AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT, 485BPOS, 1996-04-24

AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
485BPOS, 1996-04-24

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<PAGE>

As filed with the Securities and Exchange Commission on April 24, 1996

Registration No. 33- 83560
811-8750
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549

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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.___

Post-Effective Amendment No. 3 X
--

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940

Amendment No. 4 X
--

AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
--------------------------------------
(Exact Name of Registrant)

AUSA LIFE INSURANCE COMPANY, INC.
---------------------------------
(Name of Depositor)

666 Fifth Avenue, New York, New York 10103
(Address of Depositor's Principal Executive Offices)

Depositor's Telephone Number, including Area Code

(212) 246-5234

Frank A. Camp, Esquire
AUSA Life Insurance Company, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
(Name and Address of Agent for Service)

Copy to:

Frederick R. Bellamy, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
AUSAENDC

1
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DECLARATION PURSUANT TO RULE 24f-2

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that a notice pursuant to Rule 24f-2 for the year
ended December 31, 1995 was filed on February 22, 1996.

______________

It is proposed that this filing will become effective:

______________

_____ immediately upon filing pursuant to paragraph (b) of Rule
485.

__X___ on May 1, 1995 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)(i)

_____ 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.

2
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CROSS REFERENCE SHEET
Pursuant to Rule 495

Showing Location in Part A (Prospectus) and
Part B (Statement of Additional Information)
of Registration Statement of Information Required by Form N-4
-------------------------------------------------------------

PART A
------
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
- ---------------- ------------------
<S> <C>
1. Cover Page ...................... Cover Page

2. Definitions ..................... Definitions

3. Synopsis ........................ Summary; Historical Performance
Data

4. Condensed Financial Information Financial Statements

5. General
(a) Depositor ................... AUSA Life
............................. Insurance Company, Inc.
(b) Registrant .................. The Mutual Fund Account
(c) Portfolio Company ........... Underlying Funds
(d) Fund Prospectus ............. Underlying Funds
(e) Voting Rights ............... Voting Rights

6. Deductions and Expenses
(a) General ..................... Charges and Deductions
(b) Sales Load % ................ Contingent Deferred Sales Charge
(c) Special Purchase Plan ....... N/A
(d) Commissions ................. Distributor of the Policies
(e) Expenses - Registrant ....... N/A
(f) Fund Expenses ............... Expenses Including Investment
Advisory Fees
(g) Organizational Expenses ..... N/A

7. Policies
(a) Persons with Rights ......... The Policy; Election of Annuity
Option; Determination of Annuity
Payments; Annuity Commencement
Date; Ownership of the Policy
Voting Rights
(b) (i) Allocation of Premium
Payments .............. Allocation of Premiums
(ii) Transfers ............. Transfers
(iii) Exchanges ............. N/A
(c) Changes ..................... Addition, Deletion or
Substitution of Investments;
Election of Annuity Option;
Annuity Commencement Date;
</TABLE>

3
<PAGE>

<TABLE>
<S> <C>
Beneficiary; Ownership of the
Policy
(d) Inquiries ................... Summary
8. Annuity Period .................. Annuity Options

9. Death Benefit ................... Death of Annuitant Prior to
Annuity Commencement Date

10. Purchase and Policy Values ......
(a) Purchases ................... Policy Application and Issuance
of Policies; Premiums
(b) Valuation ................... Policy Value; The Mutual Fund
Account Value
(c) Daily Calculation ........... The Mutual Fund Account Value
(d) Underwriter ................. Distributor of the Policies

11. Redemptions
(a) By Owners ................... Surrenders
By Annuitant ................ N/A
(b) Texas ORP ................... Restrictions Under the Texas
Optional Retirement Program
(c) Check Delay ................. Payment not Honored by Bank
(d) Lapse ....................... N/A
(e) Free Look ................... Summary

12. Taxes ........................... Certain Federal Income Tax
Consequences

13. Legal Proceedings ............... Legal Proceedings

14. Table of Contents for the
Statement of Statement of Additional
Additional Information .......... Information
<CAPTION>
PART B
------

Item of Form N-4 Statement of Additional
- ---------------- Information Caption
-------------------
<S> <C>
15. Cover Page ...................... Cover Page

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

17. General Information
and History ..................... (Prospectus) AUSA
Life Insurance Company, Inc.
18. Services ........................
(a) Fees and Expenses
of Registrant .............. N/A
(b) Management Policies ........ N/A
(c) Custodian .................. Custody of Assets
Independent
</TABLE>

4
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<TABLE>
<S> <C>
Auditors ................... Independent Auditors
(d) Assets of Registrant ....... Custody of Assets
(e) Affiliated Person .......... N/A
(f) Principal Underwriter ...... Distribution of the Policies
19. Purchase of Securities
Being Offered ................... Distribution of the Policies
Offering Sales Load ............. N/A

20. Underwriters .................... Distribution of the Policies;
(Prospectus) Distributor of the
Policies

21. Calculation of Performance
Data ............................ Calculation of Yields and Total
Returns; Other Performance Data

22. Annuity Payments ................ (Prospectus) Election of Annuity
Option; (Prospectus)
Determination of Annuity Payments

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

PART C -- OTHER INFORMATION
---------------------------
<TABLE>
<CAPTION>
Item of Form N-4 Part C Caption
- ---------------- --------------
<S> <C>
24. Financial Statements
and Exhibits .................... Financial Statements and Exhibits
(a) Financial Statements ....... Financial Statements
(b) Exhibits ................... Exhibits

25. Directors and Officers of ....... Directors and Officers of the
the Depositor Depositor

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

27. Number of Policyowners .......... Number of Policyowners

28. Indemnification ................. Indemnification

29. Principal Underwriters .......... Principal Underwriters

30. Location of Accounts
and Records ..................... Location of Accounts and Records

31. Management Services ............. Management Services

32. Undertakings .................... Undertakings

Signature Page .................. Signatures

5
</TABLE>
<PAGE>

PROSPECTUS
- ---------- May 1, 1996

THE ENDEAVOR VARIABLE ANNUITY

Issued Through

AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT

AUSA LIFE INSURANCE COMPANY, INC.

This Prospectus describes the Endeavor Variable Annuity (the "Policy"), a
Flexible Premium Variable Annuity offered by AUSA Life Insurance Company, Inc.
("AUSA"). The Policy is designed to aid in long-term financial planning and
provides for the accumulation of capital by individuals on a tax-deferred
basis for retirement or other long-term purposes. The Policy may be purchased
with a minimum initial Premium Payment of $5,000 if the Policy is purchased on
a non-tax qualified basis ("Nonqualified Policy") or $1,000 if the Policy is
purchased and used in connection with a plan qualifying for favorable income
tax treatment ("Qualified Policy") ($50 if the Policy is purchased and used in
connection with a Tax Deferred 403(b) Annuity). An Owner may make subsequent
additional Premium Payments of at least $50, including payments through
automatic deduction, at any time before the Annuity Commencement Date.The
maximum total premium payments allowed is $1,000,000 without prior approval of
AUSA.

Before the Annuity Commencement Date, the Owner may allocate Premium
Payments to one or more Subaccounts of the PFL Endeavor Variable Annuity
Account (the "Mutual Fund Account"), to a Fixed Account which guarantees a
minimum fixed return, or to a combination of these (the various options under
the Fixed Account and the Subaccounts of the Mutual Fund Account are the
"Investment Options" available under the Policies). The Mutual Fund Account
currently has nine different Subaccounts (the "Subaccounts"). Assets of each
Subaccount are invested in shares of a corresponding Portfolio of a mutual
fund: the WRL Series Fund, Inc.'s, Growth Portfolio, managed by Janus Capital
Corporation, (the "WRL Growth Portfolio") and the portfolios of the Endeavor
Series Trust (together, the "Underlying Funds"). The Underlying Funds
currently consist of nine Portfolios: the WRL Growth Portfolio, the TCW
Managed Asset Allocation Portfolio; the TCW Money Market Portfolio; the T.
Rowe Price International Stock Portfolio; the Value Equity Portfolio; the
Value Small Cap Portfolio; the Dreyfus U.S. Government Securities Portfolio;
the T. Rowe Price Equity Income Portfolio; and the T. Rowe Price Growth Stock
Portfolio. The Underlying Funds are described in separate prospectuses that
accompany this Prospectus. The Owner bears the entire investment risk for all
amounts allocated to the Mutual Fund Account, including possible loss of
principal amount invested.

THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS
FOR THE ENDEAVOR SERIES TRUST AND FOR THE WRL SERIES FUND, INC.'S
GROWTH PORTFOLIO.

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.

EVA595
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The Annuity Purchase Value will vary in accordance with the investment
performance of the Subaccounts selected by the Owner. Therefore, the Owner
bears the entire investment risk under this Policy for all amounts allocated
to the Mutual Fund Account. Amounts allocated to the Fixed Account are
guaranteed by AUSA and will earn a specified rate of interest declared
periodically.

The Policies provide for monthly annuity payments to be made by PFL for the
life of the Annuitant or for some other period, beginning on the Annuity
Commencement Date selected by the Owner. Prior to the Annuity Commencement
Date, the Owner can transfer amounts among the Investment Options, that is,
between the Fixed Account or Subaccounts of the Mutual Fund Account (some
prohibitions and restrictions apply). The Owner can also elect to surrender
all or any portion of the Cash Value in exchange for a cash withdrawal payment
from PFL; however, all withdrawals may be taxable, subject to a Contingent
Deferred Sales Charge and/or a penalty tax, and withdrawals from the Fixed
Account may be delayed and subject to an Excess Interest Adjustment.

This Prospectus sets forth the information that a prospective investor
should consider before investing in a Policy. A Statement of Additional
Information about the Policy and the Mutual Fund Account has been filed with
the Securities and Exchange Commission and is incorporated herein by
reference. The Statement of Additional Information is dated May 1, 1996, and
is available at no cost to any person requesting a copy by writing PFL at the
Administrative and Service Office or by calling 1-800-525-6205. The table of
contents of the Statement of Additional Information is included at the end of
this Prospectus.

This Prospectus and the Statement of Additional Information generally
describe only the Policies and the Mutual Fund Account, except when the Fixed
Account is specifically mentioned.

Administrative Office:
Service Office:
Financial Markets Division--Variable AUSA Life Insurance
Annuity Dept. Company, Inc.
4333 Edgewood Road, N.E. 666 Fifth Avenue, 25th Floor
New York, NY 10103
Cedar Rapids, Iowa 52499-0001

Please Read This Prospectus Carefully And Retain it For Future Reference.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................................ 5
SUMMARY.................................................................... 8
CONDENSED FINANCIAL INFORMATION............................................ 17
FINANCIAL STATEMENTS....................................................... 18
HISTORICAL PERFORMANCE DATA................................................ 18
Standardized Performance Data............................................ 18
Hypothetical Performance Data of Subaccounts............................. 19
T. Rowe Price International Stock Subaccount............................. 19
Non-Standardized Performance Data........................................ 20
PUBLISHED RATINGS.......................................................... 20
AUSA LIFE INSURANCE COMPANY................................................ 20
THE ENDEAVOR ACCOUNTS...................................................... 21
The Mutual Fund Account.................................................. 21
The Fixed Account........................................................ 25
Dollar Cost Averaging Fixed Account Option............................. 26
Transfers................................................................ 26
Reinstatements........................................................... 27
Dollar Cost Averaging.................................................... 28
Asset Rebalancing........................................................ 28
THE POLICY................................................................. 29
Policy Application and Issuance of Policies.............................. 29
Premium Payments......................................................... 30
Annuity Purchase Value................................................... 30
Adjusted Annuity Purchase Value (AAPV)................................... 31
Non-participating Policy................................................. 31
DISTRIBUTIONS UNDER THE POLICY............................................. 32
Surrenders............................................................... 32
Excess Interest Adjustments (EIA)........................................ 33
Systematic Payout Option................................................. 34
Annuity Payments......................................................... 34
Annuity Commencement Date.............................................. 34
Election of Payment Option............................................. 35
Premium Tax............................................................ 35
Supplementary Policy................................................... 35
Annuity Payment Options.................................................. 36
Death Benefit............................................................ 39
Death of Annuitant Prior to Annuity Commencement Date.................. 39
Death On or After Annuity Commencement Date............................ 41
Beneficiary............................................................ 41
Death of Owner........................................................... 41
Restrictions Under Section 403(b) Plans.................................. 41
Restrictions Under Qualified Policies ................................... 41
CHARGES AND DEDUCTIONS..................................................... 42
Contingent Deferred Sales Charge......................................... 42
Mortality and Expense Risk Charge........................................ 43
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Administrative Charges................................................... 43
Premium Taxes............................................................ 44
Federal, State and Local Taxes........................................... 44
Transfer Charge.......................................................... 44
Other Expenses Including Investment Advisory Fees........................ 45
Employee and Agent Purchases............................................. 45
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 45
Tax Status of the Policy................................................. 46
Taxation of Annuities.................................................... 46
DISTRIBUTOR OF THE POLICIES................................................ 52
VOTING RIGHTS.............................................................. 52
LEGAL PROCEEDINGS.......................................................... 53
STATEMENT OF ADDITIONAL INFORMATION........................................ 54
Appendix A............................................................... A-1
</TABLE>

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<PAGE>

DEFINITIONS

Accumulation Unit--An accounting unit of measure used in calculating the
Annuity Purchase Value.

Adjusted Annuity Purchase Value--An amount equal to the Annuity Purchase
Value increased or decreased by any Excess Interest Adjustments.

Administrative Office--AUSA Life Insurance Company, Inc., 666 Fifth Avenue,
25th Floor, New York, NY, 10103.

Annuitant--The person entitled to receive Annuity Payments after the Annuity
Commencement Date and during whose life any Annuity Payments involving life
contingencies will continue.

Annuity Commencement Date--The date upon which Annuity Payments are to
commence. This date may not be later than the last day of the policy month
starting after the Annuitant attains age 85.

Annuity Payment Option or Payment Option--A method of receiving a stream of
Annuity Payments.

Annuity Purchase Value--The sum of the value of all Accumulation Units
credited to a Policy for any particular Valuation Period in the Mutual Fund
Account, plus the value in the Fixed Account.

Annuity Unit--An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Annuity Payment.

Beneficiary--Before the Annuity Commencement Date, the person to whom the
death proceeds will be paid if the Annuitant, who is also the Owner, dies.
After the Annuity Commencement Date, the person to whom payments will be made
if the Annuitant dies. In the event the Annuitant, who is not the Owner, dies
prior to the Annuity Commencement Date, the Owner will become the Annuitant
unless the Owner specifically requests on the application or in writing that
the death benefit be paid upon the Annuitant's death and PFL agrees to such an
election.

Business Day--A day when the New York Stock Exchange is open for business
and that is a regular business day of the Administrative and Service Office.

Cash Value--The Adjusted Annuity Purchase Value less the Contingent Deferred
Sales Charge, if any, and less any applicable premium taxes.

Code--The Internal Revenue Code of 1986, as amended.

Contingent Deferred Sales Charge--The applicable surrender charge, assessed
on certain full or partial withdrawals of Premium Payments to cover expenses
relating to the sale of the Policies.

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<PAGE>

Current Interest Guarantee--PFL's guarantee to pay a declared Current
Interest Rate on amounts under a Policy allocated to the Fixed Account. A
particular Current Interest Guarantee will be in effect for at least one year.

Current Interest Guarantee Period--The period during which a Current
Interest Guarantee is in effect.

Current Interest Rate--The interest rate currently guaranteed to be paid on
amounts under a Policy allocated to the Fixed Account. This interest rate will
always equal or exceed a minimum of 3% (4% for Policies issued before May 1,
1996, and for Policies issued with a form number other than AV266 101 90 396).

Date of Issue--The date the Policy is issued, as shown on the Policy Data
Page.

Due Proof of Death--A certified copy of a death certificate, a certified
copy of a decree of a court of competent jurisdiction as to the finding of
death, a written statement by the attending physician, or any other proof
satisfactory to PFL will constitute Due Proof of Death.

Excess Interest Adjustment--Adjustment to amounts withdrawn and/or
transferred from the Fixed Account Guaranteed Period Options to reflect
changes in interest rates declared by AUSA since the payment date. The Excess
Interest Adjustment (EIA) can be positive or negative.

Fixed Account--All of the assets of AUSA that are not in separate accounts.

Fixed Annuity Payments--Payments made pursuant to an Annuity Payment Option
which do not fluctuate in amount.

Guaranteed Period Options--The various guaranteed interest rate periods
which may be offered by AUSA into which premiums may be paid or amounts
transferred.

Investment Options--Any of the Guaranteed Period Options of the Fixed
Account, and the Dollar Cost Averaging Fixed Account Option, and any of the
Subaccounts of the Mutual Fund Account.

Mutual Fund Account--The AUSA Endeavor Variable Annuity Account, a separate
account established and registered as a unit investment trust under the
Investment Company Act of 1940 to which Premium Payments under the Policies
may be allocated and which invests in the WRL Series Fund, Inc.'s Growth and
the portfolios of the Endeavor Series Trust.

Nonqualified Policy--A Policy other than a Qualified Policy.

Policy--One of the variable annuity policies offered by this Prospectus.

Policy Anniversary--Each anniversary of the Date of Issue.

Policy Owner or Owner--The person who may exercise all rights and privileges
under the Policy. The Policy Owner during the lifetime of the

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Annuitant and prior to the Annuity Commencement Date is the person designated
as the Policy Owner or a Successor Owner in the application. (See "Death
Benefit," p. 39)

Policy Value--The term used for the Annuity Purchase Value in all Policies
except those issued with form number AV266 101 90 396.

Policy Year--A Policy Year begins on the Date of Issue and on each Policy
Anniversary.

Premium Payment--An amount paid to AUSA by the Policy Owner or on the Policy
Owner's behalf as consideration for the benefits provided by the Policy.

Qualified Policy--A Policy that has received favorable tax treatment under
Section 401, 403(b), 408, or 457 or any other similar provision of the Code.

Service Office--Financial Markets Division--Variable Annuity Dept., 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.

Subaccount--A segregated account within the Mutual Fund Account which
invests in a specified Portfolio of the Underlying Funds.

Successor Policy Owner--A person appointed by the Policy Owner to succeed to
ownership of the Policy in the event of the death of the Policy Owner who is
not the Annuitant before the Annuity Commencement Date.

Underlying Funds--The WRL Series Fund, Inc.'s Growth Portfolio, managed by
Janus Capital Corporation, and the portfolios of the Endeavor Series Trust.

Valuation Period--The period of time from one determination of Accumulation
Unit and Annuity Unit values to the next subsequent determination of values.
Such determination shall be made on each Business Day.

Variable Annuity Payments--Payments made pursuant to an Annuity Payment
Option which fluctuate as to dollar amount or payment term in relation to the
investment performance of the specified Subaccounts within the Mutual Fund
Account.

Written Notice or Written Request--Written notice, signed by the Policy
Owner, that gives AUSA the information it requires and is received at the
Service Office. For some transactions, AUSA may accept an electronic notice.
Such electronic notice must meet the requirements AUSA establishes for such
notices. Telephone instructions are not permitted.

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<PAGE>

THE ENDEAVOR VARIABLE ANNUITY

SUMMARY

THE POLICY

The Endeavor Variable Annuity is a Flexible Premium Variable Annuity which
can be purchased on a non-tax qualified basis ("Nonqualified Policy") or with
the proceeds from certain plans qualifying for favorable federal income tax
treatment ("Qualified Policy"). The Owner allocates the Premium Payments among
the two Endeavor Accounts of AUSA Life Insurance Company, Inc. ("AUSA"): the
AUSA Endeavor Variable Annuity Account (the "Mutual Fund Account") and the
Fixed Account.

Only Policies issued on or after May 1, 1996, with policy form number AV266
101 90 396 contain the following features: Excess Interest Adjustment, Dollar
Cost Averaging Fixed Account Option, Asset Rebalancing, and a minimum
effective annual interest rate of 3% in the Fixed Account along with
Guaranteed Period Options. References to these features in this Prospectus
will only apply for such Policies.

THE ACCOUNTS

The Mutual Fund Account. The Mutual Fund Account is a separate account of
AUSA, which invests exclusively in shares of the WRL Growth Portfolio of the
WRL Series Fund, Inc., managed by Janus Capital Corporation, and the eight
portfolios of the Endeavor Series Trust (collectively the "Underlying Funds").
The Endeavor Series Trust is a mutual fund managed by Endeavor Investment
Advisers, a general partnership between Endeavor Management Co. and AUSA
Financial Markets, Inc., an affiliate of AUSA. Endeavor Investment Advisers
contracts with TCW Funds Management, Inc. (a subsidiary of The TCW Group,
Inc.), T. Rowe Price Associates, Inc., OpCap Advisors (formerly known as Quest
for Value Advisors) (a subsidiary of Oppenheimer Capital), The Dreyfus
Corporation (a wholly-owned subsidiary of Mellon Bank, N.A.), the successor to
The Boston Company Asset Management, Inc., and Rowe Price-Fleming
International, Inc. for investment advisory services. The WRL Growth
Portfolio, managed by Janus Capital Corporation, is a portfolio within the WRL
Series Fund, Inc. which is a mutual fund whose investment adviser is Western
Reserve Life Assurance Co. of Ohio ("Western Reserve"), an affiliate of AUSA.
Western Reserve contracts with Janus Capital Corporation as a sub-adviser to
the WRL Growth Portfolio for investment advisory services. The Underlying
Funds currently have nine available Portfolios: the WRL Growth Portfolio,
managed by Janus Capital Corporation; the TCW Managed Asset Allocation
Portfolio (formerly, the Managed Asset Allocation Portfolio); the TCW Money
Market Portfolio (formerly, the Money Market Portfolio); the T. Rowe Price
International Stock Portfolio; the Value Equity Portfolio (formerly, the Quest
for Value Equity Portfolio); the Value Small Cap Portfolio (formerly, the
Quest for Value Small Cap Portfolio); the Dreyfus U.S. Government Securities
Portfolio (formerly, the U.S. Government Securities Portfolio); the T. Rowe
Price Equity Income

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<PAGE>

Portfolio; and the T. Rowe Price Growth Stock Portfolio (the "Portfolios").
Each of the nine Subaccounts of the Mutual Fund Account invests solely in a
corresponding Portfolio of the Underlying Funds. Because the Annuity Purchase
Value may depend on the investment experience of the selected Subaccounts, the
Owner bears the entire investment risk with respect to Premium Payments
allocated to, and amounts transferred to, the Mutual Fund Account. (See the
"Mutual Fund Account," p. 21.)

The Fixed Account. The Fixed Account guarantees return of principal and a
minimum 3% (4% for Policies issued under a form number other than AV266 101 90
396) return on Premium Payments allocated to, and amounts transferred to, the
Fixed Account. AUSA may, in its sole discretion, declare a higher Current
Interest Rate. A Current Interest Rate is guaranteed for at least one year.
(See "The Fixed Account," p. 25.)

Currently AUSA anticipates that the total number of Investment Options
offered will not exceed 15. However, AUSA reserves the right to offer
additional Investment Options in the future.

PREMIUM PAYMENTS

A Nonqualified Policy may be purchased with an initial Premium Payment of at
least $5,000, and a Qualified Policy generally may be purchased with an
initial Premium Payment of at least $1,000, but a Policy purchased and used in
connection with a Tax Deferred 403(b) Annuity may be purchased with an initial
Premium Payment of at least $50. An Owner may make subsequent additional
Premium Payments of at least $50 each, including payments through
preauthorized check, at any time before the Annuity Commencement Date. The
maximum total premium payments allowed is $1,000,000 without prior approval of
AUSA. There is nothing deducted from Premium Payments, so all funds are
invested immediately. (But see "Contingent Deferred Sales Charge," p. 42.)

On the Date of Issue, the initial Premium Payment is allocated among the
Investment Options (that is, among the Fixed Account and/or the Subaccounts of
the Mutual Fund Account) in accordance with the allocation percentages
specified by the Owner in the Policy application. Any allocation must be in
whole percents, and the total allocation must equal 100%. Allocations for
additional Premium Payments may be changed by sending Written Notice to AUSA's
Service Office. (See "Premiums Payments," p. 30.)

TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE

An Owner can transfer values from one Subaccount to another within the
Mutual Fund Account or to the Fixed Account, or from the Guaranteed Period
Options of the Fixed Account to the Mutual Fund Account. The minimum amount
which may be transferred is $500 or the entire Subaccount or Guaranteed Period
Option value, whichever is less. However, following a transfer out of a
particular Subaccount or Guaranteed Period Option, at least $500 must remain
in that Subaccount or Guaranteed Period Option. Transfers currently may be
made by sending the appropriate Written Notice or Request to the Service
Office.

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<PAGE>

An Owner may choose which Guaranteed Period Option to transfer to or from.
Transfers (and withdrawals) from a Guaranteed Period Option prior to the end
of the Guaranteed Period are subject to the Excess Interest Adjustment, which
could be positive or negative. (see "Excess Interest Adjustment," p. 33.)

Transfers from the Dollar Cost Averaging Fixed Account Option (see "Dollar
Cost Averaging Fixed Account Option," p. 28), except through Dollar Cost
Averaging, are not allowed. Except for Policies issued on or after May 1,
1996, and with form number AV266 101 90 396, (1) transfers from the One Year
Option Fixed Account, except through Dollar Cost Averaging, are not allowed,
and (2) transfers from the Three Year Option of the Fixed Account are subject
to a yearly limit equal to the greater of 25% of the current policy value in
the Three Year Option Fixed Account, or the amount transferred out of the
Three Year Option Fixed Account during the prior Policy Year.

If the Excess Interest Adjustment (at the time of a transfer request only)
from any Guaranteed Interest Rate Period Option is a negative adjustment, then
the maximum amount that can be transferred is 25% of that Option's Annuity
Purchase Value, less amounts previously transferred out of that Option during
the current policy year. No maximum will apply to amounts transferred from any
Guaranteed Period if the Excess Interest Adjustment is a positive adjustment
at the time of transfer.

A $10 charge may be imposed for any transfers in excess of 12 per Policy
Year, but currently there is no charge for any transfers. (See "Transfers," p.
26.)

SURRENDERS

The Owner may elect to surrender all or a portion of the Cash Value ($500
minimum) in exchange for a cash withdrawal payment from AUSA at anytime prior
to the earlier of the Annuitant's death or the Annuity Commencement Date. The
Cash Value equals the Adjusted Annuity Purchase Value less any applicable
Contingent Deferred Sales Charge (described below) and any applicable premium
taxes. A surrender request must be made by Written Request, and a request for
a partial surrender must specify the Guaranteed Period Options or Subaccounts
from which the withdrawal is requested. There is currently no limit on the
frequency or timing of withdrawals (See "Surrenders," p. 32) although for
Qualified Policies the retirement plan or applicable law may restrict and/or
penalize withdrawals. In addition to the Contingent Deferred Sales Charge, any
applicable Excess Interest Adjustment, and any applicable premium taxes,
surrenders may be subject to income taxes and a 10% tax penalty.

CHARGES AND DEDUCTIONS

Contingent Deferred Sales Charge. In order to permit investment of the
entire Premium Payment, AUSA does not deduct sales or other charges at the
time of investment. However, a Contingent Deferred Sales Charge of up to 7% of
the amount withdrawn is imposed on certain full or partial withdrawals of
Premium Payments in order to cover expenses relating to the sale of the
Policies. The applicable Contingent Deferred Sales Charge is

- 10 -
<PAGE>

based on the period of time elapsed since payment of the Premium Payment(s)
being withdrawn, and there will be no Contingent Deferred Sales Charge imposed
seven or more years after a Premium Payment was paid. For purposes of
determining the applicable Contingent Deferred Sales Charge, Premium Payments
are considered to be withdrawn on a "first in--first out" basis. (See
"Contingent Deferred Sales Charge," p. 42.) Amounts withdrawn in the first
Policy Year, or the second and all subsequent withdrawals in any other Policy
Year, or in excess of 10% of the Annuity Purchase Value, even if it is the
first withdrawal in any Policy Year, may be subject to an Excess Interest
Adjustment and to a Contingent Deferred Sales Charge (of up to 7%). (Put
another way, after the first Policy Year, up to 10% of the Policy Value may be
withdrawn without an Excess Interest Adjustment and without a Contingent
Deferred Sales Charge if it is the first withdrawal in the Policy Year).
Amounts applied to provide an Annuity, if applied during the first five Policy
Years and applied under certain Payment Options, may also be subject to a
Contingent Deferred Sales Charge. See ("Surrenders," p. 32.)

Excess Interest Adjustment. Withdrawals and transfers out of Fixed Account
Guaranteed Interest Rate Period Options are subject to an Excess Interest
Adjustment, which could eliminate all interest in excess of the minimum
guaranteed effective annual interest rate of 3%. (The Excess Interest
Adjustment could also result in the crediting of additional interest). See
"Excess Interest Adjustment," p. 33.

Account Charges. AUSA deducts a daily charge equal to a percentage of the
net assets in the Mutual Fund Account for the mortality and expense risks
assumed by AUSA. The effective annual rate of this charge is 1.25% of the
value of the Account's net assets. (See "Mortality and Expense Risk Charge,"
p. 43.)

AUSA also deducts a daily Administrative Charge from the net assets of the
Mutual Fund Account to partially cover expenses incurred by AUSA in connection
with the administration of the Account and the Policies. The effective annual
rate of this charge is currently .15% of the value of each Subaccount of the
Mutual Fund Account's net assets. This charge is guaranteed never to exceed
.30%. (See "Administrative Charges," p. 43.)

The account charges for mortality and expense risks and administrative
expenses are guaranteed not to exceed their current level of a total of 1.40%.

Policy Charges. There is also an annual Policy Maintenance Charge each year
for Policy maintenance and related administrative expenses. This charge is the
lesser of 2% of the Annuity Purchase Value or $35 per year and is deducted
only from the Mutual Fund Account. For Policies issued on or after May 1,
1995, either (i) with form number AV266 101 90 396 or (2) with Endorsement AE
877 695, this charge is waived if the sum of the Premium Payments made less
the sum of all partial withdrawals is at least $50,000 on the Policy
Anniversary. THIS CHARGE WILL NOT BE INCREASED IN THE FUTURE. (See
"Administrative Charges," p. 43.)

