<PAGE>
As filed with the Securities and Exchange Commission on September 26, 1997
Registration No. 33- 83560
811-8750
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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. 5 X
--
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 X
--
AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
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(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 L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
AUSAENDC
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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, 1996 was filed on February 18, 1996.
______________
It is proposed that this filing will become effective:
______________
_____ immediately upon filing pursuant to paragraph (b) of Rule
485.
_____ on May 1, 1997 pursuant to paragraph (b) of Rule 485.
__X__ 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
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PART A
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<CAPTION>
Item of Form N-4 Prospectus Caption
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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;
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<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
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Item of Form N-4 Statement of Additional
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<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
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<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
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<TABLE>
<CAPTION>
Item of Form N-4 Part C Caption
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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 , 1997
THE ENDEAVOR VARIABLE ANNUITY
Issued Through
AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
by
AUSA LIFE INSURANCE COMPANY, INC.
The Endeavor Variable Annuity Policy is a Flexible Premium Variable Annuity
that is offered by AUSA Life Insurance Company, Inc. ("AUSA Life"). You can
use the Policy to accumulate funds for retirement or other long-term financial
planning purposes. You are generally not taxed on any earnings on amounts you
invest until you withdraw them or begin to receive annuity payments. The
Policy is a "variable" annuity because the value of your investments can go up
or down based on the performance of mutual fund portfolios that you select. It
is a flexible premium policy because after you purchase it you can generally
make additional investments of any amount of $50 or more, until the Annuity
Commencement Date when AUSA Life begins making annuity payments to you.
You have thirteen investment options to choose from. They include these
twelve mutual fund portfolios:
TCW Managed Asset Allocation Dreyfus Small Cap Value Portfolio
Portfolio Dreyfus U.S. Government Securities
TCW Money Market Portfolio Portfolio
T. Rowe Price International Stock Value Equity Portfolio
Portfolio Opportunity Value Portfolio
T. Rowe Price Equity Income Enhanced Index Portfolio
Portfolio
T. Rowe Price Growth Stock Portfolio Montgomery Select 50 Portfolio
WRL Growth Portfolio, managed by
Janus Capital Corporation
YOU AS THE OWNER OF THE POLICY, BEAR THE ENTIRE INVESTMENT RISK FOR ALL
AMOUNTS THAT YOU ALLOCATE TO ANY OF THE MUTUAL FUNDS. THIS MEANS THAT YOU
COULD LOSE THE AMOUNT THAT YOU INVEST. BUT IF THE MUTUAL FUND SHARES INCREASE
IN VALUE, THEN THE VALUE OF YOUR POLICY WILL ALSO INCREASE.
The thirteenth investment option is the Fixed Account. If you invest in one
of the alternatives offered in the Fixed Account, then AUSA Life guarantees to
return your investment with interest at rates that AUSA Life will declare from
time to time.
Of course, you can choose any combination of these investment options. You
can also transfer amounts among these options (subject to some restrictions).
LIKE ALL SECURITIES, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
You should only purchase a Policy as a long-term investment. However, you do
have access to all or some of the current cash value of your investments at
any time before the Annuity Commencement Date. But, if you do withdraw cash
from your Policy, there may be a surrender charge. You may also have to pay
income taxes on some or all of the amount you withdraw, and if you are under
the age 59 1/2 there may also be a tax penalty. AUSA Life has the right to
postpone withdrawals from the Fixed Account.
Prospectuses for the mutual fund portfolios are attached to the back of this
Prospectus. This Prospectus and the mutual fund prospectuses give you vital
information about the Policies and the mutual funds. Please read them
carefully before you invest. Keep them for future reference.
PLEASE NOTE THAT THE POLICIES AND THE MUTUAL FUNDS: ARE NOT BANK DEPOSITS,
ARE NOT FEDERALLY INSURED, ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
AND ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL.
This Prospectus sets forth the information that a prospective purchaser
should consider before purchasing a Policy. A Statement of Additional
Information about the Policy and the Mutual Fund Account which has the same
date as this Prospectus has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Statement of
Additional Information is available at no cost to any person requesting a copy
by writing AUSA Life at the 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.
Service Office:
Financial Markets Division--Variable Annuity Department
AUSA Life Insurance Company, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
Administrative Office:
AUSA Life Insurance
Company, Inc.
666 Fifth Avenue, 25th Floor
New York, NY 10103
Home Office:
4 Manhattanville Road
Purchase, New York 10577
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<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
DEFINITIONS................................................................ 5
SUMMARY.................................................................... 8
CONDENSED FINANCIAL INFORMATION............................................ 20
FINANCIAL STATEMENTS....................................................... 22
HISTORICAL PERFORMANCE DATA................................................ 22
Standardized Performance Data............................................ 22
TCW Money Market Subaccount.............................................. 22
Other Subaccounts........................................................ 22
Other Performance Data................................................... 25
Subadviser Performance................................................... 29
PUBLISHED RATINGS.......................................................... 29
AUSA LIFE INSURANCE COMPANY................................................ 30
THE ENDEAVOR ACCOUNTS...................................................... 30
The Mutual Fund Account.................................................. 30
The Fixed Account........................................................ 35
Guaranteed Period...................................................... 35
Dollar Cost Averaging Fixed Account Option............................. 36
Current Guaranteed Interest Rates...................................... 36
Transfers................................................................ 37
Reinstatements........................................................... 38
Dollar Cost Averaging.................................................... 38
Asset Rebalancing........................................................ 39
THE POLICY................................................................. 40
Policy Application and Issuance of Policies--Premium Payments............ 40
Annuity Purchase Value................................................... 41
Adjusted Annuity Purchase Value (AAPV)...................................
Amendments............................................................... 42
Non-participating Policy................................................. 42
DISTRIBUTIONS UNDER THE POLICY............................................. 42
Surrenders............................................................... 42
Systematic Payout Option................................................. 43
Annuity Payments......................................................... 44
Annuity Commencement Date.............................................. 44
Election of Payment Option............................................. 44
Premium Tax............................................................ 45
Supplementary Policy................................................... 45
Annuity Payment Options.................................................. 45
Death Benefit............................................................ 49
Death of Annuitant Prior to Annuity Commencement Date.................. 49
Death On or After Annuity Commencement Date............................ 51
Beneficiary............................................................ 51
Death of Owner........................................................... 51
Restrictions Under Section 403(b) Plans.................................. 52
Restrictions Under Qualified Policies.................................... 52
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PAGE
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CHARGES AND DEDUCTIONS..................................................... 52
Surrender Charge......................................................... 52
Mortality and Expense Risk Fee........................................... 53
Administrative Charges................................................... 54
Premium Taxes............................................................ 55
Federal, State and Local Taxes........................................... 55
Transfer Charge.......................................................... 55
Other Expenses Including Investment Advisory Fees........................ 55
Employee and Agent Purchases............................................. 55
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 56
Tax Status of the Policy................................................. 57
Taxation of Annuities.................................................... 57
DISTRIBUTOR OF THE POLICIES................................................ 62
VOTING RIGHTS.............................................................. 63
LEGAL PROCEEDINGS.......................................................... 63
STATEMENT OF ADDITIONAL INFORMATION........................................ 64
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<PAGE>
DEFINITIONS
Accumulation Unit--An accounting unit of measure used in calculating the
Annuity Purchase Value in the Mutual Fund Account before the Annuity
Commencement Date.
