File Nos.   33-23035
                                                                     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.    23                              (X)

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940           ( )
          Amendment No.    68                                             (X)

                        (Check appropriate box or boxes.)

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

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


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

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

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

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

     It is proposed that this filing will become effective:


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


If appropriate, check the following:

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


Title of Securities Registered:

    Individual Deferred Variable Annuity Contracts


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

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 - Condensed
                                                          Financial Information

Item 5.   General Description of Registrant, Depositor,
          and Portfolio Companies. . . . . . . . . . . .  The  Separate Account;
                                                          Allianz Life;  Invest-
                                                          ment Options

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

Item 7.   General Description of Variable Annuity
          Contracts. . . . . . . . . . . . . . . . . . .  The Franklin Valuemark
                                                          II  and  Franklin
                                                          Valuemark III Variable
                                                          Annuity Contracts

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
                                                          Additional 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)II AND THE VALUEMARK(R)III
                           VARIABLE ANNUITY CONTRACTS
                                    issued by
                         ALLIANZ LIFE VARIABLE ACCOUNT B
                                       and

                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA


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

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


VARIABLE OPTIONS:

AIM VARIABLE INSURANCE
FUNDS, INC.:
AIM V.I. Growth Fund

THE ALGER AMERICAN FUND:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio

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

#Effective May 1, 2000,  the funds of Templeton  Variable  Products  Series Fund
were merged into similar funds of Franklin Templeton Variable Insurance Products
Trust.

USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund
USAllianz VIP Fixed Income Fund
USAllianz VIP Growth Fund

<TABLE>
<CAPTION>
*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 II and the Valuemark III
Variable Annuity Contracts, each with a Fixed Account.


To learn more about the Contracts  offered by this prospectus,  you can obtain a
copy of the Statement of Additional  Information(SAI) dated May 1, 2000. The SAI
has been filed with the Securities and Exchange  Commission (SEC) and is legally
a part of this  prospectus.  The Table of  Contents  of the SAI is on page 24 of
this prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains
the  SAI,  material  incorporated  by  reference  and  other  information  about
companies  that file  electronically  with the SEC.  For a free copy of the SAI,
call us at  1-800-542-5427  or write us at: 1750 Hennepin  Avenue,  Minneapolis,
Minnesota 55403-2195.


The Valuemark II and Valuemark III
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                                           6

THE VALUEMARK II AND THE VALUEMARK III
VARIABLE ANNUITY CONTRACTS                         12
   Contract  Owner                                 12
   Contingent  Owner
   (Valuemark II Contracts Only)                   12
   Joint  Owner                                    12
   Annuitant                                       12
   Beneficiary                                     13
   Assignment                                      13

ANNUITY   PAYMENTS (THE PAYOUT  PHASE)             13
   Annuity  Options                                13

PURCHASE                                           14
   Purchase  Payments                              14
   Automatic Investment   Plan                     14
   Allocation of Purchase  Payments                14
   Accumulation  Units                             14

INVESTMENT  OPTIONS                                15
   Transfers                                       17
   Dollar Cost Averaging  Program                  17
   Flexible Rebalancing                            18
   Voting Privileges                               18
   Substitution                                    18

EXPENSES                                           18
   Insurance  Charges                              18
      Mortality and Expense Risk  Charge           18
      Administrative  Expense Charge               18
   Contract Maintenance  Charge                    19
   Contingent Deferred Sales  Charge               19
      Reduction or Elimination   of the
      Contingent Deferred Sales  Charge            19
   Transfer Fee                                    20
   Premium  Taxes                                  20
   Income  Taxes                                   20
   Portfolio  Expenses                             20

TAXES                                              20
   Annuity Contracts in  General                   20
   Qualified and  Non-Qualified Contracts          20
   Multiple Contracts                              20
   Withdrawals -  Non-Qualified Contracts          21
   Withdrawals - Qualified Contracts               21
   Withdrawals -  Tax-Sheltered Annuities          22
   Diversification                                 22

ACCESS TO YOUR MONEY                               22
   Systematic Withdrawal  Program                  22
   Minimum Distribution  Program                   23
   Suspension of Payments or Transfers             23

PERFORMANCE                                        23

DEATH  BENEFIT                                     23
   Death of Contract Owner                         23
   Death of Annuitant                              25

OTHER INFORMATION                                  25
   Allianz   Life                                  25
   The Separate  Account                           25
   Distribution                                    25
   Administration                                  25
   Financial Statements                            25

TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION                26

APPENDIX                                           27


<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

Accumulation  Phase                             12
Accumulation   Unit                             14
Annuitant                                       12
Annuity  Options                                13
Annuity  Payments                               13
Annuity   Unit                                  14
Beneficiary                                     13
Contract                                        12
Contract  Owner                                 12
Fixed  Account                                  12
Income   Date                                   13
Joint Owner                                     12
Non-Qualified                                   20
Payout  Phase                                   13
Portfolios                                      15
Purchase  Payment                               14
Qualified                                       20
Tax  Deferral                                   20
Variable Option                                 12

<PAGE>

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

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

THE VARIABLE ANNUITY CONTRACTS:


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


ANNUITY PAYMENTS:

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

PURCHASE:


The Contracts are no longer available for sale.  However,  for existing Contract
Owners,  you can add $250 ($100 if you select the Automatic  Investment Plan) or
more any time you like during the Accumulation Phase.


INVESTMENT OPTIONS:


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


EXPENSES:

The Contracts have insurance  features and  investment  features,  and there are
costs related to each.

Each year,  Allianz  Life deducts a $30  contract  maintenance  charge from your
Contract.  Allianz  Life  currently  waives  this  charge  if the  value of your
Contract is at least $100,000.

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  charge which is
equal,  on an annual basis,  to 0.15% of the average daily value of the Contract
invested in a Variable Option.

If you take money out of the  Contract,  Allianz  Life may  assess a  contingent
deferred sales charge against each Purchase  Payment  withdrawn.  The contingent
deferred  sales charge starts at 5% in the first year and declines to 0% after 5
years for the  Valuemark  II  Contract.  For the  Valuemark  III  Contract,  the
contingent  deferred sales charge starts at 6% in the first year and declines to
0% after 5 years.

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


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


TAXES:

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

ACCESS TO YOUR MONEY:

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

DEATH BENEFIT:


If you die before  moving to the Payout  Phase,  the person you have chosen as a
Beneficiary will receive a death benefit.


INQUIRIES:

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


         USAllianz Service Center
         300 Berwyn Park
         P.O. Box 3031
         Berwyn, PA 19312-0031
         1-800-624-0197


<PAGE>

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


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


CONTRACT OWNER TRANSACTION FEES

Contingent Deferred Sales   Charge*
(as a percentage of Purchase   Payments)

  VALUEMARK II:                    VALUEMARK III:
  YEARS SINCE                       YEARS SINCE
   PURCHASE                          PURCHASE
   PAYMENT      CHARGE               PAYMENT      CHARGE
--------------------------------------------------------

      0-1         5%                    0-1         6%
      1-2         5%                    1-2         5%
      2-3         4%                    2-3         4%
      3-4         3%                    3-4         3%
      4-5        1.5%                   4-5        1.5%
      5+          0%                    5+          0%

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

CONTRACT MAINTENANCE CHARGE***   $30 per Contract per year


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

Mortality and Expense Risk Charge                   1.25%

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

  * Once each Contract year,  you may make a partial  withdrawal of up to 15% of
    the  Purchase  Payments  you  have  made  (less  prior  withdrawals)  and no
    contingent  deferred  sales  charge will be  assessed.  If you do not make a
    withdrawal in a Contract  year,  you may take that 15% in future years.  See
    "Access to Your Money" for additional options.


**  The Contract  provides that if more than three transfers have been made in a
    Contract year,  Allianz Life may deduct a transfer fee.  Currently,  Allianz
    Life  permits  you to  make 12  free  transfers  each  year.  Market  timing
    transfers may not be permitted.


*** During  the  Accumulation  Phase,  the charge is waived if the value of your
    Contract or the  Purchase  Payments  you have made (less  withdrawals) is at
    least $100,000. Currently, the charge is also waived during the Payout Phase
    if the value of your Contract at the Income Date is at least $100,000.

<PAGE>
<TABLE>
<CAPTION>

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


                                                    MANAGEMENT
                                                  AND PORTFOLIO                            OTHER        TOTAL ANNUAL
                                               ADMINISTRATION FEES1     12B-1 FEES       EXPENSES         EXPENSES
--------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                  <C>           <C>               <C>
AIM V.I. Growth Fund                                   .63%                 --            .10%              .73%

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

Alger American Leveraged AllCap Portfolio(2)           .85%                 --            .08%              .93%

Franklin Aggressive Growth Securities Fund(3)          .50%                 --            .22%              .72%

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

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

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

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

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

Franklin Large Cap Growth Securities Fund(4)           .75%                 --            .02%              .77%

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

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

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

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

Franklin S&P 500 Index Fund(5)                         .15%                 --            .38%              .53%

Franklin Small Cap Fund(6)                             .55%                 --            .27%              .82%

Franklin Technology Securities Fund(3)                 .55%                 --            .38%              .93%

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

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

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

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

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

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

Mutual Shares Securities Fund(4)                       .60%                 --            .19%              .79%

Templeton Asset Strategy Fund(6)                       .60%                 --            .18%              .78%

Templeton Developing Markets Securities Fund(6)        1.25%                --            .31%             1.56%

Templeton Global Income Securities Fund(4)             .60%                 --            .05%              .65%

Templeton Growth Securities Fund(4)                    .83%                 --            .05%              .88%

Templeton International Securities Fund(6)             .69%                 --            .19%              .88%

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

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

USAllianz VIP Diversified Assets Fund(5/7)             .55%                .25%           .20%             1.00%

USAllianz VIP Fixed Income Fund(5/7)                   .50%                .25%            --               .75%

USAllianz VIP Growth Fund(5/7)                         .65%                .25%            --               .90%

<FN>

1. The Portfolio  Administration Fee is a direct expense for the Franklin Global
   Health Care Securities  Fund, the Franklin Small Cap Fund, the Franklin Value
   Securities  Fund,  the Mutual  Discovery  Securities  Fund, the Mutual Shares
   Securities Fund, the Templeton Asset Strategy Fund, the Templeton  Developing
   Markets 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. Other  expenses for the Alger American  Leveraged  AllCap  Portfolio  include
   0.01% of interest expense.

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

4. On 2/8/00,  a merger and  reorganization  was approved that combined the fund
   with a similar fund of Templeton  Variable  Products  Series Fund,  effective
   5/1/00.  The table  shows  total  expenses  based on the fund's  assets as of
   12/31/99,  and not the assets of the  combined  fund.  However,  if the table
   reflected  combined assets,  the fund's 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;  0.80%,   0.05%,  and  0.85%  respectively  for  the  Templeton  Growth
   Securities Fund; and .0.60%,  0.04%, and 0.64% respectively for the Templeton
   Global Income Securities Fund.

