. This portion depends on the ratio of pre-tax
Purchase Payments to the after-tax Purchase Payments in your Contract. If all of
your Purchase Payments were made with pre-tax money then the full amount of any
surrender is includible in taxable income. Special rules may apply to surrenders
from certain types of Qualified Contracts.
The Code also provides that any amount received under a Qualified Contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some surrenders will be
exempt from the penalty. They include any amounts:
1) paid on or after you reach age 591/2;
2) paid after you die;
3) paid if you become totally disabled (as that term is defined in the Code);
4) paid to you after leaving your employment in a series
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28
of substantially equal periodic payments made annually (or more
frequently) under a lifetime annuity;
5) paid to you after you have attained age 55 and you have left your
employment;
6) paid for certain allowable medical expenses (as defined in the Code);
7) paid pursuant to a qualified domestic relations order;
8) paid on account of an IRS levy upon the Qualified Contract;
9) paid from an IRA for medical insurance (as defined in the Code);
10) paid from an IRA for qualified higher education expenses; or
11) paid from an IRA for up to $10,000 for qualified first-
time homebuyer expenses (as defined in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in (4)
above applies to IRAs but without the requirement of leaving employment.
We have provided a more complete discussion in the Statement of Additional
Information.
SURRENDERS - TAX-SHELTERED ANNUITIES
The Code limits the surrender of amounts attributable to Purchase Payments made
pursuant to a salary reduction agreement by Contract Owners from 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 hard- ship, the Contract
Owner can only surrender the Pur- chase 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
-------------------------------------------------------------------------------
You can have access to the money in your Contract:
o by making a partial or total surrender;
o by receiving Annuity Payments; or
o when a death benefit is paid to your Beneficiary.
In general, surrenders can only be made during the Accumulation Phase. Under
certain circumstances, you can take money out of the Contract during the Payout
Phase if you select Annuity Option 2 or 4. (See "Annuity Payments (The Payout
Phase)"). If you bought your Contract before June 16, 2000 you can also take
money out during the Payout Phase under Annuity Option 6.
When you make a complete surrender you will receive the Contract Value on the
day the withdrawal request is received at the Service Center:
o less any applicable contingent deferred sales charge,
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29
o less any premium tax, and
o less any contract maintenance charge.
(See "Expenses" for a discussion of the charges.)
Any partial surrender must be for at least $500. Unless you instruct Allianz
Life otherwise, the partial surrender will be made pro-rata from all the
Sub-Accounts and the Fixed Account you selected. After you make a partial
withdrawal the value of your Contract must be at least $10,000. We reserve the
right to treat a request for a withdrawal that will reduce the Contract Value
below $10,000 as a request for the full surrender of the Contract.
In the event that there are multiple bonuses applied to the Contract, we will
reduce the oldest unvested bonus amounts first.
Partial surrenders in excess of the Partial Surrender Privilege will reduce
unvested bonus amounts by such excess amount's percentage of the Contract Value
at the time of the surrender. This percentage is determined by dividing the
amount of the partial surrender (including any contingent deferred sales charge)
in excess of the Partial Surrender Privilege amount by the Contract Value.
EXAMPLE:
You deposit $100,000 on 5/1/2000
Bonus of $6,000 is also deposited into the Contract by Allianz Life.
On 4/1/2001, the Contract Value is $110,600. On 4/1/2001, the Rewards Value is
$116,600.
You request a $50,000 partial surrender. The contingent deferred sales charge
is 8.5%; bonus is not vested at all. You get $50,000.
The contingent deferred sales charge is .085 x ($50,000 - $10,000) = $3,400.
Contract Value decreases to $110,600 - $50,000 - $3,400 = $57,200.
Bonus Change = $6,000 x ($53,400 - $10,000)/ $110,600 = $2,354.
Rewards Value = Contract Value + ($6,000 - $2,354) = $57,200 + $3,646 = $60,846.
Bonus Remaining = $6,000 - $2,354 = $3,646.
If there are multiple bonuses applied to a Contract, Allianz Life will reduce
the oldest unvested bonus amounts first. We will pay the amount of any surrender
from the Sub-Accounts 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 "Taxes" and the
discussion in the SAI.