Taxes. AUSA may incur premium taxes relating to the Policies. When permitted
by state law, AUSA will not deduct any premium taxes related to

- 11 -
<PAGE>

a particular Policy from the Annuity Purchase Value until withdrawal of all
Annuity Purchase Value, payment of the death benefit, or until the Annuity
Commencement Date. (See "Premium Taxes," p. 44.)

No charges are currently made against any of the Accounts for federal,
state, or local income taxes. Should AUSA determine that any such taxes may be
imposed with respect to any of the Accounts, AUSA may deduct such taxes from
amounts held in the relevant Account. (See "Federal, State and Local Taxes,"
p. 44.)

Charges Against the Underlying Funds. The value of the net assets of the
Subaccounts of the Mutual Fund Account will reflect the investment advisory
fee and other expenses incurred by the Underlying Funds.

Expense Data. The charges and deductions are summarized in the following
tables. This tabular information regarding expenses assumes that the entire
Annuity Purchase Value is in the Mutual Fund Account.

<TABLE>
<CAPTION>
TCW T. ROWE DREYFUS T. ROWE T. ROWE
MANAGED PRICE U.S. PRICE PRICE
TCW MONEY ASSET INTERNATIONAL VALUE VALUE GOVERNMENT EQUITY GROWTH WRL
MARKET ALLOCATION STOCK EQUITY SMALL CAP SECURITIES INCOME STOCK GROWTH
--------- ---------- ------------- ------ --------- ---------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Policy Owner Transaction
Expenses/1/
Sales Load On Purchase
Payments.............. 0 0 0 0 0 0 0 0 0
Maximum Contingent
Deferred Sales Charge
(as a % of Premium
Payment
Surrendered)/2/....... 7% 7% 7% 7% 7% 7% 7% 7% 7%
Surrender Fees......... 0 0 0 0 0 0 0 0 0
------------------------------------------------------------------------------------
Annual Policy Fee $35 Per Policy
------------------------------------------------------------------------------------
Transfer Fee First 12 Transfers Per Year: NO FEE
More than 12 in One Year:Currently no fee
Mutual Fund Account
Annual Expenses
(as a percentage of
account value)
Mortality and Expense
Risk Fees............. 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Administrative Charge.. 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Mutual Fund
Account Annual
Expenses.............. 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
Underlying Funds Annual
Expenses/3/
(as a percentage of
average net assets)
Management Fees ....... 0.50% 0.75% 0.90% 0.80% 0.80% 0.65% 0.80% 0.80% 0.80%
Other Expenses......... 0.10% 0.09% 0.25% 0.06% 0.07% 0.19% 0.35% 0.46% 0.06%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Underlying Funds
Annual Expenses/4/.... 0.60% 0.84% 1.15% 0.86% 0.87% 0.84% 1.15% 1.26% 0.86%
</TABLE>
- ----------

/1/ The Contingent Deferred Sales Charge and Transfer Fee, if any is imposed,
apply to each Policy, regardless of how Annuity Purchase Value is allocated
among the Mutual Fund Account and the Fixed Account. The Annual Policy Fee
and Mutual Fund Account Annual Expenses do not apply to the Fixed Account.
(See "Other Expenses Including Investment Advisory Fees," p. 45.)
/2/ The Contingent Deferred Sales Charge is decreased based on the Policy year
in which the withdrawal is made, from 7% in the Policy year in which the
Premium payment was made to 0% in the eighth Policy Year after the Premium
payment was made.

/3/ The fee table information relating to the Underlying Fund was provided to
AUSA by the Underlying Fund, and AUSA has not independently verified such
information.

/4/ The Manager has agreed, until terminated by the Manager, to assume expenses
of the Portfolios that exceed the following rates: TCW Money Market--0.99%;
TCW Managed Asset Allocation--1.25%; T. Rowe Price International Stock--
1.53%; Value Equity--1.30%; Dreyfus U.S. Government Securities--1.00%; T.
Rowe Price Equity Income--1.30%; T. Rowe Price Growth Stock--1.30%.

- 12 -
<PAGE>

Examples

An Owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets and assuming the entire Annuity Purchase Value is
in the applicable Subaccounts:

1. If the Policy is surrendered at the end of the applicable time period:*

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
TCW Money Market Portfolio...................... $91 $115 $141 $239
TCW Managed Asset Allocation Portfolio.......... $93 $122 $153 $263
T. Rowe Price International Stock Portfolio..... $96 $131 $168 $294
Value Equity Portfolio.......................... $94 $122 $154 $265
Value Small Cap Portfolio....................... $94 $123 $154 $266
Dreyfus U.S. Government Securities Portfolio.... $93 $122 $153 $263
T. Rowe Price Equity Income Portfolio........... $96 $131 $169 $299
T. Rowe Price Growth Stock Portfolio............ $98 $135 $175 $311
WRL Growth Portfolio............................ $94 $122 $154 $265

2. If the Policy is annuitized at the end of the applicable time period:*

TCW Money Market Portfolio...................... $21 $ 65 $111 $239
TCW Managed Asset Allocation Portfolio.......... $23 $ 72 $123 $263
T. Rowe Price International Stock Portfolio..... $26 $ 81 $138 $294
Value Equity Portfolio.......................... $24 $ 72 $124 $265
Value Small Cap Portfolio....................... $24 $ 73 $124 $266
Dreyfus U.S. Government Securities Portfolio.... $23 $ 72 $123 $263
T. Rowe Price Equity Income Portfolio........... $26 $ 81 $139 $299
T. Rowe Price Growth Stock Portfolio............ $28 $ 85 $145 $311
WRL Growth Portfolio............................ $24 $ 72 $124 $265

3. If the Policy is not surrendered or annuitized:

The above tables are intended to assist the Owner in understanding the costs
and expenses that will be borne, directly or indirectly. These include the
expenses of the Underlying Funds. See "Charges and Deductions," p. 42, and the
Underlying Funds' prospectuses. In addition to the expenses listed above,
premium taxes may be applicable.

- 13 -
<PAGE>

THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The
figures and data for the Underlying Fund annual expenses have been provided by
Western Reserve Life Assurance Co. of Ohio and Endeavor Investment Advisers,
and while AUSA does not dispute these figures, AUSA does not guaranty their
accuracy.

In these examples, the $35 Annual Policy Fee is reflected as a charge of
.0583% based on an average Policy Value of $60,083.
- -----------
* If the Policy is annuitized during the first five Policy Years, under a
period certain only payment option, with payments of less than five years,
then the expenses would be the same as if the Policy were surrendered.

DEATH BENEFIT

In the event that the Annuitant who is not the Owner dies prior to the
Annuity Commencement Date, the Owner will become the Annuitant unless the
Owner specifically requests on the application or in writing that the death
benefit be paid upon the Annuitant's death and AUSA agrees to such an
election. Upon receipt of proof that the Annuitant, who is the Owner, has died
before the Annuity Commencement Date, the Death Benefit is calculated and is
payable to the Beneficiary when we receive an election of the method of
settlement and return of the Policy.

Except for Policies with form number AV266 101 90 396, the Death Benefit
will be as follows: During the first seven Policy Years, the Death Benefit
will be the greater of (a) the Annuity Purchase Value on the date proof of
death and election of the method of settlement are received; or (b) the total
Premiums paid less any Adjusted Partial Withdrawal taken (see p. 40). After
the seventh Policy Anniversary, the Death Benefit will be the greatest of (a),
(b) or (c), where (a) and (b) are defined above and where (c) is the Annuity
Purchase Value on the seventh Policy Anniversary, plus all Premiums paid less
any Adjusted Partial Withdrawal taken since that Policy Anniversary.

For Policies issued with form number AV266 101 90 396, the Death Benefit
will be the greater of (a) the Annuity Purchase Value or the Cash Value on the
date proof of death and election of the method of settlement are received, or
(b) the Annual Step-Up Death Benefit.

The Annual Step-Up Death Benefit is the highest Annuity Purchase Value on any
Policy Anniversary prior to the earlier of the owner's 81st birthday or the
date of death, plus any Premium Payments paid less any "Adjusted Partial
Withdrawals" since that anniversary.

The Death Benefit does not apply on the death of an Owner if the Owner is
not the Annuitant. If an Owner who is not the Annuitant dies before the
Annuity Commencement Date, the amount payable under the Policy upon surrender
will be the Cash Value. These death benefit provisions may vary depending on
which state the Policy is issued in and when it was issued. No

- 14 -
<PAGE>

Contingent Deferred Sales Charge and no Excess Interest Adjustment is imposed
upon amounts received as a Death Benefit. The Death Benefit may be paid as
either a lump sum cash benefit or as an Annuity as permitted by federal or
state law. (See "Death Benefit," p. 39.)

RIGHT TO RETURN THE POLICY

The Policy Owner may, until the end of the period of time specified in the
Policy, examine the Policy and return it for a refund. The applicable period
will depend on the state in which the Policy is issued. In New York it is
twenty (20) days (in other states it may be ten (10) days) after the Policy is
delivered to the Policy Owner. The amount of refund will also depend on the
state in which the Policy is issued. Ordinarily, the amount of the refund will
be the sum of all Premium Payments made under the Policy and the accumulated
gains or losses in the Mutual Fund Account, if any. However, some states may
require a return of the premium(s) paid, or the greater of the premium(s) paid
or Cash Value. AUSA will pay the refund within seven (7) days after it
receives written notice of cancellation and the returned Policy.

FEDERAL INCOME TAX CONSEQUENCES OF INVESTMENT IN THE POLICY

With respect to Owners who are natural persons, there should be no federal
income tax on increases in the Annuity Purchase Value until a distribution
under the Policy occurs (e.g., a surrender or Annuity Payment) or is deemed to
occur (e.g., a pledge or assignment of a Policy). Generally, all or a portion
of any distribution or deemed distribution will be taxable as ordinary income.
The taxable portion of certain distributions will be subject to withholding
unless the recipient elects otherwise. In addition, prior to age 59 1/2 a ten
percent penalty tax may apply to certain distributions or deemed distributions
under the Policy. (See "Certain Federal Income Tax Consequences," p. 45.)

INQUIRIES, WRITTEN NOTICES AND WRITTEN REQUESTS

Any questions about procedures or the Policy, or any Written Notice or
Written Request required to be sent to AUSA, should be sent to AUSA's Service
Office, Financial Markets Division--Variable Annuity Dept., 4333 Edgewood
Road, N.E., Cedar Rapids, Iowa 52499-0001. Inquiries may be made by calling
800-525-6205. All inquiries, Notices and Requests should include the Policy
number, the Owner's name and the Annuitant's name.

VARIATIONS IN POLICY PROVISIONS

Certain features described below may only be available to Policies purchased
after the effective date of the Policy form number used.

Only Policies issued on or after May 1, 1996 with Policy form number AV266
101 90 396 contain the following features: Excess Interest Adjustment, a
minimum effective annual interest rate of 3% in the Fixed Account along with
Guaranteed Period Options, Dollar Cost Averaging Fixed

- 15 -
<PAGE>

Account Option, and Asset Rebalancing. Thus, references to these features in
this Prospectus will only apply to such Policies.

* * *

Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the Statement of
Additional Information and in the prospectuses for the Underlying Funds and in
the Policy, all of which should be referred to for more detailed information.
This Prospectus generally describes only the Policy and the Mutual Fund
Account. Separate prospectuses describe the Underlying Funds. (There is no
prospectus for the Fixed Account since interests in the Fixed Account are not
securities. See "The Fixed Account," p. 25.)

- 16 -
<PAGE>

CONDENSED FINANCIAL INFORMATION

The Accumulation Unit Values and the number of Accumulation Units
outstanding for each Subaccount from the date of inception (January 1, 1995,
----------------
except as noted below):
- ----------------------

<TABLE>
<CAPTION>
TCW MONEY MARKET SUBACCOUNT*
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995.... 1.072424 1.115718 271,034.756
<CAPTION>
TCW MANAGED ASSET ALLOCATION SUBACCOUNT**
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995.... 1.301669 1.577873 607,869.454
<CAPTION>
T. ROWE PRICE INTERNATIONAL STOCK SUBACCOUNT
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995.... 1.073958 1.171039 681,093.799
<CAPTION>
VALUE EQUITY SUBACCOUNT***
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995.... 1.045610 1.387903 547,233.586
<CAPTION>
VALUE SMALL CAP SUBACCOUNT****
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995.... 1.072941 1.206843 535,283.029
<CAPTION>
DREYFUS U.S. GOVERNMENT SECURITIES SUBACCOUNT*****
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995(1). 1.072051 1.124292 204,813.593
<CAPTION>
T. ROWE PRICE EQUITY INCOME SUBACCOUNT
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995(2). 1.116497 1.287240 293,619.530
<CAPTION>
T. ROWE PRICE GROWTH STOCK SUBACCOUNT
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995(3). 1.145983 1.353339 189,613.999
<CAPTION>
WRL GROWTH SUBACCOUNT
----------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ------------- ------------------
<S> <C> <C> <C>
1995.... 10.051117 14.583843 97,436.321
</TABLE>
- -----------

*Prior to May 1, 1996, known as the Money Market Subaccount

**Prior to May 1, 1996, known as the Managed Asset Allocation Subaccount

***Prior to May 1, 1996, known as the Quest for Value Equity Subaccount

****Prior to May 1, 1996, known as the Quest for Value Small Cap Subaccount

*****Prior to May 1, 1996, known as the U.S. Government Securities Subaccount

(1)Period from June 16, 1995 through December 31, 1995
- ------------------------------------------------------

(2)Period from June 28, 1995 through December 31, 1995
- ------------------------------------------------------

(3)Period from April 28, 1995 through December 31, 1995
- -------------------------------------------------------

- 17 -
<PAGE>

FINANCIAL STATEMENTS

The financial statements of the Mutual Fund Account and of AUSA and the
independent auditors' report thereon are in the Statement of Additional
Information which is available free upon request.

HISTORICAL PERFORMANCE DATA

STANDARDIZED PERFORMANCE DATA

From time to time, AUSA may advertise historical yields and total returns
for the Subaccounts of the Mutual Fund Account. In addition, AUSA may
advertise the effective yield of the Subaccount investing in the TCW Money
Market Portfolio (the "TCW Money Market Subaccount"). These figures will be
calculated according to standardized methods prescribed by the Securities and
Exchange Commission ("SEC"). They will be based on historical earnings and are
not intended to indicate future performance.

The yield of the TCW Money Market Subaccount for a Policy refers to the
annualized income generated by an investment under a Policy in the Subaccount
over a specified seven-day period. The yield is calculated by assuming that
the income generated for that seven-day period is generated each seven-day
period 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 under a Policy in the 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.

The yield of a Subaccount of the Mutual Fund Account (other than the TCW
Money Market Subaccount) for a Policy refers to the annualized income
generated by an investment under a Policy in the Subaccount over a specified
thirty-day period. The yield is calculated by assuming that the income
generated by the investment during that thirty-day period is generated each
thirty-day period over a 12-month period and is shown as a percentage of the
investment.

The total return of a Subaccount of the Mutual Fund Account refers to return
quotations assuming an investment under a Policy has been held in the
Subaccount for various periods of time including, but not limited to, a period
measured from the date the Subaccount commenced operations. When a Subaccount
has been in operation for one, five, and ten years, respectively, the total
return for these periods will be provided. The total return quotations for a
Subaccount will represent the average annual compounded rates of return that
equate an initial investment of $1,000 in the Subaccount to the redemption
value of that investment as of the first day of each of the periods for which
total return quotations are provided.

The yield and total return calculations for a Subaccount do not reflect the
effect of any premium taxes that may be applicable to a particular

- 18 -
<PAGE>

Policy. The yield calculations also do not reflect the effect of any
Contingent Deferred Sales Charge that may be applicable to a particular
Policy. To the extent that any or all of a premium tax and/or Contingent
Deferred Sales Charge is applicable to a particular Policy, the yield and/or
total return of that Policy will be reduced. For additional information
regarding yields and total returns calculated using the standard formats
briefly summarized above, please refer to the Statement of Additional
Information, a copy of which may be obtained from AUSA.

HYPOTHETICAL PERFORMANCE DATA OF SUBACCOUNTS

Prior to December 31, 1994, the Subaccounts had not yet commenced
operations. However, the following is standardized average annual total return
information based on the hypothetical assumption that the Subaccounts had been
available to the AUSA Endeavor Variable Annuity Account since inception of the
corresponding Portfolio:

<TABLE>
<CAPTION>
INCEPTION
1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR OF THE
PERIOD PERIOD PERIOD PERIOD PERIOD PORTFOLIO
ENDED ENDED ENDED ENDED ENDED 10/2/86 TO
SUBACCOUNT 12/31/94 12/31/94 12/31/94 12/31/94 12/31/94 12/31/94
---------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
WRL Growth.............. 39.93% 12.60% 9.41% 7.20% 16.08% 15.93%
</TABLE>

<TABLE>
<CAPTION>
ONE YEAR INCEPTION OF
PERIOD ENDED THE SUBACCOUNT
12/31/95 TO 12/31/95
------------ --------------
<S> <C> <C>
TCW Managed Asset Allocation/1/..................... 15.88% 9.70%
Value Equity/2/..................................... 27.46% 12.08%
Value Small Cap/3/.................................. 7.09% 5.80%
Dreyfus U.S. Government Securities/4/............... 8.59% 4.29%
T. Rowe Price Equity Income/5/...................... -- 22.63%
T. Rowe Price Growth Stock/6/....................... -- 29.30%
</TABLE>
- -----------
/1/Inception Date of corresponding Portfolio--April 8, 1991.
/2/Inception Date of corresponding Portfolio--May 27, 1993.
/3/Inception Date of corresponding Portfolio--May 4, 1993.
/4/Inception Date of corresponding Portfolio--May 13, 1994.

/5/Inception Date of corresponding Portfolio--January 3, 1995.

/6/Inception Date of corresponding Portfolio--January 3, 1995.

T. ROWE PRICE INTERNATIONAL STOCK SUBACCOUNT

Effective January 1, 1995, Rowe Price-Fleming International, Inc. became the
new Adviser to the Global Growth Portfolio. The Portfolio's name has been
changed to the T. Rowe Price International Stock Portfolio and the Portfolio's
shareholders have approved a change in investment objective from investments
in small capitalization companies on a global basis to investments in a broad
range of companies on an international basis (i.e., non-U.S. companies).

Based on the method of calculation described in the Statement of Additional
Information, the average annual total return for the one year period ended
December 31, 1995 was 8.98%.

- 19 -
<PAGE>

NON-STANDARDIZED PERFORMANCE DATA

AUSA may from time to time also advertise or disclose average annual total
return or other performance data in non-standard formats for a Subaccount of
the Mutual Fund Account. The non-standard performance data may assume that no
Contingent Deferred Sales Charge is applicable, and may also make other
assumptions.

All non-standard performance data will be advertised only if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information, a copy of which may be obtained from AUSA.

PUBLISHED RATINGS

AUSA 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 rating organizations such as A.M. Best Company, Standard &
Poor's, and Duff & Phelps. The purpose of the ratings is to reflect the
financial strength and/or claims-paying ability of AUSA and should not be
considered as bearing on the investment performance of assets held in the
Mutual Fund Account or of the safety or riskiness of an investment in the
Mutual Fund 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 their 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 AUSA as measured by Standard & Poor's Insurance Ratings
Services or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to Owners. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its
insurance policies in accordance with their terms. Claims-paying ability
ratings do not refer to an insurer's ability to meet non-policy obligations
(i.e., debt/commercial paper). These ratings do not reflect the investment
performance of the Mutual Fund Account or Fixed Account or the degree of risk
associated with an investment in either account.

AUSA LIFE INSURANCE COMPANY, INC.

AUSA Life Insurance Company, Inc. ("AUSA"), 666 Fifth Avenue, New York, New
York 10103, is a stock life insurance company. It was incorporated under the
laws of the State of New York on October 3, 1947. It is principally engaged in
the sale of life insurance and annuity policies, and is licensed in the
District of Columbia, and in all states except Alabama, Arkansas, Hawaii,
Idaho, Montana and Oregon. As of December 31, 1995, AUSA had assets of
approximately $7.8 billion. AUSA is a wholly-owned indirect subsidiary of
AEGON USA, Inc., which conducts substantially all of its operations through
subsidiary companies engaged in the insurance business or in providing non-
insurance financial services. All of the stock of AEGON USA, Inc. is
indirectly owned by AEGON n.v. of the Netherlands. AEGON n.v., a holding
company, conducts its business through subsidiary companies engaged primarily
in the insurance business.

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<PAGE>

THE ENDEAVOR ACCOUNTS

Premium Payments made under a Policy may be allocated to the Mutual Fund
Account, to the Fixed Account, or to a combination of these Accounts.

THE MUTUAL FUND ACCOUNT

The AUSA Endeavor Variable Annuity Account of AUSA Life Insurance Company,
Inc. (the "Mutual Fund Account") was established as a separate investment
account under the laws of the State of New York on September 27, 1994. The
Mutual Fund Account was created due to the assumption of certain policies of
AUSA's affiliate, International Life Investors Insurance Company ("ILI"). The
assumed policies have terms identical to those policies being issued by AUSA.
The ILI policies have been transferred to allow AUSA to succeed to the
variable annuity business of ILI. The Mutual Fund Account receives and invests
the Premium Payments under the Policies that are allocated to it for
investment in shares of the WRL Series Fund, Inc.'s Growth Portfolio, managed
by Janus Capital Corporation, and the Endeavor Series Trust.

The Mutual Fund Account currently is divided into nine Subaccounts.
Additional Subaccounts may be established in the future at the discretion of
AUSA. Each Subaccount invests exclusively in shares of one of the Portfolios
of the Underlying Funds. Under New York law, the assets of the Mutual Fund
Account are owned by AUSA, but they are held separately from the other assets
of AUSA. To the extent that these assets are attributable to the Cash Value of
the Policies, these assets are not chargeable with liabilities incurred in any
other business operation of AUSA. Income, gains, and losses incurred on the
assets in the Subaccounts of the Mutual Fund Account, whether or not realized,
are credited to or charged against that Subaccount without regard to other
income, gains or losses of any other Account or Subaccount of AUSA. Therefore,
the investment performance of any Subaccount should be entirely independent of
the investment performance of AUSA's general account assets or any other
Account or Subaccount maintained by AUSA.

The Mutual Fund Account is registered with the SEC under the Investment
Company Act of 1940 (the "1940 Act") as a unit investment trust and meets the
definition of a separate account under federal securities laws. However, the
SEC does not supervise the management or the investment practices or policies
of the Mutual Fund Account or AUSA.

Underlying Funds. The Mutual Fund Account will invest exclusively in shares
of Endeavor Series Trust and the Growth Portfolio of the WRL Series Fund, Inc.
(collectively the "Underlying Funds"). The WRL Series Fund, Inc. and the
Endeavor Series Trust are each a series-type mutual fund registered with the
SEC under the 1940 Act as an open-end, diversified management investment
company./5/ The Underlying Funds currently consist
- -----------

/5/The registration of the Underlying Funds does not involve supervision of the
management or investment practices or policies of the Underlying Funds by
the SEC.

- 21 -
<PAGE>

of the following nine Portfolios: the WRL Growth Portfolio, managed by Janus
Capital Corporation, the TCW Managed Asset Allocation Portfolio (formerly
known as the Managed Asset Allocation Portfolio), the TCW Money Market
Portfolio (formerly known as the Money Market Portfolio), the T. Rowe Price
International Stock Portfolio, the Value Equity Portfolio (formerly known as
the Quest for Value Equity Portfolio), the Value Small Cap Portfolio (formerly
known as the Quest for Value Small Cap Portfolio), the Dreyfus U.S. Government
Securities Portfolio (formerly known as the U.S. Government Securities
Portfolio), the T. Rowe Price Equity Income Portfolio, and the T. Rowe Price
Growth Stock Portfolio. The assets of each Portfolio are held separate from
the assets of the other Portfolios, and each Portfolio has its own distinct
investment objectives and policies. Each Portfolio operates as a separate
investment fund, and the income or losses of one Portfolio generally have no
effect on the investment performance of any other Portfolio.

Endeavor Investment Advisers (the "Manager"), an investment adviser
registered with the SEC under the Investment Advisers Act of 1940, is the
Endeavor Series Trust's manager. The Manager selects and contracts with
advisers for investment services for the Portfolios of Endeavor Series Trust,
reviews the advisers' activities, and otherwise performs administerial and
managerial functions for the Endeavor Series Trust. Five advisers, TCW Funds
Management, Inc. (a wholly-owned subsidiary of The TCW Group, Inc.) T. Rowe
Price Associates, Inc., Rowe Price-Fleming International, Inc. (a joint
venture between T. Rowe Price Associates, Inc. and Robert Fleming Holdings
Limited), OpCap Advisors (formerly known as Quest for Value Advisors) and The
Dreyfus Corporation (a wholly-owned subsidiary of Mellon Bank, N.A.), as
successor to The Boston Company Asset Management, Inc. (the "Advisers"), each
perform investment advisory services for particular Portfolios of Endeavor
Series Trust. TCW Funds Management, Inc. is the Adviser for the TCW Managed
Asset Allocation Portfolio and the TCW Money Market Portfolio. T. Rowe Price
Associates, Inc. is the Adviser for the T. Rowe Price Equity Income Portfolio
and the T. Rowe Price Growth Stock Portfolio. Rowe Price-Fleming
International, Inc. is the Adviser for the T. Rowe Price International Stock
Portfolio.

OpCap Advisors is the Adviser for the Value Equity Portfolio and the Value
Small Cap Portfolio. The Dreyfus Corporation is the Adviser for the Dreyfus
U.S. Government Securities Portfolio. Western Reserve Life Assurance Co. of
Ohio, an affiliate of AUSA, is the Adviser for the WRL Series Fund, Inc. and
contracts with Janus Capital Corporation (also an "Adviser") as a sub-adviser
to the WRL Growth Portfolio. The Adviser of a Portfolio is responsible for
selecting the investments of the Portfolio consistent with the investment
objectives and policies of the Portfolio, and will conduct securities trading
for the Portfolio. All Advisers are investment advisers registered with the
SEC under the Investment Advisers Act of 1940.

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<PAGE>

The investment objectives of each Portfolio are summarized as follows:

TCW Money Market Portfolio--seeks current income, preservation of capital
and maintenance of liquidity through investment in short-term money market
securities. The Portfolio seeks to maintain a constant net asset value of
$1.00 per share although no assurances can be given that such constant net
asset value will be maintained.

TCW Managed Asset Allocation Portfolio--seeks high total return through a
managed asset allocation portfolio of equity, fixed income and money market
securities.

T. Rowe Price International Stock Portfolio--seeks long-term growth of
capital through investments primarily in common stocks of established non-U.S.
companies.

Value Equity Portfolio--seeks long-term capital appreciation through
investment in securities (primarily equity securities) of companies that are
believed by the Portfolio's Adviser to be undervalued in the marketplace in
relation to factors such as the companies' assets or earnings.

Value Small Cap Portfolio--seeks capital appreciation through investments in
a diversified portfolio consisting primarily of equity securities of companies
with market capitalizations of under $1 billion.

Dreyfus U.S. Government Securities Portfolio--seeks as high a level of total
return as is consistent with prudent investment strategies by investing under
normal conditions at least 65% of its assets in debt obligations and mortgage-
backed securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

T. Rowe Price Equity Income Portfolio--seeks to provide substantial dividend
income and also capital appreciation by investing primarily in dividend paying
stocks of established companies.

T. Rowe Price Growth Stock Portfolio--seeks long-term growth of capital and
to increase dividend income through investment primarily in common stocks of
well established growth companies.

WRL Growth Portfolio, managed by Janus Capital Corporation--seeks growth of
capital. At most times, this Portfolio will be invested primarily in equity
securities which are selected solely for their capital growth potential;
investment income is not a consideration.

THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS INVOLVED IN
INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND EXPENSES
IS CONTAINED IN THE PROSPECTUSES FOR THE UNDERLYING FUNDS, CURRENT COPIES OF
WHICH ARE ATTACHED TO THIS PROSPECTUS. INFORMATION CONTAINED IN THE UNDERLYING
FUNDS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN A SUBACCOUNT
OF THE MUTUAL FUND ACCOUNT.

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<PAGE>

An investment in the Mutual Fund Account, or in any Portfolio, including the
TCW Money Market Portfolio and the Dreyfus U.S. Government Securities
Portfolio, is not insured or guaranteed by the U.S. government or any
government agency.

Addition, Deletion, or Substitution of Investments. AUSA cannot and does not
guarantee that any of the Portfolios will always be available for Premium
Payments, allocations, or transfers. AUSA retains the right, subject to any
applicable law, to make changes in the Mutual Fund Account and its
investments. AUSA reserves the right to eliminate the shares of any Portfolio
held by a Subaccount and to substitute shares of another Portfolio of the
Underlying Funds, or of another registered open-end management investment
company for the shares of any Portfolio, if the shares of the Portfolio are no
longer available for investment or if, in AUSA's judgment, investment in any
Portfolio would be inappropriate in view of the purposes of the Mutual Fund
Account. To the extent required by the 1940 Act, substitutions of shares
attributable to an Owner's interest in a Subaccount will not be made without
prior notice to the Owner and the prior approval of the SEC. Nothing contained
herein shall prevent the Mutual Fund Account from purchasing other securities
for other series or classes of variable annuity policies, or from effecting an
exchange between series or classes of variable annuity policies on the basis
of requests made by Owners.

New Subaccounts may be established when, in the sole discretion of AUSA,
marketing, tax, investment or other conditions warrant. Any new Subaccounts
may be made available to existing Owners on a basis to be determined by AUSA.
Each additional Subaccount will purchase shares in a mutual fund portfolio or
other investment vehicle. AUSA may also eliminate one or more Subaccounts if,
in its sole discretion, marketing, tax, investment or other conditions warrant
such change.