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

6. On 2/8/00,  shareholders  approved a merger and reorganization  that combined
   the assets of the fund with a similar fund of the Templeton Variable Products
   Series Fund,  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.

7. Certain expenses of the USAllianz VIP Funds have been assumed by the Adviser.
   Had those  expenses not been assumed,  total return would have been lower and
   total fund expenses  would have been 3.80% for the  Diversified  Assets Fund,
   3.77% for the Fixed Income Fund , and 3.90% for the Growth Fund.

</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

EXAMPLES

o  The examples  below  should not be  considered  a  representation  of past or
   future expenses. Actual expenses may be greater or less than those shown.

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

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


o  For additional  information,  see "Expenses" and the  accompanying  portfolio
   prospectuses.



VALUEMARK II CONTRACTS:

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

                                                    1 YEAR        3 YEARS       5 YEARS      10 YEARS
-----------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>           <C>          <C>
AIM V.I. Growth Fund                                 $65            $92           $123         $256

Alger American Growth Portfolio                      $66            $94           $126         $262

Alger American Leveraged AllCap Portfolio            $67            $98           $133         $277

Franklin Aggressive Growth Securities Fund*          $65            $91           $123         $255

Franklin Global Communications Securities Fund       $63            $85           $112         $233

Franklin Global Health Care Securities Fund          $66            $94           $128         $265

Franklin Growth and Income Securities Fund           $63            $84           $111         $231

Franklin High Income Fund                            $63            $86           $113         $236

Franklin Income Securities Fund                      $63            $85           $111         $232

Franklin Large Cap Growth Securities Fund            $66            $93           $125         $260

Franklin Money Market Fund                           $63            $86           $113         $235

Franklin Natural Resources Securities Fund           $64            $90           $120         $249

Franklin Real Estate Fund                            $64            $87           $116         $241

Franklin Rising Dividends Securities Fund            $65            $92           $124         $258

Franklin S&P 500 Index Fund*                         $63            $86           $113         $235

Franklin Small Cap Fund                              $66            $94           $128         $265

Franklin Technology Securities Fund*                 $67            $98           $133         $277

Franklin U.S. Government Fund                        $63            $85           $112         $233

Franklin Value Securities Fund                       $66            $94           $127         $264

Franklin Zero Coupon Fund - 2000                     $64            $89           $119         $248

Franklin Zero Coupon Fund - 2005                     $64            $89           $119         $248

Franklin Zero Coupon Fund - 2010                     $64            $89           $119         $248

Mutual Discovery Securities Fund                     $68           $100           $137         $285

Mutual Shares Securities Fund                        $66           $ 94           $126         $262

Templeton Asset Strategy Fund                        $66           $ 93           $126         $261

Templeton Developing Markets Securities Fund         $73           $117           $164         $338

Templeton Global Income Securities Fund              $63            $86           $113         $235

Templeton Growth Securities Fund                     $67            $96           $131         $272

Templeton International Securities Fund              $67            $96           $131         $272

Templeton International Smaller Companies Fund       $69           $103           $142         $295

Templeton Pacific Growth Securities Fund             $69           $102           $141         $292

USAllianz VIP Diversified Assets Fund*               $65            $92           $124         $258

USAllianz VIP Fixed Income Fund*                     $63            $85           $111         $232

USAllianz VIP Growth Fund*                           $64            $89           $119         $248
-----------------------------------------------------------------------------------------------------
<FN>
*Estimated
</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


VALUEMARK III CONTRACTS:

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

                                                  1 Year         3 Years        5 Years      10 Years
-----------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>           <C>           <C>
AIM V.I. Growth Fund                                $74            $92           $123          $256

Alger American Growth Portfolio                     $74            $94           $126          $262

Alger American Leveraged AllCap Portfolio           $76            $98           $133          $277

Franklin Aggressive Growth Securities Fund*         $74            $91           $123          $255

Franklin Global Communications Securities Fund      $71            $85           $112          $233

Franklin Global Health Care Securities Fund         $75            $94           $128          $265

Franklin Growth and Income Securities Fund          $71            $84           $111          $231

Franklin High Income Fund                           $72            $86           $113          $236

Franklin Income Securities Fund                     $71            $85           $111          $232

Franklin Large Cap Growth Securities Fund           $74            $93           $125          $260

Franklin Money Market Fund                          $72            $86           $113          $235

Franklin Natural Resources Securities Fund          $73            $90           $120          $249

Franklin Real Estate Fund                           $72            $87           $116          $241

Franklin Rising Dividends Securities Fund           $74            $92           $124          $258

Franklin S&P 500 Index Fund*                        $72            $86           $113          $235

Franklin Small Cap Fund                             $75            $94           $128          $265

Franklin Technology Securities Fund*                $76            $98           $133          $277

Franklin U.S. Government Fund                       $71            $85           $112          $233

Franklin Value Securities Fund                      $74            $94           $127          $264

Franklin Zero Coupon Fund - 2000                    $73            $89           $119          $248

Franklin Zero Coupon Fund - 2005                    $73            $89           $119          $248

Franklin Zero Coupon Fund - 2010                    $73            $89           $119          $248

Mutual Discovery Securities Fund                    $76           $100           $137          $285

Mutual Shares Securities Fund                       $74            $94           $126          $262

Templeton Asset Strategy Fund                       $74            $93           $126          $261

Templeton Developing Markets Securities Fund        $82           $117           $164          $338

Templeton Global Income Securities Fund             $72            $86           $113          $235

Templeton Growth Securities Fund                    $75            $96           $131          $272

Templeton International Securities Fund             $75            $96           $131          $272

Templeton International Smaller Companies Fund      $77           $103           $142          $295

Templeton Pacific Growth Securities Fund            $77           $102           $141          $292

USAllianz VIP Diversified Assets Fund*              $74            $92           $124          $258

USAllianz VIP Fixed Income Fund*                    $71            $85           $111          $232

USAllianz VIP Growth Fund*                          $73            $89           $119          $248
-----------------------------------------------------------------------------------------------------
<FN>
*Estimated
</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


VALUEMARK II AND VALUEMARK III CONTRACTS:

You would pay the following  expenses  on a $1,000  investment,  assuming  a 5%
annual  return on your money if you do not  surrender  your  Contract  or if you
apply the Contract value to an Annuity Option:

                                                   1 YEAR       3 YEARS       5 YEARS     10 YEARS
--------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>          <C>          <C>
AIM V.I. Growth Fund                                 $23           $70          $119         $256

Alger American Growth Portfolio                      $23           $72          $122         $262

Alger American Leveraged AllCap Portfolio            $25           $76          $130         $277

Franklin Aggressive Growth Securities Fund*          $23           $69          $119         $255

Franklin Global Communications Securities Fund       $20           $63          $108         $233

Franklin Global Health Care Securities Fund          $24           $72          $124         $265

Franklin Growth and Income Securities Fund           $20           $62          $107         $231

Franklin High Income Fund                            $21           $64          $110         $236

Franklin Income Securities Fund                      $20           $63          $108         $232

Franklin Large Cap Growth Securities Fund            $23           $71          $121         $260

Franklin Money Market Fund                           $21           $64          $109         $235

Franklin Natural Resources Securities Fund           $22           $68          $116         $249

Franklin Real Estate Fund                            $21           $65          $112         $241

Franklin Rising Dividends Securities Fund            $23           $70          $120         $258

Franklin S&P 500 Index Fund*                         $21           $64          $109         $235

Franklin Small Cap Fund                              $24           $72          $124         $265

Franklin Technology Securities Fund*                 $25           $76          $130         $277

Franklin U.S. Government Fund                        $20           $63          $108         $233

Franklin Value Securities Fund                       $23           $72          $123         $264

Franklin Zero Coupon Fund -2000                      $22           $67          $115         $248

Franklin Zero Coupon Fund -2005                      $22           $67          $115         $248

Franklin Zero Coupon Fund - 2010                     $22           $67          $115         $248

Mutual Discovery Securities Fund                     $25           $78          $134         $285

Mutual Shares Securities Fund                        $23           $72          $122         $262

Templeton Asset Strategy Fund                        $23           $71          $122         $261

Templeton Developing Markets Securities Fund         $31           $95          $161         $338

Templeton Global Income Securities Fund              $21           $64          $109         $235

Templeton Growth Securities Fund                     $24           $74          $127         $272

Templeton International Securities Fund              $24           $74          $127         $272

Templeton International Smaller Companies Fund       $26           $81          $139         $295

Templeton Pacific Growth Securities Fund             $26           $80          $137         $292

USAllianz VIP Diversified Assets Fund*               $23           $70          $120         $258

USAllianz VIP Fixed Income Fund*                     $20           $63          $108         $232

USAllianz VIP Growth Fund*                           $22           $67          $115         $248
--------------------------------------------------------------------------------------------------
<FN>
*Estimated
</FN>
</TABLE>

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

<PAGE>

THE VALUEMARK II AND THE
VALUEMARK III VARIABLE
ANNUITY CONTRACTS
--------------------------------------------------------------------------------


This prospectus  describes two variable deferred annuity contracts,  each with a
Fixed  Account  which are issued by Allianz  Life.  The  Contracts are no longer
offered  for  sale.  However,  as an  existing  Contract  Owner,  you  can  make
additional Purchase Payments to your Contract.


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

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

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

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

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

CONTRACT OWNER

You, as the Contract Owner, have all the rights under the Contract. The Contract
Owner is as designated at the time the Contract is issued,  unless changed.  The
Contract  Owner remains the Contract Owner after the Income Date. You may change
Contract Owners (or Contingent Owners with respect to Valuemark II Contracts) at
any time. This may be a taxable event.  You should consult with your tax adviser
before doing this.

CONTINGENT OWNER
(VALUEMARK II CONTRACTS ONLY)

In Contracts containing  Contingent Owner provisions,  you can name a Contingent
Owner. Any Contingent Owner must be the spouse of the Contract Owner.

JOINT OWNER

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

With respect to Valuemark II Contracts, if a Contingent Owner is named, upon the
death of the Contract  Owner before the Income Date, the  Contingent  Owner,  if
any, becomes the designated  Beneficiary and we will treat any other Beneficiary
named as a contingent Beneficiary unless otherwise indicated.

ANNUITANT

The Annuitant is the natural person on whose life we base Annuity Payments.  You
name an  Annuitant.  The  Annuitant  cannot  be older  than 85 years old when we
issued the Contract.  Joint  Annuitants are allowed during the Payout Phase. You
may change the  Annuitant at any time before the Income Date unless the Contract
is owned by a non-individual (for example, a corporation).

BENEFICIARY

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

ASSIGNMENT

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

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

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

You can receive  regular  monthly income  payments under your Contract.  You can
choose the month and year in which those payments  begin.  We call that date the
Income  Date.  Your Income Date must be the first day of a calendar  month.  The
Income  Date  cannot be later  than the month  following  the  Annuitant's  85th
birthday  or 10  years  (8 years  in  Pennsylvania)  from the day we issue  your
Contract, if later. With respect to Valuemark II Contracts, if you do not select
an Income  Date,  the  Income  Date will be the  later of the  Annuitant's  65th
birthday (or 85th  birthday for certain  Contracts)  or 10 years from the day we
issue your  Contract.  You can also choose  among  income  plans.  We call those
Annuity Options.