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 90.
Annuity Payment Option or Payment Option--A method of receiving a stream of
Annuity Payments selected by the Owner.
Annuity Purchase Value--The value in the policy that may be used to purchase
a stream of annuity payments. On or before the Annuity Commencement Date, this
is an amount equal to (a) the Premiums Paid; minus (b) partial withdrawals
taken; plus (c) interest credited in the Fixed Account; plus (d) accumulated
gains or losses in the Mutual Fund Account; minus (e) any applicable service
charges, premium taxes, and transfer fees.
Annuity Unit--An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Annuity Payment.
Beneficiary--The person who has the right to the Death Benefit set forth in
the Policy.
Business Day--A day when the New York Stock Exchange is open for business.
Cash Value--The Annuity Purchase Value less the Surrender Charge, if any.
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.
Current Interest Rate--The interest rate currently guaranteed to be credited
on amounts under a Policy allocated to the Fixed Account. This interest rate
will always equal or exceed a minimum of 3%.
Date of Issue--The date the Policy is issued, as shown on the Policy data
page.
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<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 AUSA Life will constitute Due Proof of Death.
Excess Premium Withdrawals--The amount of a Premium Payment withdrawal which
is in excess of the amount that is free from Surrender Charge (that is, the
"10% Withdrawal").
Fixed Account--A part of the general account of AUSA Life. General account
assets consist of all of the assets of AUSA Life 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 Option--The one year guaranteed interest rate period which
will be offered by AUSA Life into which premiums may be paid or amounts
transferred.
Investment Options--The One Year Guaranteed Period Option 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 Growth Portfolio of the WRL Series
Fund, Inc. 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 Annuitant and
prior to the Annuity Commencement Date is the person designated as the Policy
Owner or a Successor Owner in the application. (See "DISTRIBUTIONS UNDER THE
POLICY--Death Benefit," p. 49)
Policy Year--A Policy Year begins on the Date of Issue and on each Policy
Anniversary.
Premium Payment--An amount paid to AUSA Life by the Policy Owner or on the
Policy Owner's behalf as consideration for the benefits provided by the
Policy.
Qualified Policy--A Policy issued in connection with retirement plans that
qualify for special Federal income tax treatment.
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<PAGE>
Service Charge--An annual charge on each Policy Anniversary for Policy
maintenance and related administrative expenses. This annual charge is the
lesser of 2% of the Policy Value or $35.
Service Office--Financial Markets Division--Variable Annuity Dept., 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.
Subaccount--A subdivision within the Mutual Fund Account the assets of which
are invested 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.
Surrender Charge--A percentage of each Excess Premium Withdrawal, which is
deducted by AUSA Life upon surrender or partial withdrawal from the Policy.
The Surrender Charge Percentage ranges from 7% to 0% depending upon the length
of time from the date of each Premium Payment to the date of withdrawal. A
Surrender Charge may also be referred to as a "Contingent Deferred Sales
Charge."
Underlying Funds--The Growth Portfolio of the WRL Series Fund, Inc. 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 Life the information it requires and is received at the
Service Office. For some transactions, AUSA Life may accept an electronic
notice. Such electronic notice must meet the requirements AUSA Life
establishes for such notices. Telephone instructions are not permitted.
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<PAGE>
THE ENDEAVOR VARIABLE ANNUITY
SUMMARY
The following Summary is intended to provide a brief overview of the Policy.
More detailed information can be found in the sections of this Prospectus that
follow, all of which should be read in their entirety.
THE POLICY
The Endeavor Variable Annuity is a Flexible Premium Variable Annuity which
can be purchased as a Nonqualified Policy or as a Qualified Policy. The Owner
allocates the Premium Payments among the two Endeavor Accounts of AUSA Life:
the AUSA Endeavor Variable Annuity Account (the "Mutual Fund Account") and the
Fixed Account (together, the "Accounts").
THE ACCOUNTS
The Mutual Fund Account. The Mutual Fund Account is a separate account of
AUSA Life, which invests exclusively in shares of the portfolios of the
Endeavor Series Trust, and the Growth Portfolio of the WRL Series Fund, Inc.
(collectively, the "Underlying Funds").
The Underlying Funds currently have twelve Portfolios: the WRL Growth
Portfolio, managed by Janus Capital Corporation; the TCW Managed Asset
Allocation Portfolio; the TCW Money Market Portfolio; the T. Rowe Price
International Stock Portfolio; the Value Equity Portfolio; the Dreyfus Small
Cap Value Portfolio; the Dreyfus U.S. Government Securities Portfolio; the T.
Rowe Price Equity Income Portfolio; the T. Rowe Price Growth Stock Portfolio;
the Opportunity Value Portfolio; the Enhanced Index Portfolio; and the
Montgomery Select 50 Portfolio. Each of the twelve Subaccounts of the Mutual
Fund Account invests solely in a corresponding Portfolio of the Underlying
Funds. BECAUSE THE POLICY 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 ENDEAVOR ACCOUNTS--The Mutual Fund Account," p. 30.)
The Fixed Account. The Fixed Account offers two Investment Options, a one-
year Guaranteed Period Option and a Dollar Cost Averaging Fixed Account
Option. AUSA Life guarantees a minimum annual effective interest rate of 3% on
Premium Payments and transfers to, less partial withdrawals and transfers
from, the Fixed Account. AUSA Life may, in its sole discretion, declare a
higher Current Interest Rate. A Current Interest Rate is guaranteed for at
least one year. Upon surrender, AUSA Life guarantees return of at least the
Premium Payments made to, less prior Partial Withdrawals and transfers from,
the Fixed Account. (See "THE ENDEAVOR ACCOUNTS--The Fixed Account," p. 35.)
AUSA Life reserves the right to offer additional Investment Options, or to
delete Investment Options in the future.
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PREMIUM PAYMENTS
A Nonqualified Policy may be purchased with a minimum initial Premium
Payment of $5,000, and a Qualified Policy generally may be purchased with a
minimum initial Premium Payment of $1,000. A Policy purchased and used in
connection with a tax deferred 403(b) annuity may be purchased with a minimum
initial Premium Payment of $50. An Owner may make 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 Life. There is nothing
deducted from Premium Payments at the time of purchase, so all funds are
invested immediately.
On the Date of Issue, the initial Premium Payment is allocated among the
Investment Options 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%. Additional Premium Payments are
allocated among the Investment Options the same as initial Premium Payments
unless the allocation is changed by the Owner. Allocations may be changed by
sending Written Notice to AUSA Life's Service Office. (See "THE POLICY--Policy
Application and Issuance of Policies--Premium Payments," p. 40.)
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
An Owner can transfer Annuity Purchase Values from one Subaccount to another
within the Mutual Fund Account or to the Fixed Account, or from the One Year
Guaranteed Period Option of the Fixed Account to the Mutual Fund Account. The
minimum amount which may be transferred is $500 or the entire Annuity Purchase
Value in the Subaccount or Guaranteed Period Option, whichever is less.
However, following a transfer out of an Investment Option, at least $500 must
remain in that Investment Option, otherwise AUSA Life reserves the right to
include the remaining amounts in the transfer. Transfers currently may be made
by sending the appropriate Written Notice or Request to the Service Office.
