VARIABLE ACCOUNT A AMERICAN INTL LIFE ASSUR CO OF NEW YORK, 485BPOS, 1996-05-02

VARIABLE ACCOUNT A AMERICAN INTL LIFE ASSUR CO OF NEW YORK
485BPOS, 1996-05-02

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1996
FILE NO. 33-58502
811-4865
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. 3 [X]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. _______ [X]
(Check appropriate box or boxes.)

VARIABLE ACCOUNT A
------------------
(Exact Name of Registrant)

American International Life Assurance Company of New York
---------------------------------------------------------
(Name of Depositor)

80 Pine Street, New York, New York 10005
-------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)

Depositor's Telephone Number, including Area Code (212) 770-7000
--------------

Robert Liguori, Esq.
AIG Life Insurance Company
One Alico Plaza
Wilmington, Delaware 19899
--------------------------
(Name and Address of Agent for Service)

Copies to:
Michael Berenson, Esq. and Florence Davis, Esq.
Jorden Burt Berenson & Johnson, LLP American International
Suite 400 East Group, Inc.
1025 Thomas Jefferson Street, N.W. 70 Pine Street
Washington, D.C. 20007-0805 New York, New York 10270
--------------------------- ------------------------

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this filing.

It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b) of Rule 485
-----
_____ on ___________ pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
_____ on ___________ pursuant to paragraph (a)(i) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on ___________ pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has declared that it registered an indefinite number or amount of
securities in accordance with Rule 24f-2 under the Investment Company Act of
1940. Registrant filed a Rule 24f-2 notice for its most recent fiscal year on
February 26, 1996.

<PAGE>

CROSS REFERENCE SHEET
(required by Rule 495)

Item No. Location
- -------- --------
PART A

Item 1. Cover Page..................................... Cover Page
Item 2. Definitions.................................... Definitions
Item 3. Synopsis....................................... Highlights
Item 4. Condensed Financial Information................ Condensed
Financial
Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies............. The Variable
Account; The
Company; Alliance
Variable Products
Series Fund, Inc.
Item 6. Deductions and Expenses........................ Charges and
Deductions
Item 7. General Description of Variable Annuity
Contracts.............................. Purchasing a
Contract; Rights
under the
Contracts
Item 8. Annuity Period................................. Annuity Period
Item 9. Death Benefit.................................. Death Benefit
Item 10. Purchases and Contract Value................... Rights under
the Contracts;
Purchasing a Contract

Item 11. Redemptions.................................... Withdrawals
Item 12. Taxes.......................................... Taxes
Item 13. Legal Proceedings.............................. Not Applicable
Item 14. Table of Contents of the Statement of
Additional Information......................... Table of
Contents of
the Statement
of Additional
Information

<PAGE>

Item No. Location
- -------- --------
PART B

Item 15. Cover Page.................................... Cover Page
Item 16. Table of Contents............................. Table of
Contents
Item 17. General Information and History............... General Information
Item 18. Services...................................... Services
Item 19. Purchase of Securities Being Offered.......... Purchasing a Contract;
Charges and
Deductions (Part A)
Item 20. Underwriters.................................. General Information/
Distributor
Item 21. Calculation of Performance Data............... Calculation of
Performance Related
Information
Item 22. Annuity Payments.............................. Annuity Provisions
Item 23. Financial Statements.......................... Financial
Statements

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>

PROSPECTUS
FOR

INDIVIDUAL AND GROUP
SINGLE PREMIUM AND FLEXIBLE PREMIUM
DEFERRED
VARIABLE ANNUITY CONTRACTS

ISSUED BY

VARIABLE ACCOUNT A

AND

AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
OF NEW YORK
80 PINE STREET
NEW YORK, NEW YORK 10005

This Prospectus sets forth the information a prospective investor ought to
know before investing.

The Individual Deferred Variable Annuity Contracts (the "Individual
Contracts") and Group Deferred Variable Annuity Contracts ("Group Contracts")
(collectively, the "Contracts") described in this Prospectus provide for
accumulation of Contract Values and payment of monthly annuity payments. The
Contracts may be used in retirement plans which do not qualify for federal tax
advantages ("Non-Qualified Contracts") or in connection with retirement plans
which may qualify as Individual Retirement Annuities ("IRA") under Section 408
of the Internal Revenue Code of 1986, as amended (the "Code") or Section 403(b)
of the Code ("403(b) Plans"). The Contracts will not be available in connection
with retirement plans designed by American International Life Assurance Company
of New York (the "Company") which qualify for the federal tax advantages
available under Sections 401 and 457 of the Code. Purchasers intending to use
the Contracts in connection with an IRA or 403(b) Plan should seek competent tax
advice.

Premiums allocated among the Subaccounts of Variable Account A (the
"Variable Account") will be invested in shares of Alliance Variable Products
Series Fund, Inc. (the "Fund"). The Fund has made available sixteen
Portfolios: Money Market Portfolio; Short-Term Multi-Market Portfolio; Growth
Portfolio; Growth and Income Portfolio; International Portfolio; U.S.
Government/High Grade Securities Portfolio; North American Government Income
Portfolio; Global Dollar Government Portfolio; Utility Income Portfolio; Global
Bond Portfolio; Premier Growth Portfolio; Total Return Portfolio; Conservative
Investors Portfolio; Growth Investors Portfolio; Worldwide Privatization
Portfolio; and Technology Portfolio. (See "Alliance Variable Products Series
Fund, Inc. on Page .)

Additional information about the Contracts and the Variable Account is
contained in the "Statement of Additional Information" which is available upon
request at no charge by calling or writing American International Life Assurance
Company of New York; Attention: Variable Products, One Alico Plaza, Wilmington,
Delaware 19801, 1-800-340-2765 or call the service office at 1-800-255-8402. The
Statement of Additional Information dated May 1, 1996, has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference. The
Table of Contents for the Statement of Additional Information can be found on
page of this Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE
REFERENCE.

THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.

Date of Prospectus: May 1, 1996

<PAGE>

TABLE CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions................................................................................................ 3
Highlights................................................................................................. 4
Summary of Expenses........................................................................................ 6
Condensed Financial Information............................................................................ 8
Calculation of Performance Data.......................................................................... 10
The Company................................................................................................ 11
The Variable Account....................................................................................... 11
Alliance Variable Products Series Fund, Inc................................................................
The Contract
Parties to the Contract.................................................................................. 15
How to Purchase a Contract............................................................................... 16
Discount Purchase Programs............................................................................... 16
Distributor.............................................................................................. 16
Administration of the Contracts.......................................................................... 17
Premium and Allocation to Your Investment Options........................................................ 17
Right to Examine Contract Period......................................................................... 17
Unit Value and Contract Value............................................................................ 18
Transfers................................................................................................ 18
Dollar Cost Averaging.................................................................................... 18
Asset Rebalancing Option................................................................................. 19
Charges and Deductions..................................................................................... 20
Annuity Benefits........................................................................................... 22
Death Benefit.............................................................................................. 23
Distributions Under the Contract........................................................................... 24
Taxes...................................................................................................... 27
Table of Contents of the Statement of Additional Information............................................... 32
Appendix -- General Account Option......................................................................... A-1
Guaranteed Account....................................................................................... A-1
Guarantee Periods........................................................................................ A-1
Market Value Adjustment.................................................................................. A-2
</TABLE>

<PAGE>

DEFINITIONS

ACCUMULATION UNIT -- An accounting unit of measure used to calculate the
Contract Value prior to the Annuity Date.

ADMINISTRATIVE OFFICE -- The Annuity Service Office of the Company: c/o Delaware
Valley Financial Services, Inc., 300 Berwyn Park, P.O. Box 3031, Berwyn, PA
19312-0031.

ANNUITANT -- The person designated by the Owner upon whose continuation of life
any annuity payment involving life contingencies depends.

ANNUITY DATE -- The date on which annuity payments are to commence.

ANNUITY OPTION -- An arrangement under which annuity payments are made under
this Contract.

ANNUITY UNIT -- An accounting unit of measure used to calculate annuity payments
after the Annuity Date.

CONTRACT ANNIVERSARY -- An anniversary of the Effective Date of the Contract.

CONTRACT VALUE -- The dollar value as of any Valuation Date of all amounts
accumulated under this Contract.

CONTRACT YEAR -- Each period of twelve (12) months commencing with the Effective
Date.

EFFECTIVE DATE -- The date on which the first Contract Year begins.

GUARANTEED ACCOUNT -- A part of our General Account, which earns a Guaranteed
Rate of interest.

MARKET VALUE ADJUSTMENT -- An adjustment applied as a result of a transfer or
surrender of an amount allocated to the Guaranteed Account which occurs on a
date prior to the end of an applicable Guarantee Period.

OWNER -- The person named in the Contract Schedule, unless changed, and who has
all rights under the Contract.

PREMIUM -- Purchase payments for the Contract are referred to as Premium.

PREMIUM YEAR -- Any period of twelve (12) months commencing with the date a
Premium payment is made and ending on the same date in each succeeding twelve
(12) month period thereafter.

SURRENDER CHARGE -- Contingent deferred sales charges are referred to as
Surrender Charges.

VALUATION DATE -- Each day that We and the New York Stock Exchange are open for
trading.

VALUATION PERIOD -- The period between the close of business on any Valuation
Date and the close of business for the next succeeding Valuation Date.

WE, OUR, US -- American International Life Assurance Company of New York.

YOU, YOUR -- The Owner of this Contract.

<PAGE>

HIGHLIGHTS

This Prospectus describes the Individual Contracts or Group Contracts
(collectively, the "Contracts") and a segregated investment account of American
International Life Assurance Company of New York (the "Company") which account
has been designated Variable Account A (the "Variable Account"). The Contracts
are designed to assist in financial planning by providing for the accumulation
of capital on a tax-deferred basis for retirement and other long-term purposes,
and providing for the payment of monthly annuity income. Contracts may be
purchased by qualified retirement plans or with the intent to qualify for
special Federal income tax treatment ("Qualified Contracts"), or as an
Individual Retirement Annuity ("IRA"). The Contract may also be purchased for
retirement plans, deferred compensation plans and other purposes which do not
qualify for such special Federal income tax treatment ("Non-Qualified
Contracts"). (See "Taxes" on page .)

A Contract is purchased with a minimum initial premium of $5,000 for
Non-qualified Contracts and $2,000 for a Qualified Contract. If you choose a
flexible premium Contract, additional premium is permitted at any time, subject
to certain limitations. (See "Premium and Allocation to Your Investment Options"
on page .) You, as the Owner of the Contract, may allocate your premium so
that it accumulates on a variable basis, a fixed basis or a combination of both.

Premium allocated among the Subaccounts of the Variable Account will be
invested in shares of one or more of the underlying portfolios of the Alliance
Variable Products Series Fund, Inc. (the "Fund"), and will accumulate on a
variable basis. There are currently 16 Subaccounts, each of which invests
exclusively in one of the following Portfolios: Money Market; Short-Term
Multi-Market; Growth; Growth and Income; International; U.S. Government/High
Grade Securities; North American Government Income; Global Dollar Government;
Utility Income; Global Bond; Premier Growth; Total Return; Conservative
Investors; Growth Investors; Worldwide Privatization; and Technology. (See
"Alliance Variable Products Series Fund, Inc. on Page .) Your value in any one
of these Subaccounts will vary according to the investment performance of the
underlying portfolio chosen by you. You bear the entire investment risk for all
premium allocated to the Variable Account.

The Company does not deduct Sales Charges from any premium received.
However, the Contracts provide for a Surrender Charge (contingent deferred sales
charge) that may be assessed in the event that an Owner surrenders all or a
portion of the Contract Value within seven contract years following payment of
any premium. The maximum Surrender Charge is 6% of premium to which the charge
is applicable for flexible premium contracts and 6% of the Contract Value for
single premium contracts. (See "Summary of Expenses" on page , and "Charges
and Deductions -- Deduction for Surrender Charge" on page .) Withdrawals and
Surrenders from the Guaranteed Account may be subject to a Market Value
Adjustment (See "Market Value Adjustment," Appendix , page .)

A penalty free withdrawal is available. Generally, there is no Surrender
Charge imposed on the greater of the Contract Value less premiums paid or the
portion of the withdrawal that does not exceed 10% of premium otherwise subject
to the Surrender Charge. (See "Withdrawals" on page .)

Surrenders and Withdrawals may be taxable and subject to a penalty tax. (See
"Taxes" beginning on page .)

The Company deducts daily a Mortality and Expense Risk Charge which is equal
on an annual basis to 1.25% of the average daily net asset value of the Variable
Account. There are no Mortality and Expense Risk Charges deducted for amounts in
the Guaranteed Account. (See "Charges and Deductions -- Deduction for Mortality
and Expense Risk Charge" on page .)

The Company deducts daily an Administrative Charge which is equal on an
annual basis to 0.15% of the average daily net asset value of the Variable
Account. The Administrative Charge is not assessed to the Guaranteed Account. In
addition, the Company deducts from the Contract Value, an annual Contract
Maintenance Fee which is $30 per year. The Contract Maintenance Fee is waived if
the Contract Value is greater than $50,000 on the date of the charge. These
Charges are designed to

<PAGE>

reimburse the Company for administrative expenses relating to maintenance of the
Contract and the Variable Account. (See "Charges and Deductions -- Deduction for
Administrative Charge and Contract Maintenance Fee" on page .)

There are deductions and expenses paid out of the assets of the Fund which
are described in the accompanying Prospectus for the Fund.

The Owner may return the Contract within ten (10) days (the "Right to
Examine Contract Period") after it is received by returning it to the Company's
Administrative Office. The return of the Contract by mail will be effective when
the postmark is affixed to a properly addressed and postage prepaid envelope.
The Company will refund the Contract Value. In the case of Contracts issued in
connection with an IRA the Company will refund the greater of the Premium less
any withdrawals, or the Contract Value. However, if the laws of a state require
that the Company refund, during the Right to Examine Contract Period, an amount
equal to the premium paid less any withdrawals, the Company will refund such an
amount.

FEE TABLE

OWNER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
ALL
SUBACCOUNTS
-----
<S> <C>
Sales Load Imposed on Purchases................... None
</TABLE>

Surrender Charge (as a percentage of amount surrendered):

<TABLE>
<CAPTION>
SINGLE PREMIUM CONTRACTS FLEXIBLE PREMIUM CONTRACTS
- ------------------------------------ -------------------------------------
<S> <C> <C>
Contract Year 1 Premium Year 1 6%
Contract Year 2 Premium Year 2 6%
Contract Year 3 Premium Year 3 5%
Contract Year 4 Premium Year 4 5%
Contract Year 5 Premium Year 5 4%
Contract Year 6 Premium Year 6 3%
Contract Year 7 Premium Year 7 2%
Contract Year 8 and thereafter Premium Year 8 and thereafter None

Exchange Fee:
First 12 Per Contract Year............................................... None
Thereafter............................................................... $10

Annual Contract Fee........................................................ $30

Separate Account Expenses
(as a percentage of average account value)
Mortality and Expense Risk Fees.......................................... 1.25%
Account Fees and Expenses................................................ 0.15%
Total Separate Account Annual Expenses..................................... 1.40%
</TABLE>

<PAGE>

SUMMARY OF EXPENSES

ANNUAL FUND EXPENSES NET OF ANY EXPENSE REIMBURSEMENTS*

<TABLE>
<CAPTION>
TOTAL
OTHER PORTFOLIO
PORTFOLIO MANAGEMENT FEE EXPENSES EXPENSES
- ------------------------------------------------------------------------------ --------------- ----------- -----------
<S> <C> <C> <C>
Alliance Money Market......................................................... 0.38% 0.57% 0.95%
Alliance Short-Term Multi-Market.............................................. 0.20 0.75 0.95
Alliance Growth............................................................... 0.43 0.52 0.95
Alliance Growth and Income.................................................... 0.63 0.16 0.79
Alliance International........................................................ 0.00 0.95 0.95
Alliance U.S. Government/High Grade Securities................................ 0.00 0.95 0.95
Alliance North American Government Income..................................... 0.00 0.95 0.95
Alliance Global Dollar Government............................................. 0.00 0.95 0.95
Alliance Utility Income....................................................... 0.00 0.95 0.95
Alliance Global Bond.......................................................... 0.00 0.95 0.95
Alliance Premier Growth....................................................... 0.76 0.19 0.95
Alliance Total Return......................................................... 0.00 0.95 0.95
Alliance Conservative Investors............................................... 0.00 0.95 0.95
Alliance Growth Investors..................................................... 0.00 0.95 0.95
Alliance Worldwide Privatization.............................................. 0.00 0.95 0.95
Alliance Technology........................................................... 0.00 0.95 0.95
</TABLE>

The purpose of the table set forth above is to assist the Owner in
understanding the various costs and expenses that an Owner will bear directly or
indirectly. The table reflects expenses of the Variable Account as well as the
Fund. (See "Charges and Deductions" on page of this Prospectus and "Management
of the Fund" in the Fund Prospectus.)

No deduction will be made for any premium or other taxes levied by any State
unless imposed by the State where you reside. Premium taxes currently imposed on
the Contracts by various states range from 0% to 3.5% of premiums paid. (See
"Charges and Deductions -- Deduction for Premium and Other State Taxes" on page
.)