In the event any Subaccount is eliminated, AUSA will notify Owners and
request a reallocation of the amounts invested in the eliminated Subaccount.
If no such reallocation is provided by the Owner, AUSA will reinvest the
amounts invested in the eliminated Subaccount in the Subaccount that invests
in the TCW Money Market Portfolio (or in a similar portfolio of money market
instruments) or in another Subaccount, if appropriate.

In the event of any such substitution or change, AUSA may, by appropriate
endorsement, make such changes in the Policies as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to
be in the best interests of persons having voting rights under the Policies,
the Mutual Fund Account may be (i) operated as a management company under the
1940 Act or any other form permitted by law, (ii) deregistered under the 1940
Act in the event such registration is no longer required or (iii) combined
with one or more other separate accounts. To the extent permitted by
applicable law, AUSA also may transfer the assets of the Mutual Fund Account
associated with the Policies to another account or accounts.

- 24 -
<PAGE>

THE FIXED ACCOUNT

This Prospectus is generally intended to serve as a disclosure document only
for the Policy and the Mutual Fund Account. In addition, all Policies
issued before May 1, 1996, and Policies issued on or after that date but
issued under a form other than AV266 101 90 396 have different Fixed Account
features than those described in this Prospectus. For complete details
regarding the Fixed Account, see the Policy itself.

Premium Payments allocated and amounts transferred to the Fixed Account
become part of the general account of AUSA, which supports insurance and
annuity obligations. Interests in the general account have not been registered
under the Securities Act of 1933 (the "1933 Act"), nor is the general account
registered as an investment company under the 1940 Act. Accordingly, neither
the general account nor any interests therein are generally subject to the
provisions of the 1933 or 1940 Acts and AUSA has been advised that the staff
of the SEC has not reviewed the disclosures in this Prospectus which relate to
the fixed portion.

The Fixed Account is made up of all the general assets of AUSA, other than
those in the Mutual Fund Account or in any other segregated asset account. The
Policy Owner may allocate Premium Payments to the Fixed Account at the time of
Premium Payment or by subsequent transfers from the Mutual Fund Account.
Instead of the Policy Owner bearing the investment risk, as is the case for
Annuity Purchase Value in the Mutual Fund Account, AUSA bears the full
investment risk for all Annuity Purchase Value in the Fixed Account. AUSA has
sole discretion to invest the assets of its general account, including the
Fixed Account, subject to applicable law.

Premium Payments applied to and any amounts transferred to the Fixed Account
will reflect a fixed interest rate. The interest rates AUSA sets will be
credited for increments of at least one year measured from each premium
payment or transfer date. These rates will never be less than an effective
annual interest rate of 3%.

Guaranteed Periods. AUSA may offer optional guaranteed interest rate periods
("Guaranteed Period Options") into which Premium Payments may be paid or
amounts transferred. For example, AUSA may offer Guaranteed Period for periods
of 1, 3, 5, or 7 years from time to time. The current interest rate AUSA sets
for funds entering each GPO will be guaranteed until the end of that GPO's
Guaranteed Period. At the end of the Guaranteed Period, the Premium Payment or
amount transferred into the GPO less any withdrawals or transfers from that
GPO, including the effect of any Excess Interest Adjustment or Contingent
Deferred Sales Charge due to withdrawals or transfers prior to the end of the
Guaranteed Period, plus accrued interest, will be rolled into a new GPO(s).

The Policy Owner may choose the GPO(s) in which the Owner wants the funds
placed by giving AUSA notice within 30 days before the end of the expiring
GPO's Guaranteed Period. In the absence of such election, the new GPO's
Guaranteed Period will be the same as the expiring GPO's Period

- 25 -
<PAGE>

unless that GPO is no longer offered, in which case, the next shorter GPO
offered will be used. AUSA reserves the right, for new Premium Payments,
transfers, or rollovers, to offer or not to offer any GPO except that AUSA
will always offer at least a one-year GPO.

Payments applied to a Guaranteed Period Option are subject to an Excess
Interest Adjustment as described below at page 33.

AUSA guarantees that, at any time prior to the Annuity Commencement Date,
the amount in the Fixed Account allocable to a particular Policy will be not
less than the amount of the Premium Payments allocated or transferred to the
Fixed Account, plus interest at the rate of 3% per year, plus any excess
interest credited to amounts in the Fixed Account, less any applicable premium
or other taxes allocable to the Fixed Account, and less any amounts deducted
from the Fixed Account in connection with partial surrenders or transfers to
the Mutual Fund Account (including any Contingent Deferred Sales Charges).

The Current Interest Rates will be determined by AUSA in its sole
discretion.

For purposes of crediting interest, the oldest Premium Payment or transfer
into a Guaranteed Period Option within the Fixed Account, plus interest
allocable to that Premium Payment or transfer, is considered to be withdrawn
or transferred out first; the next oldest Premium Payment plus interest is
considered to be transferred out next, and so on (this is a "first-in, first-
out" procedure). The Owner bears the risk that AUSA will not credit interest
in excess of 3% per year. (4% per year for Owners with a policy form number
other than AV266 101 90 396).

Dollar Cost Averaging Fixed Account Option. AUSA may offer a Dollar Cost
Averaging Fixed Account Option separate from the GPO(s). This option will have
a one-year interest rate guarantee and will only be available under a Dollar
Cost Averaging (DCA) program (see "Dollar Cost Averaging" p. 28.)

Prior to the Annuity Commencement Date, no transfers, except through DCA,
will be allowed from the DCA Fixed Account. DCA transfers must begin within 30
days after the Premium Payment or transfer to the DCA Fixed Account. Transfers
must be scheduled for at least six but not more than 24 months, or for at
least four, but not more than eight quarters. No changes to the amount
transferred will be allowed, but changes can be made to the Subaccounts to
which these transfers are allocated. DCA transfers from the DCA Fixed Account
will not be subject to an Excess Interest Adjustment.

TRANSFERS

An Owner can transfer Annuity Purchase Value from one Investment Option to
another within certain limits.

- 26 -
<PAGE>

Subject to the limitations and restrictions described below, transfers from
an Investment Option may be made, up to thirty days prior to the Annuity
Commencement Date, by sending Written Notice, signed by the Policy Owner, to
the Service Office. The minimum amount which may be transferred is the lesser
of $500 or the entire Subaccount or Guaranteed Interest Rate Period Option
Value. If the Subaccount or Guaranteed Interest Rate Period Option Value
remaining after a transfer is less than $500, AUSA reserves the right, at its
discretion, either to deny the transfer request or to include that amount as
part of the transfer.

If the Excess Interest Adjustment (at the time of a transfer request) from
any GPO is a negative adjustment, then the maximum amount that can be
transferred is 25% of that GPO's Annuity Purchase Value, less amounts
previously transferred out of that GPO during the current Policy Year. No
maximum will apply to amounts transferred from any GPO if the Excess Interest
Adjustment is a positive adjustment at the time of transfer.

Transfers currently may be made without charge as often as the Owner wishes,
subject to the minimum amount specified above. AUSA reserves the right to
limit these transfers to no more than 12 per Policy Year in the future or to
charge up to $10 per transfer in excess of a per Policy Year.

Transfers out of the Dollar Cost Averaging Fixed Account, except through
Dollar Cost Averaging, are not allowed.

For Policies issued under form number AV266 101 90 396, transfers out of a
Guaranteed Period Option are subject to an Excess Interest Adjustment, which
could increase or decrease the amount available to transfer. Except for
Policies issued with form number AV266 101 90 396, transfers from the Three
Year Option Fixed Account are subject to a yearly limit equal to 25% of the
current Three Year Option Fixed Account Value, or an amount equal to the
amount the Owner transferred out of the Three Year Option Fixed Account during
the prior year, whichever is greater. After the Annuity Commencement Date,
transfers out of the Fixed Account are not permitted. (See "Annuity Payment
Options," page 36.)

A transfer charge may be imposed for any transfer in excess of 12 per Policy
Year; however, currently there is no charge for any transfers.

REINSTATEMENTS

Requests are sometimes received by AUSA to reinstate funds which had been
transferred to another company via a Section 1035 exchange or trustee to
trustee transfer. In this situation AUSA will require the Owner to replace the
same total amount of money in the applicable Subaccounts and/or Fixed Accounts
as was taken from them to effect the Exchange. The total dollar amount of
funds reapplied to the Separate Account will be used to purchase a number of
units available for each Subaccount based on the unit prices at the date of
Reinstatement (within two days of the date the funds are received by AUSA). It
should be noted that the number of units available on the Reinstatement date
may be more or less than the number surrendered

- 27 -
<PAGE>

for the Exchange. Amounts reapplied to the Fixed Account will receive the
interest rate they would otherwise have received, had they not been withdrawn.
However, an adjustment will be made to the amount reapplied to compensate AUSA
for the additional interest credited during the period of time between the
withdrawal and the reapplication of the funds. Owners should consult a
qualified tax adviser concerning the tax consequences of any Section 1035
exchanges or reinstatements.

DOLLAR COST AVERAGING (DCA)

Under the Dollar Cost Averaging program prior to the Annuity Commencement
Date, the Policy Owner can instruct AUSA to automatically transfer an amount
specified by the Policy Owner from the DCA Fixed Account Option, the TCW Money
Market Subaccount or the Dreyfus U.S. Government Securities Subaccount to any
other Subaccount or Subaccounts of the Mutual Fund Account. AUSA may, at its
discretion offer the Policy Owner the option to transfer interest earned in
any of the Guaranteed Period Options to any Subaccount(s) of the Mutual Fund
Account. No Excess Interest Adjustment will apply to transfers of interest.
The automatic transfers can occur monthly or quarterly and will occur on the
28th day of the month. If the DCA request is received prior to the 28th day of
any month, the first transfer will occur on the 28th day of that month. If the
DCA request is received on or after the 28th day of any month, the first
transfer will occur on the 28th day of the following month. The amount
transferred each time must be at least $500. A minimum of six monthly or four
quarterly transfers are required and a maximum of 24 monthly or eight
quarterly transfers are allowed from the DCA Fixed Account.

Dollar Cost Averaging results in the purchase of more Units when the Unit
Value is low, and fewer units when the Unit Value is high. However, there is
no guarantee that the Dollar Cost Averaging program will result in higher
Annuity Purchase Values or will otherwise be successful.

The Policy Owner may request Dollar Cost Averaging when purchasing the
Policy or at a later date. The program will terminate when the amount in the
TCW Money Market Subaccount, the DCA Fixed Account, or the Dreyfus U.S.
Government Securities Subaccount is insufficient for the next transfer, at
which time the remaining balance is transferred.

Except for DCA transfers from the DCA Fixed Account Option, the Owner can
increase or decrease the amount of the transfers by sending AUSA a new Dollar
Cost Averaging form. The Owner can discontinue the program by sending a
Written Notice to the Service Office. The minimum number of transfers (6
monthly or 4 quarterly) requirement must be satisfied each time the DCA
program is restarted following termination of the program for any reason.
There is no charge for this program.

ASSET REBALANCING

Prior to the Annuity Commencement Date the Policy Owner may instruct AUSA to
automatically transfer amounts among the Subaccounts of the Mutual Fund
Account on a regular basis to maintain a desired allocation

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<PAGE>

of the Annuity Purchase Value among the various Subaccounts offered.
Rebalancing will occur on a monthly, quarterly, semi-annual, or annual basis,
beginning on a date selected by the Policy Owner. The Policy Owner must select
the percentage of the Annuity Purchase Value desired in each of the various
Subaccounts offered (totaling 100%). Any amounts in the Fixed Account are
ignored for purposes of asset rebalancing. Rebalancing may be started, stopped,
or changed at any time, except that rebalancing will not be available when:

(1) Dollar Cost Averaging is in effect; or

(2) any other transfer is requested.

THE POLICY

The Endeavor Variable Annuity Policy is a Flexible Premium Variable Annuity
Policy. The rights and benefits under the Policy are summarized below;
however, the description of the Policy contained in this Prospectus is
qualified in its entirety by reference to the Policy itself, a copy of which
is available upon request from AUSA. The Policy may be purchased on a non-tax
qualified basis ("Nonqualified Policy"). The Policy may also be purchased and
used in connection with retirement plans or individual retirement accounts
that qualify for favorable federal income tax treatment ("Qualified Policy").

POLICY APPLICATION AND ISSUANCE OF POLICIES

Before it will issue a Policy, AUSA must receive a completed Policy
application or transmittal form and a minimum initial Premium Payment of
$5,000 for a Nonqualified Policy, $50 for a Policy purchased for use in
connection with a Tax Deferred 403(b) Annuity, or $1,000 for any other
Qualified Policy. A Policy ordinarily will be issued only in respect of
Annuitants Age 0 through 80. Acceptance or declination of an application shall
be based on AUSA's underwriting standards, and AUSA reserves the right to
reject any application or Premium Payment based on those underwriting
standards.

If the application or transmittal form can be accepted in the form received,
the initial Premium Payment will be credited to the Annuity Purchase Value
within two Business Days after the later of receipt of the information needed
to issue the Policy or receipt of the initial Premium Payment. If the initial
Premium Payment cannot be credited because the application or other issuing
requirements are incomplete, the applicant will be contacted within five
Business Days and given an explanation for the delay and the initial Premium
Payment will be returned at that time unless the applicant consents to AUSA's
retaining the initial Premium Payment and crediting it as soon as the
necessary requirements are fulfilled.

The date on which the initial Premium Payment is credited to the Annuity
Purchase Value is the Policy Date. The Policy Date is the date used to
determine Policy Years and Policy Anniversaries.
- 29 -
<PAGE>

PREMIUM PAYMENTS

All initial Premium Payment checks or drafts should be made payable to AUSA
Life Insurance Company, Inc. and sent to the Administrative Office. Subsequent
Additional Premium Payments should be sent to the Service Office. The Death
Benefit will not take effect until the check or draft for the Premium Payment
is honored.

Initial Premium Payment. The minimum initial Premium Payment that AUSA
currently will accept under a Policy is $5,000 under a Nonqualified Policy,
$50 under a Policy purchased for use in connection with a Tax Deferred 403(b)
Annuity, and $1,000 under any other Qualified Policy. AUSA reserves the right
to increase or decrease this amount for a class of Policies issued after some
future date. The initial Premium Payment is the only Premium Payment required
to be paid under a Policy.

Subsequent Additional Premium Payments. While the Annuitant is living and
prior to the Annuity Commencement Date, the Owner may make Subsequent
Additional Premium Payments at any time, and in any frequency. The minimum
Subsequent Additional Premium Payment under both a Nonqualified Policy and a
Qualified Policy is $50, including payments through automatic deduction.
Subsequent Additional Premium Payments will be credited to the Policy and
added to the Annuity Purchase Value as of the Business Day when they are
received.

Maximum Total Premium Payments. The maximum total Premium Payments allowed
without prior approval of AUSA is $1,000,000.

Allocation of Premium Payments. An Owner must allocate Premium Payments to
one or more of the Investment Options. The Owner must specify the initial
allocation in the Policy application or transmittal form. This allocation will
be used for Subsequent Additional Premium Payments unless the Owner requests a
change of allocation. All allocations must be made in whole percentages and
must total 100%. If the Owner fails to specify how Premium Payments are to be
allocated, the Premium Payment(s) cannot be accepted.

The Owner may change the allocation instructions for future Subsequent
Additional Premium Payments by sending Written Notice, signed by the Owner, to
AUSA's Service Office. The allocation change will apply to Premium Payments
received after the date the Written Notice is received.

Payment Not Honored by Bank. Any payment due under the Policy which is
derived, all or in part, from any amount paid to AUSA by check or draft may be
postponed until such time as AUSA determines that such instrument has been
honored.

ANNUITY PURCHASE VALUE

On the Policy Date, the Annuity Purchase Value equals the initial Premium
Payment. Thereafter, the Annuity Purchase Value equals the sum of the values
in the Mutual Fund Account and the Fixed Account. The

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<PAGE>

Annuity Purchase Value will increase by (1) any Subsequent Additional Premium
Payments received by AUSA; (2) any increases in the Annuity Purchase Value due
to investment results of the selected Subaccount(s); (3) any positive Excess
Interest Adjustments on transfers, and (4) interest credited in the Fixed
Account. The Annuity Purchase Value will decrease by (1) any surrenders,
including applicable Excess Interest Adjustments and/or Contingent Deferred
Sales Charges; (2) any decreases in the Annuity Purchase Value due to
investment results of the selected Subaccounts; (3) the charges imposed by
AUSA; and (4) any negative Excess Interest Adjustments on transfers.

The Annuity Purchase Value is expected to change from Valuation Period to
Valuation Period, reflecting the investment experience of the selected
Account(s) and/or Subaccount(s), as well as the deductions for charges. A
Valuation Period is the period between successive Business Days. It begins at
the close of business on each Business Day and ends at the close of business
on the next succeeding Business Day. A Business Day is each day that both the
New York Stock Exchange and AUSA's Service Office are open for business.
Holidays are generally not Business Days.

The Mutual Fund Account Value. When a Premium Payment is allocated or an
amount is transferred to a Subaccount of the Mutual Fund Account, it is
credited to the Annuity Purchase Value in the form of Accumulation Units. Each
Subaccount of the Mutual Fund Account has a distinct Accumulation Unit value
(the "Unit Value"). The number of units credited is determined by dividing the
Premium Payment or amount transferred by the Unit Value of the Subaccount as
of the end of the Valuation Period during which the allocation is made. When
amounts are transferred out of, or surrendered or withdrawn from an Account or
Subaccount, units are canceled or redeemed in a similar manner.

For each Subaccount, the Unit Value for a given Business Day is based on the
net asset value of a share of the corresponding Portfolio of the Underlying
Funds. Therefore, the Unit Values will fluctuate from day to day based on the
investment experience of the corresponding Portfolio. The determination of
Subaccount Unit Values is described in detail in the Statement of Additional
Information.

ADJUSTED ANNUITY PURCHASE VALUE (AAPV)

The Adjusted Annuity Purchase Value is the Annuity Purchase Value increased
or decreased by any Excess Interest Adjustment.

The AAPV will be used on the Annuity Commencement Date to provide the amount
of annuity payments under a Policy.

NON-PARTICIPATING POLICY

The Policy does not participate or share in the profits or surplus earnings
of AUSA. No dividends are payable on the Policy.

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<PAGE>

DISTRIBUTIONS UNDER THE POLICY

SURRENDERS

Prior to the Annuity Commencement Date, the Owner may surrender all or a
portion of the Cash Value in exchange for a cash withdrawal payment from AUSA.
The Cash Value is the Adjusted Annuity Purchase Value less any applicable
Contingent Deferred Sales Charge and any applicable premium taxes. (See
"Annuity Payment Options," p. 36.) The Policy cannot be surrendered after the
Annuity Commencement Date. (See "Annuity Payments," p. 34)

When requesting a partial withdrawal ($500 minimum), the Owner must tell
AUSA how the withdrawal is to be allocated among various Guaranteed Period
Options of the Fixed Account and/or the Subaccount(s) of the Mutual Fund
Account. If the Owner's request for a partial withdrawal from a Guaranteed
Period Option of the Fixed Account is greater than the Cash Value of that
Guaranteed Period Option, AUSA will pay the Owner the amount of the Cash Value
of that Guaranteed Period Option. If no allocation instructions are given, the
withdrawal will be deducted from each Investment Option in the same proportion
that the Policy Owner's interest in each Investment Option bears to the
Policy's total Annuity Purchase Value.

Surrenders from the Fixed Account may be delayed for up to six months.

Beginning in the second Policy Year, an Owner may surrender up to 10% of the
Annuity Purchase Value without an Excess Interest Adjustment (EIA) and without
a Contingent Deferred Sales Charge if no withdrawal has been made in the
current Policy Year ("surrender charge free/adjustment free withdrawals").
Amounts withdrawn from the Policy in excess of this free withdrawal amount or
withdrawn in the same Policy Year as a previous withdrawal (and all surrenders
in the first Policy Year) are subject to the EIA and to the Contingent
Deferred Sales Charge. In addition, neither a Contingent Deferred Sales Charge
nor an EIA will be assessed if the policy withdrawal is necessary to meet the
minimum distribution requirements for that policy specified by the IRS for tax
qualified plans.

Withdrawals free of surrender charges and adjustments will reduce the
Annuity Purchase Value by the amount withdrawn. Amounts requested in excess of
the portion that is free of surrender charges and adjustments are Excess
Partial Withdrawals. Excess Partial Withdrawals will reduce the Annuity
Purchase Value by an amount equal to (X - Y + Z) where:

X = Excess Partial Withdrawal

Y = Excess Interest Adjustment = (X) X (G - C) X (M/12) where G, C, and M
are defined in the Excess Interest Adjustment Section.

Z = Contingent Deferred Sales Charge on X and Y.

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<PAGE>

For a discussion of the Contingent Deferred Sales Charge, see "Contingent
Deferred Sales Charge," p. 42. For a discussion of the Excess Interest
Adjustment, see "Excess Interest Adjustment" below.

Since the Owner assumes the investment risk with respect to Premium Payments
allocated to the Mutual Fund Account, and because withdrawals are subject to
an Excess Interest Adjustment and to a Contingent Deferred Sales Charge, and
possibly premium taxes, the total amount paid upon total surrender of the Cash
Value (taking any prior surrenders into account) may be more or less than the
total Premium Payments made. Following a surrender of the total Cash Value, or
at any time the Annuity Purchase Value is zero, all rights of the Owner and
Annuitant will terminate.

In addition to the Excess Interest Adjustment and Contingent Deferred Sales
Charge and any applicable premium taxes, surrenders may be subject to income
taxes and, if prior to age 59 1/2, a ten percent penalty tax. (See "Certain
Federal Income Tax Consequences," p. 45.)

EXCESS INTEREST ADJUSTMENT (EIA)

Only Policies issued on or after May 1, 1996 and under form number AV266 101
90 396 are subject to the EIA, if applicable.

Full surrenders, partial withdrawals and transfers from the Fixed Account
Guaranteed Periods will be subject to an Excess Interest Adjustment except as
provided for under "Surrenders" above or "Systematic Payout Plan," below.

Excess Interest Adjustment = S X (G-C) X (M/12)

where: S is the gross amount (i.e. before premium taxes, if any) being
surrendered or withdrawn that is subject to the Excess Interest
Adjustment.

G is the guaranteed interest rate applicable to S.

C is the current guaranteed interest rate then being offered on new
Policies for the next longer option period than "M". If this Policy
form or such an option period is no longer offered, "C" will be the
U.S. Treasury rate for the next longer maturity (in whole years) than
"M" on the 25th day of the previous calendar month, plus up to 2%.

M is the number of months remaining in the option period for S, rounded
up to the next higher whole number of months.

Generally, if G is lower than C, the application of the EIA (a negative EIA
in this case) will result in a lower payment upon surrender. Conversely, if G
is higher than C, the application of the EIA (a positive EIA in this case)
will result in a higher payment upon surrender.

Upon transfer or withdrawal from any Guaranteed Period Option, or upon full
surrender of the Policy, the EIA for each Guaranteed Period Option will not
reduce the Adjusted Annuity Purchase Value for that Guaranteed Period Option
below the amount paid into, less any prior withdrawals and transfers from that
Guaranteed Period Option, plus interest at the 3% guaranteed effective annual
interest rate.

The formula for calculating the EIA and examples of the application of the
EIA are set forth in Appendix A to this Prospectus.

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<PAGE>

SYSTEMATIC PAYOUT OPTION

Under the Systematic Payout Option Policy Owners can instruct AUSA to make
automatic payments to them monthly, quarterly, semi-annually or annually from
a specified Subaccount. Monthly and quarterly payments can only be sent by
electronic funds transfer directly to a checking or savings account. The
minimum payment is $50. The maximum payment is 10% of the Annuity Purchase
Value at the time the Systematic Payout is elected divided by the number of
payments made per year (e.g. 12 for monthly). If this amount is below the
minimum distribution requirements for that policy specified by the IRS for tax
qualified plans, the maximum payment will be increased to this minimum
required distribution amount. The "Request for Systematic Withdrawal" form
must specify a date for the first payment, which must be at least 30 days but
not more than one year after the form is submitted (i.e., Systematic Payouts
will start at the end of the payment mode selected, but not earlier than 30
days from the date of request).

The Contingent Deferred Sales Charge and EIA will be waived for Policy
Owners under age 59 1/2 of tax qualified policies if they take Systematic
Payouts using one of the payout methods described in I.R.S. Notice 89-25, Q &
A-12 (the Life Expectancy Recalculation Option, Amortization, or Annuity
Factor) which generally require payments for life or life expectancy. These
payments must be continued until the later of age 59 1/2 or five years from
their commencement. No additional withdrawals may be taken during this time.
For tax qualified policies, Policy Owners age 59 1/2 or older, the Contingent
Deferred Sales Charge and EIA will be waived if payments are made using the
Life Expectancy Recalculation Option.

In addition, for either tax qualified or non-tax qualified Policies the
Contingent Deferred Sales Charge and EIA will not be imposed on Systematic
Payouts.

Qualified Policies are subject to complex rules with respect to restrictions
on and taxation of distributions, including the applicability of penalty
taxes. In addition, the tax treatment of systematic payouts from Nonqualified
Policies has had an unfavorable ruling regarding the ability to avoid the 10%
penalty tax. Therefore, the Policy Owner should consult a qualified tax
adviser before requesting a Systematic Payout. In certain circumstances
withdrawn amounts may be included in the Policy Owner's gross income. (See
"Certain Federal Income Tax Consequences," p. 45.)

ANNUITY PAYMENTS

Annuity Commencement Date. Unless the Annuity Commencement Date is changed,
Annuity Payments under a Policy will begin on the Annuity Commencement Date
which is selected by the Policy Owner at the time the Policy is applied for.
The Annuity Commencement Date may be changed from time to time by the Policy
Owner by Written Notice to AUSA, provided that notice of each change is
received by AUSA at its Service Office at least

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<PAGE>

thirty (30) days prior to the then current Annuity Commencement Date. Except
as otherwise permitted by AUSA, a new Annuity Commencement Date must be a date
which is: (1) at least thirty (30) days after the date notice of the change is
received by AUSA; and (2) not later than the last day of the policy month
following the Annuitant's 85th birthday.

The Annuity Commencement Date may also be changed by the Beneficiary's
election of the Annuity Option after the Annuitant's death.

Election of Payment Option. During the lifetime of the Annuitant and prior
to the Annuity Commencement Date, the Policy Owner may choose an Annuity
Payment Option or change the election, but Written Notice of any election or
change of election must be received by AUSA at its Service Office at least
thirty (30) days prior to the Annuity Commencement Date. If no election is
made prior to the Annuity Commencement Date, Annuity Payments will be made (i)
under Option 3, life income with level payments for 10 years certain, using
the existing Adjusted Annuity Purchase Value of the Fixed Account, or (ii)
under Option 3-V, life income with variable payments for 10 years certain,
using the existing Adjusted Annuity Purchase Value of the Mutual Fund Account,
or (iii) in a combination of (i) and (ii). If the Adjusted Annuity Purchase
Value on the Annuity Commencement Date is less than $2,000, AUSA reserves the
right to pay it in one lump sum in lieu of applying it under an Annuity
Payment Option.

Prior to the Annuity Commencement Date, the Beneficiary may elect to receive
the Death Benefit in a lump sum or under one of the Payment Options, to the
extent allowed by law and subject to the terms of any settlement agreement.
(See "Death Benefit," p. 39.) Annuity Payments will be made on either a fixed
basis or a variable basis as selected by the Policy Owner (or the Beneficiary,
after the Annuitant's death).

The person who elects a Payment Option can also name one or more successor
payees to receive any unpaid amount AUSA has at the death of a payee. Naming
these payees cancels any prior choice of a successor payee.

A payee who did not elect the Payment Option does not have the right to
advance or assign payments, take the payments in one sum, or make any other
change. However, the payee may be given the right to do one or more of these
things if the person who elects the option tells AUSA in writing and AUSA
agrees.

Unless the Policy Owner specifies otherwise, the payee shall be the
Annuitant, or, after the Annuitant's death, the Beneficiary. AUSA may require
written proof of the age of any person who has an annuity purchased under
Option 3, 3-V, 5 or 5-V.

Premium Tax. AUSA may be required by state law to pay premium tax on the
amount applied to a payment option or upon withdrawal. If so, AUSA will deduct
the premium tax before applying or paying the proceeds.

Supplementary Policy. Once proceeds become payable and a choice has been
made, AUSA will issue a Supplementary Policy in settlement of the

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<PAGE>

option elected under the Policy setting forth the terms of the option elected.
The Supplementary Policy will name the payees and will describe the payment
schedule.

ANNUITY PAYMENT OPTIONS

The Policy provides five Payment Options which are described below. Three of
these are offered as either "Fixed Payment Options" or "Variable Payment
Options," and two are only available as Fixed Payment Options. The Policy
Owner may elect a Fixed Payment Option, a Variable Payment Option, or a
combination of both. If the Policy Owner elects a combination, he must specify
what part of the Policy Proceeds are to be applied to the Fixed and Variable
Options (and he must also specify which Subaccounts for the Variable Options).

NOTE CAREFULLY: Under Payment Options 3(1) and 5 (including 3-V(1) and 5-V),
it would be possible for only one Annuity Payment to be made if the
Annuitant(s) were to die before the due date of the second annuity payment;
only two Annuity Payments if the Annuitant(s) were to die before the due date
of the third annuity payment; and so forth.

On the Annuity Commencement Date, the Policy's Adjusted Annuity Purchase
Value will be applied to provide for Annuity Payments under the selected
Annuity Option as specified. The Adjusted Annuity Purchase Value is the
Annuity Purchase Value for the Valuation Period which ends immediately
preceding the Annuity Commencement Date, including the effect of any
applicable Excess Interest Adjustment, and reduced by any applicable premium
or similar taxes.

The effect of choosing a Fixed Annuity Option is that the amount of each
payment will be set on the Annuity Commencement Date and will not change. If a
Fixed Annuity Option is selected, the Adjusted Annuity Purchase Value will be
transferred to the general account of AUSA, and the Annuity Payments will be
fixed in amount by the fixed annuity provisions selected and the age and sex
(if consideration of sex is allowed) of the Annuitant. For further
information, contact AUSA at its Service Office.

