File Nos. 33-76190
                                                                     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.    11/                             (X)

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940           ( )
          Amendment No.    69                                             (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 Immediate Variable Annuity Contracts




                              CROSS REFERENCE SHEET
                             (Required by Rule 495)
<TABLE>

<CAPTION>

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

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


Item 7.   General Description of Registrant,
          Depositor, and Portfolio Companies . . . . . .   The Franklin
                                                           Templeton Valuemark
                                                           Income Plus Immediate
                                                           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 . . . . . . . . . . . . . . .  Not Applicable

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




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

<CAPTION>

Item No.                                                   Location
--------                                                   --------
<S>       <C>                                              <C>
                                 PART B

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

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

Item 17.  General Information and History. . . . . . . .   The 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) INCOME PLUS
                       IMMEDIATE VARIABLE ANNUITY CONTRACT
                                    ISSUED BY
                         ALLIANZ LIFE VARIABLE ACCOUNT B
                                       AND
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
--------------------------------------------------------------------------------



This prospectus  describes the Valuemark Income Plus Immediate  Variable Annuity
Contract  with a Fixed Payment  Option.  The Contract is 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 Payment Option
of  Allianz  Life.   Each  Variable   Option  invests  in  a  Portfolio  of  the
corresponding  fund listed  below.  You can select up to 10  investment  choices
(which includes any of the Variable Options and the Fixed Payment  Option).  The
Fixed  Payment  Option  and  one or  more  of the  Variable  Options  may not be
available in your state.

<TABLE>
VARIABLE OPTIONS:

FRANKLIN TEMPLETON VARIABLE
INSURANCE  PRODUCTS  TRUST+:
Franklin  Global Communications  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 Real Estate Fund*
Franklin  Rising  Dividends  Securities  Fund*
Franklin Small Cap Fund
Franklin Value Securities Fund
Mutual Discovery  Securities Fund
Mutual Shares Securities Fund
Templeton  Asset Strategy Fund*
Templeton  Developing  Markets  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.

 * The fund name changed since the last prospectus update as follows:

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>

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.

Please read this prospectus  before investing and keep it for future  reference.
It contains  important  information  about the Valuemark  Income Plus  Immediate
Variable Annuity Contract with a Fixed Payment Option.


To learn more about the annuity  offered by this  prospectus,  you can receive 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 21 of
this prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains
the  SAI,  material  incorporated  by  reference  and  other  information  about
companies  that file  electronically  with the SEC.  For a free copy of the SAI,
call us at  1-800-542-5427  or write us at: 1750 Hennepin  Avenue,  Minneapolis,
Minnesota 55403-2195.


THE VALUEMARK INCOME PLUS IMMEDIATE 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>


TABLE OF CONTENTS
--------------------------------------------------------------------------------
Index of Terms                                      4

Summary                                             5

Fee Table                                           7

1. The Valuemark Income Plus Immediate
    Variable Annuity Contract                      11


2.Ownership                                        11

    Contract Owner/Annuitant                       11

    Joint Owner/Joint Annuitant                    11

    Beneficiary                                    11

    Assignment                                     11

3. Annuity Payments (The Payout Phase)             12

    Income Date                                    12

    Annuity Payments                               12

    Assumed Investment Return                      12

    Annuity Options                                12

4. Purchase                                        13

    Purchase Payment                               13

    Allocation of Purchase Payment                 13

    Free Look                                      13

    VIP Units                                      14

5.  Investment Options                             14

    Transfers                                      15
      Telephone Transfers                          16

    Voting Privileges                              16

    Substitution                                   16

6.  Expenses                                       16

    Insurance Charges                              16
      Mortality and Expense Risk Charge            16
      Administrative Expense Charge                16

    Commutation Fee                                16

    Premium Taxes                                  17

    Income Taxes                                   17

    Portfolio Expenses                             17

7.  Taxes                                          17

    Annuity Contracts in General                   17

    Qualified and Non-Qualified Contracts          17

    Liquidations - Non-Qualified Contracts         17

    Liquidations - Qualified Contracts             18

    Diversification                                19

8. Access to Your Money                            19

    Suspension of Payments or Transfers            19

9. Performance                                     20

10. Death Benefit                                  20

    Death of Beneficiary                           20

11. Other Information                              20

    Allianz Life                                   20

    The Separate Account                           20

    Distribution                                   20

    Administration                                 21

    Financial Statements                           21

Table of Contents of the Statement of
Additional Information                             21

Appendix A - Condensed Financial
Information                                        22

Appendix B - Illustration of
Annuity Income                                     25

<PAGE>

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

This prospectus is written in plain English.  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

Annuitant                                            11

Annuity Calculation Date                             13

Annuity Options                                      12

Annuity Payments                                     12

Annuity Unit                                         14

Assumed Investment Return (AIR)                      12

Beneficiary                                          11

Contract                                             11

Contract Owner                                       11

Fixed Payment Option                                 11

Income Date                                          12

Joint Annuitant                                      11

Joint Owner                                          11

Non-Qualified                                        17

Payout Phase                                         12

Portfolios                                           14

Purchase Payment                                     13

Qualified                                            17

Tax Deferral                                         17

Total Liquidation Value                              19

Variable Option                                      11

VIP Unit                                             14

<PAGE>


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

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

THE IMMEDIATE VARIABLE ANNUITY CONTRACT:

The annuity  contract  (Contract)  offered by Allianz Life  provides a means for
investing in an immediate variable annuity Contract in both Variable Options and
the Allianz Life Fixed Payment Option (referred to in the Contract as the "Fixed
Account"). In return for your one time payment, the Contract provides for income
to you and another person (if elected) under a payment plan you select.

ANNUITY PAYMENTS:

When you buy the Contract,  you select an Income Date.  You can start to receive
regular  income  from your  annuity by choosing  an Annuity  Option.  Under most
Annuity  Options,  you can choose whether to receive your Annuity  Payments as a
variable payout, a fixed payout, or both. If you choose to have any part of your
Annuity  Payments  come from the  Variable  Options,  the dollar  amount of your
Annuity Payments may go up or down based on the performance of the Portfolios.

PURCHASE:

You can buy the  Contract  with  $35,000 or more under most  circumstances.  You
cannot add to your  Contract  at a later  date  (i.e.,  it is a single  purchase
payment  contract).  Your  investment  representative  can help you complete the
appropriate forms.

INVESTMENT OPTIONS:

You can put your money in the Variable  Options  and/or you can receive  Annuity
Payments from the Allianz Life Fixed Payment Option.  Your income will fluctuate
up or down based on the  Portfolios'  performance.  No minimum payment amount is
guaranteed. You can make transfers between the Variable Options. You cannot make
transfers from the Fixed Payment Option to the Variable Options.

EXPENSES:

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

Allianz Life deducts a mortality  and expense risk charge which is equal,  on an
annual basis, to 1.25% of the average daily value of the Contract  invested in a
Variable  Option.  Allianz Life also deducts an  administrative  expense  charge
which is equal,  on an annual basis,  to 0.15% of the average daily value of the
Contract invested in a Variable Option.

Certain Annuity Options allow liquidations (withdrawals).  If you take money out
of the Contract, Allianz Life may assess a commutation fee which is a percentage
of the amount liquidated (withdrawn).  If you choose Annuity Options 2 or 4, you
may make a partial  liquidation.  A  commutation  fee of 5% in Contract  year 2,
reducing by 1% each year until it is 1% for Contract year 6 and thereafter  will
apply.  If you  choose  Annuity  Option  6,  you  may  make a  full  or  partial
liquidation,  a commutation  fee of 5% in Contract years 1 and 2, reducing by 1%
each year until it is 1% for Contract year 6 and thereafter will apply.  (If you
bought your  Contract  before May 1, 1998,  the  commutation  fee under  Annuity
Option 6 is 1% in the first Contract year.)

You currently can make as many transfers as you want each year. Allianz Life may
limit  this in the  future.  However,  you will  always  be  allowed  at least 6
transfers each year.

There are also annual Portfolio  operating  expenses,  which vary depending upon
the Variable  Options you select.  In 1999,  these expenses ranged from 0.49% to
1.56% of the average daily value of the Portfolios.

Allianz Life may assess a state premium tax charge, which ranges from 0% to 3.5%
of your Purchase Payment (depending upon the state).

TAXES:

Your  earnings  are not  taxed  until  you take them  out.  If the  Contract  is
tax-qualified,  the  entire  payment  may  be  taxable.  If you  make a  partial
liquidation,  the  earnings  come out first and are taxed as income.  If you are
younger than 591/2 when you take the money out, you may be charged a 10% federal
tax penalty.

ACCESS TO YOUR MONEY:

Generally,  you may not make  liquidations  (withdrawals)  from  your  Contract.
However, under certain circumstances, you may make one liquidation each Contract
year  after  the  Income  Date  if  you  selected  Annuity  Options  2,  4 or 6.
Liquidations made after the Income Date may be subject to a commutation fee. You
may also have to pay income tax and a tax penalty on any money you take out.

DEATH BENEFIT:

If you die before the Income Date and there is no Joint Annuitant,  the Contract
will be treated as if it had never been  issued.  We will return  your  Purchase
Payment  to your  estate.  If you have  chosen an  Annuity  Option  with a Joint
Annuitant and either you or the Joint Annuitant dies before the Income Date, the
Annuity Option will be changed to Option 2 (with 10 years of payments guaranteed
or 5 years of payments guaranteed if the survivor's life expectancy is less than
10 years).

INQUIRIES:

If you have  questions  about your  Contract  or need more  information,  please
contact us at:

   VIP Service Center
   P.O. Box 30343
   Tampa, Florida 33630-3343
   1-800-774-5001

BEGINNING JUNE 1, 2000, ALL QUESTIONS  ABOUT YOUR CONTRACT SHOULD BE DIRECTED TO
US AT:

   USAllianz Service Center
   C/O PNC Bank
   P.O. Box 820497
   Philadelphia, Pennsylvania 19182-0497
   1-800-336-0320

<PAGE>

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


The purpose of this Fee Table is to help you  understand  the costs of investing
in the  Contract.  It reflects  expenses of the Separate  Account as well as the
Portfolios.


We have provided "Illustrations of Annuity Income" in Appendix B to show you the
effects of the charges, expenses and investment performance on annuity income.

CONTRACT OWNER TRANSACTION FEES


Commutation Fee*
(as a percentage of of the amount taken out [liquidated])


                            Contract Year    Charge
                            -----------------------

                                  1             5%
                                  2             5%
                                  3             4%
                                  4             3%
                                  5           1.5%
                          6 (& thereafter)      0%

*After the first Contract year, you may make one liquidation  from your Contract
  each year if you have  selected  Annuity  Options 2 or 4. If you have selected
  Annuity  Option 6, you may make a liquidation  once each year beginning in the
  first year.  If you have  chosen  Annuity  Option 6 and bought  your  Contract
  before May 1, 1998, the commutation fee is 1% of the amount  liquidated in the
  first Contract year.



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

Mortality and Expense Risk Charge                    1.25%

Administrative Expense Charge                         .15%
                                                     -----
Total Separate Account Annual Expenses               1.40%

<PAGE>
<TABLE>
<CAPTION>

FUND ANNUAL EXPENSES
(as a percentage of the Portfolios' average daily net assets). See the accompanying fund prospectus for more
information.