We ask you to choose your Income Date when you  purchase the  Contract.  You can
change it at any time  before the Income Date with 30 days notice to us. You (or
someone you designate) will receive the Annuity  Payments.  You will receive tax
reporting on those payments.

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

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

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

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

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

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


If the actual  performance  of the  Variable  Option(s)  exceeds  the 5% assumed
investment rate, your Annuity Payments will increase.  Similarly,  if the actual
rate is less than 5%, your Annuity Payments will decrease.


ANNUITY OPTIONS

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

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

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


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


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

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

PURCHASE
--------------------------------------------------------------------------------

PURCHASE PAYMENTS

A  Purchase  Payment  is the money  you  invest  in the  Contract.  You can make
additional  Purchase  Payments  of $250 or more  (or as low as $100 if you  have
selected  the  Automatic  Investment  Plan).  The maximum  amount we will accept
without our prior  approval  is $1 million.  We reserve the right to decline any
Purchase Payments.  This product is not designed for professional  market timing
organizations,  other entities,  or persons using programmed,  large or frequent
transfers.

AUTOMATIC INVESTMENT PLAN

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

ALLOCATION OF PURCHASE PAYMENTS


We ask  that you  allocate  your  money in  either  whole  percentages  or round
dollars.  Transfers do not change the allocation  instructions for payments. You
can instruct us how to allocate additional Purchase Payments you make. If you do
not  instruct  us,  we will  allocate  them  in the  same  way as your  previous
instructions  to us. You may change the  allocation of future  payments  without
fee,  penalty or other charge upon written notice or telephone  instructions  to
the USAllianz  Service Center. A change will be effective for payments  received
on or after we receive your notice or  instructions.  Allianz Life  reserves the
right to limit the  number of  Variable  Options  that you may  invest in at one
time.  Currently,  you may invest in up to 10 investment choices at any one time
for the  additional  Purchase  Payments  you  make  (which  includes  any of the
Variable Options and the Allianz Life Fixed Account).  We may change this in the
future.  However,  we will always allow you to invest in at least five  Variable
Options.


If you make additional  Purchase Payments,  we will credit these amounts to your
Contract  within one  business  day.  Our  business day closes when the New York
Stock Exchange closes, which is usually at 4 p.m. Eastern Time.

ACCUMULATION UNITS

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

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

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

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

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

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

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

EXAMPLE:


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


INVESTMENT OPTIONS
--------------------------------------------------------------------------------

The Contract offers Variable  Options which invest in Portfolios of AIM Variable
Insurance Funds, The Alger American Fund,  Franklin Templeton Variable Insurance
Products Trust, and USAllianz  Variable  Insurance  Products Trust. The Contract
also offers a Fixed Account of Allianz Life. In Washington, the Fixed Account is
not available. Additional Portfolios may be available in the future.

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


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

Franklin  Templeton  Variable  Insurance  Products  Trust  (formerly,   Franklin
Valuemark  Funds)  issues  two  classes  of shares  which are  described  in the
attached  prospectus for Franklin  Templeton  Variable Insurance Products Trust.
Only Class 1 shares are available with your Contract. Effective May 1, 2000, the
funds of Templeton  Variable Products Series Fund were merged into similar funds
of Franklin Templeton Variable Insurance Products Trust.

Investment advisers for each Portfolio are listed in the table below and are as
follows: A I M Advisors, Inc., Allianz of America, Inc., Fred Alger Management,
Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual
Advisers, LLC, Templeton Asset Management Ltd., Templeton Global Advisors
Limited, and Templeton Investment Counsel, Inc. Certain advisers have retained
one or more subadvisers to help them manage the Portfolios.

The investment  objectives and policies of certain Portfolios are similar to the
investment  objectives  and  policies  of  other  mutual  funds  that  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 funds 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>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Growth Fund                                           A I M Advisors, Inc.

THE ALGER AMERICAN FUND:
Alger American Growth Portfolio                                Fred Alger Management, Inc.
Alger American Leveraged AllCap Portfolio                      Fred Alger Management, Inc.
(seeks long-term capital appreciation)

FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST:
Franklin Aggressive Growth Securities Fund                     Franklin Advisers, Inc.
Franklin Global Communications Securities Fund*                Franklin Advisers, Inc.
Franklin Global Health Care Securities Fund                    Franklin Advisers, Inc.
Franklin Growth and Income Securities Fund*                    Franklin Advisers, Inc.
Franklin High Income Fund                                      Franklin Advisers, Inc.
Franklin Income Securities Fund                                Franklin Advisers, Inc.
Franklin Large Cap Growth Securities Fund*                     Franklin Advisers, Inc.
Franklin Money Market Fund                                     Franklin Advisers, Inc.
Franklin Natural Resources Securities Fund                     Franklin Advisers, Inc
Franklin Real Estate Fund*                                     Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund*                     Franklin Advisory Services, LLC
Franklin S&P 500 Index Fund                                    Franklin Advisers, Inc.
Franklin Small Cap Fund                                        Franklin Advisers, Inc.
Franklin Technology Securities Fund                            Franklin Advisers, Inc.
Franklin U.S. Government Fund*                                 Franklin Advisers, Inc.
Franklin Value Securities Fund                                 Franklin Advisory Services, LLC
Franklin Zero Coupon Funds - 2000, 2005 and 2010               Franklin Advisers, Inc.
Mutual Discovery Securities Fund (capital appreciation)        Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund                                  Franklin Mutual Advisers, LLC
 (capital appreciation with income as a secondary goal)
Templeton Asset Strategy Fund*                                 Templeton Investment Counsel, Inc.
Templeton Developing Markets Securities Fund*                  Templeton Asset Management Ltd.
Templeton Global Income Securities Fund                        Franklin Advisers, Inc.
Templeton Growth Securities Fund*                              Templeton Global Advisors Limited
Templeton International Securities Fund*                       Templeton Investment Counsel, Inc.
Templeton International Smaller Companies Fund                 Templeton Investment Counsel, Inc.
Templeton Pacific Growth Securities Fund*                      Franklin Advisers, Inc.

USALLIANZ VARIABLE INSURANCE
PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund                          Allianz of America, Inc.
USAllianz VIP Fixed Income Fund                                Allianz of America, Inc.
USAllianz VIP Growth Fund                                      Allianz of America, Inc.

<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
   Franklin U.S. Government Fund                   Franklin U.S. Government Securities Fund    11-15-1999
   Templeton Asset Strategy Fund                   Templeton Global Asset Allocation Fund      05-01-2000
   Templeton Developing Markets Securities Fund    Templeton Developing Markets Equity Fund    05-01-2000
   Templeton Growth Securities Fund                Templeton Global Growth Fund                05-01-2000
   Templeton International Securities Fund         Templeton International Equity Fund         05-01-2000
   Templeton Pacific Growth Securities Fund        Templeton Pacific Growth Fund               05-01-2000
</FN>
</TABLE>

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

Shares of the funds may be offered in connection with certain  variable  annuity
contracts and variable life insurance  policies of various  insurance  companies
which may or may not be affiliated with Allianz Life.  Certain funds may also be
sold directly to qualified plans. The Investment  Advisers believe that offering
their shares in this manner will not be disadvantageous to you.


Allianz Life may enter into certain arrangements under which it is reimbursed by
the funds'  advisers,  distributors  and/or  affiliates  for the  administrative
services which it provides to the Portfolios.

TRANSFERS

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

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

The following applies to any transfer:

1) The minimum  amount  which you can transfer is $1,000 or your entire value in
   the Variable Option and/or the Fixed Account, if less.

2) You cannot make a partial  transfer if the value  remaining  in the  Variable
   Option or the Fixed Account would be less than $1,000.

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

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

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

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

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

8) During the Payout Phase, you cannot make a transfer if it would result in any
   Variable  Option or the Fixed Account  providing less than 10% of the annuity
   benefits under the Contract.

Allianz  Life  reserves  the right at any time and without  prior  notice to any
party to modify,  terminate or suspend the transfer provisions above, subject to
applicable state law.

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

DOLLAR COST AVERAGING PROGRAM

The Dollar Cost Averaging  Program allows you to  systematically  transfer a set
amount of money each month or quarter from any one Variable  Option or the Fixed
Account to up to eight of the other Variable Options. The Variable Option(s) you
transfer from may not be the Variable Option(s) you transfer to in this program.
By allocating  amounts on a regularly  scheduled basis, as opposed to allocating
the total amount at one  particular  time,  you may be less  susceptible  to the
impact of market  fluctuations.  You may only participate in this program during
the Accumulation Phase.

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

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

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

1) the number of desired transfers have been made;

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

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

4) the Contract is terminated.


If you  participate  in the Dollar Cost  Averaging  Program,  the transfers made
under the  program  are not  currently  taken into  account in  determining  any
transfer fee. You may not  participate in the Dollar Cost Averaging  Program and
Flexible Rebalancing at the same time.


FLEXIBLE REBALANCING


Once your money has been invested,  the performance of the Variable  Options may
cause your chosen allocation to shift.  Flexible Rebalancing is designed to help
you maintain your specified allocation mix among the different Variable Options.
You can direct us to readjust your Contract value on a quarterly, semi-annual or
annual basis to return to your original  Variable Option  allocations.  Flexible
Rebalancing transfers are done on calendar quarters only and will be made on the
20th day of the month unless that day is not a business  day. If it is not, then
the  transfer  will be made on the  previous  day. We must  receive a request to
participate  in the program by the 8th of the month for Flexible  Rebalancing to
begin that month. If you participate in Flexible Rebalancing, the transfers made
under the  program  are  currently  not taken into  account in  determining  any
transfer  fee.  The  Fixed  Account  is not  permitted  to be part  of  Flexible
Rebalancing.


VOTING PRIVILEGES

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

SUBSTITUTION

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

EXPENSES
--------------------------------------------------------------------------------

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

INSURANCE CHARGES

Each day, Allianz Life makes a deduction for its insurance charges. Allianz Life
does this as part of its calculation of the value of the Accumulation  Units and
the Annuity  Units.  The  insurance  charge has two parts:  1) the mortality and
expense risk charge, and 2) the administrative 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, the
death benefits,  certain expenses related to the Contract,  and for assuming the
risk (expense risk) that the current  charges will be insufficient in the future
to cover the cost of administering the Contract).

ADMINISTRATIVE 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,  together  with the  contract  maintenance  charge  (which is  explained
below),  is for all the  expenses  associated  with  the  administration  of the
Contract.  Some  of  these  expenses  include:   preparation  of  the  Contract,
confirmations,  annual  statements,  maintenance of Contract records,  personnel
costs, legal and accounting fees, filing fees, and computer and systems costs.

CONTRACT MAINTENANCE CHARGE

Every year on the anniversary of the date when your Contract was issued, Allianz
Life  deducts $30 from your  Contract  as a contract  maintenance  charge.  This
charge is for  administrative  expenses  (see  above).  This  charge  can not be
increased.

