ALLIANZ LIFE VARIABLE ACCOUNT B
485APOS, 1999-02-04
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                                                            File Nos. 33-72046
                                                                     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.    7                             (X)

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940           ( )
            Amendment No.    41                                           (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
     _____  on (date) pursuant to paragraph (b)of Rule 485
     __X__  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           Table of Contents of
          Additional Information. . . . . . . . . . . .   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>

   


        THE FRANKLIN VALUEMARK (R) II AND THE FRANKLIN 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 Franklin  Valuemark II and the Franklin Valuemark
III Variable Annuity Contracts, each with a Fixed Account (Contracts) offered by
Allianz Life Insurance  Company of North America  (Allianz Life). All references
to "we," "us" and "our" refer to Allianz  Life.  This  prospectus  describes two
variable  annuity  contracts.  All  references  to the  Contract  refer  to both
contracts except where noted otherwise.

The  Contract  has 25  Variable  Options,  each of which  invests  in one of the
Portfolios  of Franklin  Valuemark  Funds listed below and the Fixed  Account of
Allianz Life. You can select up to 10 investment choices for additional purchase
payments (which includes any of the Variable Options and the Fixed Account). The
Fixed Account may not be available in your state.

FRANKLIN VALUEMARK FUNDS:

PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund

PORTFOLIOS SEEKING CURRENT INCOME
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005 and 2010

PORTFOLIOS SEEKING
GROWTH AND INCOME
Global Utilities Securities Fund
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Value Securities Fund

PORTFOLIOS  SEEKING  CAPITAL  GROWTH
Capital  Growth  Fund
Global  Health Care Securities Fund
Mutual Discovery  Securities Fund
Natural  Resources  Securities Fund
Small Cap Fund
Templeton  Developing  Markets Equity Fund
Templeton  Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund

Please read this prospectus  before investing and keep it for future  reference.
It  contains  important  information  about the  Franklin  Valuemark  II and the
Franklin 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, 1999. The SAI
has been filed with the Securities and Exchange  Commission (SEC) and is legally
a part of this  prospectus.  The Table of  Contents of the SAI is on Page ___ of
this prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains
the  SAI,  material  incorporated  by  reference  and  other  information  about
companies  that file  electronically  with the SEC.  For a free copy of the SAI,
call us at (800)  342-3863 or write us at: 1750  Hennepin  Avenue,  Minneapolis,
Minnesota 55403-2195.

The Franklin Valuemark II and Franklin Valuemark III Variable Annuity Contracts:

- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed and may be subject to loss of principal

The  Securities and Exchange  Commission  has not approved or disapproved  these
securities  or  determined  if this  prospectus  is  truthful or  complete.  Any
representation to the contrary is a criminal offense.

This prospectus is not an offering of the securities in any state,  country,  or
jurisdiction  in which we are not authorized to sell 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.

In the State of Oregon,  all  references  to Franklin  Valuemark  II(R) refer to
Valuemark II and all references to Franklin  Valuemark III(R) refer to Valuemark
III.

Dated: May 1, 1999


TABLE OF CONTENTS
- --------------------------------------------------------------------------------
                                                   Page


INDEX OF TERMS ...................................
SUMMARY...........................................
FEE TABLE ........................................
THE FRANKLIN VALUEMARK II AND FRANKLIN
VALUEMARK III VARIABLE ANNUITY CONTACTS...........
    Contract Owner ...............................
    Joint Owner ..................................
    Annuitant ....................................
    Beneficiary ..................................
    Assignment  ..................................
ANNUITY PAYMENTS (THE PAYOUT PHASE)...............
    Annuity Options ..............................
PURCHASE .........................................
    Purchase Payments ............................
    Automatic Investment Plan ....................
    Allocation of Purchase Payments ..............
    Accumulation Units ...........................
INVESTMENT OPTIONS ...............................
    Transfers ....................................
    Dollar Cost Averaging Program ................
    Flexible Rebalancing .........................
    Voting Privileges ............................
    Substitution .................................
EXPENSES .........................................
    Insurance Charges ............................
     Mortality and Expense Risk Charge ...........
     Administrative Charge .......................
    Contract Maintenance Charge ..................
    Contingent Deferred Sales Charge .............
    Waiver of Contingent
    Deferred Sales Charge Benefits ...............
    Reduction or Elimination of the
    Contingent Deferred Sales Charge .............
    Transfer Fee .................................
    Premium Taxes ................................
    Income Taxes .................................
    Portfolio Expenses ...........................
TAXES ............................................
    Annuity Contracts in General .................
    Qualified and Non-Qualified Contracts ........
    Multiple Contracts ...........................
    Withdrawals - Non-Qualified Contracts .........
    Withdrawals - Qualified Contracts .............
    Withdrawals - Tax-Sheltered Annuities .........
    Diversification ..............................
ACCESS TO YOUR MONEY .............................
    Systematic Withdrawal Program ................
    Minimum Distribution Program .................
    Suspension of Payments or Transfers ..........
PERFORMANCE ......................................
DEATH BENEFIT ....................................
    Death of Contract Owner.......................
    Death of Annuitant ...........................
OTHER INFORMATION ................................
    Allianz Life .................................
    Year 2000 ....................................
    The Separate Account .........................
    Distribution .................................
    Administration ...............................
    Financial Statements .........................
APPENDIX .........................................
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION ...........................


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

SUMMARY

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

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

The  Franklin  Valuemark  II and the Franklin  Valuemark  III  variable  annuity
contracts offered by Allianz Life are each a Contract between you, the owner and
Allianz Life.

The Contract  provides a means for  investing  on a  tax-deferred  basis.  It is
intended for retirement  savings or other  long-term  investment  purposes.  The
Contract provides for a death benefit and guaranteed annuity income options.

The Contract has 25 Variable  Options,  each of which  invests in a Portfolio of
Franklin  Valuemark  Funds,  and a Fixed Account of Allianz Life. The Portfolios
are  managed  by  Franklin  Advisers,   Inc.  and  its  Templeton  and  Franklin
affiliates.  Depending upon market conditions, you can make or lose money in the
Contract based on the  Portfolios'  investment  performance.  The Portfolios are
designed to offer a better return than the Fixed Account,  however,  this is not
guaranteed.  The Fixed  Account  offers an interest  rate that is  guaranteed by
Allianz Life for a year at a time.

Currently,  you can put your money in up to 10 investment choices for additional
Purchase Payments (which includes any of the 25 Variable Options and the Allianz
Life Fixed Account).  Allianz Life has the right to limit the number of Variable
Options and the Fixed Account to which you may invest in at any one time (now or
in the future).

Like  all  deferred  annuity  contracts,  your  Contract  has  two  phases:  the
accumulation  phase and the payout phase.  During the accumulation  phase,  your
earnings  accumulate  on a  tax-deferred  basis and are based on the  investment
performance  of the  portfolio(s)  you select and/or the interest rate earned on
the money you have in the fixed  account.  During the  accumulation  phase,  the
earnings are taxed as income only when you make a  withdrawal.  The payout phase
occurs when you begin receiving regular payments from your Contract.

ANNUITY PAYMENTS (THE PAYOUT PHASE)

You can receive monthly annuity  payments from your Contract by selecting one of
the Annuity Options we offer. Once you begin receiving regular Annuity Payments,
you cannot change your Annuity Option or surrender your Contract.

During the payout phase, you may select from the Variable  Options  available or
the Fixed Account for your investment choices.  You may elect to receive Annuity
Payments as a variable payout, a fixed payout,  or a combination of both. If you
choose to have any part of your payments based on Portfolio  performance  (i.e.,
variable payout),  the dollar amount of your Annuity Payments may go up or down,
depending on the investment performance of the Portfolios you choose.

PURCHASE

You can add $250 ($100 if you select the automatic  investment plan) or more for
additional purchases any time during the Accumulation Phase. This product is not
appropriate for market timers.

      -  Automatic  Investment Plan - You can automatically add to your Contract
         on a monthly or quarterly  basis for as little as $100. You can do this
         by  electronically  transferring  money from your  savings or  checking
         account.

INVESTMENT OPTIONS

You may select the Allianz Life Fixed Account and/or the Variable  Options which
invest in Class 1 shares of the  Portfolios of Franklin  Valuemark  Funds listed
below.  Franklin  Valuemark Funds has two classes of shares. You may only invest
in Class 1 shares with the Contract.

FRANKLIN VALUEMARK FUNDS:

PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME:
Money Market Fund

PORTFOLIOS SEEKING
CURRENT INCOME:
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005 and 2010

PORTFOLIOS SEEKING
GROWTH AND INCOME:
Global Utilities Securities Fund
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Value Securities Fund

PORTFOLIOS SEEKING
CAPITAL GROWTH:
Capital  Growth  Fund
Global  Health  Care  Securities  Fund
Mutual  Discovery Securities  Fund
Natural  Resources  Securities  Fund
Small Cap Fund
Templeton Developing   Markets  Equity  Fund
Templeton   Global  Growth  Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund

You can make or lose money based on the Portfolios' performance.

EXPENSES

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

- - The mortality and expense risk charge is equal,  on an annual basis,  to 1.25%
total of the average  daily value of your  Contract  allocated  to the  Variable
Options.

- - The administrative expense charge is equal, on an annual basis, to .15% of the
average  daily  value  of  your  Contract  allocated  to the  Variable  Options.
Together,   we  refer  to  the   mortality  and  expense  risk  charge  and  the
administrative expense charge as the insurance charges.