"Other Expenses" are based upon the expenses outlined under the section
entitled "Management of the Fund" in the Fund Prospectus.
- ------------------------
*Expense information for the Money Market Portfolio, Premier Growth
Portfolio, U.S. Government/High Grade Securities Portfolio, Total Return
Portfolio, International Portfolio, Growth and Income Portfolio, Short-Term
Multi-Market Portfolio and Global Bond Portfolio have been restated to reflect
current fees. The expenses listed in the table for the Money Market Portfolio,
Premier Growth Portfolio, Growth and Income Portfolio, U.S. Government/High
Grade Securities Portfolio, Total Return Portfolio, International Portfolio,
Short-Term Multi-Market Portfolio, Global Bond Portfolio, North American
Government Income Portfolio, Global Dollar Government Portfolio, Utility Income
Portfolio, Conservative Investors Portfolio, Growth Investors Portfolio, Growth
Portfolio, Worldwide Privatization Portfolio and Technology Portfolio are net of
voluntary expense reimbursements, which are not required to be continued
indefinitely; however, the Advisor intends to continue such reimbursements for
the foreseeable future. The expenses of the following Portfolios, before expense
reimbursements, would be: Money Market Portfolio: Management Fees -- 50%, Other
Expenses -- .57% and Total Portfolio Operating Expenses -- 1.07%; Premier Growth
Portfolio: Management Fees -- 1.00%, Other Expenses -- .19% and Total Portfolio
Operating Expenses -- 1.19%; Growth and Income Portfolio: Management Fees --
.63%, Other Expenses -- .16% and Total Portfolio Operating Expenses -- .79%;
U.S. Government/High Grade Securities Portfolio: Management Fees -- .60%, Other
Expenses -- .98% and Total Portfolio Operating Expenses -- 1.58%; Total Return
Portfolio: Management Fees -- .63%, Other Expenses -- 3.86% and Total Portfolio
Operating Expenses -- 4.49%; International Portfolio: Management Fees -- 1.00%,
Other Expenses -- 1.99% and Total

<PAGE>

Portfolio Operating Expenses -- 2.99%; Short-Term Multi-Market Portfolio:
Management Fees -- .55%, Other Expenses -- .75% and Total Portfolio Operating
Expenses -- 1.30%; Global Bond Portfolio: Management Fees -- .65%, Other
Expenses -- 1.12% and Total Portfolio Operating Expenses -- 1.77%; North
American Government Income Portfolio: Management Fees -- .65%, Other Expenses --
1.92% and Total Portfolio Operating Expenses -- 2.57%; Global Dollar Government
Portfolio: Management Fees -- .75%, Other Expenses -- 4.07% and Total Portfolio
Operating Expenses -- 4.82%; Utility Income Portfolio: Management Fees -- .75%,
Other Expenses -- 3.04% and Total Portfolio Operating Expenses -- 3.79%;
Worldwide Privatization Portfolio: Management Fees -- 1.00%, Other Expenses --
3.17% and Total Portfolio Operating Expenses -- 4.17%; Conservative Investors
Portfolio: Management Fees -- .75%, Other Expenses -- 3.50% and Total Portfolio
Operating Expenses -- 4.25%; Growth Investors Portfolio: Management Fees --
.75%, Other Expenses -- 5.42% and Total Portfolio Operating Expenses -- 6.17%;
Growth Portfolio: Management Fees -- .75%, Other Expenses -- .52% and Total
Portfolio Operating Expenses -- 1.27%. The estimated expenses of the Technology
Portfolios before expense reimbursements would be: Technology Portfolio:
Management Fees -- 1.0%. Other Expenses -- 1.55% and Total Operating Expenses --
2.55%. THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF FUTURE EXPENSES:
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

EXPENSES ON A HYPOTHETICAL $1,000 POLICY, ASSUMING 5% GROWTH:

<TABLE>
<CAPTION>
IF YOU SURRENDER
--------------------------------------------------
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Alliance Money Market........................................................ $ 80 $ 114 $ 149 $ 275
Alliance Short Term Multi-Market............................................. 80 114 149 275
Alliance Growth.............................................................. 80 114 149 275
Alliance Growth and Income................................................... 78 109 141 258
Alliance International....................................................... 80 114 149 275
Alliance U.S. Gov't/High Grade Securities.................................... 80 114 149 275
Alliance North American Gov't Income......................................... 80 114 149 275
Alliance Global Dollar Government............................................ 80 114 149 275
Alliance Utility Income...................................................... 80 114 149 275
Alliance Global Bond......................................................... 80 114 149 275
Alliance Premier Growth...................................................... 80 114 149 275
Alliance Total Return........................................................ 80 114 149 275
Alliance Conservative Investors.............................................. 80 114 149 275
Alliance Growth Investors.................................................... 80 114 149 275
Alliance Worldwide Privatization............................................. 80 114 149 275
Alliance Technology.......................................................... 80 114 149 275
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
IF YOU ANNUITIZE OR
IF YOU DO NOT SURRENDER
--------------------------------------------------
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Alliance Money Market........................................................ $ 24 $ 75 $ 129 $ 275
Alliance Short Term Multi-Market............................................. 24 75 129 275
Alliance Growth.............................................................. 24 75 129 275
Alliance Growth and Income................................................... 23 70 120 258
Alliance International....................................................... 24 75 129 275
Alliance U.S. Gov't/High Grade Securities.................................... 24 75 129 275
Alliance North American Gov't Income......................................... 24 75 129 275
Alliance Global Dollar Government............................................ 24 75 129 275
Alliance Utility Income...................................................... 24 75 129 275
Alliance Global Bond......................................................... 24 75 129 275
Alliance Premier Growth...................................................... 24 75 129 275
Alliance Total Return........................................................ 24 75 129 275
Alliance Conservative Investors.............................................. 24 75 129 275
Alliance Growth Investors.................................................... 24 75 129 275
Alliance Worldwide Privatization............................................. 24 75 129 275
Alliance Technology.......................................................... 24 75 129 275
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

<PAGE>

CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES*

<TABLE>
<CAPTION>
1995 1994 1993 1992
--------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
ALLIANCE MONEY MARKET
Accumulation Unit Value
Beginning of Period................................ 10.27 10.07 10.00 N/A
End of Period...................................... 10.64 10.27 10.07 N/A
Accum Units o/s @ end of period...................... 551,555.84 206,034.73 1,590.74 N/A
ALLIANCE SHORT-TERM MULTI-MARKET
Accumulation Unit Value
Beginning of Period................................ 9.51 10.31 9.79 10.00
End of Period...................................... 10.03 9.51 10.31 9.79
Accum Units o/s @ end of period...................... 81,425.05 15,915.04 6,843.27 8,369.93
ALLIANCE GROWTH
Accumulation Unit Value
Beginning of Period................................ 10.48 11.13 10.00 10.00
End of Period...................................... 13.99 10.48 11.13 10.00
Accum Units o/s @ end of period...................... 777,108.88 56,104.84 35,271.53 2,081.43
ALLIANCE GROWTH & INCOME
Accumulation Unit Value
Beginning of Period................................ 11.57 11.76 10.66 10.00
End of Period...................................... 15.52 11.57 11.76 10.66
Accum Units o/s @ end of period...................... 502,667.80 179,245.69 37,573.04 7,731.36
ALLIANCE INTERNATIONAL
Accumulation Unit Value
Beginning of Period................................ 11.27 10.69 10.00 N/A
End of Period...................................... 12.22 11.27 10.69 N/A
Accum Units o/s @ end of period...................... 228,254.81 122,616.95 22,441.08 N/A
ALLIANCE U.S. GOVERNMENT/HIGH GRADE
Accumulation Unit Value
Beginning of Period................................ 9.66 10.17 10.00 N/A
End of Period...................................... 11.38 9.66 10.17 N/A
Accum Units o/s @ end of period...................... 390,483.21 75,881.31 7,608.84 N/A
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME
Accumulation Unit Value
Beginning of Period................................ 8.71 10.00 N/A N/A
End of Period...................................... 10.55 8.71 N/A N/A
Accum Units o/s @ end of period...................... 95,031.46 89,164.68 N/A N/A
ALLIANCE GLOBAL DOLLAR GOVERNMENT
Accumulation Unit Value
Beginning of Period................................ 9.73 10.00 N/A N/A
End of Period...................................... 11.81 9.73 N/A N/A
Accum Units o/s @ end of period...................... 16,171.63 5,958.18 N/A N/A
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
1995 1994 1993 1992
--------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
ALLIANCE UTILITY INCOME
Accumulation Unit Value
Beginning of Period................................ 9.71 10.00 N/A N/A
End of Period...................................... 11.64 9.71 N/A N/A
Accum Units o/s @ end of period...................... 103,042.86 13,690.19 N/A N/A
ALLIANCE GLOBAL BOND
Accumulation Unit Value
Beginning of Period................................ 9.94 10.61 10.00 N/A
End of Period...................................... 12.24 9.94 10.61 N/A
Accum Units o/s @ end of period...................... 76,604.28 27,806.30 5,589.55 N/A
ALLIANCE PREMIER GROWTH
Accumulation Unit Value
Beginning of Period................................ 10.66 10.00 N/A N/A
End of Period...................................... 15.25 10.66 N/A N/A
Accum Units o/s @ end of period...................... 420,662.68 108,111.20 N/A N/A
ALLIANCE TOTAL RETURN
Accumulation Unit Value
Beginning of Period................................ 9.75 10.00 N/A N/A
End of Period...................................... 11.90 9.75 N/A N/A
Accum Units o/s @ end of period...................... 121,094.82 4,871.12 N/A N/A
ALLIANCE CONSERVATIVE INVESTORS
Accumulation Unit Value
Beginning of Period................................ 10.03 10.00 N/A N/A
End of Period...................................... 11.59 10.03 N/A N/A
Accum Units o/s @ end of period...................... 164,400.64 6,977.55 N/A N/A
ALLIANCE GROWTH INVESTORS
Accumulation Unit Value
Beginning of Period................................ 9.83 10.00 N/A N/A
End of Period...................................... 11.70 9.83 N/A N/A
Accum Units o/s @ end of period...................... 62,762.43 3,185.25 N/A N/A
ALLIANCE WORLDWIDE PRIVATIZATION
Accumulation Unit Value
Beginning of Period................................ 10.05 10.00 N/A N/A
End of Period...................................... 11.01 10.05 N/A N/A
Accum Units o/s @ end of period...................... 62,769.30 6,357.69 N/A N/A
ALLIANCE TECHNOLOGY
Accumulation Unit Value
Beginning of Period................................ N/A N/A N/A N/A
End of Period...................................... N/A N/A N/A N/A
Accum Units o/s @ end of period...................... N/A N/A N/A N/A
</TABLE>

<PAGE>

*Funds were first invested in the Portfolios as listed below:

<TABLE>
<S> <C>
Premier Growth Portfolio December 7, 1992
Growth & Income Portfolio April 17, 1992
Short-Term Multi-Market Portfolio June 25, 1992
Global Bond Portfolio May 10, 1993
Money Market Portfolio May 13, 1993
International Portfolio June 1, 1993
U.S. Government/High Grade Securities Portfolio June 14, 1993
North American Government Income Portfolio April 11, 1994
Global Dollar Government Portfolio April 20, 1994
Utility Income Portfolio April 20, 1994
Conservative Investors Portfolio August 24, 1994
Growth Investors Portfolio August 16, 1994
Growth Portfolio August 16, 1994
Total Return Portfolio August 26, 1994
Worldwide Privatization Portfolio August 16, 1994
Technology Portfolio January 10, 1996
</TABLE>

CALCULATION OF PERFORMANCE DATA

The Company may, from time to time, advertise certain performance related
information concerning one or more of the Subaccounts, including information as
to total return and yield. Performance information about a Subaccount is based
on the Subaccount's past performance only and is not intended as an indication
of future performance.

When the Company advertises the average annual total return of a Subaccount,
it will usually be calculated for one, five, and ten year periods or, where a
Subaccount has been in existence for a period less than one, five or ten years,
for such lesser period. Average annual total return is measured by comparing the
value of the investment in a Subaccount at the beginning of the relevant period
to the value of the investment at the end of the period (assuming the deduction
of any Surrender Charge which would be payable if the account were redeemed at
the end of the period) and calculating the average annual compounded rate of
return necessary to produce the value of the investment at the end of the
period. The Company may simultaneously present returns that do not assume a
surrender and, therefore, do not deduct the Surrender Charge.

When the Company advertises the yield of a Subaccount it will be calculated
based upon a given 30-day period. The yield is determined by dividing the net
investment income earned per Accumulation Unit during the period by the value of
an Accumulation Unit on the last day of the period.

When the Company advertises the performance of the Money Market Subaccount
it may advertise in addition to the total return either the yield or the
effective yield. The yield of the Money Market Subaccount refers to the income
generated by an investment in that Subaccount over a seven-day period. The
income is then annualized (i.e., the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment). The effective yield is
calculated similarly but when annualized the income earned by an investment in
the Money Market Subaccount is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment during a 52-week period.

<PAGE>

Index, Dow Jones Industrial Average, Donoghue Money Market Institutional
Averages, indices measuring corporate bond and government security prices as
prepared by Lehman Brothers, Inc. and Salomon Brothers or other indices
measuring performance of a pertinent group of securities so that investors may
compare a Subaccount's results with those of a group of securities widely
regarded by investors as representative of the securities markets in general;
(ii) other variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services, a widely used independent research firm
which ranks mutual funds and other investment companies by overall performance,
investment objectives, and assets, or tracked by other ratings services,
companies, publications, or persons who rank separate accounts or other
investment products on overall performance or other criteria; (iii) the Consumer
Price Index (measure for inflation) to assess the real rate of return from an
investment in the Contract; and (iv) indices or averages of alternative
financial products available to prospective investors, including the Bank Rate
Monitor which monitors average returns of various bank instruments.

FINANCIAL DATA

Financial Statements of the Company may be found in the Statement of
Additional Information. No financial statements for the Variable Account have
been provided in the Statement of Additional Information because, as of the date
of this Prospectus, the Subaccounts had not yet commenced operations with
respect to the underlying portfolios of the Funds and consequently had no assets
invested in such portfolios.

THE COMPANY

American International Life Assurance Company of New York (the "Company") is
a stock life insurance company which was organized under the laws of the State
of New York in 1962. The Company provides a full range of life insurance and
annuity plans. The Company is a subsidiary of American International Group,
Inc., which serves as the holding company for a number of companies engaged in
the international insurance business, both life and general, in over 130
countries and jurisdictions around the world.

The Company may from time-to-time publish in advertisements, sales
literature and reports to Owners, the ratings and other information assigned to
it by one or more independent organizations such as A. M. Best Company, Moody's,
and Standard & Poor's. The purpose of the ratings is to reflect the financial
strength and/or claims-paying ability of the Company and should not be
considered as bearing on the investment performance of asset held in the
separate account. Each year the A. M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect A. M. Best's current opinion of the relative financial strength
and operating performance of an insurance company in comparison to the norms of
the life/health insurance industry. In addition, the claims-paying ability of
the Company as measured by Standard & Poor's Insurance Ratings Services, and the
financial strength of the Company as measured by Moody's Investors Services, may
be referred to in advertisements, sales literature or in reports to Owners.
These ratings are their opinions of an operating insurance company's financial
capacity to meet the obligations of its life insurance policies and annuity
contracts in accordance with their terms. In regard to their ratings of the
Company, these ratings are explicitly based on the existence of a Support
Agreement, dated as of December 31, 1991, between the Company and its parent
American International Group, Inc. ("AIG"), pursuant to which AIG has agreed to
cause the Company to maintain a positive net worth and to provide the Company
with funds on a timely basis sufficient to meet the Company's obligations to its
policyholders. The Support Agreement is not, however, a direct or indirect
guarantee by AIG to any person of the payment of any of the Company's
indebtedness, liabilities or other obligations (including obligations to the
Company's policyholders).

<PAGE>

any given period of time or that any rating will not be lowered or withdrawn
entirely by a rating organization if, in such organization's judgment, future
circumstances relating to the Support Agreement, such as a lowering of AIG's
long-term debt rating, so warrant. The ratings do not reflect the investment
performance of the Variable Account or the degree of risk associated with an
investment in the Variable Account.

THE VARIABLE ACCOUNT

American International Life Assurance Company of New York (the "Company") is
a stock life insurance company which was organized under the laws of the State
of New York in 1962. The Company provides a full range of life insurance and
annuity plans. The Company is a subsidiary of American International Group, Inc.
("AIG"), which serves as the holding company for a number of companies engaged
in the international insurance business, both life and general, in over 130
countries and jurisdictions around the world.

The Company owns the assets in the Variable Account and obligations under
the Contract are general corporate obligations. The Variable Account and each
Subaccount, however, are separate from the Company's other assets including
those of the General Account and from any other separate accounts. The assets of
the Variable Account, equal to the reserves and other contract liabilities with
respect to the Variable Account, are not chargeable with liabilities arising out
of any other business the Company may conduct. Investment income, as well as
both realized and unrealized gains and losses are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
income, gains or losses arising out of any other business of the Company. As a
result, the investment performance of each Subaccount and the Variable Account
is entirely independent of the investment performance of the General Account and
of any other separate account maintained by the Company.

The Variable Account is divided into Subaccounts, with the assets of each
Subaccount invested in shares of one portfolio of the Fund. The Company may,
from time to time, add additional portfolios of the Fund, and, when appropriate,
additional mutual funds to act as the funding vehicles for the Contracts. If
deemed to be in the best interests of persons having voting rights under the
Contract, the Variable Account may be operated as a management company under the
Investment Company Act of 1940, may be deregistered under such Act in the event
such registration is no longer required, or may be combined with one or more
other separate accounts. The Company may offer other variable annuity contracts
which also invest in Variable Account A, and are described in other
prospectuses.

THE FUND

Alliance Variable Products Series Fund, Inc., (the "Fund") will act as the
funding vehicle for the Contracts offered hereby. The Fund is managed by
Alliance Capital Management L.P., (the "Investment Manager"). The Fund is an
open-end, diversified management investment company, which is intended to meet
differing investment objectives. The Fund has made available the following
Portfolios: Money Market; Short-Term Multi-Market; Growth; Growth and Income;
International; U.S. Government/High Grade Securities; Global Bond; North
American Government Income; Global Dollar Government; Utility Income; Premier
Growth, Conservative Investors; Growth Investors; Total Return; Worldwide
Privatization; and Technology. The Investment Manager has entered into a sub-
advisory agreement with AIG Global Investors, Inc. (the "Sub-Adviser"), a
subsidiary of American International Group, Inc. and an affiliate of the
Company, to provide investment advice for the Global Bond Portfolio. A summary
of investment objectives for each portfolio is contained in the description of
the Fund below. More detailed information including the investment advisory fee
of each portfolio and other charges assessed by the Fund, may be found in the
current Prospectus for the Fund which contains a discussion of the risks
involved in investing in the Fund. The Prospectus for the Fund is included with
this Prospectus. Please read both Prospectuses carefully before investing.

<PAGE>

The investment objectives of the portfolios are as follows:

MONEY MARKET PORTFOLIO

This portfolio seeks safety of principal, maintenance of liquidity and
maximum current income by investing in a broadly diversified portfolio of money
market securities.

SHORT-TERM MULTI-MARKET PORTFOLIO

This portfolio seeks the highest level of current income, consistent with
what the Investment Manager considers to be prudent investment risk that is
available from a portfolio of high-quality debt securities having remaining
maturities of not more than three years.

GROWTH PORTFOLIO

This portfolio seeks growth of capital rather than current income. In
pursuing its investment objective, the Growth Portfolio will employ aggressive
investment policies. Since investments will be made based upon their potential
for capital appreciation, current income will be incidental to the objective of
capital growth. Because of the risks involved in any investment, the selection
of securities on the basis of their appreciation possibilities cannot ensure
against possible loss in value. Moreover, to the extent the portfolio seeks to
achieve its objective through such aggressive investment policies, the risk of
loss increases. The portfolio is therefore not intended for investors whose
principal objective is assured income or preservation of capital.

GROWTH AND INCOME PORTFOLIO

This portfolio seeks to balance the objectives of reasonable current income
and reasonable opportunities for appreciation through investments primarily in
dividend-paying common stocks of good quality.

INTERNATIONAL PORTFOLIO

This portfolio seeks to obtain a total return on its assets from long-term
growth of capital and from income principally through a broad portfolio of
marketable securities of established non-United States companies (or United
States companies having their principal activities and interests outside the
United States), companies participating in foreign economies with prospects for
growth, and foreign government securities.

NORTH AMERICAN GOVERNMENT INCOME PORTFOLIO

This portfolio seeks the highest level of current income, consistent with
what the adviser considers to be prudent investment risk, that is available from
a portfolio of debt securities issued or guaranteed by the governments of the
United States, Canada and Mexico, their political subdivisions (including
Canadian Provinces but excluding the States of the United States), agencies,
instrumentalities or authorities. The portfolio seeks high current yields by
investing in government securities denominated in local currency and U.S.
Dollars. Normally, the portfolio expects to maintain at least 25% of its assets
in securities denominated in the U.S. Dollar.

GLOBAL DOLLAR GOVERNMENT PORTFOLIO

This portfolio seeks a high level of current income through investing
substantially all of its assets in U.S. and non-U.S. fixed income securities
denominated only in U.S. Dollars. As a secondary objective, the portfolio seeks
capital appreciation. Substantially all of the portfolio's assets will be
invested in high yield, high risk securities that are low-rated (i.e., below
investment grade), or of comparable quality and unrated, and that are considered
to be predominately speculative as regards the issuer's capacity to pay interest
and repay principal.

UTILITY INCOME PORTFOLIO

This portfolio seeks current income and capital appreciation by investing
primarily in the equity and fixed-income securities of companies in the
"utilities industry." The portfolio's investment objective and policies are
designed to take advantage of the characteristics and historical performance of

<PAGE>

securities of utilities companies. The utilities industry consists of companies
engaged in the manufacture, production, generation, provision, transmission,
sale and distribution of gas, electric energy, and communications equipment and
services, and in the provision of other utility or utility-related goods and
services.

U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO

This portfolio seeks a high level of current income consistent with
preservation of capital by investing principally in a portfolio of U.S.
Government Securities, and other high grade debt securities.

