File Nos.   333-06709
                                                                811-05618
==============================================================================

                      SECURITIES AND EXCHANGE COMMISSION

                           Washington, D.C.  20549

                                   FORM N-4

REGISTRATION  STATEMENT UNDER THE SECURITIES ACT OF 1933                   ( )
            Pre-Effective  Amendment No.                                   ( )
            Post-Effective  Amendment No.    8                             (X)

REGISTRATION  STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940           ( )
            Amendment  No.    66                                           (X)

                      (Check appropriate box or boxes.)

     ALLIANZ  LIFE  VARIABLE  ACCOUNT  B
     -------------------------------
        (Exact  Name  of  Registrant)

     ALLIANZ  LIFE  INSURANCE  COMPANY  OF  NORTH  AMERICA
     -----------------------------------------------
        (Name  of  Depositor)


     1750  Hennepin  Avenue,  Minneapolis,  MN                           55403
     -------------------------------------------                         -----
     (Address  of  Depositor's  Principal  Executive  Offices)      (Zip Code)

Depositor's  Telephone  Number,  including  Area  Code    (612)  347-6596

     Name  and  Address  of  Agent  for  Service
     -------------------------------------
          Michael  T.  Westermeyer
          Allianz  Life  Insurance  Company  of  North  America
          1750  Hennepin  Avenue
          Minneapolis,  MN    55403

     Copies  to:
          Judith  A.  Hasenauer
          Blazzard,  Grodd  &  Hasenauer,  P.C.
          P.O.  Box  5108
          Westport,  CT  06881
          (203)  226-7866


It is proposed that this filing will become effective:

     _____  immediately  upon filing pursuant to paragraph (b) of Rule 485
     __X__  on May 1, 2000 pursuant  to  paragraph (b) of Rule 485
     _____  60 days after filing pursuant to paragraph (a)(1) of Rule 485
     _____  on (date) pursuant to paragraph (a)(1) of Rule 485

If appropriate, check the following:

     _____  this post-effective amendment designates a new effective date
            for a previously filed post-effective amendment.

Title of Securities Registered:

     Individual Deferred Variable Annuity Contracts



                            CROSS REFERENCE SHEET
                            (Required by Rule 495)

<TABLE>
<CAPTION>
<S>       <C>                                            <C>
Item No.                                                 Location
--------                                                 -----------------------

          PART A

Item 1.   Cover Page . . . . . . . . . . . . . . . . .   Cover Page

Item 2.   Definitions .  . . . . . . . . . . . . . . .   Index of Terms

Item 3.   Synopsis or Highlights.  . . . . . . . . . .   Summary


Item 4.   Condensed Financial Information. . . . . . .   Appendix-Condensed
                                                         Financial Information


Item 5.   General Description of Registrant, Depositor,
          and Portfolio Companies. . . . . . . . . . . . Other Information-
                                                         The Separate Account,
                                                         Allianz Life,
                                                         Investment Options

Item 6.   Deductions. . . . . . . . .. . . . . . . . . . Expenses

Item 7.   General Description of Variable
          Annuity Contracts . . . . . . . . . . . . . . .The Valuemark IV
                                                         Variable Annuity
                                                         Contract

Item 8.   Annuity Period. . .. . . . . . . . . . . . . . Annuity Payments
                                                         (The Payout Phase)

Item 9.   Death Benefit. . . . . . . . . . . . . . . . . Death Benefit

Item 10.  Purchases and Contract Value. . . . . . . . . .Purchase

Item 11.  Redemptions. . . . . . . . . . . . . . . . . . Access to Your Money

Item 12.  Taxes. . . . . . . . . . . . . . . . . . . . . Taxes

Item 13.  Legal Proceedings. . . . . . . . . . . . . . . None

Item 14.  Table of Contents of the Statement of
          Additional Information. . . . . . . . . . .    Table of Contents
                                                         of the Statement of
                                                         Additional Information
</TABLE>




                        CROSS REFERENCE SHEET (cont'd)
                            (Required by Rule 495)

<TABLE>
<CAPTION>
<S>       <C>                                          <C>
Item No.                                               Location
--------                                               --------------------

          PART B

Item 15.  Cover Page. . . . . . . . .. . . . . . . .   Cover Page

Item 16.  Table of Contents. . . . . . . . . . . . .   Table of Contents

Item 17.  General Information and History. . . . . .   Insurance Company

Item 18.  Services. . . . . . . . . . . . .. . . . .   Not Applicable

Item 19.  Purchase of Securities Being Offered. . . .  Not Applicable

Item 20.  Underwriters. . . . . . . . . . . . . . . .  Distributor

Item 21.  Calculation of Performance Data. . . . . .   Calculation of
                                                       Performance Data

Item 22.  Annuity Payments. . . . . . . . . . . . . .  Annuity Provisions

Item 23.  Financial Statements. . . . .  . . . . . .   Financial Statements
</TABLE>




                                 PART C

Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.

<PAGE>
                                 PART A



                  THE VALUEMARK(R) IV VARIABLE ANNUITY CONTRACT

                                    issued by

                         ALLIANZ LIFE VARIABLE ACCOUNT B

                                       and

                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA



This  prospectus  describes  the Valuemark IV Variable  Annuity  Contract with a
Fixed  Account  offered  by Allianz  Life  Insurance  Company  of North  America
(Allianz Life). All references to "we," "us" and "our" refer to Allianz Life.


The annuity  offers the Variable  Options  listed below,  and a Fixed Account of
Allianz Life. Each Variable Option invests in a Portfolio  listed below. You can
select up to 10 investment  options (which includes any of the Variable  Options
and the  Fixed  Account).  The  Fixed  Account  and one or more of the  Variable
Options may not be available in your state.



VARIABLE OPTIONS:
AIM VARIABLE INSURANCE FUNDS:

AIM V.I. Growth Fund

THE ALGER AMERICAN FUND:

Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST#:


Franklin Agressive Growth Securities Fund
Franklin Global Communications Securities Fund*
Franklin Global Health Care Securities Fund
Franklin Growth and Income Securities Fund*
Franklin High Income Fund
Franklin Income Securities Fund
Franklin Large Cap Growth Securities Fund*
Franklin Money Market Fund
Franklin Natural Resources Securities Fund
Franklin Real Estate Fund*
Franklin Rising Dividends Securities Fund*
Franklin S&P 500 Index Fund
Franklin Small Cap Fund
Franklin Technology Securities Fund
Franklin U.S. Government Fund*
Franklin Value Securities Fund
Franklin Zero Coupon Funds - 2000, 2005 and 2010
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Templeton Asset Strategy Fund*
Templeton Developing Markets Securities Fund*
Templeton Global Income Securities Fund
Templeton Growth Securities Fund*
Templeton International Securities Fund*
Templeton International Smaller Companies 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


USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:

USAllianz VIP Diversified Assets Fund
USAllianz VIP Fixed Income Fund
USAllianz VIP Growth Fund

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.



<TABLE>
<CAPTION>

*The fund name changed:

CURRENT NAME                                        PREVIOUS NAME
-----------------------------------------------------------------------------------------------------
<S>                                                 <C>
Franklin Global Communications Securities Fund      Franklin Global Utilities Securities Fund
Franklin Growth and Income Securities Fund          Franklin Growth and Income Fund
Franklin Large Cap Growth Securities Fund           Franklin Capital Growth Fund
Franklin Real Estate Fund                           Franklin Real Estate Securities Fund
Franklin Rising Dividends Securities Fund           Franklin Rising Dividends Fund
Franklin U.S. Government Fund                       Franklin U.S. Government Securities Fund
Templeton Asset Strategy Fund                       Templeton Global Asset Allocation Fund
Templeton Developing Markets Securities Fund        Templeton Developing Markets Equity Fund
Templeton Growth Securities Fund                    Templeton Global Growth Fund
Templeton International Securities Fund             Templeton International Equity Fund
Templeton Pacific Growth Securities Fund            Templeton Pacific Growth Fund
</TABLE>


2

Please read this prospectus  before investing and keep it for future  reference.
It contains  important  information  about the  Valuemark  IV  Variable  Annuity
Contract with a Fixed Account.

To learn more about the  annuity  offered by this  prospectus,  you can obtain a
copy of the Statement of Additional Information (SAI) dated May 1, 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 24 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  1-800-542-5427  or write us at: 1750 Hennepin  Avenue,  Minneapolis,
Minnesota 55403-2195.

THE VALUEMARK IV VARIABLE ANNUITY CONTRACTS:
O ARE NOT BANK DEPOSITS
O ARE NOT FEDERALLY INSURED
O ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
O ARE NOT GUARANTEED AND MAY BE SUBJECT TO LOSS OF PRINCIPAL

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


<PAGE>
3

                           Variable Annuity Prospectus

TABLE OF   CONTENTS


Index of  Terms                                     4

Summary                                             5

Fee Table                                           6

1. The  Valuemark IV
Variable Annuity Contract                          10
    Contract  Owner                                10
    Joint  Owner                                   10
    Annuitant                                      10
    Beneficiary                                    10
    Assignment                                     10

2. Annuity   Payments (The Payout  Phase)          11
    Annuity  Options                               11

3.  Purchase                                       12
    Purchase  Payments                             12
    Automatic Investment   Plan                    12
    Allocation of Purchase  Payments               12
    Free   Look                                    12
    Accumulation  Units                            13

4. Investment  Options                             13
    Transfers                                      15
    Dollar Cost Averaging  Program                 15
    Flexible Rebalancing                           16
    Voting Privileges                              16
    Substitution                                   16

5.  Expenses                                       16
    Insurance  Charges                             16
     Mortality and Expense Risk  Charge            16
     Administrative  Charge                        17
    Contract Maintenance  Charge                   17
    Contingent Deferred Sales  Charge              17



    Waiver of   Contingent Deferred
        Sales Charge  Benefits                     18
    Reduction or Elimination   of the
    Contingent Deferred Sales  Charge              18
    Transfer Fee                                   18
    Premium  Taxes                                 18
    Income  Taxes                                  18
    Portfolio  Expenses                            18

6.  Taxes                                          18
    Annuity Contracts in  General                  18
    Qualified and  Non-Qualified Contracts         19
    Multiple Contracts                             19
    Withdrawals -  Non-Qualified Contracts         19
    Withdrawals - Qualified Contracts              19
    Withdrawals -  Tax-Sheltered Annuities         20
    Diversification                                20

7. Access to Your Money                            20
    Systematic Withdrawal  Program                 21
    Minimum Distribution  Program                  21
    Suspension of Payments or Transfers            21

8. Performance                                     21

9. Death  Benefit                                  22
    Upon Your  Death                               22
    Death of Annuitant                             24

10. Other Information                              24
    Allianz   Life                                 24
    The Separate  Account                          24
    Distribution                                   24
    Administration                                 24
    Financial Statements                           24

Table of   Contents of the
Statement of Additional Information                24

Appendix                                           25
<PAGE>

4

INDEX OF TERMS
--------------------------------------------------------------------------------

This  prospectus  is written in plain  English to make it as  understandable  as
possible.  However, there are some technical terms used which are capitalized in
the  prospectus.  The page  that is  indicated  below is where you will find the
definition for the word or term.

                                                    Page

Accumulation  Phase                                   10
Accumulation   Unit                                   13
Annuitant                                             10
Annuity  Options                                      11
Annuity  Payments                                     11
Annuity   Unit                                        13
Beneficiary                                           10
Contract                                              10
Contract  Owner                                       10
Fixed  Account                                        10

                                                    Page

Income  Date                                         11
Joint Owner                                           10
Non-Qualified .                                       19
Payout  Phase                                         10
Portfolios                                            13
Purchase  Payment                                     12
Qualified                                             19
Tax  Deferral                                         10
Variable  Option                                      10


<PAGE>

5

                Variable Annuity Prospectus


SUMMARY
-------------------------------------------------------------------------------

The sections in this summary  correspond  to sections in this  prospectus  which
discuss the topics in more detail.

THE VARIABLE ANNUITY CONTRACT:

The annuity contract offered by Allianz Life provides a means for investing on a
tax-deferred  basis in Variable  Options and the Allianz Life Fixed  Account for
retirement savings or other long-term investment purposes. The Contract provides
two death benefit options and annuity income options.

ANNUITY PAYMENTS:

If you want to  receive  regular  income  from your  annuity,  you can choose an
Annuity  Option.  You can choose  whether to have payments come from our general
account,  the available Variable Options or both. If you choose to have any part
of your  payments  come from the  Variable  Options,  the dollar  amount of your
payments may go up or down based on the performance of the Portfolios.

PURCHASE:

You can buy the Contract with $5,000 or more under most  circumstances.  You can
add $250 or more any time you like during the Accumulation Phase.

INVESTMENT OPTIONS:

You can put your  money in the  Variable  Options  and/or  you can invest in the
Allianz Life Fixed  Account.  The  investment  returns on the Portfolios are not
guaranteed.  You  can  make or  lose  money.  You  can  make  transfers  between
investment options.

EXPENSES:

The Contract has insurance features and investment features, and there are costs
related to each.

Each year,  Allianz  Life deducts a $30  contract  maintenance  charge from your
Contract.  Allianz  Life  currently  waives  this  charge  if the  value of your
Contract is at least $50,000.

Allianz Life deducts a mortality  and expense risk charge which is equal,  on an
annual basis, to 1.34% of the average daily value of the Contract  invested in a
Variable Option during the  Accumulation  Phase (1.25% during the Payout Phase).
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 Variable Option.

If you take money out of the  Contract,  Allianz  Life may  assess a  contingent
deferred sales charge against each Purchase  Payment  withdrawn.  The contingent
deferred  sales charge starts at 6% in the first year and declines to 0% after 7
years.

You can make 12 free transfers each year. After that,  Allianz Life deducts $25,
or 2% of  the  amount  transferred,  whichever  is  less,  for  each  additional
transfer.

There are also daily  investment  charges which range, on an annual basis,  from
0.49% to 1.56% of the average daily value of the  Portfolio,  depending upon the
Portfolio.

TAXES:

Your  earnings  are not taxed  until you take  them out.  If you take  money out
during the Accumulation Phase,  earnings come out first and are taxed as income.
If you are younger  than 591/2 when you take money out, you may be charged a 10%
federal tax penalty.

ACCESS TO YOUR MONEY:

You  can  take  money  out of  your  Contract  during  the  Accumulation  Phase.
Withdrawals  during  the  Accumulation  Phase  may be  subject  to a  contingent
deferred sales charge.  You may also have to pay income tax and a tax penalty on
any money you take out.

DEATH BENEFIT:

If you die before moving to the Payout  Phase,  the  Beneficiary  will receive a
death  benefit.  The amount of the death  benefit  depends on whether you select
Death Benefit Option 1 or Death Benefit Option 2.

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 value of your
Contract 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 19312-0031
         1-800-624-0197

<PAGE>

6

FEE TABLE
--------------------------------------------------------------------------------


The purpose of this Fee Table is to help you  understand the costs of investing,
directly or indirectly,  in the Variable Options under the Contract. It reflects
expenses of the Separate Account as well as the Portfolios.

CONTRACT OWNER TRANSACTION FEES

Contingent Deferred Sales Charge*

(as a percentage of Purchase Payments)

                                  YEARS SINCE
                              PURCHASE PAYMENT    CHARGE
-----------------------------------------------------------------
                                      0-1           6%
                                      1-2           6%
                                      2-3           6%
                                      3-4           5%
                                      4-5           4%
                                      5-6           3%
                                      6-7           2%
                                      7 +           0%

Transfer Fee First 12 transfers in a Contract year are free. Thereafter, the fee
is $25 or 2% of the amount transferred, if less. Dollar Cost Averaging transfers
and Flexible Rebalancing transfers are not counted.


CONTRACT MAINTENANCE CHARGE**      $30 per Contract   per year


SEPARATE ACCOUNT ANNUAL   EXPENSES
(as a percentage of average account   value)

Mortality and Expense Risk Charge***         1.34%

Administrative Charge                         .15%
                                              ---

Total Separate Account Annual Expenses       1.49%

* Each  year  after the  first  Contract  year,  you may make  multiple  partial
withdrawals  of up to a  total  of 15% of the  value  of  your  Contract  and no
contingent  deferred sales charge will be assessed.  See Section 7 -- "Access to
Your Money" for additional options.

** During  the  Accumulation  Phase,  the  charge is waived if the value of your
Contract is at least  $50,000.  If you own more than one  Valuemark  IV Contract
(registered with the same social security  number),  we will determine the total
value of all your  Contracts.  If the total  value of all your  Contracts  is at
least  $50,000,  the charge is waived  (except in New  Jersey).  Currently,  the
charge is also waived  during the Payout Phase if the value of your  Contract at
the Income Date is at least $50,000 (except in New Jersey).

*** The Mortality and Expense Risk Charge is 1.25% during the Payout Phase.
<PAGE>
7

                         Variable Annuity Prospectus
<TABLE>

<CAPTION>



FUND ANNUAL EXPENSES:

(as a  percentage  of the  Portfolio's  average  net assets for the most  recent
fiscal year). See the accompanying Portfolio prospectuses for more information.



                                                    MANAGEMENT

                                                  AND PORTFOLIO                                      TOTAL ANNUAL

                                               ADMINISTRATIVE FEES1  12B-1 FEES     OTHER EXPENSES     EXPENSES
---------------------------------------------------------------------------------------------------------------------------

<S>                                                    <C>               <C>            <C>              <C>
AIM V.I. Growth Fund.                                  .63%              --             .10%             .73%

Alger American Growth Portfolio                        .75%              --             .04%             .79%

Alger American Leveraged AllCap Portfolio2             .85%              --             .08%             .93%

Franklin Agressive Growth Securities Fund3             .50%              --             .22%             .72%

Franklin Global Communications Securities Fund         .48%              --             .03%              .51%

Franklin Global Health Care Securities Fund            .60%              --             .22%              .82%

Franklin Growth and Income Securities Fund             .47%              --             .02%              .49%

Franklin High Income Fund                              .51%              --             .03%              .54%

Franklin Income Securities Fund                        .48%              --             .02%              .50%

Franklin Large Cap Growth Securities Fund4             .75%              --             .02%              .77%

Franklin Money Market Fund                             .52%              --             .01%              .53%

Franklin Natural Resources Securities Fund             .62%              --             .04%              .66%

Franklin Real Estate Fund                              .56%              --             .02%              .58%

Franklin Rising Dividends Securities Fund              .73%              --             .02%              .75%

Franklin S&P 500 Index Fund5                           .15%              --             .38%              .53%

Franklin Small Cap Fund6                               .55%              --             .27%              .82%

Franklin Technology Securities Fund3                   .55%              --             .38%             .93%

Franklin U.S. Government  Fund                         .49%              --             .02%              .51%

Franklin Value Securities Fund                         .60%              --             .21%              .81%

Franklin Zero Coupon Fund - 2000                       .63%              --             .02%              .65%

Franklin Zero Coupon Fund - 2005                       .63%              --             .02%              .65%

Franklin Zero Coupon Fund - 2010                       .63%              --             .02%              .65%

Mutual Discovery Securities Fund                       .80%              --              .21             1.01%

Mutual Shares Securities Fund4                         .60%              --             .19%              .79%

Templeton Asset Strategy Fund6                         .60%              --             .18%              .78%

Templeton Developing Markets Securities Fund6         1.25%              --             .31%             1.56%

Templeton Global Income Securities Fund4               .60%              --             .05%              .65%

Templeton Growth Securities Fund4                      .83%              --             .05%              .88%

Templeton International Securities Fund6               .69%              --             .19%              .88%

Templeton International Smaller Companies Fund         .85%              --             .26%             1.11%

Templeton Pacific Growth Securities Fund              1.00%              --             .08%             1.08%

USAllianz VIP Diversified Assets Fund5/7               .55%             .25%            .20%             1.00%

USAllianz VIP Fixed Income Fund5/7                     .50%             .25%            .00%              .75%

USAllianz VIP Growth Fund5/7                           .65%             .25%            .00%              .90%
<FN>

1. The Portfolio  Administration  Fee is a direct expense for the Franklin Global Health Care Securities  Fund, the Franklin Small
Cap Fund, the Franklin Value  Securities  Fund,  the Mutual  Discovery  Securities  Fund, the Mutual Shares  Securities  Fund, the
Templeton  Asset Strategy Fund, the Templeton  Developing  Markets Fund, the Templeton  Interna-  tional  Securities  Fund and the
Templeton  International  Smaller Companies Fund. Other Portfolios of Franklin Templeton Variable Insurance Products Trust pay for
similar serv- ices indirectly  through the Management Fee. See the Franklin Templeton Variable Insurance Products Trust prospectus
for further information regarding these fees.

2.  Other expenses for the Alger American Leveraged AllCap Fund include 0.01% of interest expense.

3. The Franklin Aggressive Growth Securities Fund and the Franklin Technology  Securities Fund commenced operations as of the date
of this prospectus. The expenses shown above for these portfolios are therefore estimated for the current fiscal year.

8

4. 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 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 Manage- ment Fees,  Other Expenses,  and Total Fund
Operating  Expenses after 5/1/00 would be estimated as: 0.75%,  0.02%,  and 0.77%  respectively  for the Franklin Large Cap Growth
Securities Fund; 0.60%,  0.19%, and 0.79% respectively for the Mutual Shares Securities Fund; 0.80%, 0.05%, and 0.85% respectively
for the Templeton Growth  Securities Fund; and .0.60%,  0.04%, and 0.64%  respectively for the Templeton Global Income  Securities
Fund.

5. The Franklin S&P 500 Index Fund, the US Allianz VIP  Diversified  Assets Fund, the US Allianz VIP Fixed Income Fund, and the US
Allianz VIP Growth Fund commenced  operations on November 12, 1999.  The expenses  shown above for these  portfolios are therefore
estimated for the fund's current fiscal year.

6. On 2/8/00,  shareholders  approved a merger and reorganization  that combined the assets of the fund with a similar fund of the
Templeton  Variable Products Series Fund, effec- tive 5/1/00. The shareholders of the 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 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 Management Fees, Other Expenses,  and Total Fund Operating Expenses after 5/1/00 would be estimated as: 0.55%,
0.27%, and 0.82% respectively for the Franklin Small Cap Fund; 1.25%,  0.29%, and 1.54% respectively for the Templeton  Developing
Markets Securities Fund; 0.60%,  0.14%, and 0.74% respectively for the Templeton Asset Strategy Fund; and 0.65%,  0.20%, and 0.85%
respectively for the Templeton International Securities Fund.

7. 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, and 3.90% for the Growth Fund.
</FN>
</TABLE>

<PAGE>

<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 $30  contract  maintenance  charge is  included  in the  examples as a
prorated  charge of $1. Since the average  Contract size is greater than $1,000,
the contract maintenance charge is reduced accordingly.

    O Premium taxes are not reflected in the tables. Premium taxes may apply.

    O  For  additional  information,   see  Section  5  --  "Expenses"  and  the
accompanying fund prospectuses.

You would pay the  following  expenses  on a $1,000  investment,  assuming  a 5%
annual  return on your money if you  surrender  your Contract at the end of each
time period:

                                                     1 YEAR           3 YEARS          5 YEARS          10 YEARS
---------------------------------------------------------------------------------------------------------------------------

<S>                                                   <C>              <C>              <C>               <C>
AIM V.I. Growth Fund                                  $84              $123             $158              $265

Alger American Growth Portfolio                       $84              $125             $161              $272

Alger American Leveraged AllCap Portfolio             $86              $129             $168              $286

Franklin Agressive Growth Securities Fund*            $83              $123             $157              $264

Franklin Global Communications Securities Fund        $81              $117             $147              $243

Franklin Global Health Care Securities Fund           $84              $126             $163              $275

Franklin Growth and Income Securities Fund            $81              $116             $146              $241

Franklin High Income Fund                             $82              $118             $148              $246

Franklin Income Securities Fund                       $81              $116             $146              $242

Franklin Large Cap Growth Securities Fund             $84              $125             $160              $270

Franklin Money Market Fund                            $82              $117             $148              $245

Franklin Natural Resources Securities Fund            $83              $121             $154              $258

Franklin Real Estate Fund                             $82              $119             $150              $250

Franklin Rising Dividends Securities Fund             $84              $124             $159              $267

Franklin S&P 500 Index Fund*                          $82              $117             $148              $245

Franklin Small Cap Fund                               $84              $126             $163              $275

Franklin Technology Securities Fund*                  $86              $129             $168              $286

Franklin U.S. Government Fund                         $81              $117             $147              $243

Franklin Value Securities Fund                        $84              $126             $162              $274

Franklin Zero Coupon Fund - 2000                      $83              $121             $154              $257

Franklin Zero Coupon Fund - 2005                      $83              $121             $154              $257

Franklin Zero Coupon Fund - 2010                      $83              $121             $154              $257

Mutual Discovery Securities Fund                      $86              $132             $172              $294

Mutual Shares Securities Fund                         $84              $125             $161              $272

Templeton Asset Strategy Fund                         $84              $125             $161              $271

Templeton Developing Markets Securities Fund          $92              $148             $199              $346

Templeton Global Income Securities Fund               $82              $117             $148              $245

Templeton Growth Securities Fund                      $85              $128             $166              $281

Templeton International Securities Fund               $85              $128             $166              $281

Templeton International Smaller Companies Fund        $87              $135             $177              $303

Templeton Pacific Growth Securities Fund              $87              $134             $176              $300

USAllianz VIP Diversified Assets Fund*                $84              $124             $159              $267

USAllianz VIP Fixed Income Fund*                      $81              $116             $146              $242

USAllianz VIP Growth Fund*                            $83              $121             $154              $257

<FN>
*Estimated
</FN>
</TABLE>



<PAGE>
9

                           Variable Annuity Prospectus

<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:

                                                     1 YEAR           3 YEARS          5 YEARS         10 YEARS
---------------------------------------------------------------------------------------------------------------------------

<S>                                                   <C>              <C>              <C>             <C>
AIM V.I. Growth Fund                                  $24              $72              $124            $265

Alger American Growth Portfolio                       $24              $74              $127            $272

Alger American Leveraged AllCap Portfolio             $26              $78              $134            $286

Franklin Agressive Growth Securities Fund*            $23              $72              $123            $264

Franklin Global Communications Securities Fund        $21              $66              $113            $243

Franklin Global Health Care Securities Fund           $24              $75              $129            $275

Franklin Growth and Income Securities Fund            $21              $65              $112            $241

Franklin High Income Fund                             $22              $67              $114            $246

Franklin Income Securities Fund                       $21              $65              $112            $242

Franklin Large Cap Growth Securities Fund             $24              $74              $126            $270

Franklin Money Market Fund                            $22              $66              $114            $245

Franklin Natural Resources Securities Fund            $23              $70              $120            $258

Franklin Real Estate Fund                             $22              $68              $116            $250

Franklin Rising Dividends Securities Fund             $22              $66              $114            $245

Franklin S&P 500 Index Fund*                          $26              $80              $137            $291

Franklin Small Cap Fund                               $24              $75              $129            $275

Franklin Technology Securities Fund*                  $26              $78              $134            $286

Franklin U.S. Government Fund                         $21              $66              $113            $243

Franklin Value Securities Fund                        $24              $75              $128            $274

Franklin Zero Coupon Fund - 2000                      $23              $70              $120            $257

Franklin Zero Coupon Fund - 2005                      $23              $70              $120            $257

Franklin Zero Coupon Fund - 2010                      $23              $70              $120            $257

Mutual Discovery Securities Fund                      $26              $81              $138            $294

Mutual Shares Securities Fund                         $24              $74              $127            $272

Templeton Asset Strategy Fund                         $24              $74              $127            $271

Templeton Developing Markets Securities Fund          $32              $97              $165            $346

Templeton Global Income Securities Fund               $22              $66              $114            $245

Templeton Growth Securities Fund                      $25              $77              $132            $281

Templeton International Securities Fund               $25              $77              $132            $281

Templeton International Smaller Companies Fund        $27              $84              $143            $303

Templeton Pacific Growth Securities Fund              $27              $83              $142            $300

USAllianz VIP Diversified Assets Fund*                $24              $73              $125            $267

USAllianz VIP Fixed Income Fund*                      $21              $65              $112            $242

USAllianz VIP Growth Fund*                            $23              $70              $120            $257

<FN>
*Estimated
</FN>
</TABLE>

SEE THE APPENDIX FOR ACCUMULATION UNIT VALUES - CONDENSED FINANCIAL INFORMATION.


<PAGE>

10

1. The valuemark iv
variable annuity contract
-------------------------------------------------------------------------------

This  prospectus  describes a variable  deferred  annuity  contract with a Fixed
Account offered by Allianz Life.

An annuity is a contract  between you, the owner,  and an insurance  company (in
this case Allianz  Life),  where the insurance  company  promises to pay you (or
someone else you choose) an income, in the form of Annuity Payments. The Annuity
Payments  must  begin on a  designated  date  that is at least  two years in the
future. Until you decide to begin receiving Annuity Payments, your annuity is in
the Accumulation Phase. Once you begin receiving Annuity Payments, your Contract
switches to the Payout Phase.

The Contract  benefits  from Tax Deferral.  Tax Deferral  means that you are not
taxed on any earnings or  appreciation  on the assets in your Contract until you
take money out of your Contract.

Your  investment  choices  include  Variable  Options  and the Fixed  Account of
Allianz Life. The Contract is called a variable  annuity  because you can choose
among the Variable Options and, depending upon market  conditions,  you can make
or lose  money  in the  Contract  based  on the  investment  performance  of the
Portfolios.  The Portfolios are designed to offer a better return than the Fixed
Account.  However,  this is not guaranteed.  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 of the Contract  also
depends in large part upon the  investment  performance  of the  Portfolios  you
select for the Payout Phase.

The Contract also contains a Fixed Account. The Fixed Account offers an interest
rate that is  guaranteed by Allianz Life for all deposits made within the twelve
month period.  Your initial  interest rate is set on the date when your money is
invested  in the Fixed  Account  and  remains  effective  for one year.  Initial
interest rates are declared  monthly.  Allianz Life guarantees that the interest
credited to the Fixed  Account will not be less than 3% per year.  If you select
the Fixed  Account,  your money will be placed  with the other  general  account
assets of Allianz  Life.  Allianz Life may change the terms of the Fixed Account
in the future - please contact Allianz Life for the most current terms.

If you select the Fixed Account,  the amount of money you are able to accumulate
in your Contract during the  Accumulation  Phase depends upon the total interest
credited to your Contract.

We will not make any changes to your Contract without your permission  except as
may be required by law.

CONTRACT OWNER

You, as the Contract Owner, have all the rights under the Contract. The Contract
Owner is as designated at the time the Contract is issued,  unless changed.  You
may change Contract Owners at any time. This may be a taxable event.  You should
consult with your tax adviser before doing this.

JOINT OWNER

The Contract can be owned by Joint Owners. Any Joint Owner must be the spouse of
the other Contract Owner (except in Pennsylvania,  Oregon and New Jersey).  Upon
the  death  of  either  Joint  Owner,  the  surviving  Joint  Owner  will be the
designated  Beneficiary.  Any  other  Beneficiary  designation  at the  time the
Contract  was  issued or as may have been  later  changed  will be  treated as a
contingent Beneficiary unless otherwise indicated.

ANNUITANT

The Annuitant is the natural person on whose life we base Annuity Payments.  You
name the  Annuitant.  You may change the Annuitant at any time before the Income
Date  unless  the  Contract  is  owned  by  a  non-individual  (for  example,  a
corporation).

BENEFICIARY

The  Beneficiary  is the  person(s)  or  entity  you name to  receive  any death
benefit.  The  Beneficiary  is named at the time the  Contract is issued  unless
changed at a later date.  Unless an irrevocable  Beneficiary has been named, you
can change the Beneficiary or contingent Beneficiary.

ASSIGNMENT

You can  transfer  ownership  (assign)  of the  Contract at any time during your
lifetime.  Allianz  Life will not be bound by the  assignment  until it receives
written  notice of the  assignment.  Allianz  Life  will not be  liable  for any
payment  or other  action it takes in  accordance  with the  Contract  before it
receives notice of the  assignment.  Any assignment made after the death benefit
has become  payable can only be done with our consent.  AN  ASSIGNMENT  MAY BE A
TAXABLE EVENT.

If the  Contract is issued  pursuant to a Qualified  plan,  you may be unable to
assign the Contract.


11

                           Variable Annuity Prospectus


2. annuity payments

(the payout phase)
-------------------------------------------------------------------------------

You can receive  regular  monthly income  payments under your Contract.  You can
choose the month and year in which those payments  begin.  We call that date the
Income Date. Your Income Date must be the first day of a calendar month and must
be at least 2 years after you buy the Contract. You can also choose among income
plans. We call those Annuity Options.

We ask you to choose your Income Date when you  purchase the  Contract.  You can
change it at any time before the Income Date with 30 days notice to us.  Annuity
Payments  must begin by the  Annuitant's  85th  birthday or 10 years (5 years in
Pennsylvania)  from the date the Contract was issued,  whichever is later.  This
limitation  may not apply when the Contract is issued to a charitable  remainder
trust.  You (or someone you designate)  will receive the Annuity  Payments.  You
will receive tax reporting on those payments.

If you do not choose an Annuity  Option prior to the Income Date, we will assume
that  you  selected  Option  2 which  provides  a life  annuity  with 5 years of
guaranteed payments.

You may elect to receive your  Annuity  Payments as a variable  payout,  a fixed
payout,  or a  combination  of both.  Under a fixed  payout,  all of the Annuity
Payments will be the same dollar amount  (equal  installments).  If you choose a
variable payout, you can select from the available  Variable Options.  If you do
not tell us otherwise,  your Annuity  Payments  will be based on the  investment
allocations that were in place on the Income Date.

If you  choose  to have  any  portion  of your  Annuity  Payments  based  on the
investment  performance  of the Variable  Option(s),  the dollar  amount of your
payments will depend upon three things:

1) the value of your Contract in the Variable Option(s) on the Income Date;

2) the 5% assumed  investment  rate used in the annuity  table for the Contract;
and

3) the performance of the Variable Option(s) you selected.

If the actual  performance  exceeds the 5% assumed investment rate, your Annuity
Payments  will  increase.  Similarly,  if the actual  rate is less than 5%, your
Annuity Payments will decrease.

ANNUITY OPTIONS

You can choose one of the following  Annuity Options or any other Annuity Option
you want and that Allianz Life agrees to provide.  After Annuity Payments begin,
you cannot change the Annuity Option.

OPTION 1. LIFE ANNUITY. Under this option, we will make monthly Annuity Payments
so long as the  Annuitant is alive.  After the  Annuitant  dies,  we stop making
Annuity Payments.

OPTION 2. LIFE ANNUITY WITH 5, 10, 15 OR 20 YEAR PAYMENTS GUARANTEED. Under this
option, we will make monthly Annuity Payments so long as the Annuitant is alive.
However, if the Annuitant dies before the end of the selected guaranteed period,
we will  continue to make  Annuity  Payments to you or any person you choose for
the  rest  of the  guaranteed  period.  If you do not  want to  receive  Annuity
Payments after the Annuitant's death, you can ask us for a single lump sum.

OPTION 3.  JOINT AND LAST  SURVIVOR  ANNUITY.  Under this  option,  we will make
monthly  Annuity  Payments  during the joint  lifetime of the  Annuitant and the
joint Annuitant. When the Annuitant dies, if the joint Annuitant is still alive,
we will  continue  to make  Annuity  Payments  so  long as the  joint  Annuitant
continues to live. The amount of the Annuity Payments we will make to you can be
equal to 100%, 75% or 50% of the amount that was being paid when both Annuitants
were  alive.  The  monthly  Annuity  Payments  will end when the last  surviving
Annuitant dies.

OPTION 4. JOINT AND LAST  SURVIVOR  ANNUITY  WITH 5, 10, 15 OR 20 YEAR  PAYMENTS
GUARANTEED.  Under this option, we will make monthly Annuity Payments during the
joint  lifetime of the  Annuitant  and the joint  Annuitant.  When the Annuitant
dies,  if the joint  Annuitant is still alive,  we will continue to make Annuity
Payments,  so long as the surviving  Annuitant continues to live, at 100% of the
amount that was being paid when both were alive. If, when the last death occurs,
we have made Annuity Payments for less than the selected  guaranteed  period, we
will  continue to make Annuity  Payments to you or any person you choose for the
rest of the guaranteed  period.  If you do not want to receive Annuity  Payments
after the Annuitant's death, you can ask us for a single lump sum.

OPTION 5. REFUND LIFE ANNUITY.  Under this option,  we will make monthly Annuity
Payments during the Annuitant's lifetime.  The last Annuity Payment will be made
before the Annuitant dies and if the value of the Annuity  Payments made is less
than the value applied to the Annuity Option,  then you will receive a refund as
set forth in the Contract.

12

3.   PURCHASE
--------------------------------------------------------------------------------

PURCHASE PAYMENTS

A Purchase Payment is the money you invest in the Contract.  The minimum payment
Allianz   Life  will  accept  is  $5,000  when  the  Contract  is  bought  as  a
Non-Qualified Contract. If you enroll in the Automatic Investment Plan (which is
described  below),  your Purchase  Payment can be $2,000.  If you are buying the
Contract  as part of an IRA  (Individual  Retirement  Annuity),  401(k) or other
Qualified plan, the minimum amount we will accept is $2,000.  The maximum amount
we will accept without our prior approval is $1 million. You can make additional
Purchase  Payments of $250 (or as low as $100 if you have selected the Automatic
Investment  Plan) or more to either type of  Contract.  Allianz Life may, at its
sole discretion, waive the minimum payment requirements. We reserve the right to
decline any Purchase  Payments.  At the time you buy the  Contract,  you and the
Annuitant cannot be older than 85 years old.

This product is not designed for professional market timing organizations, other
entities, or persons using programmed, large or frequent transfers.

AUTOMATIC INVESTMENT PLAN

The  Automatic  Investment  Plan  (AIP) is a program  which  allows  you to make
additional Purchase Payments to your Contract on a monthly or quarterly basis by
electronic  transfer of monies from your  savings or checking  account.  You may
participate in this program by completing the appropriate  form. We must receive
your form by the first of the month in order for AIP to begin  that same  month.
Investments  will take place on the 20th of the month, or the next business day.
The minimum  investment that can be made by AIP is $100. You may stop AIP at any
time you want. We need to be notified by the first of the month in order to stop
or change AIP that month.  If AIP is used for a Qualified  Contract,  you should
consult your tax adviser for advice regarding maximum contributions.

ALLOCATION OF PURCHASE PAYMENTS

When you purchase a Contract,  we will  allocate  your  Purchase  Payment to the
Fixed Account and/or one or more of the Variable  Options you have selected.  We
ask that you allocate your money in either whole  percentages  or round dollars.
The Fixed Account may not be available in your state (check with your registered
representative).  Transfers  do  not  change  the  allocation  instructions  for
payments.  You can instruct us how to allocate  additional Purchase Payments you
make.  If you do not instruct us, we will  allocate them in the same way as your
previous  instructions  to us. You may change the allocation of future  payments
without  fee,   penalty  or  other  charge  upon  written  notice  or  telephone
instructions to the 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
Variable Options that you may invest in at one time.  Currently,  you may invest
in 10  investment  choices at any one time (which  includes  any of the Variable
Options listed in Section 4 and the Allianz Life Fixed  Account).  We may change
this in the future. However, we will always allow you to invest in at least five
Variable Options.

Once we receive your  Purchase  Payment and the necessary  information,  we will
issue your Contract and allocate your first  Purchase  Payment within 2 business
days. If you do not give us all of the  information we need, we will contact you
or your registered representative to get it. If for some reason we are unable to
complete  this  process  within 5 business  days,  we will either send back your
money  or get  your  permission  to keep it  until  we get all of the  necessary
information.  If you make  additional  Purchase  Payments,  we will credit these
amounts to your  Contract  within one business day. Our business day closes when
the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern time.

FREE LOOK

If you change your mind about owning the  Contract,  you can cancel it within 10
days after receiving it (or the period required in your state).  When you cancel
the Contract within this time period,  Allianz Life will not assess a contingent
deferred sales charge.  You will receive back whatever your Contract is worth on
the day we receive your request. In certain states, or if you have purchased the
Contract as an IRA, we may be required to give you back your Purchase Payment if
you  decide to  cancel  your  Contract  within 10 days  after  receiving  it (or
whatever period is required in your state).  If that is the case, we reserve the
right to allocate  your initial  Purchase  Payment to the Franklin  Money Market
Fund for 15 days  after we  receive  it.  (In some  states,  the  period  may be
longer.)  At the end of that  period,  we will  re-allocate  your  money  as you
selected.  Currently,  however,  we will  directly  allocate  your  money to the
Variable Options and/or the Fixed Account as you have selected.


13
                              Variable Annuity Prospectus


ACCUMULATION UNITS

The value of the portion of your Contract allocated to the Variable Options will
go up or down based upon the investment  performance  of the Variable  Option(s)
you choose.  The value of your  Contract will also depend on the expenses of the
Contract.  In  order  to keep  track of the  value  of your  Contract,  we use a
measurement  called  an  Accumulation  Unit  (which  is like a share of a mutual
fund). During the Payout Phase of the Contract we call it an Annuity Unit.

Every  business  day we  determine  the value of an  Accumulation  Unit for each
Variable  Option by  multiplying  the  Accumulation  Unit value for the previous
period by a factor for the current period. The factor is determined by:

1)  dividing  the value of a Portfolio  at the end of the current  period by the
value of a Portfolio for the previous period; and

2) multiplying it by one minus the daily amount of the insurance charges and any
charges for taxes.

The value of an Accumulation Unit may go up or down from day to day.

When you make a Purchase  Payment,  we credit your  Contract  with  Accumulation
Units for any portion of your Purchase  Payment  allocated to a Variable Option.
The number of  Accumulation  Units we credit your Contract with is determined by
dividing the amount of the Purchase  Payment  allocated to a Variable  Option by
the value of the corresponding Accumulation Unit.

We  calculate  the value of each  Accumulation  Unit  after  the New York  Stock
Exchange closes each day and then credit your Contract.

EXAMPLE:

On Wednesday we receive an additional  Purchase  Payment of $3,000 from you. You
have told us you want this to go to the  Franklin  Growth and Income  Securities
Fund. When the New York Stock Exchange  closes on that  Wednesday,  we determine
that the value of an  Accumulation  Unit based on an  investment in the Franklin
Growth and Income Securities Fund is $12.50. We then divide $3,000 by $12.50 and
credit your Contract on Wednesday night with 240 Accumulation Units.