- - During the  Accumulation  Phase,  each year  Allianz  Life also  deducts a $30
contract  maintenance  charge from your Contract.  Allianz Life currently waives
this  charge  if the  value of your  Contract  or your  Purchase  Payments  less
withdrawals is at least $100,000.  Currently Allianz Life also waives the charge
during the Payout  Phase if your  Contract  value at the Income Date is at least
$100,000.

- - There are also annual Portfolio operating expenses,  which vary depending upon
the  Portfolio(s)  you  select.  These  expenses  range from ___% to ___% of the
average daily value of the Portfolios' Class 1 shares.

- - You can  transfer  between  investment  choices up to 12 times a year  without
charge.  After 12 transfers,  the charge is $25 or 2% of the amount transferred,
whichever is less. Market timing transfers may not be permitted.

- - If you  make a  withdrawal  from  the  Contract,  Allianz  Life  may  assess a
contingent deferred sales charge (withdrawal  charge).  The amount of the charge
depends  upon the  length of time  since you made your  Purchase  Payment.  Each
Purchase Payment you add to your Contract has its own 5 year contingent deferred
sales charge period. The charge may be different  depending upon whether you own
a Franklin  Valuemark  II Contract or a Franklin  Valuemark  III  Contract.  The
charge is:

<TABLE>
<CAPTION>

  Franklin Valuemark II:                 Franklin Valuemark III:

                 Charge (as a                             Charge (as a
 Years since     percentage            Years since        percentage
 Purchase        of Purchase           Purchase           of Purchase
 Payment         Payments)             Payment            Payments)
 ----------      -----------------     ------------       ----------------
 <S>              <C>                  <C>                 <C>
 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%
</TABLE>

Once each Contract year,  you can make a partial  withdrawal of up to 15% of the
Purchase Payments you have made less prior withdrawals and Allianz Life will not
deduct the contingent  deferred sales charge. If you do not make a withdrawal in
a Contract year, you may take that 15% in future years.

- - Allianz Life may assess a state  premium tax charge which ranges from 0%- 3.5%
(depending upon the state) when you die, start receiving  Annuity  Payments,  or
make a complete withdrawal.

TAXES

You do not have to pay taxes on any earnings  until you withdraw money from your
Contract.  In most cases, if you make a withdrawal,  earnings come out first and
are taxed as income.  If you are younger than 59 1/2 when you make a withdrawal,
you may be charged a 10% federal tax penalty on the taxable  amounts  withdrawn.
Payments during the payout phase are considered partly a return of your original
investment.  That part of each payment is not taxable as income. If the Contract
is tax-qualified, the entire payment may be taxable.

ACCESS TO YOUR MONEY

You may make a withdrawal  at any time during the  Accumulation  Phase.  You may
request a  withdrawal  or elect the  Systematic  Withdrawal  Program  or Minimum
Distribution  Program which are briefly described below. Of course, you may also
have to pay  income  tax and a tax  penalty  on any  money  you  take out of the
Contract.

         - Systematic  Withdrawal  Program - You can elect to receive monthly or
         quarterly  payments  from  Allianz  Life while your  Contract is in the
         Accumulation  Phase.  Of course,  you may have to pay tax penalties and
         income taxes on the money you receive.

         - Minimum  Distribution Program - You can arrange to have money sent to
         you  each  month  or  quarter  to meet  certain  required  distribution
         requirements  imposed by the Internal  Revenue Code for IRAs (generally
         after age 70 1/2).

PERFORMANCE

The value of the Contract will vary up or down depending upon the performance of
the  Portfolio(s)  you choose.  From time to time,  Allianz  Life may  advertise
performance. The SAI contains performance information. Past performance is not a
guarantee of future results.

DEATH BENEFIT

If you die during the  Accumulation  Phase, the person you have selected as your
beneficiary will receive a death benefit.

OTHER INFORMATION

No Probate. In most cases, when you die, your beneficiary will receive the death
benefit without going through probate.

Additional Features:

The Contract offers additional  features which you might be interested in. These
include:

- - Dollar Cost  Averaging  Program - You can arrange to have a regular  amount of
money automatically transferred from selected Variable Options to other Variable
Options  each  month or each  quarter  (but it does  not  have to be a  calendar
quarter.)  Theoretically  this can give you a lower  average  cost per unit over
time than a single one time purchase. However, there are no guarantees that this
will take place.

- - Flexible Rebalancing - Allianz Life will automatically  readjust your Contract
value among the Variable Options that you have chosen to maintain your specified
allocation mix. This can be done quarterly, semi-annually or annually.

These features may not be suitable for your particular situation.

INQUIRIES

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

            Valuemark Service Center
            300 Berwyn Park
            P.O. Box 3031
            Berwyn, PA 19312-0031
            (800) 624-0197

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.

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Contract Owner Transaction Fees

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


    Franklin Valuemark II             Franklin Valuemark III
    ---------------------             ----------------------

   Years Since                          Years Since
Purchase Payment   Charge            Purchase Payment   Charge
- -------------------------            --------------------------
<S>                <C>                     <C>           <C>
    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%

</TABLE>


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>

FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES: CLASS 1 SHARES

(as a percentage of Franklin Valuemark Funds' average net assets)

The Management and Portfolio Administration Fees for each Portfolio are based on
a percentage of that  Portfolio's  net assets.  See the  prospectus for Franklin
Valuemark Funds for more information.

The  "Management and Portfolio  Administration  Fees" below are the amounts that
were paid to the Managers and  Portfolio  Administrators  for the 1998  calendar
year  except  for  newer  Portfolios  without a full  year of  operations  as of
December 31, 1998.

                                         Management
                                        and Portfolio          Total           Annual
                                      Administration Fees 1  Other Expenses    Expenses

- ----------------------------------------------------------------------------------------
<S>                                       <C>                <C>             <C>
Capital Growth Fund .................      .75%              .02%             .77%
Global Health Care Securities Fund  .      .75%              .11%             .86%
Global Utilities Securities Fund......     .47%              .03%             .50%
Growth and Income Fund ...............     .47%              .02%             .49%
High Income Fund .....................     .50%              .03%             .53%
Income Securities Fund ...............     .47%              .03%             .50%
Money Market Fund  ...................     .51%              .02%             .53%
Mutual Discovery Securities Fund......     .95%              .11%            1.06%
Mutual Shares Securities Fund ........     .75%              .05%             .80%
Natural Resources Securities Fund .....    .62%              .07%             .69%
Real Estate Securities Fund ...........    .51%              .03%             .54%
Rising Dividends Fund .................    .72%              .02%             .74%
Small Cap Fund ........................    .75%              .02%             .77%
Templeton Developing Markets Equity Fund  1.25%              .17%            1.42%
Templeton Global Asset Allocation Fund .   .80%              .14%             .94%
Templeton Global Growth Fund ....          .83%              .05%             .88%
Templeton Global Income Securities Fund .  .56%              .06%             .62%
Templeton International Equity Fund ....   .80%              .09%             .89%
Templeton International Smaller Companies
       Fund ............................. 1.00%              .06%            1.06%
Templeton Pacific Growth Fund ...........  .92%              .11%            1.03%
U.S. Government Securities Fund .........  .48%              .02%             .50%
Value Securities Fund  .................   .75%              .06%             .81%
Zero Coupon Fund - 2000  ...............   .37%              .03%             .40%
Zero Coupon Fund - 2005  ...............   .37%              .03%             .40%
Zero Coupon Fund - 2010  ...............   .37%              .03%             .40%
<FN>

1 The  Portfolio  Administration  Fee is a direct  expense for the Global Health
Care Securities  Fund, the Mutual  Discovery  Securities Fund, the Mutual Shares
Securities  Fund,  the Templeton  Global Asset  Allocation  Fund,  the Templeton
International  Smaller  Companies  Fund, and the Value  Securities  Fund.  Other
Portfolios pay for similar services  indirectly  through the Management Fee. See
the Franklin Valuemark Funds prospectus for further information  regarding these
fees.
</FN>
</TABLE>

EXAMPLES

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

- - 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.

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

- - For additional  information,  see "Expenses" and the Franklin  Valuemark Funds
prospectus.