                                                          MANAGEMENT
                                                        AND PORTFOLIO              OTHER         TOTAL ANNUAL
                                                     ADMINISTRATION FEES1        EXPENSES          EXPENSES
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                      <C>             <C>
 Franklin Global Communications Securities Fund             .48%                    .03%              .51%

 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 Fund2                 .75%                    .02%              .77%

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

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

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

 Franklin Small Cap Fund3                                   .55%                    .27%              .82%

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

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

 Mutual Shares Securities Fund2                             .60%                    .19%              .79%

 Templeton Asset Strategy Fund3                             .60%                    .18%              .78%

 Templeton Developing Markets Securities Fund3             1.25%                    .31%             1.56%

 Templeton Growth Securities Fund2                          .83%                    .05%              .88%

 Templeton International Securities Fund3                   .69%                    .19%              .88%

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

 Templeton Pacific Growth Securities Fund                  1.00%                    .08%             1.08%
-------------------------------------------------------------------------------------------------------------
<FN>
1.The Portfolio  Administration  Fee is a direct  expense for 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 Securities Fund, the Templeton  International
  Securities Fund, and the Templeton International Smaller Companies Fund. Other
  Portfolios of Franklin  Templeton  Variable  Insurance  Products Trust pay for
  similar  services  indirectly  through the  Management  Fee.  See the Franklin
  Templeton Variable Insurance Products Trust prospectus for further information
  regarding these fees.

2.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  Management 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;  and 0.80%,  0.05%,  and 0.85%  respectively  for the  Templeton  Growth
  Securities Fund.

3.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,  effective 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.
</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 examples  assume you invested  $1,000 with annual  payments based on a 15
   year  period  certain  payout  under  Annuity  Option  6  with  a 5%  Assumed
   Investment Return.


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

o  For additional  information, see Section 5 - "Expenses" and the  accompanying
   portfolio prospectus.


You would pay the  following  expenses  on a $1,000  investment,  assuming  a 5%
annual return on your money (compounded annually) if you surrender your Contract
under Annuity Option 6 at the end of each time period:

                                                     1 YEAR         3 YEARS        5 YEARS       10 YEARS
---------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>          <C>
Franklin Global Communications Securities Fund         $64            $82             $90          $125

Franklin Growth and Income Securities Fund             $64            $81             $89          $124

Franklin High Income Fund                              $65            $82             $91          $126

Franklin Income Securities Fund                        $64            $81             $89          $124

Franklin Large Cap Growth Securities Fund              $67            $88             $99          $140

Franklin Money Market Fund                             $65            $82             $90          $126

Franklin Real Estate Fund                              $65            $83             $92          $129

Franklin Rising Dividends Securities Fund              $67            $87             $98          $139

Franklin Small Cap Fund                                $67            $89            $101          $143

Franklin Value Securities Fund                         $67            $89            $101          $142

Mutual Discovery Securities Fund                       $69            $94            $108          $153

Mutual Shares Securities Fund                          $67            $88            $100          $141

Templeton Asset Strategy Fund                          $67            $88            $100          $140

Templeton Developing Markets Securities Fund           $73           $106            $127          $182

Templeton Growth Securities Fund                       $68            $90            $103          $146

Templeton International Securities Fund                $68            $90            $103          $146

Templeton International Smaller Companies Fund         $70            $96            $112          $159

Templeton Pacific Growth Securities Fund               $69            $95            $111          $157
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

You would pay the  following  expenses  on a $1,000  investment,  assuming  a 5%
annual  return on your  money  (compounded  annually)  if your  Contract  is not
surrendered:

                                                    1 YEAR         3 YEARS         5 YEARS       10 YEARS
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>             <C>           <C>
Franklin Global Communications Securities Fund        $18            $49             $76           $121

Franklin Growth and Income Securities Fund            $17            $49             $75           $120

Franklin High Income Fund                             $18            $50             $77           $123

Franklin Income Securities Fund                       $18            $49             $76           $121

Franklin Large Cap Growth Securities Fund             $20            $56             $86           $136

Franklin Money Market Fund                            $18            $50             $77           $122

Franklin Real Estate Fund                             $18            $51             $79           $125

Franklin Rising Dividends Securities Fund             $20            $55             $85           $135

Franklin Small Cap Fund                               $20            $57             $88           $139

Franklin Value Securities Fund                        $20            $57             $87           $139

Mutual Discovery Securities Fund                      $22            $62             $95           $150

Mutual Shares Securities Fund                         $20            $56             $87           $137

Templeton Asset Strategy Fund                         $20            $56             $86           $137

Templeton Developing Markets Securities Fund          $27            $75            $114           $179

Templeton Growth Securities Fund                      $21            $58             $90           $143

Templeton International Securities Fund               $21            $58             $90           $143

Templeton International Smaller Companies Fund        $23            $64             $99           $155

Templeton Pacific Growth Securities Fund              $23            $63             $97           $154

See Appendix A - Condensed Financial Information for unit values.

</TABLE>

<PAGE>

1. THE VALUEMARK INCOME PLUS
IMMEDIATE VARIABLE ANNUITY CONTRACT
--------------------------------------------------------------------------------


This prospectus describes an immediate variable annuity contract (Contract) with
a Fixed Payment Option 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 no later than 60 days after we
allocate your Purchase Payment. This is called the Income Date.

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.

The  Contract  is called a variable  annuity  because  you can  choose  among 18
Variable Options, and depending upon market conditions,  your payments can go up
or down based on the  Portfolios'  investment  performance.  The  Portfolios are
designed to offer a better return than the Fixed Payment Option.  However,  this
is not  guaranteed.  Your  payments  may go up or down  based on the  investment
performance of the Portfolio(s) you select.


The Contract also contains a Fixed Payment  Option  (referred to in the Contract
as the "Fixed  Account").  The Fixed Payment Option offers an interest rate that
is guaranteed by Allianz  Life.  If you select the Fixed  Payment  Option,  your
money will be placed with the other general  assets of Allianz Life. Any portion
of  your  Purchase  Payment  allocated  to the  Fixed  Payment  Option  will  be
temporarily  allocated to the Franklin  Money Market Fund on the day we allocate
your Purchase  Payment.  It will then be allocated to the Fixed  Payment  Option
when you begin receiving Annuity Payments from your Contract.


We will not make any changes to your Contract without your permission  except as
may be required by law. We may, however,  add endorsements to your Contract from
time to time.


2. OWNERSHIP
--------------------------------------------------------------------------------

CONTRACT OWNER/ANNUITANT

You are the Contract Owner and the Annuitant.  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.

An Annuitant is the natural person on whose life we base Annuity Payments.

JOINT OWNER/JOINT ANNUITANT

If there is more than one Contract  Owner,  each Contract Owner is a Joint Owner
of the  Contract.  Joint  Owners  have  equal  ownership  rights.  You both must
authorize those ownership rights unless  otherwise  allowed by Allianz Life. You
can name a Joint  Annuitant.  Each Joint  Owner must be either an  Annuitant  or
Joint Annuitant.

IF YOU DIE BEFORE THE INCOME DATE AND THERE IS NO JOINT ANNUITANT, WE WILL TREAT
THE CONTRACT AS IF WE NEVER  ISSUED IT AND WILL RETURN THE  PURCHASE  PAYMENT TO
YOUR ESTATE.

If you die while the Contract is in force, the Joint Annuitant (if not already a
Joint Owner) will become the  Contract  Owner.  On or after the Income Date,  if
there  is  no  Joint   Annuitant  or  when  the  Joint   Annuitant   dies,   the
Beneficiary(ies) will be the Owner(s) of their respective shares.

BENEFICIARY

The  Beneficiary  is the  person(s)  or  entity  you name to  receive  any death
benefit. You can also name a contingent Beneficiary.  The contingent Beneficiary
will receive any death benefit if the  Beneficiary is not alive when you and any
Joint Annuitant die. 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  of (assign)  the  Contract at any time during your
lifetime.  We will not be liable  for any  payment we make,  or other  action we
take, in accordance  with the Contract  before we receive  written notice of the
assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.

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


3. ANNUITY PAYMENTS
(THE PAYOUT PHASE)
--------------------------------------------------------------------------------

INCOME DATE


You can receive  regular income  payments under your Contract as long as you and
any Joint  Annuitant  are alive on the Income  Date.  We call the date that your
Annuity  Payments  begin the Income Date.  We ask you to choose your Income Date
when you purchase the Contract.  Your Income Date must be the first or fifteenth
day of a  calendar  month  and must not be  later  than 60 days  from the day we
allocate your Purchase Payment.


ANNUITY PAYMENTS

Under Annuity  Options 1-5, you may elect to receive your Annuity  Payments as a
variable payout, a fixed payout,  or a combination of both. Under Annuity Option
6, Annuity Payments will come from the Variable Options only (variable  payout).
If you choose a Fixed Payment  Option,  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 choose to receive  variable  payments,  we  determine  the amount of your
first variable payment based on:

1) your  Contract  value on the Annuity  Calculation  Date (no more than 10 days
   before the first payment),

2) your age and the age of any Joint Annuitant on the Annuity  Calculation  Date
   (except in Option 6);

3) the Assumed Investment Return (AIR), a benchmark you select, and

4) the Annuity Option you select.

We credit your  Contract  with a fixed number of Annuity Units for each Variable
Option you select.  We do this by allocating  the first payment amount among the
Variable  Options  according  to your  instructions,  and  dividing  the  amount
allocated  to each  Variable  Option by the  Annuity  Unit value on the  Annuity
Calculation  Date. The number of Annuity Units in your Contract remains the same
unless you make a liquidation or transfer.

After the first payment,  your payments will change based on the change in value
of the Annuity Units credited to your  Contract.  The amount of each change will
depend on how the Annuity Units in your Contract perform as compared to your AIR
benchmark.

You can  choose  the  frequency  of  Annuity  Payments  (for  example,  monthly,
quarterly, semi-annually or annually).

The SAI contains a discussion of how we calculate Annuity Unit values.

ASSUMED INVESTMENT RETURN

We base your Annuity Payments on the Assumed  Investment  Return. You can choose
either a 7%, 5% or 3% per year AIR.  The 7% AIR is not  available  in all states
(check with your  registered  representative  for  availability).  If you do not
choose  one,  the 5% AIR will  automatically  apply.  If the actual  performance
exceeds the AIR you chose,  your Annuity Payments will increase.  Similarly,  if
the  actual  rate is less than the AIR you chose,  your  Annuity  Payments  will
decrease.  If you choose a higher  AIR,  the  initial  amount of income  will be
higher,  but income will increase more slowly during periods of good  investment
performance and decrease faster during periods of poor investment performance.

ANNUITY OPTIONS

You can choose among income  plans.  We call those Annuity  Options.  Except for
Annuity Option 6, once you select an Annuity Option you may not change it.

You can choose one of the  following  Annuity  Options.  You can also choose any
other Annuity Option you want as long as Allianz Life agrees to provide it.

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

OPTION 2. LIFE ANNUITY WITH 5, 10, 15 OR 20 YEAR PAYMENTS GUARANTEED. Under this
option,  we will make  periodic  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 the  Beneficiary  for the
rest of the  guaranteed  period.  If the  Beneficiary  does not want to  receive
Annuity Payments after the Annuitant's  death, he or she can ask us for a single
lump sum. The amount of the lump sum payment is described in your Contract.

OPTION 3.  JOINT AND LAST  SURVIVOR  ANNUITY.  Under this  option,  we will make
periodic  Annuity  Payments  during  the  joint  lifetime  of you and the  Joint
Annuitant. When you die, if the Joint Annuitant is still alive, we will continue
to make Annuity  Payments during the Joint  Annuitant's  life. The amount of the
Annuity  Payments we will make to the Joint  Annuitant can be equal to 100%, 75%
or 50% of the amount  that was being paid when both you and the Joint  Annuitant
were alive.  You choose this  percentage  when you apply for the  Contract.  The
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 periodic Annuity Payments during the
joint  lifetime  of you and the  Joint  Annuitant.  When you die,  if the  Joint
Annuitant is still alive,  we will continue to make Annuity  Payments during the
life of the  surviving  Annuitant.  The payments will be 100% of the amount that
was being paid when you were both 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 the  Beneficiary  for  the  rest of the
guaranteed period. If the Beneficiary does not want to receive Annuity Payments,
he or she can ask us for a single  lump sum.  The amount of the lump sum payment
is described in your Contract.