GLOBAL BOND PORTFOLIO

This portfolio seeks to provide the highest level of current income
consistent with what the Fund's Adviser and Sub-Adviser consider to be prudent
investment risk that is available from a multi-currency portfolio of high
quality debt securities of varying maturities.

PREMIER GROWTH PORTFOLIO

This portfolio seeks growth of capital rather than current income. In
pursuing its investment objective, the Premier Growth Portfolio will employ
aggressive investment policies. Since investments will be made based on their
potential for capital appreciation, current income will be incidental to the
objective of capital growth. The portfolio is not intended for investors whose
principal objective is assured income or preservation of capital.

TOTAL RETURN PORTFOLIO

This portfolio seeks to achieve a high return through a combination of
current income and capital appreciation by investing in a diversified portfolio
of common and preferred stocks, senior corporate debt securities, and U.S.
Government and Agency obligations, bonds and senior debt securities.

CONSERVATIVE INVESTORS PORTFOLIO

This portfolio seeks the highest total return without, in the view of the
Fund's Adviser, undue risk to principal by investing in a diversified mix of
publicly traded equity and fixed-income securities.

GROWTH INVESTORS PORTFOLIO

This portfolio seeks the highest total return consistent with what the
Fund's Adviser considers to be reasonable risk by investing in a diversified mix
of publicly traded equity and fixed-income securities.

WORLDWIDE PRIVATIZATION PORTFOLIO

This portfolio seeks long-term capital appreciation by investing principally
in equity securities issued by enterprises that are undergoing, or have
undergone, privatization. The balance of the investment portfolio will include
equity securities of companies that are believed by the Fund's Adviser to be
beneficiaries of the privatization process.

TECHNOLOGY PORTFOLIO

This portfolio seeks growth of capital through investment in companies
expected to benefit from advances in technology. The Technology portfolio
invests principally in a diversified portfolio of securities of companies which
use technology extensively in the development of new or improved products or
processes.

THERE IS NO ASSURANCE THAT ANY OF THESE PORTFOLIOS WILL ACHIEVE THEIR STATED
OBJECTIVES.

VOTING RIGHTS

As previously stated, all of the assets held in the Subaccounts of the
Variable Account will be invested in shares of a corresponding portfolio of the
Fund. Based on the Company's view of present

<PAGE>

applicable law, we will vote the portfolio shares held in the Variable Account
at meetings of shareholders in accordance with instructions received from Owners
having a voting interest in the portfolio. However, if the 1940 Act or its
regulations are amended, or if our interpretation of present law changes to
permit us to vote the portfolio shares in our own right, we may elect to do so.

Prior to the Annuity Date, the Owner holds a voting interest in each
portfolio in which there is value in the corresponding Subaccount. The number of
portfolio shares which are attributable to the Owner is determined by dividing
the corresponding value in a particular Subaccount by the net asset value of one
portfolio share. The number of votes which an Owner will have a right to cast
will be determined as of the record date established by each portfolio.

We will solicit voting instructions by mail prior to the shareholder
meetings. An Owner having a voting interest in a Subaccount will be sent proxy
material, reports and other materials as provided by the Fund, relating to the
appropriate portfolios. The Company will vote shares in accordance with
instructions received from the Owner having a voting interest. At the meeting,
the Company will vote shares for which it has received no instructions and any
shares not attributable to Owners in the same proportion as it votes shares for
which it has received instructions from Owners.

The voting rights relate only to amounts invested in the Variable Account.
There are no voting rights with respect to funds allocated to the Guaranteed
Account.

Shares of the Fund may be sold only to separate accounts of life insurance
companies. The shares of the Fund will be sold to separate accounts of the
Company and its affiliate, AIG Life Insurance Company, as well as to separate
accounts of other affiliated or unaffiliated life insurance companies to fund
variable annuity contracts and variable life insurance policies. It is
conceivable that, in the future, it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the Fund simultaneously. Although neither the Company nor the Fund currently
foresees any such disadvantages, either to variable life insurance policyowners
or to variable annuity Owners, the Fund's Board of Directors will monitor events
in order to identify any material irreconcilable conflicts which may possibly
arise and to determine what action, if any, should be taken in response thereto.
If a material irreconcilable conflict were to occur, the Fund will take whatever
steps it deems necessary, at its expense, to remedy or eliminate the
irreconcilable material conflict. If such a conflict were to occur, one or more
insurance company separate accounts might withdraw its investments in the Fund.
This might force the Fund to sell securities at disadvantageous prices.

SUBSTITUTION OF SHARES

If the shares of the Fund (or any portfolio within the Fund) should no
longer be available for investment by the Variable Account or if, in the
judgment of the Company, further investment in such shares should become
inappropriate in view of the purpose of the Contracts, the Company may
substitute shares of another mutual fund (or portfolio within the fund) for Fund
shares already purchased or to be purchased in the future under the Contracts.
No substitution of securities may take place without any required prior approval
of the Securities and Exchange Commission and under such requirements as it may
impose.

THE CONTRACT

The Contract described in this Prospectus is a deferred variable annuity.
Single premium Contracts do not permit the payment of additional premiums after
the Contract Date. Flexible premium Contracts permit the payment of additional
Premiums at any time.

PARTIES TO THE CONTRACT

OWNER

As the purchaser of the Contract, You may exercise all rights and privileges
provided in the Contract, subject to any rights that You, as Owner, may convey
to an irrevocable beneficiary. As Owner, You will also be the Annuitant, unless
You name in writing some other person as Annuitant.

<PAGE>

ANNUITANT

The Annuitant is the person who receives annuity payments and upon the
continuance of whose life these payments are based. You may designate someone
other than yourself as Annuitant. If the Annuitant is a person other than the
Owner, and the Annuitant dies before the Annuity Date, You will become the
Annuitant unless you designate someone else as the new Annuitant.

BENEFICIARY

The Beneficiary You designate will receive the death proceeds if You die
prior to the Annuity Date. If no Beneficiary is living at that time, the death
proceeds are payable to Your estate. If the Annuitant dies after the Annuity
Date, the Beneficiary will receive any remaining guaranteed payments under an
Annuity Option. If no Beneficiary is living at that time, the remaining
guaranteed payments are payable to Your estate.

CHANGE OF ANNUITANT AND BENEFICIARY

Prior to the Annuity Date, You may change the Annuitant and Beneficiary by
making a written request to Our Administrative Office. After the Annuity Date
only a change of Beneficiary may be made. Once We have accepted Your written
request, any change will become effective on the date You signed it. However,
any change will be subject to any payment or other action taken by Us before We
record the change. If the Owner is not a natural person, under current Federal
tax law, the Contract may be subject to unintended and adverse tax consequences.
For possible tax considerations of these changes, see FEDERAL TAX MATTERS, page
.

HOW TO PURCHASE A CONTRACT

At the time of application, the Owner must pay at least the minimum Premium
required and provide instructions regarding the allocation of the Premium among
the Subaccounts. Acceptance of the Premium and form of application is subject to
Our requirements and We reserve the right to reject any Premium. If the
application and Premium are accepted in the form received, the Premium will be
credited and allocated to the Subaccounts within two business days of its
receipt. The date the Premium is credited to the Contract is the Effective Date.

If within five days of the receipt of the initial Premium We have not
received sufficient information to issue a Contract, You will be contacted. The
reason for the delay will be explained to You. If You consent We will retain the
Premium until the necessary requirements are fulfilled. Otherwise, the Premium
will be immediately refunded to You.

DISCOUNT PURCHASE PROGRAMS

Purchases made by officers, directors and employees of either the Company,
an affiliate of the Company or any individual, firm or company that has executed
the necessary agreements to sell the Contracts and members of each of their
immediate families will not be subject to the Surrender Charge. Such purchases
include retirement accounts and must be for accounts in the name of the
individual or qualifying family member.

DISTRIBUTOR

AIG Equity Sales Corp. ("AESC"), 80 Pine Street, New York, New York, acts as
the distributor of the Contracts. AESC is a wholly-owned subsidiary of AIG, and
an affiliate of the Company. Commissions not to exceed 7% of Premiums will be
paid to entities which sell the Contract. Additional payments may be made for
other services not directly related to the sale of the Contract, including the
recruitment and training of personnel, production of promotional literature and
similar services.

Under the Glass-Steagall Act and other laws, certain banking institutions
may be prohibited from distributing variable annuity contracts. If a bank were
to be prohibited from performing certain agency or administrative services and
receiving fees from AESC, Owners who purchased Contracts through the bank would
be permitted to retain their Contracts and alternate means for servicing those
Owners would be sought. It is not expected, however, that Owners would suffer
any loss of services or adverse financial consequences as a result of any of
these occurrences.

<PAGE>

ADMINISTRATION OF THE CONTRACTS

While the Company has primary responsibility for all administration of the
Contracts and the Variable Account, it has retained the services of Delaware
Valley Financial Services, Inc. ("DVFS") pursuant to an administrative
agreement. Such administrative services include issuance of the Contracts and
maintenance of Owners' records. DVFS serves as the administrator to various
insurance companies offering variable contracts.

PREMIUM AND ALLOCATION TO YOUR INVESTMENT OPTIONS

The initial Premium must be at least $5,000 for Non-Qualified Contracts and
$2,000 for a Contract purchased in connection with an IRA or 403(b) Plan. If you
chose a Flexible Premium Contract, You may make additional payments of Premium
prior to the Annuity Date, in amounts of at least $1000. There is no maximum
limit on the additional Premiums You may pay or on the numbers of payments;
however, the Company reserves the right to reject any Premium on any Contract.
You specify at the time of issue or subsequently how the remaining amount, known
as Additional Premium will be allocated.

Except for any Contract issued as an IRA, the initial Premium is allocated
among the Subaccounts and Guaranteed Account on the Effective Date. For IRAs the
initial Premium will be allocated to the Money Market Subaccount until the end
of the Right to Examine Contract Period, after which Your value in the Money
Market Subaccount will then be reallocated among the Subaccounts and Guaranteed
Account in accordance with Your allocation instructions. (See "Right to Examine
Contract Period" on Page , and "Individual Retirement Annuities" on page .)

Your allocation instructions will specify what percentage of Your initial
Premium is to be credited to each Subaccount and to the Guaranteed Account.
Allocation instructions must be expressed in whole percentages of not less than
10%. Allocations for additional Premium will be made on the same basis as the
initial Premium unless We receive a written notice with new instructions.
Additional Premium will be credited to the Contract Value and allocated at the
close of the first Valuation Date on or after which the Additional Premium is
received at Our Administrative Office.

ALL PREMIUM TO QUALIFIED CONTRACTS MUST COMPLY WITH THE APPLICABLE
PROVISIONS IN THE CODE AND THE APPLICABLE PROVISIONS OF YOUR RETIREMENT PLAN.
ADDITIONAL PREMIUM COMMINGLED IN AN IRA WITH A ROLLOVER CONTRIBUTION FROM OTHER
RETIREMENT PLANS MAY RESULT IN UNFAVORABLE TAX CONSEQUENCES. YOU SHOULD SEEK
LEGAL COUNSEL AND TAX ADVICE REGARDING THE SUITABILITY OF THE CONTRACT FOR YOUR
SITUATION. (SEE "FEDERAL TAX MATTERS" ON PAGE .)

RIGHT TO EXAMINE CONTRACT PERIOD

The Contract provides a 10 day Right to Examine Contract Period giving You
the opportunity to cancel the Contract. You must return the Contract with
written notice to Us. If We receive the Contract and Your written notice within
10 days after it is received by You, the Contract will be voided. With the
exception of Contracts issued in connection with an IRA, in those states whose
laws do not require that We assume the risk of market loss during the Right to
Examine Contract Period, should You decide to cancel Your Contract, the amount
to be returned to You will be the Contract Value (on the day We receive the
Contract) plus any charges deducted for State Taxes, without imposition of the
Surrender Charge. The amount returned to you may be more or less than the
initial Premium. (See "Charges and Deductions" on page .) For Contracts issued
in those states that require we return the premium, we will do so. In the case
of Contracts issued in connection with an IRA, the Company will refund the
greater of the Premium, less any withdrawals, or the Contract Value.

State laws governing the duration of the Right to Examine Contract Period
may vary from state to state. We will comply with the laws of the state in which
the Owner resides at the time the Contract is applied for. Federal laws
governing IRAs require a minimum seven day right of revocation. We provide 10
days from the date the Contract is received by you. (See "Individual Retirement
Annuities" on page .)

<PAGE>

UNIT VALUE AND CONTRACT VALUE

After the deduction of certain changes and expenses, amounts which You
allocate to a Subaccount of the Variable Account are used to purchase
Accumulation Units in that Subaccount, not shares of the Portfolio in which that
Subaccount invest: The number of Accumulation Units you purchase will be
determined by dividing the amount allocated to each Subaccount by the Unit Value
of the Subaccount for the Valuation Period during which the amount was
allocated.

The Unit Value for each Subaccount will vary from one Valuation Period to
the next, based on the investment experience of the Portfolio in which the
Subaccount invests and the deduction of certain charges and expenses. The
Statement of Additional Information contains a detailed explanation of how
Accumulation Units are valued.

Your value in any given Subaccount is determined by multiplying the Unit
Value for the Subaccount by the number of Units You own. Your value within the
Variable Account is the sum of your values in all the Subaccounts. The total
value of your Contract, known as the Contract Value, equals your Value in the
Variable Account plus Your value in the Guaranteed Account.

TRANSFERS

Prior to the Annuity Date, You may make Transfers among the Subaccounts and
into and out of the Guaranteed Account subject to certain rules.

At the present time there is no limit on the number of transfers which can
be made among the Subaccounts and the Guaranteed Account in any one Contract
Year. We reserve the right to limit the number of transfers to 12 per Contract
Year. There are no fees for the first 12 transfers in any one Contract Year. For
each transfer in excess of 12 within one Contract Year, We impose a transfer fee
of $10. A transfer fee, if any, is deducted from the amount transferred.
Transfers of Contract Value in the Guaranteed Account may be subject to a Market
Value Adjustment. (See Appendix , "Guaranteed Account Transfers," page .)

Transfers may be made by written request or by telephone as described in the
Contract or specifically authorized in writing. The Company will undertake
reasonable procedures to confirm that instructions communicated by telephone are
genuine. All calls will be recorded. All transfers will be confirmed in writing
to the Owner. The Company is not liable for any loss, cost, or expense for
action on telephone instructions which are believed to be genuine in accordance
with these procedures.

After the Annuity Date, the Owner may transfer the Contract Value allocated
to the Variable Account among the Subaccounts. However, the Company reserves the
right to refuse any more than one transfer per month. The transfer fee is the
same as before the Annuity Date. This transfer fee, if any, will be deducted
from the next annuity payment after the transfer. If following the transfer, the
Annuity Units remaining in the Subaccount would generate a monthly annuity
payment of less than $100, the Company will transfer the entire amount in the
Subaccount.

Once the transfer is effected, the Company will recompute the number of
Annuity Units for each Subaccount. The number of Annuity Units for each
Subaccount will remain the same for the remainder of the payment period unless
the Owner requests another change.

The minimum amount which may be transferred at any one time is the lesser of
$1,000 or the value of the Subaccount or Guarantee Period from which the
transfer is made. However, the minimum amount for transfers under our Dollar
Cost Averaging program is $100 per Subaccount. (See "Dollar Cost Averaging") For
additional limitations regarding transfers out of the Guaranteed Account, see
"The Guaranteed Account" in the Appendix, page .)

DOLLAR COST AVERAGING

<PAGE>

intervals in fixed dollar amounts so that the cost of the securities gets
averaged over time and possibly over various market cycles. The option will
result in the allocation of Contract Value to one or more Subaccounts, and these
amounts will be credited at the Accumulation Unit value as of the end of the
Valuation Dates on which the exchanges are effected. Amounts periodically
transferred under this option are not included in the 12 transfers per Contract
Year discussed under "Transfers" on page . Since the value of Accumulation
Units will vary, the amounts allocated to a Subaccount will result in the
crediting of a greater number of units when the Accumulation Unit value is low
and a lesser number of units when the Accumulation Unit value is high.
Similarly, the amounts exchanged from a Subaccount will result in a debiting of
a greater number of units when the Subaccount's Accumulation Unit value is low
and a lesser number of units when the Accumulation Unit value is high. Dollar
cost averaging does not guarantee profits, nor does it assure that an Owner will
not have losses.

A Dollar Cost Averaging Request form is available from the Administrative
Office upon request. On the form, the Owner must designate whether Contract
Value is to be exchanged on the basis of a specific dollar amount, a fixed
period or earnings only, the Subaccount or Subaccounts to and from which the
transfers will be made, the desired frequency of the transfers, which may be on
a monthly, quarterly, semiannual, or annual basis, and the length of time during
which the transfers shall continue or the total amount to be exchanged over
time. The Owner may specify that such transfers be made on any day of any month
with the exception of the 29th, 30th or 31st of a month.

To elect the Dollar Cost Averaging Option, the Owner's Contract Value must
be at least $12,000 ($2,000 for a Contract funding a Qualified Plan), and a
Dollar Cost Averaging Request in proper form must be received by the Company.
The Dollar Cost Averaging Request form will not be considered complete until the
Contract Value is at least the required amount. An Owner may not have in effect
at the same time Dollar Cost Averaging and Asset Rebalancing Options.

The Dollar Cost Averaging Option may be canceled at any time by written
request or if the Accumulation Unit value is less than $5,000, or such lower
amount as the Company may determine.

ASSET REBALANCING OPTION

The Company currently offers an option under which Owners may authorize the
Company to automatically exchange Contract Value each quarter to maintain a
particular percentage allocation among the Subaccounts as selected by the Owner.
The Contract Value allocated to each Subaccount will grow or decline in value at
different rates during the quarter, and Asset Rebalancing automatically
reallocates the Contract Value in the Subaccounts each quarter to the allocation
selected by the Owner. Asset Rebalancing is intended to exchange Contract Value
from those Subaccounts that have increased in value to those Subaccounts that
have declined in value. Over time, this method of investing may help an Owner
buy low and sell high,although there can be no assurance of this. This
investment method does not guarantee profits, nor does it assure that an Owner
will not have losses.

To elect the Asset Rebalancing Option, the Contract Value in the Contract
must be at least $12,000 ($2,000 for a Contract funding a Qualified Plan) and an
Asset Rebalancing Request in proper form must be received by the Company. An
Owner may not have in effect at the same time Dollar Cost Averaging and Asset
Rebalancing Options. An Asset Rebalancing Request form is available upon
request. On the form, the Owner must indicate the applicable Subaccounts and the
percentage of Contract Value which should be allocated to each of the applicable
Subaccounts each quarter under the Asset Rebalancing Option. If the Asset
Rebalancing Option is elected, all Contract Value allocated to the Subaccounts
must be included in the Asset Rebalancing Option.

This option will result in the transfer of Contract Value to one or more of
the Subaccounts on the date specified by the Owner or, if no date is specified,
on the date of the Company's receipt of the Asset Rebalancing Request in proper
form and on each quarterly anniversary of the applicable date thereafter. The
amounts transferred will be credited to the Accumulation Unit Value as of the
end of the Valuation Dates on which the transfers are effected. Amounts
periodically transferred under this option are not included in the 12 transfers
per Contract Year discussed under "Transfers" on page .

<PAGE>

An Owner may instruct the Company at any time to terminate this option by
written request. Once terminated, this Option may not be reselected during the
same Contract Year.

CHARGES AND DEDUCTIONS

Various charges and deductions are made from Premium, the Contract Value and
the Variable Account. These charges and deductions are as follows:

DEDUCTION FOR PREMIUM AND OTHER STATE TAXES

We do not deduct premium taxes unless assessed by the state of residence of
the Owner. Any premium or other taxes levied by any governmental entity with
respect to the Contracts will be charged at Our discretion against either
Premium or Contract Value. Premium taxes currently imposed by certain states on
the Contracts range typically from 0% to 3.5% of premiums paid. Some states
assess premium taxes at the time Premium is received; others assess premium
taxes at the time of annuitization. Premium taxes are subject to being changed
or amended by state legislatures, administrative interpretations or judicial
acts.