4.INVESTMENT OPTIONS
--------------------------------------------------------------------------------


The Contract offers Variable Options, which invest in Portfolios of AIM Variable
Insurance Funds, The Alger American Fund,  Franklin Templeton Variable Insurance
Products Trust, and USAllianz  Variable  Insurance  Products Trust. The Contract
also  offers a Fixed  Account  of Allianz  Life.  Additional  Portfolios  may be
available in the future.

You should read the fund  prospectuses  (which are attached to this  prospectus)
carefully before investing.

AIM Variable  Insurance  Funds,  The Alger  American  Fund,  Franklin  Templeton
Variable  Insurance  Products Trust and USAllianz  Variable  Insurance  Products
Trust  are the  funds  underlying  your  Contract.  Each  Portfolio  has its own
investment objective.


Franklin  Templeton  Variable  Insurance  Products  Trust  (formerly,   Franklin
Valuemark  Funds)  issues  two  classes  of shares  which are  described  in the
attached  prospectus for Franklin  Templeton  Variable Insurance Products Trust.
Only Class 1 shares are available in connection  with your  Contract.  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 below and are as
follows: A I M Advisors,  Inc., Allianz of America, Inc., Fred Alger Management,
Inc., Franklin Advisers,  Inc., Franklin Advisory Services, LLC, Franklin Mutual
Advisers,  LLC,  Templeton  Asset  Management  Ltd.,  Templeton  Global Advisors
Limited, and Templeton  Investment Counsel,  Inc. Certain advisers have retained
one or more subadvisers to help them manage the Portfolios.

The investment  objectives and policies of certain Portfolios are similar to the
investment  objectives  and  policies of other  mutual funds that certain of the
investment advisers manage. Although the objectives and policies may be similar,
the investment results of the Portfolios may be higher or lower than the results
of such other mutual funds. The investment  advisers cannot guarantee,  and make
no  representation,  that  the  investment  results  of  similar  funds  will be
comparable  even though the  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 otherinvestment techniques may
have a magnified  perforance  impact on a Portfolio  with a small asset base.  A
Portfolio may not experience similar performance as its assets grow.


14

<TABLE>
<CAPTION>

The following is a list of the Portfolios  available  under the Contract and the
investment adviser for each Portfolio:

                                                                       INVESTMENT

AVAILABLE PORTFOLIOS                                                   ADVISERS
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                  <C>
AIM VARIABLE INSURANCE FUNDS:

AIM V.I. Growth 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)

FRANKLIN TEMPLETON VARIABLE

INSURANCE PRODUCTS TRUST:

Franklin Aggressive Growth Securities Fund                            Franklin Advisers, Inc.

Franklin Global Communications Securities Fund*                       Franklin Advisers, Inc.

Franklin Global Health Care Securities Fund                           Franklin Advisers, Inc.

Franklin Growth and Income Securities Fund*                           Franklin Advisers, Inc.

Franklin High Income Fund                                             Franklin Advisers, Inc.

Franklin Income Securities Fund                                       Franklin Advisers, Inc.

Franklin Large Cap Growth Securities Fund*                            Franklin Advisers, Inc.

Franklin Money Market Fund                                            Franklin Advisers, Inc.

Franklin Natural Resources Securities Fund                            Franklin Advisers, Inc.

Franklin Real Estate Fund*                                            Franklin Advisers, Inc.

Franklin Rising Dividends Securities Fund*                            Franklin Advisory Services, LLC

Franklin S&P 500 Index Fund                                           Franklin Advisers, Inc.

Franklin Small Cap Fund                                               Franklin Advisers, Inc.

Franklin Technology Securities Fund                                   Franklin Advisers, Inc.

Franklin U.S. Government Fund*                                        Franklin Advisers, Inc.

Franklin Value Securities Fund                                        Franklin Advisory Services, LLC

Franklin Zero Coupon Funds - 2000, 2005 and 2010                      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 Asset Strategy Fund*                                        Templeton Investment Counsel, Inc.

Templeton Developing Markets Securities Fund*                         Templeton Asset Management Ltd.

Templeton Global Income Securities Fund                               Franklin Advisers, Inc.

Templeton Growth Securities Fund*                                     Templeton Global Advisors Limited

Templeton International Securities Fund*                              Templeton Investment Counsel, Inc.

Templeton International Smaller Companies Fund                        Templeton Investment Counsel, Inc.

Templeton Pacific Growth Securities Fund*                             Franklin Advisers, Inc.

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 Growth Fund                                             Allianz of America, Inc.

</TABLE>

<TABLE>
<CAPTION>

*The Portfolio name changed as of the effective date listed below:

Current Name                                        Previous Name                              Effective Date
---------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                                        <C>
Franklin Global Communications Securities Fund      Franklin Global Utilities Securities Fund  11-15-1999
Franklin Growth and Income Securities Fund          Franklin Growth and Income Fund            05-01-2000
Franklin Large Cap Growth Securities Fund           Franklin Capital Growth Fund               12-15-1999
Franklin Real Estate Fund                           Franklin Real Estate Securities Fund       11-15-1999
Franklin Rising Dividends Securities Fund           Franklin Rising Dividends Fund             11-15-1999
Franklin U.S. Government Fund                       Franklin U.S. Government Securities Fund   11-15-1999
Templeton Asset Strategy Fund                       Templeton Global Asset Allocation Fund     05-01-2000
Templeton Developing Markets Securities Fund        Templeton Developing Markets Equity Fund   05-01-2000
Templeton Growth Securities Fund                    Templeton Global Growth Fund               05-01-2000
Templeton International Securities Fund             Templeton International Equity Fund        05-01-2000
Templeton Pacific Growth Securities Fund            Templeton Pacific Growth Fund              05-01-2000
</TABLE>


15

                             Variable Annuity Prospectus


THE FRANKLIN ZERO COUPON  FUND-2000  WILL MATURE  DECEMBER 15, 2000. If you have
not made a  selection  prior to the  maturity  date of a Zero Coupon  Fund,  the
Contract Value held in the Zero Coupon Fund 2000  underlying  your Contract will
be  automatically  transferred to the Franklin Money Market Fund. We will notify
you of a  maturing  Zero  Coupon  Fund in  writing at least 30 days prior to the
maturity. Included with the notification will be investment options available at
that time as well as the automatic Money Market option.


Shares of the  Portfolios  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
Portfolios may also be sold directly to qualified plans. The investment advisers
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 funds'  advisers,  distributors  and/or  affiliates  for the  administrative
services which it provides to the Portfolios.

TRANSFERS

You can transfer  money among the  Variable  Options  and/or the Fixed  Account.
Allianz Life currently  allows you to make as many transfers as you want to each
year. Allianz Life may change this practice in the future. However, this product
is not designed for  professional  market timing  organizations or other persons
using programmed,  large, or frequent transfers. Such activity may be disruptive
to a  Portfolio.  We reserve the right to reject any specific  Purchase  Payment
allocation or transfer  request from any person,  if in the Portfolio  manager's
judgment,  a Portfolio would be unable to invest  effectively in accordance with
its  investment  objectives  and policies,  or would  otherwise  potentially  be
adversely affected.

Your Contract  provides that you can make 3 transfers every year without charge.
However,  currently  Allianz Life  permits you to make 12  transfers  every year
without charge. We measure a year from the anniversary of the day we issued your
Contract.  You can make a transfer  to or from the Fixed  Account and to or from
any Variable  Option.  If you make more than 12 transfers in a year,  there is a
transfer fee deducted. The fee is $25 per transfer or, if less, 2% of the amount
transferred. The following applies to any transfer:

1) The minimum  amount  which you can transfer is $1,000 ($500 in New Jersey) or
your  entire  value in the  Variable  Option  or Fixed  Account,  if less.  This
requirement  is waived if the  transfer is in con-  nection with the Dollar Cost
Averaging Program or Flexible Rebalancing (which are described below).

2) We may not allow you to make transfers during the free look period.

3) Your request for a transfer  must clearly state which  Variable  Option(s) or
the Fixed Account is involved in the transfer.

4) Your request for a transfer must clearly state how much the transfer is for.

5) You cannot make any  transfers  within 7 calendar days prior to the date your
first Annuity Payment is due.

6) During the Payout  Phase,  you may not make a transfer  from a fixed  Annuity
Option to a variable Annuity Option.

7) During the Payout  Phase,  you can make at least one transfer from a variable
Annuity Option to a fixed Annuity Option.

Allianz Life has reserved the right to modify the transfer provisions subject to
the guarantees described above and subject to applicable state law.

You can make transfers by telephone.  We may allow you to authorize someone else
to make  transfers by telephone on your behalf.  If you own the Contract  with a
Joint  Owner,  unless  you  instruct  Allianz  Life  otherwise,  we will  accept
instructions from either one of you. Allianz Life will use reasonable procedures
to confirm that instructions given to us by telephone are genuine.  If we do not
use such  procedures,  we may be liable for any losses  due to  unauthorized  or
fraudulent instructions. Allianz Life tape records all telephone instructions.

DOLLAR COST AVERAGING PROGRAM

The Dollar Cost Averaging  Program allows you to  systematically  transfer a set
amount of money each month or quarter from any one Variable  Option or the Fixed
Account to up to eight of the other Variable Options.

The Variable  Option(s) you transfer from may not be the Variable  Option(s) you
transfer to in this  program.  By  allocating  amounts on a regularly  scheduled
basis, as opposed to allocating the total amount at one particular time, you may
be less susceptible to the impact of mar-

16

ket  fluctuations.   You  may  only  participate  in  this  program  during  the
Accumulation Phase.

You must  participate  in the program for at least six months (or two  quarters)
and must  transfer  at least  $500  each time (or  $1,500  each  quarter).  Your
allocations can be in whole  percentages or dollar  amounts.  You may elect this
program by properly  completing  the Dollar  Cost  Averaging  forms  provided by
Allianz Life.

All Dollar Cost  Averaging  transfers  will be made on the 10th day of the month
unless that day is not a business  day. If it is not,  then the transfer will be
made the next business day.

Your participation in the program will end when any of the following occurs:

1)  the number of desired transfers have been made;

2) you do not have enough money in the Variable  Option(s) or the Fixed  Account
to make the  transfer  (if less money is  available,  that amount will be dollar
cost averaged and the program will end);

3) you request to terminate  the program (your request must be received by us by
the first of the month to terminate that month); or

4)  the Contract is terminated.

If you  participate  in the Dollar Cost  Averaging  Program,  the transfers made
under the  program  are not  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 Variable  Options may
cause your chosen allocation to shift.  Flexible Rebalancing is designed to help
you maintain your specified allocation mix among the different Variable Options.
You can direct us to readjust your Contract value on a quarterly, semi-annual or
annual basis to return to your original  Variable Option  allocations.  Flexible
Rebalancing  transfers will be made on the 20th day of the month unless that day
is not a  business  day.  If it is not,  then the  transfer  will be made on the
previous day. If you  participate  in Flexible  Rebalancing,  the transfers made
under the  program  are not  currently  taken into  account in  determining  any
transfer  fee.  The  Fixed  Account  is not  permitted  to be part  of  Flexible
Rebalancing.


VOTING PRIVILEGES

Allianz  Life is the  legal  owner  of the  Portfolio  shares.  However,  when a
Portfolio  solicits proxies in conjunction with a shareholder vote which affects
your investment,  Allianz Life will obtain from you and other affected  Contract
Owners  instructions  as to how to vote  those  shares.  When we  receive  those
instructions,  we will  vote all of the  shares  we own in  proportion  to those
instructions.  This will also  include any shares that  Allianz Life owns on its
own behalf.  Should  Allianz  Life  determine  that it is no longer  required to
comply with the above, we will vote the shares in our own right.

SUBSTITUTION

Allianz Life may substitute  one of the Variable  Options you have selected with
another Variable Option.  We would not do this without the prior approval of the
Securities and Exchange Commission.  We will give you notice of our intention to
do this.  We may also limit further  investment in a Variable  Option if we deem
the investment inappropriate.

5.   EXPENSES
--------------------------------------------------------------------------------

There are charges and other  expenses  associated  with the  Contract  that will
reduce your investment return. These charges and expenses are:

INSURANCE CHARGES

Each day, Allianz Life makes a deduction for its insurance charges. Allianz Life
does this as part of its calculation of the value of the Accumulation  Units and
the Annuity Units. The insurance charge has two parts:

1) the mortality and expense risk charge, and

2) the administrative charge.

MORTALITY AND EXPENSE RISK CHARGE. During the Accumulation Phase, this charge is
equal,  on an annual basis,  to 1.34% of the average daily value of the Contract
invested in a Variable Option.  During the Payout Phase, the charge is equal, on
an annual basis, to 1.25% of the average daily value of the Contract invested in
a Variable  Option.  This charge  compensates us for all the insurance  benefits
provided by your  Contract  (for  example,  our  contractual  obligation to make
Annuity Payments, the death benefits,  certain expenses related to the Contract,
and for  assuming  the risk  (expense  risk) that the  current  charges  will be
insufficient in the future to cover the cost of administering the Contract). The
amount of the mortality and expense risk charge is less during the Payout

17
                             Variable Annuity Prospectus

Phase because  Allianz Life does not pay a death benefit  separate from benefits
under the Annuity Option if you die during the Payout Phase.

ADMINISTRATIVE  CHARGE. This charge is equal, on an annual basis, to .15% of the
average daily value of the Contract invested in a Variable Option.  This charge,
together with the contract maintenance charge (which is explained below), is for
all the expenses  associated with the  administration  of the Contract.  Some of
these  expenses  include:  preparation  of the Contract,  confirmations,  annual
statements,   maintenance  of  Contract  records,  personnel  costs,  legal  and
accounting fees, filing fees, and computer and systems costs.

CONTRACT MAINTENANCE CHARGE

On each Contract  anniversary,  Allianz Life deducts $30 from your Contract as a
contract  maintenance  charge.  The  fee is  assessed  on the  last  day of each
Contract  year.  (In South  Carolina,  if your  Contract is in force on the 20th
Contract  anniversary,  we will waive the contract maintenance charge that is to
be  deducted  after  the  20th  Contract   anniversary.)   This  charge  is  for
administrative expenses (see above). This charge cannot be increased.

However,  during the  Accumulation  Phase,  if the value of your  Contract is at
least $50,000 when the deduction for the charge is to be made, Allianz Life will
not deduct this charge. If you own more than one Valuemark IV Contract,  Allianz
Life will determine the total value of all your  Valuemark IV Contracts.  If the
total  value of all  Valuemark  IV  Contracts  registered  under the same social
security  number is at least $50,000,  Allianz Life will not assess the contract
maintenance charge (except in New Jersey).  Currently, the charge is also waived
during the Payout  Phase if the value of your  Contract at the Income Date is at
least  $50,000.  If the  Contract  is owned by a  non-natural  person  (e.g.,  a
corporation),  Allianz  Life will look to the  Annuitant to determine if it will
assess the charge.

If you make a complete withdrawal from your Contract,  the contract  maintenance
charge  will  also  be  deducted.  During  the  Payout  Phase,  if the  contract
maintenance charge is deducted, the charge will be collected monthly out of each
Annuity Payment.

CONTINGENT DEFERRED SALES   CHARGE

Withdrawals  may be subject to a contingent  deferred  sales charge.  During the
Accumulation  Phase, you can make  withdrawals from your Contract.  Allianz Life
keeps  track of each  Purchase  Payment you make.  The amount of the  contingent
deferred  sales  charge  depends  upon the  length  of time  since you made your
Purchase Payment. The charge is:


          YEARS SINCE        CONTINGENT DEFERRAL
           PURCHASE             SALES CHARGE
           PAYMENTS   (AS A % OF PURCHASE PAYMENTS)
--------------------------------------------------------------------------------
              0-1                    6%
              1-2                    6%
              2-3                    6%
              3-4                    5%
              4-5                    4%
              5-6                    3%
              6-7                    2%
              7+                     0%

However,  after Allianz Life has had a Purchase Payment for 7 full years,  there
is no charge  when you  withdraw  that  Purchase  Payment.  For  purposes of the
contingent deferred sales charge, Allianz Life treats withdrawals as coming from
the oldest Purchase Payments first.  Allianz Life does not assess the contingent
deferred  sales charge on any payments paid out as Annuity  Payments or as death
benefits.

In the state of Washington,  the contingent deferred sales charge will be waived
beginning with the later of the first Contract  anniversary after you attain age
70 or the 10th Contract anniversary.

NOTE:  FOR TAX PURPOSES,  WITHDRAWALS  ARE CONSIDERED TO HAVE COME FROM THE LAST
MONEY YOU PUT INTO THE CONTRACT. THUS, FOR TAX PURPOSES, EARNINGS ARE CONSIDERED
TO COME OUT FIRST.


Free  Withdrawal  Amount  (referred to in sales  literature  as "15%  Withdrawal
Privilege")  - Each year after the first  Contract  year,  you can make multiple
withdrawals  up to 15% of the value of your Contract and no contingent  deferred
sales  charge will be deducted  from the 15% you take out.  (This  amount may be
increased when the Contract is issued to a charitable  remainder  trust.) If you
make a  withdrawal  of more  than the free  amount,  it will be  subject  to the
contingent deferred sales charge. If you do not withdraw the full 15% in any one
Contract year, you may not carry over the remaining percentage amount to another
year. The free withdrawal amount is not applicable to a full surrender. The free
withdrawal amount only applies in the event of a partial withdrawal.


You may also elect to participate in the  Systematic  Withdrawal  Program or the
Minimum  Distribution  Program.  These  programs  allow you to make  withdrawals
without the  deduction of the  contingent  deferred  sales charge under  certain
circumstances. See Section 7 -- "Access to

18

Your  Money" for a  description  of the  Systematic  Withdrawal  Program and the
Minimum Distribution Program.


WAIVER OF CONTINGENT   DEFERRED SALES CHARGE   BENEFITS

Under certain circumstances,  after the first year, Allianz Life will permit you
to take your money out of the Contract without  deducting a contingent  deferred
sales charge:

1) if you become confined to a nursing home for at least 90 days;

2) if you become  terminally  ill,  which is defined  as life  expectancy  of 12
months or less (a full withdrawal of the Contract will be required); or

3) if you become totally disabled for at least 90 consec- utive days.

The  waiver  will not apply if any of the above  conditions  existed on the date
your Contract was issued.

Also, after the first year, if you become unemployed for at least 90 consecutive
days, you can take up to 50% of your Contract value out of the Contract  without
incurring a contingent  deferred  sales charge.  This benefit is available  only
once during the life of the Contract.  You may not use both this benefit and the
15% free withdrawal amount in the same Contract year.

These  benefits  vary from state to state or may not be available in your state.
(Check with your registered representative.)

REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE

Allianz  Life will reduce or  eliminate  the amount of the  contingent  deferred
sales  charge when the  Contract is sold under  circumstances  which  reduce its
sales expenses. Some examples are: if there is a large group of individuals that
will be  purchasing  the  Contract  or a  prospective  purchaser  already  had a
relationship  with  Allianz  Life.  Allianz  Life may not  deduct  a  contingent
deferred  sales  charge  under a  Contract  issued to an  officer,  director  or
employee of Allianz Life or any of its affiliates. Also, Allianz Life may reduce
or not deduct a contingent  deferred  sales charge when a Contract is sold by an
agent of  Allianz  Life to any  members of his or her  immediate  family and the
commission  is waived.  We  require  our prior  approval  for any  reduction  or
elimination of the contingent deferred sales charge.

TRANSFER FEE


You can make 12 free  transfers  every  year.  We measure a year from the day we
issue your Contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25, or 2% of the amount that is transferred, whichever is less,
for  each  additional  transfer.  If the  transfer  is part of the  Dollar  Cost
Averaging  Program  or  Flexible  Rebalancing,  it will not  currently  count in
determin- ing the transfer fee.


PREMIUM TAXES

Some  states  and other  governmental  entities  (e.g.,  municipalities)  charge
premium taxes or similar taxes.  Allianz Life is responsible  for the payment of
these taxes.  We will make a deduction  from the value of the Contract for them.
Some of these  taxes are due when the  Contract  is issued,  others are due when
Annuity  Payments begin. It is Allianz Life's current practice to not charge you
for these taxes  until you die,  Annuity  Payments  begin or you make a complete
withdrawal.  Allianz Life may discontinue this practice in the future and assess
the charge when the tax is due. Premium taxes generally range from 0% to 3.5% of
the Purchase Payment, depending on the state.

INCOME TAXES

Allianz Life reserves the right to deduct from the Contract for any income taxes
which it may incur  because  of the  Contract.  Currently,  Allianz  Life is not
making any such deductions.

PORTFOLIO EXPENSES

There are  deductions  from the assets of the various  Portfolios  for operating
expenses  (including  management fees),  which are described in the Fee Table in
this prospectus and the accompanying fund prospectuses.


6. TAXES
--------------------------------------------------------------------------------


NOTE: ALLIANZ LIFE HAS PREPARED THE FOLLOWING  INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT.  IT IS NOT INTENDED AS TAX ADVICE. YOU SHOULD CONSULT
YOUR OWN TAX ADVISER  ABOUT YOUR OWN  CIRCUMSTANCES.  ALLIANZ  LIFE HAS INCLUDED
ADDITIONAL   INFORMATION   REGARDING   TAXES  IN  THE  STATEMENT  OF  ADDITIONAL
INFORMATION.

ANNUITY CONTRACTS IN GENERAL

Annuity  contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized

19
                        Variable Annuity Prospectus


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).


When a  Non-Qualified  Contract  is  owned  by a  non-natural  person  (e.g.,  a
corporation or certain other entities other than a trust holding the Contract as
an agent for a natural person), the Contract will generally not be treated as an
annuity  for tax  purposes.  This means that the  Contract  may not  receive the
benefits of Tax Deferral. Income may be taxed as ordinary income every year.

QUALIFIED AND NON-QUALIFIED CONTRACTS

If you purchase the Contract under a Qualified  plan,  your Contract is referred
to  as a  Qualified  Contract.  Examples  of  Qualified  plans  are:  Individual
Retirement Annuities (IRAs),  Tax-Sheltered  Annuities (sometimes referred to as
403(b) contracts),  and pension and  profit-sharing  plans, which include 401(k)
plans and H.R. 10 plans.  If you do not purchase the Contract  under a Qualified
plan, your Contract is referred to as a Non-Qualified Contract.


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.

WITHDRAWALS -- NON-QUALIFIED CONTRACTS

You, as the Contract Owner,  will not be taxed on increases in the value of your
Contract  until a  distribution  occurs  either as a  withdrawal  or as  Annuity
Payments.  When you make a withdrawal from your Contract, the Code treats such a
withdrawal as first coming from  earnings and then from your Purchase  Payments.
You will be taxed on the  amount of the  withdrawal  that is  earnings.  In most
cases,  such withdrawn  earnings are included in income.  For Annuity  Payments,
different  rules apply.  A portion of each  Annuity  Payment you receive will be
treated as a partial return of your Purchase Payments and will not be taxed. The
remaining portion of the Annuity Payment will be treated as ordinary income. How
the Annuity Payment is divided between taxable and non-taxable  portions depends
upon the period over which the Annuity Payments are expected to be made. Annuity
Payments  received  after you have  received all of your  Purchase  Payments are
fully includible in income.

The Code also provides that any amount received under an annuity  contract which
is included in income may be subject to a tax penalty. The amount of the penalty
is equal to 10% of the amount that is  includible  in income.  Some  withdrawals
will be exempt from the penalty. They include any amounts:

1)  paid on or after the taxpayer reaches age 591/2;

2)  paid after you die;

3) paid if the taxpayer becomes totally disabled (as that term is defined in the
Code);

4) paid in a series of  substantially  equal  payments  made  annually  (or more
frequently) for life or a period not exceeding life expectancy;

5)  paid under an immediate annuity; or

6) which come from purchase payments made prior to August 14, 1982.

WITHDRAWALS --QUALIFIED CONTRACTS

If you  make a  withdrawal  from  your  Qualified  Contract,  a  portion  of the
withdrawal 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  withdrawal  is includible  in taxable  income.  Special rules may
apply to withdrawals from certain types of Qualified Contracts.

20

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
withdrawals 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 of substantially  equal
periodic payments made annu- ally (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.

WITHDRAWALS -- TAX-SHELTERED ANNUITIES

The Code limits the withdrawal of amounts attributable to Purchase Payments made
under a  salary  reduction  agreement  by  Contract  Owners  from  Tax-Sheltered
Annuities. Withdrawals can only be made when a Contract Owner:

1)  reaches age 591/2;

2)  leaves his/her job;

3)  dies;

4) becomes disabled (as that term is defined in the Code); or

5) in the case of  hardship.  However,  in the case of hard- ship,  the Contract
Owner can only withdraw the
Purchase Payments and not any earnings.

DIVERSIFICATION

The Code provides that the underlying  investments  for a variable  annuity must
satisfy  certain  diversification  requirements  in  order to be  treated  as an
annuity contract. Allianz Life believes that the Portfolios are being managed so
as to comply with the requirements.

Neither the Code nor the Internal  Revenue  Service  Regulations  issued to date
provide guidance as to the circumstances  under which you, because of the degree
of control you exercise over the underlying  investments,  and not Allianz Life,
would be  considered  the  owner of the  shares  of the  Portfolios.  If you are
considered the owner of the shares,  it will result in the loss of the favorable
tax treatment  for the Contract.  It is unknown to what extent under federal tax
law Contract Owners are permitted to select Portfolios,  to make transfers among
the Portfolios or the number and type of Portfolios  Contract  Owners may select
from  without  being  considered  the owner of the  shares.  If any  guidance is
provided which is considered a new position,  then the guidance would  generally
be applied  prospectively.  However,  if such guidance is considered not to be a
new position, it may be applied retroactively.  This would mean that you, as the
Owner of the Contract, could be treated as the owner of the Portfolios.

Due to the  uncertainty in this area,  Allianz Life reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.


7. ACCESS TO  YOUR MONEY
-------------------------------------------------------------------------------

You can have access to the money in your Contract:

1) by making a withdrawal (either a partial or a total withdrawal);

2)  by receiving Annuity Payments; or

3)  when a death benefit is paid to your Beneficiary.

Withdrawals can only be made during the Accumula- tion Phase.

When you make a complete  withdrawal  you will receive the value of the Contract
on the day you make the  withdrawal,  less any  applicable  contingent  deferred
sales

21
                           Variable Annuity Prospectus

charge,  less any premium tax and less any  contract  maintenance  charge.  (See
Section 5 -- "Expenses" for a discussion of the charges.)

Any partial  withdrawal must be for at least $500.  Unless you instruct  Allianz
Life otherwise, a partial withdrawal will be made pro-rata from all the Variable
Options and the Fixed Account you selected. After you make a partial withdrawal,
the value of your Contract must be at least $2,000.

We will pay the amount of any withdrawal from the Variable  Options within seven
(7) days of when we receive your request in good order unless the  Suspension of
Payments or Transfers provision is in effect (see below).

INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.

There are limits to the amount you can withdraw  from a Qualified  plan referred
to as a 403(b) plan.  For a more complete  explanation  see Section 6 -- "Taxes"
and the discussion in the SAI.

SYSTEMATIC WITHDRAWAL PROGRAM

If the value of your Contract is at least $25,000, Allianz Life offers a program
which  provides  automatic  monthly or quarterly  payments to you each year. The
total systematic  withdrawals  which you can make each year without Allianz Life
deducting a contingent  deferred sales charge are limited to 15% of the value of
your Contract. This is determined on the last business day prior to the day your
request is received.  You may withdraw any amount you want under this program if
your payments are no longer subject to the contingent  deferred sales charge. If
you  make  withdrawals  under  this  program,  you may not also use the 15% free
withdrawal  amount that year. For a discussion of the contingent  deferred sales
charge and the 15% free  withdrawal  amount,  see Section 5 --  "Expenses."  All
systematic  withdrawals will be made on the 9th day of the month unless that day
is not a  business  day.  If it is not,  then  the  withdrawal  will be made the
previous business day.

INCOME TAXES,  TAX PENALTIES  AND CERTAIN  RESTRICTIONS  MAY APPLY TO SYSTEMATIC
WITHDRAWALS.

MINIMUM DISTRIBUTION PROGRAM

If you own a Contract that is an Individual  Retirement  Annuity (IRA),  you may
select the Minimum Distribution Program.  Under this program,  Allianz Life will
make payments to you from your Contract that are designed to meet the applicable
minimum distribution  requirements imposed by the Code for IRAs. If the value of
your Contract is at least  $25,000,  Allianz Life will make payments to you on a
monthly or quarterly  basis.  The payments will not be subject to the contingent
deferred sales charge and will be instead of the 15% free withdrawal amount.

SUSPENSION OF PAYMENTS OR TRANSFERS

Allianz Life may be required to suspend or postpone  payments for withdrawals or
transfers for any period when:

1) the New York Stock  Exchange  is closed  (other  than  customary  weekend and
holiday closings);

2)  trading on the New York Stock Exchange is restricted;

3) an emergency  exists as a result of which disposal of the Portfolio shares is
not reasonably practicable or Allianz Life cannot reasonably value the Portfolio
shares;

4) during any other  period when the  Securities  and  Exchange  Commission,  by
order, so permits for the protection of Contract Owners.

Allianz  Life has  reserved  the  right to defer  payment  for a  withdrawal  or
transfer from the Fixed Account for the period permitted by law but not for more
than six months.

8.PERFORMANCE
--------------------------------------------------------------------------------

Allianz  Life  periodically  advertises  performance  of the  Variable  Options.
Allianz Life will calculate  performance by determining the percentage change in
the value of an Accumulation  Unit by dividing the increase  (decrease) for that
unit by the value of the Accumulation Unit at the beginning of the period.  This
performance  number  reflects  the  deduction of the  insurance  charges and the
Portfolio  expenses.  It  may  not  reflect  the  deduction  of  any  applicable
contingent deferred sales charges and contract maintenance charge. The deduction
of any applicable  contract  maintenance  charge and  contingent  deferred sales
charges  would reduce the  percentage  increase or make  greater any  percentage
decrease.  Any  advertisement  will also  include  average  annual  total return
figures  which  reflect  the  deduction  of  the  insurance  charges,   contract
maintenance  charge,  contingent  deferred sales charges and the expenses of the
Portfolios. Allianz Life may also advertise cumulative total return information.
Cumulative  total return is determined  the same way except that the results are
not annualized.  Performance  information for the underlying Portfolios may also
be advertised; see the accompanying fund prospectuses for more information.

22

Certain  Portfolios  have been in  existence  for some time and have  investment
performance  history.  However,  the Contracts  have been  available  only since
February 3, 1997. In order to demonstrate how the actual  investment  experience
of the Portfolios  may affect your  Accumulation  Unit values,  Allianz Life has
prepared  performance  information  which  can be  found  in the  SAI.  There is
performance  shown  which  is  based  on  the  historical   performance  of  the
Portfolios,  modified  to reflect  the  current  charges  and  expenses  of your
Contract as if the Contract had been in  existence  for the time periods  shown.
The  information is based upon the  historical  experience of the Portfolios and
does not represent past performance or predict future performance.

Allianz Life may in the future also advertise yield information.  If it does, it
will  provide  you with  information  regarding  how yield is  calculated.  More
detailed  information  regarding how  performance  is calculated is found in the
SAI.

Any  performance  advertised  will be  based  on  historical  data.  It does not
guarantee future results of the Portfolios.

9. DEATH   BENEFIT
--------------------------------------------------------------------------------

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.  If you  purchase the
Contract  on or after July 6, 1999,  you may choose  Death  Benefit  Option 1 or
Death Benefit Option 2 at the time of application.  Once you make the selection,
you may not change it. If you purchased the Contract before July 6, 1999,  Death
Benefit Option 2 is not available.

I. CONTRACTS THAT RECEIVE AN ENHANCED DEATH BENEFIT ENDORSEMENT

       Contracts that are owned individually, or jointly with another person, or
as agent for an  individual  person,  will  receive an  enhanced  death  benefit
endorsement  for Death  Benefit  Option 1 or Death  Benefit  Option 2. For these
Contracts, the death benefit options are:

DEATH BENEFIT OPTION 1

The death benefit will be the greater of 1) or 2) below:

1) The  current  value of your  Contract,  less any pre- mium taxes  owed.  This
amount is  determined as of the day that all claim proofs and payment elec- tion
forms are received at the USAllianz Service Center.

2) The guaranteed  minimum death benefit (as explained below and in the enhanced
death bene- fit endorsement to your Contract), as of the day you die.

A.  During the first year of all such  Contracts  and if you are age 81 or older
(76 or older for deaths occurring in Washington,  or in most other states before
11/1/98) at the time of purchase, the following guaranteed minimum death benefit
will apply:

         o payments you have made,

         o less any money you have taken out,

         o less any applicable charges paid on moneytaken out,

         o less any premium taxes owed.

    B. After the first  Contract  year,  for  Contracts  issued before your 81st
birthday (76th birth- day for deaths occurring  before  11/1/98),  and until you
reach age 81 (age 76 for deaths occurring before 11/1/98), the greater of (a) or
(b) below will be your guaranteed minimum death benefit:

        a) 5% Increase

          o payments you have made,

          o less any money you have taken out,

          o less any applicable charges paid on money  taken out,

          o plus 5% on each Contract anniversary,

          o less any premium taxes owed.

        b) Highest 6th Year Contract Value

          o highest Contract value on any six year Contract anniversary,

          o plus any payments made since that Contract anniversary,

          o less any money you have taken out since that anniversary,

          o less any applicable charges paid on money taken out since that
           anniversary,

23

                           Variable Annuity Prospectus

o less any premium taxes owed.

C. After your 81st birthday (76th birthday for deaths occurring before 11/1/98),
the following guaranteed minimum death benefit will apply:

       o your guaranteed minimum death benefit on  the Contract anniversary
         prior to your 81st  birthday (76th birthday for deaths occurring
         before 11/1/98),

       o plus any payments you have made since then,

       o less any money you have taken out since then,

       o less any applicable charges paid on money taken out since then,

       o less any premium taxes owed.

DEATH BENEFIT OPTION 2

The death benefit will be the greater of:

1) the  current  value of your  Contract,  less any taxes,  on the day all claim
proofs and payment  election forms are received by Allianz Life at the USAllianz
Service Center; or

2) (if applicable) the guaranteed minimum death benefit,  less any taxes, on the
day all claim proofs and pay- ment  election  forms are received by Allianz Life
at the USAllianz Service Center.

The guaranteed minimum death benefit is the greater of:

      opayments you have made, less any money you  have taken out and any
      charges paid on the money you have taken out.

      othe greatest  Contract  "anniversary  value".  The Contract  "anniversary
value" is the value of the  Contract  on a Contract  anniversary,  increased  by
payments  you have made since that  anniversary  and  decreased by any money you
have taken out and any  charges  paid on the money you have taken out since that
anniversary.  Allianz  Life  will not take  into  consideration  any Con-  tract
anniversaries  which  occur on or after your 81st  birthday  or date of death in
determining this benefit.

In certain  states,  the above death  benefit may not be  available.  Check your
Contract and Endorsement for your applicable death benefit.

II. CONTRACTS THAT DO NOT RECEIVE AN ENHANCED DEATH BENEFIT ENDORSEMENT

For all Contracts that do not receive an enhanced death benefit endorsement, the
death benefit will be:

        The current value of your Contract,  less any taxes owed. This amount is
determined  as of the day that all claim proofs and payment  election  forms are
received at the USAllianz Service Center.

III. ADDITIONAL PROVISIONS

If you have a Joint Owner,  the age of the older  Contract Owner will be used to
determine the  guaranteed  minimum death benefit.  The guaranteed  minimum death
benefit will be reduced by any amounts withdrawn after the date of death. If the
Contract is owned by a non-natural  person,  then all references to you mean the
Annuitant.

In the case of Joint Owners,  if a Joint Owner dies,  the surviving  Joint Owner
will be the  Beneficiary.  Joint Owners must be spouses (except in Pennsylvania,
Oregon and New Jersey).

A Beneficiary may request that the death benefit be paid in one of the following
ways:  (1)  Payment of the entire  death  benefit  within 5 years of the date of
death,  or (2) Payment of the death benefit under an Annuity  Option.  The death
benefit  payable  under an Annuity  Option  must be paid over the  Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payment  must  begin  within  one  year  of the  date  of  death,  or (3) If the
Beneficiary is the spouse of the Contract  Owner,  he/she can choose to continue
the Contract in his/her own name at the then current value,  or if greater,  the
death  benefit  value,  or (4) If a lump  sum  payment  is  elected  and all the
necessary requirements, including any required tax consent from some states, are
met, the payment will be made within 7 days. Payment of the death benefit may be
delayed  pending  receipt of any  applicable  tax  consents  and/or forms from a
state.

If you (or any Joint  Owner) die  during  the  Payout  Phase and you are not the
Annuitant,  any payments which are remaining  under the Annuity Option  selected
will continue at least as rapidly as they were being paid at your death.  If you
die during the Payout Phase, the Beneficiary becomes the Contract Owner.



DEATH OF ANNUITANT

If the Annuitant,  who is not a Contract  Owner or Joint Owner,  dies during the
Accumulation  Phase,  you can  name a new  Annuitant.  If you do not  name a new
Annuitant  within 30 days of the death of the  Annuitant,  you will  become  the
Annuitant. However, if the Contract

24

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 Variable
Options  (also  known  as  sub-accounts).  Each  Variable  Option  invests  in a
Portfolio.

The assets of the Separate  Account are held in Allianz Life's name on behalf of
the Separate Account and legally belong to Allianz Life.  However,  those assets
that underlie the variable Contracts are not chargeable with liabilities arising
out of any other business  Allianz Life may conduct.  All the income,  gains and
losses  (realized or unrealized)  resulting from these assets are credited to or
charged against the Contracts and not against any other  contracts  Allianz Life
may issue.

DISTRIBUTION

USAllianz  Investor  Services,  LLC (formerly NALAC Financial Plans,  LLC), 1750
Hennepin Avenue, Minneapolis, MN 55403, acts as the distributor of the Contract.
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  7.5%  of  Purchase  Payments.
Sometimes,  Allianz Life enters into an agreement with the  broker-dealer to pay
the  broker-dealer  commissions  as a  combination  of a  certain  amount of the
commission at the time of sale and a trail commission  (which when totaled could
exceed 7.5% of Purchase  Payments).  In  addition,  Allianz Life 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 or there is a recission of the Contract within the Free-Look period.

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                              13

Mortality and Expense Risk Guarantee            14

Financial Statements                            14

<PAGE>

25

                           Variable Annuity Prospectus
<TABLE>
<CAPTION>


APPENDIX
-------------------------------------------------------------------------------


CONDENSED FINANCIAL  INFORMATION

The consolidated financial statements of Allianz Life Insurance Company of North
America and the financial  statements of Allianz Life Variable  Account B may be
found in the Statement of Additional Information.

The table below includes Accumulation Unit values for the periods indicated.

This information should be read in conjunction with the financial statements and
related  notes of the Separate  Account  included in the Statement of Additional
Information.