However,  during  the  Accumulation  Phase,  if the  value of your  Contract  or
Purchase Payments (less withdrawals) is at least $100,000 when the deduction for
the charge is to be made,  Allianz Life will not deduct this charge.  Currently,
Allianz Life also waives the charge during the Payout Phase if the value of your
Contract at the Income Date is at least $100,000.

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

CONTINGENT DEFERRED SALES CHARGE

If you make a  withdrawal,  it may be subject  to a  contingent  deferred  sales
charge.  During  the  Accumulation  Phase,  you can make  withdrawals  from your
Contract. Allianz Life keeps track of each Purchase Payment you make. The amount
of the  contingent  deferred  sales charge depends upon the length of time since
you made your Purchase Payment. This charge reimburses Allianz Life for expenses
associated with the promotion, sale and distribution of the Contracts.

For a partial withdrawal, we will deduct the charge from the amount remaining in
the Contract,  if sufficient.  Otherwise,  we will deduct it from the amount you
withdraw.  We will deduct the charge  pro-rata from the Variable  Options and/or
the Fixed Account unless you instruct us otherwise.  The charge may be different
depending  upon  whether  you own a Valuemark  II  Contract  or a Valuemark  III
Contract. The charge is:

     Valuemark II:                 Valuemark III:
-------------------------------------------------------


Years Since  Contingent      Years Since    Contingent
Purchase      Deferred        Purchase       Deferred
 Payment    Sales Charge       Payment     Sales Charge
-------------------------------------------------------

   0-1           5%             0-1             6%
   1-2           5%             1-2             5%
   2-3           4%             2-3             4%
   3-4           3%             3-4             3%
   4-5         1.5%             4-5           1.5%
   5+            0%              5+             0%

However,  after Allianz Life has had a Purchase Payment for 5 full years,  there
is no charge  when you  withdraw  that  Purchase  Payment.  For  purposes of the
contingent deferred sales charge, Allianz Life treats withdrawals as coming from
the oldest Purchase Payments first.

Note:  For tax purposes,  withdrawals  are  considered to have come from the las
money you put into the Contract. Thus, for tax purposes, earnings are considered
to come out first.

Once each  Contract  year,  you can make a  withdrawal  of up to 15% of Purchase
Payments you have made (less any prior  withdrawals) and no contingent  deferred
sales  charge  will be  deducted  from  the  15% you  take  out.  If you  make a
withdrawal of more than the free  withdrawal  amount,  it will be subject to the
contingent  deferred sales charge.  You may only carry over to the next year the
full 15% if you do not make any withdrawal in a Contract year. Allianz Life does
not assess the  contingent  deferred  sales charge from Purchase  Payments which
have  been  held  under  the  Contract  for more  than 5 years or as paid out as
Annuity Payments.


If you do not withdraw the full 15% in any one Contract  year, you may not carry
over the remaining percentage amount to another year.


You may also elect to participate in the  Systematic  Withdrawal  Program or the
Minimum  Distribution  Program.  These  programs  allow you to make  withdrawals
without the  deduction of the  contingent  deferred  sales charge under  certain
circumstances.  See "Access to Your Money" for a description  of the  Systematic
Withdrawal Program and the Minimum Distribution Program.

REDUCTION OR ELIMINATION OF THE
CONTINGENT DEFERRED SALES CHARGE

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

TRANSFER FEE

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

Allianz Life reserves the right to charge a fee for all transfers you make after
the Income Date.

PREMIUM TAXES

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

INCOME TAXES

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

PORTFOLIO EXPENSES


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


TAXES
--------------------------------------------------------------------------------

NOTE: Allianz Life has prepared the following  information on taxes as a general
discussion of the subject.  It is not intended as tax advice. You should consult
your own tax adviser  about your own  circumstances.  Allianz  Life has included
additional   information   regarding   taxes  in  the  Statement  of  Additional
Information.

ANNUITY CONTRACTS IN GENERAL

Annuity  contracts are a means of setting aside money for future  needs--usually
retirement.  Congress  recognized  how important  saving for  retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.

Basically, these rules provide that you will not be taxed on any earnings on the
money  held in your  annuity  Contract  until  you take the money  out.  This is
referred to as Tax Deferral. There are different rules regarding how you will be
taxed  depending  upon how you take the  money out and the type of  Contract--
Qualified or Non-Qualified (see following sections).



QUALIFIED AND NON-QUALIFIED CONTRACTS

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


A Qualified  Contract will not provide any necessary or additional  Tax Deferral
if it is used to fund a  Qualified  plan  that  is tax  deferred.  However,  the
Contract has features and benefits  other than Tax Deferral  that may make it an
appropriate investment for a Qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing a Qualified Contract.


MULTIPLE CONTRACTS

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

WITHDRAWALS-- NON-QUALIFIED CONTRACTS


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

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


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

1) paid on or after the taxpayer reaches age 59 1/2;

2) paid after you die;

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

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

5) paid under an immediate annuity; or

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

WITHDRAWALS-- QUALIFIED CONTRACTS




If you  make a  withdrawal  from  your  Qualified  Contract,  a  portion  of the
withdrawal is treated as taxable  income.  This portion  depends on the ratio of
pre-tax Purchase  Payments to the after-tax  Purchase Payments in your Contract.
If all of your  Purchase  Payments  were made with  pre-tax  money then the full
amount of any  withdrawal  is includible  in taxable  income.  Special rules may
apply to withdrawals from certain types of Qualified Contracts.

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

1) paid on or after you reach age 59 1/2;

2) paid after you die;

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

4) paid to you after leaving your employment in a series of substantially  equal
   periodic  payments  made  annually  (or  more  frequently)  under a  lifetime
   annuity;

5) paid to you after you have attained age 55 and you have left your employment;

6) paid for certain allowable medical expenses (as defined in the Code);

7) paid pursuant to a qualified domestic relations order;

8) paid on account of an IRS levy upon the Qualified Contract;

9) paid from an IRA for medical insurance (as defined in the Code);

10) paid from an IRA for qualified higher education expenses; or

11) paid  from  an IRA  for up to  $10,000  for qualified  first-time  homebuyer
    expenses (as defined in the Code).

The  exceptions  in 5) and 7) above do not apply to IRAs.  The  exception  in 4)
above applies to IRAs but without the requirement of leaving employment.

We have  provided a more  complete  discussion  in the  Statement of  Additional
Information.


WITHDRAWALS-- TAX-SHELTERED ANNUITIES

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

1) reaches age 59 1/2;

2) leaves his/her job;

3) dies;

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

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

DIVERSIFICATION

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

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

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

ACCESS TO YOUR MONEY
--------------------------------------------------------------------------------

You can have access to the money in your Contract:

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

2) by receiving Annuity Payments; or

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

Withdrawals can only be made during the Accumulation Phase.

When you make a complete  withdrawal  you will receive the value of the Contract
on the day you made the  withdrawal,  less any  applicable  contingent  deferred
sales  charge,  less any premium tax and less any contract  maintenance  charge.
(See "Expenses" for a discussion of the charges.)

Unless you instruct  Allianz Life otherwise,  a partial  withdrawal will be made
pro-rata from all the Variable Options and the Fixed Account you selected.

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

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

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

SYSTEMATIC WITHDRAWAL PROGRAM


If the value of your Contract is at least $25,000, Allianz Life offers a program
which  provides  automatic  monthly or quarterly  payments to you each year. The
total systematic  withdrawals  which you can make each year without Allianz Life
deducting a contingent  deferred  sales charge are limited to 9% of the value of
your  Contract.  However,  we may  increase  the 9% limit  to allow  you to make
systematic withdrawals to meet the applicable minimum distribution  requirements
for Qualified Contracts. If you make withdrawals under this program, you may not
also use the 15% free  withdrawal  amount  that year.  For a  discussion  of the
contingent  deferred  sales  charge  and the 15%  free  withdrawal  amount,  see
"Expenses."  Allianz Life reserves the right to modify the eligibility  rules of
this program at any time without notice.


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

MINIMUM DISTRIBUTION PROGRAM

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

SUSPENSION OF PAYMENTS OR TRANSFERS

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

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

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

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

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

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

PERFORMANCE
--------------------------------------------------------------------------------


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

Certain  Portfolios  have been in  existence  for some time and have  investment
performance   history.  In  order  to  demonstrate  how  the  actual  investment
experience of those Portfolios may affect your Accumulation Unit values, Allianz
Life has  prepared  performance  information.  The  performance  is based on the
historical  performance of the  Portfolios,  modified to reflect the charges and
expenses of your  Contract as if the Contract had been in existence for the time
periods shown. The inception dates of certain Portfolios  pre-date the inception
dates of the corresponding  Variable Options.  For periods starting prior to the
date the Variable Options invested in the Portfolio, the performance is based on
the historical performance of the corresponding Portfolio.


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

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

DEATH BENEFIT
--------------------------------------------------------------------------------

DEATH OF CONTRACT OWNER


If you die during the Accumulation Phase,  Allianz Life will pay a death benefit
to your Beneficiary (see below).  No death benefit is paid if you die during the
Payout Phase.  We will determine the value of the death benefit as of the end of
the business  day we receive  both due proof of death and a payment  election at
our USAllianz Service Center.


The value of the death  benefit at the time we process  the  election  option is
guaranteed  to be at least the larger of the surrender  value or the  guaranteed
minimum death benefit (described below).

o  The surrender  value is the Contract  value as of the end of the business day
   when we receive the written request for a withdrawal  which is reduced by the
   sum of:  (i) any  applicable  premium  taxes  which  we have  not  previously
   deducted;  (ii) any applicable  contract  maintenance  charge;  and (iii) any
   applicable contingent deferred sales charge.

o  The guaranteed minimum death benefit will be the greater of (a) or (b) below:

   (a)the sum of all Purchase  Payments you have made, less any withdrawals (and
      any contingent  deferred sales charge paid on the withdrawals),  increased
      by 5% each Contract anniversary prior to the earlier of your 81st birthday
      or the date of death.

   (b)the greatest sixth Contract  anniversary value for Contract  anniversaries
      prior to the earlier of your 81st birthday or the date of death. The sixth
      Contract  anniversary  value  is equal  to the  Contract  value on a sixth
      Contract anniversary,  plus any Purchase Payments you have made since that
      anniversary, less the amount of any withdrawals (and applicable contingent
      deferred sales charges paid on the withdrawals) since that anniversary.

      On the earlier of your 81st birthday or the date of death and  thereafter,
      the guaranteed minimum death benefit will only be increased by  subsequent
      Purchase Payments and decreased by subsequent withdrawals (and  applicable
      contingent deferred sales charges paid on the withdrawals).


If there are Joint Owners,  the age of the older Owner will be used to determine
the guaranteed minimum death benefit.


The Beneficiary may, at any time before the end of a sixty (60) day period after
Allianz Life receives  proof of death,  elect the death benefit to be paid under
one of the following options:

A. Lump sum  payment  of the death  benefit.  The value of the death  benefit is
   equal to the greater of the guaranteed minimum death benefit or the surrender
   value as of the end of the  business  day we receive  both due proof of death
   and a payment election.