An Owner can also transfer an amount equal to the interest credited in the
One Year Guaranteed Period Option to any Subaccount of the Mutual Fund Account
prior to the end of the Guaranteed Period. Such "interest transfers" may
affect the interest crediting rate experienced on amounts remaining in the
One-Year Guaranteed Period Options, because AUSA Life deems all withdrawals to
be on a "first-in, first-out" basis for the purpose of crediting interest.
Transfers from the Dollar Cost Averaging Fixed Account Option,except through
automatic Dollar Cost Averaging transfers, are not allowed. (See "THE ENDEAVOR
ACCOUNTS--Dollar Cost Averaging Fixed Account Option," p. 36.)
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<PAGE>
The maximum amount of Annuity Purchase Value that can be transferred from
the One Year Guaranteed Period Option prior to the end of the Guaranteed
Period is 25% of the Annuity Purchase Value in that Option, less amounts
previously transferred out of that Option during the current policy year. The
entire Annuity Purchase Value may be transferred from the One Year Guaranteed
Period Option at the end of the Guaranteed Period.
A $10 charge may be imposed for each transfer in excess of 12 transfers per
Policy Year. Currently AUSA Life does not charge for any transfers. (See "THE
ENDEAVOR ACCOUNTS--Transfers," p. 37.)
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 Life at any time
prior to the earlier of the Annuitant's death or the Annuity Commencement
Date. A Surrender or partial withdrawal may be subject to deductions for
Surrender Charges. (See "CHARGES AND DEDUCTIONS," p. 52.) The Cash Value
equals the Annuity Purchase Value less any applicable Surrender Charge
(described below). A surrender request must be made by Written Request, and a
request for a partial withdrawal must specify the Guaranteed Period Option or
Subaccounts from which the withdrawal is requested. There is currently no
limit on the frequency or timing of withdrawals (See "DISTRIBUTIONS UNDER THE
POLICY--Surrenders," p. 42) although for Qualified Policies the retirement
plan or applicable law may restrict and/or penalize withdrawals. In addition
to the applicable charges and deductions under the Policy and any applicable
premium taxes, surrenders and partial withdrawals may be subject to income
taxes and a 10% Federal penalty tax.
CHARGES AND DEDUCTIONS
Surrender Charge. In order to permit investment of the entire Premium
Payment, AUSA Life does not deduct sales or other charges at the time of
investment. However, a Surrender Charge of up to 7% of the amount withdrawn is
imposed on certain surrenders or partial withdrawals of Premium Payments in
order to cover expenses relating to the sale of the Policies. The applicable
Surrender Charge is based on the period of time elapsed since payment of the
Premium Payment(s) being withdrawn. There is no Surrender Charge imposed more
than seven years after a Premium Payment was paid. For purposes of determining
the applicable Surrender Charge, Premium Payments are considered to be
withdrawn on a "first in-first out" basis. (See "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 52.) After the first Policy Year, up to 10% of the
Annuity Purchase Value may be withdrawn once per Policy Year without a
Surrender Charge if it is the first withdrawal in the Policy Year.
Account Charges. AUSA Life 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 Life. The amount of this charge
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<PAGE>
depends on the Death Benefit Option selected by the Policy Owner and the
number of Policy Anniversaries that have elapsed since the Date of Issue. For
the Return of Premium Death Benefit, the effective annual rate of this charge
is 1.25% of the Mutual Fund Account's daily net assets in the first seven
Policy Years, and 1.10% thereafter. For the Annual Step-Up Death Benefit, the
corresponding charge is 1.40% in the first seven Policy Years and 1.25%
thereafter. (See "CHARGES AND DEDUCTIONS--Mortality and Expense Risk Fee," p.
53.)
AUSA Life also deducts a daily Administrative Charge from the net assets of
the Mutual Fund Account to partially cover expenses incurred by AUSA Life in
connection with the administration of the Account and the Policies. The
effective annual rate of this charge is currently .15% of the Mutual Fund
Account's daily net assets in all Policy Years for both Death Benefit Options.
(See "CHARGES AND DEDUCTIONS--Administrative Charges," p. 54.)
The Administrative Charge may be increased in the future. The Mortality and
Expense Risk Fee and Administrative Charge may be increased upon commencement
of annuity payments. In no event will the total of the Mortality and Expense
Risk Fee and the Administrative Charge exceed 1.40% on or after the Annuity
Commencement Date.
Service Charge. There is an annual Service Charge deducted 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. The Service 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. The service charge will not be
increased during the term of the Policy. (See "CHARGES AND DEDUCTIONS--
Administrative Charges," p. 54.)
Taxes. AUSA Life may incur premium taxes relating to the Policies. When
permitted by state law, AUSA Life will not deduct any premium taxes related to
a particular Policy from the Annuity Purchase Value until withdrawal of all
Annuity Purchase Value, payment of the death benefit, or the Annuity
Commencement Date, whichever occurs first. (See "ANNUITY PAYMENTS--Premium
Tax," p. 45.)
No charges are currently made against the Fixed Account or the Mutual Fund
Account for federal, state, or local income taxes. Should AUSA Life determine
that any such taxes may be imposed with respect to the Accounts, AUSA Life may
deduct such taxes from amounts held in the relevant Account. (See "CHARGES AND
DEDUCTIONS--Federal, State and Local Taxes," p. 55.)
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. Those fees and
expenses are detailed in the prospectuses for the Underlying Funds that
accompany this Prospectus.
- 11 -
<PAGE>
Expense Data. The charges and deductions are summarized in the following
tables. These tables assume that the entire Annuity Purchase Value is in the
Mutual Fund Account. These tables reflect charges and expenses of the Mutual
Fund Account, as well as the Underlying Funds for the fiscal year ended
December 31, 1996, except as otherwise noted. Expenses of the Underlying Funds
may be higher or lower in the future. These tables also do not reflect any
premium taxes that may be applicable.
<TABLE>
<CAPTION>
TCW T. ROWE DREYFUS
TCW MANAGED PRICE DREYFUS U.S.