(NUMBER OF UNITS IN THOUSANDS)


                                                      YEAR OR PERIOD          YEAR OR PERIOD         INCEPTION

                                                          ENDED                   ENDED             (2/3/97) TO

VARIABLE OPTIONS:                                     DEC. 31, 1999           DEC. 31, 1998         DEC. 31, 1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                       <C>                <C>                            <C>
AIM V.I. GROWTH*

Unit value at beginning of period                         $10.000                   NA                   NA

Unit value at end of period                               $11.083                   NA                   NA

Number of units outstanding at end of period                  363                   NA                   NA

ALGER AMERICAN GROWTH*

Unit value at beginning of period                         $10.000                   NA                    NA

Unit value at end of period                               $10.921                   NA                    NA

Number of units outstanding at end of period                  415                   NA                    NA

ALGER AMERICAN LEVERAGED ALLCAP*

Unit value at beginning of period                         $10.000                   NA                    NA

Unit value at end of period                               $12.159                   NA                    NA

Number of units outstanding at end of period                  277                   NA                    NA

FRANKLIN GLOBAL COMMUNICATIONS SECURITIES

Unit value at beginning of period                         $28.082                 $25.635              $20.526

Unit value at end of period                               $38.572                 $28.082              $25.635

Number of units outstanding at end of period                1,418                   1,006                  310

FRANKLIN GLOBAL HEALTH CARE SECURITIES

Unit value at beginning of period                         $10.604                 $10.000                   NA

Unit value at end of period                                $9.601                 $10.604                   NA

Number of units outstanding at end of period                  469                    224                    NA

FRANKLIN GROWTH AND INCOME SECURITIES

Unit value at beginning of period                         $25.993                 $24.354              $19.351

Unit value at end of period                               $25.891                 $25.993              $24.354

Number of units outstanding at end of period                5,570                   5,185                2,376

FRANKLIN HIGH INCOME

Unit value at beginning of period                         $21.020                 $21.141              $19.237

Unit value at end of period                               $20.695                 $21.020              $21.141

Number of units outstanding at end of period                4,118                   4,191                2,202

FRANKLIN INCOME SECURITIES

Unit value at beginning of period                         $24.898                 $24.864              $21.554

Unit value at end of period                               $24.084                 $24.898              $24.864

Number of units outstanding at end of period                4,380                   4,239                2,094

26

(NUMBER OF UNITS IN THOUSANDS)


                                                      YEAR OR PERIOD          YEAR OR PERIOD         INCEPTION

                                                          ENDED                   ENDED             (2/3/97) TO

VARIABLE OPTIONS:                                     DEC. 31, 1999           DEC. 31, 1998         DEC. 31, 1997
---------------------------------------------------------------------------------------------------------------------------

FRANKLIN LARGE CAP GROWTH SECURITIES

Unit value at beginning of period                         $15.537                $13.110               $11.247

Unit value at end of period                               $20.152                 $15.537              $13.110

Number of units outstanding at end of period                7,521                   4,502                1,957

FRANKLIN MONEY MARKET

Unit value at beginning of period                         $14.260                 $13.756              $13.266

Unit value at end of period                               $14.717                 $14.260              $13.756

Number of units outstanding at end of period                5,236                   4,342                3,214

FRANKLIN NATURAL RESOURCES SECURITIES

Unit value at beginning of period                          $8.430                 $11.466              $14.364

Unit value at end of period                               $10.983                  $8.430              $11.466

Number of units outstanding at end of period                  616                     514                  304

FRANKLIN REAL ESTATE

Unit value at beginning of period                         $22.901                 $27.944              $23.499

Unit value at end of period                               $21.176                 $22.901              $27.944

Number of units outstanding at end of period                1,490                   1,823                1,217

FRANKLIN RISING DIVIDENDS SECURITIES

Unit value at beginning of period                         $21.034                 $19.968              $15.235

Unit value at end of period                               $18.712                 $21.034              $19.968

Number of units outstanding at end of period                4,137                   4,428                1,991

FRANKLIN S&P 500 INDEX*

Unit value at beginning of period                         $10.000                     NA                    NA

Unit value at end of period                               $10.465                     NA                    NA

Number of units outstanding at end of period                  626                     NA                    NA

FRANKLIN SMALL CAP

Unit value at beginning of period                         $14.558                 $14.923              $12.899

Unit value at end of period                               $28.247                 $14.558              $14.923

Number of units outstanding at end of period                5,460                   5,492                2,965

FRANKLIN U.S. GOVERNMENT

Unit value at beginning of period                         $18.847                 $17.805              $16.533

Unit value at end of period                               $18.394                 $18.847              $17.805

Number of units outstanding at end of period                3,857                   3,040                1,359

FRANKLIN VALUE SECURITIES

Unit value at beginning of period                          $7.713                 $10.000                   NA

Unit value at end of period                                $7.724                  $7.713                   NA

Number of units outstanding at end of period                  603                     367                   NA

FRANKLIN ZERO COUPON 2000

Unit value at beginning of period                         $20.502                 $19.358              $18.345

Unit value at end of period                               $20.819                 $20.502              $19.358

Number of units outstanding at end of period                  282                     188                   94

FRANKLIN ZERO COUPON 2005

Unit value at beginning of period                         $24.786                 $22.357              $20.375

Unit value at end of period                               $22.983                 $24.786              $22.357

Number of units outstanding at end of period                  555                     380                  161

27

                           Variable Annuity Prospectus

NUMBER OF UNITS IN THOUSANDS)



                                                      YEAR OR PERIOD          YEAR OR PERIOD        INCEPTION

                                                          ENDED                  ENDED             (2/3/97) TO

VARIABLE OPTIONS:                                     DEC. 31, 1999           DEC. 31, 1998        DEC. 31, 1997
---------------------------------------------------------------------------------------------------------------------------

FRANKLIN ZERO COUPON 2010

Unit value at beginning of period                         $27.674                $24.544              $21.371

Unit value at end of period                               $23.929                $27.674              $24.544

Number of units outstanding at end of period                  668                   478                   150

MUTUAL DISCOVERY SECURITIES

Unit value at beginning of period                         $11.205                $11.971              $10.179

Unit value at end of period                               $13.662                $11.205              $11.971

Number of units outstanding at end of period                7,820                   8,822               5,461

MUTUAL SHARES SECURITIES

Unit value at beginning of period                         $11.814                $11.981              $10.329

Unit value at end of period                               $13.199                $11.814              $11.981

Number of units outstanding at end of period               18,924                 19,834               11,394

TEMPLETON ASSET STRATEGY

Unit value at beginning of period                         $13.543                $13.752              $12.495

Unit value at end of period                               $14.347                $13.543              $13.752

Number of units outstanding at end of period                1,403                  1,491                1,008

TEMPLETON DEVELOPING MARKETS SECURITIES

Unit value at beginning of period                          $7.958                $10.305              $11.458

Unit value at end of period                               $12.125                 $7.958              $10.305

Number of units outstanding at end of period                3,389                  3,425                2,663

TEMPLETON GLOBAL INCOME SECURITIES

Unit value at beginning of period                         $17.746                $16.821              $16.661

Unit value at end of period                               $16.472                $17.746              $16.821

Number of units outstanding at end of period                  657                    651                  393

TEMPLETON GROWTH SECURITIES

Unit value at beginning of period                         $16.238                $15.124              $13.525

Unit value at end of period                               $19.364                $16.238              $15.124

Number of units outstanding at end of period                9,008                  8,864                5,525

TEMPLETON INTERNATIONAL SECURITIES

Unit value at beginning of period                         $18.322                $17.617              $16.010

Unit value at end of period                               $22.858                $18.322              $17.617

Number of units outstanding at end of period                4,164                  4,427                3,122

TEMPLETON INTERNATIONAL SMALLER COMPANIES

Unit value at beginning of period                          $9.342                $10.809              $11.138

Unit value at end of period                               $11.403                 $9.342              $10.809

Number of units outstanding at end of period                  865                   967                   792

TEMPLETON PACIFIC GROWTH SECURITIES

Unit value at beginning of period                          $8.028                 $9.381              $14.866

Unit value at end of period                               $10.838                 $8.028               $9.381

Number of units outstanding at end of period                1,041                    655                  379

USALLIANZ VIP DIVERSIFIED ASSETS*

Unit value at beginning of period                         $10.000                     NA                   NA

Unit value at end of period                               $10.168                     NA                   NA

Number of units outstanding at end of period                    1                     NA                   NA

USALLIANZ VIP FIXED INCOME*

Unit value at beginning of period                         $10.000                     NA                   NA

Unit value at end of period                                $9.749                     NA                   NA

Number of units outstanding at end of period                    1                     NA                   NA

USALLIANZ VIP GROWTH*

Unit value at beginning of period                         $10.000                    NA                    NA

Unit value at end of period                               $10.731                    NA                    NA

Number of units outstanding at end of period                   10                    NA                    NA



<FN>
*The AIM V.I. Growth,  Alger American Growth,  Alger American  Leveraged AllCap,
Franklin S&P 500 Index  ,USAllianz VIP Diversified  Assets,  USAllianz VIP Fixed
Income and  USAllianz  VIP Growth  Sub-Accounts  commenced  operations  with the
Separate Account on November 12, 1999. Unit Values at inceptions were $10.00.

There  are no  accumulation  units  shown  for the  Franklin  Aggressive  Growth
Securities  Sub-Account  and  the  Franklin  Technology  Securities  Sub-Account
because  they  commenced  operations  as of the  date  of  this  prospectus  and
therefore had no assets as of December 31, 1999.
</FN>
</TABLE>








                                    PART B

                       STATEMENT OF ADDITIONAL INFORMATION
                                  VALUEMARK IV
                           INDIVIDUAL FLEXIBLE PAYMENT
                           VARIABLE ANNUITY CONTRACTS
                                    issued by
                         ALLIANZ LIFE VARIABLE ACCOUNT B
                                       and
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA

                                  May 1, 2000


THIS IS NOT A PROSPECTUS.  THIS  STATEMENT OF ADDITIONAL  INFORMATION  SHOULD BE
READ IN CONJUNCTION  WITH THE PROSPECTUS  FOR THE  INDIVIDUAL  FLEXIBLE  PAYMENT
VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.

THE PROSPECTUS  CONCISELY  SETS FORTH  INFORMATION  THAT A PROSPECTIVE  INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS,  CALL OR WRITE THE
INSURANCE COMPANY AT: 1750 Hennepin Avenue,  Minneapolis,  MN 55403-2195,  (800)
542-5427.


THIS  STATEMENT OF ADDITIONAL  INFORMATION  AND THE  PROSPECTUS ARE DATED May 1,
2000, AND AS MAY BE AMENDED FROM TIME TO TIME.

Table of Contents
Contents                                            Page
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
Mortality and Expense Risk Guarantee ............    13
Financial Statements ............................    13





Insurance Company
-------------------------------------------------------------------------------


Allianz Life Insurance  Company of North America (the "Insurance  Company") is a
stock life insurance  company organized under the laws of the state of Minnesota
in  1896.  The  Insurance  Company  is  a  wholly-owned  subsidiary  of  Allianz
Versicherungs-AG  Holding  ("Allianz").  Allianz  is  headquartered  in  Munich,
Germany,  and has sales outlets  throughout  the world.  The  Insurance  Company
offers fixed and variable life insurance and annuities, and group life, accident
and health insurance.

The Insurance Company is rated A++g by A.M. BEST, an independent  analyst of the
insurance  industry.  The  financial  strength  of an  insurance  company may be
relevant in that it may be a  reflection  as to the ability of a company to make
fixed annuity payments from its general account.


Experts
-------------------------------------------------------------------------------


The financial statements of Allianz Life Variable Account B and the consolidated
financial  statements  of the  Insurance  Company  as of and for the year  ended
December 31, 1999 included in this Statement of Additional Information have been
audited  by KPMG  LLP,  independent  auditors,  as  indicated  in their  reports
included in this Statement of Additional  Information and are included herein in
reliance  upon such  reports and upon the  authority  of said firm as experts in
accounting and auditing.


Legal Opinions
------------------------------------------------------------------------------

Blazzard, Grodd & Hasenauer, P.C., Westport,  Connecticut has provided advice on
certain  matters  relating  to the  federal  securities  and  income tax laws in
connection with the Contracts.

Distributor
-------------------------------------------------------------------------------

USAllianz  Investor  Services,  LLC (formerly  NALAC  Financial  Plans,  LLC), a
subsidiary of the Insurance Company, acts as the distributor. The offering is on
a continuous basis.

Reduction or Elimination of the
Contingent Deferred Sales Charge
-------------------------------------------------------------------------------

The amount of the  contingent  deferred  sales  charge on the  Contracts  may be
reduced or eliminated  when sales of the Contracts are made to individuals or to
a group of  individuals  in a manner that results in savings of sales  expenses.
The  entitlement to a reduction of the contingent  deferred sales charge will be
determined by the Insurance Company after examination of the following  factors:
1) the size of the group; 2) the total amount of purchase  payments  expected to
be received  from the group;  3) the nature of the group for which the Contracts
are purchased,  and the  persistency  expected in that group; 4) the purpose for
which the  Contracts are purchased and whether that purpose makes it likely that
expenses  will be reduced;  and 5) any other  circumstances  which the Insurance
Company  believes  to be  relevant  to  determining  whether  reduced  sales  or
administrative  expenses may be expected.  None of the reductions in charges for
sales is contractually guaranteed.

The contingent  deferred  sales charge may be eliminated  when the Contracts are
issued to an officer,  director or employee of the  Insurance  Company or any of
its  affiliates.  The  contingent  deferred  sales  charge  may  be  reduced  or
eliminated when the Contract is sold by an agent of the Insurance Company to any
members of his or her immediate family and the commission is waived. In no event
will any reduction or  elimination  of the  contingent  deferred sales charge be
permitted where the reduction or elimination will be unfairly  discriminatory to
any person.

Calculation of Performance Data
------------------------------------------------------------------------------

Total Return

From time to time, the Insurance  Company may advertise the performance data for
the  Variable  Options  in  sales   literature,   advertisements,   personalized
hypothetical  illustrations,  and Contract Owner communications.  Such data will
show the  percentage  change in the value of an  Accumulation  Unit based on the
performance  of a Portfolio  over a stated period of time which is determined by
dividing the increase (or  decrease) in value for that unit by the  Accumulation
Unit value at the beginning of the period.

Any such  performance  data will include total return figures for the one, five,
and ten year (or since  inception)  time  periods  indicated.  Such total return
figures will reflect the deduction of a 1.34% mortality and expense risk charge,
a  0.15%  administrative  charge,  the  operating  expenses  of  the  underlying
Portfolios  and any  applicable  contingent  deferred  sales charge and contract
maintenance charge ("Standardized Total Return").  The contingent deferred sales
charge and contract  maintenance  charge  deductions are  calculated  assuming a
Contract is surrendered at the end of the reporting period.

The hypothetical  value of a Contract  purchased for the time periods  described
will be determined by using the actual  Accumulation  Unit values for an initial
$1,000  purchase  payment,  and deducting any  applicable  contract  maintenance
charges and any  applicable  contingent  deferred sales charges to arrive at the
ending hypothetical value. The average annual total return is then determined by
computing the fixed interest rate that a $1,000  purchase  payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:

                                  P(1+T)n = ERV

where:

P  = a hypothetical initial payment of $1,000;

T  = average annual total return;

n  = number of years;

ERV = ending  redeemable  value of a  hypothetical  $1,000  payment  made at the
beginning  of the  time  periods  used  at the  end of  such  time  periods  (or
fractional portion thereof).

The  Insurance  Company  may  also  advertise  performance  data  which  will be
calculated in the same manner as described  above but which will not reflect the
deduction of the contingent  deferred sales charge and the contract  maintenance
charge.  The Insurance  Company may also advertise  cumulative and average total
return  information over different periods of time. The Company may also present
performance information computed on a different basis  ("Non-Standardized  Total
Return").

Cumulative  total  return is  calculated  in a similar  manner,  except that the
results  are not  annualized.  Each  calculation  assumes  that no sales load is
deducted  from the initial  $1,000  payment at the time it is  allocated  to the
Portfolios and assumes that the income earned by the investment in the Portfolio
is reinvested.

Contract  Owners should note that  investment  results will fluctuate over time,
and any  presentation of total return for any period should not be considered as
a representation of what an investment may earn or what a Contract Owner's total
return may be in any future period.

Yield

The Franklin  Money Market  Fund.  The  Insurance  Company may  advertise  yield
information for the Franklin Money Market Fund. The Franklin Money Market Fund's
current yield may vary each day, depending upon, among other things, the average
maturity of the  underlying  Portfolio's  investment  securities  and changes in
interest rates,  operating expenses,  the deduction of the mortality and expense
risk charge, the administrative  charge and the contract maintenance charge and,
in  certain  instances,  the  value  of the  underlying  Portfolio's  investment
securities.  The fact that the Portfolio's current yield will fluctuate and that
the principal is not guaranteed  should be taken into  consideration  when using
the Portfolio's current yield as a basis for comparison with savings accounts or
other  fixed-yield  investments.  The  yield  at  any  particular  time  is  not
indicative of what the yield may be at any other time.

The Franklin  Money  Market  Fund's  current  yield is computed on a base period
return of a hypothetical Contract having a beginning balance of one Accumulation
Unit for a  particular  period of time  (generally  seven  days).  The return is
determined by dividing the net change (exclusive of any capital changes) in such
Accumulation  Unit by its beginning  value,  and then multiplying it by 365/7 to
get the annualized  current yield.  The  calculation of net change  reflects the
value of additional  shares  purchased with the dividends paid by the Portfolio,
and the deduction of the mortality and expense risk charge,  the  administrative
charge and contract maintenance charge. The effective yield reflects the effects
of compounding  and represents an  annualization  of the current return with all
dividends reinvested.

(Effective yield = [(Base Period Return + 1)365/7] - 1.)


For the seven-day  period ending on December 31, 1999, the Franklin Money Market
Sub-Account  had a current yield of 4.21% and an effective  yield of 4.29%.  The
yield  information  assumes  that the Contract  Sub-Account  was invested in the
Franklin Money Market Fund for the time period shown.


Other  Variable  Options.  The  Insurance  Company may also quote yield in sales
literature,   advertisements,   personalized  hypothetical  illustrations,   and
Contract  Owner  communications  for the other Variable  Options.  Each Variable
Options  (other than the Franklin  Money Market Fund) will publish  standardized
total return information with any quotation of current yield.

The yield  computation is determined by dividing the net  investment  income per
Accumulation  Unit  earned  during  the  period  (minus  the  deduction  for the
mortality   and  expense  risk  charge,   administrative   charge  and  contract
maintenance charge) by the Accumulation Unit value on the last day of the period
and annualizing the resulting figure, according to the following formula:

         Yield =  2  [(a-b) + 1)6 - 1]
                            cd
where:

a = net  investment  income  earned  during the period by the  Variable  Options
    attributable to shares owned by the Portfolio;

b  = expenses accrued for the period (net of reimbursements);

c = the  average  daily  number of  Accumulation  Units  outstanding  during the
    period;

d = the  maximum  offering  price per  Accumulation  Unit on the last day of the
    period.

The above  formula will be used in  calculating  quotations  of yield,  based on
specified  30-day  periods (or one month)  identified  in the sales  literature,
advertisement,  or communication.  Yield calculations  assume no sales load. The
Insurance  Company  does  not  currently  advertise  yield  information  for any
Variable Option (other than the Franklin Money Market Fund).

Performance Ranking

Total return may be compared to relevant  indices,  including U.S.  domestic and
international indices and data from Lipper Analytical Services, Inc., Standard &
Poor's  Indices,  or VARDS(R).  From time to time,  evaluation of performance by
independent sources may also be used.

Performance Information

In  order  to  show  how  investment   performance  of  the  Portfolios  affects
Accumulation Unit values, the following performance information was developed.


Effective May 1, 2000, the Templeton  International  Securities  Fund (a fund of
Templeton Variable Series Fund) merged into the Templeton  International  Equity
Fund.  The  performance  shown  in the  charts  below  reflects  the  historical
performance of the Templeton  International  Equity Fund. Effective May 1, 2000,
the Templeton  Developing  Markets Securities Fund (a fund of Templeton Variable
Series Fund)  merged into the  Templeton  Developing  Markets  Equity Fund.  The
performance shown in the charts below reflects the historical performance of the
Templeton  Developing Markets Equity Fund.  Effective May 1, 2000, the Templeton
Asset Strategy Fund (a fund of Templeton  Variable  Series Fund) merged into the
Templeton  Global Asset  Allocation  Fund. The  performance  shown in the charts
below  reflects  the  historical  performance  of  the  Templeton  Global  Asset
Allocation Fund.


The charts  below show  Accumulation  Unit  performance  which  assumes that the
Accumulation Units were invested in each of the Portfolios for the same periods.
The  performance  figures  in  Table I  represent  performance  figures  for the
Accumulation  Units which  reflects the  deduction of the  mortality and expense
risk  charge,   administrative   charge,  and  the  operating  expenses  of  the
Portfolios.  Table II represents  performance figures for the Accumulation Units
which reflects the Mortality and Expense Risk Charge, administrative charge, the
contract  maintenance  charge,  the  operating  expenses of the  Portfolios  and
assumes  that you make a  withdrawal  at the end of the  period  (therefore  the
contingent  deferred  sales  charge is  reflected).  Past  performance  does not
guarantee future results.

<TABLE>
<CAPTION>
Valuemark IV
Table I:  Total Return for the periods ended December 31, 1999

---------------------------------------------------------------------------------------------------------------------------
                                            Sub-Account
                                             Inception        One         Three       Five            Ten           Since
Variable Option                                Date          Year         Years       Years          Years        Inception
---------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>           <C>          <C>          <C>             <C>
Franklin Global Communications
   Securities*                                1/24/89       37.35%        23.40%       20.75%       12.39%          13.13%
Franklin Global Health Care Securities         5/1/98       -9.46%            NA           NA           NA          -2.41%
Franklin Growth and Income Securities*        1/24/89       -0.39%        10.19%       14.52%        9.79%           9.09%
Franklin High Income                          1/24/89       -1.54%         2.47%        7.33%        7.53%           6.87%
Franklin Income Securities                    1/24/89       -3.27%         3.77%        8.12%        8.38%           8.37%
Franklin Large Cap Growth Securities*          5/1/96       29.70%        21.46%           NA           NA          21.05%
Franklin Money Market                         1/24/89        3.21%         3.52%        3.67%        3.31%           3.60%
Franklin Natural Resources Securities         1/24/89       30.29%        -8.56%       -4.61%       -1.08%           0.86%
Franklin Real Estate*                         1/24/89       -7.53%        -3.41%        6.42%        7.41%           7.10%
Franklin Rising Dividends Securities*         1/27/92      -11.04%         7.09%       13.94%           NA           8.22%
Franklin Small Cap                           11/01/95       94.03%        29.86%           NA           NA          28.30%
Franklin U.S. Government*                     3/14/89       -2.40%         3.62%        5.97%        5.85%           5.80%
Franklin Value Securities                      5/1/98        0.15%            NA           NA           NA         -14.34%
Franklin Zero Coupon - 2000                   3/14/89        1.54%         4.31%        6.36%        6.63%           7.02%
Franklin Zero Coupon - 2005                   3/14/89       -7.27%         4.10%        7.49%        7.26%           8.01%
Franklin Zero Coupon - 2010                   3/14/89      -13.53%         3.84%        8.59%        7.62%          8.41%%
Mutual Discovery Securities                  11/08/96       21.93%        10.31%           NA           NA          10.43%
Mutual Shares Securities                     11/08/96       11.73%         8.52%           NA           NA           9.23%
Templeton Asset Strategy*                      5/1/95        5.94%         4.72%           NA           NA           8.03%
Templeton Developing Markets Securities*      3/15/94       52.35%         1.90%        5.12%           NA           3.38%
Templeton Global Income Securities            1/24/89       -7.18%        -0.38%        3.82%        4.31%           4.67%
Templeton Growth Securities*                  3/15/94       19.25%        12.71%       13.69%           NA          12.07%
Templeton International Securities*           1/27/92       24.76%        12.60%       13.51%           NA          10.99%
Templeton International
   Smaller Companies                          5/01/96       22.07%         0.79%           NA           NA           3.64%
Templeton Pacific Growth Securities*          1/27/92       34.99%       -10.00%       -3.23%           NA           1.02%

<FN>
*The fund name changed since the last Statement of Additional Information update
as of the effective date listed below:
</FN>
</TABLE>

<TABLE>
<CAPTION>

       Current Name                                Previous Name                               Effective Date
     <S>                                           <C>                                         <C>
     Franklin Global Communications Securities FundFranklin Global Utilities Securities Fund   11-15-1999
     Franklin Growth and Income Securities Fund    Franklin Growth and Income Fund             05-01-2000
     Franklin Large Cap Growth Securities Fund     Franklin Capital Growth Fund                12-15-1999
     Franklin Real Estate Fund                     Franklin Real Estate Securities Fund        11-15-1999
     Franklin Rising Dividends Securities Fund     Franklin Rising Dividends Fund              11-15-1999
     Franklin U.S. Government Fund                 Franklin U.S. Government Securities Fund    11-15-1999
     Templeton Asset Strategy Fund                 Templeton Global Asset Allocation Fund      05-01-2000
     Templeton Developing Markets Securities Fund  Templeton Developing Markets Equity Fund    05-01-2000
     Templeton Growth Securities Fund              Templeton Global Growth Fund                05-01-2000
     Templeton International Securities Fund       Templeton International Equity Fund         05-01-2000
     Templeton Pacific Growth Securities Fund      Templeton Pacific Growth Fund               05-01-2000
</TABLE>


There is no performance  shown for the AIM V.I.  Growth,  Alger American Growth,
Alger  American  Leveraged  AllCap,   Franklin  S&P  500  Index,  USAllianz  VIP
Diversified  Assets,  USAllianz  VIP Fixed  Income,  and  USAllianz  VIP  Growth
Sub-Accounts  because they were first offered under the Contract on November 12,
1999.

The Franklin  Aggressive  Growth Securities and Franklin  Technology  Securities
Sub-Accounts commenced operations on May 1, 2000.

<TABLE>
<CAPTION>


Table II:  Total Return for the periods ended December 31, 1999

---------------------------------------------------------------------------------------------------------------------------
                                            Sub-Account
                                             Inception         One        Three         Five           Ten          Since
Variable Option                                Date           Year        Years         Years         Years       Inception
---------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>           <C>           <C>          <C>             <C>
Franklin Global Communications
   Securities*                                1/24/89       31.25%        22.19%       20.36%       12.31%          13.07%
Franklin Global Health Care Securities         5/1/98      -15.56%            NA           NA           NA          -5.68%
Franklin Growth and Income Securities*        1/24/89       -6.49%         8.69%       14.05%        9.72%           9.01%
Franklin High Income                          1/24/89       -7.64%         0.72%        6.73%        7.46%           6.80%
Franklin Income Securities                    1/24/89       -9.37%         2.07%        7.53%        8.31%           8.30%
Franklin Large Cap Growth Securities*          5/1/96       23.60%        20.20%           NA           NA          20.26%
Franklin Money Market                         1/24/89       -2.89%         1.81%        2.98%        3.22%           3.51%
Franklin Natural Resources Securities         1/24/89       24.19%       -10.77%       -5.56%       -1.18%           0.77%
Franklin Real Estate*                         1/24/89      -13.63%        -5.37%        5.81%        7.34%           7.03%
Franklin Rising Dividends Securities*         1/27/92      -17.14%         5.50%       13.47%           NA           8.14%
Franklin Small Cap                           11/01/95       87.93%        28.74%           NA           NA          27.89%
Franklin U.S. Government*                     3/14/89       -8.50%         1.91%        5.34%        5.77%           5.73%
Franklin Value Securities                      5/1/98       -5.95%            NA           NA           NA         -17.91%
Franklin Zero Coupon - 2000                   3/14/89       -4.56%         2.62%        5.74%        6.56%           6.95%
Franklin Zero Coupon - 2005                   3/14/89      -13.37%         2.41%        6.90%        7.19%           7.94%
Franklin Zero Coupon - 2010                   3/14/89      -19.63%         2.15%        8.02%        7.55%           8.34%
Mutual Discovery Securities                  11/08/96       15.83%         8.80%           NA           NA           9.21%
Mutual Shares Securities                     11/08/96        5.63%         6.96%           NA           NA           7.98%
Templeton Asset Strategy*                      5/1/95       -0.16%         3.04%           NA           NA           7.39%
Templeton Developing Markets Securities*      3/15/94       46.25%         0.11%        4.45%           NA           2.89%
Templeton Global Income Securities            1/24/89      -13.28%        -2.22%        3.15%        4.23%           4.59%
Templeton Growth Securities*                  3/15/94       13.15%        11.26%       13.20%           NA          11.73%
Templeton International Securities*           1/27/92       18.66%        11.15%       13.02%           NA          10.91%
Templeton International
   Smaller Companies                          5/01/96       15.97%        -1.03%           NA           NA           2.47%
Templeton Pacific Growth Securities*          1/27/92       28.89%       -12.30%       -4.13%           NA           0.93%

</TABLE>

<TABLE>
<CAPTION>

*The fund name changed since the last Statement of Additional Information update
as of the effective date listed below:

       Current Name                                Previous Name                               Effective Date
     <S>                                           <C>                                         <C>
     Franklin Global Communications Securities FundFranklin Global Utilities Securities Fund   11-15-1999
     Franklin Growth and Income Securities Fund    Franklin Growth and Income Fund             05-01-2000
     Franklin Large Cap Growth Securities Fund     Franklin Capital Growth Fund                12-15-1999
     Franklin Real Estate Fund                     Franklin Real Estate Securities Fund        11-15-1999
     Franklin Rising Dividends Securities Fund     Franklin Rising Dividends Fund              11-15-1999
     Franklin U.S. Government Fund                 Franklin U.S. Government Securities Fund    11-15-1999
     Templeton Asset Strategy Fund                 Templeton Global Asset Allocation Fund      05-01-2000
     Templeton Developing Markets Securities Fund  Templeton Developing Markets Equity Fund    05-01-2000
     Templeton Growth Securities Fund              Templeton Global Growth Fund                05-01-2000
     Templeton International Securities Fund       Templeton International Equity Fund         05-01-2000
     Templeton Pacific Growth Securities Fund      Templeton Pacific Growth Fund               05-01-2000
</TABLE>



There is no performance  shown for the AIM V.I.  Growth,  Alger American Growth,
Alger  American  Leveraged  AllCap,   Franklin  S&P  500  Index,  USAllianz  VIP
Diversified  Assets,  USAllianz  VIP Fixed  Income,  and  USAllianz  VIP  Growth
Sub-Accounts  because they were first offered under the Contract on November 12,
1999.

The Franklin  Aggressive  Growth Securities and Franklin  Technology  Securities
Sub-Accounts commenced operations on May 1, 2000.


<PAGE>


Federal Tax Status
--------------------------------------------------------------------------------

Note:  The  following   description  is  based  upon  the  Insurance   Company's
understanding  of current  federal  income tax law  applicable  to  annuities in
general.  The Insurance  Company cannot predict the probability that any changes
in such laws will be made. Purchasers are cautioned to seek competent tax advice
regarding  the  possibility  of such  changes.  The  Insurance  Company does not
guarantee  the tax status of the  Contracts.  Purchasers  bear the complete risk
that the  Contracts  may not be treated as  "annuity  contracts"  under  federal
income tax laws. It should be further  understood that the following  discussion
is not exhaustive and that special rules not described  herein may be applicable
in certain  situations.  Moreover,  no  attempt  has been made to  consider  any
applicable state or other tax laws.

General

Section 72 of the Internal  Revenue Code of 1986,  as amended  ("Code")  governs
taxation of annuities in general.  A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs,  either in the form of a lump
sum payment or as annuity payments under the Annuity Option elected.  For a lump
sum payment received as a total surrender  (total  redemption) or death benefit,
the recipient is taxed on the portion of the payment that exceeds the cost basis
of the Contract. For Non-Qualified  Contracts,  this cost basis is generally the
purchase payments, while for Qualified Contracts there may be no cost basis. The
taxable portion of the lump sum payment is taxed at ordinary income tax rates.

For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable  income.  The exclusion  amount for payments based on a
fixed annuity option is determined by multiplying  the payment by the ratio that
the cost  basis of the  Contract  (adjusted  for any  period  certain  or refund
feature) bears to the expected return under the Contract.  The exclusion  amount
for payments  based on a variable  annuity  option is determined by dividing the
cost basis of the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is  expected to be paid.  Payments
received after the investment in the Contract has been recovered  (i.e. when the
total of the excludible  amounts equal the investment in the Contract) are fully
taxable.  The taxable  portion is taxed at ordinary  income  rates.  For certain
types of Qualified  Plans there may be no cost basis in the Contract  within the
meaning of Section 72 of the Code. Contract Owners, annuitants and beneficiaries
under  the  Contracts  should  seek  competent  financial  advice  about the tax
consequences of any distributions.

The Insurance  Company is taxed as a life insurance  company under the Code. For
federal income tax purposes,  the Separate Account is not a separate entity from
the Insurance Company, and its operations form a part of the Insurance Company.

Diversification

Section  817(h) of the Code  imposes  certain  diversification  standards on the
underlying  assets of  variable  annuity  contracts.  The Code  provides  that a
variable  annuity  contract  will not be treated as an annuity  contract for any
period (and any subsequent  period) for which the investments are not adequately
diversified  in  accordance  with  regulations  prescribed  by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity  contract  would result in  imposition  of federal  income tax to the
Contract  Owner with respect to earnings  allocable to the Contract prior to the
receipt  of  payments  under  the  Contract.  The Code  contains  a safe  harbor
provision  which provides that annuity  contracts such as the Contracts meet the
diversification  requirements if, as of the end of each quarter,  the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five  percent (55%) of the total assets consist of cash, cash
items, U.S. government  securities and securities of other regulated  investment
companies.

On March 2, 1989,  the  Treasury  Department  issued  regulations  (Treas.  Reg.
1.817-5)  which  established  diversification  requirements  for the  investment
portfolios underlying variable contracts such as the Contracts.  The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor  provision  described  above.
Under  the  regulations,  an  investment  portfolio  will be  deemed  adequately
diversified  if:  (1) no more than 55% of the  value of the total  assets of the
portfolio  is  represented  by any one  investment;  (2) no more than 70% of the
value  of  the  total  assets  of  the  portfolio  is  represented  by  any  two
investments;  (3) no more  than 80% of the  value  of the  total  assets  of the
portfolio is represented by any three  investments;  and (4) no more than 90% of
the  value of the total  assets  of the  portfolio  is  represented  by any four
investments.

The  Code  provides  that  for  purposes  of  determining  whether  or  not  the
diversification standards imposed on the underlying assets of variable contracts
by Section  817(h) of the Code have been met,  "each  United  States  government
agency or instrumentality  shall be treated as a separate issuer." The Insurance
Company intends that all Portfolios  underlying the Contracts will be managed by
the investment advisers in such a manner as to comply with these diversification
requirements.

The Treasury  Department has indicated that the  diversification  Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the  investments of the Separate  Account will cause the Contract Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract.  At this time it cannot be
determined whether  additional  guidance will be provided and what standards may
be contained in such guidance.

The amount of Contract  Owner control which may be exercised  under the Contract
is different in some respects from the situations addressed in published rulings
issued by the  Internal  Revenue  Service  in which it was held that the  policy
owner was not the owner of the  assets of the  separate  account.  It is unknown
whether  these  differences,  such as the Contract  Owner's  ability to transfer
among investment choices or the number and type of investment choices available,
would cause the Contract  Owner to be  considered  as the owner of the assets of
the Separate  Account  resulting in the  imposition of federal income tax to the
Contract  Owner with  respect to earnings  allocable  to the  Contract  prior to
receipt of payments under the Contract.

In the event any forthcoming guidance or ruling is considered to set forth a new
position,  such guidance or ruling will generally be applied only prospectively.
However,  if such  ruling  or  guidance  was not  considered  to set forth a new
position, it may be applied retroactively  resulting in the Contract Owner being
retroactively  determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, the Insurance Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.

Multiple Contracts

The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year period to the same  contract  owner by one company or its
affiliates are treated as one annuity  contract for purposes of determining  the
tax consequences of any  distribution.  Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination  of contracts.  For purposes of this rule,  contracts  received in a
Section 1035  exchange  will be  considered  issued in the year of the exchange.
Contract  Owners should consult a tax adviser prior to purchasing  more than one
non-qualified annuity contract in any calendar year period.

Contracts Owned by Other
than Natural Persons

Under Section 72(u) of the Code,  the investment  earnings on purchase  payments
for the Contracts will be taxed  currently to the Contract Owner if the Owner is
a non-natural  person,  e.g., a  corporation  or certain  other  entities.  Such
Contracts  generally  will not be treated as  annuities  for federal  income tax
purposes. However, this treatment is not applied to Contracts held by a trust or
other entity as an agent for a natural person nor to Contracts held by qualified
plans.  Purchasers  should  consult  their own tax  counsel or other tax adviser
before purchasing a Contract to be owned by a non-natural person.

Tax Treatment of Assignments

An assignment or pledge of a Contract may be a taxable  event.  Contract  Owners
should  therefore  consult  competent tax advisers should they wish to assign or
pledge their Contracts. Death Benefits

Any death benefits paid under the Contract are taxable to the  beneficiary.  The
rules governing the taxation of payments from an annuity contract,  as discussed
above,  generally  apply to the payment of death  benefits and depend on whether
the death benefits are paid as a lump sum or as annuity  payments.  Estate taxes
may also apply.

Income Tax Withholding

All distributions or the portion thereof which is includible in the gross income
of the Contract Owner are subject to federal income tax withholding.  Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from  non-periodic  payments.  However,  the Contract Owner, in most
cases,  may elect not to have taxes  withheld or to have  withholding  done at a
different rate.

Certain  distributions  from  retirement  plans  qualified  under Section 401 or
Section  403(b)  of the Code,  which are not  directly  rolled  over to  another
eligible  retirement  plan  or  individual   retirement  account  or  individual
retirement  annuity,  are subject to a  mandatory  20%  withholding  for federal
income tax. The 20% withholding  requirement  generally does not apply to: (a) a
series of  substantially  equal  payments made at least annually for the life or
life expectancy of the participant or joint and last survivor  expectancy of the
participant and a designated beneficiary,  or for a specified period of 10 years
or more; or (b) distributions which are required minimum  distributions;  or (c)
the portion of the distributions not includible in gross income (i.e. returns of
after-tax  contributions);  or (d)  hardship  withdrawals.  Participants  should
consult  their  own tax  counsel  or other  tax  adviser  regarding  withholding
requirements.

Tax Treatment of Withdrawals -
Non-Qualified Contracts

Section  72  of  the  Code  governs  treatment  of  distributions  from  annuity
contracts. It provides that if the contract value exceeds the aggregate purchase
payments made, any amount  surrendered  will be treated as coming first from the
earnings and then,  only after the income  portion is exhausted,  as coming from
the principal.  Withdrawn  earnings are  includable in gross income.  It further
provides that a ten percent  (10%)  penalty will apply to the income  portion of
any distribution.  However, the penalty is not imposed on amounts received:  (a)
after the  taxpayer  reaches  age 59 1/2 ; (b)  after the death of the  Contract
Owner; (c) if the taxpayer is totally  disabled (for this purpose  disability is
as defined in Section  72(m)(7) of the Code);  (d) in a series of  substantially
equal periodic  payments made not less frequently than annually for the life (or
life  expectancy)  of the  taxpayer  or for  the  joint  lives  (or  joint  life
expectancies)  of the  taxpayer  and his  beneficiary;  (e)  under an  immediate
annuity;  or (f) which are  allocable to purchase  payments made prior to August
14, 1982.

With  respect  to (d)  above,  if the  series of  substantially  equal  periodic
payments is modified  before the later of your  attaining  age 59 1/2 or 5 years
from the date of the first  periodic  payment,  then the tax for the year of the
modification  is  increased  by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the  exception,  plus interest for the tax
years in which the exception was used.

The above information does not apply to Qualified Contracts.  However,  separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals"- Qualified Contracts.")

Qualified Plans


The  Contracts  offered by the  Prospectus  are  designed to be suitable for use
under various types of Qualified Plans.  Because of the minimum purchase payment
requirements,  these Contracts may not be appropriate for some periodic  payment
retirement  plans.  Taxation of  participants in each Qualified Plan varies with
the type of plan and  terms  and  conditions  of each  specific  plan.  Contract
Owners,  Annuitants  and  beneficiaries  are  cautioned  that  benefits  under a
Qualified Plan may be subject to the terms and conditions of the plan regardless
of the terms and conditions of the Contracts  issued  pursuant to the plan. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the Insurance Company's administrative procedures. The Company
is not bound by the terms and  conditions of such plans to the extent such terms
conflict with the terms of a Contract,  unless the Company specifically consents
to be bound. Contract Owners, participants and beneficiaries are responsible for
determining  that  contributions,  distributions  and  other  transactions  with
respect to the Contracts comply with applicable law.

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. Following are general descriptions
of the types of  Qualified  Plans with  which the  Contracts  may be used.  Such
descriptions are not exhaustive and are for general informational purposes only.
The tax rules regarding Qualified Plans are very complex and will have differing
applications,  depending on individual facts and  circumstances.  Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.


On July 6, 1983,  the Supreme  Court decided in Arizona  Governing  Committee v.
Norris that optional  annuity  benefits  provided  under an employer's  deferred
compensation  plan could not,  under Title VII of the Civil  Rights Act of 1964,
vary  between men and women.  The  Contracts  sold by the  Insurance  Company in
connection  with  Qualified  Plans  will  utilize  annuity  tables  which do not
differentiate  on the basis of sex.  Such annuity  tables will also be available
for use in connection with certain non-qualified deferred compensation plans.

Contracts  issued  pursuant  to  Qualified  Plans  include  special   provisions
restricting Contract provisions that may otherwise be available and described in
this Statement of Additional Information.  Generally,  Contracts issued pursuant
to Qualified Plans are not transferable  except upon surrender or annuitization.
Various  penalty and excise taxes may apply to  contributions  or  distributions
made in violation of applicable  limitations.  Furthermore,  certain  withdrawal
penalties and restrictions  may apply to withdrawals  from Qualified  Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts.")

a. Tax-Sheltered Annuities

Section 403(b) of the Code permits the purchase of "tax-sheltered  annuities" by
public schools and certain charitable,  educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying  employers may make
contributions  to the  Contracts  for  the  benefit  of  their  employees.  Such
contributions  are not  includible in the gross income of the employee until the
employee receives  distributions from the Contract.  The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability,  distributions,  nondiscrimination  and withdrawals.  (See "Tax
Treatment of Withdrawals - Qualified  Contracts" and "Tax-Sheltered  Annuities -
Withdrawal  Limitations.") Employee loans are not allowed under these Contracts.
Any employee  should  obtain  competent  tax advice as to the tax  treatment and
suitability of such an investment.

b. Individual Retirement Annuities

Section  408(b) of the Code permits  eligible  individuals  to  contribute to an
individual  retirement  program  known  as an  "Individual  Retirement  Annuity"
("IRA"). Under applicable limitations,  certain amounts may be contributed to an
IRA which may be deductible from the individual's taxable income. These IRAs are
subject  to  limitations  on  eligibility,  contributions,  transferability  and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts.") Under
certain conditions,  distributions from other IRAs and other Qualified Plans may
be rolled over or  transferred  on a  tax-deferred  basis into an IRA.  Sales of
Contracts for use with IRAs are subject to special  requirements  imposed by the
Code, including the requirement that certain  informational  disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual  Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.

Roth IRAs

Section  408A of the Code  provides  that  beginning  in 1998,  individuals  may
purchase  a new  type of  non-deductible  IRA,  known  as a Roth  IRA.  Purchase
payments  for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income.  Lower maximum  limitations apply to individuals
with adjusted gross incomes  between  $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint  returns,  and  between $0 and  $10,000  in the case of married  taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.

Qualified  distributions  from Roth IRAs are free from  federal  income  tax.  A
qualified  distribution requires that an individual has held the Roth IRA for at
least five years and, in addition,  that the  distribution  is made either after
the individual reaches age 59 1/2, on the individual's  death or disability,  or
as a qualified first-time home purchase,  subject to a $10,000 lifetime maximum,
for the individual, a spouse, child,  grandchild,  or ancestor. Any distribution
which is not a  qualified  distribution  is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions  exceed the amount of
contributions  to the  Roth  IRA.  The  10%  penalty  tax and  the  regular  IRA
exceptions  to the 10%  penalty tax apply to taxable  distributions  from a Roth
IRA.

Amounts may be rolled over from one Roth IRA to another  Roth IRA.  Furthermore,
an  individual  may make a rollover  contribution  from a non-Roth IRA to a Roth
IRA,  unless the  individual  has  adjusted  gross  income over  $100,000 or the
individual is a married taxpayer filing a separate  return.  The individual must
pay tax on any portion of the IRA being rolled over that represents  income or a
previously  deductible  IRA  contribution.  However,  for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year periods beginning
with tax year 1998.

Purchasers  of Contracts to be qualified as a Roth IRA should  obtain  competent
tax advice as to the tax treatment and suitability of such an investment.

c. Pension and Profit-Sharing Plans

Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement  plans may permit the purchase of the  Contracts to provide  benefits
under the Plan.  Contributions to the Plan for the benefit of employees will not
be includible  in the gross income of the employee  until  distributed  from the
Plan.  The tax  consequences  to  participants  may  vary,  depending  upon  the
particular Plan design. However, the Code places limitations and restrictions on
all Plans, including on such items as: amount of allowable contributions;  form,
manner and timing of  distributions;  transferability  of benefits;  vesting and
nonforfeitability   of   interests;   nondiscrimination   in   eligibility   and
participation;   and  the  tax  treatment  of  distributions   and  withdrawals.
Participant  loans are not allowed under the  Contracts  purchased in connection
with these Plans.  (See "Tax Treatment of  Withdrawals - Qualified  Contracts.")
Purchasers  of  Contracts  for use with Pension or  Profit-Sharing  Plans should
obtain  competent tax advice as to the tax treatment and  suitability of such an
investment.