B. The  payment of the entire  death  benefit  within 5 years of the date of the
   Contract  Owner's  death.  We determine  the value of the death benefit under
   Option B by comparing  the  guaranteed  minimum death benefit to the Contract
   value as of the end of the  business  day we receive  both due proof of death
   and a pay ment  election.  If the Contract  value is greater,  it will be the
   death benefit.  We will reduce any  distribution of such death benefit by the
   sum of  any  applicable  premium  taxes,  contract  maintenance  charges  and
   contingent deferred sales charges. If the guaranteed minimum death benefit is
   greater, it will be the death benefit. After the death benefit is calculated,
   it will be subject to market risk. We will not accept any additional Purchase
   Payments after the Contract Owner dies.

C. Payment over the lifetime of the designated  Beneficiary or over a period not
   extending  beyond the life  expectancy  of the  designated  Beneficiary  with
   distribution  beginning  within one year of the date of death of the Contract
   Owner (see  "Annuity  Payments  (The Payout  Phase) - Annuity  Options").  We
   determine  the value of the death  benefit  under Option C by  comparing  the
   guaranteed  death benefit to the Contract value as of the end of the business
   day we receive both due proof of death and a payment election. We will reduce
   any  distribution of such death benefit by the sum of any applicable  premium
   taxes, contract maintenance charges and contingent deferred sales charges. If
   the Contract value is greater,  we will treat it as the death benefit. If the
   guaranteed minimum death benefit is greater, it will be the death benefit.


D. If the  Beneficiary  is your  spouse,  he/she can  continue  the  Contract in
   his/her own name.  We determine the value of the death benefit under Option D
   by comparing the guaranteed minimum death benefit to the Contract value as of
   the end of the  business day we receive both due proof of death and a payment
   election.  If the  Contract  value is greater,  it will  remain the  Contract
   value. If the guaranteed minimum death benefit is greater, it will become the
   new  Contract  value.  Any  distribution  to the new  Contract  Owner will be
   reduced by the sum of any  applicable  premium  taxes,  contract  maintenance
   charges and con tingent deferred sales charges.


Upon the death of the Contract  Owner,  the Contingent  Owner or surviving Joint
Owner, as applicable, may elect to keep the Contract in force and become the new
Contract Owner (if they are the spouse of the Contract Owner).

If the Beneficiary  does not elect a payment  option,  we will make a single sum
settlement at the end of the sixty (60) day period following the date we receive
proof of death.  We may delay  paying a death  benefit  pending  receipt  of any
applicable tax consents and/or forms from a state.

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

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

DEATH OF ANNUITANT

If the Annuitant,  who is not a Contract  Owner or Joint Owner,  dies before the
Income Date, you will become the Annuitant  unless you designate a new Annuitant
(subject to our  underwriting  rules then in effect).  However,  if the Contract
Owner is a  non-natural  person  (e.g.,  a  corporation),  then the death of the
Annuitant  will  be  treated  as the  death  of the  Contract  Owner,  and a new
Annuitant may not be named.

If the  Annuitant  dies on or after  the  Income  Date,  the  remaining  amounts
payable,  if any, will be as provided for in the Annuity  Option  selected.  The
remaining  amounts  payable  will be paid at least as rapidly as they were being
paid at the Annuitant's death.

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 Lif is licensed
to do direct business in 49 states and the District of Columbia. Allianz Life is
a wholly-owned subsidiary of Allianz Versicherungs-AG Holding.


THE SEPARATE ACCOUNT

Allianz Life  established a separate account named Allianz Life Variable Account
B (Separate  Account) to hold the assets that  underlie  the  Contracts,  except
assets  allocated to the Fixed  Account.  The Board of Directors of Allianz Life
adopted a resolution to establish the Separate Account under Minnesota insurance
law on May 31, 1985.  Allianz Life has registered the Separate  Account with the
Securities  and  Exchange  Commission  as a  unit  investment  trust  under  the
Investment  Company Act of 1940.  The Separate  Account is divided into Variable
Options  (also  known  as  sub-accounts).  Each  Variable  Option  invests  in a
Portfolio.


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


DISTRIBUTION

USAllianz  Investor  Services,  LLC (formerly NALAC Financial Plans,  LLC), 1750
Hennepin Avenue, Minneapolis, MN 55403, acts as the distributor of the Contract.
USAllianz Investor Services, LLC is a wholly-owned subsidiary of Allianz Life.

Commissions   will  be  paid  to   broker-dealers   who  sell   the   Contracts.
Broker-dealers  will  be paid  commissions  up to  6.0%  of  Purchase  Payments.
Sometimes,  Allianz Life enters into an agreement with the  broker-dealer to pay
the  broker-dealer  commissions  as a  combination  of a  certain  amount of the
commission at the time of sale and a trail commission  (which when totaled could
exceed 6.0% of Purchase  Payments).  In  addition,  Allianz Life may pay certain
sellers for other  services  not directly  related to the sale of the  Contracts
(such as special  marketing  support  allowances).  Commissions may be recovered
from a  broker-dealer  if a  withdrawal  occurs  within 12 months of a  Purchase
Payment.

ADMINISTRATION

Allianz Life has hired  Delaware  Valley  Financial  Services,  Inc., 300 Berwyn
Park, Berwyn, Pennsylvania, to perform certain administrative services regarding
the Contracts. The administrative services include issuance of the Contracts and
maintenance of Contract Owner's records.

FINANCIAL STATEMENTS

The consolidated  financial  statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.


TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------


Company                                          2


Experts                                          2

Legal  Opinions                                  2

Distributor                                      2

Reduction or Elimination  of the
Contingent Deferred Sales  Charge                2

Calculation of Performance Data                  2

Federal Tax  Status                              8

Annuity Provisions                              14

Financial Statements                            15

<PAGE>
<TABLE>
<CAPTION>


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

CONDENSED FINANCIAL INFORMATION

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

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

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

(NUMBER OF UNITS IN THOUSANDS)                             ALGER    FRANKLIN  FRANKLIN    FRANKLIN
                                        AIM      ALGER   AMERICAN    GLOBAL    GLOBAL     GROWTH &  FRANKLIN  FRANKLIN
                                        V.I.   AMERICAN  LEVERAGED    COMM   HEALTH CARE   INCOME     HIGH     INCOME
VARIABLE OPTIONS:                      GROWTH   GROWTH    ALLCAP   SECURITIES SECURITIES SECURITIES  INCOME  SECURITIES
-----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>      <C>       <C>       <C>       <C>        <C>        <C>      <C>
YEAR ENDED DEC. 31, 1999
Unit value at beginning of period      $10.000* $10.000*  $10.000*  $28.308   $10.610    $26.226    $21.208  $25.122
Unit value at end of period            $11.084  $10.922   $12.160   $38.917    $9.615    $26.147    $20.900  $24.323
Number of units outstanding
  at end of period                         526      540       340    21,687       634     27,634      9,493   24,929
YEAR ENDED DEC. 31, 1998
Unit value at beginning of period           NA       NA        NA   $25.818   $10.000*   $24.551    $21.312  $25.065
Unit value at end of period                 NA       NA        NA   $28.308   $10.610    $26.226    $21.208  $25.122
Number of units outstanding
  at end of period                          NA       NA        NA    30,851       586     40,480     14,987   39,420
YEAR ENDED DEC. 31, 1997
Unit value at beginning of period           NA       NA        NA   $20.654        NA    $19.490    $19.375  $21.708
Unit value at end of period                 NA       NA        NA   $25.818        NA    $24.551    $21.312  $25.065
Number of units outstanding
  at end of period                          NA       NA        NA    39,623        NA     46,962     18,871   49,812
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period           NA       NA        NA   $19.565        NA    $17.310    $17.252  $19.785
Unit value at end of period                 NA       NA        NA   $20.654        NA    $19.490    $19.375  $21.708
Number of units outstanding
  at end of period                          NA       NA        NA    53,086        NA     50,027     20,736   57,504
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period           NA       NA        NA   $15.104        NA    $13.215    $14.608  $16.392
Unit value at end of period                 NA       NA        NA   $19.565        NA    $17.310    $17.252  $19.785
Number of units outstanding
  at end of period                          NA       NA        NA    66,669        NA     46,893     18,756   59,309
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period           NA       NA        NA   $17.319        NA    $13.677    $15.155  $17.734
Unit value at end of period                 NA       NA        NA   $15.104        NA    $13.215    $14.608  $16.392
Number of units outstanding
  at end of period                          NA       NA        NA    70,082        NA     35,695     15,679   56,569
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period           NA       NA        NA   $15.889        NA    $12.574    $13.278  $15.163
Unit value at end of period                 NA       NA        NA   $17.319        NA    $13.677    $15.155  $17.734
Number of units outstanding
  at end of period                          NA       NA        NA    84,217        NA     24,719     11,787   38,967
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period           NA       NA        NA   $14.821        NA    $11.949    $11.583  $13.580
Unit value at end of period                 NA       NA        NA   $15.889        NA    $12.574    $13.278  $15.163
Number of units outstanding
  at end of period                          NA       NA        NA    39,387        NA     17,144      4,780   11,397
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period           NA       NA        NA   $12.062        NA     $9.803     $9.026   $9.842
Unit value at end of period                 NA       NA        NA   $14.821        NA    $11.949    $11.583  $13.580
Number of units outstanding
  at end of period                          NA       NA        NA    16,188        NA      9,671      1,923    4,472
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period           NA       NA        NA   $12.010        NA    $10.180    $10.021  $10.783
Unit value at end of period                 NA       NA        NA   $12.062        NA     $9.803     $9.026   $9.842
Number of units outstanding
  at end of period                          NA       NA        NA     6,300        NA      5,356      1,056    3,011
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