OPTION 5. REFUND LIFE ANNUITY.  Under this option, we will make periodic Annuity
Payments during your lifetime.  The last Annuity Payment will be made before you
die. If the value of the Annuity Payments made is less than the value applied to
the Annuity Option,  then the Beneficiary  will receive a refund as set forth in
the Contract.


OPTION 6. SPECIFIED  PERIOD  CERTAIN  ANNUITY.  Under this option,  we will make
periodic Annuity Payments for a specified period that you choose. The period can
be from 5 to 30 years (you must use whole numbers of years). If at the time both
you and any Joint Annuitant die, we have made Annuity Payments for less than the
selected  guaranteed  period,  we will continue to make Annuity  Payments to the
Beneficiary  for the  rest of the  guaranteed  period.  This  option  may not be
available in all states. This option can only be elected as a variable payout.

After the first  Contract  anniversary,  you can  exchange  an Annuity  Option 6
payout for a payout  under  Annuity  Options  1-5.  You can do this if the Total
Liquidation Value of your Contract is at least $25,000.  Furthermore, if you own
a  Non-Qualified  Contract  you must be 591/2 or older.  If you own a  Qualified
Contract you may make the exchange after the later of your reaching age 591/2 or
5 years  from the date of the  first  Annuity  Payment  and prior to the year in
which  you  reach  age  701/2.  A new  Contract  will be  issued to you for your
existing  Contract.  You must return your existing  Contract to us. The Contract
Owner/Annuitant  and  Joint  Annuitant  (if  any)  must be the same  under  both
Contracts.

4. PURCHASE
--------------------------------------------------------------------------------

PURCHASE PAYMENT


The Purchase Payment is the money you put into the Contract. The minimum payment
Allianz Life will accept is $35,000.  The Contract is a single payment Contract.
This means that you cannot add money to your  Contract  after you buy it. If you
buy more than one Contract, the Purchase Payment for each Contract does not need
to be $35,000 if the average  payment for each Contract is $35,000 or more. When
you make your  Purchase  Payment,  we will deduct any premium taxes that you owe
before we allocate it to the Variable Options.


This product is not designed for market timers.

ALLOCATION OF PURCHASE PAYMENT


When you purchase a Contract,  we will allocate your Purchase  Payment to one or
more of the Variable  Options you have selected.  If you want any portion of the
Purchase  Payment  to  be  allocated  to  the  Fixed  Payment  Option,  we  will
temporarily  allocate it to the Franklin  Money Market Fund. It will be moved to
the Fixed  Payment  Option on the day we calculate  your first  Annuity  Payment
(Annuity Calculation Date). The Annuity Calculation Date will be no more than 10
business  days before the Income Date.  We ask that you  allocate  your money in
whole percentages. Each allocation must be at least 10%.

Currently,  you may  invest  in 10  investment  choices  at any one time  (which
includes  the Variable  Options and the Fixed  Payment  Option).  We may, in the
future,  limit the number of Variable Options that you may invest in at one time
(except in Texas).


Once we receive your  Purchase  Payment and the necessary  information,  we will
issue your Contract and allocate your 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.  Our business day closes when the New York Stock  Exchange  closes,
which is usually at 4:00 p.m. Eastern Time.

FREE LOOK


If you change your mind about owning the  Contract,  you can cancel it within 10
days after receiving it (or the period required in your state). You will receive
back the value of your  Contract on the day we receive  your  request,  less any
Annuity  Payments paid in states where permitted.  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 the period  required in your state).  If that is the case,  we
reserve the right to allocate your 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 Option(s) you have selected.


VIP 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  prior to the
Annuity  Calculation Date, we use a measurement called a VIP Unit (which is like
a share of a mutual fund). On and after the Annuity Calculation Date, we call it
an Annuity Unit.


Every business day we determine the value of a VIP Unit for each Variable Option
by  multiplying  the VIP 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 a VIP Unit may go up or down from day to day.

When you make the Purchase Payment,  we credit your Contract with VIP Units. The
number of VIP 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 VIP Unit.

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

EXAMPLE:


On Monday we receive your Purchase Payment of $35,000. 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 Tuesday, we determine that the value of a VIP Unit
based on an  investment  in the Franklin  Growth and Income  Securities  Fund is
$12.50.  We then divide  $35,000 by $12.50 and credit  your  Contract on Tuesday
night with 2800 VIP Units.  (This example  assumes there are no premium taxes in
your state.)



5. INVESTMENT OPTIONS
--------------------------------------------------------------------------------


The Contract  offers  Variable  Options,  which invest in Portfolios of Franklin
Templeton  Variable  Insurance  Products Trust. The Contract also offers a Fixed
Payment  Option of Allianz Life.  Additional  Portfolios may be available in the
future.

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

Franklin  Templeton  Variable  Insurance  Products  Trust  is  the  mutual  fund
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 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:  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  the  same
investment advisers manage. Although the objectives and policies may be similar,
the investment results of the Portfolios may be higher or lower than the results
of such other mutual funds. The investment  advisers cannot guarantee,  and make
no  representation,  that  the  investment  results  of  similar  funds  will be
comparable even though the Portfolios have the same investment advisers.

A Portfolio's  performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments,  non-investment
grade  debt  securities,  initial  public  offerings  (IPOs) or  companies  with
relatively small market  capitalizations.  IPOs and other investment  techniques
may have a magnified  performance impact on a Portfolio with a small asset base.
A Portfolio may not experience similar performance as its assets grow.
<TABLE>
<CAPTION>

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

AVAILABLE PORTFOLIOS                                          INVESTMENT ADVISERS
------------------------------------------------------------------------------------------------
<S>                                                           <C>
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST:

Franklin Global Communications 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 Real Estate Fund*                                    Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund*                    Franklin Advisory Services, LLC
Franklin Small Cap Fund                                       Franklin Advisers, Inc.
Franklin Value Securities Fund                                Franklin Advisory Services, LLC
Mutual Discovery Securities Fund (capital appreciation)       Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund (capital appreciation with
  income as a secondary goal)                                 Franklin Mutual Advisers, LLC
Templeton Asset Strategy Fund*                                Templeton Investment Counsel, Inc.
Templeton Developing Markets Securities Fund*                 Templeton Asset Management Ltd.
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.

<FN>
 * The fund name changed  since the last  prospectus  update as of the effective
date listed below:

CURRENT NAME                                           PREVIOUS NAME                                  EFFECTIVE DATE
--------------------------------------------------------------------------------------------------------------------
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
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
</FN>
</TABLE>

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.  You cannot make  transfers
from the Fixed Payment  Option to the Variable  Options.  Allianz Life currently
allow you to make as many  transfers as you want each year. We may limit this in
the future.  However, you will always be allowed at least 6 transfers each year.
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 may reject any  specific  Purchase  Payment
allocation or transfer  request from any person,  if in the Portfolio  managers'
judgment,  a Portfolio would be unable to invest  effectively in accordance with
its investment objectives and policies, or if the Portfolio would be potentially
adversely affected.


The following applies to any transfer:

1. You cannot make transfers during the free look period.

2. Your request for a transfer must clearly state which Variable  Options or the
   Fixed Payment Option is involved in the transfer.

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

4. You cannot make a transfer if it would cause any Variable Option or the Fixed
   Payment Option to provide less than 10% of the benefits under your Contract.

5. You can make at least one allocation to the Fixed Payment  Option.  Both your
   initial allocation to the Fixed Payment Option and each transfer to the Fixed
   Payment Option will be treated as an allocation.

TELEPHONE TRANSFERS
You can make transfers by telephone.  We may allow you to authorize someone else
to make  transfers by telephone on your behalf.  If you own the Contract  with a
Joint  Owner,  we will  accept  instructions  from  either one of you unless you
instruct  us  otherwise.  We 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. We tape record all telephone instructions.

VOTING PRIVILEGES

We are the  legal  owner of the  Portfolio  shares.  However,  when a  Portfolio
solicits  proxies in  conjunction  with a shareholder  vote,  which affects your
investment, we will obtain from you and other 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 we own on our own behalf.  If we determine that we are 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 will 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.



6. 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, we make a deduction for insurance  charges.  We do this as part of our
calculation of the value of the VIP Units and the Annuity  Units.  The insurance
charge has two parts:  1) the  mortality  and expense  risk  charge,  and 2) the
administrative expense charge.


MORTALITY AND EXPENSE RISK CHARGE.  This 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,
certain  expenses  related to the  Contract,  and for assuming the risk (expense
risk) that the current  charges will be  insufficient in the future to cover the
cost of administering the Contract).


ADMINISTRATIVE EXPENSE 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  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.


COMMUTATION FEE

Under  certain  circumstances,  you can  liquidate  (withdraw)  all or part of a
Variable  Option of the Contract.  When you make a  liquidation,  the amount you
receive  will be  reduced  by the  commutation  fee.  The  commutation  fee is a
percentage of the amount withdrawn. The commutation fee is equal to:

            CONTRACT YEAR        CHARGE
          -------------------------------
                  1                5%
                  2                5%
                  3                4%
                  4                3%
                  5               1.5%
          6 (& thereafter)         0%

After the first Contract year, you may make one  liquidation  from your Contract
each year if you have  selected  Annuity  Options  2 or 4. If you have  selected
Annuity  Option 6, you may make a  liquidation  once each year  beginning in the
first year.  If you have chosen  Annuity  Option 6 and you bought your  Contract
before May 1,  1998,  the  commutation  fee is 1% of the  amount  liquidated  in
Contract year 1.

PREMIUM TAXES

Some  states  and other  governmental  entities  (e.g.,  municipalities)  charge
premium  taxes or similar  taxes.  We are  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.  Premium taxes  generally range from 0% to 3.5% of the Purchase
Payment, depending on the state. For information regarding premium taxes in your
state, contact your agent or our VIP Service Center.

INCOME TAXES

We reserve the right to deduct from the  Contract  for any income taxes which we
may  incur  because  of the  Contract.  Currently,  we are 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 prospectus.



7. 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 to any  individual.
You should  consult your own tax adviser about your own  circumstances.  Allianz
Life has  included in the  Statement of  Additional  Information  an  additional
discussion regarding taxes.

ANNUITY CONTRACTS IN GENERAL

Annuity  contracts  are a means of setting  aside money for future needs and for
providing a series of  periodic  payments  for life or a fixed  number of years.
Congress recognized how important saving for retirement was and provided special
rules in the Internal Revenue Code (Code) for annuities.


Simply stated, these rules provide that you will not be taxed on the 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 as to how you will be
taxed  depending  on how you take the  money  out and the  type of  Contract  --
Qualified or Non-Qualified (see following sections).




QUALIFIED AND NON-QUALIFIED CONTRACTS

If  you  purchase  the  Contract  as an  individual  and  not  as an  individual
retirement annuity, your Contract is referred to as a Non-Qualified Contract.

If you purchase the Contract as an individual  retirement annuity, your Contract
is referred to as a 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.


LIQUIDATIONS-- NON-QUALIFIED CONTRACTS


You, as the Owner,  will not be taxed on increases in the value of your Contract
until a  distribution  occurs -- either as a surrender  or as Annuity  Payments.
When you make a surrender you are taxed on the amount of the surrender from your
Contract,  that is earnings.  For Annuity  Payments,  different  rules apply.  A
portion of each Annuity  Payment is treated as a partial return of your Purchase
Payment 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 Payment are fully includible in income.