SYSTEMATIC WITHDRAWAL PROGRAM
If the value of your Contract is at least $25,000, Allianz Life offers a program
which provides automatic monthly or quarterly payments to you. The minimum
amount you can surrender under the program is $500. The Systematic Withdrawal
Program is subject to the Partial Surrender Privilege which means that the total
systematic surrenders which you can make each year without Allianz Life
deducting a contingent deferred sales charge is limited to 10% of your Purchase
Payments for that year. This is determined on the last business day prior to the
day your request is received. If a Purchase Payment is no longer subject to a
contingent deferred sales charge, there is no limit to the amount or percentage
which can be taken under this program. 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 Qualified Contract, 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 Qualified Contracts. Such surrenders will
not be subject to a contingent deferred sales charge. Payments may be made
monthly, quarterly, or annually unless your Contract is less than $25,000 in
which case the payments will only be made
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30
annually. If you have elected the Minimum Distribution Program, any additional
surrenders in a Contract year which exceed 10% of Purchase Payments when
combined with Minimum Distribution surrenders will be subject to any applicable
contingent deferred sales charge.
You cannot participate in the Systematic Withdrawal Program and the Minimum
Distribution Program at the same time.
SUSPENSION OF PAYMENTS OR TRANSFERS
Allianz Life may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of the Portfolio shares
is not reasonably practicable or Allianz
Life cannot reasonably value the Portfolio shares;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the
protection of Contract Owners.
Allianz Life has reserved the right to defer payment for a withdrawal or
transfer from the Fixed Account for the period permitted by law but not for more
than six months.
8.PERFORMANCE
-------------------------------------------------------------------------------
Allianz Life periodically advertises performance of the Sub-Accounts. Allianz
Life will calculate performance by determining the percentage change in the
value of an Accumulation Unit by dividing the increase (decrease) for that unit
by the value of the Accumulation Unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges and the
Portfolio expenses. It may not reflect the deduction of any applicable
contingent deferred sales charge and contract maintenance charge. The deduction
of any applicable contract maintenance charge and contingent deferred sales
charges would reduce the percentage increase or make greater any percentage
decrease. Any advertisement will also include average annual total return
figures which reflect the deduction of the insurance charges, contract
maintenance charge, contingent deferred sales charges and the expenses of the
Portfolios. Bonus amounts will not be reflected in any performance information.
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 Portfolios of the Underlying Mutual
Funds may also be advertised; see the Fund prospectuses 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 actual investment experience of the Portfolios may affect your Accumulation
Unit values, Allianz Life has prepared performance information which can be
found in the SAI.
Allianz Life may in the future also advertise yield information. If it does, it
will provide you with information regarding how yield is calculated. More
detailed information regarding how performance is calculated is found in the
SAI.
Any performance advertised will be based on historical data. It does not
guarantee future results of the Portfolios.
9.DEATH BENEFIT
--------------------------------------------------------------------------------
UPON YOUR DEATH
If you die during the Accumulation Phase, Allianz Life will pay a death benefit
to your Beneficiary (see below). If you die during the Payout Phase any benefit
will be as provided for in the Annuity Option selected.
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PHASE
At the time you purchase the Contract, you select the traditional death benefit
or the enhanced death benefit. If you do not make a selection, the traditional
death benefit will apply to your Contract.
TRADITIONAL DEATH BENEFIT - If you select the traditional death benefit, the
amount of the death benefit will be the greater of 1 or 2, less any applicable
premium tax.
1. The Contract Value determined as of the end of the business day during
which both due proof of death
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31
and an election of the payment method have been received at the USAllianz
Service Center;
2. The guaranteed minimum death benefit (GMDB) which is equal to the total of
all Purchase Payments you have made reduced proportionately by the percentage of
the Contract Value surrendered, includ- ing any contingent deferred sales charge
assessed.
ENHANCED DEATH BENEFIT - If you select the enhanced death benefit, the amount of
the death benefit will be the greater of 1 or 2, less any applicable premium
tax.
1. The Contract Value determined as of the end of the business day during which
both due proof of death and an election of the payment method have been
received at the USAllianz Service Center;
2. The guaranteed minimum death benefit (GMDB), as defined below, determined as
of the end of the business day during which both due proof of death and election
of the payment method have been received at the USAllianz Service Center.
The GMDB is equal to the greater of:
The total of all Purchase Payments you have made reduced proportionately by the
percentage of the Contract Value surrendered, including any contingent deferred
sales charge assessed.
THE GREATEST ANNIVERSARY VALUE. The anniversary value is equal to the Contract
Value on a Contract anniversary, increased by additional Purchase Payments and
reduced proportionately by the percentage of the Contract Value surrendered,
including any contingent deferred sales charge assessed, since that Contract
anniversary. Contract anniversaries occurring on or after your 81st birthday or
date of death will not be taken into consideration in determining this benefit.