<TABLE>
<CAPTION>
FRANKLIN 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> 
Capital Growth Fund ...............     $__        $___      $___      $___
Global Health Care Securities Fund*.    $__        $___      $___      $___
Global Utilities Securities Fund...     $__        $___      $___      $___
Growth and Income Fund.............     $__        $___      $___      $___
High Income Fund ..................     $__        $___      $___      $___
Income Securities Fund.............     $__        $___      $___      $___
Money Market Fund..................     $__        $___      $___      $___
Mutual Discovery Securities Fund...     $__        $___      $___      $___
Mutual Shares Securities Fund......     $__        $___      $___      $___
Natural Resources Securities Fund..     $__        $___      $___      $___
Real Estate Securities Fund........     $__        $___      $___      $___
Rising Dividends Fund..............     $__        $___      $___      $___
Small Cap Fund.....................     $__        $___      $___      $___
Templeton Developing Markets Equity
    Fund ..............  ..........     $__        $___      $___      $___
Templeton Global Asset Allocation
    Fund ....... ..................     $__        $___      $___      $___
Templeton Global Growth Fund.......     $__        $___      $___      $___
Templeton Global Income Securities
    Fund ..........................     $__        $___      $___      $___
Templeton International Equity Fund     $__        $___      $___      $___
Templeton International Smaller
    Companies Fund ................     $__        $___      $___      $___
Templeton Pacific Growth Fund......     $__        $___      $___      $___
U.S. Government Securities Fund....     $__        $___      $___      $___
Value Securities Fund*.............     $__        $___      $___      $___
Zero Coupon Fund -2000.............     $__        $___      $___      $___
Zero Coupon Fund -2005.............     $__        $___      $___      $___
Zero Coupon Fund -2010.............     $__        $___      $___      $___
<FN>

*Annualized

</FN>
</TABLE>

<TABLE>
<CAPTION>

FRANKLIN 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> 
Capital Growth Fund ...............     $__        $___      $___      $___
Global Health Care Securities Fund*.    $__        $___      $___      $___
Global Utilities Securities Fund...     $__        $___      $___      $___
Growth and Income Fund.............     $__        $___      $___      $___
High Income Fund ..................     $__        $___      $___      $___
Income Securities Fund.............     $__        $___      $___      $___
Money Market Fund..................     $__        $___      $___      $___
Mutual Discovery Securities Fund...     $__        $___      $___      $___
Mutual Shares Securities Fund......     $__        $___      $___      $___
Natural Resources Securities Fund..     $__        $___      $___      $___
Real Estate Securities Fund........     $__        $___      $___      $___
Rising Dividends Fund..............     $__        $___      $___      $___
Small Cap Fund.....................     $__        $___      $___      $___
Templeton Developing Markets Equity
    Fund ..............  ..........     $__        $___      $___      $___
Templeton Global Asset Allocation
    Fund ....... ..................     $__        $___      $___      $___
Templeton Global Growth Fund.......     $__        $___      $___      $___
Templeton Global Income Securities
    Fund ..........................     $__        $___      $___      $___
Templeton International Equity Fund     $__        $___      $___      $___
Templeton International Smaller
    Companies Fund ................     $__        $___      $___      $___
Templeton Pacific Growth Fund......     $__        $___      $___      $___
U.S. Government Securities Fund....     $__        $___      $___      $___
Value Securities Fund*.............     $__        $___      $___      $___
Zero Coupon Fund -2000.............     $__        $___      $___      $___
Zero Coupon Fund -2005.............     $__        $___      $___      $___
Zero Coupon Fund -2010.............     $__        $___      $___      $___
<FN>

*Annualized
</FN>
</TABLE>


<TABLE>
<CAPTION>
FRANKLIN VALUEMARK II AND FRANKLIN 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 it is
annuitized:


                                          1 Year    3 Years   5 Years  10 Years
- ------------------------------------------------------------------------------
<S>                                        <C>       <C>      <C>       <C> 
Capital Growth Fund ..................     $__       $__      $___      $___
Global Health Care Securities Fund*...     $__       $__      $___      $___
Global Utilities Securities Fund......     $__       $__      $___      $___
Growth and Income Fund................     $__       $__      $___      $___
High Income Fund......................     $__       $__      $___      $___
Income Securities Fund................     $__       $__      $___      $___
Money Market Fund.....................     $__       $__      $___      $___
Mutual Discovery Securities Fund......     $__       $__      $___      $___
Mutual Shares Securities Fund.........     $__       $__      $___      $___
Natural Resources Securities Fund.....     $__       $__      $___      $___
Real Estate Securities Fund...........     $__       $__      $___      $___
Rising Dividends Fund.................     $__       $__      $___      $___
Small Cap Fund........................     $__       $__      $___      $___
Templeton Developing Markets Equity Fund   $__       $__      $___      $___
Templeton Global Asset Allocation Fund     $__       $__      $___      $___
Templeton Global Growth Fund..........     $__       $__      $___      $___
Templeton Global Income Securities Fund    $__       $__      $___      $___
Templeton International Equity Fund...     $__       $__      $___      $___
Templeton International Smaller Companies
           Fund ......................     $__       $__      $___      $___
Templeton Pacific Growth Fund.........     $__       $__      $___      $___
U.S. Government Securities Fund.......     $__       $__      $___      $___
Value Securities Fund*................     $__       $__      $___      $___
Zero Coupon Fund -2000................     $__       $__      $___      $___
Zero Coupon Fund -2005................     $__       $__      $___      $___
Zero Coupon Fund - 2010...............     $__       $__      $___      $___
<FN>

*Annualized

</FN>
</TABLE>

See the Appendix for Accumulation Unit Values - Condensed Financial Information.

<PAGE>

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

This prospectus  describes two variable deferred annuity contracts,  each with a
Fixed Account which are offered by Allianz Life.

An annuity is a contract  between you, the owner,  and an insurance  company (in
this case Allianz  Life),  where the insurance  company  promises to pay you (or
someone else you choose) an income, in the form of Annuity Payments. The Annuity
Payments  must begin on a  designated  date that is at least 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.

You have 26 investment choices - the 25 Variable Options,  each of which invests
in one of the Portfolios of Franklin  Valuemark  Funds, and the Fixed Account of
Allianz Life. The Contract is called a variable  annuity  because you can choose
among 25 Variable Options and, depending upon market conditions, you can make or
lose money in the Contract based on the investment performance of the Portfolios
of Franklin  Valuemark  Funds.  The  Portfolios  are  designed to offer a better
return than the Fixed Account.  However,  this is not guaranteed.  If you select
the variable  annuity portion of the Contract,  the amount of money you are able
to accumulate in your Contract  during the  Accumulation  Phase depends in large
part upon the investment  performance of the Portfolio(s) you select. The amount
of the Annuity  Payments  you receive  during the Payout Phase from the variable
annuity  portion of the Contract also depends in large part upon the  investment
performance of the Portfolios you select for the Payout Phase.

The Contract also contains a Fixed Account. The Fixed Account offers an interest
rate that is  guaranteed by Allianz Life for all deposits 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 Franklin  Valuemark II
Contracts) at any time.  This may be a taxable  event.  You should  consult with
your tax adviser before doing this.

Contingent Owner (Franklin 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 other 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 Franklin 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 issue
a 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 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  we take in  accordance  with the  Contract  before we
receive notice of the  assignment.  Any assignment  made after the death benefit
has become payable can only be done with our consent.
AN ASSIGNMENT MAY BE A TAXABLE EVENT.

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

ANNUITY PAYMENTS (THE PAYOUT PHASE)

You can receive  regular  monthly income  payments under your Contract.  You can
choose the month and year in which those payments  begin.  We call that date the
Income Date. Your Income Date must be the first day of a calendar month and must
be at least one month  after you buy the  Contract.  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 Franklin 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  exceeds the 5% assumed 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 the Beneficiary 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 for the rest of the guaranteed period. If
you do not want to receive Annuity Payments after the Annuitant's death, you can
ask us for a single lump sum.

OPTION 5. REFUND LIFE ANNUITY.  Under this option,  we will make monthly Annuity
Payments during the Annuitant's lifetime.  The last Annuity Payment will be made
before the Annuitant dies and if the value of the Annuity  Payments made is less
than the value annuitized,  then the Contract Owner 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 as low as $100 if you have selected the
Automatic  Investment  Plan) or more to either type of Contract.  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  which  allows  you to make
additional Purchase Payments to your Contract on a monthly or quarterly basis by
electronic  transfer of monies from your  savings or checking  account.  You may
participate in this program by completing the appropriate  form. We must receive
your form by the first of the month in order for AIP to begin  that same  month.
Investments  will take place on the 20th of the month, or the next business day.
The minimum  investment that can be made by AIP is $100. You may stop AIP at any
time you want. We need to be notified by the first of the month in order to stop
or change AIP that month.  If AIP is used for a Qualified  Contract,  you should
consult your tax adviser for advice regarding maximum contributions.

Allocation of Purchase Payments

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 Valuemark  Service Center. A change will be effective for payments  received
on or after we receive your notice or  instructions.  Allianz Life  reserves the
right to limit the  number of  Variable  Options  that you may  invest in at one
time.  Currently,  you may invest in up to 10 investment  choices for additional
Purchase Payments at any one time (which includes any of the 25 Variable Options
which  invest in a Portfolio  of Franklin  Valuemark  Funds and the Allianz Life
Fixed Account). IN WASHINGTON, THE FIXED ACCOUNT IS NOT AVAILABLE UNTIL APPROVED
BY THE  WASHINGTON  INSURANCE  DEPARTMENT.  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 4:00 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. We do this by:

1.  determining  the total amount of money invested in the  particular  Variable
Option;

2.  subtracting  from that amount the  mortality and expense risk charge and the
administrative  expense  charge  and any  other  charges  such as  taxes we have
deducted; and

3. dividing this amount by the number of outstanding Accumulation Units.

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

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

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

Example:

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

INVESTMENT OPTIONS

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

The  Contract  offers  Variable  Options  which  invest  in Class 1 shares of 25
Portfolios of Franklin Valuemark Funds. The Contract also offers a Fixed Account
of Allianz Life. Additional Portfolios may be available in the future.

YOU SHOULD READ THE FRANKLIN  VALUEMARK FUNDS  PROSPECTUS  (WHICH IS ATTACHED TO
THIS PROSPECTUS) CAREFULLY BEFORE INVESTING.

Franklin  Valuemark  Funds (Trust) is the mutual fund  underlying your Contract.
Each Portfolio has its own investment objective. The Trust issues two classes of
shares which are described in the attached Trust prospectus. Only Class 1 shares
are available  with your  Contract.  Investment  managers for each Portfolio are
listed in the table  below and are as follows:  Franklin  Advisers,  Inc.  (FA),
Franklin Advisory Services,  Inc. (FAS),  Franklin Mutual Advisers,  Inc. (FMA),
Templeton Asset Management Ltd. (TAM),  Templeton Global Advisors Limited (TGA),
and Templeton Investment Counsel, Inc. (TIC). Certain managers have retained one
or more affiliated subadvisers to help them manage the Portfolios.