If the value of your Contract exceeds your Purchase Payment, any surrenders will
be included in taxable income to the extent of earnings in your Contract.


The Code also provides that any amount received under an annuity 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 distributions 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 in a series of  substantially  equal  payments  made  annually  (or more
   frequently) under a lifetime annuity;

5) paid as annuity payments under an immediate annuity; or

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

The Code does not specifically address withdrawals (liquidations) from immediate
annuity  contracts.  A Private  Letter  Ruling  issued by the  Internal  Revenue
Service  concludes  that the  ability  to make  withdrawals  does not  prevent a
contract from qualifying as an immediate annuity.  However,  the Ruling does not
address  the issue of  whether a  withdrawal  would  affect  the  favorable  tax
treatment of the Annuity Payments made before and after the withdrawal under the
requirement that all immediate annuity payment must be substantially  equal. The
loss of  favorable  tax  treatment  would mean that the  income  portion of each
Annuity Payment received prior to your attaining age 591/2 would be subject to a
10% penalty tax unless  another  exception  to the  penalty tax  applies.  While
Allianz Life currently  believes that such withdrawals will not adversely affect
the  favorable  tax  treatment of Annuity  Payments  received  before or after a
withdrawal  and  Allianz  Life  intends to perform its tax  reporting  functions
accordingly,  there can be no assurance that the Internal  Revenue  Service will
not take a contrary  position.  You should obtain  competent tax advice prior to
making a partial or total liquidation (withdrawal).

LIQUIDATIONS-- QUALIFIED CONTRACTS

If you make a  withdrawal  under an IRA  Contract,  a portion  of the  amount is
taxable,  generally  based on the ratio of your cost basis to the total  accrued
benefit under the contract.  Often in the case of IRA's,  there is no cost basis
which  results in the full amount of the  withdrawal  being  included in taxable
income.  The Code  imposes  a 10%  penalty  tax on the  taxable  portion  of any
distributions  from qualified  retirement  plans,  including IRA Contracts.  The
penalty tax will not apply to the following distributions:

(a) distributions made on or after the date you reach age 591/2;

(b) distributions   following  your  death  or  disability   (for  this  purpose
    disability is as defined in Section 72(m)(7) of the Code);

(c) distributions  that are part of a series  of  substantially  equal  periodic
    payments  made at least  yearly  for your life (or life  expectancy)  or the
    joint  lives  (or  joint  life  expectancies)  of you  and  your  designated
    Beneficiary;

(d) distributions made to you to the extent such distributions do not exceed the
    amount  allowable  as a deduction  under Code  Section 213 for amounts  paid
    during the taxable year for medical care;


(e) distributions made on account of an IRS levy upon the Qualified Contract;


(f) distributions for the purchase of medical insurance (as described in Section
    213(d)(1)(D) of the Code) for you and your spouse and dependents if you have
    received  unemployment  compensation  for at least 12 weeks (this  exception
    will no longer apply after you have been re-employed for at least 60 days);

(g) distributions  made to you to the extent  such  distributions  do not exceed
    your qualified higher education  expenses (as defined in Section 72(t)(7) of
    the Code) for the taxable year; and

(h) distributions  which are qualified first time home buyer  distributions  (as
    defined in Section 72(t)(8) of the Code).

With  respect  to (c)  above,  if the  series of  substantially  equal  periodic
payments is  modified  before the later of your  attaining  age 591/2 or 5 years
from the date of the  first  Annuity  Payment,  then the tax for the year of the
modification  is  increased  by the  penalty  tax that would  have been  imposed
without the  exception,  plus  interest for the tax years in which the exception
was used. A partial  liquidation may result in the modification of the series of
Annuity  Payments made after such  liquidation and therefore could result in the
imposition  of the 10%  penalty  tax and  interest  for the period as  described
above.  You should obtain  competent tax advice before you make any liquidations
from an IRA  Contract.  Any amounts  distributed  will only be paid to you, your
Annuitant  or your  Beneficiary.  Allianz  Life  will not  transfer  or pay such
amounts to another IRA or tax qualified plan.

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  of  Franklin
Templeton  Variable  Insurance  Products Trust 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 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.


8. ACCESS TO YOUR MONEY
--------------------------------------------------------------------------------

If  you  have  chosen  Annuity  Options  2,  4 or 6 you  may  make  liquidations
(withdrawals)  from your  Contract  under the  certain  circumstances  described
below.

Annuity  Options  2 and 4: If you  have  selected  Annuity  Option  2 or 4 and a
portion of your  payments come from the Variable  Options,  you may make partial
liquidations  (withdrawals)  from your Contract.  You can only make liquidations
after the first Contract year. During the lifetime of the Annuitant(s) and while
the  number  of  Annuity  Payments  made is less than the  guaranteed  number of
payments  elected under the Annuity Option,  you can request a liquidation  once
each year. You can liquidate a portion of the Total  Liquidation  Value.  (Total
Liquidation  Value is referred to as "Total  Withdrawal  Value" in your Contract
and  endorsement.)  The Total Liquidation Value is equal to the present value of
the remaining guaranteed Annuity Payments (allocated to the Variable Options) to
the end of the period certain  commuted at the AIR, less a commutation  fee. The
total  amount you can  liquidate  is  guaranteed  to not be less than 25% of the
Total  Liquidation  Value.  Currently,  you may liquidate up to 75% of the Total
Liquidation  Value.  Allianz  Life may change  this  amount in the  future.  The
minimum  amount  you can  liquidate  is the  lesser of  $2,500 or the  remaining
portion of the Total  Liquidation  Value  available  to be  liquidated.  Partial
liquidations may not be available in your state.

After a partial  liquidation,  the subsequent monthly Annuity Payment during the
guaranteed  period  certain  will be  reduced  by the  percentage  of the  Total
Liquidation Value liquidated, including the commutation fee.

Annuity Option 6: If you have selected  Annuity Option 6, you can currently make
one liquidation each year. You may liquidate the Total Liquidation Value of your
Contract.  The  Total  Liquidation  Value is equal to the  present  value of the
remaining  Annuity Payments to the end of the period certain commuted at the AIR
less a commutation fee. The amount of the commutation fee depends on whether you
bought your Contract before May 1, 1998. Allianz Life may restrict the amount of
a partial  liquidation  to a  minimum  of  $2,500.  We may  require  a  complete
liquidation of your Contract if the remaining Total  Liquidation Value after you
request a partial  liquidation  would be less than  $35,000.  Allianz  Life will
require you to return your Contract before we pay the entire commuted value.

We will process partial  liquidations on the next Annuity Calculation Date after
your written request for a liquidation.

INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY LIQUIDATION YOU MAKE.

SUSPENSION OF PAYMENTS OR TRANSFERS

We may be required to suspend or postpone payments for liquidations 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 we 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.


9. PERFORMANCE
--------------------------------------------------------------------------------


We  periodically  advertise  performance.   We  will  calculate  performance  by
determining  the  percentage  change in the value of a VIP Unit by dividing  the
increase  (decrease) for that unit by the value of the VIP Unit at the beginning
of the period.  This performance  number reflects the deduction of the insurance
charges and the expenses of the  Portfolios.  We 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
prospectus for more information.


We may in the future also advertise yield information. If we do, we will provide
you  with  information   regarding  how  yield  is  calculated.   More  detailed
information regarding how performance is calculated is found in the SAI.

We base any performance advertised on historical data. This performance does not
guarantee future results of the Portfolios.


10. DEATH BENEFIT
--------------------------------------------------------------------------------

If you die before the Income Date and there is no Joint Annuitant, we will treat
your Contract as if we had never issued it. We will return the Purchase  Payment
to your estate.

If you have chosen either  Annuity  Option 3, 4 or 6 with a Joint  Annuitant and
either you or the Joint  Annuitant  dies  before the Income  Date,  the  Annuity
Option will be changed to Option 2 with 10 years of payments guaranteed.  If the
survivor's  life  expectancy  is less than 10 years,  the  period of  guaranteed
payments will be 5 years instead.

If you or the  Joint  Annuitant  dies on or after  the  Income  Date,  the death
benefit, if any, will be paid under the Annuity Option selected. We will require
proof of death.  We may delay paying the death  benefit until we receive any tax
consents and/or forms from a state.


DEATH OF BENEFICIARY

Unless you tell us  otherwise,  any amount  payable after your death and that of
any Joint Annuitant will be payable:

1. in equal shares to the surviving Beneficiaries;

2. if no  Beneficiary  is living,  payment  will be made in equal  shares to any
   surviving contingent Beneficiaries;

3. if there is no surviving Beneficiary or contingent Beneficiary,  payment will
   be made to your estate.



11. 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).  The Separate  Account holds the assets that underlie the
Contracts  (except assets allocated to the Fixed Payment  Option).  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  at the time of purchase up to 4.0% of
the Purchase Payment.  Broker-dealers  are also paid a trail commission of up to
 .40% of the  remaining  payout  value that  remains  under your  Annuity  Option
invested in a Portfolio  (trail  commissions are not paid on amounts invested in
the  Fixed  Payment  Option.).  We (by  agreement  with the  broker-dealer)  pay
commissions as a combination of a certain  percentage amount at the time of sale
and a trail  commission  (which  when  combined  could  be  more  than 4% of the
Purchase Payment).  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).

ADMINISTRATION

We have hired Templeton Funds Annuity Company (in California,  doing business as
"Templeton  Funds Life & Annuity  Insurance  Company")  (VIP Service  Center) to
perform   certain   administrative   services   regarding  the  Contracts.   The
administrative  services  include  issuance of the Contracts and  maintenance of
Contract  Owner's  records.  Templeton  Funds Annuity Company has entered into a
reinsurance agreement with us regarding certain risks under the Contracts.


Effective June 1, 2000,  Delaware Valley Financial  Services,  Inc. (DVFS),  300
Berwyn  Park,   Berwyn,   Pennsylvania,   will  take  over  performing   certain
administrative services regarding the Contracts.