THE TRADITIONAL DEATH BENEFIT AND/OR THE ENHANCED DEATH BENEFIT MAY NOT BE
APPROVED IN YOUR STATE. If they are not
available or if the Contract is owned by a non-individual, the death benefit
will be the Contract Value (less any premium taxes) determined as of the end of
the business day during which Allianz Life receives both due proof of death and
an election for the payment method at the USAllianz Service Center.
Please refer to the applicable endorsements to your Contract for the specific
terms and conditions of the death benefits.
Any part of the death benefit amount that had been invested in the Sub-Accounts
remains in the Sub-Accounts until distribution begins. From the time the death
benefit is determined until we make a complete distribution, any amount in the
Sub-Accounts will be subject to investment risk which will be borne by the
Beneficiary.
If you have a Joint Owner, the age of the older Contract Owner will be used to
determine the guaranteed minimum death benefit. If the Contract is owned by a
non-natural person, then all references to you mean the Annuitant.
In the case of Joint Owners, if a Joint Owner dies, the surviving Joint Owner
will be considered the Beneficiary. Any other Beneficiary designation on record
at the time of death will be treated as a contingent Beneficiary. Joint Owners
must be spouses (this requirement may not apply in certain states).
If you have not previously designated a death benefit option, a Beneficiary must
request the death benefit be paid under one of the death benefit options below.
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 Contract 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.
OPTION A: lump sum payment of the death benefit.
OPTION B: the payment of the entire death benefit within 5 years of the date of
the Contract Owner's or any Joint Owner's death. Allianz Life will assess the
full contract maintenance charge to each Beneficiary on each Contract
anniversary.
OPTION C: payment of the death benefit under an Annuity Option over the lifetime
of the Beneficiary or over a period not extending beyond the life expectancy of
the Beneficiary. Distribution under this option must begin within one year of
the date of the Contract Owner's or any Joint Owner's death. The full contract
maintenance charge will continue to be assessed to each Beneficiary. Any portion
of the death benefit not applied under Option C within one
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32
year of the date of the Contract Owner's death must be distributed within five
years of the date of death.
If the Beneficiary wants to receive the payment other than in a lump sum, he/she
may only make such an election during the 60 day period after the day that the
lump sum first became payable by Allianz Life.
If a lump sum payment is requested, the amount will be paid within 7 days of
receipt of proof of death and the valid election, including any required
governmental forms, unless the Suspension or Deferral of Payments Provision is
in effect.
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 will become the Annuitant unless you designate another
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
--------------------------------------------------------------------------------
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 direct business in 49 states and the District of Columbia.
Allianz Life is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding.
THE SEPARATE ACCOUNT
Allianz Life established a separate account named Allianz Life Variable Account
B (Separate Account) to hold the assets that underlie the Contracts, except
assets allocated to the Fixed Account. The Board of Directors of Allianz Life
adopted a resolution to establish the Separate Account under Minnesota insurance
law on May 31, 1985. Allianz Life has registered the Separate Account with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The Separate Account is divided into
Sub-Accounts. Each Sub-Account invests in one Portfolio of an Underlying Mutual
Fund. The obligations under the Contracts are obligations of Allianz Life.
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
USAllianz Investor Services, LLC (formerly NALAC Financial Plans, LLC), 1750
Hennepin Avenue, Minneapolis, MN 55403, acts as the distributor of the
Contracts. USAllianz Investor Services LLC, is a wholly-owned subsidiary of
Allianz Life.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions up to 6% of Purchase Payments.
Sometimes, Allianz Life enters into an agreement with the broker-dealer to pay
the broker-dealer commissions as a combination of a certain amount of the
commission at the time of sale and a trail commission (which when
totaled could exceed 6% of Purchase Payments). In addition, Allianz Life may pay
certain sellers for other services not directly related to the sale of the
Contracts (such as special marketing support allowances). Commissions may be
recovered from a broker-dealer if a withdrawal occurs within 12 months of a
Purchase Payment.
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33
ADMINISTRATION
Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300
Berwyn Park, Berwyn, Pennsylvania, to perform
certain administrative services regarding the Contracts. The administrative
services include issuance of the Contracts and maintenance of Contract Owner's
records.
FINANCIAL STATEMENTS
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
Insurance Company 2
Experts 2
Legal Opinions 2
Distributor 2
Reduction or Elimination of the
Contingent Deferred Sales Charge 2
Calculation of Performance Data 3
Federal Tax Status 7
Annuity Provisions 12
Financial Statements 13
<PAGE>
34