Guaranteed Values. There are five Fixed Annuity Options. Options 1, 2 and 4
are based on a guaranteed interest rate of 3%. Options 3 and 5 are based on a
guaranteed interest rate of 3% using the "1983 Table a" (male, female, and
unisex if required by law) mortality table improved to the year 2000 with
projection scale G. ("The 1983 Table a" mortality rates are adjusted based on
improvements in mortality since 1983 to more appropriately reflect increased
longevity. This is accomplished using a set of improvement factors referred to
as projection scale G.)

Option 1--Interest Payments. The policy proceeds may be left with AUSA for
any term agreed to. AUSA will pay the interest in equal payments or it may be
left to accumulate. Withdrawal rights will be agreed upon by the Owner and
AUSA when the option is elected.

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<PAGE>

Option 2--Income for a Specified Period. Level payments of the proceeds with
interest are made for the fixed period elected, at which time the funds are
exhausted.

Option 3--Life Income. An election may be made between:

1. "No Period Certain"--Level payments will be made during the
lifetime of the Annuitant.

2. "10 Years Certain"--Level Payments will be made for the longer of
the Annuitant's lifetime or ten years.

3. "Guaranteed Return of Policy Proceeds"--Level payments will be
made for the longer of the Annuitant's lifetime or the number of
payments which, when added together, equals the proceeds applied
to the income option.

Option 4--Income of a Specified Amount. Payments are made for any specified
amount until the proceeds with interest are exhausted.

Option 5--Joint and Survivor Annuity. Payments are made during the joint
lifetime of the payee and a joint payee of the Owner's selection. Payments
will be made as long as either person is living.

Other options may be arranged by agreement with AUSA. Certain options may
not be available in some states.

Current immediate annuity rates for the same class of annuities will be used
if higher than the guaranteed amount (guaranteed amounts are based upon the
tables contained in the Policy). Current amounts may be obtained from AUSA.

Variable Payment Options. The dollar amount of the first Variable Annuity
Payment will be determined in accordance with the annuity payment rates set
forth in the applicable table contained in the Policy. The tables are based on
a 5% effective annual Assumed Investment Return and the "1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year
2000 with projection Scale G. ("The 1983 Table a" mortality rates are adjusted
based on improvements in mortality since 1983 to more appropriately reflect
increased longevity. This is accomplished using a set of improvement factors
referred to as projection scale G.) The dollar amount of subsequent Variable
Annuity Payments will vary based on the investment performance of the
Subaccount of the Mutual Fund Account selected by the Annuitant or
Beneficiary. If the actual investment performance exactly matched the Assumed
Investment Return of 5% at all times, the amount of each Variable Annuity
Payment would remain equal. If actual investment performance exceeds the
Assumed Investment Return, the amount of the payments would increase.
Conversely, if actual investment performance is worse than the Assumed
Investment Return, the amount of the payments would decrease.

Determination of the First Variable Payment. The amount of the first
variable payment depends upon the sex (if consideration of sex is allowed) and
adjusted age of the Annuitant. The adjusted age is the Annuitant's actual

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<PAGE>

age nearest birthday, at the Annuity Commencement Date, adjusted as follows:

<TABLE>
<CAPTION>
ANNUITY COMMENCEMENT DATE ADJUSTED AGE
------------------------- ------------
<S> <C>
Before 2001 Actual Age
2001-2010 Actual Age minus 1
2011-2020 Actual Age minus 2
2021-2030 Actual Age minus 3
2031-2040 Actual Age minus 4
After 2040 As determined by AUSA
</TABLE>

This adjustment assumes an increase in life expectancy, and therefore it
results in lower payments than without such an adjustment.

The following Variable Payment Options generally are available:

Option 3-V--Life Income. An election may be made between:

1. "No Period Certain"--Payments will be made during the lifetime of
the Annuitant.

2. "10 Years Certain"--Payments will be made for the longer of the
Annuitant's lifetime or ten years.

Option 5-V--Joint and Survivor Annuity. Payments are made as long as either
the Annuitant or the joint Annuitant is living.

Certain options may not be available in some states.

Determination of Subsequent Variable Payments. All Variable Annuity Payments
other than the first are calculated using "Annuity Units" which are credited
to the Policy. The number of Annuity Units to be credited in respect of a
particular Subaccount is determined by dividing that portion of the first
Variable Annuity Payment attributable to that Subaccount by the Annuity Unit
Value of that Subaccount for the Annuity Commencement Date. The number of
Annuity Units of each particular Subaccount credited to the Policy then
remains fixed. The dollar value of variable Annuity Units in the chosen
Subaccount will increase or decrease reflecting the investment experience of
the chosen Subaccount. The dollar amount of each Variable Annuity Payment
after the first may increase, decrease or remain constant, and is equal to the
sum of the amounts determined by multiplying the number of Annuity Units of
each particular Subaccount credited to the Policy by the Annuity Unit Value
for the particular Subaccount on the date the payment is made.

Transfer. A Policy Owner may transfer the value of the Annuity Units from
one Subaccount to another within the Mutual Fund Account or to the Fixed
Account. However, after the Annuity Commencement Date no transfers may be made
from the Fixed Account to the Mutual Fund Account. The minimum amount which
may be transferred is the lesser of $10 of monthly income or the entire
monthly income of the variable Annuity Units in the Subaccount from which the
transfer is being made. The remaining Annuity Units in the Subaccount must
provide at least $10 of monthly

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<PAGE>

income. If, after a transfer, the monthly income of the remaining Annuity
Units in a Subaccount would be less than $10, AUSA reserves the right to
include those Annuity Units as part of the transfer. AUSA reserves the right
to limit transfers between Subaccounts or to the Fixed Account to once per
Policy Year.

* * *

A portion or the entire amount of the Annuity Payments may be taxable as
ordinary income. If, at the time the Annuity Payments begin, the Policy Owner
has not provided AUSA with a written election not to have federal income taxes
withheld, AUSA must by law withhold such taxes from the taxable portion of
such annuity payments and remit that amount to the federal government.
Withholding is mandatory as to certain Qualified Policies. (See "Certain
Federal Income Tax Consequences," p. 45.)

Adjustment of Annuity Payments. Payments will be made at 1, 3, 6, or 12
month intervals. If the individual payments provided for would be or become
less than $50, AUSA may change, at its discretion, the frequency of payments
to such intervals as will result in payments of at least $50. If the Adjusted
Annuity Purchase Value on the Annuity Commencement Date is less than $2,000,
AUSA may pay such value in one sum in lieu of the payments otherwise provided
for.

DEATH BENEFIT

Death of Annuitant Prior to Annuity Commencement Date. A Death Benefit will
be paid to the Beneficiary if the Annuitant is also the Owner and the Owner
dies prior to the Annuity Commencement Date. The amount of the Death Benefit
will be the greater of a) the Annuity Purchase Value (or the Cash Value, if
greater) on the later of the date proof of the Owner's death and the date an
election of the method of settlement are received by AUSA's Service Office, or
b) the Guaranteed Minimum Death Benefit ("GMDB") described below.

The Annual Step-Up Guaranteed Minimum Death Benefit is the highest Annuity
Purchase Value on any Policy Anniversary prior to the earlier of the date of
death or the Owner's 81st birthday, plus Premium Payments less any Adjusted
Partial Withdrawals since that anniversary. For this purpose, the issue date
will be treated as a Policy Anniversary. The Annual Step-Up Guaranteed Minimum
Death Benefit only applies to Policies issued with form number AV266 101 90
396.

If the surviving spouse elects to continue the policy in lieu of receiving
the Death Benefit, an amount equal to the excess, if any, of the Guaranteed
Minimum Death Benefit (i.e., the Annual Step-Up Death Benefit) over the
Annuity Purchase Value, will then be added to the Annuity Purchase Value. This
amount will be added only once, at the time of such election.

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<PAGE>

Adjusted Partial Withdrawal. To determine the GMDB for each partial
withdrawal, the Adjusted Partial Withdrawal is the sum of (1) and (2), where

(1) The Surrender charge free/adjustment free withdrawal amount taken and,

(2) the product of (a) times (b) where:

(a)is the ratio of the amount of the Excess Partial Withdrawal to the
Annuity Purchase Value on the date of (but prior to) the Excess Partial
Withdrawal; and

(b) is the Death Benefit on the date of (but prior to) the Excess Partial
Withdrawal.

If a partial withdrawal is taken when the GMDB exceeds the Annuity Purchase
Value, then the partial withdrawal amount used to determine the GMDB will
exceed the amount of the partial withdrawal. In that case, the total proceeds
of a partial withdrawal followed by a Death Benefit could be less than total
Premium Payments.

Note that the Death Benefit is payable on the death of the Annuitant who is
the Owner, not the death of the Owner, if different (if the Annuitant who is
not the Owner dies, the Owner will become the Annuitant unless the Owner
specifically requests on the policy application or in writing that the Death
Benefit be paid upon the Annuitant's death and AUSA agrees to such election).

Due Proof of Death of the Annuitant is proof that the Annuitant who is the
Owner died prior to the commencement of Annuity Payments. Upon receipt of this
proof and an election of a method of settlement and return of the Policy, the
Death Benefit generally will be paid within seven days, or as soon thereafter
as AUSA has sufficient information about the Beneficiary to make the payment.
The Beneficiary may receive the amount payable in a lump sum cash benefit, or,
subject to any limitation under any state or federal law, rule, or regulation,
under one of the Annuity Payment Options described above, unless a settlement
agreement is effective at the death of the Annuitant preventing such election.

If the Annuitant was the Policy Owner, and the Beneficiary was not the
Annuitant's spouse, then (1) the Death Benefit must be distributed within five
years of the date of the deceased Owner's death, or (2) payments under a
Payment Option must begin within one year of the deceased Owner's death and
must be made for the Beneficiary's lifetime or for a period certain (so long
as any certain period does not exceed the Beneficiary's life expectancy).
Death proceeds which are not paid to or for the benefit of a natural person
must be distributed within five years of the date of the deceased Owner's
death. If the sole Beneficiary is the deceased Owner's surviving spouse, such
spouse may elect to continue the Policy as the new Annuitant and Policy Owner
instead of receiving the Death Benefit. (See "Federal Tax Matters" in the
Statement of Additional Information.)

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<PAGE>

Death On or After Annuity Commencement Date. The death benefit payable on or
after the Annuity Commencement Date depends on the Payment Option selected. If
any Owner dies on or after the Annuity Commencement Date, but before the
entire interest in the Policy is distributed, the remaining portion of such
interest in the Policy will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Owner's death.

Beneficiary. The Beneficiary designation in the application will remain in
effect until changed. The Policy Owner may change the designated Beneficiary
by sending Written Notice to AUSA. The Beneficiary's consent to such change is
not required unless the Beneficiary was irrevocably designated or consent is
required by law. (If an irrevocable Beneficiary dies, the Policy Owner may
then designate a new Beneficiary.) The change will take effect as of the date
the Policy Owner signs the Written Notice, whether or not the Policy Owner is
living when the Notice is received by AUSA. AUSA will not be liable for any
payment made before the Written Notice is received. If more than one
Beneficiary is designated, and the Policy Owner fails to specify their
interests, they will share equally.

DEATH OF OWNER

Federal tax law requires that if any Policy Owner (including any joint Owner
or any Successor Policy Owner who has become a current Owner) dies before the
Annuity Commencement Date, then the entire value of the Policy must generally
be distributed within five years of the date of death of such Policy Owner or
the Contingent Policy Owner. Certain rules apply where 1) the spouse of the
deceased Owner is the sole Beneficiary, 2) the Policy Owner is not a natural
person and the primary Annuitant dies or is changed, or 3) any Policy Owner
dies after the Annuity Commencement Date. See "Federal Tax Matters" in the
Statement of Additional Information for a detailed description of these rules.
Other rules may apply to Qualified Policies. (See also "Death Benefit," p.
39).

RESTRICTIONS UNDER SECTION 403(B) PLANS

Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Policy used for a 403(b) plan will prohibit distributions of elective
contributions and earnings on elective contributions except upon death of the
employee, attainment of age 59 1/2, separation from service, disability, or
financial hardship. In addition, income attributable to elective contributions
may not be distributed in the case of hardship.

RESTRICTIONS UNDER QUALIFIED POLICIES

Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Policies or under the terms
of the plans in respect of which Qualified Policies are issued.

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<PAGE>

CHARGES AND DEDUCTIONS

No deductions are made from Premium Payments, so that the full amount of
each Premium Payment is invested in one or more of the Accounts. AUSA will
make certain charges and deductions in connection with the Policy in order to
compensate it for incurring expenses in distributing the Policy, bearing
mortality and expense risks under the Policy, and administering the Accounts
and the Policies. Charges may also be made for premium taxes, federal, state
or local taxes, or for certain transfers or other transactions. Charges and
expenses are also deducted from the Underlying Funds.

CONTINGENT DEFERRED SALES CHARGE

AUSA will incur expenses relating to the sale of Policies, including
commissions to registered representatives and other promotional expenses. AUSA
may apply a Contingent Deferred Sales Charge to any amount surrendered (i.e.,
withdrawn) in connection with a full or partial Policy surrender in order to
cover distribution expenses. A Contingent Deferred Sales Charge will not be
applied to withdrawal, after the first Policy Year, of up to 10% of the
Annuity Purchase Value, if there have been no withdrawals in the current
Policy Year. A Contingent Deferred Sales Charge will also not be applied if
the withdrawal is necessary to meet the minimum distribution requirements for
that policy specified by the IRS for tax qualified plans. The Contingent
Deferred Sales Charge is also waived upon certain Systematic Payment Options
(see p. 34).

The amount of the Contingent Deferred Sales Charge is determined by
multiplying the amount of the premium withdrawn by the applicable Contingent
Deferred Sales Charge Percentage. The applicable Contingent Deferred Sales
Charge Percentage will depend upon the number of Policy Anniversaries that
have elapsed since the Premium Payment that is being withdrawn was made. For
this purpose, surrenders are allocated to Premium Payments on a "first in-
first out" basis, i.e., first to the oldest Premium Payment, then to the next
oldest Premium Payment, and so on. Premium Payments are deemed to be withdrawn
before earnings, and after all Premium Payments have been withdrawn, the
remaining Adjusted Annuity Premium Value may be withdrawn without any
Contingent Deferred Sales Charge. The following is the table of Contingent
Deferred Sales Charge Percentages:

<TABLE>
<CAPTION>
NUMBER OF POLICY APPLICABLE CONTINGENT
YEARS SINCE DEFERRED SALES
PREMIUM PAYMENT CHARGE PERCENTAGE
---------------- ---------------------
<S> <C>
Less than 1 7%
At least 1 and less than 2 6%
At least 2 and less than 3 5%
At least 3 and less than 4 4%
At least 4 and less than 5 3%
At least 5 and less than 6 2%
At least 6 and less than 7 1%
</TABLE>

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<PAGE>

AUSA anticipates that the Contingent Deferred Sales Charge will not generate
sufficient funds to pay the cost of distributing the Policies. If this charge
is insufficient to cover the distribution expenses, the deficiency will be met
from AUSA's general funds, which will include amounts derived from the charge
for mortality and expense risks.

MORTALITY AND EXPENSE RISK CHARGE

AUSA imposes a daily charge as compensation for bearing certain mortality
and expense risks in connection with the Policies. This charge is equal to an
effective annual rate of 1.25% of the daily net asset value of a fund share
held in the Mutual Fund Account for each Subaccount. The Mortality and Expense
Risk Charge is reflected in the Accumulation or Annuity Unit Values for the
Policy for each Subaccount.

Annuity Purchase Values and Annuity Payments are not affected by changes in
actual mortality experience nor by actual expenses incurred by AUSA. The
mortality risks assumed by AUSA arise from its contractual obligations to make
Annuity Payments (determined in accordance with the Annuity tables and other
provisions contained in the Policy) and to pay Death Benefits prior to the
Annuity Commencement Date. Thus, Owners are assured that neither an
Annuitant's own longevity nor an unanticipated improvement in general life
expectancy will adversely affect the monthly Annuity payments that the
Annuitant will receive under the Policy.

AUSA also bears substantial risk in connection with the Death Benefit
Guarantee since AUSA will pay a Death Benefit equal to the Guaranteed Minimum
Death Benefit if that amount is higher than the Annuity Purchase Value.

The expense risk assumed by AUSA is the risk that AUSA's actual expenses in
administering the Policy and the Accounts will exceed the amount recovered
through the Administrative and Policy Maintenance Charges.

If the Mortality and Expense Risk Charge is insufficient to cover AUSA's
actual costs, AUSA will bear the loss; conversely, if the charge is more than
sufficient to cover costs, the excess will be profit to AUSA. AUSA expects a
profit from this charge. To the extent that the Contingent Deferred Sales
Charge is insufficient to cover the actual cost of Policy distribution, the
deficiency will be met from AUSA's general corporate assets, which may include
amounts, if any, derived from the Mortality and Expense Risk Charge. A
mortality and expense risk charge is assessed during the annuity phase for all
Variable Annuity Options including those that do not carry a life contingency.

ADMINISTRATIVE CHARGES

In order to cover the costs of administering the Policies and the Accounts,
AUSA deducts a Policy Maintenance Charge from the Annuity Purchase Value of
each Policy, and also deducts a daily Administrative Expense Charge from the
assets of each Subaccount of the Mutual Fund Account.

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<PAGE>

The annual Policy Maintenance Charge is deducted from the Annuity Purchase
Value of each Policy on each Policy Anniversary prior to the Annuity
Commencement Date. After the Annuity Commencement Date, the charge is not
deducted. This annual Policy Maintenance Charge generally is $35 and it will
not be increased. It will never exceed 2% of the Annuity Purchase Value. For
Policies issued on or after May 1, 1995, this charge is waived if the sum of
the Premium Payments made less the sum of all Partial Withdrawals is at least
$50,000 on the Policy Anniversary. AUSA does not anticipate realizing any
profit from this charge. The Policy Maintenance Charge will be deducted only
from the Subaccounts in the Mutual Fund Account, in the same proportion that
the Policy Owner's interest in each Subaccount bears to the Annuity Purchase
Value in the Mutual Fund Account.

AUSA also deducts a daily Administrative Expense Charge from the net assets
of each Subaccount of the Mutual Fund Account. This charge currently is equal
to an effective annual rate of .15% of the daily net asset value of a fund
share held in the Mutual Fund Account for each Subaccount. The Administrative
Expense Charge may be increased in the future (but it will never exceed .30%,
and the combined total of this charge and the Mortality and Expense Risk
Charge will never exceed the current level of 1.40%). AUSA does not anticipate
realizing any profit from this charge.

PREMIUM TAXES

AUSA currently makes no deduction from the Premium Payments for any state
premium taxes AUSA pays in connection with Premium Payments under the
Policies. However, AUSA will deduct the aggregate premium taxes paid on behalf
of a particular Policy from the Annuity Purchase Value on (i) the Annuity
Commencement Date (thus reducing the Adjusted Annuity Purchase Value), (ii)
the total surrender of a Policy, or (iii) payment of the death proceeds of a
Policy.

FEDERAL, STATE AND LOCAL TAXES

No charges are currently made for federal, state, or local taxes other than
premium taxes. However, AUSA reserves the right to deduct charges in the
future from the Subaccounts for any taxes or other economic burden resulting
from the application of any tax laws that AUSA determines to be attributable
to the accounts or the policies.

TRANSFER CHARGE

There is no charge for the first 12 transfers between Investment Options in
each Policy Year. AUSA reserves the right to impose a $10 charge for the
thirteenth and each subsequent transfer request made by the Owner during a
single Policy Year. For the purpose of determining whether a transfer charge
is payable, Premium Payment allocations are not considered transfers. All
transfer requests made simultaneously will be treated as a single request. No
transfer charge will be imposed for any transfer which is not at the Owner's
request.

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<PAGE>

OTHER EXPENSES INCLUDING INVESTMENT ADVISORY FEES

Each of the Portfolios of the Underlying Funds is responsible for all of its
expenses. In addition, charges will be made against each of the Portfolios of
the Underlying Funds for investment advisory services provided to the
Portfolio. The net assets of each Portfolio of the Underlying Funds will
reflect deductions in connection with the investment advisory fee and other
expenses.

For more information concerning the investment advisory fee and other
charges against the Portfolios, see the prospectuses for the Underlying Funds,
current copies of which accompany this Prospectus.

EMPLOYEES AND AGENT PURCHASES

The Policy may be acquired by an employee or registered representative of
any broker/dealer authorized to sell the Policy or their spouse or minor
children, or by an officer, director, trustee or bona-fide full-time employee
of AUSA or its affiliated companies or their spouse or minor children. In such
a case, a bonus of 5% of each premium deposit may be credited to the Policy
due to lower acquisition costs AUSA experiences on those purchases. The bonus
will be reported to the Internal Revenue Service as taxable income to the
employee or registered representative. Compensation to the registered
representative and broker/dealer will be reduced by the amount of such bonus.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary does not constitute tax advice. It is a general
discussion of certain of the expected federal income tax consequences of
investment in and distributions with respect to a Policy, based on the
Internal Revenue Code of 1986, as amended (the "Code"), proposed and final
Treasury Regulations thereunder, judicial authority, and current
administrative rulings and practice. This summary discusses only certain
federal income tax consequences to "United States Persons," and does not
discuss state, local, or foreign tax consequences. United States Persons means
citizens or residents of the United States, domestic corporations, domestic
partnerships and trusts or estates that are subject to United States federal
income tax regardless of the source of their income.

At the time the initial Premium Payment is paid, a prospective purchaser
must specify whether he or she is purchasing a Nonqualified Policy or a
Qualified Policy. If the initial Premium Payment is derived from an exchange
or surrender of another annuity policy, AUSA may require that the prospective
purchaser provide information with regard to the federal income tax status of
the previous annuity policy. AUSA will require that persons purchase separate
Policies if they desire to invest monies qualifying for different annuity tax
treatment under the Code. Each such separate Policy would require the minimum
initial Premium Payment stated above. Subsequent Additional Premium Payments
under a Policy must qualify for

- 45 -
<PAGE>

the same federal income tax treatment as the initial Premium Payment under the
Policy; AUSA will not accept a Subsequent Additional Premium Payment under a
Policy if the federal income tax treatment of such Premium Payment would be
different from that of the initial Premium Payment.

The Qualified Policies were designed for use by retirement plans and
individual retirement accounts that qualify for special federal income tax
treatment under Sections 401(a), 403(b), 408(a), or 457 of the Code and
individuals purchasing individual retirement annuities that qualify for
special federal income tax treatment under Section 408(b) of the Code. Certain
requirements must be satisfied in purchasing a Qualified Policy in order for
the plan, account or annuity to retain its special tax treatment. This summary
is not intended to cover such requirements, and assumes that Qualified
Policies are purchased pursuant to retirement plans or individual retirement
accounts, or are individual retirement annuities, that qualify for such
special tax treatment. This summary was prepared by AUSA after consultation
with tax counsel, but no opinion of tax counsel has been obtained.

THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. EACH
POTENTIAL PURCHASER IS URGED TO CONSULT HIS/HER OWN TAX ADVISER AS TO THE
CONSEQUENCES OF INVESTMENT IN A POLICY UNDER FEDERAL AND APPLICABLE STATE,
LOCAL AND FOREIGN TAX LAWS.

TAX STATUS OF THE POLICY

The following discussion is based on the assumption that the Policy
qualifies as an annuity contract for federal income tax purposes. The
Statement of Additional Information discusses the tax requirements for
qualifying as an annuity contract.

TAXATION OF ANNUITIES

The discussion below applies only to those Policies owned by natural
persons, and that qualify as annuity contracts for federal income tax
purposes. With respect to Owners who are natural persons, the Policy should be
treated as an annuity contract for federal income tax purposes.

In General. Except as described below with respect to Owners who are not
natural persons, an Owner who holds a Policy satisfying the diversification
and distribution requirements described in the Statement of Additional
Information should not be taxed on increases in the Annuity Purchase Value
until an amount is received or deemed received, e.g., upon a partial or full
surrender or as Annuity Payments under the Annuity Option selected. Generally,
any amount received or deemed received under a Nonqualified Annuity Contract
prior to the Annuity Commencement Date is deemed to come first from any
"Income on the Contract" and then from the "Investment in the Contract." The
"Investment in the Contract" generally equals total premium payments less
amounts received which were not includable in gross income. To the extent that
the Annuity Purchase Value

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<PAGE>

(ignoring any surrender charges except on a full surrender) exceeds the
"Investment in the Contract," such excess constitutes the "Income on the
Contract." For these purposes such "Income on the Contract" shall be computed
by reference to the aggregation rules described below, and the amount
includable in gross income will be taxable as ordinary income. If at the time
that any amount is received or deemed received there is no "Income on the
Contract" (e.g., because the gross Annuity Purchase Value does not exceed the
"Investment in the Contract" and no aggregation rule applies), then such
amount received or deemed received will not be includable in gross income, and
will simply reduce the "Investment in the Contract."

For this purpose, the assignment, pledge or agreement to assign or pledge
any portion of the Annuity Purchase Value (including assignment of Owner's
right to receive Annuity Payments prior to the Annuity Commencement Date)
generally will be treated as a distribution in the amount of such portion of
the Annuity Purchase Value. Additionally, if an Owner designates a new Owner
prior to the Annuity Commencement Date without receiving full and adequate
consideration, the old Owner generally will be treated as receiving a
distribution under the Policy in an amount equal to the Annuity Purchase
Value. A transfer of ownership or an assignment of a Policy, or designation of
an Annuitant or Beneficiary who is not also the Owner, as well as the
selection of certain Annuity Commencement Dates, may result in certain tax
consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, designation, selection or assignment of a
Policy should contact a competent tax adviser with respect to the potential
tax effects of such a transaction.

Aggregation Rules. Generally all nonqualified deferred annuity contracts
issued by the same company (or an affiliated company) to the same owner during
any calendar year shall be treated as one annuity contract, and "aggregated"
for purposes of determining the amount includable in gross income. In
addition, for such purposes all individual retirement annuities and accounts
under Section 408 of the Code for an individual are aggregated, and generally
all distributions therefrom during a calendar year are treated as one
distribution made as of the end of such year.

Surrenders. In the case of a partial surrender (including systematic
withdrawals) under a Nonqualified Policy, the amount received generally will
be includable in gross income to the extent that it does not exceed the
"Income on the Contract," which is generally equal to the excess of the
Annuity Purchase Value immediately before the partial surrender over the
"Investment in the Contract" at that time. However for these purposes, the
Annuity Purchase Value immediately before a partial surrender may have to be
increased by any positive Excess Interest Adjustment which results from such a
partial surrender or which could result from a simultaneous full surrender,
and may need further adjustments if the aggregation rules apply. There is,
however, no definitive guidance on the proper tax treatment of Excess Interest
Adjustments, and the Owner should contact a competent tax adviser with respect
to the potential tax consequences of an Excess Interest

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<PAGE>

Adjustment. In the case of a partial surrender (including systematic
withdrawals) under a Qualified Policy, a ratable portion of the amount
received is generally excludable from gross income, based on the ratio of the
"Investment in the Contract" to the individual's total account balance or
accrued benefit under the retirement plan at the time of each such payment.
For a Qualified Policy, the "Investment in the Contract" can be zero. Special
tax rules may be available for certain distributions from a Qualified Policy.
In the case of a full surrender under a Nonqualified Policy or a Qualified
Policy, the amount received generally will be taxable only to the extent it
exceeds the "Investment in the Contract," unless the aggregation rules apply.

Annuity Payments. Although the tax consequences may vary depending on the
Annuity Payment Option elected under the Policy, in general only a portion of
the Annuity Payments received after the Annuity Commencement Date will be
includable in the gross income of the recipient.

For Fixed Annuity Payments, in general the excludable portion of each
payment is determined by dividing the "Investment in the Contract" on the
Annuity Commencement Date by the total expected value of the Annuity Payments
for the term of the payments. The remainder of each Annuity Payment is
includable in gross income. Once the "Investment in the Contract" has been
fully recovered, the full amount of any additional Annuity Payments is
includable in gross income.

For Variable Annuity Payments, the includable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is excludable from gross income. This dollar amount is determined
by dividing the "Investment in the Contract" on the Annuity Commencement Date
by the total number of expected periodic payments. The remainder of each
Annuity Payment is includable in gross income. Once the "Investment in the
Contract" has been fully recovered, the full amount of any additional Annuity
Payments is includable in gross income.

If, after the Annuity Commencement Date, Annuity Payments cease by reason of
the death of the Annuitant, the excess (if any) of the "Investment in the
Contract" as of the Annuity Commencement Date over the aggregate amount of
Annuity Payments received on or after the Annuity Commencement Date that was
excluded from gross income is allowable as a deduction for the last taxable
year of the Annuitant.

Taxation of Death Benefit Proceeds. Amounts may be distributed from the
Policy because of the death of an Owner or the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a full
surrender, as described above, or (2) if distributed under an Annuity Option,
they are taxed in the same manner as Annuity Payments, as described above. For
these purposes, the "Investment in the Contract" is not affected by the
Owner's or Annuitant's death. That is, the "Investment in the Contract"
remains generally the total premium payments less amounts received which were
not includible in gross income.

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<PAGE>

Penalty Taxes. In the case of any amount received or deemed received from
the Policy, e.g., upon a surrender of a Policy or a deemed distribution under
a Policy resulting from a pledge, assignment or agreement to pledge or assign
or an Annuity Payment with respect to a Policy, there may be imposed on the
recipient a federal penalty tax equal to 10% of the amount includable in gross
income. The penalty tax generally will not apply to any distribution: (i) made
on or after the date on which the taxpayer attains age 59 1/2; (ii) made as a
result of the death of the holder (generally the Owner); (iii) attributable to
the disability of the taxpayer; or (iv) which is part of a series of
substantially equal periodic payments made (not less frequently than annually)
for the life (or life expectancy) of the taxpayer or the joint lives (or joint
life expectancies) of such taxpayer and his/her beneficiary. Other rules may
apply to Qualified Policies.