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
--------------------------------------------------------------------------------


Company                                               2


Experts                                               2

Legal Opinions                                        2

Distributor                                           2

Calculation of Performance Data                       2

Federal Tax Status                                    5

Annuity Provisions                                    9

Financial Statements                                 10

<PAGE>
<TABLE>
<CAPTION>

APPENDIX A
--------------------------------------------------------------------------------

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 gives per unit information 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)       FRANKLIN   FRANKLIN                           FRANKLIN
                                      GLOBAL    GROWTH &   FRANKLIN    FRANKLIN    LARGE CAP   FRANKLIN
                                       COMM      INCOME      HIGH       INCOME      GROWTH      MONEY     FRANKLIN
VARIABLE OPTIONS:                   SECURITIES SECURITIES   INCOME    SECURITIES  SECURITIES    MARKET   REAL ESTATE
---------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>         <C>         <C>         <C>         <C>        <C>

YEAR ENDED DEC. 31, 1999
Unit value at beginning of period    $28.308    $26.226    $21.208     $25.122     $15.574     $14.386    $23.107
Unit value at end of period          $38.917    $26.147    $20.900     $24.323     $20.218     $14.860    $21.386
Number of units outstanding
  at end of period                    21,687     27,634      9,493      24,929      10,867      17,388       5401


YEAR ENDED DEC. 31, 1998
Unit value at beginning of period    $25.818    $24.551    $21.312     $25.065     $13.130     $13.865    $28.169
Unit value at end of period          $28.308    $26.226    $21.208     $25.122     $15.574     $14.386    $23.107
Number of units outstanding
  at end of period                    30,851     40,480     14,987      39,420       8,454      22,032      9,639

YEAR ENDED DEC. 31, 1997
Unit value at beginning of period    $20.654    $19.490    $19.375     $21.708     $11.254     $13.359    $23.668
Unit value at end of period          $25.818    $24.551    $21.312     $25.065     $13.130     $13.865    $28.169
Number of units outstanding
  at end of period                    39,623     46,962     18,871      49,812       5,673      20,982     13,445

YEAR ENDED DEC. 31, 1996
Unit value at beginning of period    $19.565    $17.310    $17.252     $19.785     $10.000*    $12.883    $18.073
Unit value at end of period          $20.654    $19.490    $19.375     $21.708     $11.254     $13.359    $23.668
Number of units outstanding
  at end of period                    53,086     50,027     20,736      57,504       3,722      28,060     12,757

YEAR ENDED DEC. 31, 1995
Unit value at beginning of period    $15.104    $13.215    $14.608     $16.392          NA     $12.354    $15.594
Unit value at end of period          $19.565    $17.310    $17.252     $19.785          NA     $12.883    $18.073
Number of units outstanding
  at end of period                    66,669     46,893     !8,756      59,309          NA      31,040     10,998

YEAR ENDED DEC. 31, 1994
Unit value at beginning of period    $17.319    $13.677    $15.155     $17.734          NA     $12.066    $15.369
Unit value at end of period          $15.104    $13.215    $14.608     $16.392          NA     $12.354    $15.594
Number of units outstanding
  at end of period                    70,082     35,695     15,679      56,569          NA      39,437     11,645

YEAR ENDED DEC. 31, 1993
Unit value at beginning of period    $15.889    $12.574    $13.278     $15.163          NA     $11.932    $13.095
Unit value at end of period          $17.319    $13.677    $15.155     $17.734          NA     $12.066    $15.369
Number of units outstanding
  at end of period                    84,217     24,719     11,787      38,967          NA      10,247      5,589

YEAR ENDED DEC. 31, 1992
Unit value at beginning of period    $14.821    $11.949    $11.583     $13.580          NA     $11.742    $11.848
Unit value at end of period          $15.889    $12.574    $13.278     $15.163          NA     $11.932    $13.095
Number of units outstanding
  at end of period                    39,387     17,144      4,780      11,397          NA       6,951      1,052

YEAR ENDED DEC. 31, 1991
Unit value at beginning of period    $12.062    $ 9.803     $9.026      $9.842          NA     $11.288     $9.000
Unit value at end of period          $14.821    $11.949    $11.583     $13.580          NA     $11.742    $11.848
Number of units outstanding
  at end of period                    16,188      9,671      1,923       4,472          NA       5,682        394

YEAR ENDED DEC. 31, 1990
Unit value at beginning of period    $12.010    $10.180    $10.021     $10.783          NA     $10.637    $10.368
Unit value at end of period          $12.062     $9.803     $9.026      $9.842          NA     $11.288     $9.000
Number of units outstanding
  at end of period                     6,300      5,356      1,056       3,011          NA       5,768        200



</TABLE>

<PAGE>
<TABLE>
<CAPTION>

(NUMBER OF UNITS IN THOUSANDS)
                                     FRANKLIN                                                      TEMPLETON
                                      RISING    FRANKLIN  FRANKLIN    MUTUAL     MUTUAL  TEMPLETON DEVELOPING
                                     DIVIDENDS    SMALL     VALUE    DISCOVERY   SHARES     ASSET   MARKETS
VARIABLE OPTIONS:                   SECURITIES     CAP   SECURITIES SECURITIES SECURITIES STRATEGY SECURITIES
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>        <C>         <C>       <C>       <C>       <C>       <C>
YEAR ENDED DEC. 31, 1999
Unit value at beginning of period    $21.165     $14.600    $7.717    $11.226   $11.837   $13.589    $7.993
Unit value at end of period          $18.846     $28.353    $7.736    $13.701   $13.237   $14.408   $12.188
Number of units outstanding
  at end of period                    17,252      10,654       727      5,796    12,423     2,504    11,226

YEAR ENDED DEC. 31, 1998
Unit value at beginning of period    $20.074     $14.952  $10.000*    $11.983   $11.993   $13.786   $10.340
Unit value at end of period          $21.165     $14.600    $7.717    $11.226   $11.837   $13.589    $7.993
Number of units outstanding
  at end of period                    27,683      14,856       719      9,718    18,133     4,056    15,989

YEAR ENDED DEC. 31, 1997
Unit value at beginning of period    $15.303     $12.913        NA    $10.180   $10.330   $12.514   $11.487
Unit value at end of period          $20.074     $14.952        NA    $11.983   $11.993   $13.786   $10.340
Number of units outstanding
  at end of period                    33,249      16,925        NA      9,940    18,744     5,229    23,005

YEAR ENDED DEC. 31, 1996
Unit value at beginning of period    $12.498     $10.146        NA   $10.000*  $10.000*   $10.591    $9.582
Unit value at end of period          $15.303     $12.913        NA    $10.180   $10.330   $12.514   $11.487
Number of units outstanding
  at end of period                    35,569      12,784        NA      1,471     2,613     4,104    22,423

YEAR ENDED DEC. 31, 1995
Unit value at beginning of period    $ 9.769    $10.000*        NA         NA        NA  $10.000*    $9.454
Unit value at end of period          $12.498     $10.146        NA         NA        NA   $10.591    $9.582
Number of units outstanding
  at end of period                    33,789       1,302        NA         NA        NA     1,338    15,618

YEAR ENDED DEC. 31, 1994
Unit value at beginning of period    $10.327          NA        NA         NA        NA        NA  $10.000*
Unit value at end of period           $9.769          NA        NA         NA        NA        NA    $9.454
Number of units outstanding
  at end of period                    28,778          NA        NA         NA        NA        NA     9,774

YEAR ENDED DEC. 31, 1993
Unit value at beginning of period    $10.848          NA        NA         NA        NA        NA        NA
Unit value at end of period          $10.327          NA        NA         NA        NA        NA        NA
Number of units outstanding
  at end of period                    26,256          NA        NA         NA        NA        NA        NA

YEAR ENDED DEC. 31, 1992
Unit value at beginning of period    $10.000*         NA        NA         NA        NA        NA        NA
Unit value at end of period          $10.848          NA        NA         NA        NA        NA        NA
Number of units outstanding
  at end of period                     8,388          NA        NA         NA        NA        NA        NA

YEAR ENDED DEC. 31, 1991
Unit value at beginning of period         NA          NA        NA         NA        NA        NA        NA
Unit value at end of period               NA          NA        NA         NA        NA        NA        NA
Number of units outstanding
  at end of period                        NA          NA        NA         NA        NA        NA        NA

YEAR ENDED DEC. 31, 1990
Unit value at beginning of period         NA          NA        NA         NA        NA        NA        NA
Unit value at end of period               NA          NA        NA         NA        NA        NA        NA
Number of units outstanding
  at end of period                        NA          NA        NA         NA        NA        NA        NA



</TABLE>

<PAGE>
<TABLE>
<CAPTION>

(NUMBER OF UNITS IN THOUSANDS)                                                   TEMPLETON         TEMPLETON
                                               TEMPLETON          TEMPLETON    INTERNATIONAL        PACIFIC
                                                GROWTH          INTERNATIONAL     SMALLER           GROWTH
VARIABLE OPTIONS:                             SECURITIES         SECURITIES         COS           SECURITIES
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>             <C>               <C>
YEAR ENDED DEC. 31, 1999
Unit value at beginning of period              $16.309           $18.437         $ 9.364           $ 8.078
Unit value at end of period                    $19.466           $23.022         $11.441           $10.915
Number of units outstanding
  at end of period                              24,872            27,313           1,034             7,066

YEAR ENDED DEC. 31, 1998
Unit value at beginning of period              $15.176           $17.711         $10.825           $ 9.431
Unit value at end of period                    $16.309           $18.437         $ 9.364           $ 8.078
Number of units outstanding
  at end of period                              34,226            44,256           1,533            10,669

YEAR ENDED DEC. 31, 1997
Unit value at beginning of period              $13.560           $16.081         $11.145           $14.932
Unit value at end of period                    $15.176           $17.711         $10.825           $ 9.431
Number of units outstanding
  at end of period                              41,433            58,179           1,998            15,833

YEAR ENDED DEC. 31, 1996
Unit value at beginning of period              $11.339           $13.263        $10.000*           $13.630
Unit value at end of period                    $13.560           $16.081         $11.145           $14.932
Number of units outstanding
  at end of period                              40,327            64,375           1,388            22,061

YEAR ENDED DEC. 31, 1995
Unit value at beginning of period              $10.201           $12.161              NA           $12.802
Unit value at end of period                    $11.339           $13.263              NA           $13.630
Number of units outstanding
  at end of period                              28,309            59,883              NA            22,483

YEAR ENDED DEC. 31, 1994
Unit value at beginning of period              $10.000*          $12.226              NA           $14.233
Unit value at end of period                    $10.201           $12.161              NA           $12.802
Number of units outstanding
  at end of period                              14,637            60,464              NA            27,231

YEAR ENDED DEC. 31, 1993
Unit value at beginning of period                   NA           $ 9.642              NA           $ 9.761
Unit value at end of period                         NA           $12.226              NA           $14.233
Number of units outstanding
  at end of period                                  NA            24,026              NA            14,240

YEAR ENDED DEC. 31, 1992
Unit value at beginning of period                   NA          $10.000*              NA           $10.000*
Unit value at end of period                         NA          $ 9.642               NA           $ 9.761
Number of units outstanding
  at end of period                                  NA             1,329              NA               534

YEAR ENDED DEC. 31, 1991
Unit value at beginning of period                   NA               NA               NA                NA
Unit value at end of period                         NA               NA               NA                NA
Number of units outstanding
  at end of period                                  NA               NA               NA                NA

YEAR ENDED DEC. 31, 1990
Unit value at beginning of period                   NA               NA               NA                NA
Unit value at end of period                         NA               NA               NA                NA
Number of units outstanding
  at end of period                                  NA               NA               NA                NA

<FN>
*Unit Value at inception was $10.00.

The Unit Value at inception was $10.00 for each Variable  Option.  Inception was
1/24/89 for the Franklin Global Communications  Securities,  Franklin Growth and
Income Securities,  Franklin High Income,  Franklin Income Securities,  Franklin
Money  Market,  and  Franklin  Real  Estate  Variable  Options;  1/27/92 for the
Franklin Rising Dividends Securities,  Templeton International  Securities,  and
Templeton Pacific Growth Securities Variable Options;  3/15/94 for the Templeton
Developing Markets Securities, and Templeton Growth Securities Variable Options;
5/1/95  for the  Templeton  Asset  Strategy  Variable  Option;  11/1/95  for the
Franklin  Small Cap Variable  Option;  5/1/96 for the Franklin  Large Cap Growth
Securities,  and Templeton  International  Smaller  Companies  Variable Options;
11/8/96  for the  Mutual  Discovery  Securities,  and Mutual  Shares  Securities
Variable Options; and 5/1/98 for the Franklin Value Securities Variable Option.
</FN>
</TABLE>


<PAGE>

APPENDIX B
--------------------------------------------------------------------------------

ILLUSTRATION OF ANNUITY INCOME


We have prepared the  following  tables to show you how  investment  performance
affects  variable  annuity income over time. The variable annuity income amounts
reflect three different  assumptions for a constant investment return before all
expenses of 0%, 6% and 12%. These are hypothetical rates of return. Allianz Life
does not guarantee that the Contract will earn these returns for any one year or
any sustained  period of time.  The tables are for  illustrative  purposes only.
They do not represent past or future investment returns.