Tax Treatment of Withdrawals -
Qualified Contracts


In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount  received is taxable,  generally  based on the ratio of the  individual's
cost basis to the individual's  total accrued benefit under the retirement plan.
Special tax rules may be available  for certain  distributions  from a Qualified
Contract.  Section  72(t) of the Code  imposes a 10%  penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b)  (Tax-Sheltered  Annuities)  and  408  and  408A  (Individual  Retirement
Annuities).  To the extent  amounts are not  includible in gross income  because
they have been properly rolled over to an IRA or to another  eligible  Qualified
Plan,  no tax  penalty  will be imposed.  The tax penalty  will not apply to the
following  distributions:  (a) if  distribution  is made on or after the date on
which the Contract  Owner or Annuitant (as  applicable)  reaches age 59 1/2; (b)
distributions  following  the  death  or  disability  of the  Contract  Owner or
Annuitant (as applicable) (for this purpose  disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of  substantially  equal periodic  payments made not less  frequently  than
annually for the life (or life  expectancy)  of the Contract  Owner or Annuitant
(as applicable) or the joint lives (or joint life expectancies) of such Contract
Owner or Annuitant (as  applicable) and his or her designated  beneficiary;  (d)
distributions to a Contract Owner or Annuitant (as applicable) who has separated
from service after he or she has attained age 55; (e) distributions  made to the
Contract Owner or Annuitant (as applicable) to the extent such  distributions do
not exceed the amount  allowable  as a deduction  under Code  Section 213 to the
Contract Owner or Annuitant (as  applicable) for amounts paid during the taxable
year for medical care; (f) distributions  made to an alternate payee pursuant to
a qualified  domestic  relations order; (g) distributions  made on account of an
IRS levy upon the  Qualified  Contract;  (h)  distributions  from an  Individual
Retirement  Annuity  for the  purchase of medical  insurance  (as  described  in
Section  213(d)(1)(D)  of the  Code) for the  Contract  Owner or  Annuitant  (as
applicable)  and his or her  spouse  and  dependents  if the  Contract  Owner or
Annuitant (as applicable) has received unemployment compensation for at least 12
weeks (this  exception no longer  applies after the Contract  Owner or Annuitant
(as applicable) has been  re-employed for at least 60 days);  (i)  distributions
from an  Individual  Retirement  Annuity  made to the  Owner  or  Annuitant  (as
applicable) to the extent such  distributions do not exceed the qualified higher
education  expenses (as defined in Section 72(t)(7) of the Code) of the Owner or
Annuitant (as  applicable) for the taxable year; and (j)  distributions  from an
Individual  Retirement  Annuity made to the Owner or Annuitant  (as  applicable)
which are qualified  first-time home buyer  distributions (as defined in Section
72(t)(8) of the Code).  The exceptions  stated in items (d) and (f) above do not
apply in the case of an Individual  Retirement Annuity.  The exception stated in
item (c) applies to an Individual  Retirement  Annuity  without the  requirement
that there be a separation from service.


With  respect  to (c)  above,  if the  series of  substantially  equal  periodic
payments is modified  before the later of your  attaining  age 59 1/2 or 5 years
from the date of the first  periodic  payment,  then the tax for the year of the
modification  is  increased  by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the  exception,  plus interest for the tax
years in which the exception was used.

Generally, distributions from a Qualified Plan must commence no later than April
1 of the  calendar  year  following  the  later  of:  (a) the year in which  the
employee  attains age 70 1/2,  or (b) the  calendar  year in which the  employee
retires.  The date set forth in (b) does not apply to an  Individual  Retirement
Annuity.  Required  distributions  must be over a period not  exceeding the life
expectancy  of the  individual  or the joint lives or life  expectancies  of the
individual  and  his or her  designated  beneficiary.  If the  required  minimum
distributions  are not made,  a 50%  penalty tax is imposed as to the amount not
distributed.

Tax-Sheltered Annuities - Withdrawal Limitations

The Code limits the withdrawal of amounts  attributable  to  contributions  made
pursuant to a salary  reduction  agreement (as defined in Section  403(b)(11) of
the Code) to circumstances only when the Contract Owner: (1) attains age 59 1/2;
(2) separates from service;  (3) dies; (4) becomes  disabled (within the meaning
of Section  72(m)(7)  of the  Code);  or (5) in the case of  hardship.  However,
withdrawals  for hardship are restricted to the portion of the Contract  Owner's
Contract Value which represents contributions by the Contract Owner and does not
include any investment results.  The limitations on withdrawals became effective
on January 1, 1989, and apply only to salary reduction  contributions made after
December 31,  1988,  and to income  attributable  to such  contributions  and to
income  attributable to amounts held as of December 31, 1988. The limitations on
withdrawals  do not affect  rollovers and transfers  between  certain  Qualified
Plans. Contract Owners should consult their own tax counsel or other tax adviser
regarding any distributions.

Annuity Provisions
-------------------------------------------------------------------------------

Fixed Annuity Payout

A fixed  annuity is an annuity with payments  which are  guaranteed as to dollar
amount by the Insurance  Company and do not vary with the investment  experience
of a Portfolio.  The Fixed  Account value on the day  immediately  preceding the
Income Date will be used to determine the Fixed  Annuity  monthly  payment.  The
monthly  Annuity  Payment will be based upon the  Contract  Value at the time of
annuitization,  the Annuity  Option  selected,  the age of the Annuitant and any
joint Annuitant and the sex of the Annuitant and joint Annuitant where allowed.

Variable Annuity Payout

A variable annuity is an annuity with payments which: (1) are not  predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable Portfolio(s).

Annuity Unit Value

On the Income  Date,  a fixed  number of  Annuity  Units  will be  purchased  as
follows:
The first Annuity Payment is equal to the Adjusted Contract Value, divided first
by $1,000 and then multiplied by the appropriate Annuity Payment amount for each
$1,000 of value for the Annuity  Option  selected.  In each  Portfolio the fixed
number of Annuity  Units is  determined  by  dividing  the amount of the initial
Annuity  Payment  determined for each Portfolio by the Annuity Unit value on the
Income Date.  Thereafter,  the number of Annuity Units in each Portfolio remains
unchanged unless the Contract Owner elects to transfer between  Portfolios.  All
calculations will appropriately reflect the Annuity Payment frequency selected.

On each subsequent Annuity Payment date, the total Annuity Payment is the sum of
the Annuity  Payments for each Portfolio.  The Annuity Payment in each Portfolio
is determined by multiplying  the number of Annuity Units then allocated to such
Portfolio by the Annuity Unit value for that Portfolio.

On each subsequent Valuation Date, the value of an Annuity Unit is determined in
the following way:

First:  The Net  Investment  Factor is determined as described in the Prospectus
under "Purchase - Accumulation Units."

Second: The value of an Annuity Unit for a Valuation Period is equal to:

a. the value of the Annuity Unit for the immediately preceding Valuation Period.

b. multiplied by the Net Investment Factor for the current Valuation Period;

c. divided by the Assumed Net  Investment  Factor (see below) for the  Valuation
   Period.

The Assumed Net  Investment  Factor is equal to one plus the Assumed  Investment
Return  which is used in  determining  the basis for the purchase of an Annuity,
adjusted to reflect the  particular  Valuation  Period.  The Assumed  Investment
Return that the Insurance Company will use is 5%. However, the Insurance Company
may agree to use a different value.

Mortality and Expense Risk Guarantee
--------------------------------------------------------------------------------

The Insurance Company  guarantees that the dollar amount of each Annuity Payment
after the first Annuity  Payment will not be affected by variations in mortality
and expense experience.

Financial Statements
-------------------------------------------------------------------------------


The audited consolidated financial statements of the Insurance Company as of and
for the year ended December 31, 1999,  included herein should be considered only
as bearing  upon the ability of the  Insurance  Company to meet its  obligations
under the Contracts. The audited financial statements of the Separate Account as
of and for the year ended December 31, 1999, are also included herein.







                         ALLIANZ LIFE VARIABLE ACCOUNT B
                                       of
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
                              Financial Statements
                                December 31, 1999


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Independent Auditors' Report

The Board of Directors of Allianz Life  Insurance  Company of North  America and
Contract Owners of Allianz Life Variable Account B:

We have audited the  accompanying  statements of assets and  liabilities  of the
sub-accounts  of Allianz Life  Variable  Account B as of December 31, 1999,  the
related  statements of operations  for the year then ended and the statements of
changes in net assets for each of the years in the two-years  then ended.  These
financial   statements  are  the   responsibility  of  the  Variable   Account's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial  statements.  Investment securities
held in custody for the benefit of the Variable  Account were confirmed to us by
AIM Variable Insurance Funds, Inc., The Alger American Fund,  Franklin Templeton
Variable  Insurance  Products Trust, and USAllianz  Variable  Insurance Products
Trust.  An audit also includes  assessing  the  accounting  principles  used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the assets and liabilities of the sub-accounts of Allianz
Life Variable  Account B at December 31, 1999,  the results of their  operations
for the year then  ended and the  changes  in their net  assets  for each of the
years in the  two-years  then  ended,  in  conformity  with  generally  accepted
accounting principles.



                                                                    KPMG LLP



Minneapolis, Minnesota
February 4, 2000



<PAGE>




<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements

Statements of Assets and Liabilities
December 31, 1999
(In thousands)

                                                      AIM                Alger         Alger American     Franklin Global
                                                 V.I. Growth        American Growth       Leveraged       Communications
                                                     Fund                 Fund           AllCap Fund      Securities Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>   <C>          <C>    <C>       <C>    <C>          <C>
Investments at net asset value:
  AIM V.I. Growth Fund,
   Class 1 - 306 shares, cost $9,508           $9,867        -         -         -         -        -         -         -
   Class 2 - 0 shares, cost $0                      -        -         -         -         -        -         -         -
  Alger American Growth Fund,
   Class 1 - 162 shares, cost $9,957                -        -    10,442         -         -        -         -         -
   Class 2 - 0 shares, cost $0                      -        -         -         -         -        -         -         -
  Alger American Leveraged AllCap Fund,
   Class 1 - 129 shares, cost $6,851                -        -         -         -     7,507        -         -         -
   Class 2 - 0 shares, cost $0                      -        -         -         -         -        -         -         -
  Franklin Global Communications Securities Fund,
   Class 1 - 36,310 shares, cost $609,001           -        -         -         -         -        -   902,669         -
   Class 2 - 20 shares, cost $420                   -        -         -         -         -        -         -       491
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                    9,867        -    10,442         -     7,507        -   902,669       491
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                 4        -         4         -         3        -     (215)         -
  Valuemark IV                                       3        -         4         -         3        -      (13)         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         2
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         1
 Accrued administrative charges:
  Valuemark II & III                                 1        -         1         -         -        -      (26)         -
  Valuemark IV                                       -        -         -         -         -        -       (1)         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                    8        -         9         -         6        -     (255)         3
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                      $9,859        -    10,433         -     7,501        -   902,924       488
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)                $5,833        -     5,894         -     4,137        -   844,307         -
  Valuemark IV (note 5)                          4,026        -     4,535         -     3,364        -    54,724         -
  Valuemark Charter Traditional (note 6)             -        -         -         -         -        -         -       213
  Valuemark Charter Enhanced (note 6)                -        -         -         -         -        -         -       275
 Contracts in annuity payment period (note 2)        -        -         4         -         -        -     3,893         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                   $9,859        -    10,433         -     7,501        -   902,924       488
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                                Franklin Global
                                                  Health Care      Franklin Growth      Franklin High     Franklin Income
                                                Securities Fund     and Income Fund      Income Fund       Securities Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>   <C>           <C>   <C>         <C>    <C>         <C>
Investments at net asset value:
  Franklin Global Health Care Securities Fund,
   Class 1 - 1,081 shares, cost $10,216        $10,611        -         -         -         -        -         -         -
   Class 2 - 8 shares, cost $75                      -       83         -         -         -        -         -         -
  Franklin Growth and Income Fund,
   Class 1 - 49,294 shares, cost $796,041            -        -   876,439         -         -        -         -         -
   Class 2 - 45 shares, cost $846                    -        -         -       789         -        -         -         -
  Franklin High Income Fund,
   Class 1 - 28,876 shares, cost $361,738            -        -         -         -   284,716        -         -         -
   Class 2 - 46 shares, cost $506                    -        -         -         -         -      448         -         -
  Franklin Income Securities Fund,
   Class 1 - 48,865 shares, cost $748,259            -        -         -         -         -        -   717,826         -
   Class 2 - 89 shares, cost $1,388                  -        -         -         -         -        -         -     1,303
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                    10,611       83   876,439       789   284,716      448   717,826     1,303
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                 4        -        97         -        34        -       183         -
  Valuemark IV                                       5        -        10         -         9        -         9         -
  Valuemark Charter Traditional                      -        -         -         4         -        1         -         4
  Valuemark Charter Enhanced                         -        -         -         1         -        -         -         1
 Accrued administrative charges:
 Valuemark II & III                                  1        -        11         -         4        -        22         -
 Valuemark IV                                        1        -         1         -         1        -         1         -
 Valuemark Charter Traditional                       -        -         -         1         -        -         -         -
 Valuemark Charter Enhanced                          -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                   11        -       119         6        48        1       215         5
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                     $10,600       83   876,320       783   284,668      447   717,611     1,298
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)                $6,088        -   722,583         -   198,407        -   606,369         -
  Valuemark IV (note 5)                          4,512        -   144,218         -    85,209        -   105,486         -
  Valuemark Charter Traditional (note 6)             -       33         -       545         -      429         -     1,206
  Valuemark Charter Enhanced (note 6)                -       50         -       238         -       18         -        92
 Contracts in annuity payment period (note 2)        -        -     9,519         -     1,052        -     5,756         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                  $10,600       83   876,320       783   284,668      447   717,611     1,298
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                                   Franklin                               Franklin
                                               Large Cap Growth     Franklin Money    Natural Resources    Franklin Real
                                                Securities Fund       Market Fund      Securities Fund       Estate Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>   <C>         <C>      <C>         <C>   <C>           <C>
Investments at net asset value:
  Franklin Large Cap Growth Securities Fund,
   Class 1 - 17,954 shares, cost $269,731     $378,462        -         -         -         -        -         -         -
   Class 2 - 26 shares, cost $458                    -      542         -         -         -        -         -         -
  Franklin Money Market Fund,
   Class 1 - 337,544 shares, cost $337,544           -        -   337,544         -         -        -         -         -
   Class 2 - 8,602 shares, cost $8,602               -        -         -     8,602         -        -         -         -
  Franklin Natural Resources Securities Fund,
   Class 1 - 3,604 shares, cost $39,973              -        -         -         -    39,395        -         -         -
   Class 2 - 6 shares, cost $68                      -        -         -         -         -       68         -         -
  Franklin Real Estate Fund,
   Class 1 - 9,912 shares, cost $176,899             -        -         -         -         -        -   147,887         -
   Class 2 - 30 shares, cost $443                    -        -         -         -         -        -         -       443
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                   378,462      542   337,544     8,602    39,395       68   147,887       443
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                98        -       217         -         6        -         9         -
  Valuemark IV                                      11        -         8         -         5        -         6         -
  Valuemark Charter Traditional                      -        5         -        26         -        -         -         -
  Valuemark Charter Enhanced                         -        1         -         -         -        -         -         -
 Accrued administrative charges:
  Valuemark II & III                                12        -        26         -         1        -         1         -
  Valuemark IV                                       1        -         1         -         1        -         1         -
  Valuemark Charter Traditional                      -        -         -         3         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                  122        6       252        29        13        -        17         -
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                    $378,340      536   337,292     8,573    39,382       68   147,870       443
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)              $219,679        -   258,373         -    32,615        -   115,525         -
  Valuemark IV (note 5)                        151,537        -    77,050         -     6,761        -    31,567         -
  Valuemark Charter Traditional (note 6)             -      392         -     8,557         -       62         -       429
  Valuemark Charter Enhanced (note 6)                -      144         -        16         -        6         -        14
 Contracts in annuity payment period (note 2     7,124        -     1,869         -         6        -       778         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                 $378,340      536   337,292     8,573    39,382       68   147,870       443
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                               Franklin Rising         Franklin           Franklin            Franklin
                                                  Dividends           S & P 500          Small Cap        U.S. Government
                                                Securities Fund       Index Fund            Fund                Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>    <C>           <C>  <C>        <C>      <C>        <C>
Investments at net asset value:
  Franklin Rising Dividends Securities Fund,
   Class 1 - 29,867 shares, cost $417,038     $406,493        -         -         -         -        -         -         -
   Class 2 - 40 shares, cost $626                    -      549         -         -         -        -         -         -
  Franklin S&P 500 Index Fund
   Class 1 - 1,343 shares, cost $13,794              -        -    14,180         -         -        -         -         -
   Class 2 - 0 shares, cost $0                       -        -         -         -         -        -         -         -
  Franklin Small Cap Fund,
   Class 1 - 17,248 shares, cost $244,267            -        -         -         -  463,443         -        -          -
   Class 2 - 37 shares, cost $701                    -        -         -         -         -     985          -        -
  Franklin U.S. Government Fund,
   Class 1 - 39,076 shares, cost $509,643           -         -         -         -         -        -   460,317         -
   Class 2 - 159 shares, cost $2,127                 -       -          -         -         -        -         -    1,878
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                   406,493      549    14,180         -   463,443      985   460,317     1,878
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                54        -         4         -       118        -        18         -
  Valuemark IV                                       8        -         6         -        10        -         8         -
  Valuemark Charter Traditional                      -        2         -         -         -        2         -        12
  Valuemark Charter Enhanced                         -        1         -         -         -        -         -         1
 Accrued administrative charges:
  Valuemark II & III                                 6        -         1         -        14        -         2         -
  Valuemark IV                                       1        -         1         -         1        -         1         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         1
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                   69        3        12         -       143        2        29        14
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                    $406,424      546    14,168         -   463,300      983   460,288     1,864
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)              $325,172        -     7,613         -   302,040        -   388,862         -
  Valuemark IV (note 5)                         77,429        -     6,555         -   154,275        -    70,974         -
  Valuemark Charter Traditional (note 6)             -      340         -         -         -      904         -     1,647
  Valuemark Charter Enhanced (note 6)                -      206         -         -         -       79         -       217
 Contracts in annuity payment period (note 2)    3,823        -         -         -     6,985        -       452         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                 $406,424      546    14,168         -   463,300      983   460,288     1,864
------------------------------------------------------------------------------------------------------------------------------------

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                                   Franklin            Franklin           Franklin            Franklin
                                               Value Securities       Zero Coupon        Zero Coupon         Zero Coupon
                                                     Fund             Fund - 2000        Fund - 2005         Fund - 2010
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>    <C>            <C>   <C>          <C>   <C>          <C>
Investments at net asset value:
  Franklin Value Securities Fund
   Class 1 - 1,349 shares, cost $10,759        $10,660        -         -         -         -        -         -         -
   Class 2 - 17 shares, cost $131                    -      130         -         -         -        -         -         -
  Franklin Zero Coupon Fund- 2000
   Class 1 - 4,724 shares, cost $65,759              -        -    59,382         -         -        -         -         -
   Class 2 - 0 shares, cost $0                       -        -         -         -         -        -         -         -
  Franklin Zero Coupon Fund- 2005
   Class 1 - 4,097 shares, cost $63,136              -        -         -         -    59,443        -         -         -
   Class 2 - 0 shares, cost $0                       -        -         -         -         -        -         -         -
  Franklin Zero Coupon Fund- 2010
   Class 1 - 4,292 shares, cost $71,092              -        -         -         -         -        -    60,739         -
   Class 2 - 0 shares, cost $0                       -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                    10,660      130    59,382         -    59,443        -    60,739         -
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                37        -         6         -         6        -         5         -
  Valuemark IV                                       5        -         5         -         6        -         5         -
  Valuemark Charter Traditional                      -        1         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
 Accrued administrative charges:
  Valuemark II & III                                 4        -         1         -         1        -         1         -
  Valuemark IV                                       -        -         1         -         1        -         1         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                   46        1        13         -        14        -        12         -
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                     $10,614      129    59,369         -    59,429        -    60,727         -
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)                $5,614        -    53,526         -    46,679        -    44,759         -
  Valuemark IV (note 5)                          4,657        -     5,831         -    12,750        -    15,961         -
  Valuemark Charter Traditional (note 6)             -      108         -         -         -        -         -         -
  Valuemark Charter Enhanced (note 6)                -       21         -         -         -        -         -         -
 Contracts in annuity payment period (note 2)      343        -        12         -         -        -         7         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                  $10,614      129    59,369         -    59,429        -    60,727         -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                                    Mutual              Mutual            Templeton           Templeton
                                             Discovery Securities  Shares Securities Developing Markets     Global Asset
                                                     Fund                Fund            Equity Fund       Allocation Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>   <C>           <C>   <C>         <C>     <C>          <C>
Investments at net asset value:
  Mutual Discovery Securities Fund,
   Class 1 - 14,046 shares, cost $164,635    $190,610         -         -         -         -        -         -         -
   Class 2 - 30 shares, cost $365                    -      413         -         -         -        -         -         -
  Mutual Shares Securities Fund,
   Class 1 - 31,789 shares, cost $370,341            -        -   420,567         -         -        -         -         -
   Class 2 - 74 shares, cost $939                    -        -         -       980         -        -         -         -
  Templeton Developing Markets Equity Fund,
   Class 1 - 17,079 shares, cost $167,971            -        -         -         -   179,157        -         -         -
   Class 2 - 33 shares, cost $328                    -        -         -         -         -      346         -         -
  Templeton Global Asset Allocation Fund,
   Class 1 - 4,909 shares, cost $59,592              -        -         -         -         -        -    57,979         -
   Class 2 - 4 shares, cost $54                      -        -         -         -         -        -         -        52
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                   190,610      413   420,567       980   179,157      346    57,979        52
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                95        -       146         -        46        -        71         -
  Valuemark IV                                       9        -        14         -         7        -         6         -
  Valuemark Charter Traditional                      -        2         -         4         -        4         -         -
  Valuemark Charter Enhanced                         -        -         -         1         -        -         -         -
 Accrued administrative charges:
  Valuemark II & III                                11        -        18         -         6        -         9         -
  Valuemark IV                                       1        -         2         -         1        -         1         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                  116        2       180         5        60        4        87         -
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                    $190,494      411   420,387       975   179,097      342    57,892        52
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)               $79,396        -   164,442         -   136,842        -    36,071         -
  Valuemark IV (note 5)                        106,824        -   249,799         -    41,093        -    20,133         -
  Valuemark Charter Traditional (note 6)             -      275         -       875         -      253         -        36
  Valuemark Charter Enhanced (note 6)                -      136         -       100         -       89         -        16
 Contracts in annuity payment period (note 2)    4,274        -     6,146         -     1,162        -     1,688         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                 $190,494      411   420,387       975   179,097      342    57,892        52
------------------------------------------------------------------------------------------------------------------------------------

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                                   Templeton           Templeton          Templeton          Templeton
                                                 Global Growth       Global Income      International   International Smaller
                                                     Fund           Securities Fund      Equity Fund       Companies Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>         <C>      <C>          <C>   <C>        <C>      <C>           <C>
Investments at net asset value:
  Templeton Global Growth Fund,
   Class 1 - 42,714 shares, cost $548,058     $667,615        -         -         -         -        -         -         -
   Class 2 - 86 shares, cost $1,294                  -    1,339         -         -         -        -         -         -
  Templeton Global Income Securities Fund,
   Class 1 - 7,339 shares, cost $92,234              -        -    81,239         -         -        -         -         -
   Class 2 - 40 shares, cost $464                    -        -         -       442         -        -         -         -
  Templeton International Equity Fund,
   Class 1 - 40,536 shares, cost $579,632            -        -         -         -   727,623        -         -         -
   Class 2 - 181 shares, cost $3,112                 -        -         -         -         -    3,232         -         -
  Templeton International Smaller Companies Fund,
   Class 1 - 2,014 shares, cost $21,792              -        -         -         -         -        -    22,297         -
   Class 2 - 5 shares, cost $56                      -        -         -         -         -        -         -        58
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                   667,615    1,339    81,239       442   727,623    3,232    22,297        58
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                               225        -         8         -       170        -        11         -
  Valuemark IV                                      11        -         5         -         9        -         5         -
  Valuemark Charter Traditional                      -       12         -         1         -       30         -         3
  Valuemark Charter Enhanced                         -        1         -         -         -        1         -         -
 Accrued administrative charges:
  Valuemark II & III                                27        -         1         -        21        -         1         -
  Valuemark IV                                       1        -         1         -         1        -         1         -
  Valuemark Charter Traditional                      -        1         -         -         -        3         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                  264       14        15         1       201       34        18         3
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                    $667,351    1,325    81,224       441   727,422    3,198    22,279        55
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)              $484,117        -    70,284         -   628,777        -    11,825         -
  Valuemark IV (note 5)                        174,453        -    10,843         -    95,194        -     9,864         -
  Valuemark Charter Traditional (note 6)             -    1,012         -       435         -    2,895         -         4
  Valuemark Charter Enhanced (note 6)                -      313         -         6         -      303         -        51
 Contracts in annuity payment period (note 2)    8,781        -        97         -     3,451        -       590         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                 $667,351    1,325    81,224       441   727,422    3,198    22,279        55
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                                   Templeton           USAllianz          USAllianz           USAllianz
                                                Pacific Growth     VIP Diversified    VIP Fixed Income       VIP Growth
                                                     Fund             Assets Fund           Fund                Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>      <C>          <C>     <C>        <C>     <C>         <C>
Investments at net asset value:
  Templeton Pacific Growth Fund,
   Class 1 - 8,732 shares, cost $84,474        $88,975        -         -         -         -        -         -         -
   Class 2 - 11 shares, cost $111                    -      112         -         -         -        -         -         -
  USAllianz VIP Diversified Assets Fund,
   Class 1 - 10 shares, cost $102                    -        -       103         -         -        -         -         -
   Class 2 - 0 shares, cost $0                       -        -         -         -         -        -         -         -
  USAllianz VIP Fixed Income Fund,
   Class 1 - 13 shares, cost $131                    -        -         -         -       129        -         -         -
   Class 2 - 0 shares, cost $0                       -        -         -         -         -        -         -         -
  USAllianz VIP Growth Fund,
   Class 1 - 31 shares, cost $317                    -        -         -         -         -        -       331         -
   Class 2 - 0 shares, cost $0                       -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                    88,975      112       103         -       129        -       331         -
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                21        -         -         -         -        -         -         -
  Valuemark IV                                       6        -         -         -         -        -         -         -
  Valuemark Charter Traditional                      -        1         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
 Accrued administrative charges:
  Valuemark II & III                                 2        -         -         -         -        -         -         -
  Valuemark IV                                       1        -         -         -         -        -         -         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                   30        1         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                     $88,945      111       103         -       129        -       331         -
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)               $77,144        -        88         -       124        -       226         -
  Valuemark IV (note 5)                         11,295        -        15         -         5        -       105         -
  Valuemark Charter Traditional (note 6)             -       63         -         -         -        -         -         -
  Valuemark Charter Enhanced (note 6)                -       48         -         -         -        -         -         -
 Contracts in annuity payment period (note 2)      506        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                  $88,945      111       103         -       129        -       331         -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)

                                                                                                                Total
                                                                                                                 All
                                                                                                                Funds
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
Investments at net asset value:
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                                   <C>           <C>
Total assets                                                                                          $7,694,647    23,285
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
 Accrued mortality and expense risk charges:
  Valuemark II & III                                                                                       1,485         -
  Valuemark IV                                                                                               185         -
  Valuemark Charter Traditional                                                                                -       116
  Valuemark Charter Enhanced                                                                                   -         9
 Accrued administrative charges:
  Valuemark II & III                                                                                         180         -
  Valuemark IV                                                                                                24         -
  Valuemark Charter Traditional                                                                                -         9
  Valuemark Charter Enhanced                                                                                   -         -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                                          1,874       134
------------------------------------------------------------------------------------------------------------------------------------
Net assets                                                                                            $7,692,773    23,151
------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
 Contracts in accumulation period:
  Valuemark II and III  (note 5)                                                                      $5,883,411         -
  Valuemark IV (note 5)                                                                                1,741,044         -
  Valuemark Charter Traditional (note 6)                                                                       -    20,713
  Valuemark Charter Enhanced (note 6)                                                                          -     2,438
 Contracts in annuity payment period (note 2)                                                             68,318         -
------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity                                                                         $7,692,773    23,151
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations
For the year ended December 31, 1999
(In thousands)

                                                                         Alger              Alger             Franklin
                                                      AIM           American Growth  American Leverage  Global Communications
                                               V.I. Growth Fund          Fund          AllCap Fund         Securities Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>      <C>        <C>       <C>        <C>     <C>    <C>        <C>
Investment income:
 Dividends reinvested in fund shares               $11        -         -         -         -        -    30,155        10
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                                 4        -         5         -         3        -     9,416         -
  Valuemark IV                                       3        -         4         -         3        -       481         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         1
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         1
 Administrative charges:
  Valuemark II & III                                 1        -         1         -         -        -     1,130         -
  Valuemark IV                                       -        -         -         -         -        -        54         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                       8        -        10         -         6        -    11,081         2
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                        3        -       (10)        -        (6)       -    19,074         8
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions
 on mutual funds                                   201        -         -         -         -        -    73,027        25
 Realized gains (losses) on sales of
 investments, net                                    4        -         -         -        17        -    57,739        (2)
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net        205        -         -         -        17        -   130,766        23
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                    359        -       484         -       656        -   108,627        70
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
  appreciation (depreciation) on
  investments, net                                 564        -       484         -       673        -   239,393        93
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                                  $567        -       474         -       667        -   258,467       101
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                   Franklin            Franklin           Franklin            Franklin
                                              Global Health Care   Growth and Income     High Income      Income Securities
                                                Securities Fund          Fund               Fund                Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>       <C>   <C>        <C>      <C>       <C>      <C>         <C>
Investment income:
 Dividends reinvested in fund shares               $23        -    38,834        22    77,709      105    74,850        44
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                                74        -    11,011         -     3,263        -     9,791         -
  Valuemark IV                                      45        -     1,986         -     1,231        -     1,485         -
  Valuemark Charter Traditional                      -        -         -         4         -        1         -         4
  Valuemark Charter Enhanced                         -        -         -         1         -        -         -         1
 Administrative charges:
  Valuemark II & III                                 9        -     1,321         -       392        -     1,175         -
  Valuemark IV                                       5        -       222         -       138        -       166         -
  Valuemark Charter Traditional                      -        -         -         1         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                     133        -    14,540         6     5,024        1    12,617         5
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                     (110)       -    24,294        16    72,685      104    62,233        39
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions
 on mutual funds                                     -        -   108,254        62    11,372       13    26,820        16
 Realized gains (losses) on sales of
 investments, net                                 (444)       -    72,697       (27)  (13,505)     (60)   18,957         -
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net       (444)       -   180,951        35    (2,133)     (47)   45,777        16
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                   (413)       8  (203,466)      (57)  (74,035)     (58) (135,753)      (85)
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on
 investments, net                                 (857)        8  (22,515)      (22)  (76,168)    (105)  (89,976)      (69)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                                 ($967)        8    1,779        (6)   (3,483)      (1)  (27,743)      (30)
------------------------------------------------------------------------------------------------------------------------------------

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                   Franklin            Franklin           Franklin            Franklin
                                               Large Cap Growth      Money Market     Natural Resources      Real Estate
                                                Securities Fund          Fund          Securities Fund          Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>        <C>      <C>        <C>      <C>       <C>      <C>        <C>
Investment income:
 Dividends reinvested in fund shares            $1,404        1    16,250       111       684        1    16,917         5
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                             2,414        -     3,641         -       464        -     2,022         -
  Valuemark IV                                   1,569        -       869         -        88        -       503         -
  Valuemark Charter Traditional                      -        4         -        25         -        -         -         1
  Valuemark Charter Enhanced                         -        1         -         -         -        -         -         -
 Administrative charges:
  Valuemark II & III                               290        -       437         -        56        -       243         -
  Valuemark IV                                     176        -        97         -        10        -        56         -
  Valuemark Charter Traditional                      -        -         -         3         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                   4,449        5     5,044        28       618        -     2,824         1
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                   (3,045)      (4)   11,206        83        66        1    14,093         4
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions
 on mutual funds                                     -        -         -         -        -         -    23,442         7
 Realized gains (losses) on sales of
 investments, net                               14,374       94         -         -    (9,180)     (11)     (920)        -
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net     14,374       94         -         -    (9,180)     (11)   22,522         7
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                 74,106       84         -         -    20,689        1   (51,341)        -
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on
 investments, net                               88,480      178         -         -    11,509      (10)  (28,819)        7
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
 from operations                               $85,435      174    11,206        83    11,575       (9)  (14,726)       11
------------------------------------------------------------------------------------------------------------------------------------

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                   Franklin            Franklin           Franklin            Franklin
                                               Rising Dividends      S&P 500 Index        Small Cap        U.S. Government
                                                Securities Fund          Fund               Fund                Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>        <C>          <C>      <C>   <C>        <C>     <C>         <C>
Investment income:
 Dividends reinvested in fund shares            $8,456        5         -         -     1,420        -    73,938       257
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                             5,510        -         6         -     2,642        -     5,965         -
  Valuemark IV                                   1,184        -         6         -     1,255        -       909         -
  Valuemark Charter Traditional                      -        2         -         -         -        2         -        12
  Valuemark Charter Enhanced                         -        1         -         -         -        -         -         1
 Administrative charges:
  Valuemark II & III                               661        -         1         -       317        -       716         -
  Valuemark IV                                     133        -         1         -       141        -       102         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         1
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                   7,488        3        14         -     4,355        2     7,692        14
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                      968        2       (14)        -    (2,935)      (2)   66,246       243
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions
 on mutual funds                                84,717       53         -         -       198        -         -         -
 Realized gains (losses) on sales of
 investments, net                               36,917       (1)        -         -    15,350        3     3,396       (20)
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net    121,634       52         -         -    15,548        3     3,396       (20)
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments               (184,821)     (77)      386         -   211,659      284   (82,778)     (250)
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on
 investments, net                              (63,187)     (25)      386         -   227,207      287   (79,382)     (270)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                              ($62,219)     (23)      372         -   224,272      285   (13,136)      (27)
------------------------------------------------------------------------------------------------------------------------------------

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                   Franklin            Franklin           Franklin            Franklin
                                               Value Securities       Zero Coupon        Zero Coupon         Zero Coupon
                                                     Fund             Fund - 2000        Fund - 2005         Fund - 2010
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>        <C>  <C>            <C>    <C>        <C>    <C>        <C>
Investment income:
 Dividends reinvested in fund shares               $27        -    10,170         -     8,132        -     8,748         -
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                                91        -       784         -       693        -       719         -
  Valuemark IV                                      52        -        64         -       159        -       211         -
  Valuemark Charter Traditional                      -        1         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
 Administrative charges:
  Valuemark II & III                                11        -        94         -        83        -        86         -
  Valuemark IV                                       6        -         7         -        18        -        24         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                     160        1       949         -       953        -     1,040         -
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                     (133)      (1)    9,221         -     7,179        -     7,708         -
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions
 on mutual funds                                     -        -     1,456         -       407        -     2,122         -
 Realized gains (losses) on sales
 of investments, net                              (411)      (7)      471         -     1,372        -       322         -
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net       (411)      (7)    1,927         -     1,779        -     2,444         -
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                    309        -   (10,114)        -   (14,138)       -   (21,090)        -
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on
 investments, net                                 (102)      (7)   (8,187)         -  (12,359)       -   (18,646)        -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                                 ($235)      (8)    1,034          -   (5,180)       -   (10,938)        -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                    Mutual              Mutual            Templeton           Templeton
                                             Discovery Securities  Shares Securities Developing Markets     Global Asset
                                                     Fund                Fund            Equity Fund       Allocation Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>  <C>          <C>     <C>          <C>    <C>          <C>
Investment income:
 Dividends reinvested in fund shares            $5,527        6    11,481        11     3,258        2     4,363         3
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                             1,136        -     2,422         -     1,619        -       586         -
  Valuemark IV                                   1,340        -     3,346         -       448        -       265         -
  Valuemark Charter Traditional                      -        2         -         4         -        4         -         -
  Valuemark Charter Enhanced                         -        -         -         1         -        -         -         -
 Administrative charges:
  Valuemark II & III                               136        -       291         -       194        -        70         -
  Valuemark IV                                     150        -       375         -        50        -        30         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                   2,762        2     6,434         5     2,311        4       951         -
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                    2,765        4     5,047         6       947       (2)    3,412         3
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions
 on mutual funds                                     -        -         -         -         -        -     4,294         3
 Realized gains (losses) on sales
 of investments, net                               877        -    10,361        (2)  (14,723)     263       217         -
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net        877        -    10,361        (2)  (14,723)     263     4,511         3
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                 33,265       48    32,828        41    81,897       18    (4,595)       (2)
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on
 investments, net                               34,142       48    43,189        39    67,174      281       (84)        1
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                               $36,907       52    48,236        45    68,121      279      3,328        4
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                   Templeton           Templeton          Templeton           Templeton
                                                 Global Growth       Global Income      International   International Smaller
                                                     Fund           Securities Fund      Equity Fund        Companies Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>       <C>      <C>         <C>      <C>       <C>        <C>       <C>
Investment income:
 Dividends reinvested in fund shares           $14,804       17     8,318        20    43,449      147       658         -
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                             6,443        -     1,175         -     8,528        -       158         -
  Valuemark IV                                   2,090        -       155         -     1,149        -       126         -
  Valuemark Charter Traditional                      -       12         -         1         -       29         -         3
  Valuemark Charter Enhanced                         -        1         -         -         -        1         -         -
 Administrative charges:
  Valuemark II & III                               773        -       141         -     1,023        -        19         -
  Valuemark IV                                     234        -        17         -       129        -        14         -
  Valuemark Charter Traditional                      -        1         -         -         -        3         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                   9,540       14     1,488         1    10,829       33       317         3
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                    5,264        3     6,830        19    32,620      114       341        (3)
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions
 on mutual funds                                71,620       82         -         -    22,510       56         -         -
 Realized gains (losses) on sales
 of investments, net                            29,748      235    (2,393)        -    57,375      870      (948)      137
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net    101,368      317    (2,393)        -    79,885      926      (948)      137
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                 10,044       45   (12,888)      (22)   51,890      120     4,893         2
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on investments,
   net                                         111,412      362   (15,281)      (22)  131,775     1,046    3,945       139
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                              $116,676      365    (8,451)       (3)  164,395     1,160    4,286       136
------------------------------------------------------------------------------------------------------------------------------------

<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                   Templeton           USAllianz          USAllianz           USAllianz
                                                Pacific Growth     VIP Diversified     VIP Fixed Income       VIP Growth
                                                     Fund            Assets Fund             Fund                Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1   Class 2   Class 1   Class 2  Class 1   Class 2   Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>     <C>         <C>        <C>       <C>      <C>       <C>       <C>
Investment income:
 Dividends reinvested in fund shares              $907        1         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                             1,051        -         -         -         -        -         -         -
  Valuemark IV                                     111        -         -         -         -        -         -         -
  Valuemark Charter Traditional                      -        1         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
 Administrative charges:
  Valuemark II & III                               126        -         -         -         -        -         -         -
  Valuemark IV                                      12        -         -         -         -        -         -         -
  Valuemark Charter Traditional                      -        -         -         -         -        -         -         -
  Valuemark Charter Enhanced                         -        -         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                   1,300        1         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                     (393)       -         -         -         -        -         -         -
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distribution
 on mutual funds                                     -        -         -         -         -        -         -         -
 Realized gains (losses) on sales
 of investments, net                            (3,508)      38         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net     (3,508)      38         -         -         -        -         -         -
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                 33,561        1         1         -        (2)       -        14         -
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on
 investments, net                               30,053       39         1         -        (2)       -        14         -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                               $29,660       39         1         -        (2)        -       14         -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)

                                                                                                                Total
                                                                                                                 All
                                                                                                                Funds
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Class 1   Class 2
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                     <C>           <C>
Investment income:
 Dividends reinvested in fund shares                                                                    $460,493       768
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
 Mortality and expense risk charges:
  Valuemark II & III                                                                                      81,636         -
  Valuemark IV                                                                                            21,137         -
  Valuemark Charter Traditional                                                                                -       113
  Valuemark Charter Enhanced                                                                                   -         9
 Administrative charges:
  Valuemark II & III                                                                                       9,797         -
  Valuemark IV                                                                                             2,367         -
  Valuemark Charter Traditional                                                                                -         9
  Valuemark Charter Enhanced                                                                                   -         -
------------------------------------------------------------------------------------------------------------------------------------
Total expenses                                                                                           114,937       131
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net                                                                            345,556       637
Realized gains (losses) and unrealized
 appreciation (depreciation) on investments:
 Realized capital gain distributions on mutual funds                                                     430,440       317
 Realized gains (losses) on sales of investments, net                                                    274,162     1,510
------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net                                                              704,602     1,827
------------------------------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation
  (depreciation) on investments                                                                         (129,766)      171
------------------------------------------------------------------------------------------------------------------------------------
  Total realized gains (losses) and unrealized
   appreciation (depreciation) on investments, net                                                       574,836     1,998
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations                                                   $920,392     2,635
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements  of Changes in Net Assets For the years ended  December  31, 1999 and
1998 (In thousands)