The following is a list of the Portfolios available under the Contract:
<TABLE>
<CAPTION>

                                              Investment
Available Portfolios                           Managers
- ------------------------------------------------------------------------------
<S>                                               <C>
PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund ...........................     FA

PORTFOLIOS SEEKING
CURRENT INCOME
High Income Fund ............................     FA
Templeton Global Income Securities Fund .....     FA
U.S. Government Securities Fund .............     FA
Zero Coupon Funds - 2000, 2005, 2010 ........     FA

PORTFOLIOS SEEKING
GROWTH AND INCOME
Global Utilities Securities Fund.............     FA
Growth and Income Fund ......................     FA
Income Securities Fund ......................     FA
Mutual Shares Securities Fund ...............     FMA
Real Estate Securities Fund .................     FA
Rising Dividends Fund .......................     FAS
Templeton Global Asset Allocation Fund ......     TGA
Value Securities Fund .......................     FAS

PORTFOLIOS SEEKING
CAPITAL GROWTH
Capital Growth Fund .........................     FA
Global Health Care Securities Fund ..........     FA
Mutual Discovery Securities Fund ............     FMA
Natural Resources Securities Fund ...........     FA
Small Cap Fund ..............................     FA
Templeton Developing Markets
 Equity Fund ................................     TAM
Templeton Global Growth Fund ................     TGA
Templeton International Equity Fund .........     FA
Templeton International Smaller
 Companies Fund .............................     TIC
Templeton Pacific Growth Fund ...............     FA

- ------------------------------------------------------------------------------
</TABLE>

Franklin  Valuemark Funds serves as the underlying mutual fund for variable life
insurance  policies offered by Allianz Life and other variable annuity contracts
offered by Allianz Life and its  affiliates.  Franklin  Valuemark Funds believes
that offering its shares in this manner will not be disadvantageous to you.

Transfers

You can transfer  money among the 25 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 or Fixed Account, if less.

2. You cannot make a partial  transfer if the value  remaining  in the  Variable
Option or 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.

There are two Dollar Cost Averaging options. The first option is the Dollar Cost
Averaging  Fixed Option.  It is available for  additional  Purchase  Payments to
existing  Contracts.  You will receive a special fixed rate  guaranteed  for one
year by Allianz Life.  Dollar cost  averaging will take place over twelve months
and requires a minimum  investment of $6,000.  The Dollar Cost  Averaging  Fixed
Option may not be available in your state.

The second option is the Standard  Dollar Cost Averaging  Option.  It requires a
$3,000  minimum  investment  and  participation  for at least six months (or two
quarters).

All Dollar Cost  Averaging  transfers  will be made on the 10th day of the month
unless that day is not a business  day. If it is not,  then the transfer will be
made the next business day. You may elect either program by properly  completing
the Dollar Cost Averaging form provided by Allianz Life.

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

(1) the number of desired transfers have been made;

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

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

(4) the Contract is terminated.

If you  participate  in the Dollar Cost  Averaging  Program,  the transfers made
under the program are not 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 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  Trust's  Class 1  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,
after  the  deduction  of  expenses.  This  charge  compensates  us for  all the
insurance  benefits  provided by your Contract  (for  example,  the guarantee of
annuity rates, the death benefits, certain expenses related to the Contract, and
for  assuming  the  risk  (expense  risk)  that  the  current  charges  will  be
insufficient in the future to cover the cost of administering the Contract).

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

Contract Maintenance Charge

Every year on the anniversary of the date when your Contract was issued, Allianz
Life  deducts $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
Fixed  Account  unless you  instruct us  otherwise.  The charge may be different
depending  upon  whether you own a Franklin  Valuemark II Contract or a Franklin
Valuemark III Contract. The charge is:

<TABLE>
<CAPTION>

      Franklin Valuemark II             Franklin Valuemark III
      ---------------------             ----------------------
                     Contingent                           Contingent
  Years Since        Deferred        Years Since          Deferred
 Purchase Payment    Sales Charge    Purchase Payment     Sales Charge
 ----------------    ------------    ----------------    -------------
  <S>                 <C>              <C>                  <C>
   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%

</TABLE>

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 last
money you put into the Contract. Thus, for tax purposes, earnings are considered
to come out first.

FREE WITHDRAWAL AMOUNT. Once each Contract year, you can make a withdrawal 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. 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 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 Payment.

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 prospectus for Franklin Valuemark Funds.

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).

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  you are  taxed  on the  amount  of the
withdrawal  that is earnings.  For Annuity  Payments,  different  rules apply. A
portion of each Annuity  Payment you receive will be treated as a partial return
of your Purchase  Payments and will not be taxed.  The remaining  portion of the
Annuity Payment will be treated as ordinary  income.  How the Annuity Payment is
divided between taxable and  non-taxable  portions  depends upon the period over
which the Annuity Payments are expected to be made.  Annuity  Payments  received
after you have  received all of your Purchase  Payments are fully  includible in
income.

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

Qualified and Non-Qualified Contracts

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

Multiple Contracts

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

Withdrawals - Non-Qualified Contracts

If you make a withdrawal  from your Contract,  the Code treats such a withdrawal
as first coming from  earnings  and then from your  Purchase  Payments.  In most
cases, such withdrawn earnings are includible in income.

The Code also provides that any amount received under an annuity  contract which
is included in income may be subject to a tax penalty. The amount of the penalty
is equal to 10% of the amount that is  includible  in income.  Some  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 in the Code);  (4)
paid in a  series  of  substantially  equal  payments  made  annually  (or  more
frequently) for life or a period not exceeding life  expectancy;  (5) paid under
an immediate  annuity;  or (6) which come from  purchase  payments made prior to
August 14, 1982.

Withdrawals - Qualified Contracts

The above  information  describing the taxation of Non-Qualified  Contracts does
not apply to Qualified Contracts.  There are special rules that govern Qualified
Contracts. A more complete discussion of withdrawals from Qualified Contracts is
contained in the Statement of Additional Information.

Withdrawals - Tax-Sheltered Annuities

The Code limits the withdrawal of Purchase Payments made by Contract Owners from
certain  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 hardship,  the Contract  Owner can only  withdrawal 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,  the 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 is 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 is
not reasonably practicable or Allianz Life cannot reasonably value the Portfolio
shares;

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

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

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

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

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 Valuemark 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).

- -        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.

- -        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 oldest 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 payment
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. 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
contingent 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 be  considered  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 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  Life is
licensed to do business in 49 states and the District of Columbia.  Allianz Life
is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding.

Year 2000

Allianz Life has initiated  programs to ensure that all of the computer  systems
utilized to provide services and administer  policies will function  properly in
the year 2000. An assessment of the total expected costs specifically related to
the year  2000  conversion  has been  completed.  These  costs are  expensed  as
incurred  and  total  costs are not  expected  to have a  significant  effect on
Allianz  Life's  financial  position  or results  of  operations.  Allianz  Life
believes  it is  taking  steps  that are  reasonably  designed  to  address  the
potential  failure of  computer  systems  used by its service  providers  and to
ensure its year 2000  program is completed  on a timely  basis.  There can be no
assurance,  however,  that the steps  taken by Allianz  Life will be adequate to
avoid any adverse impact.

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 one class
of shares of a Portfolio.

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

Distribution

NALAC Financial Plans, LLC (NFP), 1750 Hennepin Avenue,  Minneapolis,  MN 55403,
acts as the  distributor of the Contracts.  NFP is a wholly-owned  subsidiary of
Allianz Life. NFP has subcontracted with Franklin  Advisers,  Inc. for it and/or
certain of its affiliates to provide certain  marketing support services and NFP
compensates these entities for their services.

Commissions   will  be  paid  to   broker-dealers   who  sell   the   Contracts.
Broker-dealers  will  be paid  commissions  up to  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 and  Franklin
Advisers,  Inc. and/or its affiliates may pay certain sellers for other services
not directly  related to the sale of the  Contracts  (such as special  marketing
support  allowances).  Commissions  may be recovered from a  broker-dealer  if a
withdrawal occurs within 12 months of a Purchase Payment.

Administration

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

Financial Statements

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

APPENDIX
<TABLE>
<CAPTION>

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 to the Separate  Account  included in the Statement of Additional
Information.