NUMBER OF UNITS IN THOUSANDS)           FRANKLIN         FRANKLIN            FRANKLIN
                                       LARGE CAP FRANKLIN NATURAL   FRANKLIN  RISING  FRANKLIN  FRANKLIN  FRANKLIN
                                        GROWTH    MONEY  RESOURCES    REAL  DIVIDENDS  S&P 500   SMALL      U.S.
VARIABLE OPTIONS:                      SECURITIES MARKET SECURITIES  ESTATE SECURITIES  INDEX     CAP    GOVERNMENT
-------------------------------------------------------------------------------------------------------------------
<S>                                     <C>      <C>      <C>      <C>      <C>      <C>        <C>       <C>
YEAR ENDED DEC. 31, 1999
Unit value at beginning of period       $15.574  $14.386   $8.505   $23.107  $21.165  $10.000*   $14.600   $19.014
Unit value at end of period             $20.218  $14.860  $11.092   $21.386  $18.846   $10.467   $28.353   $18.574
Number of units outstanding
  at end of period                       10,867   17,388    2,940     5,401   17,252       727    10,654    20,938
YEAR ENDED DEC. 31, 1998
Unit value at beginning of period       $13.130  $13.865  $11.559   $28.169  $20.074        NA   $14.952   $17.947
Unit value at end of period             $15.574  $14.386   $8.505   $23.107  $21.165        NA   $14.600   $19.014
Number of units outstanding
  at end of period                        8,454   22,032    4,453     9,639   27,683        NA    14,856    30,500
YEAR ENDED DEC. 31, 1997
Unit value at beginning of period       $11.254  $13.359  $14.467   $23.668  $15.303        NA   $12.913   $16.650
Unit value at end of period             $13.130  $13.865  $11.559   $28.169  $20.074        NA   $14.952   $17.947
Number of units outstanding
  at end of period                        5,673   20,982    5,709    13,445   33,249        NA    16,925    36,347
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period      $10.000*  $12.883  $14.109   $18.073  $12.498        NA   $10.146   $16.298
Unit value at end of period             $11.254  $13.359  $14.467   $23.668  $15.303        NA   $12.913   $16.650
Number of units outstanding
  at end of period                        3,722   28,060    6,998    12,757   35,569        NA    12,784        45
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period            NA  $12.354  $13.979   $15.594   $9.769        NA   $10.000*  $13.835
Unit value at end of period                  NA  $12.883  $14.109   $18.073  $12.498        NA   $10.146   $16.298
Number of units outstanding
  at end of period                           NA   31,040    6,919    10,998   33,789        NA     1,302    34,313
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period            NA  $12.066  $14.464   $15.369  $10.327        NA        NA   $14.698
Unit value at end of period                  NA  $12.354  $13.979   $15.594   $9.769        NA        NA   $13.835
Number of units outstanding
  at end of period                           NA   39,437    8,285    11,645   28,778        NA        NA    36,490
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period            NA  $11.932   $9.424   $13.095  $10.848        NA        NA   $13.586
Unit value at end of period                  NA  $12.066  $14.464   $15.369  $10.327        NA        NA   $14.698
Number of units outstanding
  at end of period                           NA   10,247    4,685     5,589   26,256        NA        NA    40,402
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period            NA  $11.742  $10.635   $11.848  $10.000*       NA        NA   $12.798
Unit value at end of period                  NA  $11.932   $9.424   $13.095  $10.848        NA        NA   $13.586
Number of units outstanding
  at end of period                           NA    6,951    1,419     1,052    8,388        NA        NA    25,054
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period            NA  $11.288  $10.387    $9.000       NA        NA        NA   $11.199
Unit value at end of period                  NA  $11.742  $10.635   $11.848       NA        NA        NA   $12.798
Number of units outstanding
  at end of period                           NA    5,682      833       394       NA        NA        NA    14,426
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period            NA  $10.637  $12.247   $10.368       NA        NA        NA   $10.427
Unit value at end of period                  NA  $11.288  $10.387    $9.000       NA        NA        NA   $11.199
Number of units outstanding
  at end of period                           NA    5,768    1,015       200       NA        NA        NA     5,450
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

(NUMBER OF UNITS IN THOUSANDS)

                                                 FRANKLIN FRANKLIN FRANKLIN                                TEMPLETON
                                        FRANKLIN   ZERO     ZERO     ZERO     MUTUAL     MUTUAL  TEMPLETON DEVELOPING
                                         VALUE    COUPON   COUPON   COUPON  DISCOVERY    SHARES    ASSET    MARKETS
VARIABLE OPTIONS:                      SECURITIES  2000     2005     2010   SECURITIES SECURITIES STRATEGY SECURITIES
---------------------------------------------------------------------------------------------------------------------
<S>                                     <C>       <C>      <C>     <C>      <C>         <C>       <C>       <C>
YEAR ENDED DEC. 31, 1999
Unit value at beginning of period       $7.717    $20.684  $25.003  $27.920  $11.226    $11.837   $13.589    $7.993
Unit value at end of period             $7.736    $21.023  $23.205  $24.164  $13.701    $13.237   $14.408   $12.188
Number of units outstanding
  at end of period                         727      2,547    2,011    1,851    5,796     12,423     2,504    11,226
YEAR ENDED DEC. 31, 1998
Unit value at beginning of period      $10.000*   $19.512  $22.532  $24.740  $11.983    $11.993   $13.786   $10.340
Unit value at end of period             $7.717    $20.684  $25.003  $27.920  $11.226    $11.837   $13.589    $7.993
Number of units outstanding
  at end of period                         719      3,595    2,635    2,582    9,718     18,133     4,056    15,989
YEAR ENDED DEC. 31, 1997
Unit value at beginning of period           NA    $18.475  $20.517  $21.522  $10.180    $10.330   $12.514   $11.487
Unit value at end of period                 NA    $19.512  $22.532  $24.740  $11.983    $11.993   $13.786   $10.340
Number of units outstanding
  at end of period                          NA      4,523    2,910    2,998    9,940     18,744     5,229    23,005
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period           NA    $18.294  $20.914  $22.431 $10.000*    $10.000*  $10.591    $9.582
Unit value at end of period                 NA    $18.475  $20.517  $21.522  $10.180    $10.330   $12.514   $11.487
Number of units outstanding
  at end of period                          NA      5,636    3,579    3,297    1,471      2,613     4,104    22,423
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period           NA    $15.373  $16.096  $15.930       NA         NA   $10.000*   $9.454
Unit value at end of period                 NA    $18.294  $20.914  $22.431       NA         NA   $10.591    $9.582
Number of units outstanding
  at end of period                          NA      6,066    3,504    3,437       NA         NA     1,338    15,618
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period           NA    $16.717  $18.050  $18.144       NA         NA        NA   $10.000*
Unit value at end of period                 NA    $15.373  $16.096  $15.930       NA         NA        NA    $9.454
Number of units outstanding
  at end of period                          NA      4,953    2,780    2,589       NA         NA        NA     9,774
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period           NA    $14.595  $14.975  $14.670       NA         NA        NA        NA
Unit value at end of period                 NA    $16.717  $18.050  $18.144       NA         NA        NA        NA
Number of units outstanding
  at end of period                          NA      3,787    2,020    1,405       NA         NA        NA        NA
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period           NA    $13.570  $13.705  $13.482       NA         NA        NA        NA
Unit value at end of period                 NA    $14.595  $14.975  $14.670       NA         NA        NA        NA
Number of units outstanding
  at end of period                          NA      2,886    1,090      849       NA         NA        NA        NA
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period           NA    $11.446  $11.545  $11.390       NA         NA        NA        NA
Unit value at end of period                 NA    $13,570  $13.705  $13.482       NA         NA        NA        NA
Number of units outstanding
  at end of period                          NA      2,012      795    1,150       NA         NA        NA        NA
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period           NA    $10.961  $11.406  $11.486       NA         NA        NA        NA
Unit value at end of period                 NA    $11.446  $11.545  $11.390       NA         NA        NA        NA
Number of units outstanding
  at end of period                          NA      1,041      406      581       NA         NA        NA        NA
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                       TEMPLETON                                    TEMPLETON  USALLIANZ USALLIANZ
                                         GLOBAL   TEMPLETON  TEMPLETON   TEMPLETON   PACIFIC      VIP       VIP    USALLIANZ
                                         INCOME     GROWTH   INTERNT'L   INTERNT'L    GROWTH  DIVERSIFIED  FIXED      VIP
VARIABLE OPTIONS:                      SECURITIES SECURITIES SECURITIES SMALLER COS SECURITIES  ASSETS    INCOME    GROWTH
----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>        <C>        <C>         <C>        <C>       <C>      <C>
YEAR ENDED DEC. 31, 1999
Unit value at beginning of period       $17.905    $16.309    $18.437      $9.364      $8.078   $10.000*  $10.000*  $10.000*
Unit value at end of period             $16.635    $19.466    $23.022     $11.441     $10.915   $10.170    $9.751   $10.733
Number of units outstanding
  at end of period                        4,226     24,872     27,313       1,034       7,066         9        13        21
YEAR ENDED DEC. 31, 1998
Unit value at beginning of period       $16.957    $15.176    $17.711     $10.825      $9.431        NA        NA        NA
Unit value at end of period             $17.905    $16.309    $18.437      $9.364      $8.078        NA        NA        NA
Number of units outstanding
  at end of period                        6,976     34,226     44,256       1,533      10,669        NA        NA        NA
YEAR ENDED DEC. 31, 1997
Unit value at beginning of period       $16.780    $13.560    $16.081     $11.145     $14.932        NA        NA        NA
Unit value at end of period             $16.957    $15.176    $17.711     $10.825      $9.431        NA        NA        NA
Number of units outstanding
  at end of period                        9,434     41,433     58,179       1,998      15,833        NA        NA        NA
YEAR ENDED DEC. 31, 1996
Unit value at beginning of period       $15.522    $11.339    $13.263    $10.000*     $13.630        NA        NA        NA
Unit value at end of period             $16.781    $13.560    $16.081     $11.145     $14.932        NA        NA        NA
Number of units outstanding
  at end of period                       11,857     40,327     64,375       1,388      22,061        NA        NA        NA
YEAR ENDED DEC. 31, 1995
Unit value at beginning of period       $13.726    $10.201    $12.161          NA     $12.802        NA        NA        NA
Unit value at end of period             $15.522    $11.339    $13.263          NA     $13.630        NA        NA        NA
Number of units outstanding
  at end of period                       14,181     28,309     59,883          NA      22,483        NA        NA        NA
YEAR ENDED DEC. 31, 1994
Unit value at beginning of period       $14.650    $10.000*   $12.226          NA     $14.233        NA        NA        NA
Unit value at end of period             $13.726    $10.201    $12.161          NA     $12.802        NA        NA        NA
Number of units outstanding
  at end of period                       16,855     14,637     60,464          NA      27,231        NA        NA        NA
YEAR ENDED DEC. 31, 1993
Unit value at beginning of period       $12.733         NA     $9.642          NA      $9.761        NA        NA        NA
Unit value at end of period             $14.650         NA    $12.226          NA     $14.233        NA        NA        NA
Number of units outstanding
  at end of period                       13,054         NA     24,026          NA      14,240        NA        NA        NA
YEAR ENDED DEC. 31, 1992
Unit value at beginning of period       $12.962         NA    $10.000*         NA     $10.000*       NA        NA        NA
 Unit value at end of period            $12.733         NA     $9.642          NA      $9.761        NA        NA        NA
Number of units outstanding
  at end of period                        5,487         NA      1,329          NA         534        NA        NA        NA
YEAR ENDED DEC. 31, 1991
Unit value at beginning of period       $11.706         NA         NA          NA          NA        NA        NA        NA
Unit value at end of period             $12.962         NA         NA          NA          NA        NA        NA        NA
Number of units outstanding
  at end of period                        2,979         NA         NA          NA          NA        NA        NA        NA
YEAR ENDED DEC. 31, 1990
Unit value at beginning of period       $10.813         NA         NA          NA          NA        NA        NA        NA
Unit value at end of period             $11.706         NA         NA          NA          NA        NA        NA        NA
Number of units outstanding
  at end of period                         1322         NA         NA          NA          NA        NA        NA        NA

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

Accumulation  Unit Value at the 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,  Franklin  Natural  Resources  Securities,
Franklin Real Estate,  and Templeton Global Income Securities  Variable Options;
3/14/89 for the Franklin  U.S.  Government  and the three  Franklin  Zero Coupon
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;  5/1/98 for the Franklin Global
Health Care Securities and Franklin Value Securities  Variable Options.  The AIM
V.I. Growth,  Alger American Growth,  Alger American Leveraged AllCap,  Franklin
S&P 500 Index, USAllianz VIP Diversified Assets, USAllianz VIP Fixed Income, and
USAllianz VIP Growth  Variable  Options  commenced  operations with the Separate
Account on November  12,  1999.