The Company will also deduct from any amount payable under the Contracts any
income taxes a governmental authority requires the Company to withhold with
respect to that amount.

DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE

The Company deducts for each Valuation Period a Mortality and Expense Risk
Charge which is equal on an annual basis to 1.25% of the average daily net asset
value of the Variable Account. The mortality risks assumed by the Company arise
from its contractual obligation to make annuity payments after the Annuity Date
for the life of the Annuitant, to waive the Surrender Charge in the event of the
death of the Owner prior to the Annuity Date and to provide the death benefit.
The expense risk assumed by the Company is that the costs of administering the
Contracts and the Variable Account will exceed the amount received from
Administrative and Contract Maintenance Charges.

If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount deducted
proves more than sufficient, the excess will be profit to the Company. The
Mortality and Expense Risk Charge is guaranteed by the Company and cannot be
increased. The Mortality and Expense Risk Charge is deducted during the
Accumulation Period and after the Annuity Date.

The Company currently offers annuity payment options that are based on a
life contingency. (See "Annuity Period -- Annuity Options" on page .) The
Company in its discretion may offer additional payment options which are not
based on a life contingency. If this should occur and if a Owner should elect a
payment option not based on a life contingency, the Mortality and Expense Risk
Charge is still deducted but the Owner receives no benefit from that portion of
the charge attributable to mortality risk.

DEDUCTION FOR ACCIDENTAL DEATH BENEFIT

If the Owner has elected the Accidental Death Benefit, the Company deducts
for each Valuation Period, an Accidental Death Benefit Charge equal on an annual
basis to 0.10% of the average daily net asset value in the Variable Account.

DEDUCTION FOR SURRENDER (DEFERRED SALES) CHARGES

<PAGE>

the Company within six (6) years of the date of the withdrawal and will vary in
amount depending upon the time which has elapsed since the date Premium was
received. In calculating the Surrender Charge, Premium is allocated to the
amount surrendered on a first-in, first out basis. In the case of single premium
Contracts, the Surrender Charge will vary in amount depending upon the number of
Contract Years that a Contract has been in effect. The amount of any withdrawal
which exceeds the Free Withdrawal Amount will be subject to the following
charges:

<TABLE>
<CAPTION>
APPLICABLE
SURRENDER
SINGLE PREMIUM CONTRACTS FLEXIBLE PREMIUM CONTRACTS CHARGE PERCENTAGE
- ------------------------------------ ------------------------------------- -------------------
<S> <C> <C>
Contract Year 1 Premium Year 1 6%
Contract Year 2 Premium Year 2 6%
Contract Year 3 Premium Year 3 5%
Contract Year 4 Premium Year 4 5%
Contract Year 5 Premium Year 5 4%
Contract Year 6 Premium Year 6 3%
Contract Year 7 Premium Year 7 2%
Contract Year 8 and thereafter Premium Year 8 and thereafter None
</TABLE>

No Surrender Charge is imposed against: (1) Transfers of Contract Value
under Dollar Cost Averaging, Asset Rebalancing, or Systematic Withdrawal
options; (2) Contract Value upon Annuitization; (3) a Death Benefit.

The Surrender Charge is intended to reimburse the Company for expenses
incurred which are related to Contract sales. The Company does not expect the
proceeds from the Surrender Charge to cover all distribution costs. To the
extent such charge is insufficient to cover all distribution costs, the Company
may use any of its corporate assets, including potential profit which may arise
from the Mortality and Expense Risk Charge, to make up any difference.

Certain restrictions on surrenders are imposed on Contracts issued in
connection with retirement plans which qualify under Code Section 403(b) (a
"403(b) Plan"). (See "Taxes -- 403(b) Plans" on page .)

DEDUCTION FOR ADMINISTRATIVE CHARGES

The Company deducts for each Valuation Period a daily Administrative Charge
which is equal on an annual basis to .15% of the average daily net asset value
of the Variable Account. This charge is intended to reimburse Us for
administrative expenses, both during the accumulation period and following the
Annuity Date. We do not expect to recover an amount in excess of our accumulated
expenses through the deduction of the Administrative Charge.

DEDUCTION FOR CONTRACT MAINTENANCE CHARGE

The Company also deducts an annual Contract Maintenance Charge of $30 per
year, from the Contract Value on each Contract Anniversary. The Contract
Maintenance Fee is waived if the Contract Value is greater than $50,000 on the
date of deduction of the charge. These charges are designed to reimburse the
Company for the costs it incurs relating to maintenance of the Contract, the
Variable Account, and the Guaranteed Account. If the Contract is surrendered, we
will deduct the Contract Maintenance Charge at the time of surrender, pro-rata,
for the current Contract Year. The deduction will be made proportionally based
on your value in each Subaccount and the Guaranteed Account. After the Annuity
Date, the Contract Maintenance Charge is deducted on a pro-rata basis from each
annuity income payment and is guaranteed to remain at the same amount as at the
Annuity Date. This charge is not expected to result in a profit to the Company.

DEDUCTION FOR INCOME TAXES

The Company deducts from the Contract Value and/or the Variable Account any
Federal income taxes resulting from the operation of the Variable Account. The
Company does not currently anticipate incurring any Federal income taxes.

<PAGE>

OTHER EXPENSES

There are deductions from and expenses paid out of the assets of the Fund
which are described in the accompanying Prospectus for the Fund.

GROUP AND GROUP SPONSORED ARRANGEMENTS

In certain instances, we may reduce the Surrender Charge and the
Administrative Charge or change the minimum premium requirements for the sale of
Contracts to certain groups, including those in which a trustee or an employer,
for example, purchases Contracts covering a group of individuals on a group
basis.

Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
similar arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or group sponsored arrangements
that have been set up solely to buy Contracts or that have been in existence
less than six months will not qualify for reduced charges.

We will make any reductions according to our rules in effect when an
application or enrollment form for a Contract is approved. We may change these
rules from time to time. Any variation in the Surrender Charge or Administrative
Charge will reflect differences in costs or services and will not be unfairly
discriminatory.

ANNUITY BENEFITS

ANNUITIZATION

Annuitization is an election you make to apply the Contract Value to an
Annuity Option in order to provide a series of annuity payments. The date the
Annuity Option becomes effective is the Annuity Date.

ANNUITY DATE

The latest Annuity Date is: (a) the first day of the calendar month
following the later of the Annuitant's 90th birthday; or (b) such earlier date
as may be set by applicable law.

The Owner may designate an earlier date or may change the Annuity Date by
making a written request at least thirty (30) days prior to the Annuity Date
being changed. However, any Annuity Date must be no later than the date defined
above; and, the first day of a calendar month.

Without the approval of the Company, the new Annuity Date cannot be earlier
than one year after the Effective Date. In addition, for Qualified Contracts,
certain provisions of your retirement plan or the Code may further restrict your
choice of an Annuity Date. (See "Federal Tax Matters," page ).

ANNUITY OPTIONS

The Owner may choose annuity payments which are fixed, or which are based on
the Variable Account, or a combination of the two. The Owner may, upon at least
30 days prior written notice to us, at any time prior to the Annuity Date,
select or change an Annuity Option. If the Owner elects annuity payments which
are based on the Variable Account, the amount of the payments will be variable.
The amount of the annuity payment based on the value of a Subaccount is
determined through a calculation described in the Statement of Additional
Information, under the caption "Annuity Provisions". The Owner may not transfer
Contract Values between the Guaranteed Account and the Variable Account after
the Annuity Date, but may, subject to certain conditions, transfer Contract
Values from one Subaccount to another Subaccount. (See "Transfer of Contract
Values" on page .)

If the Owner has not made any annuity payment option selection at the
Annuity Date, the Contract Value will be applied to purchase Option 2 fixed
basis annuity payments and Option 2 variable basis annuity payments, in
proportion to the amount of Contract Value in the Guaranteed Account and the
Variable Account, respectively.

<PAGE>

The annuity payment options are:

OPTION 1: LIFE INCOME. The Company will make annuity payments during the
lifetime of the Annuitant.

OPTION 2: LIFE INCOME WITH 10 YEARS OF PAYMENTS GUARANTEED. The Company
will make monthly annuity payments during the lifetime of the Annuitant. If, at
the death of the Annuitant, payments have been made for less than 10 years,
payments will be continued during the remainder of the period to the
Beneficiary.

OPTION 3: JOINT AND LAST SURVIVOR INCOME. The Company will make annuity
payments for as long as either the Annuitant or a Contingent Annuitant is alive.
In the event that the Contract is issued in connection with an IRA, the payments
in this Option will be made only to the Owner as Annuitant and the Owner's
spouse.

The annuity payment options are more fully explained in the Statement of
Additional Information. The Company may also offer additional options at its own
discretion.

ANNUITY PAYMENTS

If the Contract Value applied to annuity payment options is less than
$2,000, the Company reserves the right to pay the amount in a lump sum in lieu
of annuity payments. The Company makes all other annuity payments monthly.
However, if the total monthly annuity payment would be less than $100 the
Company reserves the right to make payments semi-annually or annually.

If fixed annuity payments are selected, the amount of each fixed payment is
determined by multiplying the Contract Value allocated to purchase fixed annuity
payments by the factor shown in the annuity table specified in the Contract for
the option selected, divided by 1,000.

If variable annuity payments are selected, the Annuitant receives the value
of a fixed number of Annuity Units each month. The actual dollar amount of
variable annuity payments is dependent upon: (i) the Contract Value at the time
of annuitization; (ii) the annuity table specified in the Contract; (iii) the
Annuity Option selected; (iv) the investment performance of the Subaccount
selected; and (v) the pro-rata portion of the Contract Maintenance charge.

The annuity tables contained in the Contract are based on a 5% assumed
investment rate. If the actual net investment rate exceeds 5%, payments will
increase. Conversely, if the actual rate is less than 5%, variable annuity
payments will decrease.

DEATH BENEFIT

PRIOR TO THE ANNUITY DATE

In the event of Your death prior to the Annuity Date, a death benefit is
payable to the Beneficiary. The value of the death benefit will be determined as
of the date We receive proof of death in a form acceptable to Us. If there has
been a change of Owner, the death benefit will equal the Contract Value.
Otherwise, We will pay the death benefit equal to the greatest of: (a) the total
of all Premium, reduced proportionately by withdrawals and surrenders; (b) the
Contract Value; (c) the greatest of the Contract Value at the seventh Contract
Anniversary if attained prior to Owner's attained age 76 or at the Contract
Anniversary every seven years thereafter, plus any Premium paid and less any
surrenders subsequent to that Contract Anniversary.

The Beneficiary may elect the death benefit to be paid as follows: (a)
payment of the entire death benefit within 5 years of the date of the Owner's
death; or (b) payment over the lifetime of the designated Beneficiary with
distribution beginning within 1 year of the date of death of the Owner; or (c)
if the designated Beneficiary is Your spouse, he/she can continue the contract
in his/her own name.

If no payment option is elected, a single sum settlement will be made at the
end of the sixty (60) day period following receipt of proof of death.

<PAGE>

AFTER THE ANNUITY DATE

If the Owner is a person other than the Annuitant, and if the Owner's death
occurs on or after the Annuity Date, no death benefit will be payable under this
contract, except that any guaranteed payments remaining unpaid will continue to
be paid to the Annuitant pursuant to the Annuity Option in force at the date of
the Owner's death.

ACCIDENTAL DEATH BENEFIT

If an Accidental Death Benefit has been elected, the cost of this benefit
will be equal on an annual basis to 0.10% of the average daily net assets in the
Variable Account.

The Accidental Death Benefit, if any, is equal to the lesser of the Contract
Value as of the date the death benefit is determined or $250,000. The Accidental
Death Benefit is payable if the death of the primary Owner occurs prior to the
Contract Anniversary next following his 75th birthday as a result of an Injury.
The death must also occur before the Annuity Date and within 365 days of the
date of the accident which caused the Injury. The Accidental Death Benefit is
paid to the Beneficiary.

The Accidental Death Benefit will not be paid for any death caused by or
resulting (in whole or in part) from the following:

(a) suicide or attempted suicide while sane or insane; intentionally
self-inflicted injuries;

(b) sickness, disease or bacterial infection of any kind, except pyogenic
infections which occur as a result of an injury or bacterial infections
which result from the accidental ingestion of contaminated substances;

(d) injury sustained as a consequence of riding in, including boarding or
alighting from, any vehicle or device used for aerial navigation except
if the Owner is a passenger on any aircraft licensed for the
transportation of passengers;

(e) declared or undeclared war or any act thereof; or

(f) service in the military, naval or air service of any country.

DEATH OF THE ANNUITANT

If the Annuitant is a person other than the Owner, and if the Annuitant dies
before the Annuity Date, a new Annuitant may be named by the Owner. If no new
Annuitant is named within sixty (60) days of Our receipt of proof of the
Annuitant's death, the Owner will be deemed the new Annuitant. If an Annuitant
dies after the Annuity Date, the remaining payments, if any, will be as
specified in the Annuity Option elected. We will require proof of the
Annuitant's death. Death benefits, if any, will be paid to the designated
Beneficiary at least as rapidly as under the method of distribution in effect at
the Annuitant's death.

DISTRIBUTIONS UNDER THE CONTRACT

WITHDRAWALS

The Owner may withdraw Contract Values prior to the Annuity Date. Any
withdrawal is subject to the following conditions:

(a) the Company must receive a written request;

(b) the amount requested must be at least $500;

(d) the Contract Value will be reduced by the sum of the amount requested
plus the amount of any applicable Surrender Charge;

<PAGE>

(e) the Company will deduct the amount requested plus any Surrender Charge
from each Subaccount of the Variable Account and from the Guaranteed
Account either as specified or in the proportion that each Subaccount and
the Guaranteed Account bears to the Contract Value; and

We reserve the right to consider any withdrawal request that would reduce
the Value of the Accumulation Account to less than $2,000 to be a request for
Surrender. In this event, the Surrender Value will be paid to You and the
Contract will terminate.

Each withdrawal is subject to Federal income taxes on the taxable portion.
Unless otherwise directed by You, We must withhold federal income taxes from
each withdrawal. In addition, a 10% penalty tax may be assessed on withdrawals
if You are under age 59 1/2. This includes withdrawals under the Systematic
Withdrawal program (described below) and withdrawals You may make to pay fees to
Your investment advisor, if any.

SYSTEMATIC WITHDRAWAL

The systematic withdrawal program involves making regularly scheduled
withdrawals from Your value in the Contract. In order to initiate the program,
your total Contract Value must be at least $24,000. The program allows You to
prearrange the withdrawal of a specified dollar amount of at least $200 per
withdrawal, on a monthly or quarterly payment basis. A maximum of 10% of the
Contract Value may be withdrawn in a Contract Year. Surrender Charges are not
imposed on withdrawals under this program. If you elect this program Surrender
Charges will be imposed on any withdrawal, other than withdrawals made under
Your systematic withdrawal program, when the withdrawal is from Premium paid in
the last six years. You may not elect this program if you have taken a prior
withdrawal during the same Contract Year. (See "Withdrawals" on page , and
"Surrender Charges" on page .)

Systematic withdrawals will begin on the first scheduled withdrawal date
selected by You following the date We process Your request. If the day You
designate is not a Valuation Date, the withdrawal will be made on the following
Valuation Date. In the event that Your value in a specified Subaccount or the
Guaranteed Account is not sufficient to deduct a withdrawal or if Your request
for systematic withdrawal does not specify the Guaranteed Account or from which
Subaccounts withdrawals are to be deducted, withdrawals will be deducted
proportionally based on Your value in each Subaccount and the Guaranteed
Account.

All parties to the Contract are cautioned that the rights of any person to
implement the systematic withdrawal program under Qualified Contracts may be
subject to the terms and conditions of the retirement plan, regardless of the
terms and conditions of the Qualified Contract issued in connection with such a
retirement plan. (See "Federal Tax Matters" on page .)

The systematic withdrawal program may be canceled at any time by written
request or automatically by Us should the Contract Value fall below $1,000. In
the event the systematic withdrawal program is canceled, the Owner may not elect
to participate in such program until the next Contract Anniversary.

An Owner may change once per Contract Year the amount or frequency of
withdrawals on a systematic basis.

The Free Withdrawal Amount (see "Charges and Deductions -- Deduction for
Surrender Charge" on page ) is not available while an Owner is receiving
systematic withdrawals. An Owner will be entitled to the free withdrawal amount
on and after the Contract Anniversary next following the termination of the
systematic withdrawal program.

Implementation of the systematic withdrawal program may subject an Owner to
adverse tax consequences, including a 10% tax penalty. (See "Taxes -- Taxation
of Annuities in General" on page for a discussion of the tax consequences of
withdrawals.)

<PAGE>

THE COMPANY RESERVES THE RIGHT TO DISCONTINUE THIS PROGRAM AT ANY TIME.

SURRENDER

Prior to the Annuity Date you may Surrender the Contract for the Surrender
Value by withdrawing the entire Contract Value. You must submit a written
request for Surrender and return the Contract to Us. The Surrender Value will be
based on the Contract Value at the end of the Valuation Period during which the
Surrender request is received as described below. The Contract may not be
surrendered after the Annuity Date.

SURRENDER VALUE

The Surrender Value of the Contract varies each day depending on the
investment results of the Subaccounts selected by the Owner. Contract Value in
the Guaranteed Account may be subject to a Market Value Adjustment. (See "Market
Value Adjustment", Appendix .) The Surrender Value will be the Contract Value,
subject to any applicable Market Value Adjustment, as of the date the Company
receives Your surrender request, reduced by the following: (1) any applicable
taxes not previously deducted; (2) any applicable portion of the Contract
Maintenance Charge; and (3) any applicable Surrender Charge.

PAYMENT OF WITHDRAWALS AND SURRENDER VALUES

Payments of Withdrawals and Surrender Values will ordinarily be sent to the
Owner within seven (7) days of receipt of the written request, but see the
Deferment of Payment discussion below. (Also see Statement of Additional
Information -- "Delay of Payments.")

The Company reserves the right to ensure that an Owner's check or other form
of Premium has been cleared for payment prior to processing any withdrawal or
redemption request occurring shortly after a Premium payment.

If, at the time You make a request for a Withdrawal or a Surrender, You have
not provided Us with a written election not to have Federal income taxes
withheld, We must by law withhold such taxes from the taxable portion of Your
payment and remit that amount to the IRS. Mandatory withholding rules apply to
distributions from qualified plans and Code Section 403(b) annuities.
Additionally, the Code provides that a 10% penalty tax may be imposed on certain
early Withdrawals and Surrenders. (See "Federal Tax Matters" on page , and
"Qualified Contracts" on page .)

DEFERRAL OF PAYMENT

Payment of any Withdrawal, Surrender, or lump sum death proceeds from the
Variable Account will usually occur within seven days. We may be permitted to
defer such payment if: (1) the New York Stock Exchange is closed for other than
usual weekends or holidays, or trading on the Exchange is otherwise restricted;
(2) an emergency exists as defined by the SEC or the SEC requires that trading
be restricted; (3) the SEC permits a delay for protection of Owners; or (4) the
check used to pay any Premium has not cleared through the banking system (this
may take up to 15 days).

We may defer payment of any Withdrawal or Surrender from the Guaranteed
Account for up to six months from the date we receive Your written request.

TAXES

INTRODUCTION

The Contracts are designed to accumulate Contract Values for retirement
plans which, except for IRAs and 403(b) Plans, are generally not tax-qualified
plans ("Qualified Plans"). The ultimate effect of Federal income taxes on the
amounts held under a Contract, on annuity payments, and on the economic benefits
to the Owner, Annuitant or Beneficiary depend on the Company's tax status and
upon the tax status of the individual concerned. Accordingly, each potential
Owner should consult a competent tax adviser regarding the tax consequences of
purchasing a Contract.