(Number of units in thousands)                     Global     Global    Growth                                  Mutual
                                       Capital   Health Care Utilities    and      High      Income    Money   Discovery
Contract Sub-Accounts:                 Growth    Securities Securities  Income    Income   Securities Market  Securities
- - ----------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>       <C>        <C>        <C>      <C>       <C>        <C>      <C>
Year Ended Dec. 31, 1998
Unit value at beginning of period .
Unit value at end of period .......
Number of units outstanding at
 end of period.....................
Year Ended Dec. 31, 1997
Unit value at beginning of period .    $11.254        NA     $20.654   $19.490   $19.375   $21.708    $13.359    $10.180
Unit value at end of period .......    $13.130        NA     $25.818   $24.551   $21.312   $25.065    $13.865    $11.983
Number of units outstanding at
 end of period ....................      5,672        NA      39,623    46,962    18,871    49,812     20,982      9,940
Year Ended Dec. 31, 1996
Unit value at beginning of period .    $10.000*       NA     $19.565   $17.310   $17.252   $19.785    $12.883    $10.000*
Unit value at end of period .......    $11.254        NA     $20.654   $19.490   $19.375   $21.708    $13.359    $10.180
Number of units outstanding at
 end of period ....................      3,722        NA      53,086    50,027    20,736    57,504     28,060      1,471
Year Ended Dec. 31, 1995
Unit value at beginning of period .         NA        NA     $15.104   $13.215   $14.608   $16.392    $12.354         NA
Unit value at end of period .......         NA        NA     $19.565   $17.310   $17.252   $19.785    $12.883         NA
Number of units outstanding at
 end of period ....................         NA        NA      66,669    46,893    18,756    59,309     31,040         NA
Year Ended Dec. 31, 1994
Unit value at beginning of period .         NA        NA     $17.319   $13.677   $15.155   $17.734    $12.066         NA
Unit value at end of period .......         NA        NA     $15.104   $13.215   $14.608   $16.392    $12.354         NA
Number of units outstanding at
 end of period ....................         NA        NA      70,082    35,695    15,679    56,569     39,437         NA
Year Ended Dec. 31, 1993
Unit value at beginning of period .         NA        NA     $15.889   $12.574   $13.278   $15.163    $11.932         NA
Unit value at end of period .......         NA        NA     $17.319   $13.677   $15.155   $17.734    $12.066         NA
Number of units outstanding at
 end of period ....................         NA        NA      84,217    24,719    11,787    38,967     10,247         NA
Year Ended Dec. 31, 1992
Unit value at beginning of period .         NA        NA     $14.821   $11.949   $11.583   $13.580    $11.742         NA
Unit value at end of period .......         NA        NA     $15.889   $12.574   $13.278   $15.163    $11.932         NA
Number of units outstanding at
 end of period ....................         NA        NA      39,387    17,144     4,780    11,397      6,951         NA
Year Ended Dec. 31, 1991
Unit value at beginning of period .         NA        NA     $12.062   $ 9.803   $ 9.026   $ 9.842    $11.288         NA
Unit value at end of period .......         NA        NA     $14.821   $11.949   $11.583   $13.580    $11.742         NA
Number of units outstanding at
 end of period ....................         NA        NA      16,188     9,671     1,923     4,472      5,682         NA
Year Ended Dec. 31, 1990
Unit value at beginning of period .         NA        NA     $12.010   $10.180   $10.021   $10.783    $10.637         NA
Unit value at end of period .......         NA        NA     $12.062   $ 9.803   $ 9.026   $ 9.842    $11.288         NA
Number of units outstanding at
 end of period ....................         NA        NA       6,300     5,356     1,056     3,011      5,768         NA
Period from Inception* to Dec. 31, 1989
Unit value at beginning of period .         NA        NA     $10.000   $10.000   $10.000   $10.000    $10.000         NA
Unit value at end of period .......         NA        NA     $12.010   $10.180   $10.021   $10.783    $10.637         NA
Number of units outstanding at
 end of period ....................         NA        NA       1,173     1,662       612     1,508      1,199         NA
</TABLE>



<TABLE>
<CAPTION>

(Number of units in thousands)                                                             Templeton    Templeton
                                       Mutual     Natural     Real                         Developing   Global     Templeton
                                       Shares     Resources   Estate     Rising    Small   Markets      Asset      Global
Contract Sub-Accounts:                 Securities Securities  Securities Dividends Cap     Equity      Allocation  Growth
- - ----------------------------------------------------------------------------------------------------------------------------------

<S>                                    <C>        <C>        <C>        <C>        <C>     <C>         <C>        <C>
Year Ended Dec. 31, 1998
Unit value at beginning of period .
Unit value at end of period .......
Number of units outstanding at
 end of period....................
Year Ended Dec. 31, 1997
Unit value at beginning of period .    $10.330    $14.467    $23.668    $15.303    $12.913  $11.487    $12.514    $13.560
Unit value at end of period .......    $11.993    $11.559    $28.169    $20.074    $14.952  $10.340    $13.786    $15.176
Number of units outstanding at
 end of period ....................     18,744      5,709     13,445     33,250     16,924   23,007      5,229     41,432
Year Ended Dec. 31, 1996
Unit value at beginning of period .    $10.000*   $14.109    $18.073    $12.498    $10.146  $ 9.582    $10.591    $11.339
Unit value at end of period .......    $10.330    $14.467    $23.668    $15.303    $12.913  $11.487    $12.514    $13.560
Number of units outstanding at
 end of period ....................      2,613      6,998     12,757     35,569     12,784   22,423      4,104     40,327
Year Ended Dec. 31, 1995
Unit value at beginning of period .         NA    $13.979    $15.594    $ 9.769    $10.000* $ 9.454    $10.000*   $10.201
Unit value at end of period .......         NA    $14.109    $18.073    $12.498    $10.146  $ 9.582    $10.591    $11.339
Number of units outstanding at
 end of period ....................         NA      6,919     10,998     33,789      1,302   15,618      1,338     28,309
Year Ended Dec. 31, 1994
Unit value at beginning of period .         NA    $14.464    $15.369    $10.327         NA  $10.000*        NA    $10.000*
Unit value at end of period .......         NA    $13.979    $15.594    $ 9.769         NA  $ 9.454         NA    $10.201
Number of units outstanding at
 end of period ....................         NA      8,285     11,645     28,778         NA    9,774         NA     14,637
Year Ended Dec. 31, 1993
Unit value at beginning of period .         NA    $ 9.424    $13.095    $10.848         NA       NA         NA         NA
Unit value at end of period .......         NA    $14.464    $15.369    $10.327         NA       NA         NA         NA
Number of units outstanding at
 end of period ....................         NA      4,685      5,589     26,256         NA       NA         NA         NA
Year Ended Dec. 31, 1992
Unit value at beginning of period .         NA    $10.635    $11.848    $10.000*        NA       NA         NA         NA
Unit value at end of period .......         NA    $ 9.424    $13.095    $10.848         NA       NA         NA         NA
Number of units outstanding at
 end of period ....................         NA      1,419      1,052      8,388         NA       NA         NA         NA
Year Ended Dec. 31, 1991
Unit value at beginning of period .         NA    $10.387    $ 9.000         NA         NA       NA         NA         NA
Unit value at end of period .......         NA    $10.635    $11.848         NA         NA       NA         NA         NA
Number of units outstanding at
 end of period ....................         NA        833        394         NA         NA       NA         NA         NA
Year Ended Dec. 31, 1990
Unit value at beginning of period .         NA    $12.247    $10.368         NA         NA       NA         NA         NA
Unit value at end of period .......         NA    $10.387    $ 9.000         NA         NA       NA         NA         NA
Number of units outstanding at
 end of period ....................         NA      1,015        200         NA         NA       NA         NA         NA
Period from Inception*  to Dec. 31, 1989
Unit value at beginning of period .         NA    $10.000    $10.000         NA         NA       NA         NA         NA
Unit value at end of period .......         NA    $12.247    $10.368         NA         NA       NA         NA         NA
Number of units outstanding at
 end of period ....................         NA        167         57         NA         NA       NA         NA         NA
</TABLE>




<TABLE>
<CAPTION>


(Number of units in thousands)      Templeton    Templeton    Templeton    Templeton U.S.                  Zero   Zero    Zero
                                    Global IncomeInternationalInternationalPacific   Government   Value   Coupon Coupon  Coupon
Contract Sub-Accounts:              Securities   Equity       Smaller Cos. Growth    Securities Securities 2000   2005   2010
- - ----------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>          <C>          <C>       <C>        <C>       <C>     <C>     <C>
Year Ended Dec. 31, 1998
Unit value at beginning of period .
Unit value at end of period .......
Number of units outstanding at
 end of period....................
Year Ended Dec. 31, 1997
Unit value at beginning of period    $16.781    $16.081       $11.145      $14.932   $16.650       NA     $18.475  $20.517 $21.522
Unit value at end of period ...      $16.957    $17.711       $10.825      $ 9.431   $17.947       NA     $19.512  $22.532 $24.740
Number of units outstanding at
 end of period ................        9,434     58,179         1,998       15,833    36,347       NA       4,523    2,910   2,998
Year Ended Dec. 31, 1996
Unit value at beginning of period    $15.522    $13.263       $10.000*     $13.630   $16.298       NA     $18.294  $20.914 $22.431
Unit value at end of period ...      $16.781    $16.081       $11.145      $14.932   $16.650       NA     $18.475  $20.517 $21.522
Number of units outstanding at
 end of period ................       11,857     64,375         1,388       22,061    44,598       NA       5,636    3,579   3,297
Year Ended Dec. 31, 1995
Unit value at beginning of period    $13.726    $12.161            NA      $12.802   $13.835       NA     $15.373  $16.096 $15.930
Unit value at end of period ...      $15.522    $13.263            NA      $13.630   $16.298       NA     $18.294  $20.914 $22.431
Number of units outstanding at
 end of period ................       14,181     59,883            NA       22,483    34,313       NA      6,066     3,504  3,437
Year Ended Dec. 31, 1994
Unit value at beginning of period    $14.650    $12.226            NA      $14.233   $14.698       NA     $16.717  $18.050 $18.144
Unit value at end of period ...      $13.726    $12.161            NA      $12.802   $13.835       NA     $15.373  $16.096 $15.930
Number of units outstanding at
 end of period ................       16,855     60,464            NA       27,231    36,490       NA       4,953    2,780   2,589
Year Ended Dec. 31, 1993
Unit value at beginning of period    $12.733    $ 9.642            NA      $ 9.761   $13.586       NA     $14.595  $14.975 $14.670
Unit value at end of period ...      $14.650    $12.226            NA      $14.233   $14.698       NA     $16.717  $18.050 $18.144
Number of units outstanding at
 end of period ................       13,054     24,026            NA       14,240    40,402       NA       3,787    2,020   1,405
Year Ended Dec. 31, 1992
Unit value at beginning of period    $12.962    $10.000*           NA      $10.000*  $12.798       NA     $13.570  $13.705 $13.482
Unit value at end of period ...      $12.733    $ 9.642            NA      $ 9.761   $13.586       NA     $14.595  $14.975 $14.670
Number of units outstanding at
 end of period ................        5,487      1,329            NA          534    25,054       NA       2,886    1,090     849
Year Ended Dec. 31, 1991
Unit value at beginning of period    $11.706         NA            NA           NA    $11.199      NA     $11.446  $11.545 $11.390
Unit value at end of period ...      $12.962         NA            NA           NA    $12.798      NA     $13.570  $13.705 $13.482
Number of units outstanding at
 end of period ................        2,979         NA            NA           NA     14,426      NA       2,012      795   1,150
Year Ended Dec. 31, 1990
Unit value at beginning of period    $10.813         NA            NA           NA    $10.427      NA     $10.961  $11.406 $11.486
Unit value at end of period ...      $11.706         NA            NA           NA    $11.199      NA     $11.446  $11.545 $11.390
Number of units outstanding at
 end of period ................        1,322         NA            NA           NA      5,450      NA       1,041      406     581
Period from Inception* to Dec. 31, 1989
Unit value at beginning of period    $10.000         NA            NA           NA    $10.000      NA     $10.000  $10.000 $10.000
Unit value at end of period ...      $10.813         NA            NA           NA    $10.427      NA     $10.961  $11.406 $11.486
Number of units outstanding at
 end of period ................          278         NA            NA           NA      1,102      NA         162       86     194
<FN>