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


<PAGE>

                                     PART B

                       STATEMENT OF ADDITIONAL INFORMATION
                         VALUEMARK II AND VALUEMARK III
                           INDIVIDUAL FLEXIBLE PAYMENT
                           VARIABLE ANNUITY CONTRACTS
                                    issued by
                         ALLIANZ LIFE VARIABLE ACCOUNT B
                                       and
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
                                   May 1, 2000

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

THE PROSPECTUS  CONCISELY  SETS FORTH  INFORMATION  THAT A PROSPECTIVE  INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS,  CALL OR WRITE THE
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
Reduction or Elimination of the Contingent
 Deferred Sales Charge ..........................     2
Calculation of Performance Data .................     2
Federal Tax Status ..............................     8
Annuity Provisions ..............................    14
Financial Statements ............................    15


















                                                            VMII/III 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.

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

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

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

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

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

Any such  performance  data will include total return figures for the one, five,
and ten year (or since  inception)  time  periods  indicated.  Such total return
figures will reflect the deduction of a 1.25% Mortality and Expense Risk Charge,
a 0.15% Administrative  Expense Charge, the operating expenses of the underlying
Portfolios  and any  applicable  contingent  deferred  sales charge and Contract
Maintenance Charge ("Standardized Total Return").  The contingent deferred sales
charge and Contract  Maintenance  Charge  deductions are  calculated  assuming a
Contract is surrendered at the end of the reporting period.

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

                                P (1 + T)n = ERV
where:

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

T = average annual total return;

n = number  of  years;

ERV = ending redeemable value of a hypothetical  $1,000 purchase payment made at
the beginning of the period at the end of the period.

The Company may also advertise  performance data which will be calculated in the
same manner as described  above but which will not reflect the  deduction of the
contingent deferred sales charge and the Contract Maintenance Charge. Cumulative
total return is  calculated in a similar  manner as described  above except that
the results are not  annualized.  The Company may also advertise  cumulative and
total return  information  over different  periods of time. The Company may also
present performance information computed on a different basis ("Non-Standardized
Total Return").

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 the  Contract  Maintenance  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 Accumulation
Unit for a  particular  period of time  (generally  seven  days).  The return is
determined by dividing the net change (exclusive of any capital changes) in such
Accumulation  Unit by its beginning  value,  and then multiplying it by 365/7 to
get the annualized  current yield.  The  calculation of net change  reflects the
value of additional  shares  purchased with the dividends paid by the Portfolio,
and the  deduction of the  Mortality  and Expense  Risk  Charge,  Administrative
Expense Charge and Contract Maintenance Charge.

The  effective  yield  reflects the effects of  compounding  and  represents  an
annualization  of the current return with all dividends  reinvested.  (Effective
yield = [(Base Period Return + 1)365/7] -1.)

For the seven-day period ending on 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 Option's. 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
Accumulation  Unit  earned  during  the  period  (minus  the  deduction  for the
Mortality and Expense Risk Charge,  Administrative  Expense  Charge and Contract
Maintenance Charge) by the Accumulation Unit value on the last day of the period
and annualizing the resulting figure, according to the following formula:

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

a = net investment  income  earned  during the  period  by the  Variable  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  Accumulation  Units outstanding  during the
    period;

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

The above  formula will be used in  calculating  quotations  of yield,  based on
specified  30-day  periods (or one month)  identified  in the sales  literature,
advertisement,  or communication.  Yield calculations  assume that no Contingent
Deferred Sales Charges have been deducted (see the  Prospectus  for  information
regarding the Contingent Deferred Sales Charge).  The Company does not currently
advertise  yield  information  for any Variable  Option (other than the Franklin
Money  Market  Fund).

Performance  Ranking

Total return information for the Sub-Accounts and the Portfolios may be compared
to relevant indices,  including U.S. domestic and international indices and data
from Lipper Analytical Services, Inc., Standard & Poor's Indices, or VARDS(R).

From time to time,  evaluation of performance by independent sources may also be
used.


<PAGE>

<TABLE>
<CAPTION>

Performance Information

Total returns reflect all aspects of a Variable Option's return,  including the automatic  reinvestment by Allianz
Life Variable Account B of all distributions and any change in a Variable Option's value over the period.

The returns reflect the deduction of the Mortality and Expense Risk Charge,  Administrative Expense Charge and the
operating expenses of each Portfolio and are shown both with and without the deduction of the Contingent  Deferred
Sales Charge and Contract Maintenance Charge. 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.

Standardized Total Return Valuemark II

Average  Annual Total Return for the period ended  December 31, 1999:  with  Contingent  Deferred Sales Charge and
other charges

                                                                        Valuemark II
-------------------------------------------------------------------------------------------------------------------
                                          Sub-Account
                                           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       33.13%       22.94%      20.73%      12.40%        13.16%
Franklin Global Health Care Securities      5/1/98      -13.73%           NA          NA          NA        -4.60%
Franklin Growth and Income Securities*     1/24/89       -4.65%        9.60%      14.51%       9.82%         9.11%
Franklin High Income                       1/24/89       -5.81%        1.76%       7.29%       7.56%         6.90%
Franklin Income Securities                 1/24/89       -7.53%        3.09%       8.08%       8.41%         8.40%
Franklin Large Cap Growth Securities*       5/1/96       25.47%       20.98%          NA          NA        20.87%
Franklin Money Market                      1/24/89       -1.05%        2.83%       3.61%       3.31%         3.60%
Franklin Natural Resources Securities      1/24/89       26.06%       -9.49%      -4.73%      -1.09%         0.86%
Franklin Real Estate*                      1/24/89      -11.80%       -4.21%       6.39%       7.44%         7.13%
Franklin Rising Dividends Securities*      1/27/92      -15.31%        6.46%      13.93%          NA         8.24%
Franklin Small Cap                         11/1/95       89.85%       29.44%          NA          NA        28.28%
Franklin U.S. Government*                  3/14/89       -6.67%        2.93%       5.93%       5.87%         5.82%
Franklin Value Securities                   5/1/98       -4.11%           NA          NA          NA       -16.74%
Franklin Zero Coupon - 2000                3/14/89       -2.71%        3.63%       6.32%       6.66%         7.05%
Franklin Zero Coupon - 2005                3/14/89      -11.54%        3.42%       7.46%       7.29%         8.03%
Franklin Zero Coupon - 2010                3/14/89      -17.81%        3.16%       8.56%       7.65%         8.44%
Mutual Discovery Securities                11/8/96       17.69%        9.71%          NA          NA        10.10%
Mutual Shares Securities                   11/8/96        7.48%        7.90%          NA          NA         8.90%
Templeton Asset Strategy*                   5/1/95        1.68%        4.05%          NA          NA         7.98%
Templeton Developing Markets Sec.*         3/15/94       48.14%        1.16%       5.05%          NA         3.36%
Templeton Global Income Securities         1/24/89      -11.45%       -1.13%       3.77%       4.32%         4.69%
Templeton Growth Securities*               3/15/94       15.01%       12.14%      13.67%          NA        12.09%
Templeton International Securities*        1/27/92       20.52%       12.03%      13.49%          NA        11.01%
Templeton International Smaller Cos.        5/1/96       17.83%        0.04%          NA          NA         3.34%
Templeton Pacific Growth Securities*       1/27/92       30.77%      -10.98%      -3.34%          NA         1.02%

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

The Franklin Aggressive Growth Securities and Franklin Technology Securities  Sub-Accounts commenced operations on
May 1, 2000.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Standardized Total Return Valuemark III

Average  Annual Total Return for the period ended  December 31, 1999:  with  Contingent  Deferred Sales Charge and
other charges

                                                                        Valuemark III
-------------------------------------------------------------------------------------------------------------------
                                          Sub-Account
                                           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       32.28%       22.94%      20.73%      12.40%        13.16%
Franklin Global Health Care Securities      5/1/98      -14.58%           NA          NA          NA        -4.60%
Franklin Growth and Income Securities*     1/24/89       -5.50%       -9.49%      14.51%       9.82%         9.11%
Franklin High Income                       1/24/89       -6.66%        1.76%       7.29%       7.56%         6.90%
Franklin Income Securities                 1/24/89       -8.38%        3.09%       8.08%       8.41%         8.40%
Franklin Large Cap Growth Securities*       5/1/96       24.62%       20.98%          NA          NA        20.87%
Franklin Money Market                      1/24/89       -1.90%        2.83%       3.61%       3.31%         3.60%
Franklin Natural Resources Securities      1/24/89       25.21%       -9.49%      -4.73%      -1.09%         0.86%
Franklin Real Estate*                      1/24/89      -12.65%       -4.21%       6.39%       7.44%         7.13%
Franklin Rising Dividends Securities*      1/27/92      -16.16%        6.46%      13.93%          NA         8.24%
Franklin Small Cap                         11/1/95       89.00%       29.44%          NA          NA        28.28%
Franklin U.S. Government*                  3/14/89       -7.52%        2.93%       5.93%       5.87%         5.82%
Franklin Value Securities                   5/1/98       -4.96%           NA          NA          NA       -16.74%
Franklin Zero Coupon - 2000                3/14/89       -3.56%        3.63%       6.32%       6.66%         7.05%
Franklin Zero Coupon - 2005                3/14/89      -12.39%        3.42%       7.46%       7.29%         8.03%
Franklin Zero Coupon - 2010                3/14/89      -18.66%        3.16%       8.56%       7.65%         8.44%
Mutual Discovery Securities                11/8/96       16.84%        9.71%          NA          NA        10.10%
Mutual Shares Securities                   11/8/96        6.63%        7.90%          NA          NA         8.90%
Templeton Asset Strategy*                   5/1/95        0.83%        4.04%          NA          NA         7.98%
Templeton Developing Markets Sec.*         3/15/94       47.29%        1.16%       5.05%          NA         3.36%
Templeton Global Income Securities         1/24/89      -12.30%        3.77%       3.77%       4.32%         4.69%
Templeton Growth Securities*               3/15/94       14.16%       12.14%      13.67%          NA        12.09%
Templeton International Securities*        1/27/92       19.67%       12.03%      13.49%          NA        11.01%
Templeton International Smaller Cos.        5/1/96       16.98%        0.04%          NA          NA         3.34%
Templeton Pacific Growth Securities*       1/27/92       29.92%      -10.98%      -3.34%          NA         1.02%