Withholding. The portion of any distribution under a Policy that is
includable in gross income will be subject to federal income tax withholding
unless the recipient of such distribution elects not to have federal income
tax withheld. Election forms will be provided at the time distributions are
requested or made. For certain Qualified Policies, certain distributions are
subject to mandatory withholding.

Qualified Policies. The Qualified Policy is designed for use with several
types of tax-qualified retirement plans. The tax rules applicable to
participants and beneficiaries in tax-qualified retirement plans vary
according to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to
specified commencement and minimum distribution rules; aggregate distributions
in excess of a specified annual amount; and in other specified circumstances.
Some retirement plans are subject to distribution and other requirements that
are not incorporated into our Policy administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Policies comply with applicable law.

AUSA makes no attempt to provide more than general information about use of
the Policy with the various types of retirement plans. Purchasers of Policies
for use with any retirement plan should consult their legal counsel and tax
adviser regarding the suitability of the Policy.

Individual Retirement Annuities. In order to qualify as an individual
retirement annuity under Section 408(b) of the Code, a Policy must contain
certain provisions: (i) the Owner must be the Annuitant; (ii) the Policy may
not be transferable by the Owner, e.g., the Owner may not designate a new
Owner, designate a Contingent Owner or assign the Policy as collateral
security; (iii) the total Premium Payments for any calendar year may not
exceed $2,000, unless the portion of such Premium Payments in excess of $2,000
qualifies as a rollover amount or contribution under Section 402(c) or

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<PAGE>

408(d)(3) of the Code; (iv) Annuity Payments or withdrawals must begin no
later than April 1 of the calendar year following the calendar year in which
the Annuitant attains age 70 1/2; (v) an Annuity Payment Option with a Period
Certain that will guarantee Annuity Payments beyond the life expectancy of the
Annuitant and the Beneficiary may not be selected; and (vi) certain payments
of Death Benefits must be made in the event the Annuitant dies prior to the
distribution of the Annuity Purchase Value. Policies intended to qualify as
individual retirement annuities under Section 408(b) of the Code contain such
provisions.

Section 408 of the Code also indicates that no part of the funds for an
individual retirement account or annuity should be invested in a life
insurance contract, but the regulations thereunder allow such funds to be
invested in an annuity contract that provides a death benefit that equals the
greater of the premiums paid or the cash value for the contract. The Policy
provides an enhanced death benefit that could exceed the amount of such a
permissible death benefit, but it is unclear to what extent such an enhanced
death benefit could disqualify the Policy under Section 408 of the Code. The
Internal Revenue Service has not reviewed the Policy for qualification as an
IRA, and has not addressed in a ruling of general applicability whether an
enhanced death benefit provision, such as the provision in the Policy,
comports with IRA qualification requirements.

Section 403(b) Plans. Under Section 403(b) of the Code, payments made by
public school systems and certain tax exempt organizations to purchase
Policies for their employees are excludable from the gross income of the
employee, subject to certain limitations. However, such payments may be
subject to FICA (Social Security) taxes. Additionally, in accordance with the
requirements of the Code Section 403(b) annuities generally may not permit
distribution of (i) elective contributions made in years beginning after
December 31, 1988, and (ii) earnings on those contributions and (iii) earnings
on amounts attributed to elective contributions held as of the end of the last
year beginning before January 1, 1989. Distributions of such amounts will be
allowed only upon the death of the employee, on or after attainment of age 59
1/2, separation from service, disability, or financial hardship, except that
income attributable to elective contributions may not be distributed in the
case of hardship.

Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans. Section 401(a)
and 403(a) of the Code permit corporate employers to establish various types
of retirement plans for employees and self-employed individuals to establish
qualified plans for themselves and their employees. Such retirement plans may
permit the purchase of the Policies to accumulate retirement savings. Adverse
tax consequences to the plan, the participant, or both may result if the
Policy is assigned or transferred to any individual as a means to provide
benefit payments.

Deferred Compensation Plans. Section 457 of the Code, while not actually
providing for a qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service for state

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<PAGE>

governments, local governments, political sub-divisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The Policies can be used with
such plans. Under such plans a participant may specify the form of investment
in which his or her participation will be made. All such investments, however,
are owned by, and are subject to, the claims of the general creditors of the
sponsoring employer. Depending on the terms of the particular plan, the
employer may be entitled to draw on deferred amounts for purposes unrelated to
its Section 457 plan obligations. In general, all amounts required under a
Section 457 Plan are taxable and are subject to federal income tax withholding
as wages.

Non-natural Persons. Pursuant to Section 72(u) of the Code, an annuity
contract held by a taxpayer other than a natural person generally will not be
treated as an annuity contract under the Code; accordingly, an Owner who is
not a natural person will recognize as ordinary income for a taxable year the
excess of (i) the sum of the Cash Value as of the close of the taxable year
and all previous distributions under the Policy over (ii) the sum of the
Premium Payments paid for the taxable year and any prior taxable year and the
amounts includable in gross income for any prior taxable year with respect to
the Policy. For these purposes, the Annuity Purchase Value at year end may
have to be increased by any positive excess interest adjustment which could
result from a full surrender at such time. There is, however, no definitive
guidance on the proper tax treatment of Excess Interest Adjustments and the
Owner should contact a competent tax adviser with respect to the potential tax
consequences of an Excess interest adjustment. Notwithstanding the preceding
sentences in this paragraph, Section 72(u) of the Code does not apply to (i) a
Policy the nominal Owner of which is not a natural person but the beneficial
Owner of which is a natural person, (ii) a Policy acquired by the estate of a
decedent by reason of such decedent's death (iii) a Qualified Policy (other
than one qualified under Section 457) or (iv) a single-payment annuity the
Annuity Commencement Date for which is no later than one year from the date of
the single Premium Payment; instead, such Policies are taxed as described
above under the heading "Taxation of Annuities."

Possible Changes in Taxation. In past years, legislation has been proposed
in the U.S. Congress that would have adversely modified the federal taxation
of certain annuities. For example, one such proposal would have changed the
tax treatment of non-qualified annuities that did not have "substantial life
contingencies" by taxing income as it is credited to the annuity. Although as
of the date of this Prospectus Congress was not actively considering any
legislation regarding the taxation of annuities, there is always the
possibility that the tax treatment of annuities could change by legislation or
other means (such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any change could be retroactive
(that is, effective prior to the date of the change).

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<PAGE>

DISTRIBUTOR OF THE POLICIES

AEGON USA Securities, Inc., an affiliate of AUSA, is the principal
underwriter of the Policies. AEGON USA Securities, Inc. has entered or will
enter into one or more agreements with various broker-dealers for the
distribution of the Policies. Commissions and expense allowances on Policy
sales are paid to dealers. Commissions and expense allowances payable to a
broker-dealer will be up to 4 1/2% of Premium Payments. In addition, certain
broker-dealers may receive additional commissions and certain expense
allowances based upon the attainment of specific sales volume targets and
other factors. These commissions and expense allowances are not deducted from
Premium Payments, they are paid by AUSA.

VOTING RIGHTS

To the extent required by law, AUSA will vote the Underlying Funds shares
held by the Mutual Fund Account at regular and special shareholder meetings of
the Underlying Funds in accordance with instructions received from persons
having voting interests in the portfolios. If, however, the 1940 Act or any
regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result AUSA determines that it is permitted to
vote the Underlying Funds' shares in its own right, it may elect to do so.

Before the Annuity Commencement Date, the Policy Owner holds the voting
interest in the selected Portfolios. The number of votes that an Owner has the
right to instruct will be calculated separately for each Subaccount. The
number of votes that an Owner has the right to instruct for a particular
Subaccount will be determined by dividing his or her Annuity Purchase Value in
the Subaccount by the net asset value per share of the corresponding Portfolio
in which the Subaccount invests. Fractional shares will be counted.

After the Annuity Commencement Date, the person receiving Annuity Payments
has the voting interest, and the number of votes decreases as Annuity Payments
are made and as the reserves for the Policy decrease. The person's number of
votes will be determined by dividing the reserve for the Policy allocated to
the applicable Subaccount by the net asset value per share of the
corresponding Portfolio. Fractional shares will be counted.

The number of votes that the Owner or person receiving income payments has
the right to instruct will be determined as of the date established by the
Underlying Funds for determining shareholders eligible to vote at the meeting
of the Underlying Funds. AUSA will solicit voting instructions by sending
Owners or other persons entitled to vote written requests for instructions
prior to that meeting in accordance with procedures established by the
Underlying Funds. Portfolio shares as to which no timely instructions are
received and shares held by AUSA in which Owners or other persons entitled to
vote have no beneficial interest will be voted in proportion to the voting
instructions that are received with respect to all Policies participating in
the same Subaccount.

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<PAGE>

Each person having a voting interest in a Subaccount will receive proxy
material, reports, and other materials relating to the appropriate Portfolio.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Mutual Fund Account is a party or
to which the assets of the Account are subject. AUSA is not involved in any
litigation that is of material importance in relation to its total assets or
that relates to the Mutual Fund Account.

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus.
The following is the Table of Contents for that Statement:

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Policy--General Provisions............................................ 3
Owner................................................................... 3
Entire Policy........................................................... 3
Deferment of Payment and Transfers...................................... 3
Misstatement of Age or Sex.............................................. 4
Reallocation of Annuity Purchase Values After the Annuity Commencement
Date.................................................................. 4
Assignment.............................................................. 4
Evidence of Survival.................................................... 4
Amendments.............................................................. 4
Federal Tax Matters....................................................... 5
Tax Status of the Policy................................................ 5
Taxation of AUSA........................................................ 6
Investment Experience..................................................... 6
State Regulation of AUSA.................................................. 10
Records and Reports....................................................... 10
Distribution of the Policies.............................................. 10
Custody of Assets......................................................... 10
Historical Performance Data............................................... 10
Money Market Yields..................................................... 10
Other Subaccount Yields................................................. 11
Total Returns........................................................... 12
Other Performance Data.................................................. 13
Legal Matters............................................................. 13
Independent Auditors...................................................... 13
Other Information......................................................... 13
Financial Statements...................................................... 14
</TABLE>

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<PAGE>

APPENDIX A

EXCESS INTEREST ADJUSTMENT(1)

The formula which will be used to determined the Excess Interest Adjustment
(EIA) is:

S*(G - C)* (M/12)

S= Gross amount being withdrawn that is subject to the EIA

G= Guaranteed Interest Rate in effect for the policy

C= Current Guaranteed Interest Rate then being offered on new premiums for
the next longer option period than "M". If this policy form or such an
option period is no longer offered, "C" will be the U.S. Treasury rate for
the next longer maturity (in whole years) than "M" on the 25th day of the
previous calendar month, plus up to 2%.

M= Number of months remaining in the current option period, rounded up to the
next higher whole number of months.

EXAMPLE 1 (FULL SURRENDER, RATES INCREASE BY 3%):

Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3

Annuity Purchase Value ("APV") at
middle of Contract Year 3
= 50,000* (1.055)() 2.5 = 57,161.18
Penalty Free Amount at middle of --(symbol appears here)
Contract Year 3
= 57,161.18* .10 = 5,716.12
Amount Subject to EIA = 57,161.18 - 5,716.12 = 51,445.06
EIA Floor = 50,000* (1.03)() 2.5 = 53,834.80
--(symbol appears here)
Excess Interest Adjustment
G= .055
C= .085
M = 30

Excess Interest Adjustment = S* (G - C)* (M/12)
= 51,445.06* (.055 - .085)* (30/12)
= (3,858.38), but Excess Interest
Adjustment cannot cause the Adjusted
APV to fall below the floor, so the
adjustment is limited to 53,834.80 -
57,161.18 = (3,326.38)

Adjusted Annuity Purchase Value
("APV")
= APV + EIA = 57,161.18 + (3,326.38) =
53,834.80

A-1
<PAGE>

Surrender Charges = (50,000 - 5,716.12)* .05
= 2,214.19
Net Surrender Value at middle of
Contract Year 3
= 53,834.80 - 2,214.19
= 51,620.61

EXAMPLE 2 (FULL SURRENDER, RATES DECREASE BY 1%):

Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3

Annuity Purchase Value at middle
of Contract Year 3
= 50,000* (1.055)() 2.5 = 57,161.18
Penalty Free Amount at middle of --(symbol appears here)
Contract Year 3
= 57,161.18* .10 = 5,716.12
Amount Subject to EIA = 57,161.18 - 5,716.12 = 51,445.06
EIA Floor = 50,000* (1.03)() 2.5 = 53,834.80
--(symbol appears here)
Excess Interest Adjustment
G= .055
C= .045
M = 30

Excess Interest Adjustment = S* (G - C)* (M/12)
= 51,445.06* (.055 - .045)* (30/12)
= 1,286.13

Adjusted APV = 57,161.18 + 1,286.13 = 58,447.31

Surrender Charges = (50,000 - 5,716.12)* .05
= 2,214.19

Net Surrender Value at middle of
Contract Year 3 = 58,447.31 - 2,214.19
= 56,233.12

A-2
<PAGE>

On a partial surrender, AUSA will pay the policy holder the full amount of
withdrawal requested (as long as the Annuity Purchase Value is sufficient).
Surrender Charge free/adjustment free withdrawals will reduce the APV by the
amount withdrawn. Amounts withdrawn in excess of the Surrender Charge
free/adjustment free portion will reduce the APV by an amount equal to:

X-Y+Z

X= Excess Partial Withdrawal
Y= Excess Interest Adjustment = (X)*(G-C)*(M/12) where G, C, and M are defined
above.
Z= Surrender Charge on X and Y.

EXAMPLE 3 (PARTIAL WITHDRAWAL, RATES INCREASE BY 1%):

Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Partial Surrender: $20,000; Middle of Contract Year 3

Annuity Purchase Value at middle
of Contract Year 3
= 50,000* (1.055)() 2.5 = 57,161.18
Penalty Free Amount at middle of --(symbol appears here)
Contract Year 3
= 57,161.18* .10 = 5,716.12

Excess Interest/Surrender Charge (SC) Adjustment
X= 20,000 - 5,716.12 = 14,283.88
G= .055
C= .065
M= 30
Y= 14,283.88* (.055 - .065)* (30/12) = (357.10)
Z= ..05* (20,000 - 5,716.12 - 357.10) = 696.34

Reduction to APV for Excess
Withdrawal: = X - Y + Z
= 14,283.88 - (357.10) + 696.34
= 15,337.32

Remaining Annuity Purchase Value
at middle of Contract Year 3 = 57,161.18 - 5,716.12 - 15,337.32
= 36,107.74

A-3
<PAGE>

EXAMPLE 4 (PARTIAL WITHDRAWAL, RATES DECREASE BY 1%):

Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Partial Surrender: $20,000; Middle of Contract Year 3

Annuity Purchase Value at middle of
Contract Year 3 = 50,000* (1,055)() 2.5 = 57,161.18
Penalty Free Amount at middle of --(symbol appears here)
Contract Year 3
= 57,161.18* .10 = 5,716.12

Excess Interest/Surrender Charge Adjustment
X= 20,000 - 5,716.12 = 14,283.88
G= .055
C= .045
M= 30
Y= 14.283.88*(.055 - .045)*(30/12) = 357.10
Z= .05* (20,000 - 5,716.12 + 357.10) = 732.05
Reduction to APV for Excess Withdrawal:
= X-Y + Z
= 14,283.88 - 357.10 + 732.05
= 14,658.83
Remaining Annuity Purchase Value at
middle of Contract Year 3 = 57,161.18 - 5,716.12 - 14,658.83
= 36,786.23

(1)* represents multiplication;
() represents exponentiation.
- --(symbol appears here)
A-4
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

THE ENDEAVOR VARIABLE ANNUITY

Issued through

AUSA ENDEAVOR VARIABLE
ANNUITY ACCOUNT

Offered by
AUSA LIFE INSURANCE COMPANY, INC.

666 Fifth Avenue
New York, New York 10103

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

This Statement of Additional information expands upon subjects discussed in
the current Prospectus for the Endeavor Variable Annuity (the "Policy")
offered by AUSA Life Insurance Company, Inc. You may obtain a copy of the
Prospectus dated May 1, 1996 by calling 1-800-525-6205, or by writing to the
Service Office, Financial Markets Division--Variable Annuity Dept., 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001. Terms used in the current
Prospectus for the Policy are incorporated in this Statement of Additional
Information.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR THE POLICY, ENDEAVOR SERIES
TRUST AND THE GROWTH PORTFOLIO OF THE WRL SERIES FUND, INC.

Dated: May 1, 1996

- 1 -
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Policy-General Provisions............................................. 3
Owner................................................................... 3
Entire Policy........................................................... 3
Deferment of Payment and Transfers...................................... 3
Misstatement of Age or Sex.............................................. 4
Reallocation of Policy Values After the Annuity Commencement Date....... 4
Assignment.............................................................. 4
Evidence of Survival.................................................... 4
Amendments.............................................................. 4
Federal Tax Matters (45).................................................. 5
Tax Status of the Policy................................................ 5
Taxation of AUSA........................................................ 6
Investment Experience..................................................... 6
State Regulation of AUSA.................................................. 10
Records and Reports....................................................... 10
Distribution of the Policies (51)......................................... 10
Custody of Assets......................................................... 10
Historical Performance Data (8)........................................... 10
Money Market Yields..................................................... 10
Other Subaccount Yields................................................. 11
Total Returns........................................................... 12
Other Performance Data.................................................. 13
Legal Matters............................................................. 13
Independent Auditors...................................................... 13
Other Information......................................................... 13
Financial Statements (8).................................................. 14

(Numbers in parenthesis indicate corresponding pages of the Prospectus).
</TABLE>

- 2 -
<PAGE>

In order to supplement the description in the Prospectus, the following
provides additional information about AUSA and the Policy which may be of
interest to an Owner.

THE POLICY--GENERAL PROVISIONS

OWNER

The Policy shall belong to the Policy Owner upon issuance of the Policy
after completion of an application and delivery of the initial Premium
Payment. While the Annuitant is living, the Owner may: (1) assign the Policy;
(2) surrender the Policy; (3) amend or modify the Policy with AUSA's consent;
(4) receive annuity payments or name a Payee to receive the payments; and (5)
exercise, receive and enjoy every other right and benefit contained in the
Policy. The exercise of these rights may be subject to the consent of any
assignee or irrevocable Beneficiary.

A Successor Owner can be named in the Policy application or in a Written
Notice. The Successor Owner will become the new Owner upon the Owner's death,
if the Owner predeceases the Annuitant. If no Successor Owner survives the
Owner and the Owner predeceases the Annuitant, the Owner's estate will become
the Owner.

The Owner may change the ownership of the Policy in a Written Notice. When
this change takes effect, all rights of ownership in the Policy will pass to
the new Owner.

When there is a change of Owner or Successor Owner, the change will take
effect as of the date the Owner signs the Written Notice, subject to any
payment AUSA has made or action AUSA has taken before recording the change.
Changing the Owner or naming a new Successor Owner cancels any prior choice of
Successor Owner, but does not change the designation of the Beneficiary or the
Annuitant.

If ownership is transferred (except to the Owner's spouse) because the Owner
dies before the Annuitant, the Cash Value generally must be distributed to the
Successor Owner within five years of the Owner's death, or payments must be
made for a period certain or for the Successor Owner's lifetime so long as any
period certain does not exceed that Successor Owner's life expectancy, if the
first payment begins within one year of the Owner's death.

ENTIRE POLICY

The Policy and any endorsements thereon and the Policy application
constitute the entire contract between AUSA and the Owner. All statements in
the application are representations and not warranties. No statement will
cause the Policy to be void or to be used in defense of a claim unless
contained in the application.

DEFERMENT OF PAYMENT AND TRANSFERS

Payment of any amount due from the Mutual Fund Account in respect of a
surrender, the Death Benefit or the death of the Owner of a Nonqualified
Policy generally will occur within seven business days from the date the
Written Notice (and any other required documentation or information) is
received, except that AUSA may be permitted to defer such payment from the
Mutual Fund Account if: (1) the New York Stock Exchange is closed for other
than usual weekends or holidays or trading on the Exchange is otherwise
restricted; or (2) an emergency exists as defined by the SEC or the SEC
requires that trading be restricted; or (3) the SEC permits a delay for the
protection of Owners. In addition, transfers of amounts from the Subaccounts
may be deferred under these circumstances.

- 3 -
<PAGE>

Certain delays and restrictions apply to transfers of amounts out of the
Fixed Account. See page 24 of the Policy Prospectus.

MISSTATEMENT OF AGE OR SEX

If the age or sex of the Annuitant has been misstated, AUSA will change the
annuity benefit payable to that which the Premium Payments would have
purchased for the correct age or sex. The dollar amount of any underpayment
made by AUSA shall be paid in full with the next payment due such person or
the Beneficiary. The dollar amount of any overpayment made by AUSA due to any
misstatement shall be deducted from payments subsequently accruing to such
person or Beneficiary. Any underpayment or overpayment will include interest
at 5% per year, from the date of the wrong payment to the date of the
adjustment. The age of the Annuitant may be established at any time by the
submission of proof satisfactory to AUSA.

REALLOCATION OF ANNUITY PURCHASE VALUES AFTER THE ANNUITY COMMENCEMENT DATE

After the Annuity Commencement Date, the Policy Owner may reallocate the
value of a designated number of Annuity Units of a Subaccount of the Mutual
Fund Account then credited to a Policy into an equal value of Annuity Units of
one or more other Subaccounts of the Mutual Fund Account, or the Fixed
Account. The reallocation shall be based on the relative value of the Annuity
Units of the Account(s) or Subaccount(s) at the end of the Business Day on the
next payment date. The minimum amount which may be reallocated is the lesser
of (1) $10 of monthly income or (2) the entire monthly income of the Annuity
Units in the Account or Subaccount from which the transfer is being made. If
the monthly income of the Annuity Units remaining in an Account or Subaccount
after a reallocation is less than $10, AUSA reserves the right to include the
value of those Annuity Units as part of the transfer. The request must be in
writing to AUSA's Service Office. There is no charge assessed in connection
with such reallocation. AUSA reserves the right to limit the number of times a
reallocation of Annuity Purchase Value may be made in any given Policy Year.

ASSIGNMENT

During the lifetime of the Annuitant the Policy Owner may assign any rights
or benefits provided by the Policy. An assignment will not be binding on AUSA
until a copy has been filed at its Service Office. The rights and benefits of
the Policy Owner and Beneficiary are subject to the rights of the assignee.
AUSA assumes no responsibility for the validity or effect of any assignment.
Any claim made under an assignment shall be subject to proof of interest and
the extent of the assignment. An assignment may have tax consequences.

Unless the Policy Owner so directs by filing written notice with AUSA, no
Beneficiary may assign any payments under the Policy before they are due. To
the extent permitted by law, no payments will be subject to the claims of any
Beneficiary's creditors.

EVIDENCE OF SURVIVAL

AUSA reserves the right to require satisfactory evidence that a person is
alive if a payment is based on that person being alive. No payment will be
made until AUSA receives such evidence.

AMENDMENTS

No change in the Policy is valid unless made in writing by AUSA and approved
by one of AUSA's officers. No Registered Representative has authority to
change or waive any provision of the Policy.

- 4 -
<PAGE>

AUSA reserves the right to amend the Policies to meet the requirements of
the Internal Revenue Code, regulations or published rulings. A Policy Owner
can refuse such a change by giving Written Notice, but a refusal may result in
adverse tax consequences.

FEDERAL TAX MATTERS

TAX STATUS OF THE POLICY

Diversification Requirements. Section 817(h) of the Code provides that in
order for a variable contract which is based on a segregated asset account to
qualify as an annuity contract under the Code, the investments made by such
account must be "adequately diversified" in accordance with Treasury
regulations. The Treasury regulations issued under Section 817(h) (Treas. Reg.
(S) 1.817-5) apply a diversification requirement to each of the Subaccounts of
the Mutual Fund Account. The Mutual Fund Account, through the Underlying Funds
and their Portfolios, intend to comply with the diversification requirements
of the Treasury. AUSA has entered into agreements regarding participation in
the Endeavor Series Trust and WRL Series Fund, Inc. that require the
Underlying Funds and their Portfolios to be operated in compliance with the
Treasury regulations.

Owner Control. In connection with the issuance of temporary regulations on
diversification requirements, the Treasury also announced that such
regulations do not provide guidance concerning the extent to which Owners may
direct their investments to the Subaccounts of the Mutual Fund Account. It is
not clear whether additional guidance in this regard will be provided nor
whether, if provided, it will be prospective only. It is possible that any
such guidance could treat an Owner as the owner of the assets of the Mutual
Fund Account if a Subaccount is too narrow in its investment strategy (e.g., a
fund that invests only in gold or stock of gold mining companies) or if Owners
have too many subaccount options to select, even though it technically meets
the diversification requirements. It is possible that if any guidance is
provided then the Mutual Fund Account may not be in compliance. AUSA can
provide no assurances that any such guidance will not adversely affect the tax
treatment of existing Policies. For these reasons, AUSA reserves the right to
modify the Policy as necessary to prevent the Owner from being considered the
owner of the assets of the Mutual Fund Account or otherwise to qualify the
Policy for favorable tax treatment.

Distribution Requirements. The Code also requires that Nonqualified Policies
contain specific provisions for distribution of Policy proceeds upon the death
of the Owner. In order to be treated as an annuity contract for federal income
tax purposes, the Code requires that such Policies provide that if any Owner
dies on or after the Annuity Commencement Date and before the entire interest
in the Policy has been distributed, the remaining portion must be distributed
at least as rapidly as under the method in effect on such Owner's death. If
any Owner dies before the Annuity Commencement Date, the entire interest in
the Policy must generally be distributed within 5 years after such Owner's
date of death or be used to purchase an immediate annuity under which payments
will begin within one year of such Owner's death and will be made for the life
of the Beneficiary or for a period not extending beyond the life expectancy of
the Beneficiary. However, if upon such Owner's death prior to the Annuity
Commencement Date, such Owner's surviving spouse becomes the sole new Owner
under the Policy, then the Policy may be continued with the surviving spouse
as the new Owner. If any Owner is not a natural person, then for purposes of
these distribution requirements, the primary Annuitant shall be treated as the
Owner, and any death or change of such primary Annuitant shall be treated as
the death of the Owner. The Policy contains provisions intended to comply with
these requirements of the Code. No regulations interpreting these requirements
of the Code have yet been issued and thus no assurance can be given that the
provisions contained in the Policies satisfy all such Code requirements. The
provisions contained in the Policies will be reviewed and modified if
necessary to assure that they comply with the Code requirements when clarified
by regulation or otherwise.

- 5 -
<PAGE>

TAXATION OF AUSA

AUSA at present is taxed as a life insurance company under part I of
Subchapter L of the Code. The Mutual Fund Account is treated as part of AUSA
and, accordingly, will not be taxed separately as a "regulated investment
company" under Subchapter M of the Code. AUSA does not expect to incur any
federal income tax liability with respect to investment income and net capital
gains arising from the activities of the Mutual Fund Account retained as part
of the reserves under the Policy. Based on this expectation, it is anticipated
that no charges will be made against the Mutual Fund Account for federal
income taxes. If, in future years, any federal income taxes are incurred by
AUSA with respect to the Mutual Fund Account, AUSA may make a charge to the
Mutual Fund Account.

INVESTMENT EXPERIENCE

An "Investment Experience Factor" is used to determine the value of
Accumulation Units and Annuity Units, and to determine annuity payment rates.

ACCUMULATION UNITS

Upon allocation to the selected Subaccount of the Mutual Fund Account,
Premium Payments are converted into Accumulation Units of the Subaccount. The
number of Accumulation Units to be credited is determined by dividing the
dollar amount allocated to each Subaccount by the value of an Accumulation
Unit for that Subaccount as next determined after the Premium Payment is
received at the Service Office or, in the case of the initial Premium Payment,
when the Policy application is completed, whichever is later. The value of an
Accumulation Unit was arbitrarily established at $1 (except the WRL Growth
Subaccount which was established at $10) at the inception of each Subaccount.
Thereafter, the value of an Accumulation Unit is determined as of the close of
trading on each day the New York Stock Exchange and AUSA's Service Office are
open for business.

An index (the "Investment Experience Factor") which measures the investment
performance of a Subaccount during a Valuation Period is used to determine the
value of an Accumulation Unit for the next subsequent Valuation Period. The
Investment Experience Factor may be greater or less than or equal to one;
therefore, the value of an Accumulation Unit may increase, decrease or remain
the same from one Valuation Period to the next. The Policy Owner bears this
investment risk. The Net Investment Performance of a Subaccount and deduction
of certain charges affects the Accumulation Unit Value.

The Investment Experience Factor for any Subaccount for any Valuation Period
is determined by dividing (a) by (b) and subtracting (c) from the result,
where:

(a) is the net result of:

(1) the net asset value per share of the shares held in the
Subaccount determined at the end of the current Valuation Period, plus

(2) The per share amount of any dividend or capital gain distribution
made with respect to the shares held in the Subaccount if the ex-
dividend date occurs during the current Valuation Period, plus or minus

(3) a per share charge or credit for any taxes determined by AUSA to
have resulted from the investment operations of the Subaccount and for
which it has created a reserve;

(b) is the net result of:

(1) the net asset value per share of the shares held in the
Subaccount determined as of the end of the immediately preceding
Valuation Period, plus or minus

(2) the per share charge or credit for taxes pertaining to the
immediately preceding Valuation Period for which AUSA has created a
reserve; and

- 6 -
<PAGE>

(c) is the charge for mortality and expense risk during the Valuation
Period equal on an annual basis to 1.25% of the daily net asset value of
the Subaccount, plus the .15% administrative charge.