MONEY ASSET INTERNATIONAL VALUE SMALL CAP GOVERNMENT
MARKET ALLOCATION STOCK EQUITY VALUE SECURITIES
------ ---------- ------------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Policy Owner Transaction
Expenses
Sales Load(/1/) On
Purchase Payments..... 0 0 0 0 0 0
Maximum Surrender
Charge (as a % of
Excess Premium
Withdrawal)(/2/)...... 7 7 7 7 7 7
Surrender Fees......... 0 0 0 0 0 0
Annual Service $35 Per Policy, but not greater than 2%
Charge(/1/)........... of the Annuity Purchase Value
-----------------------------------------------------
Transfer Fee(/1/)...... Currently no fee
-----------------------------------------------------
Mutual Fund Account
Annual Expenses (as a
percentage of account
value)
Mortality and Expense
Risk Fees............. 1.40 1.40 1.40 1.40 1.40 1.40
Administrative Charge.. 0.15 0.15 0.15 0.15 0.15 0.15
Total Mutual Fund
Account Annual
Expenses(/3/)......... 1.55 1.55 1.55 1.55 1.55 1.55
Underlying Funds Annual
Expenses(/4/) (as a
percentage of average
net assets and after
expense reimbursements)
Management Fees........ 0.50 0.75 0.90 0.80 0.80 0.65
Other Expenses......... 0.10 0.10 0.28 0.11 0.12 0.17
Total Underlying Funds
Annual Ex-
pense(/4/)(/5/)....... 0.60 0.85 1.18 0.91 0.92 0.82
</TABLE>
<TABLE>
<CAPTION>
T. ROWE T. ROWE
PRICE PRICE
EQUITY GROWTH OPPORTUNITY ENHANCED MONTGOMERY WRL
INCOME STOCK VALUE INDEX SELECT 50(6) GROWTH
------- ------- ----------- -------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Policy Owner Transaction
Expenses
Sales Load On Purchase
Payments(/1/)......... 0 0 0 0 0 0
Maximum Surrender
Charge (as a % of
Excess Premium
Withdrawal)(/2/)...... 7 7 7 7 7 7
Surrender Fees......... 0 0 0 0 0 0
Annual Service $35 Per Policy, but not greater than 2%
Charge(/1/)........... of the Annuity Purchase Value
------------------------------------------------------
Transfer Fee(/1/)...... Currently no fee
------------------------------------------------------
Mutual Fund Account
Annual Expenses (as a
percentage of account
value)
Mortality and Expense
Risk Fees............. 1.40 1.40 1.40 1.40 1.40 1.40
Administrative Charge.. 0.15 0.15 0.15 0.15 0.15 0.15
Total Mutual Fund
Account Annual
Expenses(/3/)......... 1.55 1.55 1.55 1.55 1.55 1.55
Underlying Funds Annual
Expenses(/4/) (as a
percentage of average
net assets and after
expense reimbursements)
Management Fees........ 0.80 0.80 0.80 0.75 1.10 0.80
Other Expenses......... 0.16 0.21 0.50 0.55 0.40 0.08
Total Underlying Funds
Annual
Expenses(/4/)(/5/).... 0.96 1.01 1.30 1.30 1.50 0.88
</TABLE>
- 12 -
<PAGE>
- ----------------------------------
/1/ The SurrenderCharge and Transfer Fee, if any is imposed, apply to each
Policy, regardless of how the Annuity Purchase Value is allocated among the
Mutual Fund Account and the Fixed Account. The annual Service Charge, if any
is imposed, applies only to the Mutual Fund Account, and is assessed on a
prorata basis relative to each Subaccount's Annuity Purchase Value as a
percentage of the Policy's total Annuity Purchase Value. The Service Charge
is deducted on each Policy Anniversary. (See "CHARGES AND DEDUCTIONS--Other
Expenses Including Investment Advisory Fees," p. 55.)
/2/ The Surrender Charge is decreased based on the number of years since the
Premium Payment date in which the withdrawal is made, from 7% during the
first year after the Premium Payment was made to 0% after the seventh year
after the Premium Payment was made. (See "CHARGES AND DEDUCTIONS--Surrender
Charge," p. 52.)
/3/ The Mortality and Expense Risk Fees shown are for the Annual Step-Up Death
Benefit and apply only during the first seven Policy Years. After the
seventh Policy Year this charge is 1.25%. The corresponding Fee for the
Return of Premium Death Benefit is 1.25% for each Subaccount during the
first seven Policy Years and 1.10% thereafter. The Administrative Charge may
be increased in the future. (See "DISTRIBUTIONS UNDER THE POLICY--Death
Benefit," p. 49.) In no event will the Mortality and Expense Risk Fee and
Administrative Charge exceed 1.40% on or after the Annuity Commencement
Date, regardless of the Death Benefit that was in effect prior to
commencement of Annuity Payments.
/4/ Endeavor Investment Advisers has agreed, until further notice, to assume
expenses of the Portfolios that exceed the following rates: Opportunity
Value--1.30%; Enhanced Index--1.30%; Montgomery Select 50--1.30%. Expenses
shown for these Portfolios are estimated for 1997. During 1996, Endeavor
Investment Advisers waived fees relative to, or reimbursed expenses,
relative to the Opportunity Value Portfolio. The annualized Total Underlying
Funds Annual Expense of the Opportunity Value Portfolio before
waiver/reimbursement by Endeavor Investment Advisers for the period ended
December 31, 1996, was 12.69%. The fee table information relating to the
Underlying Funds was provided to AUSA Life by the Underlying Funds, and AUSA
Life has not independently verified such information.
/5/ Effective January 1, 1997, the WRL Series Fund, Inc. adopted a Plan of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "1940 Act") ("Distribution Plan") and pursuant to the Distribution
Plan, entered into a Distribution Agreement with InterSecurities, Inc.
("ISI"), principal underwriter for the WRL Series Fund, Inc. Under the
Distribution Plan, the WRL Series Fund, Inc., on behalf of the WRL Growth
Portfolio, is authorized to pay to various service providers, as direct
payment for expenses incurred in connection with the distribution of the
Portfolio's shares, amounts equal to actual expenses associated with
distributing the Portfolio's shares, up to a maximum rate of 0.15% on an
annualized basis of the average daily net assets. This fee is measured and
accrued daily and paid monthly. ISI has determined that it will not seek
payment by the WRL Series Fund, Inc. of
- 13 -
<PAGE>
distribution expenses with respect to any portfolio (including the WRL
Growth Portfolio) during the fiscal year ending December 31, 1997. Owners
will be notified prior to the time ISI would seek such reimbursement.
/6/ The Montgomery Select 50 Portfolio is expected to commence operations on or
about the date of this Prospectus. The expenses shown are annualized
estimates of expenses for 1997.