* Unit Value at inception was $10.00.

</FN>
</TABLE>

Accumulation   Unit  Value  at  the  inception  was  $10.00  for  each  Contract
Sub-Account.  Inception  was  1/24/89 for the Growth and  Income,  High  Income,
Income  Securities,  Money Market,  Natural  Resources  Securities,  Real Estate
Securities,  Templeton Global Income Securities, and Global Utilities Securities
Sub-Accounts;  3/14/89  for the U.S.  Government  Securities  and the three Zero
Coupon Sub-Accounts;  1/27/92 for the Rising Dividends,  Templeton International
Equity and  Templeton  Pacific  Growth  Sub-Accounts;  3/15/94 for the Templeton
Developing Markets Equity and Templeton Global Growth  Sub-Accounts;  5/1/95 for
the Templeton  Global Asset  Allocation  Sub-Account;  11/1/95 for the Small Cap
Sub-Account;  5/1/96 for the Capital Growth and Templeton  International Smaller
Companies  Sub-Accounts;  11/8/96 for the Mutual Discovery Securities and Mutual
Shares Securities Sub-Accounts; and 5/1/98 for the Global Health Care Securities
and Value Securities Sub-Accounts.




TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

Insurance Company.................................
Experts ..........................................
Legal Opinions ...................................
Distributor ......................................
Reduction or Elimination of the
Contingent Deferred Sales Charge .................
Calculation of Performance Data ..................
Federal Tax Status ...............................
Annuity Provisions................................
Financial Statements .............................
            
    

<PAGE>

                                     PART B


                       STATEMENT OF ADDITIONAL INFORMATION

                 FRANKLIN VALUEMARK II AND FRANKLIN 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, 1999
    
                                                            
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,
1999, AND AS MAY BE AMENDED FROM TIME TO TIME.
    


TABLE OF CONTENTS
CONTENTS                                          PAGE
Company ........................................     
Experts ........................................     
Legal Opinions .................................     
Distributor ....................................     
Reduction or Elimination of the Contingent
 Deferred Sales Charge..........................
Calculation of Performance Data ................     
Federal Tax Status..............................
Annuity Provisions .............................     
Financial Statements ...........................     

<PAGE>

COMPANY

Information  regarding  Allianz  Life  Insurance  Company of North  America (the
"Company") and its ownership is contained in the Prospectus.  On April 1,  1993,
the Company  changed its name from North  American Life and Casualty  Company to

its  present  name.  The  Company  is  rated  A+  (Superior)  by A.M.  BEST,  an
independent  analyst of the insurance  industry.  The  financial  strength of an
insurance  company may be  relevant  insofar as 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,
1997 included in this Statement of Additional  Information  have been audited by
______________________,  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
- --------------------------------------------------------------------------------
   
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 Insurance
Company  believes  to be  relevant  to  determining  whether  reduced  sales  or
administrative  expenses may be expected.  None of the reductions in charges for
sales is contractually guaranteed.
   
The Contingent  Deferred Sales Charge will be eliminated  when the Contracts are
issued to an officer,  director or employee of the  Insurance  Company or any of
its  affiliates.  The  Contingent  Deferred  Sales  Charge  may  be  reduced  or
eliminated when the Contract is sold by an agent of the Insurance Company to any
members of his or her immediate family and the commission is waived. In no event
will any reduction or  elimination  of the  Contingent  Deferred Sales Charge be
permitted where the reduction or elimination will be unfairly  discriminatory to
any person.


CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------

TOTAL RETURN
   
From time to time,  the  Company  may  advertise  the  performance  data for the
Contract   Sub-Accounts  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  Contract  Sub-Account  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 MONEY MARKET  SUB-ACCOUNT. The  Company may advertise yield  information for
the Money Market Sub-Account.  The Money Market Sub-Account'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  Contract  Sub-Account's  current  yield  will
fluctuate  and  that the  principal  is not  guaranteed  should  be  taken  into
consideration when using the Contract Sub-Account'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 Money Market Sub-Account'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 12/31/98,  the Money Market Sub-Account had a
current yield of ____% and an effective yield of ____%.

OTHER  CONTRACT  SUB-ACCOUNTS.   The  Company  may  also  quote  yield  in sales
literature,   advertisements,   personalized  hypothetical  illustrations,   and
Contract Owner communications for the other Contract Sub-Accounts. Each Contract
Sub-Account (other than the Money Market Sub-Account) 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 Portfolio attributable
to shares owned by the Contract Sub-Account; 

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

c = the  average  daily  number of  accumulation  units  outstanding  during the
period;

d = the  maximum  offering  price per  accumulation  unit on the last day of the
period.


The above  formula will be used in  calculating  quotations  of yield,  based on
specified  30-day  periods (or one month)  identified  in the sales  literature,
advertisement,  or communication.  Yield calculations  assume 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 Contract  Sub-Account  (other than the Money
Market Sub-Account).
    

PERFORMANCE RANKING

Total return information for the Contract 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.



PERFORMANCE INFORMATION
   
Total returns reflect all aspects of a Contract Sub-Account's return,  including
the  automatic   reinvestment  by  Allianz  Life  Variable   Account  B  of  all
distributions and any change in a Contract  Sub-Account'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.

<TABLE>
<CAPTION>

STANDARDIZED TOTAL RETURN
FRANKLIN VALUEMARK II/III

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1998:
WITH CONTINGENT DEFERRED SALES CHARGE AND OTHER CHARGES


                                                         FRANKLIN VALUEMARK II           FRANKLIN VALUEMARK III
                                                     ______________________________   ______________________________
CONTRACT SUB-ACCOUNT                      DATE       YEAR       YEAR      INCEPTION   YEAR       YEAR      INCEPTION
- --------------------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>        <C>       <C>         <C>        <C>       <C>
Capital Growth ......................     5/1/96       _____%    _____%   _____%      _____%     _____%    _____%
Global Utilities Securities .........    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
Growth and Income ...................    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
High Income .........................    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
Income Securities ...................    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
Money Market ........................    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
Mutual Discovery Securities .........    11/8/96       _____%    _____%   _____%      _____%     _____%    _____%
Mutual Shares Securities ............    11/8/96       _____%    _____%   _____%      _____%     _____%    _____%
Natural Resources Securities ........    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
Real Estate Securities ..............    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
Rising Dividends ....................    1/27/92       _____%    _____%   _____%      _____%     _____%    _____%
Small Cap ...........................    11/1/95       _____%    _____%   _____%      _____%     _____%    _____%
Templeton Developing
 Markets Equity .....................    3/15/94       _____%    _____%   _____%      _____%     _____%    _____%
Templeton Global
 Asset Allocation ...................     5/1/95       _____%    _____%   _____%      _____%     _____%    _____%
Templeton Global Growth .............    3/15/94       _____%    _____%   _____%      _____%     _____%    _____%
Templeton Global
 Income Securities ..................    1/24/89       _____%    _____%   _____%      _____%     _____%    _____%
Templeton International
 Equity .............................    1/27/92       _____%    _____%   _____%      _____%     _____%    _____%
Templeton International
 Smaller Companies ..................     5/1/96       _____%    _____%   _____%      _____%     _____%    _____%
Templeton Pacific Growth ............    1/27/92       _____%    _____%   _____%      _____%     _____%    _____%
U.S. Government Securities ..........    3/14/89       _____%    _____%   _____%      _____%     _____%    _____%
Zero Coupon - 2000 1.................    3/14/89       _____%    _____%   _____%      _____%     _____%    _____%
Zero Coupon - 2005 1.................    3/14/89       _____%    _____%   _____%      _____%     _____%    _____%
Zero Coupon - 2010 1.................    3/14/89       _____%    _____%   _____%      _____%     _____%    _____%