Your  variable  annuity  income may be more or less than the income shown if the
actual  returns of the  Portfolios  you select are  different  than those  shown
below. Since it is very likely that investment returns will fluctuate over time,
the amount of variable annuity income you will receive will also fluctuate.  The
total  amount  of  annuity  income  you  actually  receive  will  depend  on the
cumulative  investment  returns of the Portfolios you choose,  how long you live
and the Annuity Option you choose.

Another factor which will affect the amount of variable  annuity income you will
receive is the Assumed  Investment  Return (AIR).  Income will increase from one
Income Date to the next if the annualized net rate of return during that time is
greater than the AIR you choose.  It will decrease if the annualized net rate of
return is less than the AIR.

There are three  illustrations.  The first is based on a 3% AIR,  the  second is
based on a 5% AIR,  and the  third  is based on a 7% AIR.  The 7% AIR may not be
available in your state.  (Check with your registered  representative  regarding
availability).


The income amounts shown reflect the deduction of all fees and expenses.  Actual
Portfolio  fees and expenses  will vary from year to year and from  Portfolio to
Portfolio.  Actual  expenses  may be higher  or lower  than the rate used in the
illustrations.  The illustrations assume that each Portfolio will incur expenses
at an  average  annual  rate of 0.79% of the  average  daily  net  assets of the
Portfolio.  The insurance  charges are  calculated at an annual rate of 1.40% of
the  average  daily net  assets of the  Separate  Account.  After  taking  these
expenses  and charges  into  consideration,  the  illustrated  gross  investment
returns  of 0%, 6% and 12% are  approximately  equal to net rates  (which  means
after expenses have been deducted) of -2.17%, 3.70% and 9.57%, respectively.


<PAGE>
<TABLE>
<CAPTION>

                                     VALUEMARK INCOME PLUS ILLUSTRATION




ANNUITANT:                   John Doe                             ANNUITY PURCHASE AMOUNT:          $100,000
DATE OF BIRTH:               1/1/1931                             EFFECTIVE DATE:                   12/1/2000
ANNUITY INCOME OPTION:       Single Life Annuity                  FIRST ANNUITY INCOME DATE:        1/1/2001
PREMIUM TAX:                 0%                                   FREQUENCY OF ANNUITY INCOME:      Monthly
                                                                  ASSUMED INVESTMENT RETURN:        3%

The amount of monthly  variable annuity income shown in the table below and the graph that follows assumes a
constant annual  investment  return.  The amount of variable  annuity income that you actually  receive will
depend on the investment  performance of the Portfolio(s) you choose.  The variable annuity income can go up
or down. No minimum dollar amount of variable annuity income is guaranteed. The amounts shown are based on a
3% AIR.  Income will  remain  constant  at $625 per month when the net rate of return  after  expenses is 3%
(annually).



                                            MONTHLY ANNUITY PAYMENTS
                                     Annual rate of return before expenses:         0%          6%          12%
Annuity Income Date           Age     Annual rate of return after expenses:       -2.17%       3.70%       9.57%
----------------------------------------------------------------------------------------------------------------
<S>                           <C>                                                  <C>         <C>        <C>
January 1, 2001               70                                                   $622        $625        $628
January 1, 2002               71                                                    591         629         668
January 1, 2003               72                                                    561         634         711
January 1, 2004               73                                                    533         638         756
January 1, 2005               74                                                    506         642         804
January 1, 2010               79                                                    391         664       1,096
January 1, 2015               84                                                    302         687       1,493
January 1, 2020               89                                                    234         711       2,034
January 1, 2025               94                                                    181         736       2,772


</TABLE>

<PAGE>

The  investment  rates of return  shown are  hypothetical  only.  You should not
consider them to represent past or future investment  performance.  Actual rates
of return  may be more or less than those  shown and will  depend on a number of
factors.

<TABLE>
<CAPTION>

The following table summarizes  Annuity Income with an Assumed Investment Return
of 3%. This table is presented graphically in the printed prospectus.


                               Monthly Payment Amount
             -----------------------------------------------------------
                  -2.17%               3.70%               9.57%
                Annual Rate         Annual Rate         Annual Rate
                 of Return           of Return           of Return
 Year          After Expenses      After Expenses      After Expenses
------------------------------------------------------------------------
<S>               <C>                 <C>                <C>
  1               $ 622               $ 625               $ 628
  2                 591                 629                 668
  3                 561                 634                 711
  4                 533                 638                 756
  5                 506                 642                 804
  6                 481                 647                 856
  7                 457                 651                 910
  8                 434                 655                 968
  9                 412                 660               1,030
 10                 391                 664               1,096
 11                 372                 669               1,166
 12                 353                 673               1,240
 13                 335                 678               1,319
 14                 318                 683               1,404
 15                 302                 687               1,493
 16                 287                 692               1,588
 17                 273                 697               1,690
 18                 259                 702               1,798
 19                 246                 706               1,912
 20                 234                 711               2,034
 21                 222                 716               2,164
 22                 211                 721               2,302
 23                 200                 726               2,449
 24                 190                 731               2,606
 25                 181                 736               2,772
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                     VALUEMARK INCOME PLUS ILLUSTRATION



ANNUITANT:                   John Doe                             ANNUITY PURCHASE AMOUNT:          $100,000
DATE OF BIRTH:               1/1/1931                             EFFECTIVE DATE:                   12/1/2000
ANNUITY INCOME OPTION:       Single Life Annuity                  FIRST ANNUITY INCOME DATE:        1/1/2001
PREMIUM TAX:                 0%                                   FREQUENCY OF ANNUITY INCOME:      Monthly
                                                                  ASSUMED INVESTMENT RETURN:        5%

The amount of monthly  variable annuity income shown in the table below and the graph that follows assumes a
constant annual  investment  return.  The amount of variable  annuity income that you actually  receive will
depend on the investment  performance of the Portfolio(s) you choose.  The variable annuity income can go up
or down. No minimum dollar amount of variable annuity income is guaranteed. The amounts shown are based on a
5% AIR.  Income will  remain  constant  at $743 per month when the net rate of return  after  expenses is 5%
(annually).



                                            MONTHLY ANNUITY PAYMENTS
                                     Annual rate of return before expenses:         0%          6%          12%
Annuity Income Date           Age     Annual rate of return after expenses:       -2.17%       3.70%       9.57%
----------------------------------------------------------------------------------------------------------------
<S>                           <C>                                                 <C>          <C>       <C>
January 1, 2001               70                                                  $739         $742        $746
January 1, 2002               71                                                   688          733         779
January 1, 2003               72                                                   641          724         812
January 1, 2004               73                                                   597          715         848
January 1, 2005               74                                                   557          706         885
January 1, 2010               79                                                   391          664       1,095
January 1, 2015               84                                                   274          624       1,355
January 1, 2020               89                                                   193          586       1,677
January 1, 2025               94                                                   135          551       2,075

</TABLE>

<PAGE>

The  investment  rates of return  shown are  hypothetical  only.  You should not
consider them to represent past or future investment  performance.  Actual rates
of return  may be more or less than those  shown and will  depend on a number of
factors.

<TABLE>
<CAPTION>

The following table summarizes  Annuity Income with an Assumed Investment Return
of 5%. This table is presented graphically in the printed prospectus.


                                Monthly Payment Amount
              ----------------------------------------------------------
                   -2.17%               3.70%              9.57%
                 Annual Rate         Annual Rate        Annual Rate
                  of Return           of Return          of Return
 Year          After Expenses      After Expenses      After Expenses
------------------------------------------------------------------------
<S>            <C>                   <C>                 <C>
  1             $ 739                 $ 742               $ 746
  2               688                   733                 779
  3               641                   724                 812
  4               597                   715                 848
  5               557                   706                 885
  6               519                   698                 923
  7               483                   689                 963
  8               450                   680               1,005
  9               420                   672               1,049
 10               391                   664               1,095
 11               364                   656               1,143
 12               339                   647               1,192
 13               316                   639               1,244
 14               295                   632               1,298
 15               274                   624               1,355
 16               256                   616               1,414
 17               238                   608               1,476
 18               222                   601               1,540
 19               207                   593               1,607
 20               193                   586               1,677
 21               180                   579               1,750
 22               167                   572               1,826
 23               156                   565               1,906
 24               145                   558               1,989
 25               135                   551               2,075
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                     VALUEMARK INCOME PLUS ILLUSTRATION



ANNUITANT:                   John Doe                             ANNUITY PURCHASE AMOUNT:          $100,000
DATE OF BIRTH:               1/1/1931                             EFFECTIVE DATE:                   12/1/2000
ANNUITY INCOME OPTION:       Single Life Annuity                  FIRST ANNUITY INCOME DATE:        1/1/2001
PREMIUM TAX:                 0%                                   FREQUENCY OF ANNUITY INCOME:      Monthly
                                                                  ASSUMED INVESTMENT RETURN:        7%

The amount of monthly  variable annuity income shown in the table below and the graph that follows assumes a
constant annual  investment  return.  The amount of variable  annuity income that you actually  receive will
depend on the investment  performance of the Portfolio(s) you choose.  The variable annuity income can go up
or down. No minimum dollar amount of variable annuity income is guaranteed. The amounts shown are based on a
7% AIR.  Income will  remain  constant  at $866 per month when the net rate of return  after  expenses is 7%
(annually). The 7% AIR may not be available in your state.



                                            MONTHLY ANNUITY PAYMENTS
                                     Annual rate of return before expenses:         0%          6%          12%
Annuity Income Date           Age     Annual rate of return after expenses:       -2.17%       3.70%       9.57%
----------------------------------------------------------------------------------------------------------------
<S>                           <C>                                                  <C>         <C>       <C>
January 1, 2001               70                                                   $859        $864        $868
January 1, 2002               71                                                    786         837         889
January 1, 2003               72                                                    718         811         910
January 1, 2004               73                                                    657         786         932
January 1, 2005               74                                                    601         762         955
January 1, 2010               79                                                    384         652       1,075
January 1, 2015               84                                                    245         557       1,211
January 1, 2020               89                                                    157         476       1,363
January 1, 2025               94                                                    100         407       1,535

</TABLE>

<PAGE>

The  investment  rates of return  shown are  hypothetical  only.  You should not
consider them to represent past or future investment  performance.  Actual rates
of return  may be more or less than those  shown and will  depend on a number of
factors.

<TABLE>
<CAPTION>

The following table summarizes Annuity Income with an Assumed Investment Return of 7%.
This table is presented graphically in the printed prospectus.


                                Monthly Payment Amount
              ----------------------------------------------------------
                   -2.17%               3.70%               9.57%
                 Annual Rate         Annual Rate         Annual Rate
                 of Return           of Return           of Return
Year           After Expenses      After Expenses      After Expenses
------------------------------------------------------------------------
<S>            <C>                   <C>                 <C>
  1             $ 859                 $ 864               $ 868
  2               786                   837                 889
  3               718                   811                 910
  4               657                   786                 932
  5               601                   762                 955
  6               549                   739                 977
  7               502                   716               1,001
  8               459                   694               1,025
  9               420                   672               1,050
 10               384                   652               1,075
 11               351                   632               1,101
 12               321                   612               1,127
 13               293                   593               1,154
 14               268                   575               1,182
 15               245                   557               1,211
 16               224                   540               1,240
 17               205                   523               1,269
 18               187                   507               1,300
 19               171                   492               1,331
 20               157                   476               1,363
 21               143                   462               1,396
 22               131                   448               1,430
 23               120                   434               1,464
 24               110                   420               1,499
 25               100                   407               1,535
</TABLE>


<PAGE>

                                     PART B

                       STATEMENT OF ADDITIONAL INFORMATION
                              INDIVIDUAL IMMEDIATE
                           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  IMMEDIATE  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
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
-------------------------------------------------------
Company .........................................     2
Experts .........................................     2
Legal Opinions ..................................     2
Distributor .....................................     2
Calculation of Performance Data .................     2
Federal Tax Status ..............................     5
Annuity Provisions ..............................     9
Financial Statements ............................    10

















                                                                 VIP SAI 05/2000

<PAGE>

Company
--------------------------------------------------------------------------------

Information  regarding  Allianz  Life  Insurance  Company of North  America (the
"Company")  and its  ownership is contained  in the  Prospectus.  The 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  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
wholly-owned subsidiary of the Company, acts as the distributor. The offering is
on a continuous basis.