                                                       AIM V.I.                               Alger American
                                                      Growth Fund                               Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>         <C>       <C>     <C>      <C>           <C>       <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net               $3        -           -       -         (10)       -           -       -
  Realized gains (losses) on investments,net 205        -           -       -           -        -           -       -
  Net change in unrealized appreciation
   (depreciation) on investments             359        -           -       -         484        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
 from operations                             567        -           -       -         474        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                           27        -           -       -           6        -           -       -
  Transfers between funds                  5,530        -           -       -       5,632        -           -       -
  Surrenders and terminations                (61)       -           -       -          (3)       -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
 Valuemark II & III                        4,496        -           -       -       5,635        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                           50        -           -       -         215        -           -       -
  Transfers between funds                  3,764        -           -       -       4,119        -           -       -
  Surrenders and terminations                (18)       -           -       -         (10)       -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV      3,796        -           -       -       4,324        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -           -        -          -       -           -        -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -           -       -           -       -            -       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets          9,859        -           -       -      10,433        -           -       -
Net assets at beginning of year                -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                 $9,859        -           -       -      10,433        -           -       -
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                    Alger American                    Franklin Global Communications
                                                 Leveraged AllCap Fund                        Securities Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>         <C>      <C>   <C>      <C>         <C>         <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net              ($6)       -           -       -      19,074   25,465           8       -
  Realized gains (losses) on investments, net 17        -           -       -     130,766   99,245          23       -
  Net change in unrealized appreciation
   (depreciation) on investments             656        -           -       -     108,627  (40,032)         70       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
 from operations                             667        -           -        -    258,467   84,678         101       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                            1        -           -       -       3,272    7,461           -       -
  Transfers between funds                  3,765        -           -       -     (24,958) (39,931)          -       -
  Surrenders and terminations                 (9)       -           -       -    (250,550)(198,959)          -       -
  Rescissions                                  -        -           -       -        (386)    (241)          -       -
  Other transactions (note 2)                  -        -           -       -         476      155           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                        3,757        -           -       -    (272,146 (231,515)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                            8        -           -       -       3,917   12,583           -       -
  Transfers between funds                  3,078        -           -       -      13,001    6,950           -       -
  Surrenders and terminations                 (9)       -           -       -      (4,391)  (1,068)          -       -
  Rescissions                                  -        -           -       -         (16)     (88)          -       -
  Other transactions (note 2)                  -        -           -       -           1        5           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                              3,077       -            -       -      12,512   18,382           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -           -       -           -        -         179       -
  Transfers between funds                      -        -           -       -           -        -         (19)      -
  Surrenders and terminations                  -        -           -       -           -        -          (1)      -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -           -       -           -       -          159       -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -           -       -           -        -         237       -
  Transfers between funds                      -        -           -       -           -        -          (8)      -
  Surrenders and terminations                  -        -           -       -           -        -          (1)      -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -           -       -           -       -          228       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets          7,501        -           -       -      (1,167)(128,455)        488       -
Net assets at beginning of year                -        -           -       -     904,0911,032,546           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                 $7,501        -           -       -     902,924  904,091         488       -
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                Franklin Global Health                           Franklin
                                                 Care Securities Fund                     Growth and Income Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>        <C>         <C>      <C>     <C>        <C>          <C>       <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net            ($110)     (42)          -       -      24,294     22,488        16       -
  Realized gains (losses) on investments,
 net                                        (444)    (205)          -       -     180,951    128,386        35       -
  Net change in unrealized appreciation
   (depreciation) on investments            (413)     808           8       -    (203,466)   (73,442)      (57)      -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                            (967)     561           8       -       1,779     77,432        (6)      -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                          103      194           -       -       8,279     16,130         -       -
  Transfers between funds                  3,399    5,818           -       -     (16,044)    20,093         -       -
  Surrenders and terminations             (2,835)    (190)          -       -    (331,869)  (195,983)        -       -
  Rescissions                                 (2)       -           -       -        (714)      (276)        -       -
  Other transactions (note 2)                 (3)      (1)          -       -         585        356         -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                          662    5,821           -       -    (339,763)  (159,680)        -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                          502    1,428           -       -      11,510     51,280         -       -
  Transfers between funds                  2,077    1,051           -       -      18,552     25,926         -       -
  Surrenders and terminations               (267)      (7)          -       -     (18,769)    (5,388)        -       -
  Rescissions                                 (2)    (258)          -       -        (127)      (943)        -       -
  Other transactions (note 2)                 (1)       -           -       -          78         46         -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV      2,309    2,214           -       -      11,244     70,921         -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -          36       -           -          -     1,195       -
  Transfers between funds                      -        -          (6)      -           -          -       (13)      -
  Surrenders and terminations                  -        -           -       -           -          -      (634)      -
  Rescissions                                  -        -           -       -           -          -         -       -
  Other transactions (note 2)                  -        -           -       -           -          -         -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -          30       -           -          -       548       -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions -Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -          43       -           -          -       238       -
  Transfers between funds                      -        -           2       -           -          -         7       -
  Surrenders and terminations                  -        -           -       -           -          -        (4)      -
  Rescissions                                  -        -           -       -           -          -         -       -
  Other transactions (note 2)                  -        -           -       -           -          -         -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -          45       -           -         -        241       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets          2,004    8,596          83       -    (326,740)   (11,327)      783       -
Net assets at beginning of year            8,596        -           -       -   1,203,060  1,214,387         -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                $10,600    8,596          83       -     876,320  1,203,060       783       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Franklin                                  Franklin
                                                   High Income Fund                       Income Securities Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>       <C>         <C>        <C>     <C>        <C>          <C>       <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net          $72,685   33,766         104       -      62,233     77,877          39       -
  Realized gains (losses) on investments,
 net                                      (2,133)   4,702         (47)      -      45,777     48,389          16       -
  Net change in unrealized appreciation
   (depreciation) on investments         (74,035) (38,630)        (58)      -    (135,753)  (126,374)        (85)      -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                          (3,483)    (162)         (1)      -     (27,743)      (108)        (30)      -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                        1,791    4,834           -       -       4,169     13,275           -       -
  Transfers between funds                (18,484) (19,142)          -       -     (69,103)   (51,375)          -       -
  Surrenders and terminations           (100,108) (71,048)          -       -    (294,539   (219,332)          -       -
  Rescissions                               (186)    (154)          -       -      (1,016)      (278)          -       -
  Other transactions (note 2)                173      455           -       -         767        411           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                     (116,814) (85,055)          -       -    (359,722)  (257,299)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                        7,857   39,346           -       -       9,595     42,572           -       -
  Transfers between funds                  2,895    8,234           -       -       5,898     14,799           -       -
  Surrenders and terminations            (11,650)  (4,106)          -       -     (11,956)    (3,538)          -       -
  Rescissions                               (890)  (1,327)          -       -        (122)      (530)          -       -
  Other transactions (note 2)                277       50           -       -          64         (5)          -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                             (1,511)  42,197           -       -       3,479     53,298           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -         219       -           -          -       1,223       -
  Transfers between funds                      -        -         260       -           -          -          12       -
  Surrenders and terminations                  -        -         (49)      -           -          -          (2)      -
  Rescissions                                  -        -           -       -           -          -           -       -
  Other transactions (note 2)                  -        -           -       -           -          -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -         430       -           -       -          1,233       -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions -Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -           7       -           -          -          79       -
  Transfers between funds                      -        -          14       -           -          -          17       -
  Surrenders and terminations                  -        -          (3)      -           -          -          (1)      -
  Rescissions                                  -        -           -       -           -          -           -       -
  Other transactions (note 2)                  -        -           -       -           -          -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -          18       -           -       -             95       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets       (121,808) (43,020)        447       -    (383,986)  (204,109)      1,298       -
Net assets at beginning of year          406,476  449,496           -       -   1,101,597  1,305,706           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $284,668  406,476         447       -     717,611  1,101,597       1,298       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Franklin                                  Franklin
                                           Large Cap Growth Securities Fund                  Money Market Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>       <C>          <C>       <C>       <C>      <C>        <C>      <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net          ($3,045)  (1,497)         (4)      -      11,206   12,915          83       -
  Realized gains (losses) on investments,
 net                                      14,374    3,101          94       -           -        -           -       -
  Net change in unrealized appreciation
   (depreciation) on investments          74,106   24,031          84       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                          85,435   25,635         174        -      11,206  12,915          83       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                        3,422    3,713           -       -       7,896   11,342           -       -
  Transfers between funds                117,374   55,930           -       -     194,558  207,647           -       -
  Surrenders and terminations            (81,624) (17,886)          -       -    (276,520)(204,171)          -       -
  Rescissions                               (255)      (8)          -       -        (187)    (341)          -       -
  Other transactions (note 2)                151      (19)          -       -       6,553      824           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                       39,068   41,730           -       -     (67,700)  15,301           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                       10,004   21,127           -       -      12,863   44,229           -       -
  Transfers between funds                 59,488   17,665           -       -      25,077  (20,238)          -       -
  Surrenders and terminations            (20,335)  (2,192)          -       -     (25,510)  (6,316)          -       -
  Rescissions                                (56)    (556)          -       -         (49)  (1,952)          -       -
  Other transactions (note 2)                258        1           -       -         470      199           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                             49,359   36,045           -       -      12,851   15,922           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -       1,393       -           -        -       8,404       -
  Transfers between funds                      -        -          42       -           -        -         173       -
  Surrenders and terminations                  -        -        (920)      -           -        -        (103)      -
  Rescissions                                  -        -        (274)      -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -         241       -           -       -        8,474       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -         125       -           -        -          57       -
  Transfers between funds                      -        -           -       -           -        -         (41)      -
  Surrenders and terminations                  -        -          (4)      -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -         121       -           -       -           16       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets        173,862  103,410         536       -     (43,643)  44,138       8,573       -
Net assets at beginning of year          204,478  101,068           -       -     380,935  336,797           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $378,340  204,478         536       -     337,292  380,935       8,573       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                              Franklin Natural Resources                         Franklin
                                                    Securities Fund                          Real Estate Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>        <C>       <C>     <C>        <C>            <C>      <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net              $66       75           1       -      14,093    9,568           4       -
  Realized gains (losses) on investments,
 net                                      (9,180) (13,600)        (11)      -      22,522   25,702           7       -
  Net change in unrealized appreciation
   (depreciation) on investments          20,689   (3,804)          1       -     (51,341)(105,327)          -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                          11,575  (17,329)         (9)      -     (14,726) (70,057)         11       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                          315      899           -       -         790    4,373           -       -
  Transfers between funds                 (5,419)  (5,230)          -       -     (29,234) (48,548)          -       -
  Surrenders and terminations             (9,951)  (7,877)          -       -     (66,788) (49,929)          -       -
  Rescissions                                (65)     (49)          -       -        (283)    (148)          -       -
  Other transactions (note 2)                 11       15           -       -          46      161           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
  Valuemark II & III                     (15,109) (12,242)          -       -     (95,469) (94,091)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                          459    1,717           -       -       1,696   16,008           -       -
  Transfers between funds                    923      841           -       -      (4,570)   1,947           -       -
  Surrenders and terminations               (618)    (188)          -       -      (4,367)  (1,625)          -       -
  Rescissions                                (57)     (52)          -       -          (7)    (202)          -       -
  Other transactions (note 2)                 (2)     (15)          -       -          26       13           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                                705    2,303           -       -      (7,222)  16,141           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -          57       -           -        -         281       -
  Transfers between funds                      -        -          14       -           -        -         136       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -          71       -           -       -          417       -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -           4       -           -        -          13       -
  Transfers between funds                      -        -           2       -           -        -           2       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -           6       -           -       -           15       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets         (2,829) (27,268)         68       -    (117,417)(148,007)        443       -
Net assets at beginning of year           42,211   69,479           -       -     265,287  413,294           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                $39,382   42,211          68       -     147,870  265,287         443       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Franklin                              Franklin S&P 500
                                           Rising Dividends Securities Fund                     Index Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>       <C>          <C>     <C>           <C>        <C>        <C>      <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net             $968   (2,149)          2       -         (14)       -           -       -
  Realized gains (losses) on investments,
 net                                     121,634  134,667          52       -           -        -           -       -
  Net change in unrealized appreciation
   (depreciation) on investments        (184,821)(101,514)        (77)      -         386        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                         (62,219)  31,004         (23)      -         372       -            -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                        2,867   10,801           -       -           5        -           -       -
  Transfers between funds                (38,032)  17,226           -       -       7,594        -           -       -
  Surrenders and terminations           (174,156)(135,412)          -       -        (181)       -           -       -
  Rescissions                               (316)    (207)          -       -           -        -           -       -
  Other transactions (note 2)                221      239           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                     (209,416 (107,353)          -       -       7,418        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                        5,964   36,972           -       -         274        -           -       -
  Transfers between funds                   (282)  17,333           -       -       6,114        -           -       -
  Surrenders and terminations            (11,026)  (3,213)          -       -         (10)       -           -       -
  Rescissions                               (111)    (691)          -       -           -        -           -       -
  Other transactions (note 2)                115        3           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                             (5,340)  50,404           -       -       6,378        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -         355       -           -        -           -       -
  Transfers between funds                      -        -           2       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -         357       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -         214       -           -        -           -       -
  Transfers between funds                      -        -          (1)      -           -        -           -       -
  Surrenders and terminations                  -        -          (1)      -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -         212       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets       (276,975) (25,945)        546       -      14,168        -           -       -
Net assets at beginning of year          683,399  709,344           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $406,424  683,399         546       -      14,168        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Franklin                          Franklin U.S. Government
                                                    Small Cap Fund                                 Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>        <C>         <C>     <C>      <C>         <C>      <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net          ($2,935)  (4,034)         (2)      -      66,246   36,201         243       -
  Realized gains (losses) on investments,
 net                                      15,548   24,392           3       -       3,396    8,286         (20)      -
  Net change in unrealized appreciation
   (depreciation) on investments         211,659  (31,057)        284       -     (82,778)  (7,222)       (250)      -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                         224,272  (10,699)        285       -     (13,136) (37,265)        (27)      -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                        1,798    6,424           -       -       2,444    5,708           -       -
  Transfers between funds                  8,311    4,845           -       -     (16,017)  12,261           -       -
  Surrenders and terminations            (72,615) (36,786)          -       -    (165,246)(126,296)          -       -
  Rescissions                               (139)    (186)          -       -      (1,028)    (188)          -       -
  Other transactions (note 2)                302      (15)          -       -         294      860           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                      (62,343) (25,718)          -       -    (179,553)(107,655)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                        4,252   26,375           -       -       7,769   20,857           -       -
  Transfers between funds                  6,853   13,910           -       -      15,383   12,943           -       -
  Surrenders and terminations             (9,570)  (2,749)          -       -      (7,818)  (2,139)          -       -
  Rescissions                                (56)    (368)          -       -        (156)    (701)          -       -
  Other transactions (note 2)                112       32           -       -         195        4           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                              1,591   37,200           -       -      15,373   30,964           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -         190       -           -        -       1,598       -
  Transfers between funds                      -        -         456       -           -        -         343       -
  Surrenders and terminations                  -        -           -       -           -        -        (270)      -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional                  -        -         646        -           -       -     1,671    -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -          48       -           -        -         213       -
  Transfers between funds                      -        -           4       -           -        -          14       -
  Surrenders and terminations                  -        -           -       -           -        -          (7)      -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced                      -       -          52        -           -       -          220      -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets        163,520      783         983       -    (177,316) (39,426)      1,864       -
Net assets at beginning of year          299,780  298,997           -       -     637,604  677,030           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $463,300  299,780         983       -     460,288  637,604       1,864       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                    Franklin Value                               Franklin
                                                    Securities Fund                       Zero Coupon Fund - 2000
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>         <C>      <C>      <C>       <C>        <C>       <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net            ($133)     (47)         (1)      -       9,221    5,241           -       -
  Realized gains (losses) on investments,
 net                                        (411)     (74)         (7)      -       1,927    2,396           -       -
  Net change in unrealized appreciation
   (depreciation) on investments             309     (407)          -       -     (10,114)  (2,765)          -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                            (235)    (528)         (8)      -       1,034    4,872           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                          326      190           -       -         183      498           -       -
  Transfers between funds                  2,439    6,072           -       -      (1,531)  (4,978)          -       -
  Surrenders and terminations             (2,562)    (129)          -       -     (20,544) (14,347)          -       -
  Rescissions                                 (1)       -           -       -          (4)      (4)          -       -
  Other transactions (note 2)                 (2)      (1)          -       -         117      165           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                          200    6,132           -       -     (21,779) (18,666)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                          715      916           -       -         340      864           -       -
  Transfers between funds                  1,785    2,211           -       -       2,017    1,107           -       -
  Surrenders and terminations               (521)     (62)          -       -        (406)     (68)          -       -
  Rescissions                                 (1)      (4)          -       -          (8)     (23)          -       -
  Other transactions (note 2)                  6        -           -       -           3       (6)          -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                              1,984    3,061          -        -       1,946    1,874           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -         374       -           -        -           -       -
  Transfers between funds                      -        -          (1)      -           -        -           -       -
  Surrenders and terminations                  -        -        (258)      -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -         115       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -          22       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -          22       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets          1,949    8,665         129       -     (18,799) (11,920)          -       -
Net assets at beginning of year            8,665        -           -       -      78,168   90,088           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                $10,614    8,665         129       -      59,369   78,168           -       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Franklin                                  Franklin
                                                Zero Coupon Fund - 2005                   Zero Coupon Fund - 2010
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>         <C>      <C>       <C>       <C>       <C>       <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net           $7,179    3,261           -       -       7,708    3,294           -       -
  Realized gains (losses) on investments,
 net                                       1,779    2,485           -       -       2,444    5,443           -       -
  Net change in unrealized appreciation
   (depreciation) on investments         (14,138)   1,608           -       -     (21,090)     769           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                          (5,180)   7,354           -        -    (10,938)   9,506           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                          215      759           -       -         206      682           -       -
  Transfers between funds                   (950)   3,490           -       -         225    4,057           -       -
  Surrenders and terminations            (14,198) (10,720)          -       -     (19,296) (15,533)          -       -
  Rescissions                                (15)     (11)          -       -          (7)      (2)          -       -
  Other transactions (note 2)                 71      105           -       -         230       49           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions
 Valuemark II & III                      (14,877   (6,377)          -       -     (18,642) (10,747)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                        1,585    3,307           -       -       2,411    5,944           -       -
  Transfers between funds                  3,627    2,192           -       -       3,934    3,245           -       -
  Surrenders and terminations             (1,004)    (284)          -       -      (1,316)    (458)          -       -
  Rescissions                                (89)     (68)          -       -         (84)     (20)          -       -
  Other transactions (note 2)                 89       (4)          -       -           5       (2)          -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                              4,208    5,143           -       -       4,950    8,709           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions
 Valuemark Charter Enhanced                    -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets        (15,849)   6,120           -       -     (24,630)   7,468           -       -
Net assets at beginning of year           75,278   69,158           -       -      85,357   77,889           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                $59,429   75,278           -       -      60,727   85,357           -       -
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                   Mutual Discovery                            Mutual Shares
                                                    Securities Fund                           Securities Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>           <C>       <C>    <C>      <C>             <C>     <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net           $2,765      (64)          4       -       5,047   (1,566)          6       -
  Realized gains (losses) on investments,
 net                                         877    1,768           -       -      10,361    4,339          (2)      -
  Net change in unrealized appreciation
   (depreciation) on investments          33,265  (23,026)         48       -      32,828  (15,031)         41       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 from operations                          36,907  (21,322)         52       -      48,236  (12,258)         45       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                          889    6,337           -       -       2,270   11,748           -       -
  Transfers between funds                 (9,239)  18,856           -       -         261   28,224           -       -
  Surrenders and terminations            (37,626) (22,824)          -       -     (73,031) (42,653)          -       -
  Rescissions                                (62)    (132)          -       -        (653)    (194)          -       -
  Other transactions (note 2)                110        5           -       -         389       59           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark II & III                     (45,928)    2,242           -       -     (70,764)  (2,816)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                        3,851   35,649           -       -       9,961   85,482           -       -
  Transfers between funds                 (3,004)  12,085           -       -       6,279   28,604           -       -
  Surrenders and terminations            (12,692)  (3,935)          -       -     (27,466)  (8,498)          -       -
  Rescissions                               (169)    (577)          -       -        (156)  (1,549)          -       -
  Other transactions (note 2)                100       59           -       -         247       92           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark IV                           (11,914)   43,281           -       -     (11,135) 104,131           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -         262       -           -        -         895       -
  Transfers between funds                      -        -          (2)      -           -        -         (34)      -
  Surrenders and terminations                  -        -         (24)      -           -        -         (26)      -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Traditional                 -        -         236       -           -        -         835       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -         123       -           -        -          94       -
  Transfers between funds                      -        -           4       -           -        -           6       -
  Surrenders and terminations                  -        -          (4)      -           -        -          (5)      -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from contract transactions -
 Valuemark Charter Enhanced                    -        -         123       -           -       -           95       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets        (20,935)  24,201         411       -     (33,663)  89,057         975       -
Net assets at beginning of year          211,429  187,228           -       -     454,050  364,993           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $190,494  211,429         411       -     420,387  454,050         975       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                 Templeton Developing                        Templeton Global
                                                  Markets Equity Fund                      Asset Allocation Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>     <C>          <C>      <C>        <C>       <C>        <C>         <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net             $947    3,912          (2)      -       3,412    1,887           3       -
  Realized gains (losses) on
                    investments, net     (14,723) (8,736)         263       -       4,511    4,396           3       -
  Net change in unrealized appreciation
   (depreciation) on investments          81,897  (51,993)         18       -      (4,595)  (8,198)         (2)      -
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
          assets from operations          68,121  (56,817)        279        -       3,328  (1,915)          4        -
-----------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                        1,065    4,084           -       -         577    1,787           -       -
  Transfers between funds                 (9,812) (39,497)          -       -      (8,133)  (8,074)          -       -
  Surrenders and terminations            (35,896) (26,039)          -       -     (13,638)  (8,859)          -       -
  Rescissions                               (154)     (68)          -       -         (16)      (7)          -       -
  Other transactions (note 2)                131      (56)          -       -          43       30           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions-Valuemark II & III(44,666) (61,576)         -           -  (21,167)  (15,123)         -       -
-----------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                        2,375    9,390           -       -       2,112    6,881           -       -
  Transfers between funds                    164   (1,057)          -       -      (1,245)     525           -       -
  Surrenders and terminations             (2,692)  (1,050)          -       -      (2,233)    (519)          -       -
  Rescissions                                 (6)    (129)          -       -          (2)     (14)          -       -
  Other transactions (note 2)                 13      (13)          -       -          39       11           -       -
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV       (146)   7,141           -       -      (1,329)   6,884           -       -
-----------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -         211       -           -        -          34       -
  Transfers between funds                      -        -        (225)      -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional                  -        -         (14)      -           -        -           34      -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -          75       -           -        -          15       -
  Transfers between funds                      -        -           2       -           -        -          (1)      -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced                     -           -        77      -           -        -          14       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets         23,309 (111,252)        342       -     (19,168) (10,154)         52       -
Net assets at beginning of year          155,788  267,040           -       -      77,060   87,214           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $179,097  155,788         342       -      57,892   77,060          52       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
 See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Templeton                             Templeton Global
                                                  Global Growth Fund                      Income Securities Fund
-----------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
-----------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>     <C>         <C>         <C>     <C>       <C>         <C>      <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net           $5,264    8,781           3       -       6,830    9,058          19       -
  Realized gains (losses) on
             investments, net            101,368   82,495         317       -      (2,393)     263          -        -
  Net change in unrealized appreciation
   (depreciation) on investments          10,044  (44,136)         45       -     (12,888)  (1,320)        (22)      -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
  from operations                        116,676   47,140         365       -      (8,451)   8,001          (3)      -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                        3,910   10,586           -       -         372      983           -       -
  Transfers between funds                (21,594) (41,415)          -       -      (8,997) (13,288)          -       -
  Surrenders and terminations           (143,382) (79,015)          -       -     (38,030) (30,382)          -       -
  Rescissions                               (338)    (300)          -       -        (414)     (42)          -       -
  Other transactions (note 2)                309       78           -       -          37      154           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
  resulting from  contract transaction
     - Valuemark II & III               (161,095)(110,066)          -       -    (47,032)   (42,575)         -       -
-----------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                       12,834   47,491           -       -       1,026    3,461           -       -
  Transfers between funds                  8,319   11,653           -       -         761    1,385           -       -
  Surrenders and terminations            (17,858)  (4,558)          -       -      (1,634)    (377)          -       -
  Rescissions                               (144)    (653)          -       -          (5)     (12)          -       -
  Other transactions (note 2)                111      (12)          -       -           5        2           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV      3,262   53,921           -       -         153    4,459           -       -
-----------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -       1,732       -           -        -         437       -
  Transfers between funds                      -        -        (132)      -           -        -           1       -
  Surrenders and terminations                  -        -        (863)      -           -        -           -       -
  Rescissions                                  -        -         (59)      -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
 resulting from  contract transactions -
      Valuemark Charter Traditional             -       -         678        -           -       -          438      -
-----------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -         288       -           -        -          21       -
  Transfers between funds                      -        -           4       -           -        -         (15)      -
  Surrenders and terminations                  -        -         (10)      -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
   resulting from  contract transactions -
    Valuemark Charter Enhanced                 -       -           282      -           -       -            6        -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets        (41,157)  (9,005)      1,325       -     (55,330) (30,115)        441       -
Net assets at beginning of year          708,508  717,513           -       -     136,554  166,669           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $667,351  708,508       1,325       -      81,224  136,554         441       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Templeton                          Templeton International
                                               International Equity Fund                  Smaller Companies Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>        <C>       <C>        <C>        <C>     <C>           <C>     <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net          $32,620   18,022         114       -         341      290          (3)      -
  Realized gains (losses) on investments, net      79,885     112,100     926           -     (948)       (547)    137     -
  Net change in unrealized appreciation
   (depreciation) on investments          51,890  (88,725)        120       -       4,893   (3,830)          2       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
   assets from operations                164,395  41,397        1,160       -       4,286  (4,087)          136      -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                        2,621    8,884           -       -         115      865           -       -
  Transfers between funds                (63,288) (92,026)          -       -      (1,461)  (3,005)          -       -
  Surrenders and terminations           (269,672)(171,313)          -       -      (3,584)  (2,234)          -       -
  Rescissions                             (1,975)    (404)          -       -          (3)     (24)          -       -
  Other transactions (note 2)              1,097      252           -       -          35       10           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from  contract transactions -
   Valuemark II & III                   (331,217)(254,607)          -       -      (4,898)  (4,388)          -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                        3,376   21,502           -       -         412    2,980           -       -
  Transfers between funds                   (471)   6,064           -       -        (381)    (467)          -       -
  Surrenders and terminations             (8,179)  (2,654)          -       -      (1,017)    (365)          -       -
  Rescissions                                (40)     (95)          -       -          (3)     (85)          -       -
  Other transactions (note 2)                 68       45           -       -           4      (15)          -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV     (5,246)  24,862           -       -        (985)   2,048           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -       2,640       -           -        -           3       -
  Transfers between funds                      -        -        (882)      -           -        -        (133)      -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional                  -       -        1,758       -           -        -         (130)     -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -         268       -           -        -          49       -
  Transfers between funds                      -        -          12       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from  contract transactions -
     Valuemark Charter Enhanced                 -       -         280       -           -       -           49       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets       (172,068)(188,348)      3,198       -      (1,597)  (6,427)         55       -
Net assets at beginning of year          899,4901,087,838           -       -      23,876   30,303           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year               $727,422  899,490       3,198       -      22,279   23,876          55       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

                                                                <PAGE>
<TABLE>
<CAPTION>



Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                       Templeton                               USAllianz VIP
                                                  Pacific Growth Fund                     Diversified Assets Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>      <C>        <C>          <C>         <C>     <C>         <C>     <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net            ($393)   3,442           -       -           -        -           -       -
  Realized gains(losses)on investments,net(3,508) (66,038)         38       -           -        -           -       -
  Net change in unrealized appreciation
   (depreciation) on investments          33,561   39,890           1       -           1        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
    from operations                       29,660 (22,706)         39        -           1        -           -        -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                          738    1,634           -       -           -        -           -       -
  Transfers between funds                 (6,774) (21,917)          -       -          88        -           -       -
  Surrenders and terminations            (29,719) (20,611)          -       -           -        -           -       -
  Rescissions                                (36)     (54)          -       -           -        -           -       -
  Other transactions (note 2)                 11       48           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from  contract transactions -
    Valuemark II & III                   (35,780) (40,900)          -       -          88        -          -        -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                          635    2,042           -       -           -        -           -       -
  Transfers between funds                  3,409      282           -       -          14        -           -       -
  Surrenders and terminations               (795)    (205)          -       -           -        -           -       -
  Rescissions                                 (3)     (42)          -       -           -        -           -       -
  Other transactions (note 2)                 21       (1)          -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV      3,267    2,076           -       -          14        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -          58       -           -        -           -       -
  Transfers between funds                      -        -         (32)      -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from  contract transactions -
   Valuemark Charter Traditional              -         -          26        -           -       -           -        -
-----------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -          46       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from  contract transactions -
Valuemark Charter Enhanced                     -       -          46        -           -        -           -        -
-----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets         (2,853) (61,530)        111       -         103        -           -       -
Net assets at beginning of year           91,798  153,328           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                $88,945   91,798         111       -         103        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                     USAllianz VIP                             USAllianz VIP
                                                   Fixed Income Fund                            Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
                                               Class 1              Class 2             Class 1             Class 2
------------------------------------------------------------------------------------------------------------------------------------
                                            1999     1998        1999    1998        1999     1998        1999    1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>       <C>         <C>     <C>        <C>       <C>       <C>      <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net               $-        -           -       -           -        -           -       -
  Realized gains (losses) on investments, ne   -        -           -       -           -        -           -       -
  Net change in unrealized appreciation
   (depreciation) on investments              (2)       -           -       -          14        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations                               (2)      -           -        -          14       -            -        -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                    126        -           -       -         224        -           -       -
  Surrenders and terminations                  -        -           -       -          (8)       -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III                           126        -           -       -         216        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                      5        -           -       -         101        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV          5        -           -       -         101        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from  contract transactions -
    Valuemark Charter Traditional              -        -           -        -           -       -           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                            -        -           -       -           -        -           -       -
  Transfers between funds                      -        -           -       -           -        -           -       -
  Surrenders and terminations                  -        -           -       -           -        -           -       -
  Rescissions                                  -        -           -       -           -        -           -       -
  Other transactions (note 2)                  -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from  contract transactions -
     Valuemark Charter Enhanced                 -       -           -        -           -       -          -        -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets            129        -           -       -         331        -           -       -
Net assets at beginning of year                -        -           -       -           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                   $129        -           -       -         331        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Financial Statements (continued)

Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)

                                                                                              Total All Funds
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Class 1             Class 2
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                     1999     1998        1999    1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>       <C>            <C>     <C>
Increase (decrease) in net assets:
 Operations:
  Investment income (loss), net                                                  $345,556  266,144         637       -
  Realized gains (losses) on investments, net                                     704,602  603,355       1,827       -
  Net change in unrealized appreciation
   (depreciation) on investments                                                 (129,766)(699,727)        171       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations                             920,392  169,772       2,635       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark II & III (note 5):
  Purchase payments                                                                50,672  134,191           -       -
  Transfers between funds                                                             456   (3,907)          -       -
  Surrenders and terminations                                                   (2,528,241)(1,708,528)       -       -
  Rescissions                                                                      (8,255)  (3,318)          -       -
  Other transactions (note 2)                                                      12,154    4,339           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark II & III                                     (2,473,214)(1,577,223)       -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark IV (note 5):
  Purchase payments                                                               118,568  540,403           -       -
  Transfers between funds                                                         187,684  169,190           -       -
  Surrenders and terminations                                                    (204,137) (55,562)          -       -
  Rescissions                                                                      (2,359) (10,939)          -       -
  Other transactions (note 2)                                                       2,304      489           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark IV                                             102,060  643,581           -       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Traditional (note 6):
  Purchase payments                                                                     -        -      21,776       -
  Transfers between funds                                                               -        -         (40)      -
  Surrenders and terminations                                                           -        -      (3,150)      -
  Rescissions                                                                           -        -        (333)      -
  Other transactions (note 2)                                                           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark Charter Traditional                                  -        -      18,253       -
------------------------------------------------------------------------------------------------------------------------------------
 Contract transactions - Valuemark Charter Enhanced (note 6):
  Purchase payments                                                                     -        -       2,279       -
  Transfers between funds                                                               -        -          24       -
  Surrenders and terminations                                                           -        -         (40)      -
  Rescissions                                                                           -        -           -       -
  Other transactions (note 2)                                                           -        -           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
 contract transactions - Valuemark Charter Enhanced                                     -        -       2,263       -
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets                                               (1,450,762)(763,870)    23,151       -
Net assets at beginning of year                                                 9,143,5359,907,405           -       -
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year                                                       $7,692,7739,143,535     23,151       -
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>

<PAGE>



Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements
December 31, 1999


1. Organization
Allianz Life Variable  Account B (Variable  Account) is a segregated  investment
account of Allianz Life Insurance Company of North America (Allianz Life) and is
registered  with the  Securities  and Exchange  Commission as a unit  investment
trust  pursuant  to the  provisions  of the  Investment  Company Act of 1940 (as
amended).  The Variable  Account was  established  on May 31, 1985 and commenced
operations January 24, 1989. Accordingly, it is an accounting entity wherein all
segregated account transactions are reflected.

The Variable  Account's assets are the property of Allianz Life and are held for
the benefit of the owners and other persons  entitled to payments under variable
annuity  contracts  issued  through the  Variable  Account and  underwritten  by
Allianz  Life.  The assets of the  Variable  Account,  equal to the reserves and
other liabilities of the Variable  Account,  are not chargeable with liabilities
that arise from any other business which Allianz Life may conduct.

The Variable  Account's  sub-accounts may invest, at net asset values, in one or
more of select  portfolios  of AIM Variable  Insurance  Funds,  Inc.,  The Alger
American Fund,  Franklin  Templeton Variable Insurance Products Trust (formerly,
Franklin  Valuemark Funds),  and USAllianz Variable Insurance Products Trust, in
accordance with the selection made by the contract owner. Not all portfolios are
available as  investment  options for the products  which  comprise the Variable
Account.  The investment advisers for each portfolio are listed in the following
table.
<TABLE>
<CAPTION>

Portfolio                                     Investment Adviser
<S>                                           <C>
AIM VI Growth Fund                            AIM Advisors, Inc.
Alger American Growth Fund                    Fred Alger Management, Inc.
Alger American Leveraged AllCap Fund          Fred Alger Management, Inc.
Franklin Global Communications Securities
  Fund                                        Franklin Advisers, Inc.
Franklin Global Health Care Securities Fund   Franklin Advisers, Inc.
Franklin Growth and Income Fund               Franklin Advisers, Inc.
Franklin High Income Fund                     Franklin Advisers, Inc.
Franklin Income Securities Fund               Franklin Advisers, Inc.
Franklin Large Cap Growth Securities Fund     Franklin Advisers, Inc.
Franklin Money Market Fund                    Franklin Advisers, Inc.
Franklin Natural Resources Securities Fund    Franklin Advisers, Inc.
Franklin Real Estate Fund                     Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund     Franklin Advisory Services, LLC
S&P 500 Index Fund                            Franklin Advisers,Inc.
Franklin Small Cap Fund                       Franklin Advisers, Inc.
Franklin U.S. Government Fund                 Franklin Advisers, Inc.
Franklin Value Securities Fund                Franklin Advisory Services, LLC
Franklin Zero Coupon - 2000 Fund              Franklin Advisers, Inc.
Franklin Zero Coupon - 2005 Fund              Franklin Advisers, Inc.
Franklin Zero Coupon - 2010 Fund              Franklin Advisers, Inc.
Mutual Discovery Securities Fund              Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund                 Franklin Mutual Advisers, LLC
Templeton Developing Markets Equity Fund      Templeton Asset Management Ltd.
Templeton Global Asset Allocation Fund        Templeton Global Advisors Limited
Templeton Global Growth Fund                  Templeton Global Advisors Limited
Templeton Global Income Securities Fund       Franklin Advisers, Inc.
Templeton International Equity Fund           Franklin Advisers, Inc.
Templeton International Smaller Companies
   Fund                                       Templeton Investment Counsel, Inc.
Templeton Pacific Growth Fund                 Franklin Advisers, Inc.
USAllianz VIP Diversified Assets Fund         Allianz of America, Inc.
USAllianz VIP Fixed Income Fund               Allianz of America, Inc.
USAllianz VIP Growth Fund                     Allianz of America, Inc.
<FN>

Certain of the Franklin  Templeton  Variable Insurance Products Trust portfolios
also have class 2 shares  which are  available  to  Valuemark  Charter  contract
owners.
</FN>
</TABLE>


<PAGE>



Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999

2. Significant Accounting Policies


Use of Estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.


Investments
Investments  of the Variable  Account are valued daily at market value using net
asset values provided by AIM Variable  Insurance Funds, Inc., The Alger American
Fund,  the  Franklin  Templeton  Variable  Insurance  Products  Trust,  and  the
USAllianz Variable Insurance Products Trust.

Realized investment gains include realized gain distributions  received from the
respective portfolios and gains on the sale of portfolio shares as determined by
the average cost method.  Realized  gain  distributions  are  reinvested  in the
respective  portfolios.  Dividend distributions received from the portfolios are
reinvested in additional  shares of the portfolios and are recorded as income to
the Variable Account on the ex-dividend date.

Two Fixed Account  investment options are available to deferred annuity contract
owners.  A Flexible Fixed Option is available to all deferred  annuity  contract
owners  and a Dollar  Cost  Averaging  Option  is  available  to  Valuemark  II,
Valuemark III, and Valuemark IV deferred annuity contract owners. These accounts
are  comprised  of equity  and fixed  income  investments  which are part of the
general assets of Allianz Life.  The  liabilities of the Fixed Accounts are part
of the general  obligations of Allianz Life and are not included in the Variable
Account. The guaranteed minimum rate of return on the Fixed Accounts is 3%.

The Franklin Global Health Care  Securities  Fund and Franklin Value  Securities
Fund were added as available  investment options on May 1, 1998. On November 12,
1999,  the AIM VI Growth  Fund,  Alger  American  Growth  Fund,  Alger  American
Leveraged  AllCap Fund,  Franklin S&P 500 Index Fund,  USAllianz VIP Diversified
Assets Fund, USAllianz VIP Fixed Income Fund, and USAllianz VIP Growth Fund were
added as available investment options.

During the year ended December 31, 1999,  several  portfolios changed their name
as summarized, with the effective date of the change, in the following table.
<TABLE>
<CAPTION>

Current Portfolio                                    Prior Portfolio Name                     Effective Date
<S>                                                  <C>                                      <C>
Franklin Global Communications Securities Fund       Franklin Global Utilities Securities FundNovember 15, 1999
Franklin Real Estate Fund                            Franklin Real Estate Securities Fund     November 15, 1999
Franklin Rising Dividends Securities Fund            Franklin Rising Dividends Fund           November 15, 1999
Franklin U.S. Government Fund                        Franklin U.S. Government Securities Fund November 15, 1999
Franklin Large Cap Growth Securities Fund            Franklin Capital Growth Fund             December 15, 1999
</TABLE>


Contracts in Annuity Payment Period
Annuity reserves are computed for currently payable  contracts  according to the
1983 Individual  Annuity  Mortality Table,  using an assumed  investment  return
(AIR) equal to the AIR of the specific contracts,  either 3%, 5%, or 7%. Charges
to annuity  reserves for  mortality  and risk expense are  reimbursed to Allianz
Life if the reserves required are less than originally estimated.  If additional
reserves are required, Allianz Life reimburses the account.


<PAGE>

38

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


2. Significant Accounting Policies (Continued)


Expenses

Asset Based Expenses
A mortality  and expense risk charge and an  administrative  charge are deducted
from the Variable Account on a daily basis. The charges, on an annual basis, are
summarized in the following table.

                            Mortality and Expense         Administrative
Contract                         Risk Charge                  Charge
Valuemark II                        1.25%                      0.15%
Valuemark III                       1.25%                      0.15%
Valuemark IV                        1.34%                      0.15%
Valuemark Charter - Traditional     1.00%                      0.15%
Valuemark Charter - Enhanced        1.20%                      0.15%
Valuemark Income Plus               1.25%                      0.15%


Contract Based Expenses
A contract  maintenance  charge is paid by the contract owner annually from each
deferred  annuity  contract  by  liquidating  contract  units  at the end of the
contract year and at the time of full surrender. The amount of the charge is $30
each year for  Valuemark II,  Valuemark  III, and Valuemark IV contracts and $40
for  Valuemark  Charter  contracts.  Contract  maintenance  charges  paid by the
contract  owners  during  the  years  ended  December  31,  1999 and  1998  were
$4,426,312 and $4,716,335, respectively. These contract charges are reflected in
the Statements of Changes in Net Assets as other transactions.

A contingent  deferred  sales charge is deducted from the contract  value at the
time of surrender  on Valuemark  II,  Valuemark  III, and  Valuemark IV deferred
annuity contracts.  This charge applies only to a surrender of purchase payments
received  within  five  years  of the date of  surrender  for  Valuemark  II and
Valuemark  III  contracts  and within seven years of the date of  surrender  for
Valuemark IV contracts.  The amount of the  contingent  deferred sales charge is
shown below.

Years Since                 Contingent Deferred Sales Charge
Payment                 Valuemark II  Valuemark III  Valuemark IV
0-1                          5%            6%             6%
1-2                          5%            5%             6%
2-3                          4%            4%             6%
3-4                          3%            3%             5%
4-5                         1.5%          1.5%            4%
5-6                          0%            0%             3%
6-7                          0%            0%             2%
7+                           0%            0%             0%

Total  contingent  deferred sales charges paid by the contract owners during the
years  ended  December  31,  1999  and 1998  were  $16,657,195  and  $8,535,795,
respectively.

A systematic  withdrawal  plan is available to Valuemark II,  Valuemark III, and
Valuemark  IV deferred  annuity  contract  owners  which allows a portion of the
contract  value to be withdrawn  without  incurring a contingent  deferred sales
charge.  The exercise of the  systematic  withdrawal  plan in any contract  year
replaces the penalty free privilege for that year.



Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


2. Significant Accounting Policies (Continued)


Contract Based Expenses (Continued)
Currently,  twelve transfers are permitted each contract year.  Thereafter,  the
fee is $25 per transfer,  or 2% of the amount transferred,  if less.  Currently,
transfers  associated  with any dollar cost  averaging  program are not counted.
Total  transfer  charges  paid by the  contract  owners  during the years  ended
December 31, 1999 and 1998 were  $153,188 and $159,282,  respectively.  Transfer
charges  are  reflected  in the  Statements  of  Changes  in Net Assets as other
transactions. Net transfers from the Fixed Accounts for the years ended December
31, 1999 and 1998 were $188,123,947 and $165,283,144, respectively.