<FN>

1 Calculated with waiver of fees
</FN>
</TABLE>


<TABLE>
<CAPTION>
   
NON-STANDARDIZED TOTAL RETURN
FRANKLIN VALUEMARK II/III

TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1998:
WITHOUT CONTINGENT DEFERRED SALES CHARGE OR CONTRACT MAINTENANCE CHARGE

                                                      ANNUAL TOTAL RETURN                 CUMULATIVE TOTAL RETURN
                                             ______________________________________    _____________________________
                                INCEPTION     ONE       THREE     FIVE       SINCE     THREE      FIVE       SINCE
CONTRACT SUB-ACCOUNT              DATE       YEAR       YEAR      YEAR     INCEPTION   YEAR       YEAR     INCEPTION
- --------------------------------------------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>       <C>       <C>         <C>        <C>       <C>   
Capital Growth ..............     5/1/96    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Global Utilities Securities      1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Growth and Income ...........    1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
High Income .................    1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Income Securities ...........    1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Money Market ................    1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Mutual Discovery
 Securities .................    11/8/96    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Mutual Shares
 Securities .................    11/8/96    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Natural Resources 
 Securities .................    1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Real Estate Securities ......    1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Rising Dividends ............    1/27/92    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Small Cap ...................    11/1/95    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Templeton Developing
 Markets Equity .............    3/15/94    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Templeton Global
 Asset Allocation ...........     5/1/95    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Templeton Global
 Growth .....................    3/15/94    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Templeton Global
 Income Securities ..........    1/24/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Templeton International
 Equity .....................    1/27/92    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Templeton International
 Smaller Companies ..........     5/1/96    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Templeton Pacific
 Growth .....................    1/27/92    _____%     _____%     _____%   _____%      _____%     _____%    _____%
U.S. Government
 Securities .................    3/14/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Zero Coupon - 2000 1.........    3/14/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Zero Coupon - 2005 1.........    3/14/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%
Zero Coupon - 2010 1.........    3/14/89    _____%     _____%     _____%   _____%      _____%     _____%    _____%

<FN>
1 Calculated with waiver fees
</FN>
    
</TABLE>
<TABLE>
<CAPTION>
   
NON-STANDARDIZED TOTAL RETURN
FRANKLIN VALUEMARK III


TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1998:
WITH CONTINGENT DEFERRED SALES CHARGE AND OTHER CHARGES

                                                      ANNUAL TOTAL RETURN                 CUMULATIVE TOTAL RETURN
                                             _______________________________________   _____________________________
                                INCEPTION     ONE       THREE     FIVE       SINCE     THREE      FIVE       SINCE
CONTRACT SUB-ACCOUNT              DATE       YEAR       YEAR      YEAR     INCEPTION   YEAR       YEAR     INCEPTION
- --------------------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>        <C>       <C>       <C>        <C>        <C>       <C>   
Capital Growth  .............     5/1/96     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Global Utilities
 Securities .................    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Growth and Income ...........    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
High Income .................    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Income Securities ...........    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Money Market ................    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Mutual Discovery
 Securities .................    11/8/96     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Mutual Shares
 Securities .................    11/8/96     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Natural Resources
 Securities .................    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Real Estate Securities ......    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Rising Dividends ............    1/27/92     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Small Cap ...................    11/1/95     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Templeton Developing
 Markets Equity .............    3/15/94     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Templeton Global Asset
 Allocation .................     5/1/95     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Templeton Global
 Growth .....................    3/15/94     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Templeton Global
 Income Securities ..........    1/24/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Templeton International
 Equity .....................    1/27/92     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Templeton International
 Smaller Companies ..........     5/1/96     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Templeton Pacific
 Growth .....................    1/27/92     _____%     _____%     _____%   _____%    _____%      _____%    _____%
U.S. Government
 Securities .................    3/14/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Zero Coupon - 2000 1.........    3/14/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Zero Coupon - 2005 1.........    3/14/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%
Zero Coupon - 2010 1.........    3/14/89     _____%     _____%     _____%   _____%    _____%      _____%    _____%

<FN>
1 Calculated with waiver of fees
</FN>
    
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
   
NON-STANDARDIZED TOTAL RETURN
FRANKLIN VALUEMARK II

TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1998
WITH CONTINGENT DEFERRED SALES CHARGE AND OTHER CHARGES

                                                      ANNUAL TOTAL RETURN                 CUMULATIVE TOTAL RETURN
                                             __________________________________ ____   _____________________________
                                INCEPTION     ONE       THREE     FIVE       SINCE     THREE      FIVE       SINCE
CONTRACT SUB-ACCOUNT              DATE       YEAR       YEAR      YEAR     INCEPTION   YEAR       YEAR     INCEPTION
- --------------------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>        <C>       <C>      <C>         <C>        <C>      <C>
Capital Growth ..............     5/1/96       _____%    _____%     _____%     _____%    _____%         NA   27.58%
Global Utilities
 Securities  ................    1/24/89       _____%    _____%     _____%     _____%    _____%     61.44%  156.72%
Growth and Income ...........    1/24/89       _____%    _____%     _____%     _____%    _____%     94.15%  143.89%
High Income .................    1/24/89       _____%    _____%     _____%     _____%    _____%     59.51%  111.71%
Income Securities ...........    1/24/89       _____%    _____%     _____%     _____%    _____%     64.29%  149.19%
Money Market ................    1/24/89       _____%    _____%     _____%     _____%    _____%     15.28%   37.62%
Mutual Discovery
 Securities .................    11/8/96       _____%    _____%     _____%     _____%    _____%         NA   16.13%
Mutual Shares
 Securities .................    11/8/96       _____%    _____%     _____%     _____%    _____%         NA   16.23%
Natural Resources
 Securities .................    1/24/89       _____%    _____%     _____%     _____%    _____%     21.85%   14.73%
Real Estate Securities ......    1/24/89       _____%    _____%     _____%     _____%    _____%    113.99%  179.94%
Rising Dividends ............    1/27/92       _____%    _____%     _____%     _____%    _____%     83.89%   99.77%
Small Cap ...................    11/1/95       _____%    _____%     _____%     _____%    _____%         NA   47.00%
Templeton Developing
 Markets Equity .............    3/15/94       _____%    _____%     _____%     _____%    _____%         NA    1.80%
Templeton Global
 Asset Allocation ...........     5/1/95       _____%    _____%     _____%     _____%    _____%         NA   35.33%
Templeton Global
 Growth .....................    3/15/94       _____%    _____%     _____%     _____%    _____%         NA   50.08%
Templeton Global
 Income Securities ..........    1/24/89       _____%    _____%     _____%     _____%    _____%     32.25%   68.45%
Templeton International
 Equity .....................    1/27/92       _____%    _____%     _____%     _____%    _____%     82.67%   76.30%
Templeton International
 Smaller Companies ..........     5/1/96       _____%    _____%     _____%     _____%    _____%         NA    4.56%
Templeton Pacific
 Growth .....................    1/27/92       _____%    _____%     _____%     _____%    _____%     -4.13%   -6.16%
U.S. Government
 Securities .................    3/14/89       _____%    _____%     _____%     _____%    _____%     31.15%   78.30%
Zero Coupon - 2000 1.........    3/14/89       _____%    _____%     _____%     _____%    _____%     32.76%   93.93%
Zero Coupon - 2005 1.........    3/14/89       _____%    _____%     _____%     _____%    _____%     49.51%  124.00%
Zero Coupon - 2010 1.........    3/14/89       _____%    _____%     _____%     _____%    _____%     67.65%  145.95%

<FN>

1 Calculated with waiver of fees
</FN>
    
</TABLE>
<PAGE>

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.


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

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

General

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

For annuity payments, a portion of each payment in excess of an exclusion amount
is includable 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 Insurance  Company is taxed as a life insurance  company under the Code. For
federal income tax purposes,  the Separate Account is not a separate entity from
the Insurance Company, and its operations form a part of the Insurance Company.

Diversification

Section  817(h) of the Code  imposes  certain  diversification  standards on the
underlying  assets of  variable  annuity  contracts.  The Code  provides  that a
variable  annuity  contract  will not be treated as an annuity  contract for any
period (and any subsequent  period) for which the investments are not adequately
diversified  in  accordance  with  regulations  prescribed  by the United States

Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity  contract  would result in  imposition  of federal  income tax to the
Contract  Owner with respect to earnings  allocable to the Contract prior to the
receipt  of  payments  under  the  Contract.  The Code  contains  a safe  harbor
provision  which provides that annuity  contracts such as the Contracts meet the
diversification  requirements if, as of the end of each quarter,  the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five  percent (55%) of the total assets consist of cash, cash
items, U.S. government  securities and securities of other regulated  investment
companies.

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

The  Code  provides  that  for  purposes  of  determining  whether  or  not  the
diversification standards imposed on the underlying assets of variable contracts
by Section  817(h) of the Code have been met,  "each  United  States  government
agency or instrumentality shall be treated as a separate issuer."
   
The Insurance  Company  intends that all Portfolios of Franklin  Valuemark Funds
underlying the Contracts will be managed by the managers for Franklin  Valuemark
Funds in such a manner as to comply with these diversification requirements.
   