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

Total Return

From time to time,  the  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 a VIP Unit  based on the  performance  of a
Sub-Account  over a stated  period of time which is  determined  by dividing the
increase  (or  decrease)  in value  for that  unit by the VIP Unit  value at the
beginning of the period.

Any such  performance  data will include total return figures for the one, five,
and 10 year (or since  inception)  time  periods  indicated.  Such total  return
figures will reflect the deduction of a 1.25% Mortality and Expense Risk Charge,
a  0.15%  Administrative  Expense  Charge  and  the  operating  expenses  of the
underlying Portfolios.

The hypothetical  value of a Contract  purchased for the time periods  described
will be  determined  by using the actual VIP Unit  Values for an initial  $1,000
purchase  payment.  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 purchase payment made at
the beginning of the period at the end of the period.

The Company may also  advertise  cumulative  and total return  information  over
different  periods of time.  Cumulative  total return is calculated in a similar
manner as described above except that the results are not annualized.

Yield

The Franklin Money Market Fund. The 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  Expense  Charge  and,  in  certain  instances,  the value of the
underlying Portfolio's  investment securities.  The fact that the Fund's current
yield will  fluctuate and that the principal is not  guaranteed  should be taken
into consideration when using the Fund'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 VIP 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 VIP 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 and the Administrative Expense 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 12/31/99,  the Franklin Money Market Fund had
a current yield of 4.31% and an effective yield of 4.40%.

Other Variable  Options.  The Company may also quote yield in sales  literature,
advertisements,  personalized  hypothetical  illustrations,  and Contract  Owner
communications for the other Variable Options.  Each Variable Option (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
VIP Unit earned  during the period  (minus the  deduction  for the Mortality and
Expense Risk Charge and Administrative  Expense Charge) by the VIP 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 Option
     attributable to shares owned by the Portfolio;

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

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

d  = the maximum offering price per VIP 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.  The Company does not currently advertise yield
information for any Variable Option (other than the Franklin Money Market Fund).

Performance Ranking

The performance based on each or all of the Sub-Accounts of the Variable Account
may be compared in its  advertising  and sales  literature to the performance of
other variable  annuity  issuers in general or to the  performance of particular
types of variable annuities investing in mutual funds, or series of mutual funds
with investment  objectives  similar to each of the Sub-Accounts of the Variable
Account or indices. Lipper Analytical Services, Inc. ("Lipper") and the Variable
Annuity  Research and Data Service  ("VARDS")  are  independent  services  which
monitor  and rank the  performance  of variable  annuity  issuers in each of the
major categories of investment objectives on an industry-wide basis.

Lipper's  rankings  include  variable  life issuers as well as variable  annuity
issuers.  VARDS rankings compare only variable annuity issuers.  The performance
analyses  prepared  by Lipper and VARDS rank such  issuers on the basis of total
return,  assuming reinvestment of distributions,  but do not take sales charges,
redemption fees or certain expense deductions at the variable account level into
consideration.  In  addition,  VARDS  prepares  risk  adjusted  rankings,  which
consider  the effects of market risk on total return  performance.  This type of
ranking  may address the  question  as to which  portfolios  provide the highest
total return with the least amount of risk.  Other ranking  services may be used
as sources of performance comparison, such as CDA/Weisenberger and Morningstar.

Performance Information

Total  returns  reflect  all  aspects of a  Portfolio's  return,  including  the
automatic  reinvestment by Allianz Life Variable Account B of all  distributions
and any change in a Portfolio's  value over the period.  The  performance of the
Portfolios  reflects  results  achieved  prior to the date the  Contracts  first
invested in the Portfolios.

The returns  reflect the  deduction  of the  Mortality  and Expense Risk Charge,
Administrative Expense Charge and the operating expenses of each Portfolio. Past
performance does not guarantee future results.

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.

<TABLE>
<CAPTION>

Standardized Total Return

Average Annual Total Return for the period ended December 31, 1999

                                           Inception        One          Three        Five          Ten          Since
Variable Option                              Date          Year          Year         Year         Year        Inception
------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>           <C>           <C>          <C>         <C>
Franklin Global Communications Sec.*       1/24/89        37.48%        23.51%         20.84%      12.48%       13.23%
Franklin Growth and Income Securities*     1/24/89        -0.30%        10.29%         14.62%       9.89%        9.18%
Franklin High Income                       1/24/89        -1.46%         2.56%          7.43%       7.63%        6.97%
Franklin Income Securities                 1/24/89        -3.18%         3.86%          8.21%       8.47%        8.46%
Franklin Large Cap Growth Securities*       5/1/96        29.82%        21.57%             NA          NA       21.16%
Franklin Money Market                      1/24/89         3.30%         3.61%          3.76%       3.40%        3.69%
Franklin Real Estate*                      1/24/89        -7.45%        -3.32%          6.52%       7.51%        7.20%
Franklin Rising Dividends Securities*      1/27/92       -10.96%         7.19%         14.05%          NA        8.32%
Franklin Small Cap                         11/1/95        94.20%        29.97%             NA          NA       28.41%
Franklin Value Securities                   5/1/98         0.24%            NA             NA          NA      -14.26%
Mutual Discovery Securities                11/8/96        22.04%        10.41%             NA          NA       10.53%
Mutual Shares Securities                   11/8/96        11.83%         8.62%             NA          NA        9.33%
Templeton Asset Strategy*                   5/1/95         6.03%         4.81%             NA          NA        8.13%
Templeton Developing Markets Sec.*         3/15/94        52.49%         1.99%          5.21%          NA        3.47%
Templeton Growth Securities*               3/15/94        19.36%        12.81%         13.80%          NA       12.17%
Templeton International Securities*        1/27/92        24.87%        12.70%         13.61%          NA       11.09%
Templeton International Smaller Cos.        5/1/96        22.18%         0.88%             NA          NA        3.74%
Templeton Pacific Growth Securities*       1/27/92        35.12%        -9.92%         -3.14%          NA        1.11%

<FN>
*The fund name changed since the last SAI update as of the effective date listed below:

   Current Name                                    Previous Name                               Effective Date
   ----------------------------------------------------------------------------------------------------------
   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
   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
</FN>

The Company may also present performance information computed on a different basis.

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 Owner's total
return may be in any future period.

</TABLE>

Annuity Income

Periodic  annuity  income  amounts  may  be  illustrated  using  the  historical
performance of the  Portfolios,  the Standard & Poor's 500 Composite Stock Price
Index or other recognized  investment  benchmark  portfolios.  All illustrations
will  reflect the 1.25% annual  Mortality  and Expense Risk Charge and the 0.15%
Administrative Expense Charge and actual or assumed Portfolio expenses.


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

NOTE:  The following  description is based upon the Company's  understanding  of
current  federal income tax law applicable to annuities in general.  The 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 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 (the "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 annuity
payments, the portion of a payment includible in income equals the excess of the
payment over the exclusion amount.  The exclusion amount for payments based on a
variable annuity option is determined by dividing the investment in the Contract
(adjusted  for any period  certain or refund  guarantee)  by the number of years
over  which  the  annuity  is  expected  to  be  paid  (determined  by  Treasury
Regulations).  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  guarantee)  bears to the
expected  return under the Contract.  Payments  received after the investment in
the Contract has been recovered (i.e. the total of the excludable  amounts equal
the  investment in the Contract) are fully  taxable.  The taxable  portion of an
annuity  payment  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 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
Company, and its operations form a part of the 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 the 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 Company  intends that all  Portfolios of the Trust  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 Company  reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.

Multiple Contracts

Section  72(e)(11) of 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. The legislative history of Section 72(e)(11) indicates
that  it was  not  intended  to  apply  to  immediate  annuities.  However,  the
legislative  history also states that no inference is intended as to whether the
Treasury  Department,  under its authority to prescribe rules to enforce the tax
laws, may treat the combination  purchase of a deferred annuity contract with an
immediate  annuity contract as a single contract for purposes of determining the
tax consequences of any distribution.

Tax Treatment of Distributions -
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  withdrawn  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  includible 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 591/2; (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 and his Beneficiary; (e) as an annuity payment under
an immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.

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 Distributions - IRA Contracts.")

The availability of total or partial  withdrawals  from an immediate  annuity is
not  expressly  provided for in the Code or Treasury  Regulations.  The only tax
guidance  currently  available for such issue is a Private Letter Ruling holding
that the right to make  withdrawals  does not prevent a contract from qualifying
as an immediate annuity. However, the Private Letter Ruling does not address the
issue of whether the making of a withdrawal would adversely affect the favorable
tax treatment of annuity  payments made before or after such partial  withdrawal
because  of  the  requirement  that  all  immediate  annuity  payments  must  be
"substantially  equal." The loss of favorable tax treatment  would mean that the
income  portion  of  each  annuity  payment  received  prior  to the  taxpayer's
attaining  age 591/2  would be  subject  to a 10%  penalty  tax  unless  another
exception to the penalty tax applies.  While the Company currently believes that
such  withdrawals  will not  adversely  affect the  favorable  tax  treatment of
annuity  payments  received before or after a withdrawal and the Company intends
to perform its tax reporting  functions  accordingly,  there can be no assurance
that the Internal  Revenue Service will not take a contrary  position.  Contract
Owners  should  obtain  competent  tax advice prior to making a partial or total
withdrawal.

Qualified Plans

The Contracts  offered by the  Prospectus may also be used with a plan qualified
under Section 408(b) of the Code ("IRA Contracts").  Contract Owners, annuitants
and  beneficiaries  are  cautioned  that  benefits  under an IRA Contract 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.  The  following
discussion of IRA Contracts is not exhaustive  and is for general  informational
purposes only.  The tax rules  regarding IRA Contracts are very complex and will
have differing  applications  depending on individual  facts and  circumstances.
Each  purchaser  should  obtain  competent  tax advice prior to  purchasing  IRA
Contracts.   IRA  Contracts  include  special  provisions  restricting  Contract
provisions  that may  otherwise be  available  as described in this  Prospectus.
Generally,   IRA  Contracts  are  not  transferable  except  upon  surrender  or
annuitization.

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.

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 distributions  from IRA Contracts.  (See
"Tax Treatment of Distributions - IRA Contracts.")

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.  IRA Contracts will utilize  annuity tables which do
not differentiate on the basis of sex because of the use of the IRA Contracts in
a Simplified  Employee  Pension.  Such annuity tables will also be available for
use in connection with certain non-qualified deferred compensation plans.

Under  applicable  limitations,  certain  amounts may be  contributed  to an IRA
Contract which will be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility,  contributions,  transferability  and
distributions.  (See "Tax Treatment of  Distributions - IRA  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  Contract.
Sales of Contracts for use as IRA Contracts 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.

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.