Examples
I. An Owner would pay the following expenses on a $1,000 investment, assuming
Return of Premium Death Benefit, a hypothetical 5% annual return on assets,
and assuming the entire Annuity Purchase Value is in the applicable
Subaccount:
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 $109 $136 $231
TCW Managed Asset Allocation Portfolio......... $ 93 $116 $149 $257
T. Rowe Price International Stock Portfolio.... $ 97 $126 $166 $290
Value Equity Portfolio......................... $ 94 $118 $152 $263
Dreyfus Small Cap Value Portfolio.............. $ 94 $118 $153 $264
Dreyfus U.S. Government Securities Portfolio... $ 93 $115 $148 $254
T. Rowe Price Equity Income Portfolio.......... $ 94 $119 $155 $268
T. Rowe Price Growth Stock Portfolio........... $ 95 $121 $157 $273
Opportunity Value Portfolio.................... $ 98 $130 $172 $302
Enhanced Index Portfolio....................... $ 98 $130 $172 $302
Montgomery Select 50 Portfolio................. $100 $136 $181 $321
WRL Growth Portfolio........................... $ 94 $117 $151 $260
</TABLE>
2. If the Policy is annuitized 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..................... $21 $64 $110 $231
TCW Managed Asset Allocation Portfolio......... $23 $72 $123 $257
T. Rowe Price International Stock Portfolio.... $27 $81 $139 $290
Value Equity Portfolio......................... $24 $73 $126 $263
Dreyfus Small Cap Value Portfolio.............. $24 $74 $126 $264
Dreyfus U.S. Government Securities Portfolio... $23 $71 $121 $254
T. Rowe Price Equity Income Portfolio.......... $24 $75 $128 $268
T. Rowe Price Growth Stock Portfolio........... $25 $76 $131 $273
Opportunity Value Portfolio.................... $28 $85 $145 $302
Enhanced Index Portfolio....................... $28 $85 $145 $302
Montgomery Select 50 Portfolio................. $30 $91 $155 $321
WRL Growth Portfolio........................... $24 $72 $124 $260
</TABLE>
- 14 -
<PAGE>
3. If the Policy is not surrendered or annuitized:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
TCW Money Market Portfolio..................... $21 $64 $110 $231
TCW Managed Asset Allocation Portfolio......... $23 $72 $123 $257
T. Rowe Price International Stock Portfolio.... $27 $81 $139 $290
Value Equity Portfolio......................... $24 $73 $126 $263
Dreyfus Small Cap Value Portfolio.............. $24 $74 $126 $264
Dreyfus U.S. Government Securities Portfolio... $23 $71 $121 $254
T. Rowe Price Equity Income Portfolio.......... $24 $75 $128 $268
T. Rowe Price Growth Stock Portfolio........... $25 $76 $131 $273
Opportunity Value Portfolio.................... $28 $85 $145 $302
Enhanced Index Portfolio....................... $28 $85 $145 $302
Montgomery Select 50 Portfolio................. $30 $91 $155 $321
WRL Growth Portfolio........................... $24 $72 $124 $260
</TABLE>
II. An Owner would pay the following expenses on a $1,000 investment, assuming
Annual Step-Up Death Benefit, a hypothetical 5% annual return on assets, and
assuming the entire Annuity Purchase Value is in the applicable Subaccount:
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..................... $ 92 $113 $144 $247
TCW Managed Asset Allocation Portfolio......... $ 95 $121 $157 $272
T. Rowe Price International Stock Portfolio.... $ 98 $131 $173 $305
Value Equity Portfolio......................... $ 95 $123 $160 $278
Dreyfus Small Cap Value Portfolio.............. $ 95 $123 $160 $279
Dreyfus U.S. Government Securities Portfolio... $ 94 $120 $155 $269
T. Rowe Price Equity Income Portfolio.......... $ 96 $124 $162 $283
T. Rowe Price Growth Stock Portfolio........... $ 96 $126 $165 $288
Opportunity Value Portfolio.................... $ 99 $134 $179 $316
Enhanced Index Portfolio....................... $ 99 $134 $179 $316
Montgomery Select 50 Portfolio................. $101 $140 $189 $335
WRL Growth Portfolio........................... $ 95 $122 $158 $275
</TABLE>
- 15 -
<PAGE>
2. If the Policy is annuitized 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..................... $22 $69 $118 $247
TCW Managed Asset Allocation Portfolio......... $25 $76 $130 $272
T. Rowe Price International Stock Portfolio.... $28 $86 $147 $305
Value Equity Portfolio......................... $25 $78 $133 $278
Dreyfus Small Cap Value Portfolio.............. $25 $78 $134 $279
Dreyfus U.S. Government Securities Portfolio... $24 $75 $129 $269
T. Rowe Price Equity Income Portfolio.......... $26 $79 $136 $283
T. Rowe Price Growth Stock Portfolio........... $26 $81 $138 $288
Opportunity Value Portfolio.................... $29 $90 $152 $316
Enhanced Index Portfolio....................... $29 $90 $152 $316
Montgomery Select 50 Portfolio................. $31 $95 $162 $335
WRL Growth Portfolio........................... $25 $77 $132 $275
</TABLE>
3. If the Policy is not surrendered or annuitized:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
TCW Money Market Portfolio..................... $22 $69 $118 $247
TCW Managed Asset Allocation Portfolio......... $25 $76 $130 $272
T. Rowe Price International Stock Portfolio.... $28 $86 $147 $305
Value Equity Portfolio......................... $25 $78 $133 $278
Dreyfus Small Cap Value Portfolio.............. $25 $78 $134 $279
Dreyfus U.S. Government Securities Portfolio... $24 $75 $129 $269
T. Rowe Price Equity Income Portfolio.......... $26 $79 $136 $283
T. Rowe Price Growth Stock Portfolio........... $26 $81 $138 $288
Opportunity Value Portfolio.................... $29 $90 $152 $316
Enhanced Index Portfolio....................... $29 $90 $152 $316
Montgomery Select 50 Portfolio................. $31 $95 $162 $335
WRL Growth Portfolio........................... $25 $77 $132 $275
</TABLE>
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
1996 expenses (or annualized estimates for 1997 for the Enhanced Index,
Opportunity Value and Montgomery Select 50 Portfolios) of the Underlying
Funds. See "CHARGES AND DEDUCTIONS," p. 52, and the Underlying Funds'
prospectuses. In addition to the expenses listed above, premium taxes may be
applicable.
In these examples, the $35 annual Service Charge is reflected as a charge of
.0583% based on an average Policy Value of $60,083. Normally, the $35 (but not
more than 2% of the Annuity Purchase Value) Service Charge would be waived if
the Premium Payments less partial withdrawals is at least $50,000 on a Policy
Anniversary. However, $35 has been included in these examples for illustrative
purposes.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND
- 16 -
<PAGE>
ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE ANNUAL RETURNS, WHICH COULD BE GREATER OR LESS THAN THE ASSUMED
RATE. THE FIGURES AND DATA FOR THE UNDERLYING FUND ANNUAL EXPENSES HAVE BEEN
PROVIDED BY WRL INVESTMENT MANAGEMENT, INC. AND ENDEAVOR INVESTMENT ADVISERS,
AND AUSA LIFE HAS NOT INDEPENDENTLY VERIFIED THEIR ACCURACY.
DEATH BENEFIT
If the Annuitant is also the Owner, and dies before the Annuity Commencement
Date, the Death Benefit is calculated and is payable to the Beneficiary when
AUSA Life receives due proof of death, an election of the method of settlement
and return of the Policy. The Death Benefit is only paid if the Annuitant is
also an Owner and that person dies prior to the Annuity Commencement Date. In
the event that the Annuitant who is not an Owner dies prior to the Annuity
Commencement Date, the Owner will generally become the Annuitant unless the
Owner specifically requests on the application or in writing prior to
Annuitant's death that the death benefit be paid to the Beneficiary upon the
Annuitant's death and AUSA Life agrees to such an election. Death Benefits
which are not paid to or for the benefit of a natural person must be
distributed by the end of the five years after the date of the Annuitant's
death.
AUSA Life guarantees that the Death Benefit will be at least a minimum
amount (the "Guaranteed Minimum Death Benefit") selected by the Owner, either
the "Return of Premium Death Benefit" or the "Annual Step-Up Death Benefit."
The Death Benefit will be determined on the date due proof of death and an
election of a method of settlement are received. The Death Benefit will be the
greatest of (a) the Annuity Purchase Value; or (b) the Cash Value; or (c) the
Guaranteed Minimum Death Benefit plus any additional premium payments
received, less any withdrawals from the date of death to the date of payment
of death proceeds. No Surrender Charge 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 "DISTRIBUTIONS
UNDER THE POLICY--Death Benefit," p. 42.)
The "Return of Premium Death Benefit" is equal to the total Premium Payments
made, less any "Adjusted Partial Withdrawals" as of the date of death.
The "Annual Step-Up Death Benefit" is equal to the largest Annuity Purchase
Value on the Date of Issue or on any Policy Anniversary prior to the earlier
of the owner's 81st birthday or the date of death, plus any Premium Payments
made less any "Adjusted Partial Withdrawals" taken, subsequent to the date of
the largest Annuity Purchase Value on any Policy Anniversary.