The Treasury  Department has indicated that the  diversification  Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the  investments of the Separate  Account will cause the Contract Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract.  At this time it cannot be
determined whether  additional  guidance will be provided and what standards may
be contained in such guidance.

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

the Separate  Account  resulting in the  imposition of federal income tax to the
Contract  Owner with  respect to earnings  allocable  to the  Contract  prior to
receipt of payments under the Contract.

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

Multiple Contracts

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

Contracts Owned by Other than Natural Persons

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

Tax Treatment of Assignments

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

Income Tax Withholding
   
All distributions or the portion thereof which is includable 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.
    
Effective January 1, 1993, 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).  Participants should consult their own tax
counsel or other tax adviser regarding withholding requirements.

   
Tax Treatment of Withdrawals -
Non-Qualified Contracts

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

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

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

Qualified Plans
   
The  Contracts  offered by the  Prospectus  are  designed to be suitable for use
under various types of Qualified Plans.  Because of the minimum purchase payment
requirements,  these Contracts may not be appropriate for some periodic  payment

retirement  plans.  Taxation of  participants in each Qualified Plan varies with
the type of plan and  terms  and  conditions  of each  specific  plan.  Contract
Owners,  Annuitants  and  Beneficiaries  are  cautioned  that  benefits  under a
Qualified Plan may be subject to the terms and conditions of the plan regardless
of the terms and conditions of the Contracts  issued  pursuant to the plan. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the Insurance Company's  administrative  procedures.  Contract
Owners,  participants  and  Beneficiaries  are responsible for determining  that
contributions,   distributions  and  other  transactions  with  respect  to  the
Contracts comply with applicable law. Following are general  descriptions of the
types of Qualified Plans with which the Contracts may be used. Such descriptions
are not  exhaustive  and are for general  informational  purposes  only. The tax
rules  regarding  Qualified  Plans  are very  complex  and will  have  differing
applications,  depending on individual facts and  circumstances.  Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.
    

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

   
Contracts  issued  pursuant  to  Qualified  Plans  include  special   provisions
restricting Contract provisions that may otherwise be available and described in
this Statement of Additional Information.  Generally,  Contracts issued pursuant
to Qualified Plans are not transferable  except upon surrender or annuitization.
Various  penalty and excise taxes may apply to  contributions  or  distributions
made in violation of  applicable  limitations.  Furthermore,  certain  surrender
penalties and  restrictions  may apply to surrenders  from Qualified  Contracts.
(See "Tax Treatment of Surrenders - Qualified Contracts.")
    
a. Tax-Sheltered Annuities
  
Section 403(b) of the Code permits the purchase of "tax-sheltered  annuities" by
public schools and certain charitable,  educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying  employers may make
contributions  to the  Contracts  for  the  benefit  of  their  employees.  Such
contributions  are not  includable 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 Surrenders - Qualified  Contracts" and  "Tax-Sheltered  Annuities -
Surrender  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 period  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  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);  (h)  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 (i)  distributions  from an
Individual  Retirement  Annuity made to the Owner or Annuitant  (as  applicable)
which are qualified  first-time home buyer  distributions (as defined in Section
72(t)(8) of the Code).  The exceptions  stated in items (d) and (f) above do not
apply in the case of an Individual  Retirement Annuity.  The exception stated in
item (c) applies to an Individual  Retirement  Annuity  without the  requirement
that there be a separation from service.
    

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

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

Tax-Sheltered Annuities - Withdrawal Limitations
   
The Code limits the withdrawal of amounts  attributable  to  contributions  made
pursuant to a salary  reduction  agreement (as defined in Section  403(b)(11) of
the Code) to circumstances only when the Contract Owner: (1) attains age 59 1/2;
(2) separates from service;  (3) dies; (4) becomes  disabled (within the meaning
of Section  72(m)(7)  of the  Code);  or (5) in the case of  hardship.  However,
surrenders  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 surrenders 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
surrenders  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 Contract Sub-Account(s) of the Variable Account. At the Income
Date,  the Contract  Value in each Contract  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 Contract Sub-Account  Variable Annuity payments,  reduced by the Contract
Maintenance Charge.
    

ANNUITY UNIT VALUE
  
The value of an  Annuity  Unit for a Contract  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  Contract  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  Contract
     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,  1998,  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 Variable Account as of and
for the year ended December 31, 1998 are also included herein.
 


<PAGE>

                                     PART C

                                OTHER INFORMATION

Item 24.  Financial Statements and Exhibits

      a.  Financial Statements

          To be filed by amendment

      b.  Exhibits
   
          1.  Resolution of Board of Directors of the Company authorizing the
              establishment of the Variable Account (1)
          2.  Not Applicable
          3.  Principal Underwriter Agreement (3)
          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 (2)
          9.  Opinion and Consent of Counsel*
         10.  Independent Auditors' Consent*
         11.  Not Applicable
         12.  Not Applicable
         13.  Calculation of Performance Information*
         14.  Company Organizational Chart (3)
         27.  Not Applicable


 (1)Incorporated by reference to Post-Effective Amendment No. 2 to
    Registrant's Form N-4 electronically filed on October 24, 1995.
 (2)Incorporated by reference to  Post-Effective  Amendment No.3 to Registrant's
    Form N-4 electronically filed on April 18, 1996.
 (3)Incorporated by reference to  Post-Effective  Amendment No.5 to Registrant's
    Form N-4 electronically filed on April 25, 1997.
  * To be filed by amendment.
    

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>
Lowell C. Anderson        Chairman, President, Chief
1750 Hennepin Avenue      Executive Officer and Director
Minneapolis, MN 55403

Herbert F. Hansmeyer      Director
777 San Marin Drive       777 San Marin Drive
Novato, CA 94998          Novato, CA 94998

Michael P. Sullivan       Director
7505 Metro Boulevard
Minneapolis, MN 55439

Dr. Jerry E. Robertson    Director
220-13E-29/3M Center
St. Paul, MN 55144

Dr. Gerhard Rupprecht     Director
Reinsburgstrasse 19
D-70178
Stuttgart, Germany

Edward J. Bonach          Senior Vice President, Chief
1750 Hennepin Avenue      Financial Officer and Treasurer
Minneapolis, MN 55403

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

Ronald L. Wobbeking       President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403

Rev. Dennis J. Dease      Director
c/o Univer of St.Thomas
Box AQU100
2115 Summit Avenue
St. Paul, MN 55105-1096

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

Robert M. Kimmitt         Director
Wilmer, Cutler & Pickering
2445 M Street NW
Washington, DC  20037-1420
</TABLE>


Item 26.    Persons Controlled by or Under Common Control with the Depositor
            or Registrant

The Company Organizational chart is incorporated by reference to  Post-Effective
Amendment No. 5 (File No. 811-05618)

Item 27.    Number of Contract Owners
   
As of December 31, 1998, there were 16,423 qualified  Contract Owners and 37,376
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.  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 and directors of NALAC  Financial  Plans,
LLC:


<TABLE>

<CAPTION>

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

       

Thomas B. Clifford      President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403

Michael T. Westermeyer  Secretary and Director
1750 Hennepin Avenue
Minneapolis, MN 55403

Michael J. Yates        Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403

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

Edward J. Bonach        Director
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>

Item 30.    Location of Accounts and Records

Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis,  Minnesota,
maintains  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.

                                  SIGNATURES

   
As  required by the  Securities  Act of 1933 and the  Investment  Company Act of
1940, as amended,  the Registrant has caused this  Registration  Statement to be
signed on its behalf in the City of Minneapolis and State of Minnesota,  on this
27th day of January, 1999.
    

                                      ALLIANZ LIFE
                                      VARIABLE ACCOUNT B
                                      (Registrant)


                       By: ALLIANZ LIFE INSURANCE COMPANY
                                      OF NORTH AMERICA
                                      (Depositor)



                                      By:  /s/Michael T. Westermeyer
                                           -------------------------



                                      ALLIANZ LIFE INSURANCE COMPANY
                                      OF NORTH AMERICA
                                      (Depositor)



                                      By:  /s/Michael T. Westermeyer
                                           -------------------------



Pursuant to the  requirements of the Securities Act of 1933,  this  registration
statement has been signed by the following  persons in the capacities and on the
dates indicated.



Signature and Title
<TABLE>

<CAPTION>

<S>                      <C>                          <C>
Lowell C. Anderson*      Chairman of the Board,
Lowell C. Anderson       President and
                         Chief Executive Officer       01/27/99

Herbert F. Hansmeyer*    Director                      01/27/99
Herbert F. Hansmeyer

Michael P. Sullivan*     Director                      01/27/99
Michael P. Sullivan

Dr. Jerry E. Robertson*  Director                      01/27/99
Dr. Jerry E. Robertson

Dr. Gerhard Rupprecht*   Director                      01/27/99
Dr. Gerhard Rupprecht

Edward J. Bonach*        Chief Financial Officer       01/27/99
Edward J. Bonach

Rev. Dennis J. Dease*    Director                      01/27/99
Rev. Dennis J. Dease

James R. Campbell*       Director                      01/27/99
James R. Campbell

Robert M. Kimmitt*       Director                      01/27/99
Robert M. Kimmitt

</TABLE>

                                   *By  Power of Attorney


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




<PAGE>

                                   EXHIBITS

                                      TO

                        POST-EFFECTIVE AMENDMENT    NO.7    

                                      TO

                                   FORM N-4

                       ALLIANZ LIFE VARIABLE ACCOUNT B






                              INDEX TO EXHIBITS



Exhibit                                                            Page

(To be filed by amendment.)





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