ILLUSTRATION OF ACCUMULATION UNIT VALUE CALCULATIONS

FORMULA AND ILLUSTRATION FOR DETERMINING
THE INVESTMENT EXPERIENCE FACTOR

Investment Experience Factor = A + B -- C -- F
----------
D -- E

Where: A = The Net Asset Value of an Underlying Fund share as of the end of
the current
Valuation Period.
Assume..........................................A = $11.57

B = The per share amount of any dividend or capital gains distribution
since the end
of the immediately preceding Valuation Period.
Assume...............................................B = 0

C = The per share charge or credit for any taxes reserved for at the
end of the current
Valuation Period.
Assume...............................................C = 0

D = The Net Asset Value of an Underlying Fund share at the end of the
immediately
preceding Valuation Period.
Assume..........................................D = $11.40

E = The per share amount of any taxes reserved for at the end of the
immediately
preceding Valuation Period.
Assume...............................................E = 0

F = The daily deduction for mortality and expense risk and
administrative
charges, which totals 1.40% on an annual basis.
On a daily basis............................ = .0000380909

Then, the Investment Experience Factor = 11.57 -- 0 -- 0 -- .0000380909 =
Z = 1.0148741898 ------------------
11.40 -- 0

FORMULA AND ILLUSTRATION FOR DETERMINING ACCUMULATION UNIT VALUE

Accumulation Unit Value = A x B

Where: A = The Accumulation Unit Value for the immediately preceding
Valuation Period.
Assume.............................................. = $ X

B = The Net Investment Factor for the current Valuation Period.
Assume................................................ = Y

Then, the Accumulation Unit Value = $ X x Y = $ Z

- 7 -
<PAGE>

ANNUITY UNIT VALUE AND ANNUITY PAYMENT RATES

The amount of Variable Annuity Payments will vary with Annuity Unit Values.
Annuity Unit Values rise if the net investment performance of the Subaccount
exceeds the assumed interest rate of 5% annually. Conversely, Annuity Unit
Values fall if the net investment performance of the Subaccount is less than
the assumed rate. The value of a Variable Annuity Unit in each Subaccount was
established at $1.00 on the date operations began for that Subaccount. The
value of a Variable Annuity Unit on any subsequent Business Day is equal to
(a) multiplied by (b) multiplied by (c), where:

(a) is the variable Annuity Unit Value on the immediately preceding
Business Day;

(b) is the net investment factor of the valuation period; and

The investment result adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5% effective
annual Assumed Investment Return. The valuation period is the period from the
close of the immediately preceding Business Day to the close of the current
Business Day.

The net investment factor for the Policy used to calculate the value of a
variable Annuity Unit in each Subaccount for the valuation period is
determined by dividing (i) by (ii) and subtracting (iii) from the result,
where:

(i) is the result of:

(1) the net asset value of a fund share held in the Mutual Fund
Account for that Subaccount determined at the end of the current
valuation period; plus

(2) the per share amount of any dividend or capital gain
distributions made by the fund for shares held in the Mutual Fund
Account for that Subaccount if the ex-dividend date occurs during the
valuation period.

(ii) is the net asset value of a fund share held in the Mutual Fund
Account for that Subaccount determined as of the end of the immediately
preceding valuation period.

(iii) is a factor representing the mortality and expense risk fee and
administrative charge. This factor is equal, on an annual basis, to 1.40%
of the daily net asset value of a fund share held in the Mutual Fund
Account for that Subaccount.

The dollar amount of subsequent Variable Annuity Payments will depend upon
changes in applicable Annuity Unit Values.

The annuity payment rates vary according to the Annuity Option elected and
the sex and adjusted age of the Annuitant at the Annuity Commencement Date.
The Policy also contains a table for determining the adjusted age of the
Annuitant.

- 8 -
<PAGE>

ILLUSTRATION OF CALCULATIONS FOR ANNUITY UNIT VALUE
AND VARIABLE ANNUITY PAYMENTS

FORMULA AND ILLUSTRATION FOR DETERMINING ANNUITY UNIT VALUE

Annuity Unit Value = A x B x C

Where: A = Annuity Unit Value for the immediately preceding Valuation Period.
Assume.............................................. = $ X

B = Investment Experience Factor for the Valuation Period for which
the Annuity Unit value is being calculated.
Assume................................................ = Y

C = A factor to neutralize the assumed interest rate of 5% built into
the Annuity Tables used.
Assume................................................ = Z

Then, the Annuity Unit Value is:
$ X x Y x Z = $ Q

FORMULA AND ILLUSTRATION FOR DETERMINING AMOUNT OF FIRST MONTHLY VARIABLE
ANNUITY PAYMENT

First Monthly Variable Annuity Payment = A x B
------
$1,000

Where: A =
The Annuity Purchase Value as of the Annuity Commencement Date.

Assume.............................................. = $ X

B = The Annuity purchase rate per $1,000 based upon the option selected,
the sex and adjusted age of the Annuitant according to the tables
contained in the Policy.
Assume.............................................. = $ Y

Then, the first Monthly Variable Annuity
Payment = $ X x $ Y = $ Z
-----
1,000

FORMULA AND ILLUSTRATION FOR DETERMINING THE NUMBER OF ANNUITY UNITS
REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT

Number of Annuity Units = A
-
B

Where: A = The dollar amount of the first monthly Variable Annuity Payment.
Assume.............................................. = $ X

B = The Annuity Unit Value for the Valuation Date on which the first
monthly payment is due.
Assume.............................................. = $ Y

Then, the number of Annuity Units = $X = Z
----
$Y

- 9 -
<PAGE>

STATE REGULATION OF AUSA

AUSA is subject to the laws of New York governing insurance companies and to
regulation by the New York Department of Insurance. An annual statement in a
prescribed form is filed with the Department of Insurance each year covering
the operation of AUSA for the preceding year and its financial condition as of
the end of such year. Regulation by the Department of Insurance includes
periodic examination to determine AUSA's contract liabilities and reserves so
that the Department may determine the items are correct. AUSA's books and
accounts are subject to review by the Department of Insurance at all times and
a full examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. In addition, AUSA is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.

RECORDS AND REPORTS

All records and accounts relating to the Mutual Fund Account will be
maintained by AUSA. As presently required by the Investment Company Act of
1940 and regulations promulgated thereunder, AUSA will mail to all Policy
Owners at their last known address of record, at least annually, reports
containing such information as may be required under that Act or by any other
applicable law or regulation. Policy Owners will also receive confirmation of
each financial transaction and any other reports required by law or
regulation.

DISTRIBUTION OF THE POLICIES

The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws. The offering of the Policies
is continuous and AUSA does not anticipate discontinuing the offering of the
Policies. However, AUSA reserves the right to discontinue the offering of the
Policies.

AEGON USA Securities, Inc., an affiliate of AUSA, will be the principal
underwriter of the Policies. AEGON USA Securities, Inc. has entered into
agreements with broker-dealers for the distribution of the Policies. During
1995, the amount paid to AEGON USA Securities, Inc. and/or broker-dealers for
their services was $397,382. No Policies had yet been issued as of May 1,
1995, therefore no fees had been paid to AEGON USA Securities, Inc. and/or the
broker/dealers for their services during 1994 or prior years.

CUSTODY OF ASSETS

The assets of each of the Subaccounts of the Mutual Fund Account are held by
AUSA. The assets of each of the Subaccounts of the Mutual Fund Account are
segregated and held separate and apart from the assets of the other
Subaccounts and from AUSA's general account assets. AUSA maintains records of
all purchases and redemptions of shares of the Underlying Funds held by each
of the Subaccounts. Additional protection for the assets of the Mutual Fund
Account is afforded by AUSA's fidelity bond, presently in the amount of
$5,000,000, covering the acts of officers and employees of AUSA.

HISTORICAL PERFORMANCE DATA

MONEY MARKET YIELDS

AUSA may from time to time disclose the current annualized yield of the TCW
Money Market Subaccount, which invests in the TCW Money Market Portfolio, for
a 7-day period in a manner which does not take into consideration any realized
or unrealized gains or losses on shares of the

- 10 -
<PAGE>

TCW Money Market Portfolio or on its portfolio securities. This current
annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the 7-day period in the value of
a hypothetical account; having a balance of 1 unit of the TCW Money Market
Subaccount at the beginning of the 7-day period, dividing such net change in
account value by the value of the account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis. The net change in account value reflects (i) net income from the
Portfolio attributable to the hypothetical account; and (ii) charges and
deductions imposed under a Policy that are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for (i) the Administrative Charges; and (ii) the
Mortality and Expense Risk Charge. Current Yield will be calculated according
to the following formula:

Current Yield = ((NCS -- ES)/UV) x (365/7)

Where:
<TABLE>
<C> <S>
NCS= The net change in the value of the Portfolio (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) for the 7-day period attributable to a hypothetical account
having a balance of 1 Subaccount unit.
ES = Per unit expenses of the Subaccount for the 7-day period.
UV = The unit value on the first day of the 7-day period.
</TABLE>

Because of the charges and deductions imposed under a Policy, the yield for
the TCW Money Market Subaccount will be lower than the yield for the TCW Money
Market Portfolio. The yield calculations do not reflect the effect of any
premium taxes or Contingent Deferred Sales Charges that may be applicable to a
particular Policy. Contingent Deferred Sales Charges range from 7% to 0% of
the amount of premium withdrawn based on the Policy Year since payment of the
premium.

AUSA may also disclose the effective yield of the TCW Money Market
Subaccount for the same 7-day period, determined on a compounded basis. The
effective yield is calculated by compounding the base period return according
to the following formula:

Effective Yield = (1 + ((NCS -- ES)/UV))/365/7/ -- 1

The yield on amounts held in the TCW Money Market Subaccount normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The TCW Money Market Subaccount's actual yield is affected by changes
in interest rates on money market securities, average portfolio maturity of
the TCW Money Market Portfolio, the types and quality of portfolio securities
held by the TCW Money Market Portfolio and its operating expenses. For the
seven days ended December 31, 1995, the yield of the TCW Money Market
Subaccount was 2.99%, and the effective yield was 3.03%.

OTHER SUBACCOUNT YIELDS

AUSA may from time to time advertise or disclose the current annualized
yield of one or more of the Subaccounts of the Mutual Fund Account (except the
TCW Money Market Subaccount) for

- 11 -
<PAGE>

30-day periods. The annualized yield of a Subaccount refers to income
generated by the Subaccount over a specific 30-day period. Because the yield
is annualized, the yield generated by a Subaccount during the 30-day period is
assumed to be generated each 30-day period over a 12-month period. The yield
is computed by: (i) dividing the net investment income of the Subaccount less
Subaccount expenses for the period, by (ii) the maximum offering price per
unit on the last day of the period times the daily average number of units
outstanding for the period, (iii) compounding that yield for a 6-month period,
and (iv) multiplying that result by 2. Expenses attributable to the Subaccount
include (i) the Administrative Charge and (ii) the Mortality and Expense Risk
Charge. The 30-day yield is calculated according to the following formula:

Yield = 2 x ((((NI -- ES)/(U x UV)) + 1)/6/ -- 1)

Where:
<TABLE>
<C> <S>
NI= Net investment income of the Subaccount for the 30-day period attributable
to the Subaccount's unit.
ES= Expenses of the Subaccount for the 30-day period.
U = The average number of units outstanding.
UV= The unit value at the close (highest) of the last day in the 30-day
period.
</TABLE>

Because of the charges and deductions imposed by the Mutual Fund Account,
the yield for a Subaccount of the Mutual Fund Account will be lower than the
yield for its corresponding Portfolio. The yield calculations do not reflect
the effect of any premium taxes that may be applicable to a particular Policy.
Contingent Deferred Sales Charges range from 7% to 0% of the amount of premium
withdrawn based on the Policy Year since payment of the premium.

The yield on amounts held in the Subaccounts of the Mutual Fund Account
normally will fluctuate over time. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. A Subaccount's actual yield is affected by the types and
quality of its investments and its operating expenses.

TOTAL RETURNS

AUSA may from time to time also advertise or disclose total returns for one
or more of the Subaccounts of the Mutual Fund Account for various periods of
time. One of the periods of time will include the period measured from the
date the Subaccount commenced operations. When a Subaccount has been in
operation for 1, 5 and 10 years, respectively, the total return for these
periods will be provided. Total returns for other periods of time may from
time to time also be disclosed. Total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
to the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month end practicable, considering the
type and media of the communication and will be stated in the communication.

Total returns will be calculated using Subaccount Unit Values which AUSA
calculates on each Business Day based on the performance of the Subaccount's
underlying Portfolio, and the deductions for the Mortality and Expense Risk
Charge and the Administrative Charges. Total return calculations will reflect
the effect of Contingent Deferred Sales Charges that may be applicable to a
particular period. The total return will then be calculated according to the
following formula:

P(1 + T)/n/ = ERV

- 12 -
<PAGE>

Where:
<TABLE>
<C> <S>
T = The average annual total return net of Subaccount recurring charges.
ERV= The ending redeemable value of the hypothetical account at the end of the
period.
P = A hypothetical initial payment of $1,000.
N = The number of years in the period.
</TABLE>

OTHER PERFORMANCE DATA

AUSA may from time to time also disclose average annual total returns in a
non-standard format in conjunction with the standard format described above.
The non-standard format will be identical to the standard format except that
the Contingent Deferred Sales Charge percentage will be assumed to be 0%.

AUSA may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the Contingent
Deferred Sales Charge percentage will be 0%.

CTR = (ERV/P) -- 1

Where:
<TABLE>
<C> <S>
CTR= The cumulative total return net of Subaccount recurring charges for the
period.
ERV= The ending redeemable value of the hypothetical investment at the end of
the period.
P = A hypothetical initial payment of $1,000.
</TABLE>

All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required period, is
also disclosed.

LEGAL MATTERS

Legal advice relating to certain matters under the federal securities laws
applicable to the issue and sale of the Policies has been provided to AUSA by
Sutherland, Asbill & Brennan, of Washington D.C.

INDEPENDENT AUDITORS

The Financial Statements of AUSA, at December 31, 1995 and 1994, and for
each of the two years in the period ended December 31, 1995, and the Financial
Statements of the AUSA Endeavor Variable Annuity Account at December 31, 1995,
and for each of the two years in the period then ended, included in this
Statement of Additional Information have been audited by Ernst & Young LLP,
Independent Auditors, Des Moines, Iowa.

OTHER INFORMATION

A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus or this Statement of Additional
Information. Statements contained in the Prospectus and this Statement of
Additional Information concerning the content of the Policies and other legal
instruments are intended to be

- 13 -
<PAGE>

summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.

FINANCIAL STATEMENTS

The values of the interest of Policy Owners in the Mutual Fund Account will
be affected solely by the investment results of the selected Subaccount(s).
Financial statements for the AUSA Endeavor Variable Annuity Account are
contained herein. The Financial Statements of AUSA, which are included in this
Statement of Additional Information, should be considered only as bearing on
the ability of AUSA to meet its obligations under the Policies. They should
not be considered as bearing on the investment performance of the assets held
in the Mutual Fund Account.

- 14 -
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
AUSA Life Insurance Company, Inc.

We have audited the accompanying statutory-basis balance sheets of AUSA Life
Insurance Company, Inc. as of December 31, 1995 and 1994, and the statutory-
basis statements of operations, changes in capital and surplus and cash flows
for the years then ended. Our audits also included the statutory-basis
financial statement schedules required by Regulation S-X, Article 7. These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules 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.

The Company presents its financial statements in conformity with accounting
practices prescribed or permitted by the Department of Insurance of the State
of New York. The variances between such practices and generally accepted
accounting principles are described in Note 1. The effects of these variances
have not been determined but we believe they are material.

In our opinion, because of the materiality of the effects of the variances
between generally accepted accounting principles and the accounting practices
referred to in the preceding paragraph, the financial statements referred to
above are not intended to and do not present fairly, in conformity with
generally accepted accounting principles, the financial position of AUSA Life
Insurance Company, Inc. at December 31, 1995 and 1994, or the results of its
operations or its cash flows for the years then ended.

Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of AUSA Life
Insurance Company, Inc. at December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Department of Insurance of
the State of New York. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic statutory-basis financial
statements taken as a whole, present fairly in all material respects
information set forth therein.

Ernst & Young LLP

Des Moines, Iowa
February 23, 1996

- 15 -
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

BALANCE SHEETS--STATUTORY BASIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994
---------- ----------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments...................... $ 112,379 $ 89,532
Bonds................................................ 2,523,719 2,099,349
Stocks:
Preferred.......................................... 236 236
Common, at market (cost: $141 in 1995 and 1994).... 346 274
Mortgage loans on real estate........................ 768,424 862,352
Real estate acquired in satisfaction of debt......... 29,333 10,485
Policy loans......................................... 25 24
Other invested assets................................ 723 --
---------- ----------
Total cash and invested assets....................... 3,435,185 3,062,252
Accrued investment income.............................. 51,281 47,156
Federal income taxes recoverable....................... 12 12
Receivable from affiliates............................. 1,932 --
Other assets........................................... 6,189 1,690
Separate account assets................................ 4,249,345 2,907,674
---------- ----------
Total admitted assets................................ $7,743,944 $6,018,785
========== ==========
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life............................................... $ 356 $ 199
Annuity............................................ 122,145 7,572
Accident and health................................ 4,354 --
Policy and contract claim reserves:
Life............................................... 3 3
Accident and health................................ 152 --
Other policyholders' funds........................... 2,991,630 2,761,658
Remittances and items not allocated.................. 24,147 16,763
Asset valuation reserve.............................. 35,160 25,552
Interest maintenance reserve......................... 3,399 1,314
Payable to affiliates................................ -- 7,858
Short-term note payable to affiliate................. 15,200 5,200
Deferred income...................................... 19,182 26,592
Payable under assumption reinsurance agreement....... 73,546 85,612
Other liabilities.................................... 21,559 4,656
Separate account liabilities......................... 4,230,472 2,891,976
---------- ----------
Total liabilities.................................... 7,541,305 5,834,955
Commitments and contingencies
Capital and surplus:
Common stock, $125 par value, 20 shares authorized,
issued and outstanding.............................. 2,500 2,500
Paid-in surplus...................................... 251,150 210,150
Unassigned surplus (deficit)......................... (51,011) (28,820)
---------- ----------
Total capital and surplus............................ 202,639 183,830
---------- ----------
Total liabilities and capital and surplus............ $7,743,944 $6,018,785
========== ==========
</TABLE>

See accompanying notes.

- 16 -
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

STATEMENTS OF OPERATIONS--STATUTORY BASIS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1995 1994
------------ -----------
<S> <C> <C>
Revenues:
Premiums and other considerations, net of
reinsurance:
Life............................................. $ 180 $ 10
Annuity.......................................... 1,107,020 426,329
Accident and health.............................. 213 --
Net investment income.............................. 268,678 254,539
Amortization of interest maintenance reserve....... 1,987 158
Commissions and expense allowances on reinsurance
ceded............................................. 8,793 11,191
------------ ----------
1,386,871 692,957
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits............ 221 8
Surrender benefits............................... 764,290 453,799
Other benefits................................... 1,931 870
Increase (decrease) in aggregate reserves for
policies and contracts:
Life........................................... 157 (1)
Annuity........................................ 114,209 2,722
Accident and health............................ 175 --
Increase in liability for premium and other
deposit type funds.............................. 229,962 34,294
------------ ----------
1,110,945 491,692
Insurance expenses:
Commissions...................................... 83,579 91,312
General insurance expenses....................... 63,316 57,207
Taxes, licenses and fees......................... 421 131
Transfers to separate accounts................... 139,912 63,209
Other expenses................................... 11 --
------------ ----------
287,239 211,859
------------ ----------
1,398,184 703,551
------------ ----------
Loss from operations before federal income taxes and
net realized capital losses on investments.......... (11,313) (10,594)
Federal income tax expense........................... -- --
------------ ----------
Loss from operations before net realized capital
losses on investments............................... (11,313) (10,594)
Net realized capital losses on investments (net of
amounts transferred to interest maintenance
reserve)............................................ (3,432) (928)
------------ ----------
Net loss............................................. $ (14,745) $ (11,522)
============ ==========
</TABLE>

See accompanying notes.

- 17 -
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS--STATUTORY BASIS
(DOLLARS IN THOUSANDS)

YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL UNASSIGNED CAPITAL
COMMON PAID-IN SURPLUS AND
STOCK CAPITAL (DEFICIT) SURPLUS
------ ---------- ---------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1994.............. $2,500 $210,150 $ (4,297) $208,353
Net loss for 1994..................... -- -- (11,522) (11,522)
Net unrealized capital losses......... -- -- (35) (35)
Increase in non-admitted assets....... -- -- (855) (855)
Increase in asset valuation reserve... -- -- (12,809) (12,809)
Seed money contributed to separate
account.............................. -- -- (15,000) (15,000)
Increase in surplus in separate
account.............................. -- -- 15,698 15,698
------ -------- -------- --------
Balance at December 31, 1994............ 2,500 210,150 (28,820) 183,830
Capital contribution.................. -- 41,000 -- 41,000
Net loss for 1995..................... -- -- (14,745) (14,745)
Net unrealized capital gains.......... -- -- 172 172
Increase in non-admitted assets....... -- -- (61) (61)
Increase in asset valuation reserve... -- -- (9,608) (9,608)
Surplus effect of reinsurance......... -- -- (70) (70)
Redemption of separate account seed
money................................ -- -- (1,000) (1,000)
Increase in surplus in separate
account.............................. -- -- 3,121 3,121
------ -------- -------- --------
Balance at December 31, 1995............ $2,500 $251,150 $(51,011) $202,639
====== ======== ======== ========
</TABLE>

See accompanying notes.

- 18 -
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

STATEMENTS OF CASH FLOWS--STATUTORY BASIS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1995 1994
----------- -----------
<S> <C> <C>
SOURCES OF CASH
Premiums and other considerations, net of
reinsurance......................................... $ 1,116,102 $ 438,260
Net investment income................................ 265,966 246,801
----------- -----------
1,382,068 685,061
Life and accident and health claims.................. (215) (10)
Surrender benefits and other fund withdrawals........ (764,290) (453,799)
Other benefits to policyholders...................... (1,931) (868)
Commissions, other expenses and other taxes.......... (160,462) (63,919)
Net transfers to separate accounts................... (139,912) (63,209)
Federal income taxes, excluding tax on capital gains. -- (62)
Net increase in policy loans......................... (1) (6)
Increase in remittances and items not allocated...... 7,384 10,340
----------- -----------
Net cash provided by operations...................... 322,641 113,528
Proceeds from investments sold, matured or repaid:
Bonds.............................................. 432,605 421,275
Common stocks...................................... -- 2,022
Mortgage loans..................................... 138,243 189,421
Real estate........................................ 4,952 32
Other, net......................................... 5 (48)
----------- -----------
Total cash from investments.......................... 575,805 612,702
Capital contribution................................. 41,000 --
Cash received in connection with a reinsurance
transaction......................................... 38 --
Issuance of intercompany notes payable, net.......... 10,000 5,200
Other sources........................................ 22,224 14,695
----------- -----------
Total sources of cash................................ 971,708 746,125
APPLICATIONS OF CASH
Cost of investments acquired:
Bonds.............................................. 878,082 1,038,312
Common stocks...................................... -- 27
Mortgage loans..................................... 54,140 1,544
Other invested assets.............................. 725 --
----------- -----------
Total investments acquired........................... 932,947 1,039,883
Seed money contributed to separate accounts.......... 1,000 15,000
Other applications................................... 14,914 4,229
----------- -----------
Total applications of cash........................... 948,861 1,059,112
----------- -----------
Net change in cash and short-term investments........ 22,847 (312,987)
Cash and short-term investments at beginning of year. 89,532 402,519
----------- -----------
Cash and short-term investments at end of year....... $ 112,379 $ 89,532
=========== ===========
</TABLE>

See accompanying notes.

- 19 -
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

AUSA Life Insurance Company, Inc. ("the Company") is a stock life insurance
company and is a wholly-owned subsidiary of First AUSA Life Insurance Company
("First AUSA") which, in turn, is a wholly-owned subsidiary of AEGON USA
("AEGON"). AEGON is a wholly-owned subsidiary of AEGON nv, a holding company
organized under the laws of The Netherlands. Effective September 24, 1993,
First AUSA purchased from The Dreyfus Corporation ("Dreyfus"), its entire
interest in Dreyfus Life Insurance Company, a stock life insurance company. At
the time of purchase, the Company had total assets and capital and surplus of
approximately $17 million and $11 million, respectively. Effective September
27, 1993, Dreyfus Life Insurance Company changed its name to AUSA Life
Insurance Company, Inc. On December 31, 1993, the Company entered into an
assumption reinsurance agreement with Mutual of New York ("MONY") to transfer
certain group pension business of MONY to the Company.

During 1995, the Board of Directors adopted a resolution calling for the
merger of all the assets and liabilities of International Life Investors
Insurance Company, an affiliate, into the Company. This merger is expected to
occur in 1996.

Financial Statements

The accompanying financial statements present the condition of the Company
at December 31, 1995 and 1994 and the results of its operations for the year
ended December 31, 1995 and 1994. Results of operations for 1993 are not
included, as the Company believes such data would not provide a meaningful
comparison with respect to financial results after the date of the
acquisition.

Nature of Business

The Company primarily sells group fixed and variable annuities. The Company
is licensed in 44 states and the District of Columbia and is actively in the
process of becoming licensed in all 50 states. Sales of the Company's products
are primarily through brokers and agents.

Basis of Presentation

The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract reserves, guarantee fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and
assumptions utilized which could have a material impact on the financial
statements.

The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Department of Insurance of
the State of New York, which practices differ in some respects from generally
accepted accounting principles. The more significant of these differences are
as follows: (a) bonds are generally carried at amortized cost

- 20 -
<PAGE>

rather than segregating the portfolio into held-to-maturity (carried at
amortized cost), available-for-sale (carried at fair value), and trading
(reported at fair value) classifications; (b) acquisition costs of acquiring
new business are charged to current operations as incurred rather than
deferred and amortized over the life of the policies; (c) policy reserves on
traditional life products are based on statutory mortality rates and interest
which may differ from reserves based on reasonable assumptions of expected
mortality, interest, and withdrawals which include a provision for possible
unfavorable deviation from such assumptions; (d) policy reserves on certain
investment products use discounting methodologies utilizing statutory interest
rates rather than full account values; (e) reinsurance amounts are netted
against the corresponding receivable or payable rather than shown as gross
amounts on the balance sheet; (f) deferred income taxes are not provided for
the difference between the financial statement and income tax bases of assets
and liabilities; (g) net realized gains or losses attributed to changes in the
level of interest rates in the market are deferred and amortized over the
remaining life of the bond or mortgage loan, rather than recognized as gains
or losses in the statement of operations when the sale is completed;
(h) declines in the estimated realizable value of investments are provided for
through the establishment of a formula-determined statutory investment reserve
(carried as a liability) changes to which are charged directly to surplus,
rather than through recognition in the statement of operations for declines in
value, when such declines are judged to be other than temporary; (i) certain
assets designated as "non-admitted assets" have been charged to surplus rather
than being reported as assets; (j) revenues for universal life and investment
products consist of premiums received rather than policy charges for the cost
of insurance, policy administration charges, amortization of policy initiation
fees and surrender charges assessed; (k) pension expense is recorded as
amounts are paid; (l) adjustments to federal income taxes of prior years are
charged or credited directly to unassigned surplus, rather than reported as a
component of expense in the statement of operations; and (m) gains or losses
on dispositions of business are charged or credited directly to unassigned
surplus rather than being reported in the statement of operations. The effects
of these variances have not been determined by the Company.

The National Association of Insurance Commissioners (NAIC) currently is in
the process of recodifying statutory accounting practices, the result of which
is expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be completed in
1996, will likely change, to some extent, prescribed statutory accounting
practices and may result in changes to the accounting practices that the
Company uses to prepare its statutory-basis financial statements.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid investments with remaining maturity of one year or less when
purchased to be cash equivalents.

Investments

Investments in bonds (except those to which the Securities Valuation Office
of the NAIC has ascribed a value), mortgage loans on real estate and short-
term investments are reported at cost adjusted for amortization of premiums
and accrual of discounts. Amortized costs for bonds and mortgage loans on real
estate that were acquired through the reinsurance agreement, described
earlier, were initially recorded at market value, consistent with the
aforementioned agreement and as prescribed by the Department of Insurance of
the State of New York. Amortization is computed using methods which result in
a level yield over the expected life of the security. The Company reviews its
prepayment assumptions on mortgage and other asset backed securities at
regular intervals and adjusts amortization rates retrospectively when such
assumptions are changed due to experience and/or expected future patterns.
Investments in preferred stocks in

- 21 -
<PAGE>

good standing are reported at cost. Investments in preferred stocks not in
good standing are reported at the lower of cost or market. Common stocks,
which may include shares of mutual funds (money market and other), are carried
at market. Real estate is reported at cost less allowances for depreciation.
Depreciation is computed principally by the straight-line method. Policy loans
are reported at unpaid principal. Other invested assets consist principally of
investments in various joint ventures and are recorded at equity in underlying
net assets. Other "admitted assets" are valued, principally at cost, as
required or permitted by New York Insurance Laws.

Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for
anticipated losses in the event of default by issuers of certain invested
assets. These amounts are determined using a formula prescribed by the NAIC
and are reported as a liability. The formula for the AVR provides for a
corresponding adjustment for realized gains and losses, net of amounts
attributed to changes in the general level of interest rates. Under a formula
prescribed by the NAIC, the Company defers, in the Interest Maintenance
Reserve (IMR), the portion of realized gains and losses on sales of fixed
income investments, principally bonds and mortgage loans, attributable to
changes in the general level of interest rates and amortizes those deferrals
over the remaining period to maturity of the security.

Interest income is recognized on an accrual basis. The Company does not
accrue income on bonds in default, mortgage loans on real estate in default
and/or foreclosure or which are delinquent more than twelve months, or real
estate where rent is in arrears for more than three months. Further, income is
not accrued when collection is uncertain. At December 31, 1995 and 1994, the
Company excluded investment income due and accrued of $183 and $774,
respectively, with respect to such practices.