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

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


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

The Franklin Aggressive Growth Securities and Franklin Technology Securities  Sub-Accounts commenced operations on
May 1, 2000.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Non-Standardized Total Return Valuemark II/III

Total  Return for the period  ended  December  31,  1999:  without  Contingent  Deferred  Sales Charge or Contract
Maintenance Charge

                                                                     Annual Total Return
-------------------------------------------------------------------------------------------------------------------
                                         Sub-Account
                                          Inception       One         Three        Five          Ten        Since
Variable Option                             Date         Year         Year         Year         Year      Inception
-------------------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>          <C>          <C>          <C>
Franklin Global Communications Securities* 1/24/89      37.48%       23.51%       20.84%       12.48%        13.23%
Franklin Global Health Care Securities      5/1/98      -9.38%           NA           NA           NA        -2.32%
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 Natural Resources Securities      1/24/89      30.41%       -8.48%       -4.52%       -0.99%         0.95%
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 U.S. Government*                  3/14/89      -2.32%        3.71%        6.07%        5.94%         5.90%
Franklin Value Securities                   5/1/98       0.24%           NA           NA           NA       -14.26%
Franklin Zero Coupon - 2000                3/14/89       1.64%        4.40%        6.46%        6.73%         7.12%
Franklin Zero Coupon - 2005                3/14/89      -7.19%        4.19%        7.59%        7.36%         8.10%
Franklin Zero Coupon - 2010                3/14/89     -13.46%        3.93%        8.69%        7.72%         8.51%
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 Securities*   3/15/94      52.49%        1.99%        5.21%           NA         3.47%
Templeton Global Income Securities         1/24/89      -7.10%       -0.29%        3.92%        4.40%         4.76%
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 Companies   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 Statement of Additional  Information  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
   Franklin U.S. Government Fund                   Franklin U.S. Government Securities Fund     11-15-1999
   Templeton Asset Strategy Fund                   Templeton Global Asset Allocation Fund       05-01-2000
   Templeton Developing Markets Securities Fund    Templeton Developing Markets Equity Fund     05-01-2000
   Templeton Growth Securities Fund                Templeton Global Growth Fund                 05-01-2000
   Templeton International Securities Fund         Templeton International Equity Fund          05-01-2000
   Templeton Pacific Growth Securities Fund        Templeton Pacific Growth Fund                05-01-2000


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

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

You 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 your total return may
be in any future period.

</TABLE>

<PAGE>

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

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

The 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  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 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

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

Contracts Owned by
Other than Natural Persons

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

Tax Treatment of Assignments

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

Death Benefits

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

Income Tax Withholding

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

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

Tax Treatment of Withdrawals -
Non-Qualified Contracts

Section  72  of  the  Code  governs  treatment  of  distributions  from  annuity
contracts. It provides that if the contract value exceeds the aggregate purchase
payments  made,  any amount  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 59 1/2;  (b)  after the death of the  Contract
Owner; (c) if the taxpayer is totally  disabled (for this purpose  disability is
as defined in Section  72(m)(7) of the Code);  (d) in a series of  substantially
equal periodic  payments made not less frequently than annually for the life (or
life  expectancy)  of the  taxpayer  or for  the  joint  lives  (or  joint  life
expectancies)  of the  taxpayer  and his  Beneficiary;  (e)  under an  immediate
annuity;  or (f) which are  allocable to purchase  payments made prior to August
14, 1982.

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

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

Qualified Plans

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

A Qualified  Contract will not provide any necessary or additional  tax deferral
if it is used to fund a  Qualified  plan  that  is tax  deferred.  However,  the
Contract has features and benefits  other than tax deferral  that may make it an
appropriate  investment for a Qualified Plan. Following are general descriptions
of the types of  Qualified  Plans with  which the  Contracts  may be used.  Such
descriptions are not exhaustive and are for general informational purposes only.
The tax rules regarding Qualified Plans are very complex and will have differing
applications,  depending on individual facts and  circumstances.  Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.

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

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

A 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.

a.  Tax-Sheltered Annuities

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

b.  Individual Retirement Annuities

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

Roth IRAs

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

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

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

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

c. Pension and Profit-Sharing Plans

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

Tax Treatment of Withdrawals -
Qualified Contracts

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

With  respect  to (c)  above,  if the  series of  substantially  equal  periodic
payments is  modified  before the later of your  attaining  age 591/2 or 5 years
from the date of the first  periodic  payment,  then the tax for the year of the
modification  is  increased  by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the  exception,  plus interest for the tax
years in which the exception was used.

Generally, distributions from a Qualified Plan must commence no later than April
1 of the  calendar  year  following  the  later  of:  (a) the year in which  the
employee  attains  age 701/2,  or (b) the  calendar  year in which the  employee
retires.  The date set forth in (b) does not apply to an  Individual  Retirement
Annuity.  Required  distributions  must be over a period not  exceeding the life
expectancy  of the  individual  or the joint lives or life  expectancies  of the
individual  and  his or her  designated  beneficiary.  If the  required  minimum
distributions  are not made,  a 50%  penalty tax is imposed as to the amount not
distributed.

Tax-Sheltered Annuities -
Withdrawal Limitations

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

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

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 Variable Account.

At the Income Date,  the Contract Value in each  Sub-Account  will be applied to
the  applicable  Annuity  Tables.  The  Annuity  Table used will depend upon the
Annuity Option chosen.  Both sex distinct and unisex Annuity Tables are utilized
by the  Company,  depending  on the  state and type of  Contract.  If, as of the
Income Date, the then current  Annuity Option rates  applicable to this class of
Contracts  provide a larger  income  than that  guaranteed  for the same form of
annuity under the Contract, the larger amount will be paid. The dollar amount of
annuity payments after the first is determined as follows:

1. The dollar amount of the first annuity  payment is divided by the value of an
Annuity Unit as of the Income Date. This establishes the number of Annuity Units
for each monthly  payment.  The number of Annuity Units remains fixed during the
annuity payment period.

2. The fixed number of Annuity Units is multiplied by the Annuity Unit value for
the last Valuation Period of the month preceding the month for which the payment
is due. This result is the dollar amount of the payment.

3. The total dollar amount of each Variable  Annuity  variable payout is the sum
of  all  Sub-Account   Variable  Annuity  payments,   reduced  by  the  Contract
Maintenance Charge.

Annuity Unit Value

The value of an Annuity  Unit for a  Sub-Account  is  determined  (see below) by
subtracting (2) from (1),  dividing the result by (3) and multiplying the result
by  .999866337248  (.999866337248  is the daily factor to neutralize the assumed
net investment  rate of 5% per annum which is built into the annuity rate table)
where:

1. is the net result of
   a. the assets of the Sub-Account attributable  to the Annuity Units;  plus or
      minus
   b. the cumulative  charge or credit for taxes reserved which is determined by
      the Company to have resulted from the  operation of the  Sub-Account;

2. is the cumulative unpaid charge for the Mortality and Expense Risk Charge and
for the Administrative Expense Charge; and

3. is the  number  of  Annuity  Units  outstanding  at the end of the  Valuation
Period.

The value of an Annuity Unit may increase or decrease from  Valuation  Period to
Valuation Period.

Fixed Annuity Payout

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

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,
              1998 and 1997.

          The  following  financial  statements  of  the  Variable  Account  are
          included in Part B hereof.

          1.  Independent Auditors' Report.
          2.  Statements of Assets and  Liabilities  as of December 31, 1999.
          3.  Statements  of  Operations  for the year ended  December 31, 1999.
          4.  Statements of  Changes  in Net Assets for the years ended December
              31, 1999 and 1998.
          5.  Notes to Financial Statements - December 31, 1999.


b.   Exhibits

    1.  Resolution of Board of Directors of the Company authorizing
          the establishment of the Variable Account(1)
    2.  Not Applicable
    3.  a. Principal Underwriter Agreement (3)
        b. Selling Agreement
    4.  Individual Variable Annuity Contract(2)
    5.  Application for Individual Variable Annuity Contract(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
        (i)  Form  of  Fund   Participation  Agreement  between  AIM  Variable
             Insurance Funds, Inc., Allianz  Life  Insurance  Company of North
             America and NALAC Financial Plans LLC(4)
        (ii) Form of Fund Participation Agreement between Alger American Fund,
             Allianz  Life Insurance Company of  North  America and Fred Alger
             and Company(4)
        (iii)Form of Fund Participation Agreement between  USAllianz  Variable
             Insurance Products Trust, Allianz Life Insurance Company of North
             America and BISYS Fund Services Limited Partnership(4)
    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 Post-Effective Amendment No.  14
      to Registrant's Form N-4 electronically filed on October 27, 1995.
  (2) Incorporated by reference to Post-Effective Amendment No.  15
      to Registrant's Form N-4 electronically filed on April 19, 1996.
  (3) Incorporated by reference to Post-Effective Amendment No.  17
      to Registrant's Form N-4 electronically filed on April 25, 1997.
  (4) Incorporated by reference to Post-Effective Amendment No.  22
      to Registrant's Form N-4 electronically filed on November 12, 1999.




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 Boulevard
Minneapolis, MN 55439

Dr. Gerhard G. Rupprecht         Director
Reinsburgstrasse 19
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 Ave.
Box AQU100
St. Paul, MN 55105-1096

James R. Campbell                Director
c/o Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116

Robert M. Kimmitt                Director
c/o Wilmer, Cutler & Pickering
2445 M Street, N.W.
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 February 29, 2000, there were 17,345 qualified Contract Owners and 36,659
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.


                                 REPRESENTATIONS

The Company hereby  represents that it is relying upon a No Action Letter issued
to the American  Council of Life Insurance,  dated November 28, 1988 (Commission
ref. IP-6-88), and that the following provisions have been complied with:

     1. Include  appropriate  disclosure  regarding the redemption  restrictions
imposed by Section  403(b)(11)  in each  registration  statement,  including the
prospectus, used in connection with the offer of the contract;

     2. Include  appropriate  disclosure  regarding the redemption  restrictions
imposed by Section  403(b)(11) in any sales  literature  used in connection with
the offer of the contract;

     3. Instruct sales  representatives who solicit participants to purchase the
contract  specifically to bring the redemption  restrictions  imposed by Section
403(b)(11) to the attention of the potential participants;

     4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract,  prior  to or at  the  time  of  such  purchase,  a  signed  statement
acknowledging  the  participant's  understanding  of  (1)  the  restrictions  on
redemption imposed by Section 403(b)(11),  and (2) other investment alternatives
available  under  the  employer's   Section  403(b)  arrangement  to  which  the
participant may elect to transfer his contract value.

<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
                                       --------------------------



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.


<TABLE>
<CAPTION>
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 Administrative 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

Gerhard G. Rupprecht*        Director                       04/17/2000
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

</TABLE>

                                    *By    Power of Attorney


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






<PAGE>

                                    EXHIBITS

                                       TO

                     POST-EFFECTIVE AMENDMENT NO.    23

                                       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  Principal Underwriter 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