<PAGE>

The following discussion is general in nature and is not intended as tax
advice. No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion is based upon the Company's understanding of the
Federal income tax laws as they are currently interpreted. No representation is
made regarding the likelihood of continuation of the Federal income tax laws,
the Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "Service"). For a discussion of Federal income taxes as they relate
to the Fund, please see the accompanying Prospectus for the Fund.

COMPANY TAX STATUS

The Company is taxed as a life insurance company under the Internal Revenue
Code of 1986, as amended (the "Code"). Since the Variable Account is not a
separate entity from the Company and its operations form a part of the Company,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized capital gains on the
assets of the Variable Account are reinvested and taken into account in
determining the Contract Value. Under existing Federal income tax law, the
Variable Account's investment income, including realized net capital gains, is
not taxed to the Company. The Company reserves the right to make a deduction for
taxes from the assets of the Variable Account should they be imposed with
respect to such items in the future.

TAXATION OF ANNUITIES IN GENERAL -- NON-QUALIFIED PLANS

Code Section 72 governs the taxation of annuities. In general, an Owner is
not taxed on increases in value under a Contract until some form of withdrawal
or distribution is made under the Contract. However, under certain
circumstances, the increase in value may be subject to tax currently. (See
"Contracts Owned by Non-Natural Persons," and "Diversification Standards" on
page .)

WITHDRAWALS PRIOR TO THE ANNUITY DATE

Code Section 72 provides that a total or partial withdrawal from a Contract
prior to the Annuity Date will be treated as taxable income to the extent the
amounts held under the Contract on the date of the withdrawal exceed the
"investment in the contract," as that term is defined under the Code. The
"investment in the contract" can generally be described as the cost of the
Contract. It generally constitutes the sum of all purchase payments made for the
contract less any amounts received under the Contract that are excluded from
gross income. The taxable portion is taxed as ordinary income. For purposes of
this rule, a pledge or assignment of a Contract is treated as a payment received
on account of a partial withdrawal of a Contract.

WITHDRAWALS ON OR AFTER THE ANNUITY DATE

Upon receipt of a lump sum payment or an annuity payment under the Contract,
the recipient is taxed on the portion of the payment that exceeds the investment
in the Contract. Ordinarily, the taxable portion of payments under the Contract
will be taxed as ordinary income.

For fixed annuity payments, the taxable portion of each payment is generally
determined by using a formula known as the "exclusion ratio", which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the nontaxable portion of the payment. The remaining
portion of each payment is taxed as ordinary income. For variable annuity
payments, the taxable portion is determined by a formula which establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the investment in the Contract by the total number of
expected periodic payments. The remaining portion of each payment is taxed as
ordinary income.

The Company is obligated to withhold Federal income taxes from certain
payments unless the recipient elects otherwise. Prior to the first payment, the
Company will notify the payee of the right to elect out of withholding and will
furnish a form on which the election may be made. The payee must properly notify
the Company of that election in advance of the payment in order to avoid
withholding.

<PAGE>

PENALTY TAX ON CERTAIN WITHDRAWALS

With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a 10% penalty tax is imposed upon the portion of such amount which
is includable in gross income. However, the penalty tax will not apply to
withdrawals: (i) made on or after the death of the Owner (or where the Owner is
not an individual, the death of the "primary annuitant", who is defined as the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract); (ii)
attributable to the taxpayer's becoming totally disabled within the meaning of
Code Section 72(m)(7); (iii) which are part of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the taxpayer, or the joint lives (or joint life expectancies) of
the taxpayer and his beneficiary; (iv) allocable to investment in the Contract
before August 14, 1982; (v) under a qualified funding asset (as defined in Code
Section 130(d)); (vi) under an immediate annuity contract; or (vii) that are
purchased by an employer on termination of certain types of qualified plans and
which are held by the employer until the employee separates from service.

If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the first
year in which the modification occurs will be increased by an amount equal to
the tax that would have been imposed but for item (iii) above as determined
under Treasury Regulations, plus interest for the deferral period. The foregoing
rule applies if the modification takes place: (a) before the close of the period
which is five years from the date of the first payment and after the taxpayer
attains age 59 1/2; or (b) before the taxpayer reaches age 59 1/2.

ASSIGNMENTS

Any assignment or pledge of the Contract as collateral for a loan may result
in a taxable event and the excess of the Contract Value over total Premium will
be taxed to the assignor as ordinary income. Please consult your tax adviser
prior to making an assignment of the Contract.

DISTRIBUTION-AT-DEATH RULES

In order to be treated as an annuity contract for Federal income tax
purposes, a Contract must generally provide for the following two distribution
rules: (i) if the Owner dies on or after the Annuity Date, and before the entire
interest in the Contract has been distributed, the remaining portion of such
interest will be distributed at least as quickly as the method in effect on the
Owner's death; and (ii) if a Owner dies before the Annuity Date, the entire
interest must generally be distributed within five years after the date of
death. To the extent such interest is payable to a designated Beneficiary,
however, such interest may be annuitized over the life of that Beneficiary or
over a period not extending beyond the life expectancy of that Beneficiary, so
long as distributions commence within one year after the date of death. If the
Beneficiary is the spouse of the Owner, the Contract may be continued unchanged
in the name of the spouse as Owner.

If the Owner is not an individual, the "primary annuitant" (as defined under
the Code) is considered the Owner. In addition, when the Owner is not an
individual, a change in the primary annuitant is treated as the death of the
Owner.

GIFTS OF CONTRACTS

Any transfer of a Contract prior to the Annuity Date for less than full and
adequate consideration will generally trigger tax on the gain in the Contract.
The transferee will receive a step-up in basis for the amount included in the
transferor's income. This provision, however, does not apply to those transfers
between spouses or incident to a divorce which are governed by Code Section
1041(a).

CONTRACTS OWNED BY NON-NATURAL PERSONS

<PAGE>

such as a trust or other entity acting as an agent for a natural person. The
rule also does not apply when the Contract is acquired by the estate of a
decedent, when the Contract is held under certain qualified plans, when the
Contract is a qualified funding asset for structured settlements, when the
Contract is purchased on behalf of an employee upon termination of a qualified
plan, and in the case of an immediate annuity.

SECTION 1035 EXCHANGES

Code Section 1035 provides that no gain or loss shall be recognized on the
exchange of an annuity contract for another annuity contract. A replacement
contract obtained in a tax-free exchange of contracts succeeds to the status of
the surrendered contract. Special rules and procedures apply to Code Section
1035 transactions. Prospective owners wishing to take advantage of Code Section
1035 should consult their tax advisers.

MULTIPLE CONTRACTS

Annuity contracts that are issued by the Company (or affiliate) to the same
Owner during any calendar year will be treated as one annuity contract in
determining the amount includable in the taxpayer's gross income. Thus, any
amount received under any such contract prior to the contract's annuity starting
date will be taxable (and possibly subject to the 10% penalty tax) to the extent
of the combined income in all such contracts. The Treasury has broad regulatory
authority to prevent avoidance of the purposes of this aggregation rule. It is
possible that, under this authority, Treasury may apply this rule to amounts
that are paid as annuities (on or after the starting date) under annuity
contracts issued by the same company to the same Owner during any calendar year
period. In this case, annuity payments could be fully taxable (and possibly
subject to the 10% penalty tax) to the extent of the combined income in all such
contracts and regardless of whether any amount would otherwise have been
excluded from income. Owners should consult a tax adviser before purchasing more
than one Contract or other annuity contracts.

DIVERSIFICATION STANDARDS

To comply with the diversification regulations promulgated under Code
Section 817(h) (the "Diversification Regulations"), after a start-up period,
each Subaccount is required to diversify its investments. The Diversification
Regulations generally require that on the last day of each quarter of a calendar
year no more than 55% of the value of the assets of a Subaccount is represented
by any one investment, no more than 70% is represented by any two investments,
no more than 80% is represented by any three investments, and no more than 90%
is represented by any four investments. A "look-through" rule applies so that an
investment in the Fund is not treated as one investment but is treated as an
investment in a pro-rata portion of each underlying asset of the Fund. All
securities of the same issuer are treated as a single investment. In the case of
government securities, each Government agency or instrumentality is treated as a
separate issuer.

In connection with the issuance of the Diversification Regulations, Treasury
announced that such regulations do not provide guidance concerning the extent to
which Owners may direct their investments to particular divisions of a separate
account. It is possible that if and when additional regulations or IRS
pronouncements are issued, the Contract may need to be modified to comply with
such rules. For these reasons, the Company reserves the right to modify the
Contract, as necessary, to prevent the Owner from being considered the owner of
the assets of the Variable Account.

The Company intends to comply with the Diversification Regulations to assure
that the Contracts continue to be treated as annuity contracts for Federal
income tax purposes.

QUALIFIED PLANS

<PAGE>

is not intended as tax advice. A prospective Owner considering use of the
Contract to create an IRA or in connection with a 403(b) Plan should first
consult a competent tax adviser with regard to the suitability of the Contract
as an investment vehicle for their qualified plan.

A Contract may be used as the investment medium for several types of
retirement plans. Under amendments to the Internal Revenue Code which became
effective in 1993, distributions from a qualified plan (other than non-taxable
distributions representing a return of capital, distributions meeting the
minimum distribution requirement, distributions for the life or life expectancy
of the recipient(s) or distributions that are made over a period of more than 10
years) are eligible for tax-free rollover within 60 days of the date of
distribution, but are also subject to federal income tax withholding at a 20%
rate unless paid directly to another qualified plan. If the recipient is unable
to take full advantage of the tax-free rollover provisions, there may be taxable
income, and the imposition of a 10% penalty if the recipient is under age
59 1/2. We make no attempt to provide more than general information about use of
Qualified Contracts with the various types of retirement plans. Owners and
participants under retirement plans as well as Annuitants and Beneficiaries are
cautioned that the rights of any person to any benefits under Qualified
Contracts may be subject to the terms and conditions of the retirement plan,
regardless of the terms and conditions of the Qualified Contract issued in
connection with such a retirement plan. Purchasers of Qualified Contracts for
use with any retirement plan should consult their legal counsel and tax adviser
regarding the suitability of a Qualified Contract for their retirement plan.

INDIVIDUAL RETIREMENT ANNUITIES

Section 408 of the Code permits eligible individuals to contribute to an
IRA. Contracts issued in connection with an IRA are subject to limitations on
eligibility, maximum contributions, and time of distribution. Distributions from
certain retirement plans qualifying for federal tax advantages may be rolled
over into an IRA. Sales of the Contracts for use with IRAs are subject to
special requirements imposed by the Service, including the requirement that
informational disclosure be given to each person desiring to establish an IRA.
The IRAs offered by this Prospectus are not available in all states.

403(B) PLANS

Code Section 403(b)(11) imposes certain restrictions on an Owner's ability
to make partial withdrawals from Code Section 403(b) Contracts, if attributable
to Premium paid under a salary reduction agreement. Specifically, Code Section
403(b)(11) allows an Owner to make a surrender or partial withdrawal only (a)
when the employee attains age 59 1/2, separates from service, dies, or becomes
disabled (as defined in the Code), or (b) in the case of hardship. In the case
of hardship, only an amount equal to the purchase payments may be withdrawn. In
addition, under Code Section 403(b) the employer must comply with certain
non-discrimination requirements. Owners should consult their employers to
determine whether the employer has complied with these rules. The 403(b) Plan
offered by this Prospectus is not available in all states.

<PAGE>

APPENDIX

GUARANTEED ACCOUNT OPTION

Under this Guaranteed Account option, Contract Values are held in the
Company's General Account. The General Account includes all of Our assets,
except those assets segregated in Our separate accounts. Because of exemptive
and exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 nor is the General Account
registered as an investment company under the Investment Company Act of 1940.
The Company understands that the staff of the Securities and Exchange Commission
has not reviewed the disclosures in this Prospectus relating to the Guaranteed
Account portion of the Contract. Disclosures regarding the Guaranteed Account
may, however, be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.

During the Accumulation Period the Owner may allocate amounts to the
Guaranteed Account. The initial Premium will be invested in the Guaranteed
Account if selected by the Owner at the time of application. Additional Premium
will be allocated in accordance with the selection made in the application or
the most recent instruction received at the Company Office. If the Owner elects
to withdraw amounts from the Guaranteed Account, such withdrawal, except as
otherwise provided in this Appendix, will be subject to the same conditions as
imposed on withdrawals from the Variable Account. The Company reserves the right
to delay any payment from the Guaranteed Account for up to six (6) months from
the date it receives such request at its Office.

GUARANTEE PERIODS

The period(s) for which a guaranteed interest rate is credited is called a
Guarantee Period. Guarantee Periods may be offered or withdrawn at the Company's
discretion. The initial guarantee period(s) and the guaranteed interest rate(s)
applicable to the initial Premium are as shown in the Contract. At least 15 days
but no more than 75 days prior to the expiration of a Guarantee Period, the
Owner will be mailed a notice of the guaranteed interest rate applicable to a
renewal of the Guarantee Period. At the expiration of any Guarantee Period
applicable to any portion of the Contract Value, that portion of the Contract
Value will be automatically renewed for another Guarantee Period for the same
duration as the expired Guarantee Period and will receive the guaranteed
interest rate then in effect for that Guarantee Period, unless other Guarantee
Periods or one or more Subaccounts are requested in writing by the Owner. All
requests to change a Guarantee Period at the end of an existing Guarantee Period
must be received in writing at the Company's Office within 30 days prior to the
end of that Guarantee Period.

ALLOCATIONS TO THE GUARANTEED ACCOUNT

The minimum amount that may be allocated to a Guarantee Period, either from
the initial or a subsequent Premium, is $3,000. Amounts invested in the
Guaranteed Account are credited with interest on a daily basis at the then
applicable effective guarantee rate. The effective guarantee rate is that rate
in effect when the Owner allocates or transfers amounts to the Guaranteed
Account. If the Owner has allocated or transferred amounts at different times to
the Guaranteed Account, each allocation or transfer may have a unique effective
guarantee rate and Guarantee Period associated with that amount. The effective
guarantee rate will not be changed more than once per year and the minimum rate
will not be less than 3%.

GUARANTEED ACCOUNT TRANSFERS

During the accumulation period the Owner may transfer, by written request or
telephone authorization, Contract Values to or from a subaccount of the Variable
Account to or from a Guarantee Period of the Guaranteed Account at any time,
subject to the conditions set out under Transfer of Contract Values Section.

Prior to the end of a Guarantee Period the Owner may specify the
subaccount(s) of the Variable Account or the applicable Guarantee Period of the
Guaranteed Account to which the Owner wants the amounts from the Guaranteed
Account transferred at the end of the Guarantee Period. If the Owner

A-1

<PAGE>

does not notify us prior to the end of the Guarantee Period, we will reapply
that amount to a new Guarantee Period of the same duration, provided it is
available. If a new Guarantee Period of the same duration is not available, that
portion of Your Contract Value shall be transferred to the Guarantee Period next
shortest in duration. The amount so applied is then subject to the same
conditions as the original Guarantee Period, including the condition that the
amount may not be transferred until the end of that Guarantee Period. In the
event of a non-specified renewal, there is a grace period of 30 days within
which the Owner can have transferred amounts reapplied. The effective guarantee
rate applicable to the new Guarantee Period may be different from the effective
guaranteed rate applicable to the original Guarantee Period. These transfers
will be handled at no charge to the Owner.

MARKET VALUE ADJUSTMENT

Unless accomplished on the expiration date of a Guarantee Period or during
the grace period, a transfer, withdrawal, surrender or annuitization of amounts
allocated to the Guaranteed Account may be subject to a Market Value Adjustment.
The adjusted value is determined by multiplying the amount to be transferred,
withdrawn, surrendered or annuitized from a Guarantee Period by the following
formula:

.75 X (A-B) X [N/12], where:

<TABLE>
<S> <C> <C>
A = The guaranteed interest rate applicable to a Guarantee Period for that portion of
proceeds being transferred, withdrawn, surrendered or annuitized.

B = The guaranteed interest rate currently available for the same length of Guarantee
Period as that remaining in the period applicable to that portion of proceeds
being transferred, withdrawn, surrendered or annuitized. If no such Guarantee
Period is then offered, the guaranteed interest rate will be calculated by
straight line interpolation of the guaranteed interest rates of available
Guarantee Periods.

N = The number of complete and partial months remaining to the end of the Guarantee
Period applicable to that portion of proceeds being transferred, withdrawn,
surrendered or annuitized.
</TABLE>

The Market Value Adjustment is not applicable on the date a Guarantee Period
expires; however, a Withdrawal or Surrender on such date may remain subject to
Surrender Charges. Applicable Surrender Charges will be applied after any Market
Value Adjustment to Guaranteed Account values.

MINIMUM SURRENDER VALUE

The minimum Surrender Value for amounts allocated to the Guaranteed Account
equals the amounts so allocated less withdrawals, with interest compounded
annually at the rate of 3%, reduced by any applicable Surrender Charge.

A-2

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
General Information........................................................................................
The Company..............................................................................................
Independent Accountants..................................................................................
Legal Counsel............................................................................................
Distributor..............................................................................................
Calculation of Performance Related Information...........................................................
Delay of Payments........................................................................................
Transfers................................................................................................
Method of Determining Contract Values......................................................................
Annuity Provisions.........................................................................................
Annuity Benefits.........................................................................................
Annuity Options..........................................................................................
Variable Annuity Payment Values..........................................................................
Annuity Unit.............................................................................................
Net Investment Factor....................................................................................
Additional Provisions....................................................................................
Financial Statements.......................................................................................
</TABLE>

<PAGE>

PART B

<PAGE>

PART B
STATEMENT OF ADDITIONAL INFORMATION

DEFERRED VARIABLE ANNUITY CONTRACTS

issued by

VARIABLE ACCOUNT A

and

AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE DEFERRED 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 DATED MAY
1, 1996 CALL OR WRITE: American International Life Assurance Company of New
York; Attention: Variable Products, One Alico Plaza, Wilmington, Delaware 19801,
1-800-340-2765.

DATE OF STATEMENT OF ADDITIONAL INFORMATION: May 1, 1996

<PAGE>

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

PAGE
General Information..................................................
The Company......................................................
Independent Accountants..........................................
Legal Counsel....................................................
Distributor......................................................
Calculation of Performance Related Information...................
Delay of Payments................................................
Transfers........................................................

Method of Determining Contract Values................................

Annuity Provisions...................................................

Annuity Benefits.....................................................
Annuity Options..................................................
Variable Annuity Payment Values..................................
Annuity Unit.....................................................
Net Investment Factor............................................
Additional Provisions............................................

Financial Statements.................................................

B - 2

<PAGE>

GENERAL INFORMATION

THE COMPANY

A description of American International Life Assurance Company of
New York (the "Company"), and its ownership is contained in the Prospectus.
The Company will provide for the safekeeping of the assets of Variable
Account A (the "Variable Account").

INDEPENDENT ACCOUNTANTS

The audited financial statements of the Company have been audited by
Coopers and Lybrand, L.L.P., independent certified public accountants, whose
offices are located in Philadelphia, Pennsylvania.

LEGAL COUNSEL

Legal matters relating to the Federal securities laws in connection
with the Contracts described herein and in the Prospectus are being passed upon
by the law firm of Jorden Burt Berenson & Johnson LLP, Washington, D.C..

DISTRIBUTOR

AIG Equity Sales Corp. ("AESC"), a wholly owned subsidiary of American
International Group, Inc. and an affiliate of the Company, acts as the
distributor. Commissions are paid by the Registrant directly to selling
dealers and representatives on behalf of the Distributor. Commissions retained
by the Distributor in 1995 were $27,878.