The Death Benefit is not paid 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 (which may include a Surrender Charge).
- 17 -
<PAGE>
The Owner has a "one-time" choice of a Guaranteed Minimum Death Benefit at
the time of purchase of the Policy. The Owner may choose either the Annual
Step-Up Death Benefit or the Return of Premium Death Benefit. Certain age
restrictions may apply. If no choice is made by the Owner, the Policy will be
issued with the Return of Premium Death Benefit.
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
in New York is twenty days after the Policy is delivered to the Policy Owner.
The amount of 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.
AUSA Life will pay the refund within seven 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, if the Owner is younger
than age 59 1/2, a ten percent federal penalty tax may apply to certain
distributions or deemed distributions under the Policy. (See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," p. 56.)
INQUIRIES, WRITTEN NOTICES AND WRITTEN REQUESTS
Any questions about procedures or the Policy, or any Written Notice or
Written Request that is required to be sent to AUSA Life, should be sent to
AUSA Life'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 in this Prospectus may only be available to
Policies purchased after the effective date of the Policy form or Endorsement
used. See the Policy or Endorsement for details.
* * *
Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus, in the Statement of
Additional Information, in the prospectuses for the Underlying Funds, and in
the Policy, all of which should be referred to for more detailed
- 18 -
<PAGE>
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
deemed not to be securities. See "THE ENDEAVOR ACCOUNTS--The Fixed Account," p.
35.)
- 19 -
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following 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) are derived from the financial statements of the Mutual
Fund Account. The data should be read in connection with those financial
statements which are found in the Statement of Additional Information.
<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>
1996........................ 1.115718 1.154219 665,174.123
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>
1996........................ 1.577873 1.833135 1,123,469.170
1995........................ 1.301669 1.577873 607,869.454
<CAPTION>
T. ROWE PRICE INTERNATIONAL STOCK SUBACCOUNT
---------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE ACCUMULATION UNITS
BEGINNING OF YEAR AT END OF YEAR AT END OF YEAR
----------------- -------------- ------------------
<S> <C> <C> <C>
1996........................ 1.171039 1.330640 2,084,832.841
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>
1996........................ 1.387903 1.694854 1,565,599.143
1995........................ 1.045610 1.387903 547,233.586
<CAPTION>
DREYFUS SMALL CAP VALUE 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>
1996........................ 1.206843 1.496065 1,239,443.264
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>
1996........................ 1.124292 1.128769 589,799.900
1995(1)..................... 1.072051 1.124292 204,813.593
</TABLE>
- 20 -
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE EQUITY INCOME SUBACCOUNT
-----------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION UNITS AT
BEGINNING OF YEAR END OF YEAR END OF YEAR
----------------- ------------- ---------------------
<S> <C> <C> <C>
1996...................... 1.287240 1.521680 1,387,607.312
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>
1996...................... 1.353339 1.611613 964,658.085
1995(3)................... 1.145983 1.353339 189,613.999
<CAPTION>
OPPORTUNITY VALUE 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>
1996(4)................... .999050 1.004355 178,913.412
<CAPTION>
ENHANCED INDEX 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>
1996(5)................... -- -- --
<CAPTION>
MONTGOMERY SELECT 50 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>
1996(6)................... -- -- --
<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>
1996...................... 14.583843 16.964068 306,855.075
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 October 29, 1996, known as the Value Small Cap Subaccount, and
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
(4) Period from December 13, 1996 through December 31, 1996.
- 21 -
<PAGE>
(5) The offering of the Enhanced Index Subaccount commenced May 1, 1997.
Accordingly, no comparable data is available for that Subaccount.
(6) The offering of the Montgomery Select 50 Subaccount is expected to
commence on or about the date of this Prospectus, therefore no comparable
data is available for that Subaccount.
FINANCIAL STATEMENTS
The financial statements of the Mutual Fund Account and of AUSA Life, and
the independent auditors' reports thereon are found in the Statement of
Additional Information which is available free upon request from the Service
Office at (800) 525-6205 (toll-free).
HISTORICAL PERFORMANCE DATA
STANDARDIZED PERFORMANCE DATA
From time to time, AUSA Life may advertise historical yields and total
returns for the Subaccounts of the Mutual Fund Account. In addition, AUSA Life
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"). These yields and total returns will be based on
historical earnings and are not intended to indicate future performance.
TCW MONEY MARKET SUBACCOUNT
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.
OTHER SUBACCOUNTS
The yield of a Subaccount of the Mutual Fund Account (other than the 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.
- 22 -
<PAGE>
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 Policy. The
yield calculations also do not reflect the effect of any Surrender Charge that
may be applicable to a particular Policy. To the extent that a premium tax
and/or Surrender 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 the Service Office of AUSA
Life upon request.
Based on the method of calculation described in the Statement of Additional
Information, (that is, deducting the Mortality and Expense Risk Fee,
Administrative Charge and Surrender Charge under the Policy) the average
annual total returns for periods from inception of the Subaccounts to December
31, 1996, and for the one and five year periods ended December 31, 1996, are
shown below. Such data assumes a complete surrender of the Policy at the end
of the period; therefore the Surrender Charge is deducted.
AVERAGE ANNUAL TOTAL RETURNS(/1/)
RETURN OF PREMIUM DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES:
1.40%)
<TABLE>
<CAPTION>
ONE YEAR INCEPTION
PERIOD FIVE YEARS OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/96 12/31/96 12/31/96 DATE
---------- -------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
TCW Managed Asset Alloca-
tion.................... 10.81% N/A 16.75% January 1, 1995
T. Rowe Price Interna-
tional Stock............ 8.25% N/A 9.25% January 1, 1995
Value Equity............. 16.80% N/A 25.23% January 1, 1995
Dreyfus Small Cap Value.. 18.64% N/A 16.15% January 1, 1995
Dreyfus U.S. Government
Securities.............. (5.06)% N/A (0.11)% June 16, 1995
T. Rowe Price Equity In-
come.................... 12.85% N/A 19.55% June 28, 1995
T. Rowe Price Growth
Stock................... 13.73% N/A 19.75% April 28, 1995
Opportunity Value........ N/A N/A (6.47)% December 13, 1996
Enhanced Index........... N/A N/A N/A May 1, 1997
Montgomery Select
50(/2/)................. N/A N/A N/A --
WRL Growth............... 10.99% N/A 28.23% January 1, 1995
</TABLE>
- 23 -
<PAGE>
ANNUAL STEP-UP DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES:
1.55%)
<TABLE>
<CAPTION>
ONE YEAR INCEPTION
PERIOD FIVE YEARS OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/96 12/31/96 12/31/96 DATE
---------- -------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
TCW Managed Asset Alloca-
tion.................... 10.63% N/A 16.57% January 1, 1995
T. Rowe Price Interna-
tional Stock............ 8.08% N/A 9.08% January 1, 1995
Value Equity............. 16.68% N/A 25.07% January 1, 1995
Dreyfus Small Cap Value.. 18.45% N/A 15.98% January 1, 1995
Dreyfus U.S. Government
Securities.............. (5.21)% N/A (0.27)% June 16, 1995
T. Rowe Price Equity In-
come.................... 12.68% N/A 19.36% June 28, 1995
T. Rowe Price Growth
Stock................... 13.55% N/A 19.56% April 28, 1995
Opportunity Value........ N/A N/A (6.47)% December 13, 1996
Enhanced Index........... N/A N/A N/A May 1, 1997
Montgomery Select
50(/2/)................. N/A N/A N/A --
WRL Growth............... 10.81% N/A 28.03% January 1, 1995
</TABLE>
- ----------------------------------
(1) These calculations also assume the Policy has been in effect for less than
eight years and that Annuity Payments have not commenced. Policies in
effect for more than seven years would experience lower Mortality and
Expense Risk Fees and therefore the yield and/or total return of such
Policies would be increased. In no event will Policies which have reached
the Annuity Commencement Date reflect a return based on a Mortality and
Expense Risk Fee and Administrative Charge of more than 1.40%, regardless
of the death benefit option in effect just prior to the commencement of
Annuity Payments.