Tax Treatment of Distributions - IRA Contracts

In the case of a  withdrawal  under an IRA  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 IRA Contracts.  To
the extent  amounts are not  includible  in gross income  because they have been
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 Annuitant  reaches age
591/2; (b) distributions following the death or disability of the Annuitant (for
this  purpose  disability  is as defined in Section  72(m)(7) of the Code);  (c)
distributions that are part of a series of substantially equal periodic payments
made not less frequently than annually for the life (or life  expectancy) of the
Annuitant or the joint lives (or joint life  expectancies)  of the Annuitant and
his or her designated  Beneficiary;  (d) distributions  made to the Annuitant to
the extent such  distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Annuitant for amounts paid during the taxable year
for medical  care;  (e)  distributions  from an IRA Contract for the purchase of
medical  insurance  (as described in Section  213(d)(1)(D)  of the Code) for the
Annuitant  and his or her spouse and  dependents  if the  Annuitant has received
unemployment  compensation  for at least 12 weeks (this exception will no longer
apply  after the  Annuitant  has been  re-employed  for at least 60 days.);  (f)
distributions from an Individual Retirement Annuity made to the Annuitant 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  Annuitant  for the taxable
year;  (g)  distributions  made on  account  of an IRS levy  upon the  Qualified
Contract;  and (h) distributions  from an Individual  Retirement Annuity made to
the  Annuitant  which are  qualified  first-time  home buyer  distributions  (as
defined in Section  72(t)(8)  of the Code).  With  respect to (c) above,  if the
series of substantially  equal periodic payments is modified before the later of
the Annuitant  attaining age 591/2 or 5 years from the date of the first annuity
payment, then the tax for the year of the modification is increased by 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. A
partial  withdrawal  may  result in the  modification  of the  series of annuity
payments made after such withdrawal and therefore could result in the imposition
of the 10% penalty tax and interest for the period as described above. Competent
tax  advice  should be  obtained  prior to making  any  withdrawals  from an IRA
Contract.  Any amounts  distributed  will only be paid to the  Annuitant,  Joint
Annuitant or  Beneficiary.  The Company will not transfer or pay such amounts to
another IRA or tax qualified plan.

Generally,  distributions from an IRA Contract 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.  Generally,  required distributions must be over a period not exceeding
the  life or 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 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.


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

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
    Sub-Account(s) of the Separate Account.

Annuity  payments  also  depend  upon  the Age of the  Annuitant  and any  Joint
Annuitant  and the  Assumed  Net  Investment  Factor  utilized.  On the  Annuity
Calculation Date, a fixed number of Annuity Units will be purchased,  determined
as follows:

The first  Annuity  Payment  is equal to the  Contract  Value  allocated  to the
Separate  Account 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 Sub-Account, the fixed number of Annuity Units is determined by dividing
the amount of the initial Annuity Payment determined for each Sub-Account by the
Annuity Unit value on the Annuity  Calculation Date.  Thereafter,  the number of
Annuity Units in each  Sub-Account  remains  unchanged unless the Contract Owner
elects to transfer between  Sub-Accounts.  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  determined for each  Sub-Account.  The Annuity Payment in
each  Sub-Account is determined by multiplying  the number of Annuity Units then
allocated to such Sub-Account by the Annuity Unit value for that Sub-Account.

For each Sub-Account,  the value of an Annuity Unit was initially established at
$1.00.  On each  subsequent  Valuation  Date  the  value of an  Annuity  Unit is
determined in the following way:

FIRST: The Net Investment Factor is determined by dividing (a) by (b) and adding
(c) to the result, where:

a. is the net  increase  or  decrease  in the Net  Asset  Value per share of the
Portfolio  (or  other  Eligible  Investment)  plus the per  share  amount of any
dividend  or  capital  gain  distribution  paid by the  Portfolio  (or  Eligible
Investment)  during the  Valuation  Period,  plus or minus a per share charge or
credit for any taxes  incurred by or reserved for in the  Sub-Account  as of the
end of the  current  Valuation  Period  which  the  Company  determines  to have
resulted from maintenance of the Sub-Account; and

b. is the Net  Asset  Value  per  share  of the  Portfolio  (or  other  Eligible
Investment) at the beginning of the Valuation Period,  plus or minus a per share
charge or credit for any taxes incurred by or reserved for in the Sub-Account as
of the end of the  immediately  preceding  Valuation  Period  which the  Company
determines to have resulted from maintenance of the Sub-Account; and

c. is the net  result  of 1.000  less the  Valuation  Period  deduction  for the
charges to the Sub-Account.

The Net Investment Factor may be more or less than one.

SECOND: The value of an Annuity Unit for a Valuation Date is equal to:

a. the value of the Annuity Unit on the immediately preceding Valuation Date;

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

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.  For example,  with a 5%
Assumed  Investment  Return,  the Assumed Net  Investment  Factor for a one-year
Valuation Period would be 1.05. For a one-day Valuation Period,  the Assumed Net
Investment Factor would be 1.00013368062.

The  Assumed  Investment  Return is the  investment  return  upon which  Annuity
Payments are based.  Income will  increase  from one annuity  Income Date to the
next if the  annualized  Net Rate of Return during that time is greater than the
Assumed Investment Return and will decrease if the annualized Net Rate of Return
is less than the Assumed Investment Return.

A Contract Owner may choose either a 7%, 5% or a 3% Assumed  Investment  Return.
If the  Contract  Owner does not choose one,  the 5% Assumed  Investment  Return
automatically  applies.  Choosing a higher Assumed Investment Return will result
in a higher  initial  amount of income,  but income  will  increase  more slowly
during  periods of good  investment  performance  of the Trust and decrease more
rapidly during periods of poor investment performance. THE 7% ASSUMED INVESTMENT
RETURN IS NOT  AVAILABLE  IN ALL STATES  UNTIL  APPROVED BY THE STATE  INSURANCE
DEPARTMENTS. (CHECK WITH YOUR REGISTERED REPRESENTATIVE REGARDING AVAILABILITY).

The variable  annuity  benefits  provided for under the Contract are based upon:
(a) the  1983(a)  Blended  Unisex  Mortality  Table  with  50%  female  content,
projected to the year 2000 with Projection  Scale G; (b) the Assumed  Investment
Return, and (c) any applicable taxes.

Fixed Annuity Payout

Annuity  payments from the Fixed Payment  Option will be equal  payments  unless
otherwise specified by the Annuity Option selected.


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

The audited  consolidated  financial statements of the Company as of and for the
year ended  December 31, 1999,  included  herein  should be  considered  only as
bearing  upon the  ability  of the  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.


<PAGE>





                         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>



<PAGE>

                                     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,
              1988 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 Agreement (3)
               b. Selling Agreement
           4.  Individual Immediate Variable Annuity Contract(3)
           4.  (i)  Individual Immediate Variable Annuity Contract
                    Endorsements(3)
           5.  Application for Individual  Immediate  Variable  Annuity(2)
           6.  (i)  Copy of Articles of Incorporation of the Company(1)
               (ii) Copy of the Bylaws of the Company(1)
           7.  Not Applicable
           8.  Form of Fund Participation Agreement(2)
           9.  Opinion and Consent of Counsel
          10.  Independent Auditors' Consent
          11.  Not Applicable
          12.  Not Applicable
          13.  Calculation of Performance Information
          14.  Company Organizational Chart
          27.  Not Applicable

  (1)  Incorporated by reference to Registrant's Post-Effective Amendment No.
       2 to Form N-4 which was electronically filed on November 1, 1995.
  (2)  Incorporated by reference to Registrant's Post-Effective Amendment No.
       3 to Form N-4 which was electronically filed on April 24, 1996.
  (3)  Incorporated by reference to Registrant's Post-Effective Amendment No.
       5 to Form N-4 which was electronically filed on April 29, 1997.



Item 25.   Directors and Officers of the Depositor

The following are the Officers and Directors of the Company:

<TABLE>
<CAPTION>

Name and Principal               Positions and Offices
Business Address                 with Depositor
---------------------------      --------------------------------------
<S>                              <C>
Robert W. MacDonald              Chief Executive Officer
1750 Hennepin Avenue             and Director
Minneapolis, MN 55403

Margery G. Hughes                President and
1750 Hennepin Avenue             Chief Administrative Officer
Minneapolis, MN 55403

Mark A. Zesbaugh                 Senior Vice President
1750 Hennepin Avenue             and 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 Blvd.
Minneapolis, MN 55439

Dr. Gerhard G. Rupprecht         Director
Reinsburgstrasse 17
D - 70178
Stuttgart, Germany

Edward J. Bonach                 President-Special Markets Division
1750 Hennepin Avenue
Minneapolis, MN 55403

Michael T. Westermeyer           Vice President, Corporate Legal Officer
1750 Hennepin Avenue             and Secretary
Minneapolis, MN 55403

Robert S. James                  President-Individual Insurance Division
1750 Hennepin Avenue
Minneapolis, MN 55403

Paul M. Howman                   Vice President, Underwriting
1750 Hennepin Avenue
Minneapolis, MN  55403

Rev. Dennis J. Dease             Director
c/o University of St.Thomas
2115 Summit Avenue
Box AQU100
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 Company  organizational chart is included herein.


Item 27.   Number of Contract Owners


As of  March  22,  2000,  there  were  344  qualified  Contract  Owners  and 257
non-qualified Contract Owners with Contracts in the Separate Account.


Item 28.   Indemnification

The Bylaws of the 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
Company  pursuant to the foregoing,  or otherwise,  the 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 Company of expenses incurred or paid
by a director,  officer or  controlling  person of the 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>

Name & Principal             Positions and Offices
Business Address             with Underwriter
-----------------------      -----------------------------
<S>                          <C>
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 and Director
1750 Hennepin Avenue
Minneapolis, MN 55403

Catherine L. Mielke          Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403

Michael M. Ahles             Vice President and 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.


<PAGE>

                              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


                                  By:  /s/ MICHAEL T. WESTERMEYER
                                       --------------------------




<TABLE>
<CAPTION>

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
<S>                         <C>                           <C>
Lowell C. Anderson*         Chairman of the Board         04/17/2000
Lowell C. Anderson                                           Date

Robert W. MacDonald*        Director and                  04/17/2000
Robert W. MacDonald         Chief Executive Officer          Date

Margery G. Hughes*          President and                 04/17/2000
Margery G. Hughes           Chief Adminstrative Officer      Date

Mark A. Zesbaugh*           Senior Vice President and     04/17/2000
Mark A. Zesbaugh            Chief Financial Officer          Date

Herbert F. Hansmeyer*       Director                      04/17/2000
Herbert F. Hansmeyer                                         Date

Michael P. Sullivan*        Director                      04/17/2000
Michael P. Sullivan                                          Date

Dr. Gerhard G. Rupprecht*   Director                      04/17/2000
Dr. Gerhard G. Rupprecht                                     Date

Rev. Dennis J. Dease*       Director                      04/17/2000
Rev. Dennis J. Dease                                         Date

James R. Campbell*          Director                      04/17/2000
James R. Campbell                                            Date

Robert M. Kimmitt*          Director                      04/17/2000
Robert M. Kimmitt                                            Date


                                *By   Power  of  Attorney

                                 By:  /s/ MICHAEL T. WESTERMEYER
                                      --------------------------
                                          Michael T. Westermeyer
                                            Attorney-in-Fact

</TABLE>


<PAGE>


                                    EXHIBITS

                                       TO

                      POST-EFFECTIVE AMENDMENT NO.    11

                                       TO

                                    FORM N-4

                         ALLIANZ LIFE VARIABLE ACCOUNT B

               ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA






                                INDEX TO EXHIBITS


Exhibit                                                      Page

EX-99.B3.b  Selling Agreement

EX-99.B9    Opinion and Consent of Counsel

EX-99.B10   Independent Auditors' Consent

EX-99.B13   Calculation of Performance Information

EX-99.B14   Company Organizational Chart