CALCULATION OF PERFORMANCE RELATED INFORMATION

A. YIELD AND EFFECTIVE YIELD QUOTATIONS FOR THE MONEY MARKET
SUBACCOUNT

The yield quotation for the Money Market Subaccount to be set forth in
the Prospectus will be for the seven days ended on the date of the most recent
balance sheet of the Variable Account included in the registration statement,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit in the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and multiplying
the base period return by (365/7) with the resulting figure carried to at least
the nearest hundredth of one percent.

Any effective yield quotation for the Money Market Subaccount to be
set forth in the Prospectus will be for the seven days ended on the date of the
most recent balance sheet of the Variable Account included in the registration
statement, and will be carried at least to the nearest hundredth of one percent,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit in the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7 and subtracting 1 from the result, according to the
following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)to the power of 365/7]-1.

B - 3

<PAGE>

For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Owner
accounts in proportion to the length of the base period. For any fees that vary
with the size of the account, the account size is assumed to be the Money Market
Subaccount's mean account size. The yield and effective yield quotations do not
reflect the Surrender Charge that may be assessed at the time of withdrawal in
an amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract and whether withdrawals had
been previously made during that Contract Year. (See "Charges and Deductions -
Deduction for Surrender Charge" on page of the Prospectus) No deductions or
sales loads are assessed upon annuitization under the Contracts. Realized gains
and losses from the sale of securities and unrealized appreciation and
depreciation of the Money Market Subaccount and the Fund are excluded from the
calculation of yield.

B. TOTAL RETURN QUOTATIONS

The total return quotations for all of the Subaccounts to be set forth
in the Prospectus will be average annual total return quotations for the one,
five, and ten year periods (or, where a Subaccount has been in existence for a
period of less than one, five or ten years, for such lesser period) ended on the
date of the most recent balance sheet of the Variable Account and for the period
from the date monies were first placed into the Subaccounts until the aforesaid
date. The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

P(1+T)to the power of n = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

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

For the purposes of the total return quotations for all of the
Subaccounts, the calculations take into effect all fees that are charged to all
Owner accounts. For any fees that vary with the size of the account, the
account size is assumed to be the respective Subaccount's mean account size.
The calculations also assume a total withdrawal as of the end of the particular
period.

B - 4

<PAGE>

Annualized total return for certain Subaccounts as of December 29, 1995,
were as follows:

ONE YEAR THREE YEARS INCEPTION TO DATE
-------- ----------- -----------------
<S> <C> <C> <C>
Money Market -1.91% N/A -2.56%
Premier Growth 37.85% N/A 10.02%
Growth & Income 28.44% 11.93% 10.09%
International 8.34% N/A 1.10%
Short Term Multi -0.19% -0.90% -5.04%
Global Bond 17.56% 6.92% 2.75%
US Gov't Securities 12.14% N/A -1.18%
Global Dollar Gov't 15.83% N/A 3.96%
North American Gov't 15.33% N/A -3.72%
Utility Income 14.32% N/A 3.95%
Conservative Investor 10.05% N/A 3.21%
Growth Investors 13.36% N/A 3.73%
Growth 7.91% N/A 19.96%
Total Return 16.50% N/A 4.69%
World Wide Privatization 3.88% N/A -1.18%
Technology Portfolio N/A N/A N/A

</TABLE>

*Funds were first invested in the Portfolios as listed below:

Short-Term Multi-Market Portfolio June 22, 1992
Global Bond Portfolio July 8, 1992
Growth & Income Portfolio July 8, 1992
Premier Growth Portfolio February 3, 1993
Money Market Portfolio February 3, 1993
US Government/High Grade Portfolio August 20, 1993
International Portfolio October 1, 1993
North American Government Income Portfolio April 11, 1994
Global Dollar Government Portfolio April 20, 1994
Utility Income Portfolio April 20, 1994
Worldwide Privatization Portfolio August 16, 1994
Growth Investors Portfolio August 16, 1994
Growth Portfolio August 16, 1994
Conservative Investors Portfolio August 24, 1994
Total Return Portfolio August 26, 1994
Technology Portfolio January 10, 1996

C. YIELD QUOTATIONS FOR THE SHORT-TERM MULTI-MARKET, U.S. GOVERNMENT/HIGH
GRADE SECURITIES AND GLOBAL BOND SUBACCOUNTS

The yield quotations for the Short-Term Multi-Market, U.S. Government/High
Grade Securities and Global Bond Subaccounts that will be set forth in the
Prospectus will be based on the thirty-day period ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and are computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price per
unit on the last day of the period, according to the following formula:

Yield = 2[(a - b + 1)to the power of 6 - 1]
---------
cd

B-5

<PAGE>

Where: a = net investment income earned during the period by
the corresponding portfolios of the Fund
attributable to shares owned by the Subaccount.

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.

For the purposes of the yield quotations for the Short-Term Multi-
Market, U.S. Government/High Grade Securities and Global Bond Subaccounts, the
calculations take into effect all fees that are charged to all Owner accounts.
For any fees that vary with the size of the account, the account size is assumed
to be the respective Subaccount's mean account size. The calculations do not
take into account the Surrender Charge or any transfer charges.

A Surrender Charge may be assessed at the time of withdrawal in an
amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract, and whether withdrawals had
been previously made during that Contract Year. (See "Charges and Deductions -
Deduction for Surrender Charge" on page __ of the Prospectus) There is
currently a transfer charge of $10 per transfer after a specified number of
transfers in each Contract Year. (See "Alliance Variable Products Series Fund,
Inc., - Transfer of Contract Values" on page __ of the Prospectus)

D. NON - STANDARDIZED PERFORMANCE DATA

1. Total Return Quotations

P(1+T)to the power of n = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

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

B - 6

<PAGE>

assumed to be the respective Subaccount's mean account size. The calculations
do not, however, assume a total withdrawal as of the end of the particular
period and, therefore, no Surrender Charge is reflected.

Annualized total return quotations for certain Subaccounts as of December
31, 1995, were as follows:

One Year Three Years Inception to Date
-------- ----------- ----------------
<S> <C> <C> <C>
Money Market 3.55% N/A 2.11%
Premier Growth 43.31% 13.66% 13.78%
Growth & Income 33.90% 13.16% 13.69%
International 8.34% N/A 6.83%
Short Term Multi Market 5.27% 0.66% -0.04%
Global Bond 23.02% 8.27% 6.97%
US Gov't Securities 17.60% N/A 4.42%
Global Dollar Gov't 21.29% N/A 10.38%
North American Gov't 20.79% N/A 2.93%
Utility Income 19.78% N/A 7.10%
Conservative Investor 15.51% N/A 11.46%
Growth Investors 18.82% N/A 11.82%
Growth 33.37% N/A 27.65%
Total Return 21.96% N/A 12.94%
Worldwide Privatization 9.34% N/A 7.10%
Technology Portfolio N/A N/A N/A
</TABLE>

2. TAX DEFERRED ACCUMULATION

In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax-deferred compounding
on the Variable Account's investment returns or upon returns in general. These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a tax-
deferred basis with the returns on a taxable basdis. Different tax rates may be
assumed.

In general, individuals who own annuity contracts are not taxed on inreases
in the value under the annuity contract until some form of distribution is made
from the contract. Thus, the annuity contract will benefit from tax deferral
during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis. The following chart illustrates this benefit by comparing accumulation
under the Contract with accumulation from an investment on which gains are taxed
on a current basis. The chart shows accumulations on an initial investment or
Premium payment of $25,000, assuming hypothetical gross annual return of 0%, 4%
and 8%, compounded annually, and a tax rate of 31%. The values shown for the
taxable investment do not include any deduction for management fees or other
expenses but assume that taxes are deducted annually from investment returns.
The values shown for the Contract reflect the deduction of contractual expenses
such as the 1.25% mortality and expense risk charge, the 0.15% Administrative
Charge and the $30 Contract Maintenance Charge, but not the expenses of an
underlying investment vehicle. In addition, these values assume that the Owner
does not surrender the Contract or make any withdrawals until the end of the
period shown. The chart assumes a full withdrawal, at the end of the period
shown, of all contract value and the payment of taxes at the 31% rate on the
amount in excess of the Premium payment.

The rates of return illustrated are hypothetical and are not an estimate or
guaranty of performance. Actual tax rates may vary for different taxpayers from
that illustrated and withdrawals by Owners who have not reached age 59 1/2 may
be subject to a tax penalty of 10%.

[INSERT CHART]

B - 7

<PAGE>

DELAY OF PAYMENTS

Any payments due under the Contracts will generally be sent to the Owner
within seven (7) days of a completed request for payment. However, the Company
has reserved the right to postpone any type of payment from the Variable Account
for any period when:

(a) the New York Stock Exchange is closed for other than
customary weekends and holidays, or trading on the Exchange
is otherwise restricted;

(b) an emergency exists as a result of which it is not
reasonably practicable to dispose of securities held in the
Variable Account or determine their value;

(d) the check used to pay any Premium has not cleared through
the banking system (this may take up to 15 days).

The applicable rules of the Securities and Exchange Commission shall
govern as to whether the conditions in (a) and (b) exist.

METHOD OF DETERMINING CONTRACT VALUES

The Contract Value will fluctuate in accordance with the investment
results of the underlying Portfolio of the Fund held within the Subaccount. In
order to determine how these fluctuations affect Contract Values, Accumulation
Units are utilized. The value of an Accumulation Unit applicable during any
Valuation Period is determined at the end of that period.

When the first shares of the respective Portfolios of the Fund were
purchased for the Subaccounts, the Accumulation Units for the Subaccounts were
valued at $10. The value of an Accumulation Unit for a Subaccount on any
Valuation Date thereafter is determined by dividing (a) by (b), where:

(a) is equal to:

(i) the total value of the net assets attributable to
Accumulation Units in the Subaccount, minus

(ii) the daily charge for assuming the risk of guaranteeing
mortality factors and expense charges which is equal on
an annual basis to 1.25% multiplied by the daily net
asset value of the Subaccount; minus

(iii) the daily charge for providing certain administrative
functions which is equal on an annual basis to 0.15%
multiplied by the daily net asset value of the
Subaccount; minus or plus

(iv) a charge or credit for any tax provision established
for the Subaccount. The Company is not currently
making any provision for taxes.

(b) is the total number of Accumulation Units applicable to that
Subaccount at the end of the Valuation Period.

B - 8

<PAGE>

The resulting value of each Subaccount Accumulation Unit is multiplied
by the respective number of Subaccount Accumulation Units for a Contract. The
Contract Value of the Variable Account is the sum of all Subaccount values for
the Contract.

An Accumulation Unit may increase or decrease in value from Valuation
Date to Valuation Date.

ANNUITY PROVISIONS

ANNUITY BENEFITS

A description of the Annuity Benefits and Annuity Options is provided
in the prospectus

VARIABLE ANNUITY PAYMENT VALUES

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 Subaccount(s) of the Variable Account. At
the Annuity Date the Contract Value in each Subaccount will be applied to the
applicable Annuity Tables contained in the Contract. The Annuity Table used
will depend upon the payment option chosen. The same Contract Value amount
applied to each payment option may produce a different initial annuity payment.
If, as of the Annuity Date, the then current annuity rates applicable to this
class of contracts will provide a larger income than that guaranteed for the
same form of annuity under the Contracts described herein, the larger amount
will be paid.

The first annuity payment for each Subaccount is determined by
multiplying the amount of the Contract Value allocated to that Subaccount by the
factor shown in the table for the option selected, divided by 1000.

The dollar amount of Subaccount annuity payments after the first is
determined as follows:

(a) The dollar amount of the first annuity payment is divided by
the value for the Subaccount Annuity Unit as of the Annuity
Date. This establishes the number of Annuity Units for each
monthly payment. The number of Annuity Units remains fixed
during the Annuity payment period, subject to any transfers.

(b) The fixed number of Annuity Units is multiplied by the
Annuity Unit value for the Valuation Period 14 days prior to
the date of payment.

The total dollar amount of each Variable Annuity payment is the sum of
all Subaccount variable annuity payments less the pro-rata amount of the annual
Administrative Charge.

ANNUITY UNIT

The value of an Annuity Unit for each Subaccount was arbitrarily set
initially at $10. This was done when the first Fund shares were purchased. The
Subaccount Annuity Unit value at the end of any subsequent Valuation Period is
determined by multiplying the Subaccount Annuity Unit value for the immediately
preceding Valuation Period by the quotient of (a) and (b) where:

B - 9

<PAGE>

(a) is the net investment factor for the Valuation Period for which
the Subaccount Annuity Unit value is being determined; and

(b) is the assumed investment factor for such Valuation Period. The
assumed investment factor adjusts for the interest assumed in
determining the first variable annuity payment. Such factor for
any Valuation Period shall be the accumulated value, at the end
of such period, of $1.00 deposited at the beginning of such
period at the assumed investment rate of 5%.

NET INVESTMENT FACTOR

The net investment factor is used to determine how investment results
of the Fund affect the Subaccount Annuity Unit value from one Valuation Period
to the next. The net investment factor for each Subaccount for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result,
where:

(a) is equal to:

(i) the net asset value per share of the Fund held in the
Subaccount determined at the end of that Valuation
Period; plus

(ii) the per share amount of any dividend or capital gain
distribution made by the Fund held in the Subaccount if
the "ex-dividend" date occurs during that same
Valuation Period; plus or minus

(iii) a per share charge or credit, which is determined by
the Company, for changes in tax reserves resulting from
investment operations of the Subaccount.

(b) is equal to:

(i) the net asset value per share of the Fund held in the
Subaccount determined as of the end of the prior
Valuation Period; plus or minus

(ii) the per share charge or credit for any change in tax
reserves for the prior Valuation Period.

(i) the percentage factor representing the Mortality and
Expense Risk Charge, plus

(ii) the percentage factor representing the daily
Administrative Charge.

The net investment factor may be greater or less than the assumed investment
factor; therefore, the Subaccount Annuity Unit value may increase or decrease
from Valuation Period to Valuation Period.

ADDITIONAL PROVISIONS

B - 10

<PAGE>

underpayments that may have been made will be paid in full with the next annuity
payment, including interest at the annual rate of 5%. Any overpayments,
including interest at the annual rate of 5%, unless repaid to the Company in one
sum, will be deducted from future annuity payments until the Company is repaid
in full.

If a Contract provision requires that a person be alive, the Company
may require due proof that the person is alive before the Company acts under
that provision.

The Company will give the payee under an annuity payment option a
settlement contract for the payment option.

You may assign this Contract prior to the Annuity Date. A written
request, dated and signed by you must be sent to our Administrative Office. A
duly executed copy of any assignment must be filed with our Administrative
Office. We are not responsible for the validity of any assignment.

FINANCIAL STATEMENTS

The financial statements of the Company included herein shall be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.

B - 11

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE
COMPANY OF NEW YORK
(A WHOLLY-OWNED SUBSIDIARY OF
AMERICAN INTERNATIONAL GROUP, INC.)

REPORT ON AUDITS OF FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<PAGE>
(This page has been left blank intentionally.)

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors
American International Life Assurance Company of New York:

We have audited the accompanying balance sheets of American International
Life Assurance Company of New York (a wholly-owned subsidiary of American
International Group, Inc.) as of December 31, 1995 and 1994, and the related
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American International Life
Assurance Company of New York as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

As discussed in Note 1 (h) to the financial statements, the Company changed
in 1993, its method of accounting for investments in certain fixed maturity
securities.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 22, 1996

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
Investments and cash:
Fixed maturities:
Bonds available for sale, at market value (cost: 1995-$4,139,170: 1994 --
$3,807,500)................................................................. $ 4,434,329 $ 3,700,640
Equity securities:
Common stock (cost: 1995-$8,540: 1994 -- $8,382.............................. 17,703 17,201
Non-redeemable preferred stocks (cost: 1995 -- $4,564; 1994 -- $5,027)....... 4,570 4,701
Mortgage loans on real estate, net............................................... 448,700 399,695
Real estate, net of accumulated depreciation of $6,009 in 1995; and $4,861 in
1994............................................................................ 33,029 34,155
Policy loans..................................................................... 10,991 10,317
Other invested assets............................................................ 69,360 63,941
Short-term investments........................................................... 103,040 130,415
Cash............................................................................. 2,460 5,363
------------- -------------
Total investments and cash................................................. 5,124,182 4,366,428
Amounts due from related parties................................................. 1,186 2,304
Investment income due and accrued................................................ 74,355 67,623
Premium and insurance balances receivable -- net................................. 13,289 14,536
Reinsurance assets............................................................... 22,552 26,313
Deferred policy acquisition cost................................................. 31,225 29,626
Deferred incomes taxes........................................................... -- 44,926
Separate and variable accounts................................................... 68,151 27,630
Other assets..................................................................... 16,814 1,800
------------- -------------
Total assets............................................................... $ 5,351,754 $ 4,581,186
------------- -------------
------------- -------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

LIABILITIES

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
Policyholders' funds on deposit.................................................. $ 3,060,581 $ 2,742,412
Future policy benefits........................................................... 1,561,760 1,446,327
Reserve for unearned premiums.................................................... 10,808 13,099
Policy and contract claims....................................................... 37,201 37,092
Reserve for commissions, expenses and taxes...................................... 4,433 3,077
Insurance balances payable....................................................... 7,771 9,128
Federal income tax payable....................................................... 3,477 1,353
Deferred income taxes............................................................ 62,252 --
Amounts due to related parties................................................... 5,260 7,654
Separate and variable accounts................................................... 68,151 27,468
Other liabilities................................................................ 23,553 26,640
------------- -------------
Total Liabilities............................................................ 4,845,247 4,314,250
------------- -------------

Commitments and contingencies (See Note 6)

STOCKHOLDERS' EQUITY
Common stock, $200 par value; 16,125 shares authorized, issued and outstanding... 3,225 3,225
Additional paid-in capital....................................................... 197,025 197,025
Unrealized appreciation (depreciation) of investments, net of future policy
benefits and taxes of $82,352 in 1995 and $(32,471) in 1994;.................... 152,941 (60,305)
Retained Earnings................................................................ 153,316 126,991
------------- -------------
Total stockholders' equity................................................. 506,507 266,936
------------- -------------
Total liabilities and stockholders' equity....................................... $ 5,351,754 $ 4,581,186
------------- -------------
------------- -------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Premiums................................................................. $ 84,357 $ 71,826 $ 76,045
Net investment income.................................................... 386,666 335,823 308,089
Realized capital gains................................................... 1,436 1,932 18,767
----------- ----------- -----------
Total revenues......................................................... 472,459 409,581 402,901
----------- ----------- -----------
Benefits and expenses:
Benefits to policyholders................................................ 167,319 163,585 156,707
Increase in future policy benefits and policyholders' funds on deposit... 209,512 165,291 155,434
Acquisition and insurance expenses....................................... 54,808 62,759 57,758
----------- ----------- -----------
Total benefits and expenses............................................ 431,639 391,635 369,899
----------- ----------- -----------
Income before income taxes................................................. 40,820 17,946 33,002
----------- ----------- -----------
Income taxes (benefits):
Current.................................................................. 22,142 18,986 19,330
Deferred................................................................. (7,647) (12,152) (9,007)
----------- ----------- -----------
Total income taxes..................................................... 14,495 6,834 10,323
----------- ----------- -----------
Net income................................................................. $ 26,325 $ 11,112 $ 22,679
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to financial statements.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year............................................. $ 3,225 $ 3,225 $ 3,225
------------ ------------ -----------
Balance at end of year................................................... 3,225 3,225 3,225
------------ ------------ -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year:............................................ 197,025 197,025 119,025
Capital contribution..................................................... -- -- 78,000
------------ ------------ -----------
Balance at end of year................................................... 197,025 197,025 197,025
------------ ------------ -----------
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS, NET
Balance at beginning of year............................................. (60,305) 58,102 1,887
Change during year....................................................... 404,070 (182,164) 6,497
Changes due to deferred income tax benefit (expense) and future policy
benefits................................................................ (190,824) 63,757 (2,302)
Cumulative effect of accounting change, net of taxes of $28,011.......... -- -- 52,020
------------ ------------ -----------
Balance at end of year................................................... 152,941 (60,305) 58,102
------------ ------------ -----------
RETAINED EARNINGS
Balance at beginning of year............................................. 126,991 115,879 93,200
Net income............................................................... 26,325 11,112 22,679
------------ ------------ -----------
Balance at end of year................................................... 153,316 126,991 115,879
------------ ------------ -----------
Total stockholders' equity........................................... $ 506,507 $ 266,936 $ 374,231
------------ ------------ -----------
------------ ------------ -----------
</TABLE>