(2) The offering of the Montgomery Select 50 Subaccount is expected to
commence on or about the date of this Prospectus, therefore no comparable
data is available for that Subaccount.
The figures for the "from inception" periods in the above tables reflect
waiver of advisory fees and reimbursement of other expenses for all portfolios
except the T. Rowe Price Equity Income Portfolio and the T. Rowe Price Growth
Stock Portfolio. In the absence of such waivers, the average annual total
return figures above for the inception periods would have been lower.
- 24 -
<PAGE>
OTHER PERFORMANCE DATA
AUSA Life may present the total return data described above on a non-
standardized basis. This means that the data may not be reduced by all the
fees and charges under the Policy and that the data may be presented for
different time periods and for different Premium Payment amounts. NON-
STANDARDIZED PERFORMANCE DATA WILL ONLY BE DISCLOSED IF STANDARDIZED
PERFORMANCE DATA FOR THE REQUIRED PERIODS IS ALSO DISCLOSED. THE FOLLOWING
TABLES SHOW AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS SINCE THEIR
INCEPTION REDUCE BY ALL FEES AND CHARGES UNDER THE POLICY EXCEPT SURRENDER
CHARGES:
AVERAGE ANNUAL TOTAL RETURNS(/1/)
RETURN OF PREMIUM DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES:
1.40%)
<TABLE>
<CAPTION>
ONE YEAR INCEPTION
PERIOD FIVE YEARS OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/96 12/31/96 12/31/96 DATE
---------- -------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
TCW Managed Asset Alloca-
tion..................... 16.11% N/A 18.58% January 1, 1995
T. Rowe Price Interna-
tional Stock............. 13.56% N/A 11.23% January 1, 1995
Value Equity.............. 22.07% N/A 27.21% January 1, 1995
Dreyfus Small Cap Value... 23.89% N/A 17.99% January 1, 1995
Dreyfus U.S. Government
Securities............... .34% N/A 3.33% June 16, 1995
T. Rowe Price Equity In-
come..................... 18.14% N/A 22.65% June 28, 1995
T. Rowe Price Growth
Stock.................... 19.02% N/A 22.45% April 28, 1995
Opportunity Value......... N/A N/A .53% December 13, 1996
Enhanced Index............ N/A N/A N/A May 1, 1997
Montgomery Select
50(/2/).................. N/A N/A N/A --
WRL Growth................ 16.29% N/A 29.83% January 1, 1995
</TABLE>
ANNUAL STEP-UP DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES:
1.55%)
<TABLE>
<CAPTION>
ONE YEAR INCEPTION
PERIOD FIVE YEARS OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/96 12/31/96 12/31/96 DATE
---------- -------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
TCW Managed Asset Alloca-
tion..................... 15.94% N/A 18.40% January 1, 1995
T. Rowe Price Interna-
tional Stock............. 13.39% N/A 11.07% January 1, 1995
Value Equity.............. 21.95% N/A 27.06% January 1, 1995
Dreyfus Small Cap Value... 23.71% N/A 17.81% January 1, 1995
Dreyfus U.S. Government
Securities............... .19% N/A 3.18% June 16, 1995
T. Rowe Price Equity In-
come..................... 17.97% N/A 22.47% June 28, 1995
T. Rowe Price Growth
Stock.................... 18.84% N/A 22.26% April 28, 1995
Opportunity Value......... N/A N/A .53% December 13, 1996
Enhanced Index............ N/A N/A N/A May 1, 1997
Montgomery Select
50(/2/).................. N/A N/A N/A --
WRL Growth................ 16.12% N/A 29.64% January 1, 1995
</TABLE>
- ----------------------------------
(1) These calculations also assume the Policy has been in effect for less than
eight years and that Annuity Payments have not commenced.
- 25 -
<PAGE>
Policies in effect for more than seven years would experience lower
Mortality and Expense Risk Fees and therefore the yield and/or total
return of such Policies would be increased. In no event will Policies
which have reached the Annuity Commencement Date reflect a return based on
a Mortality and Expense Risk Fee and Administrative Charge of more than
1.40%, regardless of the death benefit option in effect just prior to the
commencement of Annuity Payments.
(2) The offering of the Montgomery Select 50 Subaccount is expected to
commence on or about the date of this Prospectus, therefore no comparable
data is available for that Subaccount.
The figures for the "from inception" periods in the above tables reflect
waiver of advisory fees and reimbursement of other expenses for all portfolios
except the T. Rowe Price Equity Income Portfolio and the T. Rowe Price Growth
Stock Portfolio. In the absence of such waivers, the average annual total
return figures above for the inception periods would have been lower.
In addition, AUSA Life may present historic performance data for the
underlying Portfolios since their inception reduced by some or all of the fees
and charges under the Policy. Such adjusted historic performance includes data
that precedes the inception dates of the Subaccounts. This data is designed to
show the performance that would have resulted if the Policy had been in
existence during that time.
For instance, as shown in the table below, AUSA Life may disclose average
annual total returns for the Portfolios reduced by all fees and charges under
the Policy, as if the Policy had been in existence since the inception of the
Portfolio. Such fees and charges include the Mortality and Expense Risk Fee,
Administrative Charge and Surrender Charges. Such data assumes a complete
surrender of the Policy at the end of the period; THEREFORE THE SURRENDER
CHARGE IS DEDUCTED.