Premium  taxes or other taxes  payable to a state or other  governmental  entity
will be charged  against  the  contract  values.  Allianz  Life may, in its sole
discretion, pay taxes when due and deduct that amount from the contract value at
a later date.  Payment at an earlier date does not waive any right  Allianz Life
may have to deduct such amounts at a later date.

A  rescission  is defined as a contract  that is  returned to the Company by the
Contract Owner and canceled  within the free-look  period,  generally  within 10
days.
<TABLE>
<CAPTION>


3. Capitalization

Allianz  Life  provides  capital  for the  establishment  of new  portfolios  as
investment options of the Variable Account. The capitalization transactions were
as follows during the years ended December 31, 1999 and 1998.

                                              Capitalization        Date of       Market Value        Date of
     Portfolio                                    Amount        Capitalization    at Withdrawal      Withdrawal
------------------------------------------------------------------------------------------------------------------------------------

     <S>                                          <C>               <C>             <C>                <C>
     Franklin Global Health Care Securities Fund
           - class 1                             $250,000           5/1/98           $253,250          12/1/98
     Franklin Value Securities Fund - class 1     250,000           5/1/98           192,000           12/1/98

     Franklin Global Communications Securities
         Fund - class 2                            0,000            1/6/99           13,320           12/29/99
     Franklin Global Health Care Securities
         Fund - class 2                           10,000            1/6/99            9,092           12/29/99
     Franklin Growth and Income Fund - class 2    10,000            1/6/99            9,852           12/29/99
     Franklin High Income Fund - class 2          10,000            1/6/99            9,895           12/29/99
     Franklin Income Securities Fund - class 2    10,000            1/6/99            9,674           12/29/99
     Franklin Large Cap Growth Securities Fund
          - class 2                               10,000            1/6/99           12,738           12/29/99
     Franklin Money Market Fund - class 2         10,000            1/6/99           10,444           12/29/99
     Franklin Natural Resources Securities Fund
          - class 2                               10,000            1/6/99           12,625           12/29/99
     Franklin Real Estate Fund - class 2          10,000            1/6/99            9,141           12/29/99
     Franklin Rising Dividends Securities Fund
          - class 2                               10,000            1/6/99            8,843           12/29/99
     Franklin Small Cap Fund - class 2            10,000            1/6/99           18,630           12/29/99
     Franklin U.S. Government Fund - class 2      10,000            1/6/99            9,897           12/29/99
     Franklin Value Securities Fund - class 2     10,000            1/6/99            9,759           12/29/99
     Mutual Discovery Securities Fund - class 2   10,000            1/6/99           11,844           12/29/99
     Mutual Shares Securities Fund - class 2      10,000            1/6/99           10,866           12/29/99
     Templeton Developing Markets Equity Fund
                  - class 2                       10,000            1/6/99           14,532           12/29/99
     Templeton Global Asset Allocation Fund -
           class  2                               10,000            1/6/99           10,353           12/29/99
     Templeton Global Growth Fund - class 2       10,000            1/6/99           11,493           12/29/99
     Templeton Global Income Securities Fund -
           class 2                                10,000            1/6/99            9,355           12/29/99
     Templeton International Equity Fund - class 210,000            1/6/99           11,841           12/29/99
     Templeton International Smaller Companies Fund -
            class 2                               10,000            1/6/99           11,922           12/29/99
     Templeton Pacific Growth Fund - class 2      10,000            1/6/99           13,447           12/29/99

</TABLE>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999

4. Federal Income Taxes

Operations  of the  Variable  Account  form a  part  of,  and  are  taxed  with,
operations of Allianz Life, which is taxed as a life insurance company under the
Internal Revenue Code.

Allianz Life does not expect to incur any federal  income taxes in the operation
of the Variable  Account.  If, in the future,  Allianz Life  determines that the
Variable  Account may incur federal  income  taxes,  it may then assess a charge
against the Variable Account for such taxes.


<PAGE>
<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


5. CONTRACT TRANSACTIONS - Valuemark II, III, and IV Accumulation Unit Activity (In thousands)

Transactions  in units for each fund for the years ended  December  31, 1999 and
1998 were as follows:
                                                                  Alger       Alger Franklin GlobalFranklin GlobalFranklin
                                                    AIM V.I.    American    AmericanCommunicationsHealth Care Growth and
                                                     Growth      Growth     Leveraged Securities  Securities    Income
                                                      Fund        Fund     AllCap Fund   Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>        <C>        <C>      <C>         <C>        <C>
     Valuemark II & III
Accumulation units outstanding at December 31, 1997       -          -           -      39,623           -      46,962
Contract transactions:
 Purchase payments                                        -           -          -         241          20         538
 Transfers between funds                                  -           -          -      (1,529)        586         699
 Surrenders and terminations                              -           -          -      (7,481)        (20)     (7,722)
 Rescissions                                              -           -          -          (9)          -         (11)
 Other transactions                                       -           -          -           6           -          14
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:         -          -           -      (8,772)        586      (6,482)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998       -          -           -      30,851         586      40,480
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                        3           1          -          96          11         191
 Transfers between funds                                529         539        341        (870)        351        (589)
 Surrenders and terminations                             (6)          -         (1)     (8,394)       (314)    (12,443)
 Rescissions                                              -           -          -         (12)          -         (27)
 Other transactions                                       -           -          -          16           -          22
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:       526        540         340      (9,164)         48     (12,846)
-----------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999      526        540         340      21,687         634      27,634
-----------------------------------------------------------------------------------------------------------------------------------


     Valuemark IV
Accumulation units outstanding at December 31, 1997        -          -           -         310           -      2,376
Contract transactions:
 Purchase payments                                        -           -          -         477         147       2,027
 Transfers between funds                                  -           -          -         262         106       1,031
 Surrenders and terminations                              -           -          -         (40)         (1)       (214)
 Rescissions                                              -           -          -          (3)        (28)        (37)
 Other transactions                                       -           -          -           -           -           2
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:          -          -           -         696         224       2,809
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998        -          -           -       1,006         224       5,185
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                        5          20          1         118          55         390
 Transfers between funds                                360         396        277         433         220         696
 Surrenders and terminations                             (2)         (1)        (1)       (138)        (30)       (699)
 Rescissions                                              -           -          -          (1)          -          (5)
 Other transactions                                       -           -          -           -           -           3
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:         363        415         277         412        245        385
-----------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        363        415         277       1,418         469     5,570
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>
<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                                            Franklin               Franklin
                                                    Franklin    Franklin    Large Cap  Franklin     Natural    Franklin
                                                      High       Income      Growth      Money     Resources     Real
                                                     Income    Securities  Securities   Market    Securities    Estate
                                                      Fund        Fund        Fund       Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark II & III
<S>                                                   <C>        <C>        <C>        <C>          <C>         <C>
Accumulation units outstanding at December 31, 1997   18,871     49,811       5,673      20,982       5,709     13,445
Contract transactions:
 Purchase payments                                      223         459        160         566          86         147
 Transfers between funds                               (811)     (2,088)     3,882      14,858        (562)     (1,976)
 Surrenders and terminations                         (3,310)     (8,767)    (1,258)    (14,408)       (777)     (1,978)
 Rescissions                                             (7)        (11)        (1)        (24)         (5)         (6)
 Other transactions                                      21          16         (2)         58           2           7
-----------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:     (3,884)   (10,391)      2,781       1,050      (1,256)    (3,806)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998    14,987     39,420       8,454      22,032       4,453     9,639
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                       69         123        149         180          33          29
 Transfers between funds                               (851)     (2,779)     7,093      13,480        (549)     (1,316)
 Surrenders and terminations                         (4,711)    (11,825)    (4,823)    (18,739)       (992)     (2,940)
 Rescissions                                             (9)        (41)       (15)        (13)         (6)        (13)
 Other transactions                                       8          31          9         448           1           2
-----------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:    (5,494)   (14,491)      2,413      (4,644)     (1,513)     (4,238)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999    9,493     24,929      10,867      17,388       2,940       5,401
-----------------------------------------------------------------------------------------------------------------------------------


     Valuemark IV
Accumulation units outstanding at December 31, 1997    2,202      2,094       1,957       3,214        304       1,217
Contract transactions:
 Purchase payments                                    1,834       1,710      1,503       3,217         162         604
 Transfers between funds                                409         599      1,238      (1,515)         73          75
 Surrenders and terminations                           (195)       (143)      (156)       (448)        (19)        (66)
 Rescissions                                            (61)        (21)       (40)       (140)         (5)         (8)
 Other transactions                                       2           -          -          14          (1)          1
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:      1,989      2,145       2,545      1,128        210          606
-----------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998   4,191       4,239       4,502       4,342        514        1,823
-----------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                      366         367        584         690          45          73
 Transfers between funds                                140         239      3,598       1,872         123        (216)
 Surrenders and terminations                           (550)       (463)    (1,175)     (1,698)        (61)       (191)
 Rescissions                                            (42)         (5)        (4)         (3)         (5)          -
 Other transactions                                      13           3         16          33           -           1
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:       (73)       141       3,019         894         102        (333)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999     4,118      4,380       7,521       5,236         616        1,490
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                    Franklin                                                   Franklin
                                                     Rising     Franklin    Franklin   Franklin    Franklin      Zero
                                                    Dividends    S&P 500      Small      U.S.        Value      Coupon
                                                   Securities     Index        Cap    Government  Securities    Fund -
                                                      Fund        Fund        Fund       Fund        Fund        2000
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark II & III
<S>                                                  <C>              <C>    <C>         <C>         <C>         <C>
Accumulation units outstanding at December 31, 1997  33,249           -      16,925      36,347           -      4,523
Contract transactions:
 Purchase payments                                      415           -        348         310          17          25
 Transfers between funds                                670           -        173         617         718        (249)
 Surrenders and terminations                         (6,653)          -     (2,575)     (6,810)        (16)       (712)
 Rescissions                                            (10)          -        (13)        (10)          -           -
 Other transactions                                      12           -         (2)         46           -           8
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:    (5,566)         -      (2,069)     (5,847)        719       (928)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998   27,683          -      14,856      30,500         719       3,595
-----------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                      105           -         96         130          12           9
 Transfers between funds                             (1,898)        745         38        (857)        332         (74)
 Surrenders and terminations                         (8,633)        (18)    (4,346)     (8,796)       (336)       (989)
 Rescissions                                            (16)          -         (8)        (55)          -           -
 Other transactions                                      11           -         18          16           -           6
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:   (10,431)       727      (4,202)     (9,562)          8       (1,048)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999    17,252        727      10,654      20,938         727        2,547
-----------------------------------------------------------------------------------------------------------------------------------


     Valuemark IV
Accumulation units outstanding at December 31, 1997   1,991          -       2,965       1,359           -          94
Contract transactions:
 Purchase payments                                    1,788           -      1,762       1,142         109          43
 Transfers between funds                                843           -        988         693         267          55
 Surrenders and terminations                           (159)          -       (199)       (116)         (8)         (3)
 Rescissions                                            (35)          -        (27)        (38)         (1)         (1)
 Other transactions                                       -           -          3           -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:      2,437          -       2,527       1,681         367         94
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998    4,428          -       5,492       3,040         367         188
-----------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                      284          26        243         407          80          16
 Transfers between funds                                (31)        601        269         826         221          98
 Surrenders and terminations                           (544)         (1)      (546)       (418)        (66)        (20)
 Rescissions                                             (6)          -         (4)         (8)          -           -
 Other transactions                                       6           -          6          10           1           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:      (291)       626         (32)        817         236          94
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999     4,137        626       5,460       3,857         603         282
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999



5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                    Franklin    Franklin                           Templeton   Templeton
                                                      Zero        Zero       Mutual     Mutual    Developing    Global
                                                     Coupon      Coupon     Discovery   Shares      Markets      Asset
                                                     Fund -      Fund -    Securities Securities    Equity    Allocation
                                                      2005        2010        Fund       Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark II & III
<S>                                                    <C>        <C>       <C>         <C>         <C>        <C>
Accumulation units outstanding at December 31, 1997   2,910      2,998       9,940      18,744      23,005       5,229
Contract transactions:
 Purchase payments                                       32          26        402         795         429          69
 Transfers between funds                                140         138      1,284       2,150      (4,481)       (598)
 Surrenders and terminations                           (451)       (582)    (1,897)     (3,544)     (2,951)       (646)
 Rescissions                                              -           -        (11)        (16)         (7)          -
 Other transactions                                       4           2          -           4          (6)          2
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:      (275)      (416)       (222)       (611)     (7,016)     (1,173)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998    2,635      2,582       9,718      18,133      15,989       4,056
-----------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                        9           8         56         134         106          21
 Transfers between funds                                (40)          1       (849)        (64)     (1,139)       (601)
 Surrenders and terminations                           (595)       (749)    (3,134)     (5,759)     (3,728)       (974)
 Rescissions                                             (1)          -         (5)        (52)        (15)         (1)
 Other transactions                                       3           9         10          31          13           3
----------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:      (624)      (731)     (3,922)     (5,710)     (4,763)     (1,552)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999     2,011      1,851       5,796      12,423      11,226       2,504
------------------------------------------------------------------------------------------------------------------------------------


     Valuemark IV
Accumulation units outstanding at December 31, 1997     161        150       5,461      11,394       2,663       1,008
Contract transactions:
 Purchase payments                                      142         226      2,832       6,911       1,055         487
 Transfers between funds                                 92         120        907       2,362        (154)         34
 Surrenders and terminations                            (12)        (17)      (338)       (718)       (121)        (38)
 Rescissions                                             (3)         (1)       (45)       (123)        (16)         (1)
 Other transactions                                       -           -          5           8          (2)          1
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:        219        328       3,361       8,440         762       483
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998      380        478       8,822      19,834       3,425       1,491
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                       66          92        317         780         232         146
 Transfers between funds                                152         152       (273)        461           1         (90)
 Surrenders and terminations                            (43)        (51)    (1,040)     (2,158)       (269)       (147)
 Rescissions                                             (4)         (3)       (14)        (12)         (1)          -
 Other transactions                                       4           -          8          19           1           3
----------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:       175        190      (1,002)       (910)        (36)       (88)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999      555        668       7,820      18,924       3,389        1,403
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                                Templeton              Templeton
                                                    Templeton    Global     TempletonInternational Templeton   USAllianz
                                                     Global      Income   International Smaller     Pacific VIP Diversified
                                                     Growth    Securities    Equity    Companies    Growth      Assets
                                                      Fund        Fund        Fund       Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark II & III
<S>                                                   <C>        <C>        <C>         <C>         <C>          <C>
Accumulation units outstanding at December 31, 1997  41,433      9,434      58,179       1,998      15,833           -
Contract transactions:
 Purchase payments                                      569          57        449          35         204           -
 Transfers between funds                             (2,789)       (773)    (5,188)       (288)     (2,708)          -
 Surrenders and terminations                         (4,973)     (1,749)    (9,177)       (211)     (2,662)          -
 Rescissions                                            (19)         (2)       (21)         (2)         (7)          -
 Other transactions                                       5           9         14           1           9           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:    (7,207)    (2,458)    (13,923)       (465)     (5,164)          -
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998   34,226      6,976      44,256       1,533      10,669          -
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                      176          22        122           7          69           -
 Transfers between funds                             (1,329)       (528)    (3,285)       (163)       (499)          9
 Surrenders and terminations                         (8,200)     (2,221)   (13,737)       (347)     (3,171)          -
 Rescissions                                            (19)        (25)       (99)          -          (4)          -
 Other transactions                                      18           2         56           4           2           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:    (9,354)    (2,750)    (16,943)       (499)     (3,603)         9
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999    24,872      4,226      27,313       1,034       7,066         9
------------------------------------------------------------------------------------------------------------------------------------


     Valuemark IV
Accumulation units outstanding at December 31, 1997   5,525        393       3,122         792         379          -
Contract transactions:
 Purchase payments                                    2,951         202      1,143         271         256           -
 Transfers between funds                                720          79        307         (52)         53           -
 Surrenders and terminations                           (290)        (22)      (143)        (34)        (28)          -
 Rescissions                                            (41)         (1)        (5)         (8)         (5)          -
 Other transactions                                      (1)          -          3          (2)          -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:     3,339        258       1,305         175         276          -
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998   8,864        651       4,427         967         655          -
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                      706          58        160          41          65           -
 Transfers between funds                                454          44        (18)        (46)        397           1
 Surrenders and terminations                         (1,013)        (96)      (407)        (97)        (78)          -
 Rescissions                                             (9)          -         (2)          -           -           -
 Other transactions                                       6           -          4           -           2           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:       144          6        (263)       (102)        386          1
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999     9,008        657       4,164         865       1,041         1
------------------------------------------------------------------------------------------------------------------------------------


</TABLE>

<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                                                       USAllianz   USAllianz
                                                                                       VIP Fixed      VIP        Total
                                                                                        Income      Growth        All
                                                                                         Fund        Fund        Funds
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark II & III
<S>                                                                                    <C>             <C>     <C>
Accumulation units outstanding at December 31, 1997                                          -           -     481,823
Contract transactions:
 Purchase payments                                                                           -           -       6,622
 Transfers between funds                                                                     -           -       1,875
 Surrenders and terminations                                                                 -           -     (91,330)
 Rescissions                                                                                 -           -        (192)
 Other transactions                                                                          -           -         230
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:                                            -           -     (82,795)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998                                          -           -     399,028
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                                                           -           -       1,967
 Transfers between funds                                                                    13          22       5,213
 Surrenders and terminations                                                                 -          (1)   (130,922)
 Rescissions                                                                                 -           -        (436)
 Other transactions                                                                          -           -         739
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:                                           13          21    (123,439)
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999                                          13          21     275,589
------------------------------------------------------------------------------------------------------------------------------------


     Valuemark IV
Accumulation units outstanding at December 31, 1997                                          -           -      51,131
Contract transactions:
 Purchase payments                                                                           -           -      33,001
 Transfers between funds                                                                     -           -       9,592
 Surrenders and terminations                                                                 -           -      (3,528)
 Rescissions                                                                                 -           -        (694)
 Other transactions                                                                          -           -          33
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:                                            -           -      38,404
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31, 1998                                          -           -      89,535
------------------------------------------------------------------------------------------------------------------------------------

Contract transactions:
 Purchase payments                                                                           -           -       6,433
 Transfers between funds                                                                     1          10      11,368
 Surrenders and terminations                                                                 -           -     (12,003)
 Rescissions                                                                                 -           -        (128)
 Other transactions                                                                          -           -         139
-----------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions:                                            1          10       5,809
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999                                           1          10      95,344
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS)

Transactions in units for each fund for the period from January 5, 1999 (product inception) to December 31, 1999 follows:
                                                                  Alger       Alger Franklin GlobalFranklin GlobalFranklin
                                                    AIM V.I.    American    AmericanCommunicationsHealth Care Growth and
                                                     Growth      Growth     Leveraged Securities  Securities    Income
                                                      Fund        Fund     AllCap Fund   Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark Charter Traditional
<S>                                                    <C>            <C>       <C>        <C>         <C>         <C>
Accumulation units outstanding at December 31, 1998       -           -           -           -           -         -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                        -           -          -           6           4          44
 Transfers between funds                                  -           -          -          (1)         (1)          -
 Surrenders and terminations                              -           -          -           -           -         (23)
 Rescissions                                              -           -          -           -           -           -
 Other transactions                                       -           -          -           -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          -          -           -           5           3          21
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        -          -           -           5           3          21
------------------------------------------------------------------------------------------------------------------------------------


     Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998       -          -           -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                        -           -          -           7           5           9
 Transfers between funds                                  -           -          -           -           -           -
 Surrenders and terminations                              -           -          -           -           -           -
 Rescissions                                              -           -          -           -           -           -
 Other transactions                                       -           -          -           -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          -          -           -           7           5          9
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        -          -           -           7           5          9
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS)

Transactions in units for each fund for the period from January 5, 1999 (product inception) to December 31, 1999 follows:
                                                                  Alger     Alger   FranklinGlobal FranklinGlobal Franklin
                                                    AIM V.I.    American    AmericanCommunicationsHealth Care     Growth and
                                                     Growth      Growth     Leveraged Securities  Securities      Income
                                                      Fund        Fund     AllCap Fund   Fund        Fund          Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark Charter Traditional
<S>                                                      <C>          <C>      <C>         <C>           <C>        <C>
Accumulation units outstanding at December 31, 1998       -          -           -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                        -           -          -           6           4          44
 Transfers between funds                                  -           -          -          (1)         (1)          -
 Surrenders and terminations                              -           -          -           -           -         (23)
 Rescissions                                              -           -          -           -           -           -
 Other transactions                                       -           -          -           -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          -          -           -           5           3           21
-----------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        -          -           -           5           3           21
------------------------------------------------------------------------------------------------------------------------------------

     Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998      -          -           -           -           -           -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                        -           -          -           7           5           9
 Transfers between funds                                  -           -          -           -           -           -
 Surrenders and terminations                              -           -          -           -           -           -
 Rescissions                                              -           -          -           -           -           -
 Other transactions                                       -           -          -           -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          -          -           -           7           5           9
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        -          -           -           7           5           9
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                                            Franklin               Franklin
                                                    Franklin    Franklin    Large Cap  Franklin     Natural    Franklin
                                                      High       Income      Growth      Money     Resources     Real
                                                     Income    Securities  Securities   Market    Securities    Estate
                                                      Fund        Fund        Fund       Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark Charter Traditional
<S>                                                     <C>         <C>        <C>        <C>          <C>          <C>
Accumulation units outstanding at December 31, 1998      -          -           -           -           -           -
-----------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                       10          48         82         562           5          13
 Transfers between funds                                 12           1          2           7           -           7
 Surrenders and terminations                             (2)          -        (48)         (7)          -           -
 Rescissions                                              -           -        (17)          -           -           -
 Other transactions                                       -           -          -           -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          20         49          19         562           5          20
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        20         49          19         562           5          20
------------------------------------------------------------------------------------------------------------------------------------


     Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998       -          -           -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                        -           3          7           4           -           1
 Transfers between funds                                  1           1          -          (3)          -          -
 Surrenders and terminations                              -           -          -           -           -          -
 Rescissions                                              -           -          -           -           -          -
 Other transactions                                       -           -          -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          1          4           7           1           -          1
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        1          4           7           1           -          1
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>
<TABLE>
<CAPTION>



Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                    Franklin                                                   Franklin
                                                     Rising     Franklin    Franklin   Franklin    Franklin      Zero
                                                    Dividends    S&P 500      Small      U.S.        Value      Coupon
                                                   Securities     Index        Cap    Government  Securities    Fund -
                                                      Fund        Fund        Fund       Fund        Fund        2000
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark Charter Traditional
<S>                                                      <C>         <C>       <C>         <C>         <C>         <C>
Accumulation units outstanding at December 31, 1998        -          -           -           -           -     -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                       18           -         11          83          48          -
 Transfers between funds                                  -           -         21          18           -          -
 Surrenders and terminations                              -           -          -         (14)        (34)         -
 Rescissions                                              -           -          -           -           -          -
 Other transactions                                       -           -          -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions         18          -          32          87          14          -
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999       18          -          32          87          14           -
------------------------------------------------------------------------------------------------------------------------------------


     Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998      -            -           -           -           -         -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                       11           -          3          11           3          -
 Transfers between funds                                  -           -          -           1           -          -
 Surrenders and terminations                              -           -          -           -           -           -
 Rescissions                                              -           -          -           -           -           -
 Other transactions                                       -           -          -           -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions         11          -           3          12           3            -
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999       11          -           3          12           3           -
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                    Franklin    Franklin                           Templeton  Templeton
                                                      Zero        Zero       Mutual     Mutual    Developing    Global
                                                     Coupon      Coupon     Discovery   Shares      Markets     Asset
                                                     Fund -      Fund -    Securities Securities    Equity    Allocation
                                                      2005        2010        Fund       Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark Charter Traditional
<S>                                                      <C>         <C>      <C>         <C>          <C>        <C>
Accumulation units outstanding at December 31, 1998       -          -           -           -           -         -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                        -           -         22          70          21           2
 Transfers between funds                                  -           -          -          (3)          -          -
 Surrenders and terminations                              -           -         (2)         (2)          -          -
 Rescissions                                              -           -          -           -           -          -
 Other transactions                                       -           -          -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          -          -          20          65          21           2
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        -          -          20          65          21           2
------------------------------------------------------------------------------------------------------------------------------------

     Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998       -          -           -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                        -           -         10           7           7           1
 Transfers between funds                                  -           -          -           1           -          -
 Surrenders and terminations                              -           -          -           -           -          -
 Rescissions                                              -           -          -           -           -          -
 Other transactions                                       -           -          -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          -          -          10           8           7          1
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        -          -          10           8           7          1
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>



Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                                Templeton              Templeton
                                                    Templeton    Global     TempletonInternational Templeton   USAllianz
                                                     Global      Income   International Smaller     PacificVIP Diversified
                                                     Growth    Securities    Equity    Companies    Growth      Assets
                                                      Fund        Fund        Fund       Fund        Fund        Fund
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark Charter Traditional
<S>                                                     <C>         <C>        <C>         <C>          <C>       <C>
Accumulation units outstanding at December 31, 1998     -            -           -           -           -         -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                       97          25        130           -           6          -
 Transfers between funds                                  3           -         (6)          -           -          -
 Surrenders and terminations                            (46)          -          -           -           -          -
 Rescissions                                             (3)          -          -           -           -          -
 Other transactions                                       -           -          -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions         51         25         124           -           6          -
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999       51         25         124           -           6         -
------------------------------------------------------------------------------------------------------------------------------------


     Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998      -          -           -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                       16           1         13           4           4          -
 Transfers between funds                                  -          (1)         1           -           -          -
 Surrenders and terminations                             (1)          -          -           -           -          -
 Rescissions                                              -           -          -           -           -          -
 Other transactions                                       -           -          -           -           -          -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions          15          -          14           4           4         -
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999        15          -          14           4           4         -
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>
<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999



6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)

                                                                                       USAllianz   USAllianz
                                                                                       VIP Fixed      VIP        Total
                                                                                        Income      Growth        All
                                                                                         Fund        Fund        Funds
------------------------------------------------------------------------------------------------------------------------------------
     Valuemark Charter Traditional
<S>                                                                                         <C>         <C>       <C>
Accumulation units outstanding at December 31, 1998                                          -           -           -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                                                           -           -       1,307
 Transfers between funds                                                                     -           -          60
 Surrenders and terminations                                                                 -           -        (178)
 Rescissions                                                                                 -           -         (20)
 Other transactions                                                                          -           -           -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions                                             -           -       1,169
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999                                           -           -       1,169
-----------------------------------------------------------------------------------------------------------------------------------


     Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998                                          -           -          -
------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
 Purchase payments                                                                           -           -         127
 Transfers between funds                                                                     -           -           1
 Surrenders and terminations                                                                 -           -          (1)
 Rescissions                                                                                 -           -          -
 Other transactions                                                                          -           -          -
------------------------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in accumulation
      units resulting from contract transactions                                             -           -         127
------------------------------------------------------------------------------------------------------------------------------------

Accumulation units outstanding at December 31,1999                                           -           -         127
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


7. UNIT VALUES - VALUEMARK II, III, AND IV

A summary of accumulation  unit values and  accumulation  units  outstanding for
variable  annuity  contracts and the expense ratios,  including  expenses of the
underlying  funds,  for each of the five years in the period ended  December 31,
1999 follows.

                                     Valuemark II & III                                   Valuemark IV
------------------------------------------------------------------------------------------------------------------------------------
                                                             Ratio of                                             Ratio of
                      Accumulation                           Expenses   Accumulation                              Expenses
                    Units Outstanding AccumulationNet Assetsto Average Units OutstandingAccumulation  Net Assets  to Average
                     (in thousands) Unit Value(in thousands)Net Assets* (in thousands)   Unit Value(in thousands) Net Assets*
------------------------------------------------------------------------------------------------------------------------------------

<S>                          <C>    <C>           <C>            <C>          <C>       <C>       <C>              <C>
AIM V.I. Growth Fund
December 31,
 19991                      526      $11.084      $5,833         2.13+%       363      $11.083    $4,026           2.22+%

Alger American Growth Fund
December 31,
 19991                      540       10.922       5,894         2.19+        415       10.921     4,535           2.28+

Alger American Leveraged AllCap Fund
December 31,
 19991                      340       12.160       4,137         2.33+        277       12.159     3,364           2.42+

Franklin Global Communications Securities Fund
December 31,
 1999                    21,687       38.917     844,307         1.91       1,418       38.572    54,724           2.00
 1998                    30,851       28.308     873,319         1.90       1,006       28.082    28,248           1.99
 1997                    39,623       25.818   1,022,994         1.90         310       25.635     7,959           1.99
 1996                    53,086       20.654   1,097,873         1.90           -            -         -           -
 1995                    66,669       19.565   1,305,495         1.90           -            -         -           -

Franklin Global Health Care Securities Fund
December 31,
 1999                       634        9.615       6,088         2.22         469        9.601     4,512           2.31
 19982                      586       10.610       6,215         2.24+        224           11     2,381           2.33+

Franklin Growth and Income Fund
December 31,
 1999                    27,634       26.147     722,583         1.89       5,570       25.891   144,218           1.98
 1998                    40,480       26.226   1,061,658         1.89       5,185       25.993   134,775           1.98
 1997                    46,962       24.551   1,152,961         1.89       2,376       24.354    57,877           1.98
 1996                    50,027       19.490     977,110         1.90           -            -         -           -
 1995                    46,893       17.310     812,732         1.92           -            -         -           -

Franklin High Income Fund
December 31,
 1999                     9,493       20.900     198,407         1.94       4,118       20.695    85,209           2.03
 1998                    14,987       21.208     317,865         1.93       4,191       21.020    88,069           2.02
 1997                    18,871       21.312     402,167         1.93       2,202       21.141    46,545           2.02
 1996                    20,736       19.375     402,379         1.94           -            -         -           -
 1995                    18,756       17.252     323,580         1.96           -            -         -           -

Franklin Income Securities Fund
December 31,
 1999                    24,929       24.323     606,369         1.90       4,380       24.084   105,486           1.99
 1998                    39,420       25.122     990,325         1.89       4,239       24.898   105,543           1.98
 1997                    49,811       25.065   1,248,520         1.90       2,094       24.864    52,069           1.99
 1996                    57,504       21.708   1,251,844         1.90           -            -         -           -
 1995                    59,309       19.785   1,175,143         1.91           -            -         -           -

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)

                                     Valuemark II & III                                   Valuemark IV
------------------------------------------------------------------------------------------------------------------------------------
                                                               Ratio of                                             Ratio of
                      Accumulation                            Expenses   Accumulation                              Expenses
                    Units Outstanding AccumulationNet Assets to Average Units OutstandingAccumulation Net Assets    to Average
                     (in thousands)  Unit Value(in thousands)Net Assets* (in thousands)Unit Value   (in thousands)  NetAssets*
-----------------------------------------------------------------------------------------------------------------------------------

<S>                      <C>          <C>        <C>            <C>         <C>        <C>      <C>               <C>
Franklin Large Cap Growth Securities Fund
December 31,
 1999                    10,867      $20.218    $219,679         2.17%      7,521      $20.152  $151,537           2.26%
 1998                     8,454       15.574     131,652         2.17       4,502       15.537    69,939           2.26
 1997                     5,673       13.130      74,473         2.17       1,967       13.110    25,654           2.26
 19963                    3,722       11.254      42,110         2.17+          -            -         -           -

Franklin Money Market Fund
December 31,
 1999                    17,388       14.860     258,373         1.93       5,236       14.717    77,050           2.02
 1998                    22,032       14.386     316,921         1.85       4,342       14.260    61,911           1.94
 1997                    20,892       13.865     290,904         1.85       3,214       13.756    44,200           1.94
 1996                    28,060       13.359     375,629         1.83           -            -         -           -
 1995                    31,040       12.883     399,935         1.80           -            -         -           -

Franklin Natural Resources Securities Fund
December 31,
 1999                     2,940       11.092      32,615         2.06         616       10.983     6,761           2.15
 1998                     4,453        8.505      37,878         2.04         514        8.430     4,332           2.13
 1997                     5,709       11.559      65,992         2.09         304       11.466     3,482           2.18
 1996                     6,998       14.467     101,248         2.05           -            -         -           -
 1995                     6,919       14.109      97,630         2.06           -            -         -           -

Franklin Real Estate Fund
December 31,
 1999                     5,401       21.386     115,525         1.98       1,490       21.176    31,567           2.07
 1998                     9,639       23.107     222,740         1.94       1,823       22.901    41,773           2.03
 1997                    13,445       28.169     378,751         1.94       1,217       27.944    34,023           2.03
 1996                    12,757       23.668     301,974         1.97           -            -         -           -
 1995                    10,998       18.073     198,773         1.99           -            -         -           -

Franklin Rising Dividends Securities Fund
December 31,
 1999                    17,252       18.846     325,172         2.15       4,137       18.712    77,429           2.24
 1998                    27,683       21.165     585,952         2.12       4,428       21.034    93,151           2.21
 1997                    33,249       20.074     667,473         2.14       1,991       19.968    39,752           2.23
 1996                    35,569       15.303     545,127         2.16           -            -         -          -
 1995                    33,789       12.498     422,992         2.18           -            -         -          -

Franklin S&P 500 Index Fund
December 31,
 19991                      727       10.467       7,613         1.95+        626       10.465     6,555           2.04+

Franklin Small Cap Fund
December 31,
 1999                    10,654       28.353     302,040         2.17       5,460       28.247   154,275           2.26
 1998                    14,856       14.600     216,872         2.17       5,492       14.558    79,977           2.26
 1997                    16,925       14.952     253,045         2.17       2,965       14.923    44,268           2.26
 1996                    12,784       12.913     165,578         2.17           -            -         -           -
 19954                    1,302       10.146      13,260         2.30+          -            -         -           -

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)

                                     Valuemark II & III                                   Valuemark IV
------------------------------------------------------------------------------------------------------------------------------------
                                                             Ratio of                                          Ratio of
                        Accumulation                         Expenses     Accumulation                         Expenses
                      Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
                       (in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands)Net Assets*
------------------------------------------------------------------------------------------------------------------------------------

<S>                      <C>         <C>        <C>             <C>         <C>        <C>       <C>             <C>
Franklin U.S. Government Fund
December 31,
 1999                    20,938      $18.574    $388,862         1.91%      3,857      $18.394   $70,974           2.00%
 1998                    30,500       19.014     579,909         1.90       3,040       18.847    57,334           1.99
 1997                    36,347       17.947     652,317         1.90       1,359       17.805    24,222           1.99
 1996                    44,598       16.650     742,973         1.91           -            -         -           -
 1995                    34,313       16.298     559,234         1.92           -            -         -           -

Franklin Value Securities Fund
December 31,
 1999                       727        7.736       5,614         2.21+        603        7.724     4,657           2.30+
 19982                      719        7.717       5,542         2.52+        367        7.713     2,834           2.61+

Franklin Zero Coupon Fund - 2000
December 31,
 1999                     2,547       21.023      53,526         2.05         282       20.819     5,831           2.14
 1998                     3,595       20.684      74,353         1.80         188       20.502     3,815           1.89
 1997                     4,523       19.512      88,260         1.80          94       19.358     1,801           1.89
 1996                     5,636       18.475     104,125         1.80           -            -         -           -
 1995                     6,066       18.294     110,965         1.80           -            -         -           -

Franklin Zero Coupon Fund - 2005
December 31,
 1999                     2,011       23.205      46,679         2.05         555       22.983    12,750           2.14
 1998                     2,635       25.003      65,876         1.80         380       24.786     9,402           1.89
 1997                     2,910       22.532      65,573         1.80         161       22.357     3,585           1.89
 1996                     3,579       20.517      73,434         1.80           -            -         -           -
 1995                     3,504       20.914      73,292         1.80           -            -         -           -

Franklin Zero Coupon Fund - 2010
December 31,
 1999                     1,851       24.164      44,759         2.05         668       23.929    15,961           2.14
 1998                     2,582       27.920      72,114         1.80         478       27.674    13,233           1.89
 1997                     2,998       24.740      74,199         1.80         150       24.544     3,676           1.89
 1996                     3,297       21.522      70,969         1.80           -            -         -           -
 1995                     3,437       22.431      77,136         1.80           -            -         -           -

Mutual Discovery Securities Fund
December 31,
 1999                     5,796       13.701      79,396         2.41       7,820       13.662   106,824           2.50
 1998                     9,718       11.226     109,094         2.40       8,822       11.205    98,842           2.49
 1997                     9,940       11.983     119,104         2.46       5,461       11.971    65,375           2.55
 19965                    1,471       10.180      15,074         2.77+          -            -         -           -

Mutual Shares Securities Fund
December 31,
 1999                    12,423       13.237     164,442         2.19      18,924       13.199   249,799           2.28
 1998                    18,133       11.837     214,642         2.17      19,834       11.814   234,337           2.26
 1997                    18,744       11.993     224,796         2.20      11,394       11.981   136,521           2.29
 19965                    2,613       10.330      27,141         2.40+          -            -         -          -
</TABLE>

 <PAGE>
<TABLE>
<CAPTION>



Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)

                                     Valuemark II & III                                   Valuemark IV
------------------------------------------------------------------------------------------------------------------------------------
                                                             Ratio of                                          Ratio of
                        Accumulation                         Expenses     Accumulation                         Expenses
                      Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
                       (in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands)Net Assets*
------------------------------------------------------------------------------------------------------------------------------------

<S>                      <C>         <C>        <C>              <C>         <C>        <C>      <C>             <C>
Templeton Developing Markets Equity Fund
December 31,
 1999                    11,226      $12.188    $136,842         2.79%      3,389      $12.125   $41,093           2.88%
 1998                    15,989        7.993     127,804         2.81       3,425        7.958    27,259           2.90
 1997                    23,005       10.340     237,895         2.82       2,663       10.305    27,448           2.91
 1996                    22,423       11.487     259,346         2.89           -            -         -          -
 1995                    15,618        9.582     150,481         2.81           -            -         -          -

Templeton Global Asset Allocation Fund
December 31,
 1999                     2,504       14.408      36,071         2.22       1,403       14.347    20,133           2.31
 1998                     4,056       13.589      55,102         2.24       1,491       13.543    20,200           2.33
 1997                     5,229       13.786      72,082         2.34       1,008       13.752    13,864           2.43
 1996                     4,104       12.514      52,117         2.26           -            -         -           -
 19956                    1,338       10.591      14,234         2.30+          -            -         -           -

Templeton Global Growth Fund
December 31,
 1999                    24,872       19.466     484,117         2.28       9,008       19.364   174,453           2.37
 1998                    34,226       16.309     558,162         2.28       8,864       16.238   143,943           2.37
 1997                    41,433       15.176     628,785         2.28       5,525       15.124    83,558           2.37
 1996                    40,327       13.560     550,066         2.33           -            -         -           -
 1995                    28,309       11.339     322,284         2.37           -            -         -           -

Templeton Global Income Securities Fund
December 31,
 1999                     4,226       16.635      70,284         2.05         657       16.472    10,843           2.14
 1998                     6,976       17.905     124,899         2.03         651       17.746    11,582           2.12
 1997                     9,434       16.957     159,973         2.02         393       16.821     6,620           2.11
 1996                    11,857       16.781     198,968         2.01           -            -         -           -
 1995                    14,181       15.522     220,143         2.04           -            -         -           -

Templeton International Equity Fund
December 31,
 1999                    27,313       23.022     628,777         2.30       4,164       22.858    95,194           2.39
 1998                    44,256       18.437     815,915         2.28       4,427       18.322    81,113           2.37
 1997                    58,179       17.711   1,030,420         2.29       3,122       17.617    55,008           2.38
 1996                    64,375       16.081   1,036,583         2.29           -            -         -           -
 1995                    59,883       13.263     794,670         2.32           -            -         -           -

Templeton International Smaller Companies Fund
December 31,
 1999                     1,034       11.441      11,825         2.51         865       11.403     9,864           2.60
 1998                     1,533        9.364      14,354         2.50         967        9.342     9,037           2.59
 1997                     1,998       10.825      21,626         2.46         792       10.809     8,557           2.55
 19963                    1,388       11.145      15,527         2.18+          -            -         -          -
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)

                                     Valuemark II & III                                   Valuemark IV
------------------------------------------------------------------------------------------------------------------------------------
                                                             Ratio of                                              Ratio of
                        Accumulation                         Expenses     Accumulation                             Expenses
                      Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto   Average
                       (in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands)   Net Assets*
-----------------------------------------------------------------------------------------------------------------------------------

<S>                       <C>        <C>          <C>            <C>        <C>        <C>       <C>              <C>
Templeton Pacific Growth Fund
December 31,
 1999                     7,066      $10.915     $77,144         2.48%      1,041      $10.838   $11,295           2.57%
 1998                    10,669        8.078      86,200         2.50         655        8.028     5,274           2.59
 1997                    15,833        9.431     149,327         2.43         379        9.381     3,566           2.52
 1996                    22,061       14.932     330,159         2.39           -            -         -          -
 1995                    22,483       13.630     306,843         2.41           -            -         -          -

USAllianz VIP Diversified Assets Fund
December 31,
 19991                        9       10.170          88         2.40+          1       10.168        15           2.49+

USAllianz VIP Fixed Income Fund
December 31,
 19991                       13        9.751         124         2.15+          1        9.749         5           2.24+

USAllianz VIP Growth Fund
December 31,
 19991                       21       10.733         226         2.30+         10       10.731       105           2.39+

<FN>
* For the year ended  December 31,  including  the effect of the expenses of the
underlying  funds.
+  Annualized.
1  Period  from  November  12,  1999  (fund commencement)   to  December   31,  1999.
2  Period  from  May  1,  1998  (fund commencement)   to  December   31,  1998.
3  Period  from  May  1,  1996  (fund commencement)  to  December  31,  1996.
4  Period  from  November  1, 1995 (fund commencement)  to  December  31,  1995.
5  Period  from  November  8, 1996 (fund commencement)   to  December   31,  1996.
6  Period  from  May  1,  1995  (fund commencement) to December 31, 1995.
</FN>
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


8. UNIT VALUES - VALUEMARK CHARTER

A summary of accumulation  unit values and  accumulation  units  outstanding for
variable  annuity  contracts and the expense ratios,  including  expenses of the
underlying  funds,  for the period from January 5, 1999  (product  inception) to
December 31, 1999 follows.