See accompanying notes to financial statements.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ------------ --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 26,325 $ 11,112 $ 22,679
----------- ------------ --------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Non-cash revenues, expenses, gains and losses included in income:
Change in insurance reserves....................................... 37,251 45,554 44,151
Change in premiums and insurance balances receivable and payable --
net............................................................... (110) (138) 2,251
Change in reinsurance assets....................................... 3,761 5,570 5,240
Change in deferred policy acquisition costs........................ (1,599) (213) 1,632
Change in investment income due and accrued........................ (6,732) (8,153) (7,937)
Realized capital gains............................................. (1,436) (1,932) (18,767)
Change in current and deferred income taxes -- net................. (5,523) (6,895) (21,332)
Change in reserves for commissions, expenses and taxes............. 1,356 149 1,054
Change in other assets and liabilities -- net...................... (33,021) 7,526 (1,568)
----------- ------------ --------------
Total adjustments................................................ (6,053) 41,468 4,724
----------- ------------ --------------
Net cash provided by operating activities.......................... 20,272 52,580 27,403
----------- ------------ --------------
Cash flows from investing activities:
Cost of fixed maturities, at market sold............................. 65,623 63,695 309,595
Cost of fixed maturities, at market matured or redeemed.............. 247,551 255,229 341,223
Cost of equity securities sold....................................... 1,310 958 6,738
Realized capital gains............................................... 3,436 4,715 24,542
Purchase of fixed maturities......................................... (627,188) (837,973) (1,050,415)
Purchase of equity securities........................................ (1,005) (137) (4,449)
Mortgage loans granted............................................... (111,402) (77,824) (61,932)
Repayments of mortgage loans......................................... 60,476 9,621 20,397
Change in policy loans............................................... (674) 601 870
Change in short-term investments..................................... 27,375 (7,485) (59,065)
Change in other invested assets...................................... (4,083) (6,479) (7,164)
Other -- net......................................................... (2,763) (1,086) (17,821)
----------- ------------ --------------
Net cash used in investing activities.............................. (341,344) (596,165) (497,481)
----------- ------------ --------------
Cash flows from financing activities:
Change in policyholders' funds on deposit............................ 318,169 542,729 395,889
Proceeds from capital contribution................................... -- -- 78,000
----------- ------------ --------------
Net cash provided by financing activities.......................... 318,169 542,729 473,889
----------- ------------ --------------
Change in cash......................................................... (2,903) (856) 3,811
Cash at beginning of year.............................................. 5,363 6,219 2,408
----------- ------------ --------------
Cash at end of year.................................................... $ 2,460 $ 5,363 $ 6,219
----------- ------------ --------------
----------- ------------ --------------
</TABLE>

See accompanying notes to statutory financial statements.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF PRESENTATION: American International Life Assurance Company
of New York (the Company) is a wholly-owned subsidiary of American International
Group, Inc. (the Parent). The financial statements of the Company have been
prepared on the basis of generally accepted accounting principles (GAAP). The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
The Company is licensed to sell life and accident & health insurance in the
District of Columbia and all states except Arizona, Conneticut and Maryland. The
Company is also licensed in America Samoa, Virgin Islands and Guam.

The Company also files financial statements prepared in accordance with
statutory practices prescribed or permitted by the Insurance Department of the
State of New York. Financial statements prepared in accordance with generally
accepted accounting principles differ in certain respects from the practices
prescribed or permitted by regulatory authorities. The significant differences
are: (1) statutory financial statements do not reflect fixed maturities
available for sale at market value; (2) policy acquisition costs, charged
against operations as incurred for regulatory purposes, have been deferred and
are being amortized over the anticipated life of the contracts; (3) individual
life and annuity policy reserves based on statutory requirements have been
adjusted based upon mortality, lapse and interest assumptions applicable to
these coverages, including provisions for reasonable adverse deviations; these
assumptions reflect the Company's experience and industry standards; (4)
deferred income taxes not recognized for regulatory purposes have been provided
for temporary differences between the bases of assets and liabilities for
financial reporting purposes and tax purposes; (5) for regulatory purposes,
future policy benefits, policyholders' funds on deposit, policy and contract
claims and reserve for unearned premiums are presented net of ceded reinsurance;
and (6) an asset valuation reserve and interest maintenance reserve using
National Association of Insurance Commissioners (NAIC) formulas are set up for
regulatory purposes.

(b) INVESTMENTS: Fixed maturities available for sale, where the company
may not have the ability or positive intent to hold these securities until
maturity, are carried at market value. Included in fixed maturities available
for sale are collateralized mortgage obligations (CMO's). Premiums and discounts
arising from the purchase of CMO'S are treated as yield adjustments over the
estimated life. Common stocks and preferred stocks available for sale are
carried at market value. Short-term investments are carried at cost, which
approximates market.

Unrealized gains and losses from investment in equity securities and fixed
maturities available for sale are reflected in stockholders' equity, net of
amounts recorded as future policy benefits and any related deferred income
taxes.

Realized capital gains and losses are determined principally by specific
identification. Where declines in values of securities below cost or amortized
cost are considered to be other than temporary, a charge is reflected in income
for the difference between cost or amortized cost and estimated net realizable
value.

Mortgage loans on real estate are carried at unpaid principal balance less
unamortized loan origination fees and costs less an allowance for uncollectible
loans.

Real estate is carried at depreciated cost and is depreciated on a
straight-line basis over 31.5 years. Expenditures for maintenance and repairs
are charged to income as incurred; expenditures for betterments are capitalized
and depreciated over their estimated lives.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Policy loans are carried at the aggregate unpaid principal balance.

Other invested assets consist primarily of limited partnership interests
which are carried at market value. Unrealized gains and losses from the
revaluation of these investments are reflected in stockholders' equity, net of
any related taxes. Also included in this category is an interest rate cap
agreement, which is carried at its amortized cost. The cost of the cap is being
amortized against investment income on a straight line basis over the life of
the cap.

(c) INCOME TAXES: The Company joins in a consolidated federal income tax
return with the Parent and its domestic subsidiaries. The Company and the Parent
have a written tax allocation agreement whereby the Parent agrees not to charge
the Company a greater portion of the consolidated tax liability than would have
been paid by the Company if it had filed a separate return. Additionally, the
Parent agrees to reimburse the Company for any tax benefits arising out of its
net losses within ninety days after the filing of that consolidated tax return
for the year in which these losses are utilized. Deferred federal income taxes
are provided for temporary differences related to the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns.

(d) PREMIUM RECOGNITION AND RELATED BENEFITS AND EXPENSES: Premiums on
traditional life insurance and life contingent annuity contracts are recognized
when due. Revenues for universal life and investment-type products consist of
policy charges for the cost of insurance, administration, and surrenders during
the period. Premiums on accident and health insurance are reported as earned
over the contract term. The portion of accident and health premiums which is not
earned at the end of a reporting period is recorded as unearned premiums.
Estimates of premiums due but not yet collected are accrued. Policy benefits and
expenses are associated with earned premiums on long-duration contracts
resulting in a level recognition of profits over the anticipated life of the
contracts.

Policy acquisition costs for traditional life insurance products are
generally deferred and amortized over the premium paying period of the policy.
Deferred policy acquisition costs and policy initiation costs related to
universal life and investment-type products are amortized in relation to
expected gross profits over the life of the policies (see Note 3).

The liability for future policy benefits and policyholders' contract
deposits is established using assumptions described in Note 4.

(e) POLICY AND CONTRACT CLAIMS: Policy and contract claims include amounts
representing: (1) the actual in-force amounts for reported life claims and an
estimate of incurred but unreported claims; and (2) an estimate, based upon
prior experience, for accident and health reported and incurred but unreported
losses. The methods of making such estimates and establishing the resulting
reserves are continually reviewed and updated and any adjustments resulting
therefrom are reflected in income currently.

(f) SEPARATE AND VARIABLE ACCOUNTS: These accounts represent funds for
which investment income and investment gains and losses accrue directly to the
policyholders. Each account has specific investment objectives, and the assets
are carried at market value. These assets are legally segregated and are not
subject to claims which arise out of any other business of the Company.

(g) REINSURANCE ASSETS: Reinsurance assets include the balances due from
both reinsurance and insurance companies under the terms of the Company's
reinsurance arrangements for ceded unearned premiums, future policy benefits for
life and accident and health insurance contracts, policyholders' funds on
deposit and policy and contract claims. It also includes funds held under
reinsurance treaties.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) ACCOUNTING STANDARDS: In March 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to Be Disposed Of" (FASB 121). This statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable and an impairment loss must be recognized.

FASB 121 is effective for the Company commencing January 1, 1996. The
Company believes that the adoption of this statement in 1996 will have an
immaterial impact on the results of operations, financial condition and
liquidity.

In December 1995, FASB issued "Special Report, a Guide to the Implementation
of Statement No. 115 on Accounting for Certain Investments in Debt and Equity
Securities". Among other things, this guide provided for a transition provision
permitting a one-time transfer of debt securities from the held to maturity
classification to the available for sale classification. The Company did not
transfer any securities from the held to maturity classification to available
for sale classification.

In 1994, the American Institute of Certified Public Accountants (AICPA)
issued a Statement of Position (SOP) 94-6 "Disclosure of Certain Significant
Risks and Uncertainties" (SOP 94-6). Pursuant to SOP 94-6, the Company has made
certain disclosures as to the nature of the Company's operations and the use of
estimates in the preparation of its 1995 financial statements. Certain other
disclosures were not necessary as the Company did not meet the required
criteria.

In November of 1992, FASB issued Statement of Financial Accounting Standards
No. 112 "Employers' Accounting for Postemployment Benefits" (FASB 112). FASB 112
established accounting standards for employers who provide benefits to former or
inactive employees after employment but before retirement. FASB 112 was adopted
effective January 1, 1994, and had no significant effect on the Company's
results of operations, financial condition or liquidity.

In October 1994, FASB issued Statement of Financial Accounting Standards No.
118 "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures" (FASB 118). FASB 118 amends FASB 114 to allow a creditor to use
existing methods to recognize interest income on an impaired loan. FASB 118 also
amends certain disclosure requirements of FASB 114. The Company adopted FASB 114
and FASB 118 effective December 31, 1994. The adoption of these statements did
not cause any significant impact on the Company's results of operations,
financial condition or liquidity.

In October 1994, FASB issued Statement of Financial Accounting Standard No
119 "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments" (FASB 119). FASB 119 requires disclosure about derivative
financial instruments and amends FASB 105 "Disclosure of Information about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentrations of Credit Risk" (FASB 105) and Statement of Financial Accounting
Standards No. 107 "Disclosure about Fair Value of Financial Instruments".

FASB 119 requires disclosure about the amounts, nature and terms of
derivatives that are not subject to FASB 105. Also, FASB 119 requires disclosure
about financial instruments held or issued for trading purposes and purposes
other than trading. This statement was adopted by the Company effective December
31, 1994.

In May 1993, the FASB issued Statement of Accounting Standards No. 115
"Accounting for Certain Investments on Debt and Equity Securities" (FASB 115)
and the Company adopted this standard at December 31, 1993. The pretax increase
in carrying value of fixed maturities available for

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
sale as a result of marking to market was $242,000,000. A portion was recorded
as a component of future policy benefits. Thus, the unrealized appreciation of
investments increased $52,020,000, net of taxes of $28,011,000.

(i) Certain amounts in the 1994 balance sheet have been reclassified to
conform to the 1995 presentation.

2. INVESTMENT INFORMATION

(a) STATUTORY DEPOSITS: Securities with a carrying value of $9,381,000 and
$8,289,000 were deposited by the Company under requirements of regulatory
authorities as of December 31, 1995 and 1994, respectively.

(b) NET INVESTMENT INCOME: An analysis of net investment income is as
follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturities....................................... $ 334,828 $ 289,374 $ 271,962
Equity securities...................................... 1,006 1,156 1,190
Mortgage loans......................................... 40,383 33,251 29,163
Real estate............................................ 3,446 3,771 3,305
Policy loans........................................... 733 764 846
Cash and short-term investments........................ 4,124 6,839 3,593
Other invested assets.................................. 6,381 4,465 1,661
----------- ----------- -----------
Total investment income............................ 390,901 339,620 311,720
Investment expenses.................................... 4,235 3,797 3,631
----------- ----------- -----------
Net investment income.............................. $ 386,666 $ 335,823 $ 308,089
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

(c) INVESTMENT GAINS AND LOSSES: The net realized capital gains (losses)
and change in unrealized appreciation (depreciation) of investments for 1995,
1994 and 1993 are summarized below (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
----------- ------------ ---------
<S> <C> <C> <C>
Net realized gains (losses) on investments:
Fixed maturities..................................... $ (115) $ (75) $ 20,106
Equity securities.................................... 3,515 2,046 (2,415)
Mortgage loans....................................... (2,000) (2,783) (5,775)
Other invested assets................................ 36 2,744 6,851
----------- ------------ ---------
Net realized gains................................... $ 1,436 $ 1,932 $ 18,767
----------- ------------ ---------
----------- ------------ ---------
Change in unrealized appreciation (depreciation) of
investments:
Fixed maturities..................................... $ 402,020 $ (186,892) $ --
Equity securities.................................... 677 (853) 6,499
Other invested assets................................ 1,373 5,581 (2)
Cumulative effect of accounting change............... -- -- 80,031
----------- ------------ ---------
Change in unrealized appreciation (depreciation) of
investments......................................... $ 404,070 $ (182,164) $ 86,528
----------- ------------ ---------
----------- ------------ ---------
</TABLE>

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. INVESTMENT INFORMATION (CONTINUED)
Proceeds from the sale of investments in fixed maturities during 1995, 1994
and 1993 were $80,003,000, $79,504,000 and $59,251,000, respectively.

During 1995, 1994 and 1993, gross gains of $624,000, $4,861,000 and
$30,195,000, respectively, and gross losses of $739,000, $4,936,000 and
$10,089,000, respectively, were realized on dispositions of fixed maturities.

During 1995, 1994 and 1993, gross gains of $3,516,000, $2,047,000 and
$516,000, respectively, and gross losses of $1,000, $1,000 and $2,931,000,
respectively, were realized on dispositions of equity securities.

(d) MARKET VALUE OF FIXED MATURITIES AND UNREALIZED APPRECIATION OF
INVESTMENTS: At December 31, 1995 and 1994, unrealized appreciation of
investments in equity securities (before applicable taxes) included gross gains
of $9,650,000 and $9,341,000 and gross losses of $480,000 and $848,000,
respectively.

The amortized cost and estimated market values of investments in fixed
maturities at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
1995 COST GAINS LOSSES MARKET VALUE
- --------------------------------------------------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Government and government agencies and
authorities........................................... $ 84,063 $ 19,982 $ 39 $ 104,006
States, municipalities and political subdivisions...... 883,646 56,568 89 940,125
Foreign governments.................................... 33,927 5,291 75 39,143
All other corporate.................................... 3,137,534 224,452 10,931 3,351,055
------------- ----------- ----------- -------------
Total fixed maturities............................... $ 4,139,170 $ 306,293 $ 11,134 $ 4,434,329
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
1994 COST GAINS LOSSES MARKET VALUE
- --------------------------------------------------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Government and government agencies and
authorities........................................... $ 89,861 $ 4,381 $ 3,235 $ 91,007
States, municipalities and political subdivisions...... 819,297 7,687 46,602 780,382
Foreign governments.................................... 34,230 1,481 2,310 33,401
All other corporate.................................... 2,886,112 36,160 104,422 2,795,850
------------- ----------- ----------- -------------
Total fixed maturities............................... $ 3,807,500 $ 49,709 $ 156,569 $ 3,700,640
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. INVESTMENT INFORMATION (CONTINUED)
The amortized cost and estimated market value of fixed maturities available
for sale at December 31, 1995, by contractual maturity, are shown below (in
thousands). Actual maturities could differ from contractual maturities because
certain borrowers have the right to call or prepay obligations with or without
call or prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST MARKET VALUE
------------- -------------
<S> <C> <C>
Due in one year or less...................................... $ 310,922 $ 326,318
Due after one year through five years........................ 1,110,307 1,172,894
Due after five years through ten years....................... 1,632,691 1,759,253
Due after ten years.......................................... 1,085,250 1,175,864
------------- -------------
$ 4,139,170 $ 4,434,329
------------- -------------
------------- -------------
</TABLE>

(e) CMO'S: CMOs are U.S. Government and Government agency backed and
triple A-rated securities. In the preceding table, CMO's are included in other
corporate fixed maturities. At December 31, 1995 and 1994, the market value of
the CMO portfolio was $1,114,196,000 and $967,179,000, respectively; the
estimated amortized cost was approximately $1,049,450,000 in 1995 and
$989,346,000 in 1994. The Company's CMO portfolio is readily marketable. There
were no derivative (high risk) CMO securities contained in the portfolio at
December 31, 1995.

(f) FIXED MATURITIES BELOW INVESTMENT GRADE: At December 31, 1995 and
1994, the fixed maturities held by the Company that were below investment grade
had an aggregate amortized cost of $204,254,000 and $205,986,000, respectively,
and an aggregate market value of $206,442,000 and $195,443,000, respectively.

(g) NON-INCOME PRODUCING ASSETS: Non-income producing assets were
insignificant.

(h) INVESTMENTS GREATER THAN 10% EQUITY: The market value of investments
in the following companies and institutions exceeded 10% of the Company's total
stockholders' equity at December 31, 1995 (in thousands):

<TABLE>
<S> <C>
Fixed Maturities:
Standard Credit Card................................... $ 113,683
Morgan Stanley Mortgage Trust.......................... $ 80,482
General Motors Acceptance Corporation.................. $ 71,742
Transamerica Finance................................... $ 57,329
</TABLE>

3. DEFERRED POLICY ACQUISITION COSTS
The following reflects the policy acquisition costs deferred (commissions,
direct solicitation and other costs) which will be amortized against future
income and the related current amortization charged to income, excluding certain
amounts deferred and amortized in the same period (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year............................... $ 29,626 $ 29,413 $ 31,045
Acquisition costs deferred................................. 5,933 3,286 2,157
Amortization charged to income............................. (4,334) (3,073) (3,789)
--------- --------- ---------
Balance at end of year..................................... $ 31,225 $ 29,626 $ 29,413
--------- --------- ---------
--------- --------- ---------
</TABLE>

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. FUTURE POLICY BENEFITS AND POLICYHOLDERS' FUNDS ON DEPOSIT

(a) The analysis of the future policy benefits and policyholders' funds on
deposit liabilities as at December 31, 1995 and 1994 follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Future policy benefits:
Long duration contracts.................................... $ 1,549,758 $ 1,436,875
------------- -------------
Short duration contracts................................... 12,002 9,452
------------- -------------
$ 1,561,760 $ 1,446,327
------------- -------------
------------- -------------
Policyholder funds on deposit:
Annuities.................................................. $ 2,131,609 $ 1,974,234
Guaranteed investment contracts (GICs)..................... 739,947 667,968
Universal life............................................. 84,741 94,998
Other investment contracts................................. 104,284 5,212
------------- -------------
$ 3,060,581 $ 2,742,412
------------- -------------
------------- -------------
</TABLE>

(b) Long duration contract liabilities included in future policy benefits,
as presented in the table above, result from traditional life products. Short
duration contract liabilities are primarily accident and health products. The
liability for future policy benefits has been established based upon the
following assumptions:

(i) Interest rates for traditional life insurance products are 9.5
percent graded to 7.0 percent over 30 years. The liability for future policy
benefits for universal life insurance has been established using FASB 97 and
assumes a 1.0 percent investment margin. Interest rates (exclusive of
immediate/terminal funding annuities), which vary by year of issuance and
products, range from 3.0 percent to 10.0 percent. Interest rates on
immediate/terminal funding annuities are at a maximum of 12.2 percent and
grade to not greater than 7.5 percent.