MONY entered into foreign exchange interest rate swap agreements to modify
the interest characteristics of certain of its outstanding fixed maturity
securities from a fixed rate in a foreign currency to a fixed rate in U. S.
Dollars prior to the reinsurance assumption agreement. These agreements were
assigned to the Company in connection with the reinsurance assumption
agreement. The interest rate swap agreements involve the exchange of a fixed
rate in a foreign currency for fixed rate interest payments in U. S. Dollars
over the life of the agreement without an exchange of the underlying principal
amount of $32,500 at December 31, 1995 and 1994. The differential to be paid
or received is accrued as incurred and recognized as an adjustment to interest
related to the underlying fixed maturity. The related amount payable to or
receivable from counterparties is included in other liabilities or assets. The
fair values of the swap agreements are not recognized in the financial
statements.

Deferred income for unrealized gains and losses on the securities valued at
market at the time of the assumption reinsurance agreement (described in Note
4) are returned to Mutual of New York at the time of realization pursuant to
the agreement.

Aggregate Policy Reserves

Life and annuity benefit reserves are developed by actuarial methods and are
determined based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate, reserves that
are greater than or equal to the minimum required by law.

The aggregate policy reserves for life insurance policies are based
principally upon the 1941 and 1958 Commissioners' Standard Ordinary Mortality
and American Experience Mortality Tables. The reserves are calculated using
interest rates ranging from 2.50 to 4.00 percent and are

- 22 -
<PAGE>

computed principally on the Net Level Premium Valuation and the Commissioners'
Reserve Valuation Methods.

Deferred annuity and other policyholders' funds reserves are calculated
according to the Commissioners' Annuity Reserve Valuation Method including
excess interest reserves to cover situations where the future interest
guarantees plus the decrease in surrender charges are in excess of the maximum
valuation rates of interest. Reserves for immediate annuities and
supplementary contracts with and without life contingencies are equal to the
present value of future payments assuming interest rates ranging from 5.50 to
7.50 percent and mortality rates, where appropriate, from a variety of tables.

Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.

Policy and Contract Claim Reserves

Claim reserves represent the estimated accrued liability for claims reported
to the Company and claims incurred but not yet reported through the statement
date. These reserves are estimated using either individual case-basis
valuations or statistical analysis techniques. These estimates are subject to
the effects of trends in claim severity and frequency. The estimates are
continually reviewed and adjusted as necessary as experience develops or new
information becomes available.

Separate Account

Assets held in trust for purchases of separate account contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. Income and gains and losses with respect to these
assets accrue to the benefit of the policyholders. The Company received
separate account premiums of $536,128 and $180,789 in 1995 and 1994,
respectively. The assets in the separate accounts for the variable annuities
and participating annuities are held at a market value of $3,650,091 and
$2,398,125 for the years ended December 31, 1995 and 1994, respectively.

The separate account assets in the fixed government accounts and stable fund
accounts are carried at an amortized cost of $599,254 and $509,549 for the
years ended December 31, 1995 and 1994, respectively.

Reclassifications

Certain reclassifications have been made to the 1994 financial statements to
conform to the 1995 presentation.

2. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
about Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures About Derivative Financial Instruments and
Fair Value of Financial Instruments, requires additional disclosures about
derivatives. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.

- 23 -
<PAGE>

In that regard, the derived fair value estimates cannot be substantiated by
comparisons to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. SFAS No. 107 and No. 119 exclude
certain financial instruments and all nonfinancial instruments from their
disclosure requirements and allows companies to forego the disclosures when
those estimates can only be made at excessive cost. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Company.

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

Cash and cash equivalents, short-term investments: The carrying amounts
reported in the statutory-basis balance sheet for these instruments
approximate their fair values.

Investment securities: Fair values for fixed maturity securities
(including redeemable preferred stocks) are based on quoted market prices,
where available. For fixed maturity securities not actively traded, fair
values are estimated using values obtained from independent pricing
services or, in the case of private placements, are estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the investments.
The fair values for equity securities are based on quoted market prices and
are recognized in the statutory-basis balance sheet.

Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans are assumed to equal their carrying
value.

Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash
flow calculations, based on interest rates currently being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued.

Interest rate swap: Estimated fair value of the foreign currency interest
rate swap is based upon the pricing differential for similar swap
agreements. The fair value of the interest rate swap has been included with
the fair value of the underlying fixed maturities.

Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure
to changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.

The following sets forth a comparison of the fair values and carrying values
of the Company's financial instruments subject to the provisions of SFAS
No.107 and No. 119:

<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
1995 1994
--------------------- ---------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Bonds................... $2,523,719 $2,605,786 $2,099,349 $1,976,667
Preferred stocks........ 236 180 236 162
Common stock............ 346 346 274 274
Mortgage loans on real
estate................. 768,424 806,395 862,352 851,352
Policy loans............ 25 25 24 24
Cash and short-term
investments............ 112,379 112,379 89,532 89,532
Separate account assets. 4,249,345 4,261,843 2,907,674 2,876,170
LIABILITIES
Investment contract
liabilities............ 3,113,766 3,077,557 2,771,701 2,685,570
Separate account
annuities.............. 4,237,983 4,219,281 2,886,836 2,841,006
</TABLE>

- 24 -
<PAGE>

3. INVESTMENTS

The carrying value and estimated market value of investments in debt
securities were as follows:

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Bonds:
United States Government and
agencies..................... $ 81,460 $ 1,010 $ 21 $ 82,449
State, municipal and other
government................... 20,584 871 14 21,441
Public utilities.............. 169,422 3,105 498 172,029
Industrial and miscellaneous.. 1,482,600 51,205 7,727 1,526,078
Mortgage-backed securities.... 769,653 36,675 2,539 803,789
---------- ------- -------- ----------
2,523,719 92,866 10,799 2,605,786
Preferred stocks................ 236 -- 56 180
---------- ------- -------- ----------
$2,523,955 $92,866 $ 10,855 $2,605,966
========== ======= ======== ==========
DECEMBER 31, 1994
Bonds:
United States Government and
agencies..................... $ 101,024 $ 247 $ 7,604 $ 93,667
State, municipal and other
government................... 23,270 -- 1,903 21,367
Public utilities.............. 162,527 15 14,017 148,525
Industrial and miscellaneous.. 1,448,647 3,569 82,144 1,370,072
Mortgage-backed securities.... 363,881 377 21,222 343,036
---------- ------- -------- ----------
2,099,349 4,208 126,890 1,976,667
Preferred stocks................ 236 -- 74 162
---------- ------- -------- ----------
$2,099,585 $ 4,208 $126,964 $1,976,829
========== ======= ======== ==========
</TABLE>

The carrying value and estimated market value of bonds at December 31, 1995,
by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
---------- ----------
<S> <C> <C>
Due in one year or less............................... $ 62,034 $ 62,250
Due after one year through five years................. 795,601 808,309
Due after five years through ten years................ 773,886 809,464
Due after ten years................................... 122,545 121,974
---------- ----------
1,754,066 1,801,997
Mortgage-backed securities............................ 769,653 803,789
---------- ----------
$2,523,719 $2,605,786
========== ==========
</TABLE>

- 25 -
<PAGE>

A detail of net investment income is presented below:

<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1994
-------- --------
<S> <C> <C>
Interest on bonds and notes.............................. $180,500 $145,612
Mortgage loans........................................... 98,653 117,859
Real estate.............................................. 2,400 322
Dividends on equity investments.......................... 19 51
Interest on policy loans................................. 1 1
Other investment loss.................................... (3,927) (2,458)
-------- --------
Gross investment income.................................. 277,646 261,387
Investment expenses...................................... 8,968 6,848
-------- --------
Net investment income.................................... $268,678 $254,539
======== ========
</TABLE>

Proceeds from sales and maturities of debt securities and related gross
realized gains and losses were as follows:

<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1994
-------- --------
<S> <C> <C>
Proceeds................................................. $432,605 $421,275
======== ========
Gross realized gains..................................... $ 7,214 $ 7,643
Gross realized losses.................................... 13,407 13,681
-------- --------
Net realized losses...................................... $ (6,193) $ (6,038)
======== ========
</TABLE>

At December 31, 1995, investments with an aggregate carrying value of $2,089
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required
by statute.

Realized investment gains (losses) and changes in unrealized gains (losses)
for investments are summarized below:

<TABLE>
<CAPTION>
REALIZED
----------------
YEAR ENDED
DECEMBER 31
----------------
1995 1994
------- -------
<S> <C> <C>
Debt securities........................................... $(6,193) $(6,038)
Short-term investments.................................... 2 (48)
Mortgage loans on real estate............................. (3,650) 1,067
Real estate............................................... (628) --
Other invested assets..................................... 11,109 5,412
------- -------
640 393
Tax effect................................................ -- --
Transfer to interest maintenance reserve.................. (4,072) (1,321)
------- -------
Total realized losses..................................... $(3,432) $ (928)
======= =======
</TABLE>

- 26 -
<PAGE>

<TABLE>
<CAPTION>
CHANGE IN
UNREALIZED
-------------
YEAR ENDED
DECEMBER 31
-------------
1995 1994
----- -----
<S> <C> <C>
Debt securities.............................................. $(750) $ --
Equity securities............................................ 72 (35)
----- ----
Change in unrealized depreciation............................ $(678) $(35)
===== ====
</TABLE>

Gross unrealized gains and gross unrealized losses on equity securities at
December 31, 1995 were as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------
1995 1994
---- ----
<S> <C> <C>
Unrealized gains................................................. $205 $133
Unrealized losses................................................ -- --
---- ----
Net unrealized gains............................................. $205 $133
==== ====
</TABLE>

During 1995, the Company issued mortgage loans with interest rates ranging
from 7.41% to 9.86%. The maximum percentage of any one loan to the value of
the underlying real estate at origination was 86%. Mortgage loans with a
carrying value of $13,780 were non-income producing for the previous twelve
months. Accrued interest of $150 related to these mortgage loans was excluded
from investment income. The Company refinanced the mortgage loans of two
properties with an aggregate carrying value of $23,378 to reduce the interest
rates, as a result of the current interest rate environment. The Company
requires all mortgage loans to carry fire insurance equal to the value of the
underlying property.

During 1995 and 1994, there were $14,264 and $10,587, respectively, in
foreclosed mortgage loans that were transferred to real estate. At December
31, 1995 and 1994, the Company held a mortgage loan loss reserve in the asset
valuation reserve of $9,921 and $9,061, respectively.

At December 31, 1995, the mortgage loan portfolio is diversified by
geographic region and specific collateral property type as follows:

<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION
- -----------------------------
<S> <C>
South Atlantic.......... 31.1%
E. North Central........ 20.7
Mountain................ 15.6
New England............. 11.5
W. North Central........ 9.8
W. South Central........ 8.3
Pacific................. 3.0
</TABLE>
<TABLE>
<CAPTION>
PROPERTY TYPE DISTRIBUTION
- -----------------------------
<S> <C>
Retail.................. 36.7%
Office.................. 33.2
Apartment............... 17.2
Other................... 10.4
Industrial.............. 2.5
</TABLE>

- 27 -
<PAGE>

At December 31, 1995, the Company had the following investments, excluding
U.S. Government guaranteed or insured issues, which individually represented
more than ten percent of capital and surplus and the asset valuation reserve:

<TABLE>
<CAPTION>
CARRYING
DESCRIPTION OF SECURITY VALUE
----------------------- --------
<S> <C>
Bonds:
Falcon Telecable.................................................. $44,370
Connecticut National Bank......................................... 36,220
Green Tree Financial Corporation.................................. 35,831
Standard Credit Card.............................................. 32,629
PSEG Capital...................................................... 28,783
Chemical Banking.................................................. 26,166
Triax Association................................................. 25,000
</TABLE>

4. REINSURANCE

The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to
meet its obligation under the reinsurance treaty.

Premiums earned reflect the following reinsurance assumed and ceded amounts
for the year ended December 31:

<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Direct premiums........................................ $1,105,029 $295,678
Reinsurance assumed.................................... 35,847 130,665
Reinsurance ceded...................................... (33,463) (4)
---------- --------
Net premiums earned.................................... $1,107,413 $426,339
========== ========
</TABLE>

The aggregate reserves for policies and contracts were reduced for reserve
credits for reinsurance ceded at December 31, 1995 and 1994 of $32,948 and $0,
respectively.

On December 31, 1993, the Company and MONY entered into an assumption
reinsurance agreement whereby, all of the general account liabilities were
novated to the Company from MONY as state approvals were received.

In accordance with the agreement, MONY will receive payments relating to the
performance of the assets and liabilities that exist at the date of closing
for a period of nine years. These payments will be reduced for certain
administrative expenses as defined in the agreement. The Company will
recognize operating gains and losses on renewal premiums received after
December 31, 1993 of the business in-force at December 31, 1993, and on all
new business written after that date. At the end of nine years, the Company
will purchase from MONY the remaining transferred business inforce based upon
a formula described in the agreement. At December 31, 1995 and 1994, the
Company owed MONY $73,546 and $85,612, respectively, which represents the
amount earned by MONY under the gain sharing calculation and certain fees for
investment management services for the respective years.

- 28 -
<PAGE>

In connection with the transaction, MONY purchased $150,000 and $50,000 in
Series A and Series B notes, respectively, of AEGON. The proceeds were used to
enhance the surplus of the Company. Both the Series A and Series B notes bear
a market rate of interest and mature in nine years.

AEGON provides general and administrative services for the transferred
business under a related agreement with MONY. The agreement specifies
prescribed rates for expenses to administer the business up to certain levels.
In addition, AEGON also provides investment management services on the assets
underlying the new pension business written by the Company while MONY
continues to provide investment management services for assets supporting the
remaining policy liabilities which were transferred at December 31, 1993.

On October 1, 1995, the Company entered into a reinsurance agreement with a
non-affiliate. As a result, the Company received $4,242 of assets, including
$38 of cash and $4,312 of liabilities. The difference between the assets and
the liabilities of $70 was charged directly to unassigned surplus.

5. INCOME TAXES

Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to loss from operations before taxes and
realized capital losses for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
----------------
1995 1994
------- -------
<S> <C> <C>
Computed tax benefit at federal statutory rate (35%)....... $(3,959) $(3,708)
Tax reserve adjustment..................................... 184 121
Deferred acquisition cost-- tax basis...................... 596 6
Carryforward of current year operating loss................ 3,351 3,460
Other items--net........................................... (172) 121
------- -------
Federal income tax expense................................. $ -- $ --
======= =======
</TABLE>

Prior to 1984, as provided for under the Life Insurance Company Tax Act of
1959, a portion of statutory income was not subject to current taxation but
was accumulated for income tax purposes in a memorandum account referred to as
the policyholders' surplus account. No federal income taxes have been provided
for in the financial statements on income deferred in the policyholders'
surplus account ($800 at December 31, 1995). To the extent dividends are paid
from the amount accumulated in the policyholders' surplus account, net
earnings would be reduced by the amount of tax required to be paid. Should the
entire amount in the policyholders' surplus account become taxable, the tax
thereon computed at current rates would amount to approximately $280.

At December 31, 1995, the Company had net operating loss carryforwards of
approximately $19,400 which expire through 2010.

- 29 -
<PAGE>

6. POLICY AND CONTRACT ATTRIBUTES

A portion of the Company's policy reserves and other policyholders' funds
relate to liabilities established on a variety of the Company's products that
are not subject to significant mortality or morbidity risk; however, there may
be certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics, are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------
AMOUNT PERCENT OF TOTAL
---------- ----------------
<S> <C> <C>
Subject to discretionary withdrawal with market
value adjustment............................... $ 506,683 16.1%
Subject to discretionary withdrawal at book
value less surrender charge.................... 1,892,739 60.1%
Subject to discretionary withdrawal at market
value.......................................... 2 0.0%
Subject to discretionary withdrawal at book
value (minimal or no charges or adjustments)... 523,843 16.7%
Not subject to discretionary withdrawal
provision...................................... 223,617 7.1%
---------- -----
3,146,884 100.0%
Less reinsurance ceded.......................... 32,948
----------
Total policy reserves on annuities and deposit
fund liabilities............................... $3,113,936
==========
</TABLE>

Separate and variable account assets held by the Company represent contracts
where the benefit is determined by the performance of the investments held in
the separate account. There may be certain restrictions placed upon the amount
of funds that can be withdrawn without penalty. The amount of separate account
liabilities on these products, by withdrawal characteristics, are summarized
as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------
GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
---------- -------------- ----------
<S> <C> <C> <C>
Subject to discretionary withdrawal
with market value adjustment.......... $ 290,684 $ -- $ 290,684
Subject to discretionary withdrawal at
book value less surrender charge...... 280,770 -- 280,770
Subject to discretionary withdrawal at
market value.......................... 97,049 1,492,670 1,589,719
Not subject to discretionary
withdrawal............................ 2,076,810 -- 2,076,810
---------- ---------- ----------
$2,745,313 $1,492,670 $4,237,983
========== ========== ==========
</TABLE>

At December 31, 1995 and 1994, the Company had insurance in force
aggregating $52 and $65, respectively, in which the gross premiums are less
than the net premiums required by the valuation standards established by the
Insurance Division, Department of Commerce, of the State of Iowa.

- 30 -
<PAGE>

7. DIVIDEND RESTRICTIONS

Generally, an insurance company's ability to pay dividends is limited to the
amount that their net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital requirements. However,
payment of such amounts as dividends may be subject to approval by regulatory
authorities. The Company is not entitled to pay out any dividends in 1996
without prior approval.

8. RETIREMENT AND COMPENSATION PLANS

The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The
pension expense is allocated among the participating companies based on the
FASB 87 expense as a percent of salaries. The benefits are based on years of
service and the employee's compensation during the highest five consecutive
years of employment. The Company was allocated no pension expense for the
years ended December 31, 1995 and 1994. The plan is subject to the reporting
and disclosure requirements of the Employee Retirement Income Security Act of
1974.

The Company's employees also participate in a contributory defined
contribution plan sponsored by AEGON which is qualified under Section 401(k)
of the Internal Revenue Service Code. Employees of the Company who customarily
work at least 1,000 hours during each calendar year and meet the other
eligibility requirements, are participants of the plan. Participants may elect
to contribute up to fifteen percent of their salary to the plan. The Company
will match an amount up to three percent of the participant's salary.
Participants may direct all of their contributions and plan balances to be
invested in a variety of investment options. The plan is subject to the
reporting and disclosure requirements of the Employee Retirement Income
Security Act of 1974. The Company was allocated no expense for the years ended
December 31, 1995 and 1994.

AEGON sponsors supplemental retirement plans to provide the Company's senior
management with benefits in excess of normal pension benefits. The plans are
noncontributory and benefits are based on years of service and the employee's
compensation level. The plans are unfunded and nonqualified under the Internal
Revenue Service Code. In addition, AEGON has established incentive deferred
compensation plans for certain key employees of the Company. AEGON also
sponsors an employee stock option plan for individuals employed at least three
years and a stock purchase plan for its producers, with the participating
affiliated companies establishing their own eligibility criteria, producer
contribution limits and company matching formula. These plans have been
accrued or funded as deemed appropriate by management of AEGON and the
Company.

In addition to pension benefits, the Company participates in plans sponsored
by AEGON that provide postretirement medical, dental and life insurance
benefits to employees meeting certain eligibility requirements. Portions of
the medical and dental plans are contributory. The expenses of the
postretirement plans calculated on the pay-as-you-go basis are charged to
affiliates in accordance with an intercompany cost sharing arrangement. The
Company was allocated no expense for the years ended December 31, 1995 and
1994.

9. RELATED PARTY TRANSACTIONS

In accordance with an agreement between AEGON and the Company, AEGON will
ensure the maintenance of certain minimum tangible net worth, operating
leverage and liquidity levels of the Company, as defined in the agreement,
through the contribution of additional capital by the Company's parent as
needed.

- 31 -
<PAGE>

The Company is allocated administrative and benefit expenses from the parent
for employee related costs, as all employees are considered employees of the
parent, not employees of the Company.

The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1995 and
1994, the Company paid $2,212 and $0, respectively, for these services, which
approximates their costs to the affiliates.

Payable to affiliates and intercompany borrowings bear interest at the
thirty-day commercial paper rates ranging from 5.00% to 5.85% at December 31,
1995. During 1995 and 1994, the Company paid interest of $193 and $43,
respectively, to affiliates.

10. COMMITMENTS AND CONTINGENCIES

The Company is a party to legal proceedings incidental to its business.
Although such litigation sometimes includes substantial demands for
compensatory and punitive damages, in addition to contract liability, it is
management's opinion, after consultation with counsel and a review of
available facts, that damages arising from such demands will not be material
to the Company's financial position.

The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance
companies for the benefit of policyholders and claimants in the event of
insolvency of other insurance companies. In accordance with the purchase
agreement, assessments related to periods prior to the purchase of the Company
will be paid by Dreyfus. Assessments attributable to business reinsured from
MONY for premiums received prior to the date of the transaction will be paid
by MONY. The Company will be responsible for assessments, if any, attributable
to premium income after the date of purchase. The guaranty fund expense was
$15 and $0 for the years ended December 31, 1995 and 1994, respectively.

- 32 -
<PAGE>

SCHEDULE I

AUSA LIFE INSURANCE COMPANY, INC.

SUMMARY OF INVESTMENTS--OTHER THAN
INVESTMENTS IN RELATED PARTIES
(DOLLARS IN THOUSANDS)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
AMOUNT AT WHICH
MARKET SHOWN IN THE
TYPE OF INVESTMENT COST(1) VALUE BALANCE SHEET(2)
------------------ ---------- --------- ----------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds:
United States Government and government
agencies and authorities.............. $ 499,932 $ 517,318 $ 499,232
States, municipalities and political
subdivisions.......................... 5,068 5,444 5,062
Foreign governments.................... 15,980 15,996 15,522
Public utilities....................... 172,286 172,029 169,422
All other corporate bonds.............. 1,853,621 1,894,999 1,834,481
Redeemable preferred stock............... 236 180 236
---------- --------- ----------
Total fixed maturities................... 2,547,123 2,605,966 2,523,955
EQUITY SECURITIES
Common stocks--industrial, miscellaneous
and all other........................... 141 346 346
---------- --------- ----------
Total equity securities.................. 141 346 346
Mortgage loans on real estate............ 768,424 768,424
Real estate.............................. 29,333 29,333
Policy loans............................. 25 25
Cash and short-term investments.......... 112,379 112,379
---------- ----------
Total investments........................ $3,457,425 $3,434,462
========== ==========
</TABLE>
- --------
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual of discounts.
(2) Amounts differ from cost as certain bonds have been adjusted to reflect
other than temporary declines in value charged to surplus, as prescribed
by the NAIC.

- 33 -
<PAGE>

SCHEDULE III

AUSA LIFE INSURANCE COMPANY, INC.

SUPPLEMENTARY INSURANCE INFORMATION
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FUTURE POLICY POLICY AND
BENEFITS AND UNEARNED CONTRACT
EXPENSES PREMIUMS LIABILITIES
------------- -------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Individual life.............................. $ 354 $-- $ 3
Individual health............................ 4,021 333 152
Group life and health........................ 2 -- --
Annuity...................................... 122,145 -- --
-------- ---- ----
$126,522 $333 $155
======== ==== ====
DECEMBER 31, 1994
Individual life.............................. $ 197 $-- $ 3
Individual health............................ -- -- --
Group life and health........................ 2 -- --
Annuity...................................... 7,572 -- --
-------- ---- ----
$ 7,771 $-- $ 3
======== ==== ====
</TABLE>

- 34 -
<PAGE>

<TABLE>
<CAPTION>
NET BENEFITS, CLAIMS OTHER
PREMIUM INVESTMENT LOSSES AND OPERATING PREMIUMS
REVENUE INCOME SETTLEMENT EXPENSES EXPENSES WRITTEN
------- ---------- ------------------- --------- ----------
<S> <C> <C> <C> <C>
$ 180 $ 47 $ 4 $ 4 $ --
213 85 386 62 --
-- -- -- -- 195
1,107,020 268,546 1,110,555 287,173 1,606,197
- ---------- -------- ---------- -------- ----------
$1,107,413 $268,678 $1,110,945 $287,239 $1,606,392
========== ======== ========== ======== ==========
$ 10 $ 19 $ 5 $ 2 $ --
-- -- -- -- --
-- -- -- -- --
426,329 254,520 491,686 211,857 426,329
- ---------- -------- ---------- -------- ----------
$ 426,339 $254,539 $ 491,691 $211,859 $ 426,329
========== ======== ========== ======== ==========
</TABLE>

- 35 -
<PAGE>

SCHEDULE IV

AUSA LIFE INSURANCE COMPANY, INC.

REINSURANCE
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995
Life insurance in force.. $ 629 $ 150 $ -- $ 479 -- %
========== ======= ======== ========== ====
Premiums:
Individual life........ $ 184 $ 4 $ -- $ 180 -- %
Individual health...... -- -- -- -- --
Group life and health.. -- -- -- -- --
Annuity................ 1,105,029 33,459 35,847 1,107,233 3
---------- ------- -------- ---------- ----
$1,104,845 $33,463 $ 35,847 $1,107,413 3%
========== ======= ======== ========== ====
YEAR ENDED DECEMBER 31,
1994
Life insurance in force.. $ 681 $ 150 $ -- $ 531 -- %
========== ======= ======== ========== ====
Premiums:
Individual life........ $ 14 $ 4 $ -- $ 10 -- %
Individual health...... -- -- -- -- --
Group life and health.. -- -- -- -- --
Annuity................ 295,664 -- 130,665 426,329 31
---------- ------- -------- ---------- ----
$ 295,678 $ 4 $130,665 $ 426,339 31%
========== ======= ======== ========== ====
</TABLE>

- 36 -
<PAGE>

THE AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Contract Owners of
The AUSA Endeavor Variable Annuity Account,
AUSA Life Insurance Company, Inc.:

We have audited the accompanying balance sheet of The AUSA Endeavor Variable
Annuity Account, formerly the ILI Endeavor Variable Annuity Account,
(comprising, respectively, the Money Market, Managed Asset Allocation, T. Rowe
Price International Stock, formerly Global Growth, Quest for Value Equity,
Quest for Value Small Cap, U.S. Government Securities, T. Rowe Price Equity
Income, T. Rowe Price Growth Stock and Growth subaccounts) as of December 31,
1995, and the related statements of operations and changes in contract owners'
equity for the periods indicated therein. These financial statements are the
responsibility of the Variable Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of mutual fund shares owned as of December
31, 1995 by correspondence with the mutual funds' transfer agent. 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 each of the respective
subaccounts constituting The AUSA Endeavor Variable Annuity Account at
December 31, 1995, and the results of their operations and changes in their
contract owners' equity for the periods indicated therein in conformity with
generally accepted accounting principles.

Ernst & Young LLP

Des Moines, Iowa
February 6, 1996

- 37 -
<PAGE>

THE AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT

BALANCE SHEET
DECEMBER 31, 1995

<TABLE>
<CAPTION>
MANAGED
MONEY ASSET
MARKET ALLOCATION
TOTAL SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments in mutual funds, at current market
value:
Endeavor Series Trust--Money Market
Portfolio
302,444.300 shares @ $1.00 (cost
$302,444).................................. $ 302,444 302,444 --
Endeavor Series Trust--Managed Asset
Allocation Portfolio 58,916.896 shares
@ $16.28 (cost $849,657)................... 959,167 -- 959,167
Endeavor Series Trust--T. Rowe Price
International Stock Portfolio 65,430.721
shares @ $12.19 (cost $775,306)............ 797,600 -- --
Endeavor Series Trust--Quest for Value
Equity Portfolio 53,374.980 shares @ $14.23
(cost $699,422)............................ 759,526 -- --
Endeavor Series Trust--Quest for Value Small
Cap Portfolio 52,866.272 shares @ $12.22
(cost $600,276)............................ 646,026 -- --
Endeavor Series Trust--U.S. Government
Securities Portfolio 20,217.241 shares
@ $11.39 (cost $224,556)................... 230,274 -- --
Endeavor Series Trust--T. Rowe Price Equity
Income Portfolio 28,963.239 shares @ $13.05
(cost $356,632)............................ 377,970 -- --
Endeavor Series Trust--T. Rowe Price Growth
Stock Portfolio 18,704.168 shares @ $13.72
(cost $240,718)............................ 256,621 -- --
WRL Series Fund, Inc.--Growth Portfolio
44,885.227 shares @ $31.660740 (cost
$1,347,228)................................ 1,421,100 -- --
---------- ------- -------
Total investments in mutual funds........... 5,750,728 302,444 959,167
---------- ------- -------
Total Assets................................ $5,750,728 302,444 959,167
========== ======= =======
LIABILITIES AND CONTRACT OWNERS' EQUITY
Liabilities:
Contract terminations payable............... $ 255 46 26
---------- ------- -------
Total Liabilities........................... 255 46 26
Contract Owners' Equity:
Deferred annuity contracts terminable by
owners (Notes 2 and 5)..................... 5,750,473 302,398 959,141
---------- ------- -------
$5,750,728 302,444 959,167
========== ======= =======
</TABLE>

See accompanying Notes to Financial Statements.