                                Valuemark Charter Traditional                      Valuemark Charter Enhanced
------------------------------------------------------------------------------------------------------------------------------------
                                                             Ratio of                                          Ratio of
                        Accumulation                         Expenses     Accumulation                         Expenses
                      Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
                       (in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands)Net Assets*
------------------------------------------------------------------------------------------------------------------------------------

<S>                           <C>     <C>            <C>         <C>            <C>    <C>         <C>             <C>
Franklin Global Communications Securities Fund
December 31, 1999             5      $39.861        $213         1.92%          7      $39.011      $275           2.12%

Franklin Global Health Care Securities Fund
December 31, 1999             3        9.626          33         2.22           5        9.594        50           2.42

Franklin Growth and Income Fund
December 31, 1999            21       26.792         545         1.90           9       26.220       238           2.10

Franklin High Income Fund
December 31, 1999            20       21.405         429         1.94           1       20.949        18           2.14

Franklin Income Securities Fund
December 31, 1999            49       24.923       1,206         1.90           4       24.391        92           2.10

Franklin Large Cap Growth Securities Fund
December 31, 1999            19       20.337         392         2.17           7       20.188       144           2.37

Franklin Money Market Fund
December 31, 1999           562       15.225       8,557         1.94           1       14.901        16           2.14

Franklin Natural Resources Securities Fund
December 31, 1999             5       11.374          62         2.07           -       11.131         6           2.27

Franklin Real Estate Fund
December 31, 1999            20       21.919         429         1.98           1       21.452        14           2.18

Franklin Rising Dividends Securities Fund
December 31, 1999            18       19.156         340         2.16          11       18.857       206           2.36

Franklin Small Cap Fund
December 31, 1999            32       28.565         904         2.17           3       28.328        79           2.37

Franklin U.S. Government Fund
December 31, 1999            87       19.049       1,647         1.92          12       18.643       217           2.12

Franklin Value Securities Fund
December 31, 1999            14        7.749         108         2.21           3        7.753        21           2.41

Mutual Discovery Securities Fund
December 31, 1999            20       13.779         275         2.42          10       13.692       136           2.62

Mutual Shares Securities Fund
December 31, 1999            65       13.362         875         2.19           8       13.278       100           2.39

Templeton Developing Markets Equity Fund
December 31, 1999            21       12.331         253         2.82           7       12.189        89           3.02

Templeton Global Asset Allocation Fund
December 31, 1999             2       17.693          36         2.22           1       17.527        16           2.42

Templeton Global Growth Fund
December 31, 1999            51       19.717       1,012         2.29          15       19.490       313           2.49

Templeton Global Income Securities Fund
December 31, 1999            25       17.033         435         2.06           -       16.670         6           2.26
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999


8. UNIT VALUES - VALUEMARK CHARTER (CONTINUED)

                                Valuemark Charter Traditional                      Valuemark Charter Enhanced
------------------------------------------------------------------------------------------------------------------------------------
                                                             Ratio of                                               Ratio of
                        Accumulation                         Expenses     Accumulation                              Expenses
                      Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto     Average
                       (in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands      Net Assets*
------------------------------------------------------------------------------------------------------------------------------------

<S>                         <C>      <C>          <C>            <C>           <C>     <C>          <C>            <C>
Templeton International Equity Fund
December 31, 1999           124      $23.368      $2,895         2.32%         14      $23.004      $303           2.52%

Templeton International Smaller Companies Fund
December 31, 1999             -       11.547           4         2.53           4       11.462        51           2.73

Templeton Pacific Growth Fund
December 31, 1999             6       11.121          63         2.51           4       10.948        48           2.71

<FN>
* For the year ended  December 31,  including  the effect of the expenses of the
underlying funds.
</FN>
</TABLE>







                             ALLIANZ LIFE INSURANCE
                            COMPANY OF NORTH AMERICA
                                AND SUBSIDIARIES
                        Consolidated Financial Statements
                           December 31, 1999 and 1998

Allianz Life Insurance Company of North America
And Subsidiaries
Independent Auditors' Report

The Board of Directors

Allianz Life Insurance Company of North America and subsidiaries:
We have audited the  accompanying  consolidated  balance  sheets of Allianz Life
Insurance  Company of North America and subsidiaries as of December 31, 1999 and
1998,  and the related  consolidated  statements  of  operations,  comprehensive
(loss) income,  stockholder's equity and cash flows for each of the years in the
three-year  period  ended  December  31,  1999.  These  consolidated   financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Allianz
Life Insurance Company of North America and subsidiaries as of December 31, 1999
and 1998,  and the  results of their  operations  and cash flows for each of the
years in the  three-year  period ended  December 31, 1999,  in  conformity  with
generally accepted accounting principles.

As discussed in note 1 to the  consolidated  financial  statements,  the Company
changed its method of calculating  deferred acquisition costs and future benefit
reserves for two-tiered annuities.

                                                                       KPMG LLP



February 7, 2000


<PAGE>

<TABLE>
<CAPTION>



Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Balance Sheets

December 31, 1999 and 1998 (in thousands)

  Assets                                                                                    1999              1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                <C>              <C>
Investments:
   Fixed maturities, at fair value                                                     $ 4,582,350        2,538,291
   Equity securities, at fair value                                                       675,541           512,404
   Mortgage loans on real estate                                                          528,933           457,128
   Certificates of deposit and short-term securities                                      139,571           166,366
   Policy loans                                                                            46,573             7,118
   Real estate                                                                            154,063            80,637
   Options                                                                                 68,217            15,109
   Investment in equity investments                                                         3,045            80,928
------------------------------------------------------------------------------------------------------------------------------------
     Total investments                                                                  6,198,293         3,857,981
Cash                                                                                       58,110            67,195
Accrued investment income                                                                  73,774            36,649
Receivables (net of allowance for uncollectible accounts of
 $3,395 in 1999 and $3,254 in 1998)                                                       310,866           323,971
Reinsurance recoverable:
   Funds held on deposit                                                                1,151,941         1,170,170
   Recoverable on future policy benefit reserves                                        3,330,612         1,191,098
   Recoverable on unpaid claims                                                           405,086           293,179
   Receivable on paid claims                                                               74,483            24,986
Goodwill (net of accumulated amortization of $3,847 in 1999)                              304,561                 0
Value of business acquired                                                                210,363                 0
Deferred acquisition costs                                                                801,763           930,059
Other assets                                                                               55,811            35,755
Federal income tax recoverable                                                             10,484             4,060
------------------------------------------------------------------------------------------------------------------------------------
   Assets, exclusive of separate account assets                                        12,986,147         7,935,103
Separate account assets                                                                 8,488,404         9,915,150
------------------------------------------------------------------------------------------------------------------------------------
   Total assets                                                                        $21,474,551        17,850,253
------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Balance Sheets (continued)

December 31, 1999 and 1998 (in thousands)

                                                                                            1999              1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                 <C>
Liabilities Future benefit reserves:

      Life                                                                            $ 1,874,904         1,445,844
      Annuity                                                                           7,796,583         3,588,491
   Policy and contract claims                                                             927,915           770,846
   Unearned premiums                                                                       49,013            53,778
   Reinsurance payable                                                                    212,239           129,397
   Deferred income on reinsurance                                                         186,888           106,065
   Deferred income taxes                                                                   51,356           257,903
   Accrued expenses                                                                       108,232            91,631
   Commissions due and accrued                                                             55,904            41,000
   Other policyholder funds                                                                77,782            20,586
   Other liabilities                                                                       98,251            89,038
------------------------------------------------------------------------------------------------------------------------------------
        Liabilities, exclusive of separate account liabilities                         11,439,067         6,594,579
   Separate account liabilities                                                         8,488,404         9,915,150
------------------------------------------------------------------------------------------------------------------------------------
        Total liabilities                                                              19,927,471        16,509,729
------------------------------------------------------------------------------------------------------------------------------------
Stockholder's equity:
   Common stock, $1 par value, 20 million shares authorized, issued and outstanding        20,000            20,000
   Additional paid-in capital                                                             830,274           407,088
   Retained earnings                                                                      632,320           673,857
   Accumulated other comprehensive income                                                  64,486           239,579
------------------------------------------------------------------------------------------------------------------------------------
        Total stockholder's equity                                                      1,547,080         1,340,524
Commitments and contingencies (notes 7 and 12)
------------------------------------------------------------------------------------------------------------------------------------
        Total liabilities and stockholder's equity                                     $21,474,551        17,850,253
------------------------------------------------------------------------------------------------------------------------------------


<FN>

See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Operations

Years ended December 31, 1999, 1998 and 1997 (in thousands)


                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                 <C>               <C>
Revenue:
   Life insurance premiums                                            $  447,026          416,199           339,841
   Other life policy considerations                                       31,786           52,668            83,816
   Annuity considerations                                                239,070          222,632           219,262
   Accident and health premiums                                          843,906          773,570           747,718
------------------------------------------------------------------------------------------------------------------------------------
     Total premiums and considerations                                 1,561,788        1,465,069         1,390,637
   Premiums and annuity considerations ceded                             478,239          411,316           438,018
------------------------------------------------------------------------------------------------------------------------------------
        Net premiums and considerations                                1,083,549        1,053,753           952,619
   Investment income, net                                                274,860          217,066           162,350
   Realized investment gains                                             112,253           89,226            61,488
   Other                                                                  72,301           78,174            53,760
------------------------------------------------------------------------------------------------------------------------------------
     Total revenue                                                     1,542,963        1,438,219         1,230,217
------------------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
   Life insurance benefits                                               382,464          461,891           336,090
   Annuity benefits                                                      243,398          251,463           206,189
   Accident and health insurance benefits                                765,257          623,640           566,746
------------------------------------------------------------------------------------------------------------------------------------
     Total benefits                                                    1,391,119        1,336,994         1,109,025
   Benefit recoveries                                                    443,441          501,719           426,607
------------------------------------------------------------------------------------------------------------------------------------
        Net benefits                                                     947,678          835,275           682,418
   Commissions and other agent compensation                              304,816          322,697           310,665
   General and administrative expenses                                   162,798          116,007           106,744
   Taxes, licenses and fees                                               26,292           15,848            20,605
   Amortization of goodwill                                                3,847                0                 0
   Amortization of value of business acquired, net of interest credited    4,161                0                 0
   Change in deferred acquisition costs, net                             129,142           (2,979)          (63,742)
------------------------------------------------------------------------------------------------------------------------------------
     Total benefits and expenses                                       1,578,734        1,286,848         1,056,690
------------------------------------------------------------------------------------------------------------------------------------
     (Loss) income from operations before income taxes                   (35,771)         151,371           173,527
------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense:   Current                                   63,371           48,410            31,571
   Deferred                                                              (73,727)           2,822            28,283
------------------------------------------------------------------------------------------------------------------------------------
     Total income tax (benefit) expense                                  (10,356)          51,232            59,854
------------------------------------------------------------------------------------------------------------------------------------
     (Loss) income before cumulative effect of change in accounting      (25,415)         100,139           113,673
Cumulative effect of change in accounting, net of tax benefit of $8,682  (16,122)               0                 0
------------------------------------------------------------------------------------------------------------------------------------
     Net (loss) income                                                $  (41,537)         100,139           113,673
------------------------------------------------------------------------------------------------------------------------------------


<FN>

See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Comprehensive (Loss) Income

Years ended December 31, 1999, 1998 and 1997 (in thousands)

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>              <C>
Net (loss) income                                                     $  (41,537)          100,139          113,673
------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive (loss) gain:

   Foreign currency translation adjustments, net of tax                    1,461            (1,761)            (975)
------------------------------------------------------------------------------------------------------------------------------------
Unrealized (losses) gains on fixed maturities and equity securities:  Unrealized
holding (losses) gains arising during the period net of tax (benefit) expense of
$(55,781), $57,703 and $71,594 in 1999, 1998,

and 1997, respectively                                                  (103,590)          107,162          132,961
Reclassification adjustment for gains included in net income, net of tax
 expense of $39,289, $30,627, and $21,588 in 1999, 1998, and 1997,
 respectively                                                             72,964           56,879            40,093
------------------------------------------------------------------------------------------------------------------------------------
        Total unrealized holding (losses) gains                         (176,554)          50,283            92,868
------------------------------------------------------------------------------------------------------------------------------------

        Total other comprehensive (loss) income                         (175,093)          48,522            91,893
------------------------------------------------------------------------------------------------------------------------------------

        Total comprehensive (loss) income                             $ (216,630)         148,661            205,566
------------------------------------------------------------------------------------------------------------------------------------

<FN>

See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Stockholder's Equity

Years ended December 31, 1999, 1998 and 1997 (in thousands)

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>               <C>
   Balance at beginning and end of year                               $   20,000           20,000            20,000
------------------------------------------------------------------------------------------------------------------------------------
Preferred stock:
   Balance at beginning of year                                                0           25,000            25,000
   Redemption of stock during the year                                         0           (25,000)               0
------------------------------------------------------------------------------------------------------------------------------------
     Balance at end of year                                                    0                0            25,000
------------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital:   Balance at beginning of year               407,088          407,088           407,088
   Capital contribution                                                  423,186                0                 0
------------------------------------------------------------------------------------------------------------------------------------
     Balance at end of year                                              830,274          407,088           407,088
------------------------------------------------------------------------------------------------------------------------------------
Retained earnings:
   Balance at beginning of year                                          673,857          574,447           462,925
   Net income                                                             41,537)         100,139           113,673
   Cash dividend to stockholder                                                0             (729)          (2,151)
------------------------------------------------------------------------------------------------------------------------------------
     Balance at end of year                                              632,320          673,857           574,447
------------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income: Accumulated unrealized holding gain:

     Balance at beginning of year                                        245,788          195,505           102,637
     Net unrealized gain (loss) on investments
        during the year, net of deferred federal income taxes           (176,554)          50,283            92,868
------------------------------------------------------------------------------------------------------------------------------------
     Balance at end of year                                               69,234          245,788           195,505
Accumulated unrealized foreign currency (loss):
   Balance at beginning of year                                           (6,209)          (4,448)           (3,473)
   Net unrealized gain (loss) on foreign currency
     translation during the year, net of deferred federal income taxes     1,461           (1,761)             (975)
------------------------------------------------------------------------------------------------------------------------------------
     Balance at end of year                                               (4,748)          (6,209)           (4,448)
------------------------------------------------------------------------------------------------------------------------------------
   Total accumulated other comprehensive income                           64,486          239,579           191,057
------------------------------------------------------------------------------------------------------------------------------------
     Total stockholder's equity                                       $1,547,080        1,340,524         1,217,592
------------------------------------------------------------------------------------------------------------------------------------

<FN>

See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Cash Flows

December 31, 1999, 1998 and 1997 (in thousands)


                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                <C>               <C>            <C>
Cash flows provided by (used in) operating activities:
   Net (loss) income                                                  $   (41,537)        100,139           113,673
------------------------------------------------------------------------------------------------------------------------------------
   Adjustments to reconcile  net (loss) income to net cash (used in) provided by
     operating activities:

        Realized investment gains                                        (112,253)         (89,226)          (61,488)
        Deferred federal income tax expense                               (82,409)           2,822            28,283
        Charges to policy account balances                                (66,945)        (104,681)         (148,159)
        Interest credited to policy account balances                      251,303          262,956           251,182
        Change in:
          Accrued investment income                                        (1,921)           1,696            (2,215)
          Receivables                                                      17,873          (61,295)         (107,398)
          Reinsurance recoverable                                        (435,498)        (162,959)       (1,205,410)
          Deferred acquisition costs                                      128,296           (2,979)          (63,742)
          Future benefit reserves                                        (136,722)          25,183           138,370
          Policy and contract claims and other policyholder funds         184,939          154,213            92,230
          Unearned premiums                                                (4,765)           3,610            17,992
          Reinsurance payable                                              13,820           17,713            68,725
          Current tax recoverable                                          (6,424)          16,701            (8,306)
          Accrued expenses and other liabilities                          (31,349)          14,797            12,113
          Commissions due and accrued                                       5,627            1,483             2,414
        Depreciation and amortization                                      (5,917)         (12,711)          (13,312)
        Equity in earnings of equity investments                             (690)          (2,207)                0
        Other, net                                                         (1,151)              94                18
------------------------------------------------------------------------------------------------------------------------------------
        Total adjustments                                                (284,186)          65,210          (998,703)
------------------------------------------------------------------------------------------------------------------------------------
        Net cash (used in) provided by operating activities              (325,723)         165,349          (885,030)
------------------------------------------------------------------------------------------------------------------------------------


<FN>

See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Cash Flows (continued)

Years ended December 31, 1999, 1998 and 1997 (in thousands)


                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>              <C>           <C>
Cash flows (used in) provided by operating activities                 $  (325,723)         165,349          (885,030)
Cash flows (used in) provided by investing activities:
   Purchase of fixed maturities                                        (1,171,682)      (1,256,653)       (1,748,950)
   Purchase of equity securities                                         (404,985)      (1,518,096)       (1,699,847)
   Purchase of real estate                                                (66,502)         (36,367)           (8,398)
   Purchase of options                                                    (32,617)         (11,503)           (3,482)
   Funding of mortgage loans                                             (114,840)        (168,870)         (103,626)
   Sale of fixed maturities                                             1,123,115        1,460,969         1,921,534
   Matured fixed maturities                                                21,280           28,152             1,150
   Sale of equity securities                                              385,559        1,560,695         1,691,789
   Sale of real estate                                                          0            7,103               551
   Repayment of mortgage loans                                             41,355           29,105            29,520
   Net change in certificates of deposit and short-term securities         38,121          (49,242)           87,848
   Purchase of Life USA, net of cash acquired                            (370,881)         (79,091)                0
   Other                                                                   (5,438)          (5,489)           94,126
------------------------------------------------------------------------------------------------------------------------------------
   Net cash (used in) provided by investing activities                   (557,515)         (39,287)          262,215
------------------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used in) financing activities:

   Policyholders' deposits to account balances                         1,033,877          864,446           748,430
   Policyholders' withdrawals from account balances                      (663,733)        (562,667)         (524,579)
   Change in assets held under reinsurance agreements                      80,823            7,876           150,526
   Funds (repaid) borrowed on dollar reverse repurchase agreements, net         0         (369,664)          239,468
   Capital contribution                                                   423,186                0                 0
   Redemption of preferred stock                                                0          (25,000)                0
   Cash dividends paid                                                          0             (729)           (2,151)
------------------------------------------------------------------------------------------------------------------------------------
   Net cash provided by (used in) financing activities                    874,153          (85,738)          611,694
------------------------------------------------------------------------------------------------------------------------------------
        Net change in cash                                                 (9,085)          40,324           (11,121)
Cash at beginning of year                                                  67,195           26,871            37,992
------------------------------------------------------------------------------------------------------------------------------------
Cash at end of year                                                   $   58,110           67,195             26,871
------------------------------------------------------------------------------------------------------------------------------------

<FN>

See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Cash Flows (continued)

Years ended December 31, 1999, 1998 and 1997 (in thousands)

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                        <C>               <C>
Supplemental disclosures of noncash transactions:
   Fair value of assets acquired in acquisition of LifeUSA:

     Fixed maturities                                                 $ 2,283,214                0                 0
     Equity securities                                                    21,358                 0                 0
     Certificates of deposit and short-term securities                    11,285                 0                 0
     Policy loans                                                         37,618                 0                 0
     Options                                                              20,491                 0                 0
     Cash                                                                 62,767                 0                 0
     Accrued investment income                                            35,204                 0                 0
     Receivables (net of allowance for uncollectible accounts of $145)     4,768                 0                 0
     Recoverable on future policy benefit reserves - annuity           3,023,377                 0                 0
     Deferred tax asset                                                   29,825                 0                 0
     Other assets                                                         21,291                 0                 0

   Liabilities assumed in acquisition of LifeUSA:

     Future policy benefit reserves - annuity                          5,395,155                 0                 0
     Reinsurance payable                                                  69,022                 0                 0
     Accrued expenses                                                     14,611                 0                 0
     Commissions due and accrued                                           9,277                 0                 0
     Other policyholder funds                                             29,729                 0                 0
     Other liabilities                                                    42,552                 0                 0

<FN>

See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

 <PAGE>




Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(1) Summary of Significant Accounting Policies

Allianz Life Insurance  Company of North America (the Company) is a wholly owned
subsidiary  of Allianz of America,  Inc.  (AZOA),  a wholly owned  subsidiary of
Allianz  Aktiengesellschaft  Holding (Allianz AG), a Federal Republic of Germany
company.

The  Company is a life  insurance  company  that is  licensed  to sell group and
individual life,  annuity and accident and health policies in the United States,
Canada  and  several   U.S.   territories.   Based  on  1999  net  revenues  and
considerations,  36%, 18% and 46% of the Company's business is life, annuity and
accident and health,  respectively.  The Company's primary distribution channels
are through  strategic  alliances with other  insurance  companies,  third party
marketing   organizations  and  with  independent  agents.  The  Company  has  a
significant relationship with The Franklin Templeton Group and its broker/dealer
network related to sales of its variable life and variable annuity products.

Following is a summary of the significant  accounting  policies reflected in the
accompanying consolidated financial statements.

Basis of Presentation

The  consolidated  financial  statements  have been prepared in accordance  with
generally accepted  accounting  principles (GAAP) which vary in certain respects
from  accounting  rules  prescribed or permitted by state  insurance  regulatory
authorities. The accounts of the Company's major subsidiaries, Life USA Holding,
Inc. (Life USA) and Preferred Life Insurance Company of New York, and other less
significant  subsidiaries  have been  consolidated.  The consolidated  financial
statements  only  include the  results of Life USA's  operations  subsequent  to
October 1, 1999,  the date of its  acquisition  by the Company (see note 2). All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

The  preparation  of  financial  statements  in  conformity  with GAAP  requires
management to make certain estimates and assumptions that affect reported assets
and  liabilities  including  reporting or disclosure  of  contingent  assets and
liabilities  as of the balance  sheet date and the reported  amounts of revenues
and  expenses   during  the  reporting   period.   Actual   results  could  vary
significantly from management's estimates.

Traditional Life, Group Life and Group Accident and Health Insurance
Traditional life products include products with guaranteed premiums and benefits
and  consist  principally  of whole life and term  insurance  policies,  limited
payment contracts and certain annuity products with life contingencies.

Premiums on  traditional  life and group life products are  recognized as income
when due. Group  accident and health  premiums are recognized as earned on a pro
rata basis over the risk coverage periods. Benefits and expenses for traditional
and group  products  are  matched  with  earned  premiums  so that  profits  are
recognized  over the premium paying  periods of the contracts.  This matching is
accomplished  by  establishing  provisions for future policy benefits and policy
and contract  claims,  and deferring and amortizing  related policy  acquisition
costs.

Nontraditional and Variable Life and Annuity Business

Nontraditional and variable life insurance and interest sensitive contracts that
have  significant  mortality or morbidity  risk are  accounted for in accordance
with the retrospective deposit method.  Interest sensitive contracts that do not
have  significant  mortality or  morbidity  risk are  accounted  for in a manner
consistent  with  interest  bearing  financial  instruments.  For both  types of
contracts,  premium  receipts are  reported as deposits to the  contractholder's
account  while  revenues  consist of amounts  assessed  against  contractholders
including surrender charges and earned administrative service fees. Mortality or
morbidity  charges  are  also  accounted  for  as  revenue  on  those  contracts
containing mortality or morbidity risk. Benefits consist of interest credited to
contractholder's  accounts  and  claims or  benefits  incurred  in excess of the
contractholder's balance.

<PAGE>



Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(1) Summary of Significant Accounting Policies (Continued)


Value of Business Acquired and Goodwill

The value of insurance  in force  purchased is recorded as the value of business
acquired  (VOBA).  The initial value was determined by an actuarial  study using
the present value of future  profits in  calculating  the value of the insurance
purchased.  An accrual of interest is added to the unamortized balance using the
rates  credited  to the  policyholder  accounts.  The  balance is  amortized  in
relation  to the  present  value of expected  future  gross  profits in the same
manner as deferred  acquisition costs. The amortization period is expected to be
approximately 20 years from the date the business was acquired.  The activity in
the VOBA balance for 1999 is summarized below.

Balance, beginning of year$  0
Additions              214,524
Interest                 1,975
Amortization           (6,136)
                        ------
Balance, end of year   210,363
                        ------

The  amortization  of the VOBA in each of the next five years is expected to be:
2000 - $21,491;  2001 -  $20,123;  2002 -  $18,329;  2003 - $18,105;  and 2004 -
$16,958.

Goodwill  is the  excess of the amount  paid to acquire a company  over the fair
value  of its net  assets  and  VOBA,  reduced  by  amortization  and  valuation
adjustments,  if any.  Goodwill is  amortized on a  straight-line  basis over 20
years.  The value of VOBA and goodwill will be monitored at least annually based
on  estimates  of  future  earnings.  For  VOBA,  those  earnings  relate to the
insurance  in  force  purchased.  For  goodwill,  estimates  will  be  based  on
production  subsequent to the purchase.  If estimated  future  earnings are less
than the carrying  amount of the related asset,  the carrying value of the asset
may not be recoverable.  If impairment is indicated,  the carrying value will be
reduced to its fair value with a corresponding charge to earnings.

Deferred Acquisition Costs

Acquisition costs,  consisting of commissions and other costs that vary with and
are  primarily  related  to  production  of  new  business,  are  deferred.  For
traditional  life and group life  products,  such costs are  amortized  over the
revenue-producing  period  of the  related  policies  using  the same  actuarial
assumptions used in computing future policy benefit reserves.  Acquisition costs
for accident and health  insurance  policies are deferred and amortized over the
lives of the  policies in the same manner as premiums  are earned.  For interest
sensitive  products,  acquisition costs are amortized in relation to the present
value of expected  future gross profits from  investment  margins and mortality,
morbidity and expense charges. Deferred acquisition costs amortized during 1999,
1998 and 1997 were $312,036, $202,644, and $219,266, respectively.

Future Policy Benefit Reserves

Future policy benefit  reserves on traditional life products are computed by the
net level premium method based upon estimated future investment yield, mortality
and withdrawal assumptions, commensurate with the Company's experience, modified
as necessary  to reflect  anticipated  trends,  including  possible  unfavorable
deviations. Most life reserve interest assumptions range from 6% to 3.5%.

Future policy  benefit  reserves for interest  sensitive  products are generally
carried at  accumulated  contract  values.  Reserves  on some  deferred  annuity
contracts  are  computed  based  on  contractholder  cash  value  accumulations,
adjusted for mortality, withdrawal and interest margin assumptions.

Fair values of investment contracts,  which include deferred annuities and other
annuities without significant mortality risk, were determined by testing amounts
payable  on  demand   against   discounted   cash  flows  using  interest  rates
commensurate  with the risks  involved.  Fair  values  are  based on the  amount
payable on demand at December 31.

Policy and Contract Claims

Policy and contract claims  represent an estimate of claims and claim adjustment
expenses  that  have been  reported  but not yet paid and  incurred  but not yet
reported as of December 31.

<PAGE>



Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(1) Summary of Significant Accounting Policies (Continued)


Reinsurance

Insurance  liabilities are reported  before the effects of reinsurance.  Amounts
paid or deemed to have been paid for claims covered by reinsurance contracts are
recorded as reinsurance receivable.  Reinsurance receivables are recognized in a
manner  consistent  with the  liabilities  related to the  underlying  reinsured
contracts.

Investments

The Company has  classified  all of its fixed  maturity and equity  portfolio as
"available-for-sale" and, accordingly, the securities are carried at fair value.
Short-term  investments are carried at amortized cost, which approximates market
value. Policy loans are reflected at their unpaid principal  balances.  Mortgage
loans are  reflected  at unpaid  principal  balances  adjusted  for  premium and
discount amortization and an allowance for uncollectible  balances.  The Company
analyzes loan impairment at least once a year when assessing the adequacy of the
allowance for possible  credit losses.  The Company does not accrue  interest on
impaired loans and accounts for interest income on such loans on a cash basis.

Realized  gains and losses are  computed  based on the  specific  identification
method.

As of December 31, 1999 and 1998,  investments with a carrying value of $164,045
and  $116,197,  respectively,  were  held  on  deposit  with  various  insurance
departments and in other trusts as required by statutory regulations.

The fair values of invested assets,  excluding  investments in real estate,  are
deemed by management to approximate  their  estimated  market  values.  The fair
value of mortgage loans has been calculated  using  discounted cash flows and is
based on pertinent  information  available to management as of year-end.  Policy
loan balances which are supported by the  underlying  cash value of the policies
approximate fair value. Changes in market conditions  subsequent to year-end may
cause estimates of fair values to differ from the amounts presented herein.

Accounting for Option Contracts

Certain annuity products provide additional benefits to the policy annuitization
value based on the growth in the Standard & Poor's (S&P) 500 Index.  The Company
has analyzed the  characteristics  of these  benefits and has  purchased  option
contracts tied to the S&P 500 Index with similar  characteristics to hedge these
risks.  Management monitors  correlation of in force amounts and option contract
values to ensure proper  matching.  If persistency  assumptions  were to deviate
significantly from anticipated  rates,  management would purchase or sell option
contracts as deemed appropriate.  As of December 31, 1999, management believes a
proper hedge exists.

The option  contracts  are  reported at fair value on the  consolidated  balance
sheet.  The fair value of the options is deemed by management to approximate the
estimated market values. Unrealized gains and losses on the option contracts are
recorded in annuity  benefits on the  consolidated  statement of  operations  to
offset increases in the future policy benefits  liability recorded for the index
benefit.

The Company purchases  "over-the-counter"  European-Asian  call option contracts
based upon the S&P 500  Index.  Two types of options  are  purchased:  five- and
seven-year options with daily averaging of the index during the last year of the
contract and five-year  cliquet options which use monthly averaging of the index
during each year and resets at each anniversary date of the contract. The strike
price depends on the product,  index period,  cap and credited rate. The Company
only purchases option contracts from counterparties  rated AA- or better and the
option contracts are not used for trading purposes.

Income Taxes

Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

<PAGE>



Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(1) Summary of Significant Accounting Policies (Continued)


Separate Accounts

Separate  accounts  represent funds for which  investment  income and investment
gains and losses accrue directly to the policyholders and contractholders.  Each
account has specific  investment  objectives  and the assets are carried at fair
value. The assets of each account are legally  segregated and are not subject to
claims that arise out of any other business of the Company.

Fair values of separate account assets were determined using the market value of
the underlying  investments  held in segregated  fund  accounts.  Fair values of
separate account  liabilities were determined using the cash surrender values of
the policyholder's and contractholder's account.

Receivables

Receivable  balances  approximate  estimated  fair  values.  This  is  based  on
pertinent  information  available to  management  as of year-end  including  the
financial  condition  and  credit  worthiness  of  the  parties  underlying  the
receivables.  Changes in market  conditions  subsequent  to  year-end  may cause
estimates of fair values to differ from the amounts presented herein.

Accounting Changes

Effective  January 1, 1999, the Company  changed its methodology for calculating
deferred  acquisition  costs and future benefit reserves for two tiered deferred
annuities.  The revised calculation better reflects the income streams from this
product. Under the previous method of accounting,  a disproportionate  amount of
gains were recognized when contract  annuitization or surrenders  occurred.  The
new  methodology  provides  for profit  emergence  over the life of the block of
annuities.  The cumulative effect of the change in accounting  principle for the
years prior to 1999 in the amount of $16,122,  net of taxes,  is recorded in the
accompanying  consolidated statement of operations.  The effect of the change in
methodology does not have a significant  impact on the financial  statements for
prior years, therefore no proforma retroactive information is included.

In 1999, the Company  adopted  Statement of Position (SOP) 97-3,  Accounting for
Insurance and Other Enterprises for Insurance-Related  Assessment, and SOP 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. No material adjustments were made to the consolidated  financial statements
upon adoption of these statements.

     In 1998, the Company  adopted  Statement of Financial  Accounting  Standard
(SFAS) No. 125,  Accounting for Transfers and Servicing of Financial  Assets and
Extinguishments of Liabilities,  and SFAS No. 132,  Employers  Disclosures about
Pensions and Other  Postretirement  Benefits.  No  adjustments  were made to the
consolidated financial statements upon adoption of these pronouncements.


Accounting Pronouncements to be Adopted

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting  for Derivative  Instruments  and Hedging  Activities.  The statement
establishes   accounting  and  reporting  standards  for  derivative   financial
instruments and other similar financial  instruments and for hedging activities.
In June 1999,  SFAS No. 137,  Accounting for Derivative  Instruments and Hedging
Activities - Deferral of Effective  Date of FASB  Statement  No. 133 was issued.
This statement  defers the effective date to fiscal years  beginning  after June
15, 2000. The Company will adopt these statements on January 1, 2001. The impact
of  adoption  of SFAS No. 133 on the  financial  position of the Company has not
been determined.


Reclassifications

Certain  prior year balances  have been  reclassified  to conform to the current
year presentation.

<PAGE>



Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(2) Business Combination

On October 1, 1999, the Company  acquired all of the  outstanding  capital stock
(including all outstanding  options) of Life USA that it did not already own for
approximately  $423 million in cash. The  acquisition  was financed by a capital
contribution from AZOA.

The  acquisition  was accounted for under the purchase method of accounting and,
accordingly,  the consolidated  financial statements include only the results of
Life  USA's  operations  from the date of  acquisition.  The  value of  business
acquired was  approximately  $215 million and is being  amortized in relation to
the present value of future gross profits, which will be approximately 20 years.
The  remaining  excess  of the  purchase  price  over the fair  value of  assets
acquired  in the amount of $308  million has been  recorded  as goodwill  and is
being amortized on a straight-line basis over 20 years.

During 1999,  expenses of  approximately $7 million were recorded related to the
acquisition  of Life USA and its  integration  with the Company.  These expenses
resulted  primarily from the costs of the  integration of the Company's and Life
USA's  strategies,  policies and practices.  These charges  include filing fees,
legal fees and other consulting fees related to the acquisition.

Following  are the  Company's  unaudited  pro forma  results for the years ended
December 31, 1999 and 1998 assuming the acquisition occurred on January 1, 1998.

                                          Unaudited
                                   1999              1998
------------------------------------------------------------------------------
Total revenue                 $ 1,766,792         1,654,531
Net (loss) income                 (44,624)          103,236
------------------------------------------------------------------------------

These  unaudited pro forma results have been prepared for  comparative  purposes
only and include  additional  amortization  expenses as a result of goodwill and
certain other  adjustments.  They do not purport to be indicative of the results
of operations that actually would have resulted had the combination  occurred on
January 1, 1998 or that may result in the future.

In 1998,  the Company  accounted for its investment in Life USA under the equity
method of accounting and carried its investment at cost,  adjusted for its share
of Life USA's  earnings,  amortization of goodwill and dividends  received.  The
difference  between the cost of the investment  and underlying  equity was to be
amortized on a straight-line  basis over ten years. As of December 31, 1998, the
company  held  21.41%  of the  outstanding  common  stock  of Life  USA  with an
approximate  market  value  of  $68,290.  The  carrying  value  of the  Life USA
investment  at year-end  1998 was  $80,928,  which was  $20,983  higher than the
equity in net assets of $59,945.

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(3) Investments

Investments at December 31, 1999 consist of:

                                                                                                             Amount
                                                                                                            shown on

                                                                         Amortized        Estimated       consolidated
                                                                           cost             fair             balance
                                                                          or cost           value             sheet
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                 <C>               <C>
Fixed maturities:
   U.S. government                                                    $  294,587          291,996           291,996
   States and political subdivisions                                      57,378           52,452            52,452
   Foreign government                                                    172,877          169,686           169,686
   Public utilities                                                      227,934          220,602           220,602
   Corporate securities                                                2,981,913        2,873,327         2,873,327
   Mortgage backed securities                                            345,794          347,235           347,235
   Collateralized mortgage obligations                                   634,680          627,052           627,052
------------------------------------------------------------------------------------------------------------------------------------
     Total fixed maturities                                           $4,715,163        4,582,350         4,582,350
------------------------------------------------------------------------------------------------------------------------------------
Equity securities:
   Common stocks:
     Banks, trusts and insurance companies                                22,935           23,831            23,831
     Industrial and miscellaneous                                        413,279          651,710           651,710
------------------------------------------------------------------------------------------------------------------------------------
     Total equity securities                                          $  436,214          675,541           675,541
------------------------------------------------------------------------------------------------------------------------------------
Other investments:
   Mortgage loans on real estate                                         528,933            XXXXXX          528,933
   Certificates of deposit and short-term securities                     139,571            XXXXXX          139,571
   Policy loans                                                           46,573            XXXXXX           46,573
   Real estate                                                           154,063            XXXXXX          154,063
   Options                                                                51,131            XXXXXX           68,217
   Investment in equity investments                                        3,045            XXXXXX            3,045
------------------------------------------------------------------------------------------------------------------------------------
     Total other investments                                          $  923,316            XXXXXX          940,402
------------------------------------------------------------------------------------------------------------------------------------
     Total investments                                                $6,074,693            XXXXXX        6,198,293
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(3) Investments (CONTINUED)

At December 31, 1999 and 1998, the amortized cost, gross unrealized gains,  gross unrealized losses and estimated fair values
of securities are as follows:

                                                          Amortized        Gross            Gross           Estimated
                                                            cost        unrealized       unrealized           fair
                                                           or cost         gains           losses             value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>              <C>             <C>
1999:

   U.S. Government                                     $  294,587          3,340            5,931           291,996
   States and political subdivisions                       57,378              0            4,926            52,452
   Foreign government                                     172,877            334            3,525           169,686
   Public utilities                                       227,934             20            7,352           220,602
   Corporate securities                                 2,981,913          3,902          112,488         2,873,327
   Mortgage backed securities                             345,794          5,026            3,585           347,235
   Collateralized mortgage obligations                    634,680          2,126            9,754           627,052
------------------------------------------------------------------------------------------------------------------------------------
     Total fixed maturities                             4,715,163         14,748          147,561         4,582,350
   Equity securities                                      436,214        289,441           50,114           675,541
------------------------------------------------------------------------------------------------------------------------------------
     Total                                             $5,151,377        304,189          197,675         5,257,891
------------------------------------------------------------------------------------------------------------------------------------
1998:

   U.S. Government                                     $  274,813         36,717              234           311,296
   States and political subdivisions                       94,640          6,481                0           101,121
   Foreign government                                      34,652          2,079                0            36,731
   Public utilities                                        66,236          5,948              202            71,982
   Corporate securities                                 1,441,359         67,234            9,891         1,498,702
   Mortgage backed securities                             401,505         26,799                0           428,304
   Collateralized mortgage obligations                     80,599         10,141              585            90,155
------------------------------------------------------------------------------------------------------------------------------------
     Total fixed maturities                             2,393,804        155,399           10,912         2,538,291
   Equity securities                                      278,753        245,913           12,262           512,404
------------------------------------------------------------------------------------------------------------------------------------
     Total                                             $2,672,557        401,312           23,174         3,050,695
------------------------------------------------------------------------------------------------------------------------------------
<FN>

The changes in unrealized (losses) gains on fixed maturity securities were $(277,300),  $22,170,  and $58,422 in each of the years
ended December 31, 1999, 1998 and 1997, respectively.

The changes in unrealized gains in equity investments, which include common stocks and nonredeemable preferred stocks were $5,676,
$55,188, and $84,718 for the years ended December 31, 1999, 1998 and 1997, respectively.

</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(3) Investments (CONTINUED)

The amortized cost and estimated  fair value of fixed  maturities at December 31, 1999, by  contractual  maturity,  are shown
below.  Expected  maturities  will differ  from  contractual  maturities  because  borrowers  may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                                                                          Amortized         Estimated
                                                                                            cost           fair value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>                  <C>
   Due in one year or less                                                             $  102,823           102,554
   Due after one year through five years                                                1,055,901         1,037,031
   Due after five years through ten years                                               1,279,988         1,243,845
   Due after ten years                                                                  1,295,977         1,224,633
   Mortgage backed securities and collateralized mortgage obligations                     980,474           974,287
------------------------------------------------------------------------------------------------------------------------------------
     Totals                                                                            $4,715,163         4,582,350
------------------------------------------------------------------------------------------------------------------------------------

Gross gains of $151,920,  $105,723,  and $70,335 and gross losses of $39,717,  $18,217,  and $8,654 were realized on sales of
securities in 1999, 1998 and 1997, respectively.

Net realized investment gains (losses) for the respective years ended December 31 are summarized as follows:

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
Fixed maturities, at market                                           $    (4,474)         30,299            40,268
Equity securities                                                         116,677          57,207            21,413
Mortgage loans                                                             (1,680)           ,320)             (982)
Real estate                                                                   331           3,133               635
Other                                                                        (601)            93)               154
------------------------------------------------------------------------------------------------------------------------------------
     Net gains before taxes                                               112,253          89,226            61,488
Tax expense on net realized gains                                          39,257          31,229            21,521
------------------------------------------------------------------------------------------------------------------------------------
     Net gains after taxes                                            $    72,996           7,997            39,967
------------------------------------------------------------------------------------------------------------------------------------

     The valuation allowances on mortgage loans at December 31, 1999, 1998 and 1997 and the changes in the allowance for the years
then ended are summarized as follows:

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
Beginning of Year                                                     $    9,599             8,279              7,279
   Charged to operations                                                   1,680             1,320             1,000
   Recoveries                                                                  0                0                  0
------------------------------------------------------------------------------------------------------------------------------------
End of Year                                                           $   11,279             9,599             8,279
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(3) Investments (CONTINUED)

Major categories of net investment income for the respective years ended December 31 are:

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                 <C>               <C>
Interest:
   Fixed maturities                                                   $  212,992          155,397           211,335
   Mortgage loans                                                         40,011           34,449            25,232
   Policy loans                                                              737              497             6,526
   Short-term investments                                                  1,823           15,022            12,804
Dividends:
   Preferred stock                                                           212              668               748
   Common stock                                                            5,259            5,190             4,603
Interest on assets held by reinsurers                                      8,097            8,272             8,858
Rental income on real estate                                              13,356            7,505             5,657
Other invested assets                                                      6,405            1,132             3,781
------------------------------------------------------------------------------------------------------------------------------------
     Total investment income                                             288,892          228,132           279,544

Investment expenses related to coinsurance agreements (note 8)             2,660            2,689            98,417
Investment expenses                                                       11,372            8,377            18,777
------------------------------------------------------------------------------------------------------------------------------------
     Net investment income                                            $  274,860          217,066           162,350
------------------------------------------------------------------------------------------------------------------------------------
<FN>

During the first two months of 1998,  the Company  entered into mortgage  backed  security  reverse  repurchase  transactions
("dollar rolls") with certain  securities  dealers.  Under this program,  the Company sold certain  securities for delivery in the
current  month and  simultaneously  contracted  with the same dealer to repurchase  similar,  but not  identical,  securities on a
specified future date. The Company gave up the right to receive  principal and interest on the securities sold. As of December 31,
1999 and 1998 there were no outstanding  amounts under the Company's  dollar roll program.  Average  balances  outstanding for the
first two months of 1998 were $120,525 and weighted average interest rates were 6.5%. The maximum balance  outstanding during 1998
was $120,525. No dollar rolls were transacted in 1999.