(ii) Mortality and withdrawal rates are based upon actual experience
modified to allow for variations in policy form. The weighted average lapse
rate, including surrenders, for individual life approximated 14.8 percent.

(i) Interest rates credited on deferred annuities vary by year of
issuance and range from 4.0 percent to 8.3 percent. Credited interest rate
guarantees are generally for a period of one year. Withdrawal charges
generally range from 6.0 percent to 10.0 percent grading to zero over a
period of 6 to 10 years.

(ii) GICs have market value withdrawal provisions for any funds
withdrawn other than benefit responsive payments. Interest rates credited
generally range from 4.7 percent to 9.1 percent and maturities range from 2
to 7 years.

(iii) The universal life funds have credited interest rates of 6.1
percent to 7.0 percent and guarantees ranging from 4.0 percent to 5.5
percent depending on the year of issue. Additionally, universal life funds
are subject to surrender charges that amount to 7.5 percent of the fund
balance and grade to zero over a period not longer than 20 years.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES

(a) The Federal income tax rate applicable to ordinary income is 35% for
1995, 1994 and 1993. Actual tax expense on income from operations differs from
the "expected" amount computed by applying the Federal income tax rate because
of the following (in thousands except percentages):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
1995 1994 1993
------------------------ ------------------------ ----------------------
PERCENT OF PERCENT OF PERCENT OF
PRE-TAX PRE-TAX PRE-TAX
OPERATING OPERATING OPERATING
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
--------- ------------- --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
"Expected" income tax expense...... $ 14,288 35.0% $ 6,281 35.0% $ 11,551 135.0%
Prior year federal income tax
benefit........................... -- -- -- -- (1,954) (5.9)
State income tax................... 627 1.5 714 4.0 758 2.3
Other.............................. (420) (1.0) (161) (0.9) (32) (0.1)
--------- --- --------- --- --------- -----
Actual income tax expense.......... $ 14,495 35.5% $ 6,834 38.1% $ 10,323 31.3%
--------- --- --------- --- --------- -----
--------- --- --------- --- --------- -----
</TABLE>

(b) The components of the net deferred tax liability were as follows (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1995 1994
--------- ----------
<S> <C> <C>
Deferred tax assets:
Adjustments to mortgage loans and investment income.............. $ 5,420 $ 4,672
Unrealized depreciation on investments........................... -- 32,471
Adjustment to life reserves...................................... 23,835 13,752
--------- ----------
Other............................................................ 1,571 2,336
30,826 53,231
--------- ----------
Deferred tax liabilities:
Deferred policy acquisition costs................................ $ 1,637 $ 2,501
Fixed maturities discount........................................ 8,745 5,497
Unrealized appreciation on investments........................... 82,352 --
Other............................................................ 344 307
--------- ----------
93,078 8,305
--------- ----------
Net deferred tax liability (asset)................................. $ 62,252 $ (44,926)
--------- ----------
--------- ----------
</TABLE>

(c) At December 31, 1995, accumulated earnings of the Company for Federal
income tax purposes include approximately $2,879,000 of "Policyholders' Surplus"
as defined under the Code. Under provisions of the Code, "Policyholders'
Surplus" has not been currently taxed but would be taxed at current rates if
distributed to the Parent. There is no present intention to make cash
distributions from "Policyholders' Surplus" and accordingly, no provision has
been made for taxes on this amount.

(d) Income taxes paid in 1995, 1994, and 1993 amounted to $19,056,000,
$13,537,000, and $23,984,000, respectively.

6. COMMITMENTS AND CONTINGENT LIABILITIES
The Company, in common with the insurance industry in general, is subject to
litigation, including claims for punitive damages, in the normal course of their
business. The Company does not believe that such litigation will have a material
effect on its operating results and financial condition.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

(a) Statement of Financial Accounting Standards No. 107 "Disclosures about
Fair Value of Financial Instruments" (FASB 107) requires disclosure of fair
value information about financial instruments for which it is practicable to
estimate such fair value. These financial instruments may or may not be
recognized in the balance sheet. In the measurement of the fair value of certain
of the financial instruments, quoted market prices were not available and other
valuation techniques were utilized. These derived fair value estimates are
significantly affected by the assumptions used. FASB 107 excludes certain
financial instruments, including those related to insurance contracts.

The following methods and assumptions were used by the Company in estimating
the fair value of the financial instruments presented:

CASH AND SHORT TERM INVESTMENTS: The carrying amounts reported in the
balance sheet for these instruments approximate fair value.

FIXED MATURITIES: Fair values for fixed maturity securities carried at
market value are generally based upon quoted market prices. For certain
fixed maturities for which market prices were not readily available, fair
values were estimated using values obtained from independent pricing
services.

EQUITY SECURITIES: Fair values for equity securities were based upon
quoted market prices.

MORTGAGE AND POLICY LOANS: Where practical, the fair values of loans on
real estate were estimated using discounted cash flow calculations based
upon the Company's current incremental lending rates for similar type loans.
The fair values of policy loans were not calculated as the Company believes
it would have to expend excessive costs for the benefits derived. Therefore,
the fair value of policy loans was estimated at carrying value.

INTEREST RATE CAP: Fair values for the interest rate cap were estimated
using values obtained from an independent pricing service.

POLICYHOLDERS' FUNDS ON DEPOSIT: Fair values of policyholder contract
deposits were estimated using discounted cash flow calculations based upon
interest rates currently being offered for similar contracts consistent with
those remaining for the contracts being valued.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) The fair value and carrying amounts of financial instruments is as
follows (in thousands):
<TABLE>
<CAPTION>
CARRYING
1995 FAIR VALUE AMOUNT
- ----------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Cash and short-term investments........................................ $ 105,500 $ 105,500
Fixed maturities....................................................... 4,434,329 4,434,329
Equity securities...................................................... 22,273 22,273
Mortgage and policy loans.............................................. 489,768 459,691
Interest rate cap...................................................... 433 510
------------- -------------
Policyholders' funds on deposit........................................ $ 3,125,730 $ 3,060,581
------------- -------------
------------- -------------

CARRYING
1994 FAIR VALUE AMOUNT
- ----------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Cash and short-term investments........................................ $ 135,778 $ 135,778
Fixed maturities....................................................... 3,700,640 3,700,640
Equity securities...................................................... 21,902 21,902
Mortgage and policy loans.............................................. 414,354 410,012
Interest rate cap...................................................... 1,567 736
------------- -------------
Policyholders' funds on deposit........................................ $ 2,755,594 $ 2,742,412
------------- -------------
------------- -------------
</TABLE>

8. STOCKHOLDERS' EQUITY

(a) The Company may not distribute dividends to the Parent without prior
approval of regulatory agencies. Generally, this limits the payment of such
dividends to an amount which, in the opinion of the regulatory agencies, is
warranted by the financial condition of the Company.

(b) The Company's stockholders' equity as determined in accordance with
statutory accounting practices was $257,910,000 at December 31, 1995 and
$214,273,000 at December 31, 1994. Statutory net income amounted to $49,059,000,
$21,226,000, and $2,298,000 for 1995, 1994 and 1993, respectively.

9. EMPLOYEE BENEFITS

(a) The Company participates with its affiliates in a qualified,
non-contributory, defined benefit pension plan which is administered by the
Parent. All qualified employees who have attained age 21 and completed twelve
months of continuous service are eligible to participate in this plan. An
employee with 5 or more years of service is entitled to pension benefits
beginning at normal retirement age 65. Benefits are based upon a percentage of
average final compensation multiplied by years of credited service limited to 44
years of credited service. Prior to January 1, 1996 the average final
compensation is subject to certain limitations. Annual funding requirements are
determined based on the "projected unit credit" cost method which attributes a
pro rata portion of the total projected benefit payable at normal retirement to
each year of credited service. Pension expense for current service costs,
retirement and termination benefits for the years ended December 31, 1995, 1994
and 1993 were approximately $225,000, $190,000 and $323,000, respectively. The
Parent's plans do not separately identify projected benefit obligations and plan
assets attributable to employees of participating affiliates. The projected
benefit obligations exceeded the plan assets at December 31, 1995 by
$59,620,000.

(b) The Parent also sponsors a voluntary savings plan for domestic employees
(a 401(k) plan), which during the two years ended December 31, 1994, provided
for salary reduction contributions by

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. EMPLOYEE BENEFITS (CONTINUED)
employees and matching contributions by the Parent up to 2 percent of annual
salary. Commencing January 1, 1995, the 401(k) plan provided for matching
contributions by the Parent of up to 6 percent of annual salary depending on the
employee's years of service.

(c) On April 1, 1985, the Parent terminated and replaced its then existing
U.S. pension plan, a contributory qualified defined benefit plan, with the
current non-contributory qualified defined benefit plan. Settlement of the
obligations of the prior plan was accomplished through the purchase of annuities
from the Company for accrued benefits as of the date of termination. Future
policy benefits reserves in the accompanying balance sheet that relate to these
annuity contracts are $73,171,000 at December 31, 1995 and $70,791,000 at
December 31, 1994.

(d) In addition to the Parent's defined benefit pension plan, the Parent and
its subsidiaries provide a post-retirement benefit program for medical care and
life insurance. Eligibility in the various plans is generally based upon
completion of a specified period of eligible service and reaching a specified
age.

(e) Employees of the Company participate in certain stock option and stock
purchase plans of the Parent. In general, under the stock option plans, officers
and other key employees are granted options to purchase AIG common stock at a
price not less than fair market value at the date of grant. In general, the
stock purchase plans provide for eligible employees to receive privileges to
purchase AIG common stock at a price equal to 85% of the fair market value on
the date of grant of the purchase privilege.

10. LEASES

(a) The Company occupies leased space in many locations under various
long-term leases and has entered into various leases covering the long-term use
of data processing equipment. At December 31, 1995, the future minimum lease
payments under operating leases were as follows:

<TABLE>
<CAPTION>
YEAR PAYMENT
- ------------------------------------------------------------------------- ---------
<S> <C>
1996..................................................................... $ 583
1997..................................................................... 463
1998..................................................................... 368
1999..................................................................... 153
2000..................................................................... 54
Remaining years after 2000............................................... --
---------
Total................................................................ $ 1,621
---------
---------
</TABLE>

Rent expense approximated $661,000, $801,000 and $657,000 for the years
ended December 31, 1995, 1994 and 1993, respectively.

(b) Sublease Income -- The Company does not participate in sublease
agreements.

11. REINSURANCE

(a) The Company reinsures portions of its life and accident and health
insurance risks with unaffiliated companies. Life insurance risks are reinsured
primarily under coinsurance and yearly renewable term treaties. Accident and
health insurance risks are reinsured primarily under coinsurance, excess of loss
and quota share treaties. Amounts recoverable from reinsurers are estimated in a
manner consistent with the assumptions used for the underlying policy benefits
and are presented as a component of reinsurance assets. A contingent liability
exists with respect to reinsurance ceded to

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. REINSURANCE (CONTINUED)
the extent that any reinsurer is unable to meet the obligations assumed under
the reinsurance agreements. The Company also reinsures portions of its life and
accident and health insurance risks with affiliated companies (see Note 12).

The effect of all reinsurance contracts, including reinsurance assumed, is
as follows (in thousands, except percentages):
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT
ASSUMED
DECEMBER 31, 1995 GROSS CEDED ASSUMED NET TO NET
- ------------------------------------ ------------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Life Insurance in Force............. $ 4,415,460 $ 711,025 $ 3,574 $ 3,708,009 0.2%
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Premiums:
Life............................ 25,939 3,368 6 22,577 0.0%
Accident and Health............. 22,136 8,034 20,822 34,924 59.6%
Annuity......................... 27,496 639 -- 26,857 --
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Total Premiums................ $ 75,571 $ 12,041 $ 20,828 $ 84,358 24.7%
------------- ----------- --------- -------------
------------- ----------- --------- -------------

PERCENTAGE OF
AMOUNT
ASSUMED
DECEMBER 31, 1994 GROSS CEDED ASSUMED NET TO NET
- ------------------------------------ ------------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Life Insurance in Force............. $ 4,241,039 $ 512,028 $ 3,980 $ 3,732,991 0.1%
Premiums:
Life............................ 26,345 3,677 13 22,681 0.1%
Accident and Health............. 23,622 9,520 20,612 34,714 59.4%
Annuity......................... 14,892 461 -- 14,431 --
------------- ----------- --------- -------------
Total Premiums................ $ 64,859 $ 13,658 $ 20,625 $ 71,826 28.7%
------------- ----------- --------- -------------
------------- ----------- --------- -------------
<CAPTION>

PERCENTAGE OF
AMOUNT
ASSUMED
DECEMBER 31, 1993 GROSS CEDED ASSUMED NET TO NET
- ------------------------------------ ------------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Life Insurance in Force............. $ 3,726,676 $ 667,040 $ 4,177 $ 3,063,813 0.1%
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Premiums:
Life............................ 28,098 3,943 594 24,749 2.4%
Accident and Health............. 23,625 9,285 18,482 32,822 56.3%
Annuity......................... 19,679 1,205 -- 18,474 --
------------- ----------- --------- -------------
Total Premiums................ $ 71,402 $ 14,433 $ 19,076 $ 76,045 25.1%
------------- ----------- --------- -------------
------------- ----------- --------- -------------
</TABLE>

(b) The maximum amount retained on any one life by the Company is $500,000.

(c) Reinsurance recoveries, which reduced death and other benefits,
approximated $7,667,000, $6,720,000 and $8,477,000 respectively, for each of the
years ended December 31, 1995, 1994 and 1993.

The Company's reinsurance arrangements do not relieve it from its direct
obligation to its insureds.

<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

12. TRANSACTIONS WITH RELATED PARTIES

(a) The Company is party to several reinsurance agreements with its
affiliates covering certain life and accident and health insurance risks.
Premium income and commission ceded to affiliates amounted to $800,000 and
$(3,000), respectively, for the year ended December 31, 1995. Premium income and
commission ceded for 1994 amounted to $574,000 and $(3,000), respectively.
Premium income and commission ceded for 1993 amounted to $849,000 and $(2,000),
respectively. Premium income and ceding commission expense assumed from
affiliates aggregated $19,679,000 and $(141,000), respectively, for 1995,
compared to $19,331,000 and $98,000, respectively, for 1994, and $17,189,000 and
$5,000, respectively, for 1993.

(b) The Company provides life insurance coverage to employees of the Parent
and its domestic subsidiaries in connection with the Parent's employee benefit
plans. The statement of income includes $4,080,000 in premiums relating to this
business for 1995, $3,952,000 for 1994, and $3,908,000 for 1993.

(c) The Company is party to several cost sharing agreements with its
affiliates. Generally, these agreements provide for the allocation of costs upon
either the specific identification basis or a proportional cost allocation basis
which management believes to be reasonable. For the years ended December 31,
1995, 1994 and 1993, the Company was charged $19,148,000, $17,401,000, and
$14,907,000, respectively, for expenses attributed to the Company but incurred
by affiliates. During the same period, the Company received reimbursements from
affiliates aggregating $20,920,000, $19,505,000 and $18,579,000, respectively,
for costs incurred by the Company but attributable to affiliates.

(d) The Company received cash surplus contributions of $78,000,000 in 1993
from AIG, Inc., the Parent and American Home Assurance Company, an affiliated
insurer.

(e) During 1993, the Company sold a mortgage loan to Atlanta 17th Street,
Inc., for the aggregate unpaid principal balance of $17,500,000.

(f) During 1995, the Company sold a mortgage loan to AIG Real Estate
Investment and Management Company for the aggregate unpaid principal balance of
$5,000,000.

<PAGE>

PROSPECTUS
FOR

INDIVIDUAL AND GROUP
SINGLE PREMIUM AND FLEXIBLE PREMIUM
DEFERRED
VARIABLE ANNUITY CONTRACTS

ISSUED BY

VARIABLE ACCOUNT A

AND

AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
OF NEW YORK
80 PINE STREET
NEW YORK, NEW YORK 10005

This Prospectus sets forth the information a prospective investor ought to
know before investing.

Premiums allocated among the Subaccounts of Variable Account A (the
"Variable Account") will be invested in shares of corresponding portfolios as
selected by the Owner from the following 17 choices: the Conservative Investors
Portfolio, Growth Investors Portfolio, Growth Portfolio, or Growth and Income
Portfolio of the ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.; the High Income
Portfolio, Growth Portfolio, Money Market Portfolio, Overseas Portfolio, Asset
Manager Portfolio, or Investment Grade Bond Portfolio of the FIDELITY
INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS; the Dreyfus Zero Coupon 2000
Portfolio of the DREYFUS VARIABLE INVESTMENT FUND; the Gold and Natural
Resources Portfolio or Worldwide Balanced Portfolio, of the VAN ECK WORLDWIDE
INSURANCE TRUST; the DREYFUS STOCK INDEX FUND; or the Short-Term Retirement
Portfolio, Medium-Term Retirement Portfolio or the Long-Term Retirement
Portfolio of the TOMORROW FUNDS RETIREMENT TRUST.

Additional information about the Contracts and the Variable Account is
contained in the "Statement of Additional Information" which is available upon
request at no charge by calling or writing American International Life Assurance
Company of New York; Attention Variable Products, One Alico Plaza, Wilmington,
Delaware 19801, 1-800-340-2765 or call the service office at 1-800-255-8402. The
Statement of Additional Information dated May 1, 1996, has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference. The
Table of Contents for the Statement of Additional Information can be found on
page of this Prospectus.

PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE
REFERENCE.

THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.

Date of Prospectus: May 1, 1996

<PAGE>

TABLE CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Definitions................................................................................................ 3
Highlights................................................................................................. 4
Summary of Expenses........................................................................................ 6
Condensed Financial Information............................................................................ 8
Calculation of Performance Data.......................................................................... 8
The Company................................................................................................ 9
The Variable Account....................................................................................... 9
The Funds.................................................................................................. 10
The Contract
Parties to the Contract.................................................................................. 14
How to Purchase a Contract............................................................................... 14
Discount Purchase Programs............................................................................... 15
Distributor.............................................................................................. 15
Administration of the Contracts.......................................................................... 15
Premium and Allocation to Your Investment Options........................................................ 15
Right to Examine Contract Period......................................................................... 16
Unit Value and Contract Value............................................................................ 16
Transfers................................................................................................ 16
Dollar Cost Averaging.................................................................................... 16
Asset Rebalancing Option.................................................................................
Charges and Deductions..................................................................................... 18
Annuity Benefits........................................................................................... 20
Death Benefit.............................................................................................. 22
Distributions Under the Contract........................................................................... 23
Taxes...................................................................................................... 25
Table of Contents of the Statement of Additional Information............................................... 30
Appendix -- General Account Option......................................................................... A-1
Guaranteed Account....................................................................................... A-1
Guarantee Periods........................................................................................ A-1
Market Value Adjustment.................................................................................. A-2
</TABLE>