- 38 -
<PAGE>

<TABLE>
<CAPTION>
T. ROWE PRICE QUEST QUEST U.S. T. ROWE PRICE T. ROWE PRICE
INTERNATIONAL FOR VALUE FOR VALUE GOVERNMENT EQUITY GROWTH
STOCK EQUITY SMALL CAP SECURITIES INCOME STOCK GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------- ---------- ---------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- --
-- -- -- -- -- -- --
797,600 -- -- -- -- -- --
-- 759,526 -- -- -- -- --
-- -- 646,026 -- -- -- --
-- -- -- 230,274 -- -- --
-- -- -- -- 377,970 -- --
-- -- -- -- -- 256,621 --
-- -- -- -- -- -- 1,421,100
------- ------- ------- ------- ------- ------- ---------
797,600 759,526 646,026 230,274 377,970 256,621 1,421,100
------- ------- ------- ------- ------- ------- ---------
797,600 759,526 646,026 230,274 377,970 256,621 1,421,100
======= ======= ======= ======= ======= ======= =========
13 19 23 4 11 9 104
------- ------- ------- ------- ------- ------- ---------
13 19 23 4 11 9 104
797,587 759,507 646,003 230,270 377,959 256,612 1,420,996
------- ------- ------- ------- ------- ------- ---------
797,600 759,526 646,026 230,274 377,970 256,621 1,421,100
======= ======= ======= ======= ======= ======= =========
</TABLE>

- 39 -
<PAGE>

THE AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT

STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995, EXCEPT AS NOTED

<TABLE>
<CAPTION>
MONEY
MARKET
TOTAL SUBACCOUNT
-------- ----------
<S> <C> <C>
NET INVESTMENT INCOME (LOSS)
Income:
Dividends............................................... $168,612 4,279
Expenses (Note 4):
Administration Fee...................................... 2,205 70
Mortality and expense risk charge....................... 39,312 1,104
-------- -------
Net investment income (loss).......................... 127,095 3,105
-------- -------
NET REALIZED AND UNREALIZED CAPITAL GAIN FROM INVESTMENTS
Net realized capital gain (loss) from sales of
investments:
Proceeds from sales..................................... 764,926 149,327
Cost of investments sold................................ 733,060 149,327
-------- -------
Net realized capital gain (loss) from sales of
investments.............................................. 31,866 --
-------- -------
Net change in unrealized appreciation/depreciation of
investments:
Beginning of the period................................. (72,254) --
End of the period....................................... 354,489 --
-------- -------
Net change in unrealized appreciation/depreciation of
investments.......................................... 426,743 --
-------- -------
Net realized and unrealized capital gain from
investments.......................................... 458,609 --
-------- -------
INCREASE FROM OPERATIONS.................................. $585,704 3,105
======== =======
</TABLE>

/(1)/Period from June 16, 1995 (commencement of operations) to December 31, 1995
/(2)/Period from June 28, 1995 (commencement of operations) to December 31, 1995
/(3)/Period from April 28, 1995 (commencement of operations) to December 31,
1995

See accompanying Notes to Financial Statements.

- 40 -
<PAGE>

<TABLE>
<CAPTION>
MANAGED T. ROWE PRICE QUEST QUEST U.S. T. ROWE PRICE T. ROWE PRICE
ASSET INTERNATIONAL FOR VALUE FOR VALUE GOVERNMENT EQUITY GROWTH
ALLOCATION STOCK EQUITY SMALL CAP SECURITIES INCOME STOCK GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT/1/ SUBACCOUNT/2/ SUBACCOUNT/3/ SUBACCOUNT
- ---------- ------------- ---------- ---------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10,741 9,218 1,199 8,097 52 294 37 134,695
658 364 174 251 -- -- -- 688
10,013 6,196 4,009 5,560 710 996 967 9,757
------- ------- ------ ------- ------ ------ ------ -------
70 2,658 (2,984) 2,286 (658) (702) (930) 124,250
------- ------- ------ ------- ------ ------ ------ -------
123,035 104,421 53,908 124,482 50,497 52,973 5,852 100,431
119,969 109,820 41,468 121,345 49,695 50,009 5,042 86,385
------- ------- ------ ------- ------ ------ ------ -------
3,066 (5,399) 12,440 3,137 802 2,964 810 14,046
------- ------- ------ ------- ------ ------ ------ -------
(17,019) (23,084) 1,856 (137) -- -- -- (33,870)
109,510 22,294 60,104 45,750 5,718 21,338 15,903 73,872
------- ------- ------ ------- ------ ------ ------ -------
126,529 45,378 58,248 45,887 5,718 21,338 15,903 107,742
------- ------- ------ ------- ------ ------ ------ -------
129,595 39,979 70,688 49,024 6,520 24,302 16,713 121,788
------- ------- ------ ------- ------ ------ ------ -------
129,665 42,637 67,704 51,310 5,862 23,600 15,783 246,038
======= ======= ====== ======= ====== ====== ====== =======
</TABLE>

- 41 -
<PAGE>

THE AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT

STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994, EXCEPT AS NOTED

<TABLE>
<CAPTION>
MANAGED T. ROWE PRICE
MONEY ASSET INTERNATIONAL
MARKET ALLOCATION STOCK
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------- ----------------- ---------------- ----------------
1995 1994 1995 1994/1/ 1995 1994 1995 1994
---------- --------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income
(loss)................... $127,095 (11,336) 3,105 424 70 (3,641) 2,658 (4,028)
Net realized capital gain
(loss)................... 31,866 (2,536) -- -- 3,066 (1,317) (5,399) 78
Net change in unrealized
appreciation/depreciation
of investments........... 426,743 (72,009) -- -- 126,529 (17,283) 45,378 (23,321)
---------- --------- -------- ------- ------- ------- ------- -------
Increase (decrease) from
operations............... 585,704 (85,881) 3,105 424 129,665 (22,241) 42,637 (27,271)
---------- --------- -------- ------- ------- ------- ------- -------
CONTRACT TRANSACTIONS
Net contract purchase
payments................. 3,101,963 1,676,100 364,210 75,106 171,807 527,169 414,317 378,543
Transfer payments from
(to) other subaccounts or
general account.......... 359,061 45,761 (120,602) (19,845) 123,270 12,015 (11,421) 12,264
Contract terminations,
withdrawals, and other
deductions............... (116,242) (8,786) -- -- (36,468) (6,310) (27,021) (1,238)
---------- --------- -------- ------- ------- ------- ------- -------
Increase from contract
transactions............. 3,344,782 1,713,075 243,608 55,261 258,609 532,874 375,875 389,569
---------- --------- -------- ------- ------- ------- ------- -------
Net increase in contract
owners' equity........... 3,930,486 1,627,194 246,713 55,685 388,274 510,633 418,512 362,298
---------- --------- -------- ------- ------- ------- ------- -------
CONTRACT OWNERS' EQUITY
Beginning of period....... 1,819,987 192,793 55,685 -- 570,867 60,234 379,075 16,777
---------- --------- -------- ------- ------- ------- ------- -------
End of period............. $5,750,473 1,819,987 302,398 55,685 959,141 570,867 797,587 379,075
========== ========= ======== ======= ======= ======= ======= =======
</TABLE>

/(1)/Period from March 17, 1994 (commencement of operations) to December 31,
1994
/(2)/Period from June 16, 1995 (commencement of operations) to December 31, 1995
/(3)/Period from June 28, 1995 (commencement of operations) to December 31, 1995
/(4)/Period from April 28, 1995 (commencement of operations) to December 31,
1995

See accompanying Notes to Financial Statements.

- 42 -
<PAGE>

<TABLE>
<CAPTION>
QUEST QUEST U.S. T. ROWE PRICE T. ROWE PRICE
FOR VALUE FOR VALUE GOVERNMENT EQUITY GROWTH
EQUITY SMALL CAP SECURITIES INCOME STOCK GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------- ---------------- ---------- ------------- ------------- ------------------
1995 1994 1995 1994 1995/2/ 1995/3/ 1995/4/ 1995 1994
- ------- ------- -------- ------- ---------- ------------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(2,984) (628) 2,286 (2,828) (658) (702) (930) 124,250 (635)
12,440 18 3,137 (519) 802 2,964 810 14,046 (796)
58,248 1,853 45,887 (166) 5,718 21,338 15,903 107,742 (33,092)
- ------- ------- -------- ------- ------- ------- ------- --------- --------
67,704 1,243 51,310 (3,513) 5,862 23,600 15,783 246,038 (34,523)
- ------- ------- -------- ------- ------- ------- ------- --------- --------
452,866 96,333 337,487 282,278 223,574 269,068 203,721 664,913 316,671
138,439 1,925 (3,930) 4,475 834 86,340 38,125 108,006 34,927
(2,005) -- (23,639) -- -- (1,049) (1,017) (25,043) (1,238)
- ------- ------- -------- ------- ------- ------- ------- --------- --------
589,300 98,258 309,918 286,753 224,408 354,359 240,829 747,876 350,360
- ------- ------- -------- ------- ------- ------- ------- --------- --------
657,004 99,501 361,228 283,240 230,270 377,959 256,612 993,914 315,837
- ------- ------- -------- ------- ------- ------- ------- --------- --------
102,503 3,002 284,775 1,535 -- -- -- 427,082 111,245
- ------- ------- -------- ------- ------- ------- ------- --------- --------
759,507 102,503 646,003 284,775 230,270 377,959 256,612 1,420,996 427,082
======= ======= ======== ======= ======= ======= ======= ========= ========
</TABLE>

- 43 -
<PAGE>

THE AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization--Effective January 1, 1995, AUSA Life Insurance Company, Inc.
assumed the Endeavor Variable Annuity policies issued by International Life
Investors Insurance Company, another indirect, wholly-owned subsidiary of
AEGON USA, Inc. In conjunction with this assumption, the AUSA Endeavor
Variable Annuity Account ("Mutual Fund Account") commenced operations on
January 1, 1995. On that same day, all the assets and liabilities of the ILI
Endeavor Variable Annuity Account were merged into the Mutual Fund Account.
The Mutual Fund Account is a segregated investment account of AUSA Life
Insurance Company, Inc. ("AUSA Life"), an indirect, wholly-owned subsidiary of
AEGON USA, Inc. ("AUSA"), a holding company. AUSA is an indirect, wholly-owned
subsidiary of AEGON nv, a holding company organized under the laws of The
Netherlands.

The T. Rowe Price Equity Income, the U.S. Government Securities, the T. Rowe
Price Growth Stock, and the Money Market subaccounts, as part of the Mutual
Fund Account, commenced operations on June 28, 1995, June 16, 1995, April 28,
1995, and March 17, 1994, respectively. Effective March 24, 1995, the names of
the Global Growth Portfolio and Global Growth Subaccount were changed to T.
Rowe Price International Stock Portfolio and T. Rowe Price International Stock
Subaccount, respectively. The investment objective of the portfolio was
changed from investment on a global basis to investment on an international
basis (i.e. in non-U.S. companies). The investment adviser of the Endeavor
Series Trust is Endeavor Investment Advisers, a general partnership between
Endeavor Management Co. and AUSA Financial Markets Inc., an affiliate of AUSA
Life. The investment advisor for the WRL Series Fund, Inc. is Western Reserve
Life Assurance Co. of Ohio, an affiliate of AUSA Life.

The Mutual Fund Account is registered with the Securities and Exchange
Commission as a Unit Investment Trust pursuant to provisions of the Investment
Company Act of 1940.

Investments--Net purchase payments received by the Mutual Fund Account are
invested in the portfolios of the Endeavor Series Trust, and the Growth
Portfolio of the WRL Series Fund, Inc. (collectively the "Series Funds"), as
selected by the contract owner. Investments are stated at the closing net
asset values per share on December 31, 1995.

Realized capital gains and losses from sale of shares in the Series Funds
are determined on the first-in, first-out basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed)
and dividend income is recorded on the ex-dividend date. Unrealized gains or
losses from investments in the Series Funds are credited or charged to
contract owners' equity.

Dividend Income--Dividends received from the Series Funds investments are
reinvested to purchase additional mutual fund shares.

- 44 -
<PAGE>

2. CONTRACT OWNERS' EQUITY

A summary of deferred annuity contracts terminable by owners at December 31,
1995 follows:

<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION TOTAL
SUBACCOUNT UNITS OWNED UNIT VALUE CONTRACT VALUE
---------- ------------ ------------ --------------
<S> <C> <C> <C>
Money Market..................... 271,034.756 $ 1.115718 $ 302,398
Managed Asset Allocation......... 607,869.454 1.577873 959,141
T. Rowe Price International
Stock........................... 681,093.799 1.171039 797,587
Quest for Value Equity........... 547,233.586 1.387903 759,507
Quest for Value Small Cap........ 535,283.029 1.206843 646,003
U.S. Government Securities....... 204,813.593 1.124292 230,270
T. Rowe Price Equity Income...... 293,619.530 1.287240 377,959
T. Rowe Price Growth Stock....... 189,613.999 1.353339 256,612
Growth........................... 97,436.321 14.583843 1,420,996
----------
$5,750,473
==========
</TABLE>

A summary of changes in contract owners' account units follows:

<TABLE>
<CAPTION>
T. ROWE T. ROWE T. ROWE
MANAGED PRICE QUEST QUEST U.S. PRICE PRICE
MONEY ASSET INTERNATIONAL FOR VALUE FOR VALUE GOVERNMENT EQUITY GROWTH
MARKET ALLOCATION STOCK EQUITY SMALL CAP SECURITIES INCOME STOCK GROWTH
SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT.
-------- ---------- ------------- --------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
1/1/94................. -- 43,225 14,507 2,948 1,386 -- -- -- 10,009
Units purchased......... 70,621 390,851 328,628 93,234 259,793 -- -- -- 29,222
Units redeemed and
transferred............ (18,697) 4,490 9,835 1,850 4,237 -- -- -- 3,260
-------- ------- ------- ------- ------- ------- ------- ------- ------
Units outstanding at
12/31/94............... 51,924 438,566 352,970 98,032 265,416 -- -- -- 42,491
Units purchased......... 329,022 110,905 362,256 344,140 292,146 204,064 223,477 160,519 48,457
Units redeemed and
transferred............ (109,911) 58,398 (34,132) 105,062 (22,279) 750 70,143 29,095 6,488
-------- ------- ------- ------- ------- ------- ------- ------- ------
Units outstanding
12/31/95............... 271,035 607,869 681,094 547,234 535,283 204,814 293,620 189,614 97,436
======== ======= ======= ======= ======= ======= ======= ======= ======
</TABLE>

3. TAXES

Operations of the Mutual Fund Account form a part of AUSA Life, which is
taxed as a life insurance company under Subchapter L of the Internal Revenue
Code of 1986, as amended (the Code). The operations of the Mutual Fund Account
are accounted for separately from other operations of AUSA Life for purposes
of federal income taxation. The Mutual Fund Account is not separately taxable
as a regulated investment company under Subchapter M of the Code and is not
otherwise taxable as an entity separate from AUSA Life. Under existing federal
income tax laws, the income of the Mutual Fund Account, to the extent applied
to increase reserves under the variable annuity policies, is not taxable to
AUSA Life.

4. ADMINISTRATIVE, MORTALITY AND EXPENSE RISK CHARGE

Administrative charges include an annual charge of the lesser of 2% of the
policy value or $35 per contract which will commence on the first policy
anniversary of each contract owner's account. For policies issued on or after
May 1, 1995, the fee is waived if the sum of the premium payments made less
the sum of all partial withdrawals is at least $50,000 on the policy
anniversary. Charges for administrative fees to the variable annuity contracts
are an expense of the Mutual Fund Account.

AUSA Life deducts a daily charge equal to an annual rate of 1.25% of the
value of the contract owners' account as a charge for assuming certain
mortality and expense risks. AUSA Life also deducts a daily charge equal to an
annual rate of .15% of the contract owners' account for administrative
expenses.

- 45 -
<PAGE>

5. NET ASSETS

At December 31, 1995 contract owners' equity was comprised of:

<TABLE>
<CAPTION>
T. ROWE QUEST QUEST T. ROWE T. ROWE
MANAGED PRICE FOR FOR U.S. PRICE PRICE
MONEY ASSET INT'L VALUE VALUE GOV'T EQUITY GROWTH
MARKET ALLOCATION STOCK EQUITY SMALL CAP SECURITIES INCOME STOCK GROWTH
TOTAL SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT.
---------- -------- ---------- -------- -------- --------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit transactions,
accumulated net
investment income
and realized
capital gains...... $5,395,984 302,398 849,631 775,293 699,403 600,253 224,552 356,621 240,709 1,347,124
Adjustment for ap-
preciation to mar-
ket value.......... 354,489 -- 109,510 22,294 60,104 45,750 5,718 21,338 15,903 73,872
---------- ------- ------- ------- ------- ------- ------- ------- ------- ---------
Total Contract Own-
ers' Equity........ $5,750,473 302,398 959,141 797,587 759,507 646,003 230,270 377,959 256,612 1,420,996
========== ======= ======= ======= ======= ======= ======= ======= ======= =========
</TABLE>

6. PURCHASES AND SALES OF INVESTMENT SECURITIES

The aggregate cost of purchases and proceeds from sales of investments were
as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 OR
COMMENCEMENT OF OPERATIONS TO DECEMBER 31
-----------------------------------------
1995 1994
-------------------- --------------------
PURCHASES SALES PURCHASES SALES
-------------------- --------------------
<S> <C> <C> <C> <C>
Endeavor Series Trust
Money Market Portfolio........ $ 396,123 149,327 $ 85,906 30,258
Managed Asset Allocation Port-
folio........................ 380,622 123,035 583,629 53,308
T. Rowe Price International
Stock Portfolio.............. 482,406 104,421 403,512 17,370
Quest for Value Equity Portfo-
lio.......................... 639,975 53,908 98,386 489
Quest for Value Small Cap
Portfolio.................... 436,139 124,482 293,269 8,768
U.S. Government Securities
Portfolio.................... 274,251 50,497 -- --
T. Rowe Price Equity Income
Portfolio.................... 406,641 52,973 -- --
T. Rowe Price Growth Stock
Portfolio.................... 245,760 5,852 -- --
WRL Series Fund, Inc.
Growth Portfolio.............. 970,989 100,431 359,303 8,831
----------- -------- ----------- --------
$ 4,232,906 764,926 $1,824,005 119,024
=========== ======== =========== ========
</TABLE>

- 46 -
<PAGE>

PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

All required financial statements are included in Part B
of this Registration Statement.

(b) Exhibits:

(1) (a) Resolution of the Board of Directors of
AUSA Life Insurance Company, Inc. authorizing
establishment of the Mutual Fund Account.
Note 2.

(2) Not Applicable.

(3) (a) Principal Underwriting Agreement by and between
AUSA Life Insurance Company, Inc. on its own
behalf and on the behalf of the Mutual Fund
Account, and AEGON USA Securities, Inc.
Note 1.

(b) Form of Broker/Dealer Supervision and Sales
Agreement by and between AEGON USA Securities,
Inc. and the Broker/Dealer. Note 1.

(4) (a) Form of Policy for the Endeavor Variable
Annuity. Note 2.

(5) Form of Application for the Endeavor Variable
Annuity. Note 2.

(6) (a) Articles of Incorporation of AUSA
Life Insurance Company, Inc. Note 1.

(b) ByLaws of AUSA Life
Insurance Company, Inc. Note 1.

(7) Not Applicable.

(8) (a) Participation Agreement by and between
AUSA Life Insurance Company, Inc.
and Endeavor Series Trust and Addendum thereto
Note 2.

(b) Participation Agreement with WRL Series Fund,
Inc. and Addendum thereto. Note 2.

(9) (a) Opinion and Consent of Counsel. Note 2.

1
<PAGE>

(b) Consent of Counsel. Note 2.

(10) Consent of Independent Auditors. Note 3.

(11) Not Applicable.

(12) Not Applicable.

(13) Performance Data Calculations. Note 2.

(14) Powers of Attorney. Note 2. (C.H. Verhagen,
L.G. Brown, W.L. Busler, J.R. Dykhouse, S.E. Frushtick,
C.T. Hanson, B.L. Jenkins, V.F. Mihaic, P.P. Post,
T.A. Schlossberg, E.K. Warren, R.J. Kontz, R.J. McGraw)
Note 3. (William Brown, Jr., Colette Vargas

Note 1. Filed with the initial filing of this Form N-4 Registration
Statement (File No. 33-83560) on September 1, 1994.

Note 2. Filed with Pre-Effective Amendment No. 1 to Form N-4
Registration Statement (File No. 33-83560) on December 21,
1994.

Note 3. Filed herewith.

Item 25. Directors and Officers of the Depositor

<TABLE>
<CAPTION>
Principal
Positions
Name and and Offices with
Business Address Depositor
- ---------------- ---------
<S> <C>
Larry G. Brown Director,
4333 Edgewood Road, N.E. Chairman of the Board
Cedar Rapids, IA 52499 and Secretary

Tom A. Schlossberg Director and President
4 Manhattanville Road
Purchase, NY 10577

Craig D. Vermie Vice President
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499

Patrick S. Baird Vice President and
4333 Edgewood Road, N.E. Chief Financial Officer
Cedar Rapids, IA 52499 Officer
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Douglas C. Kolsrud Director and
4333 Edgewood Road, N.E. Chief Actuary
Cedar Rapids, IA 52499

Robert J. Kontz Controller
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499

Robert J. McGraw Treasurer
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499
</TABLE>

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

AEGON USA, Inc. - Holding Company

Life Investors Insurance Company of America - Insurance

PFL Life Insurance Company

Transunion Casualty Company - Insurance

Investors Warranty of America, Inc. - Provider of automobile extended
maintenance contracts

Supplemental Insurance Division, Inc. - Insurance

Creditor Resources, Inc. - Credit Insurance

AEGON USA Investment Management, Inc. - Investment Advisor

AEGON USA Realty Advisors, Inc. - Provides real estate administrative
and real estate investment services

AEGON USA Realty Management, Inc. - Real Estate Management

AEGON USA Securities, Inc. - Broker-Dealer

AEGON USA Managed Portfolios, Inc. - Mutual Fund

USP Real Estate Investment Trust - Real Estate Investment Trust

Cedar Income Fund, Ltd. - Real Estate Investment Trust

First AUSA Life Insurance Company - Insurance

Bankers United Life Assurance Company - Insurance

3
<PAGE>

Universal Benefits Corporation - Third party administrator

Massachusetts Fidelity Trust Company - Trust company

Money Services, Inc. - Provides financial counseling for employees and
agents of affiliated companies

Zahorik Company, Inc. - Broker-Dealer

Cadet Holding Corp. - Holding company

ISI Insurance Agency, Inc. - Broker/Dealer

Southwest Equity Life Insurance Company - Insurance

Iowa Fidelity Life Insurance Company - Insurance

The Whitestone Corporation - Insurance agency

Monumental Life Insurance Company - Insurance

United Financial Services, Inc. - General agency

Monumental General Insurance Group, Inc. - Holding company

Monumental General Administrators, Inc. - Provides management services
to unaffiliated third party administrator

Executive Management and Consultant Services, Inc. - Provides
actuarial consulting services

Monumental General Mass Marketing, Inc. - Marketing arm for sale of
mass marketed insurance coverages

Bankers Financial Life Insurance Company - Insurance

Monumental General Casualty Company - Insurance

4
<PAGE>

AUSA Holding Company - Holding company

JLW Financial Management Systems, Inc. - Management and Administrative
Services

ZCI, Inc. - Insurance agency

AUSA Financial Markets, Inc. - Marketing

CRC Creditor Resources Canadian Dealer Network Inc. - Insurance agency

American Forum For Fiscal Fitness, Inc. - Marketing

Western Reserve Life Assurance Co. of Ohio - Insurance

Landauer Realty Advisors, Inc. - Real estate counseling

Landauer Associates, Inc. - Real estate counseling

WRL Series Fund, Inc. - Mutual fund

Intersecurities, Inc. - Broker-dealer

Idex Investor Services, Inc. - Shareholder services

Idex Management, Inc. - Investment advisor

Idex Total Income Trust - Mutual fund

Idex Fund - Mutual fund

Idex II Series Fund - Mutual fund

Idex Fund 3 - Mutual fund

Diversified Investment Advisors, Inc. - Registered Investment Adviser

Diversified Investors Securities Corp. - Broker-Dealer

AUSA Life Insurance Company, Inc. - Insurance

International Life Investors Insurance Company - Insurance

AMCORP, Inc. - Insurance agency

Colorado Annuity Agency, Inc. - Insurance agency

Realty Information Systems, Inc. - Dow Jones joint venture

Associated Mariner Financial Group, Inc. - Holding company management
services

5
<PAGE>

Mariner Financial Services, Inc. - Broker-dealer

Mariner/ISI Planning Corporation - Financial planning

Associated Mariner Agency, Inc. - Insurance agency

Mariner Mortgage Corp. - Mortgage origination

Melson and Associates, Inc. - Real estate financial management consulting

Item 27. Number of Policyowners

As of December 31, 1995, there were 282 Owners of the

Policies.

Item 28. Indemnification

The New York Code (Sections 721 et. seq.) provides for permissive
--------
indemnification in certain situations, mandatory indemnification in other
situations, and prohibits indemnification in certain situations. The Code
also specifies procedures for determining when indemnification payments can
be made.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Depositor of expenses incurred or paid by a director, officer or
controlling person in connection with the securities being registered), the
Depositor will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 29. Principal Underwriter

AEGON USA Securities, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499

The directors and officers of
AEGON USA Securities, Inc.
are as follows:/5/

6
<PAGE>

Patrick E. Falconio
Director

William L. Busler
Director

Brenda K. Clancy
Director

Robert A. Thelen
Senior Vice-President

Lorri E. Mehaffey
President and Treasurer

Billy J. Berger
Vice President and Assistant Treasurer

Charles G. Bennett
Vice President

Thomas K. Walsh
Vice President

Donna M. Craft
Vice President

Frank A. Camp
Secretary
_____________________
/5/ The principal business address of each person listed is AEGON USA
Securities, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.

Commissions and Other Compensation Received by Principal Underwriter.
- --------------------------------------------------------------------

AEGON USA Securities, Inc. and/or the broker-dealers received $397,382 from
the Registrant during the last fiscal year for its services in distributing
the Policies. No other commission or compensation was received by the
principal underwriter, directly or indirectly, from the Registrant during
the fiscal year.

Item 30. Location of Accounts and Records

The records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder,
are maintained by AUSA Life Insurance Company,

7
<PAGE>

Inc. at 666 Fifth Avenue, New York, New York 10103, or its Service Office,
Financial Markets Division - Variable Annuity Dept., 4333 Edgewood Road N.E.,
Cedar Rapids, Iowa 52499.

Item 31. Management Services.

All management Policies are discussed in Part A or
Part B.

Item 32. Undertakings

(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as necessary to ensure
that the audited financial statements in the registration statement are never
more than 16 months old for so long as Premiums under the Policy may be
accepted.

(b) Registrant undertakes that it will include either (i) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information or (ii) a space in the Policy application that an applicant can
check to request a Statement of Additional Information.

(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to AUSA at the address or phone
number listed in the Prospectus.

Section 403(b) Representations
- ------------------------------

AUSA represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88), regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on
Section 403(b) Policies, and that paragraphs numbered (1) through (4) of
that letter will be complied with.

8
<PAGE>

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant hereby certifies that this Amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Registration Statement to be signed on its behalf,
in the City of Cedar Rapids and State of Iowa, on this 24th day of April, 1996.

AUSA ENDEAVOR VARIABLE
ANNUITY ACCOUNT

AUSA LIFE INSURANCE
COMPANY, INC.
Depositor

/s/ Tom A. Schlossberg
-------------------------------
Tom A. Schlossberg
President

As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.

Signatures Title Date
- ---------- ----- ----

/s/ William Brown, Jr. Director April 24, 1996
- ------------------------
William Brown, Jr.

/s/ Larry G. Brown Director April 24, 1996
- ------------------------
Larry G. Brown

/s/ William L. Busler Director April 24, 1996
- ------------------------
William L. Busler

/s/ Jack R. Dykhouse Director April 24, 1996
- ------------------------
Jack R. Dykhouse

/s/ Steven E. Frushtick Director April 24, 1996
- ------------------------
Steven E. Frushtick

/s/ Carl T. Hanson Director April 24, 1996
- ------------------------
Carl T. Hanson

/s/ B. Larry Jenkins Director April 24, 1996
- ------------------------
B. Larry Jenkins

<PAGE>

/s/ Colette Vargas Director April 24, 1996
- ----------------------------
Colette Vargas

/s/ Vera F. Mihaic Director April 24, 1996
- ----------------------------
Vera F. Mihaic

/s/ Peter P. Post Director April 24, 1996
- ----------------------------
Peter P. Post

/s/ Tom A. Schlossberg Director April 24, 1996
- ---------------------------- (Principal
Tom A. Schlossberg Executive Officer)

/s/ Cor H. Verhagen Director April 24, 1996
- ----------------------------
Cor H. Verhagen

/s/ E. Kirby Warren Director April 24, 1996
- ----------------------------
E. Kirby Warren

/s/ Robert J. Kontz Controller April 24, 1996
- ----------------------------
Robert J. Kontz

/s/ Robert J. McGraw Treasurer April 24, 1996
- ----------------------------
Robert J. McGraw

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NO.*
------- ---------------------- ----
<S> <C> <C>
(10) Consent of Independent Auditors

(14) Powers of Attorney
</TABLE>

_________________________________________________________

*Page numbers included only in manually executed original.

<PAGE>

Consent of Independent Auditors

We consent to the reference to our firm under the captions "Independent
Auditors" and "Financial Statements", to the use of our report dated February 6,
1996 with respect to the financial statements of The AUSA Endeavor Variable
Annuity Account, and to the use of our report dated February 23, 1996 with
respect to the statutory-basis financial statements of AUSA Life Insurance
Company, Inc., included in Amendment No. 3 to Registration Statement (Form N-4
No. 33-83560) and related Prospectus of The AUSA Endeavor Variable Annuity
Account.

ERNST & YOUNG LLP

Des Moines, Iowa
April 19, 1996

<PAGE>

POWER OF ATTORNEY
WITH RESPECT TO
AUSA ENDEAVOR VARIABLE ANNUITY

Know all men by these presents that Colette Vargas, whose signature appears
below, constitutes and appoints Larry G. Brown and Craig D. Vermie, and each of
them, his attorneys-in-fact, each with the power of substitution, for him in any
and all capacities, to sign any registration statements and amendments thereto
for the PFL Endeavor Variable Annuity, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.

/s/ Colette Vargas
---------------------------
Colette Vargas
Director
AUSA Life Insurance Company, Inc.

April 24, 1996
- ----------------
Date
<PAGE>

POWER OF ATTORNEY
WITH RESPECT TO
AUSA ENDEAVOR VARIABLE ANNUITY

Know all men be these presents that William Brown, Jr., whose signature appears
below, constitutes and appoints Larry G. Brown and Craig D. Vermie, and each of
them, his attorneys-in-fact, each with the power of substitution, for him in any
and all capacities, to sign any registration statements and amendments thereto
for the PFL Endeavor Variable Annuity, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.

/s/ William Brown, Jr.
-------------------------------
William Brown, Jr.
Director
AUSA Life Insurance Company, Inc.

April 24, 1996
- ----------------
Date