</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(4) Summary Table of Fair Value Disclosures

                                                                   1999                               1998
------------------------------------------------------------------------------------------------------------------------------------
                                                          Carrying         Fair           Carrying            Fair
                                                           Amount          Value           Amount             Value
                                                           -------         -----           -------            -----
Financial assets

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>              <C>               <C>
   Fixed maturities, at market:
     U.S. Government                                   $  291,996        291,996          311,296           311,296
     States and political subdivisions                     52,452         52,452          101,121           101,121
     Foreign governments                                  169,686        169,686           36,731            36,731
     Public utilities                                     220,602        220,602           71,982            71,982
     Corporate securities                               2,873,327      2,873,327        1,546,342         1,546,342
     Mortgage backed securities                           347,235        347,235          380,664           380,664
     Collateralized mortgage obligations                  627,052        627,052           90,155            90,155
   Equity securities                                      675,541        675,541          512,404           512,404
   Mortgage loans                                         528,933        530,033          457,128           495,202
   Short term investments                                 139,571        139,571          166,366           166,366
   Policy loans                                            46,573         46,573            7,118             7,118
   Options                                                 68,217         68,217           15,109            15,109
   Investment in equity investments                         3,045          4,286           80,928            68,290
   Receivables                                            310,866        310,866          323,971           323,971
   Separate accounts assets                             8,488,404      8,488,404        9,915,150         9,915,150

Financial liabilities

------------------------------------------------------------------------------------------------------------------------------------
   Investment contracts                                 7,609,726      7,208,876        3,645,657         3,035,787
   Separate account liabilities                         8,488,404      8,361,112        9,915,150         9,765,791
------------------------------------------------------------------------------------------------------------------------------------

     See Note 1 "Summary of Significant  Accounting  Policies" for description of the methods and significant  assumptions used to
estimate fair values.

(5) Receivables

Receivables at December 31 consist of the following:

                                                                                            1999              1998
------------------------------------------------------------------------------------------------------------------------------------
Premiums due                                                                           $  264,685           270,657
Agents balances                                                                             4,809            10,088
Related party receivables                                                                   2,230             3,852
Reinsurance commission receivable                                                           9,304             8,022
Scholarship enrollment fees                                                                14,125            12,010
Due from administrators                                                                     4,550            13,271
Other                                                                                      11,163             6,071
------------------------------------------------------------------------------------------------------------------------------------
        Total receivables                                                              $  310,866            323,971
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(6) Accident and Health Claims Reserves

Accident and health claims reserves are based on estimates that are subject to uncertainty. Uncertainty regarding reserves of
a given  accident year is gradually  reduced as new  information  emerges each  succeeding  year,  thereby  allowing more reliable
re-evaluations of such reserves.  While management  believes that reserves as of December 31, 1999 are adequate,  uncertainties in
the  reserving  process  could cause such  reserves to develop  favorably  or  unfavorably  in the near term as new or  additional
information  emerges.  Any  adjustments to reserves are reflected in the operating  results of the periods in which they are made.
Movements in reserves,  which are small  relative to the amount of such  reserves,  could  significantly  impact  future  reported
earnings of the Company.

Activity in the accident and health claims  reserves,  exclusive of long term care,  hospital  indemnity and AIDS reserves of
$19,542, $9,918, and $12,479 in 1999, 1998 and 1997, respectively, is summarized as follows:

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                 <C>               <C>
Balance at January 1, net of reinsurance
   recoverables of $128,764, $141,033, and $124,320                   $  366,425          312,886           273,813
Adjustment primarily related to commutation of block of business         (53,585)               0                 0
Incurred related to:
   Current year                                                          431,279          417,042           346,901
   Prior years                                                             3,264           (12,217)          (12,087)
------------------------------------------------------------------------------------------------------------------------------------
Total incurred                                                           434,543          404,825           334,814
------------------------------------------------------------------------------------------------------------------------------------
Paid related to:
   Current year                                                          193,341          204,100           150,942
   Prior years                                                           185,696          147,186           144,798
------------------------------------------------------------------------------------------------------------------------------------
 Total paid                                                              379,037          351,286           295,740
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, net of reinsurance
   recoverables of $175,142, $128,764, and $141,033                   $  368,346          366,425            312,887
------------------------------------------------------------------------------------------------------------------------------------
<FN>

The Company incurred  additional losses in 1999 on prior year incurred claims primarily on its reinsurance  assumed (non-HMO)
business.  Due to lower than anticipated  losses related to prior years,  the provision for claims and claim  adjustment  expenses
decreased in 1998 and 1997.

</FN>
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(7) Reinsurance

In the normal  course of business,  the Company  seeks to limit its  exposure to loss on any single  insured and to recover a
portion of benefits paid by ceding risks under excess  coverage and  coinsurance  contracts.  The Company  retains a maximum of $1
million  coverage per individual  life.  Reinsurance  contracts do not relieve the Company from its obligations to  policyholders.
Failure of  reinsurers  to honor their  obligations  could result in losses to the Company.  The Company  evaluates  the financial
condition of its  reinsurers  and monitors  concentrations  of credit risk to minimize  its  exposure to  significant  losses from
reinsurer insolvencies.

Life insurance, annuities and accident and health business assumed from and ceded to other companies is as follows:

                                                                                                           Percentage

                                                           Assumed         Ceded                            of amount
                                            Direct       from other      to other            Net             assumed
Year ended                                  amount        companies      companies         amount            to net
------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999:
<S>                                    <C>            <C>             <C>             <C>                      <C>
Life insurance in force                $36,994,161    129,809,733     24,174,006      142,629,888              91.0%
------------------------------------------------------------------------------------------------------------------------------------
Premiums:
   Life                                   205,208         273,604         67,069          411,743              66.5%
   Annuities                              199,341          39,729         95,232          143,838              27.6%
   Accident and health                    541,847         302,059        315,938          527,968              57.2%
------------------------------------------------------------------------------------------------------------------------------------
     Total premiums                    $  946,396         615,392        478,239        1,083,549              56.8%
------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998:
Life insurance in force                $34,118,554     98,832,792     19,483,581      113,467,765              87.1%
------------------------------------------------------------------------------------------------------------------------------------
Premiums:
   Life                                   244,416         224,451         93,812          375,055              59.8%
   Annuities                              220,812           1,820         50,385          172,247               1.1%
   Accident and health                    479,237         294,333        267,119          506,451              58.1%
------------------------------------------------------------------------------------------------------------------------------------
     Total premiums                    $  944,465         520,604        411,316        1,053,753              49.4%
------------------------------------------------------------------------------------------------------------------------------------
December 31, 1997:
Life insurance in force                $32,234,241     72,682,842     19,873,094       85,043,989              85.5%
------------------------------------------------------------------------------------------------------------------------------------
Premiums:
   Life                                   252,859         170,798        110,579          313,078              54.6%
   Annuities                              217,353           1,910         30,789          188,474               1.0%
   Accident and health                    436,105         311,612        296,650          451,067              69.1%
------------------------------------------------------------------------------------------------------------------------------------
     Total premiums                    $  906,317         484,320        438,018          952,619              50.8%
------------------------------------------------------------------------------------------------------------------------------------
<FN>

Included in reinsurance receivables at December 31, 1999 are $2,095,817 and $849,279 recoverable from two insurers who, as of
December 31, 1999, were both rated A+ by A.M.  Best's  Insurance  Reports.  A contingent  liability  exists to the extent that the
Company's reinsurers are unable to meet their contractual obligations.  Management is of the opinion that no liability will accrue
to the Company with respect to this contingency.

Of the amounts ceded to others, the Company ceded life insurance inforce of $3,387,592,  $2,067,664,  and $1,163,533 in 1999,
1998 and  1997,  respectively,  and life  insurance  premiums  earned  of  $6,008,  $4,165,  and  $2,538  in 1999,  1998 and 1997,
respectively,  to its ultimate  parent  Allianz AG. The Company also ceded  accident and health  premiums  earned to Allianz AG of
$3,131, $2,817, and $2,467 in 1999, 1998 and 1997.

</FN>
</TABLE>


<PAGE>



Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(7) Reinsurance (Continued)

Effective January 1, 1999, the Company entered into a 100% coinsurance agreement
with an  unrelated  insurance  company to  coinsure a block of preneed  life and
annuity  business  with  1999  premium  of  $10,300.  In  connection  with  this
agreement,  the Company  recognized a recoverable on future benefit  reserves of
$95,000, received a ceding commission of $2,600 and transferred cash of $91,700.
The  unearned  ceding  commission  represents  deferred  revenue  that  will  be
amortized over the  revenue-producing  period of the related reinsured policies.
During  1999,  $1,200  was  amortized  and  included  in  other  revenue  in the
consolidated  statements of operations.  The servicing of the coinsured business
was also transferred to a third party administrator.

Effective  December  31,  1999,  the  Company  entered  into a 100%  coinsurance
agreement with an unrelated insurance company to coinsure the remaining block of
preneed life and annuity  business  with 1999 premium of $97,100.  In connection
with this  agreement,  the Company  recognized a recoverable  on future  benefit
reserves of $245,000,  received a ceding  commission of $73,900 and  transferred
cash of $154,000.  The unearned ceding  commission  represents  deferred revenue
that  will  be  amortized  over  the  revenue-producing  period  of the  related
reinsured policies. The servicing of the coinsured business was also transferred
to a third party administrator. Because the agreement was effective December 31,
1999, no revenue was recognized on this transaction in 1999.

Effective January 1, 1997, the Company entered into a 100% coinsurance agreement
with an unrelated  insurance  company to coinsure a block of business  with life
insurance  inforce of  $13,200,000  and 1997 premium of $90,000.  The  coinsured
block included certain  universal life and traditional  life insurance  policies
and annuity contracts. In connection with this agreement, the Company recognized
a  recoverable  on future  benefit  reserves  of  $1,102,000,  received a ceding
commission  of $138,500 and  transferred  assets of $881,000,  which support the
business.  The unearned ceding commission  represents deferred revenue that will
be  amortized  over  the  revenue-producing  period  of  the  related  reinsured
policies. During 1999, 1998 and 1997 $14,996, $15,965 and $22,647, respectively,
was amortized and included in other  revenue in the  consolidated  statements of
operations.  The servicing of the coinsured  business was also  transferred to a
third party  insurer who is also the  retrocessionaire  of the block.  Effective
January 1, 1998, the coinsurance  agreement was amended to include another block
of business  with future  benefit  reserves  of  $66,000,  capitalized  deferred
acquisition costs of $1,935 and deferred income of $750.

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(8) Income Taxes

Income Tax (Benefit) Expense

     Total income tax expense (benefit) for the years ended December 31 are as follows:

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
Income tax expense attributable to operations:

<S>                                                                   <C>                  <C>               <C>
   Current tax expense                                                $   63,371           48,410            31,571
   Deferred tax (benefit) expense                                         (73,727)          2,822            28,283
------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense attributable to operations             (10,356)         51,232            59,854
Tax benefit due to cumulative effect of change in accounting               (8,682)              0                 0
------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense attributable to net income             (19,038)         51,232            59,854
Income tax effect on equity:
   Income tax allocated to stockholder's equity:

     Attributable to unrealized gains and losses for the year             (94,283)         26,127            49,748
------------------------------------------------------------------------------------------------------------------------------------

Total income tax effect on equity                                     $  (113,321)         77,359           109,602
------------------------------------------------------------------------------------------------------------------------------------


Components of Income Tax (Benefit) Expense

Income tax expense computed at the statutory rate of 35% varies from tax expense  reported in the consolidated  statements of
operations for the respective years ended December 31 as follows:

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense computed at the statutory rate           $   (12,520)         52,980            60,735
Dividends received deductions and tax-exempt interest                      (2,605)         (3,294)           (2,792)
Foreign tax                                                                (1,014)           (133)              916
Interest on tax deficiency                                                    800             900             1,100
Goodwill amortization                                                       1,365               0                 0
Other                                                                       3,618             779              (105)
------------------------------------------------------------------------------------------------------------------------------------
        Income tax (benefit) expense as reported                      $  (10,356)          51,232             59,854
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(8) Income Taxes (Continued)


Components of Deferred Tax Assets and  Liabilities on the Balance Sheet Tax effects of temporary  differences  giving rise to
the significant components of the net deferred tax liability at December 31 are as follows:

                                                                                            1999              1998
------------------------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
<S>                                                                                    <C>                    <C>
   Provision for post retirement benefits                                              $    2,286             2,223
   Allowance for uncollectible accounts                                                       929               929
   Policy reserves                                                                        282,573           173,414
------------------------------------------------------------------------------------------------------------------------------------
     Total deferred tax assets                                                            285,788           176,566
------------------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
   Deferred acquisition costs                                                             219,869           272,815
   Net unrealized gain                                                                     25,701           128,883
   Value of business acquired                                                              73,627                 0
   Other                                                                                   17,947            32,771
------------------------------------------------------------------------------------------------------------------------------------
     Total deferred tax liabilities                                                       337,144           434,469
------------------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability                                                             $   51,356            257,903
------------------------------------------------------------------------------------------------------------------------------------
<FN>

Although  realization  is not assured,  the Company  believes it is not necessary to establish a valuation  allowance for the
deferred tax asset as it is more likely than not the deferred tax asset will be realized  principally  through future reversals of
existing taxable  temporary  differences and future taxable income.  The amount of the deferred tax asset  considered  realizable,
however,  could be reduced in the near term if estimates of future reversals of existing taxable temporary  differences and future
taxable income are reduced.

The Company and its subsidiaries,  with the exception of Life USA Insurance Company,  files a consolidated federal income tax
return with AZOA and all of its wholly owned subsidiaries.  The consolidated tax allocation agreement stipulates that each company
participating in the return will bear its share of the tax liability  pursuant to United States Treasury  Department  regulations.
The Company and each of its insurance  subsidiaries  generally will be paid for the tax benefit on their losses, and any other tax
attributes, to the extent they could have obtained a benefit against their post-1990 separate return taxable income or tax. Income
taxes paid by the Company were $57,121,  $30,808, and $39,914 in 1999, 1998 and 1997, respectively.  At December 31, 1999 and 1998
the Company had a tax recoverable from AZOA of $3,251 and $3,030, respectively.

At December 31, 1999 and 1998,  the Company had a tax  recoverable  separate  from the  agreement  with AZOA in the amount of
$7,233 and $1,030,  respectively.  These amounts are for foreign taxes and Life USA taxes recoverable prior to the purchase by the
Company.

</FN>
</TABLE>

<PAGE>

24

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)



(9) Related Party Transactions

In  conjunction  with the  purchase  of LifeUSA on October 1, 1999,  the Company
received a capital contribution from AZOA in the amount of $423,186.

The Company  reimbursed AZOA $3,582,  $2,495, and $2,519 in 1999, 1998 and 1997,
respectively,  for certain  administrative  and investment  management  services
performed.  The Company's  liability to AZOA for such services was $581 and $490
at December 31, 1999 and 1998, respectively.

The Company  shares a data center with and receives  other  system  support from
affiliated insurance  companies.  Usage and other system support charges paid by
the Company were $902,  $1,291 and $2,826 in 1999, 1998 and 1997,  respectively.
The  Company's  liability for data center and other system  support  charges was
$157 and $345 at December 31, 1999 and 1998, respectively.

The Company  has 200 million  authorized  shares of  preferred  stock with a par
value of $1 per share.  This  preferred  stock is  issuable  in series  with the
number of shares, redemption rights and dividend rate designated by the Board of
Directors  for each series.  Dividends are  cumulative  at a rate  reflective of
prevailing  market  conditions  at time of issue and are  payable  semiannually.
Dividend  payments are restricted by provisions in State of Minnesota  statutes.
The Company had 25 million shares of Series A preferred stock  outstanding until
March 1998, which was held by AZOA with a dividend rate of 6.4% and a book value
of $25,000.  In March 1998,  the Company  redeemed  and  canceled the 25 million
shares of Series A preferred stock.

 (10) Employee Benefit Plans

The  Company  participates  in the  Allianz  Primary  Retirement  Plan  (Primary
Retirement Plan), a defined  contribution plan. The Company makes  contributions
to a money  purchase  pension  plan on  behalf  of  eligible  participants.  All
employees,  excluding  agents,  are  eligible  to  participate  in  the  Primary
Retirement  Plan after two years of service.  The  contributions  are based on a
percentage of the participant's  salary with the participants  being 100% vested
upon eligibility.  It is the Company's policy to fund the plan costs as accrued.
Total pension  contributions were $2,025, $756, and $810 in 1999, 1998 and 1997,
respectively.

The Company  participates in the Allianz Asset Accumulation Plan (Allianz Plan),
a  defined   contribution  plan  sponsored  by  AZOA.  Under  the  Allianz  Plan
provisions,  the Company will match 75% of eligible employees'  contributions up
to a maximum of 6% of a participant's compensation.  The plan can also declare a
profit  sharing  allocation of up to 5.0% of base pay at year-end based upon the
profitability of AZOA. All employees are eligible to participate  after one year
of service and are fully vested in the  Company's  matching  contribution  after
three years of service.  The Allianz  Plan will accept  participants'  pretax or
after tax contributions up to 15% of the participant's  compensation.  It is the
Company's  policy to fund the  Allianz  Plan costs as  accrued.  The Company has
accrued $980,  $868,  and $1,057 in 1999,  1998 and 1997,  respectively,  toward
planned contributions.

Employees of Life USA also  participated in a defined  contribution  plan, which
will be merged with the Allianz Plan  effective  January 1, 2000.  Total Company
contributions made subsequent to October 1, 1999 were $329.

The Company provides certain postretirement benefits to employees who retired on
or before  December 31, 1988 or who were hired before  December 31, 1988 and who
have at least ten years of service  when they reach age 55. The  Company's  plan
obligation  at December  31, 1999 and 1998 was $6,532 and $6,352,  respectively.
This liability is included in "Other  liabilities" in the  accompanying  balance
sheet.

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(11) Statutory Financial Data and Dividend Restrictions

Statutory accounting is directed toward insurer solvency and protection of policyholders. Accordingly, certain items recorded
in financial statements prepared under GAAP are excluded or vary in determining statutory policyholders' surplus and net gain from
operations.  Currently, these items include, among others, deferred acquisition costs, furniture and fixtures, accident and health
premiums receivable which are more than 90 days past due, deferred taxes and undeclared dividends to policyholders.  Additionally,
future life and annuity benefit reserves calculated for statutory  accounting do not include provisions for withdrawals.  The NAIC
has completed a project to codify  statutory  accounting  practices,  the result of which will  constitute  the primary  source of
"prescribed"  statutory accounting practices.  Accordingly,  that project, which is currently in the process of state adoption and
expected to be effective  January 1, 2001,  will change the definition of what comprises  prescribed  versus  permitted  statutory
accounting  practices,  and may result in changes to existing  accounting  policies  insurance  enterprises  use to prepare  their
statutory  financial  statements.  The Company has not quantified the effects of adopting the NAIC codification on their statutory
financial statements.

The differences between  stockholder's  equity and net income reported in accordance with statutory  accounting practices and
the accompanying consolidated financial statements as of and for the year ended December 31 are as follows:

                                          Stockholder's equity                           Net income
------------------------------------------------------------------------------------------------------------------------------------
                                             1999           1998           1999             1998              1997
                                             -----          -----          -----            -----             -----
<S>                                    <C>                 <C>             <C>              <C>               <C>
Statutory basis                        $   873,617         654,371         97,768           35,188            72,343
Adjustments:
   Change in reserve basis                (289,261)       (226,145)       (80,952)           2,036           (99,981)
   Deferred acquisition costs              801,763         930,059       (128,296)           2,979            63,742
   Difference in accounting for
   purchase of Life USA                    340,675               0         (6,373)               0                 0
   Net deferred taxes                      (51,356)       (257,903)        82,409           (2,822)          (28,283)
   Statutory asset valuation reserve       236,210         178,011              0                0                 0
   Statutory interest maintenance reserve   43,786          48,697         (4,912)          14,361              7,994
   Modified coinsurance reinsurance              0          (2,358)             0           29,595             81,790
   Unrealized (losses) gains
   on investments                         (136,719)        158,391              0                0                 0
   Nonadmitted assets                        7,411          14,946              0                0                 0
   Deferred income on reinsurance         (186,888)       (106,065)             0                0                 0
   Other liabilities related
   to reinsurance                          (32,998)        (52,337)             0                0                 0
   Valuation allowance on mortgage loans   (11,279)         (9,599)        (1,680)          (1,320)           (1,000)
   Loss from non-insurance subsidiaries          0               0        (11,714)            (618)           (1,260)
   Other                                   (47,881)         10,456         11,613           20,740            18,327
------------------------------------------------------------------------------------------------------------------------------------
      As reported in the accompanying
      consolidated financial statements $1,547,080       1,340,524        (42,137)         100,139           113,672
------------------------------------------------------------------------------------------------------------------------------------
<FN>

The Company is required to meet minimum  statutory  capital and surplus  requirements.  The Company's  statutory  capital and
surplus as of December 31, 1999 and 1998 were in compliance with these  requirements.  The maximum amount of dividends that can be
paid by Minnesota  insurance  companies to  stockholders  without  prior  approval of the  Commissioner  of Commerce is subject to
restrictions relating to statutory earned surplus,  also known as unassigned funds.  Unassigned funds are determined in accordance
with the accounting procedures and practices governing preparation of the statutory annual statement,  minus 25% of earned surplus
attributable to unrealized capital gains. In accordance with Minnesota Statutes, the Company may declare and pay from its surplus,
cash  dividends of not more than the greater of 10% of its  beginning of the year  statutory  surplus in any year, or the net gain
from operations of the insurer,  not including  realized gains,  for the 12-month period ending the 31st day of the next preceding
year. In 1998, the Company paid AZOA dividends on preferred  stock in the amount $729. A common stock dividend of $551 was paid in
1997. Dividends of $49,391 could be paid in 2000 without prior approval of the Commissioner of Commerce.

</FN>
</TABLE>

<PAGE>



Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(11) Statutory Financial Data and Dividend Restrictions (Continued)


Regulatory Risk Based Capital

An insurance  enterprise's  state of domicile imposes minimum risk-based capital
requirements  that were  developed  by the  National  Association  of  Insurance
Commissioners  (NAIC).  The formulas for  determining  the amount of  risk-based
capital specify various weighting factors that are applied to financial balances
or various levels of activity based on the perceived degree of risk.  Regulatory
compliance is determined by a ratio of an enterprise's regulatory total adjusted
capital to its authorized  control level risk-based  capital,  as defined by the
NAIC.  Enterprises below specific  triggerpoints or ratios are classified within
certain levels,  each of which requires specified  corrective action. The levels
and ratios are as follows:

                           Ratio of total adjusted capital to
                           authorized control level risk-based
      Regulatory Event       capital (less than or equal to)
        -------------             ---------------------

    Company action level     2 (or 2.5 with negative trends)
   Regulatory action level                 1.5
  Authorized control level                  1
   Mandatory control level                 0.7

The Company's  adjusted  capital is in excess of the Company  action level as of
December 31, 1999 and 1998.

Permitted Statutory Accounting Practices

The  Company is required to file annual  statements  with  insurance  regulatory
authorities,  which are prepared on an accounting  basis prescribed or permitted
by  such  authorities.  Currently,  prescribed  statutory  accounting  practices
include state laws, regulations,  and general administrative rules, as well as a
variety of publications of the NAIC.  Permitted statutory  accounting  practices
encompass all  accounting  practices  that are not  prescribed;  such  practices
differ from state to state,  may differ from company to company  within a state,
and may change in the  future.  The Company  does not  currently  use  permitted
statutory  accounting  practices that have a significant impact on its statutory
financial statements.

(12) Commitments and Contingencies

The Company and its  subsidiaries  are involved in various pending or threatened
legal proceedings arising from the conduct of their business.  In the opinion of
management,  the ultimate resolution of such litigation will not have a material
effect on the consolidated financial position of the Company.

The  Company  is  contingently  liable for  possible  future  assessments  under
regulatory   requirements   pertaining  to   insolvencies   and  impairments  of
unaffiliated  insurance  companies.  Provision  has been  made  for  assessments
currently received and assessments anticipated for known insolvencies.

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(13) Foreign Currency Translation

The net assets of the Company's  foreign  operations are translated into U.S.  dollars using exchange rates in effect at each
year-end. Translation adjustments arising from differences in exchange rates from period to period are included in the accumulated
foreign currency translation  adjustment reported as a separate component of comprehensive income. An analysis of this account for
the respective years ended December 31 follows:

                                                                           1999             1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                   <C>               <C>
Beginning amount of cumulative translation adjustments                $    (6,209)          (4,448)           (3,473)
------------------------------------------------------------------------------------------------------------------------------------
Aggregate adjustment for the period resulting from
translation adjustments                                                     2,248           (2,710)           (1,500)
Amount of income tax (expense) benefit for period
related to aggregate adjustment                                              (787)             949               525
------------------------------------------------------------------------------------------------------------------------------------
   Net aggregate translation included in equity                             1,461           (1,761)             (975)
------------------------------------------------------------------------------------------------------------------------------------
Ending amount of cumulative translation adjustments                   $    (4,748)          (6,209)           (4,448)
------------------------------------------------------------------------------------------------------------------------------------
Canadian foreign exchange rate at end of year                              0.6924           0.6535            0.6992
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(14) Supplementary Insurance Information

     The following table summarizes certain financial information by line of business for 1999, 1998 and 1997:

                                                                             As of December 31
------------------------------------------------------------------------------------------------------------------------------------
                                                                       Future policy                          Other
                                                          Deferred       benefits,                           policy
                                                           policy         losses,                          claims and
                                                         acquisition    claims and        Unearned          benefits
                                                            costs      loss expense       premiums           payable
------------------------------------------------------------------------------------------------------------------------------------
1999:

<S>                                                    <C>             <C>                  <C>             <C>
Life                                                   $  231,927      1,874,904            3,049           116,569
Annuities                                                 561,966      7,728,072                0             1,771
Accident and health                                         7,870              0           45,964           809,575
------------------------------------------------------------------------------------------------------------------------------------
                                                       $  801,763      9,602,976           49,013           927,915
------------------------------------------------------------------------------------------------------------------------------------

1998:

Life                                                   $  217,262      1,445,844            3,859            97,647
Annuities                                                 694,388      3,588,491                0             1,727
Accident and health                                        18,409              0           49,919           671,472
------------------------------------------------------------------------------------------------------------------------------------
                                                       $  930,059      5,034,335           53,778           770,846
------------------------------------------------------------------------------------------------------------------------------------

1997:

Life                                                   $  189,971      1,297,269            5,215            63,572
Annuities                                                 717,721      3,251,829                0             1,881
Accident and health                                        19,388              0           44,953           487,660
------------------------------------------------------------------------------------------------------------------------------------
                                                       $  927,080      4,549,098           50,168           553,113
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)

December 31, 1999, 1998 and 1997 (in thousands, except share data)


(14) Supplementary Insurance Information (Continued)

                                                              For the year ended December 31
------------------------------------------------------------------------------------------------------------------------------------
                                            Premium                      Benefits,       Net change
                                            revenue                       claims             in
                                           and other         Net        losses, and        policy             Other
                                           contract      investment     settlement       acquisition        operating
                                        considerations     income        expenses         costs (a)         expenses
------------------------------------------------------------------------------------------------------------------------------------
1999:

<S>                                    <C>                 <C>           <C>               <C>              <C>
Life                                   $  411,743          36,171        319,210           (14,665)         153,281
Annuities                                 143,838         211,432        163,329           133,268          166,715
Accident and health                       527,968          27,257        465,139            10,539          173,910
------------------------------------------------------------------------------------------------------------------------------------
                                       $1,083,549         274,860        947,678           129,142          493,906
------------------------------------------------------------------------------------------------------------------------------------
1998:

Life                                   $  375,055          34,731        306,318           (27,291)         141,705
Annuities                                 172,247         158,458        135,356           23,333           151,719
Accident and health                       506,451          23,877        393,601              979           161,128
------------------------------------------------------------------------------------------------------------------------------------
                                       $1,053,753         217,066        835,275            (2,979)         454,552
------------------------------------------------------------------------------------------------------------------------------------
1997:

Life                                   $  313,078          24,352        230,357           (14,363)          99,913
Annuities                                 188,474         118,028        124,535           (44,924)         186,789
Accident and health                       451,067          19,970        327,526            (4,455)         151,312
------------------------------------------------------------------------------------------------------------------------------------
                                       $  952,619         162,350        682,418           (63,742)         438,014
------------------------------------------------------------------------------------------------------------------------------------
(a)    See note 1 for total gross amortization.

</TABLE>



                                    PART C
                              OTHER INFORMATION

Item 24.  Financial Statements and Exhibits

      a.  Financial Statements

          The following financial statements of the Company are included in Part
          B hereof.

          1.  Independent Auditors' Report.
          2.  Consolidated Balance Sheets as of December 31, 1999 and 1998.
          3.  Consolidated Statements of Income for the years ended December
              31, 1999, 1998 and 1997.
          4.  Consolidated Statements of Stockholder's Equity for the years
              ended December 31, 1999, 1998 and 1997.
          5.  Consolidated Statements of Cash Flows for the years ended
              December 31, 1999, 1998 and 1997.
          6.  Notes to Consolidated Financial Statements - December 31, 1999,
              1998 and 1997.

          The following financial statements of the Variable Account are
          included in Part B hereof.


          1.  Independent Auditors' Report.
          2.  Statements of Assets and Liabilities as of December 31, 1999.
          3.  Statements of Operations for the year ended December 31, 1999.
          4.  Statements of Changes in Net Assets for the years ended
              December 31, 1999 and 1998.
          5.  Notes to Financial Statements - December 31, 1999.


      b. Exhibits

      1.   Resolution of Board of Directors of the Company authorizing the
           establishment  of  the  Variable  Account(1)
      2.   Not  Applicable
      3.a. Principal  Underwriter's  Agreement(2)
      3.b. General Agency Agreement
      4.   Individual  Variable  Annuity  Contract(1)
      4.a. Waiver  of  Contingent  Deferred  Sales  Charge  Endorsement(1)
      4.b. Enhanced  Death  Benefit  Endorsement(1)
      5.   Application  for  Individual  Variable  Annuity  Contract(1)
      6.   (i)    Copy  of  Articles  of  Incorporation of the Company(1)
           (ii)  Copy  of  the  Bylaws  of  the  Company(1)
      7.   Not  Applicable
      8.a. Form of Fund Participation Agreement between North American
           Life and Casualty Company and Franklin Valuemark Funds(1)
      8.b. Form of Fund Participation Agreement between AIM Variable
           Insurance Funds, Inc., Allianz Life Insurance Company of North
           America and NALAC Financial Plans LLC(3)
      8.c. Form of Fund Participation Agreement between Alger American
           Fund, Allianz Life Insurance Company of North America and Fred
           Alger and Company(3)
      8.d. Form of Fund Participation Agreement between USAllianz Variable
           Insurance Products Trust, Allianz Life Insurance Company of
           North America and BISYS Fund Services Limited Partnership(3)
      9.   Opinion  and  Consent  of  Counsel
     10.   Independent  Auditors'  Consent
     11.   Not  Applicable
     12.   Not  Applicable
     13.   Calculation  of  Performance  Data
     14.   Company  Organizational  Chart
     27.   Not Applicable

(1)  Incorporated by reference to Registrant's Form N-4 electronically filed on
     June  24,  1996.
(2)  Incorporated by reference to Pre-Effective Amendment No. 1 to Registrant's
     form N-4 electronically filed on December 13, 1996.
(3)  Incorporated by reference to Registrant's Form N-4 (File Nos. 333-06709 and
     811-05618) electronically filed on November 12, 1999.




Item  25.        Directors  and  Officers  of  the  Depositor

The following are the Officers and Directors of the Insurance Company:

<TABLE>
<CAPTION>
<S>                           <C>
Name and Principal            Positions and Offices
Business Address              with Depositor
----------------------------  ---------------------------------

Robert W. MacDonald           Director,
1750 Hennepin Avenue          Chief Executive Officer
Minneapolis, MN 55403

Margery G. Hughes             President,
1750 Hennepin Avenue          Chief Administrative Officer
Minneapolis, MN 55403

Mark A. Zesbaugh              Senior Vice President,
1750 Hennepin Avenue          Chief Financial Officer
Minneapolis, MN  55403

Lowell C. Anderson            Chairman of the Board
1750 Hennepin Avenue
Minneapolis, MN 55403

Herbert F. Hansmeyer          Director
777 San Marin Drive
Novato, CA 94998

Michael P. Sullivan           Director
7505 Metro Boulevard
Minneapolis, MN 55439

Dr. Gerhard Rupprecht         Director
Reinsburgstrasse 19
D-70178
Stuttgart, Germany

Edward J. Bonach              President - Special
1750 Hennepin Avenue          Markets Division
Minneapolis, MN 55403

Robert S. James               President - Individual
1750 Hennepin Avenue          Insurance Division
Minneapolis, MN 55403

Rev. Dennis Dease             Director
c/o University of St. Thomas
215 Summit Avenue
St. Paul, MN 55105-1096

James R. Campbell             Director
c/o Norwest Corp.
Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116

Robert M. Kimmitt             Director
Wilmer, Cutler & Pickering
2445 M Street NW
Washington, DC  20037-1420
</TABLE>


Item  26.   Persons Controlled by or Under Common Control with the Depositor
            or  Registrant

The Insurance Company organizational chart is included as Exhibit 14.

Item  27.        Number  of  Contract  Owners

As of February 29, 2000 there were 7,937 qualified Contract Owners and 19,113
non-qualified Contract Owners with Contracts in the separate account

Item  28.        Indemnification

The Bylaws of the Insurance Company provide that:

Each person (and the heirs,  executors,  and administrators of such person) made
or threatened to be made a party to any action, civil or criminal,  by reason of
being or having been a Director,  officer, or employee of the corporation (or by
reason of serving  any other  organization  at the  request of the  corporation)
shall  be  indemnified  to the  extent  permitted  by the  laws of the  State of
Minnesota, and in the manner prescribed therein.

Insofar as  indemnification  for liability  arising under the  Securities Act of
1933 may be permitted for directors and officers or  controlling  persons of the
Insurance Company pursuant to the foregoing, or otherwise, the Insurance Company
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against  public  policy as  expressed  in the Act and,
therefore,  unenforceable. In the event that a claim for indemnification against
such  liabilities  (other than the payment by the Insurance  Company of expenses
incurred or paid by a director,  officer or controlling  person of the Insurance
Company in the successful defense of any action, suit or proceeding) is asserted
by  such  director,  officer  or  controlling  person  in  connection  with  the
securities  being  registered,  the Company  will,  unless in the opinion of its
counsel the matter has been settled by controlling precedent,  submit to a court
of appropriate  jurisdiction the question whether such  indemnification by it is
against  public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item  29.        Principal  Underwriters



    a.  USAllianz Investor Services, LLC (formerly NALAC Financial Plans, LLC)
        is  the  principal underwriter for the Contracts. It  also  is  the
        principal  underwriter  for:

                          Allianz  Life  Variable  Account  A
                          Preferred  Life  Variable  Account  C

     b.  The following are the officers(managers) and directors (Board of
Governors) of USAllianz Investor Services, LLC:


<TABLE>
<CAPTION>
<S>                     <C>
                        Positions and Offices
Business Address        with Underwriter
----------------------  ----------------------

Christopher H.Pinkerton President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403

Thomas B. Clifford      Vice President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403

Michael T. Westermeyer  Vice President, Secretary
1750 Hennepin Avenue    & Director
Minneapolis, MN 55403



Catherine L. Mielke     Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403


Michael M. Ahles        Vice President & Treasurer
1750 Hennepin Avenue
Minneapolis, MN  55403

Lawrance C. Skibo       Executive Vice President
1750 Hennepin Avenue
Minneapolis, MN  55403

Catherine Q. Farley     Vice President
1750 Hennepin Avenue
Minneapolis, MN  55403

Brian A. Jeffs          Regional Vice President
1750 Hennepin Avenue
Minneapolis, MN  55403

Robert S. James         Director
1750 Hennepin Avenue
Minneapolis, MN  55403



</TABLE>

     c. Not Applicable

Item  30.        Location  of  Accounts  and  Records

Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis,  Minnesota,
55403 and Delaware Valley  Financial  Services,  USAllianz  Service Center,  300
Berwyn Park, Berwyn,  Pennsylvania  19312,  maintain physical possession of the
accounts,  books or documents of the Variable  Account required to be maintained
by Section  31(a) of the  Investment  Company Act of 1940,  as amended,  and the
rules promulgated thereunder.

Item  31.        Management  Services

Not  Applicable

Item  32.        Undertakings

   a. Registrant  hereby  undertakes to file a post-effective  amendment to this
registration  statement as frequently as is necessary to ensure that the audited
financial  statements in the registration  statement are never more than sixteen
(16) months old for so long as payment under the variable annuity  contracts may
be accepted.

   b.  Registrant  hereby  undertakes  to  include  either  (1) as  part  of any
application to purchase a contract  offered by the  Prospectus,  a space that an
applicant can check to request a Statement of Additional  Information,  or (2) a
postcard  or  similar  written  communication  affixed  to or  included  in  the
Prospectus  that the  applicant can remove to send for a Statement of Additional
Information.

   c.  Registrant  hereby  undertakes  to deliver any  Statement  of  Additional
Information  and any financial  statements  required to be made available  under
this Form promptly upon written or oral request.

   d.  Allianz  Life  Insurance  Company  of North  America  ("Company")  hereby
represents  that the fees and charges  deducted under the Contract  described in
the  Prospectus,  in the  aggregate,  are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.

                             REPRESENTATIONS

The  Insurance  Company  hereby  represents  that it is relying upon a No Action
Letter issued to the American Council of Life Insurance, dated November 28, 1988
(Commission ref. IP-6-88),  and that the following provisions have been complied
with:

   1.  Include  appropriate  disclosure  regarding the redemption restrictions
imposed  by  Section  403(b)(11) in each registration statement, including the
prospectus,  used  in  connection  with  the  offer  of  the  contract;

   2.  Include  appropriate  disclosure  regarding the redemption restrictions
imposed  by Section 403(b)(11) in any sales literature used in connection with
the  offer  of  the  contract;

   3.  Instruct sales representatives who solicit participants to purchase the
contract  specifically to bring the redemption restrictions imposed by Section
403(b)(11)  to  the  attention  of  the  potential  participants;

   4. Obtain from each plan  participant  who purchases a Section 403(b) annuity
contract,  prior  to or at  the  time  of  such  purchase,  a  signed  statement
acknowledging  the  participant's  understanding  of  (1)  the  restrictions  on
redemption imposed by Section 403(b)(11),  and (2) other investment alternatives
available  under  the  employer's   Section  403(b)  arrangement  to  which  the
participant may elect to transfer his contract value.


                              SIGNATURES


As  required by the  Securities  Act of 1933 and the  Investment  Company Act of
1940, as amended,  the Registrant  certifies that it meets the  requirements  of
Securities Act Rule 485(b) for effectiveness of this Registration  Statement and
has caused this Registration Statement to be signed on its behalf in the City of
Minneapolis and State of Minnesota, on this 17th day of April, 2000.

                                         ALLIANZ  LIFE
                                         VARIABLE  ACCOUNT  B
                                         (Registrant)


                                         By:  ALLIANZ  LIFE  INSURANCE COMPANY
                                             OF  NORTH  AMERICA
                                                 (Depositor)




                                         By:/s/  MICHAEL T. WESTERMEYER
                                            --------------------------------




                                         ALLIANZ  LIFE  INSURANCE  COMPANY
                                         OF  NORTH  AMERICA
                                          (Depositor)




                                          By:/s/  MICHAEL T. WESTERMEYER
                                             ------------------------------







Pursuant to the  requirements of the Securities Act of 1933,  this  registration
statement has been signed by the following  persons in the capacities and on the
dates indicated.

Signature  and  Title

<TABLE>
<CAPTION>
<S>                      <C>                          <C>
Lowell C. Anderson*      Chairman of the Board        04-17-00
Lowell C. Anderson

Robert W. MacDonald*     Director and                 04-17-00
Robert W. MacDonald      Chief Executive Officer

Margery G. Hughes*       President and                04-17-00
Margery G. Hughes        Chief Administrative Officer

Mark A. Zesbaugh*        Chief Financial Officer      04-17-00
Mark A. Zesbaugh         Senior Vice President

Herbert F. Hansmeyer*    Director                     04-17-00
Herbert F. Hansmeyer

Michael P. Sullivan*     Director                     04-17-00
Michael P. Sullivan

Dr. Gerhard Rupprecht*   Director                     04-17-00
Dr. Gerhard Rupprecht

Rev. Dennis Dease*       Director                     04-17-00
Rev. Dennis Dease

James R. Campbell*       Director                     04-17-00
James R. Campbell

Robert M. Kimmitt*       Director                     04-17-00
Robert M. Kimmitt

</TABLE>


                                         *By    Power  of  Attorney



                                          By:  /s/ MICHAEL T. WESTERMEYER
                                              --------------------------------
                                              Michael T. Westermeyer
                                              Attorney-in-Fact





                                   EXHIBITS

                                      TO

                        POST-EFFECTIVE AMENDMENT NO. 8

                                      TO

                                   FORM N-4

                       ALLIANZ LIFE VARIABLE ACCOUNT B

               ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA



                              INDEX TO EXHIBITS



EXHIBIT
99.B.3.b     General Agency Agreement

99.B9        Opinion  and  Consent  of  Counsel

99.B10       Independent  Auditors'  Consent

99.B13       Calculation  of  Performance  Data

99.B14       Company Organizational Chart