THE AVERAGE ANNUAL TOTAL RETURNS OF THE PORTFOLIOS SINCE THEIR INCEPTION
REDUCED BY ALL THE FEES AND CHARGES UNDER THE POLICY FOR THE RETURN OF PREMIUM
DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.40%) ARE:
PERIOD ENDED DECEMBER 31, 1996(/1/)
<TABLE>
<CAPTION>
CORRESPONDING
TEN YEARS* PORTFOLIO
OR PORTFOLIO INCEPTION
SUBACCOUNT FIVE YEARS INCEPTION DATE
---------- ---------- ------------ -----------------
<S> <C> <C> <C>
TCW Managed Asset Allocation........ 9.97% 10.93% April 8, 1991
T. Rowe Price International
Stock(/2/)......................... 4.69% 4.83% April 8, 1991
Value Equity........................ N/A 14.97% May 27, 1993
Dreyfus Small Cap Value............. N/A 10.88% May 4, 1994
Dreyfus U.S. Government Securities.. N/A 3.11% May 9, 1994
T. Rowe Price Equity Income......... N/A 21.26% January 3, 1995
T. Rowe Price Growth Stock.......... N/A 24.95% January 3, 1995
Opportunity Value................... N/A (6.57)% November 18, 1996
Enhanced Index...................... N/A N/A May 1, 1997
Montgomery Select 50(/3/)........... N/A N/A --
WRL Growth.......................... 9.14% 16.26%* October 2, 1986
</TABLE>
- 26 -
<PAGE>
THE AVERAGE ANNUAL TOTAL RETURNS OF THE PORTFOLIOS SINCE THEIR INCEPTION
REDUCED BY ALL THE FEES AND CHARGES UNDER THE POLICY FOR THE ANNUAL STEP-UP
DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.55%) ARE:
PERIOD ENDED DECEMBER 31, 1996(/1/)
<TABLE>
<CAPTION>
CORRESPONDING
TEN YEARS* PORTFOLIO
FIVE OR PORTFOLIO INCEPTION
SUBACCOUNT YEARS INCEPTION DATE
---------- ----- ------------ -----------------
<S> <C> <C> <C>
TCW Managed Asset Allocation............. 9.80% 10.76% April 8, 1991
T. Rowe Price International Stock(/2/)... 4.53% 4.67% April 8, 1991
Value Equity............................. N/A 14.82% May 27, 1993
Dreyfus Small Cap Value.................. N/A 10.71% May 4, 1994
Dreyfus U.S. Government Securities....... N/A 2.95% May 9, 1994
T. Rowe Price Equity Income.............. N/A 21.07% January 3, 1995
T. Rowe Price Growth Stock............... N/A 24.76% January 3, 1995
Opportunity Value........................ N/A (6.56)% November 18, 1996
Enhanced Index........................... N/A N/A May 1, 1997
Montgomery Select 50(/3/)................ N/A N/A --
WRL Growth............................... 8.97% 16.05%* October 2, 1986
</TABLE>
- ----------------------------------
(1) The calculation of total return performance for periods prior to inception
of the Subaccounts reflects deductions for the Mortality and Expense Risk
Fee and Administrative Charge on a monthly basis, rather than a daily
basis. The monthly deduction is made at the beginning of each month and
generally approximates the performance that would have resulted if the
Subaccounts had actually been in existence since the Inception of the
Portfolio.
(2) Effective January 1, 1995, Rowe-Price Fleming International, Inc. became
the Adviser to the T. Rowe Price International Stock Portfolio. The
Portfolio's name was changed from the Global Growth Portfolio and the
Portfolio's shareholders 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).
(3) The offering of the Montgomery Select 50 Subaccount is expected to
commence on or about the date of this Prospectus, therefore no comparable
data is available for that Subaccount.
The figures for the "five year" and "from inception" periods in the above
tables reflect waiver of advisory fees and reimbursement of other expenses for
all portfolios except the T. Rowe Price Equity Income Portfolio and the T.
Rowe Price Growth Stock Portfolio. In the absence of such waivers, the average
annual total return figures above from the five year and from inception
periods would have been lower.
In addition, as shown in the next tables, AUSA Life may present average
annual total returns for the Portfolios reduced by all fees and charges under
the Policy, as if the Policy had been in existence, EXCEPT THAT THE SURRENDER
CHARGE IS NOT DEDUCTED. Such fees and charges include the Mortality and
Expense Risk Fee and the Administrative Charge.
- 27 -
<PAGE>
THE AVERAGE ANNUAL TOTAL RETURNS OF THE PORTFOLIOS SINCE THEIR INCEPTION
REDUCED BY ALL FEES AND CHARGES UNDER THE POLICY FOR THE RETURN OF PREMIUM
DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.40%) EXCEPT THE
SURRENDER CHARGE ARE:
PERIOD ENDED DECEMBER 31, 1996(/1/)
<TABLE>
<CAPTION>
CORRESPONDING
TEN YEARS* PORTFOLIO
FIVE OR PORTFOLIO INCEPTION
SUBACCOUNT YEARS INCEPTION DATE
---------- ----- ------------ -----------------
<S> <C> <C> <C>
TCW Managed Asset Allocation............ 10.20% 11.10% April 8, 1991
T. Rowe Price International
Stock(/2/).............................. 4.98% 5.07% April 8, 1991
Value Equity............................ N/A 15.77% May 27, 1993
Dreyfus Small Cap Value................. N/A 11.58% May 4, 1994
Dreyfus U.S. Government Securities ..... N/A 4.68% May 9, 1994
T. Rowe Price Equity Income............. N/A 23.35% January 3, 1995
T. Rowe Price Growth Stock.............. N/A 26.95% January 3, 1995
Opportunity Value....................... N/A .53% November 18, 1996
Enhanced Index.......................... N/A N/A May 1, 1997
Montgomery Select 50(/3/)............... N/A N/A --
WRL Growth.............................. 9.38% 16.26%* October 2, 1986
</TABLE>
THE AVERAGE ANNUAL TOTAL RETURNS OF THE PORTFOLIOS SINCE THEIR INCEPTION
REDUCED BY ALL THE FEES AND CHARGES UNDER THE POLICY FOR THE ANNUAL STEP-UP
DEATH BENEFIT (TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.55%) EXCEPT THE
SURRENDER CHARGE ARE:
PERIOD ENDED DECEMBER 31, 1996(/1/)
<TABLE>
<CAPTION>
CORRESPONDING
TEN YEARS* PORTFOLIO
FIVE OR PORTFOLIO INCEPTION
SUBACCOUNT YEARS INCEPTION DATE
---------- ----- ------------ -----------------
<S> <C> <C> <C>
TCW Managed Asset Allocation............ 10.03% 10.94% April 8, 1991
T. Rowe Price International
Stock(/2/)............................. 4.82% 4.91% April 8, 1991
Value Equity............................ N/A 15.62% May 27, 1993
Dreyfus Small Cap Value................. N/A 11.41% May 4, 1994
Dreyfus U.S. Government Securities...... N/A 4.52% May 9, 1994
T. Rowe Price Equity Income............. N/A 23.17% January 3, 1995
T. Rowe Price Growth Stock.............. N/A 26.77% January 3, 1995
Opportunity Value....................... N/A .44% November 18, 1996
Enhanced Index.......................... N/A N/A May 1, 1997
Montgomery Select 50(/3/)............... N/A N/A --
WRL Growth.............................. 9.21% 16.05% October 2, 1986
</TABLE>
- ----------------------------------
(1) The calculation of total return performance for periods prior to inception
of the Subaccounts reflects deductions for the Mortality and Expense Risk
Fee and Administrative Charge on a monthly basis, rather than a daily
basis. The monthly deduction is made at the beginning of each month and
generally approximates the performance that would have resulted if the
Subaccounts had actually been in existence since the Inception of the
Portfolio.
- 28 -
<PAGE>
(2) Effective January 1, 1995, Rowe-Price Fleming International, Inc. became
the Adviser to the T. Rowe Price International Stock Portfolio. The
Portfolio's name was changed from the Global Growth Portfolio and the
Portfolio's shareholders 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).
(3) The offering of the Montgomery Select 50 Subaccount is expected to
commence on or about the date of this Prospectus, therefore no comparable
data is available for that Subaccount.
SUBADVISER PERFORMANCE
The prospectuses for the Underlying Funds may present the total returns of
certain existing funds or accounts that are managed by Subadvisers for the
Portfolios and that have investment objectives, policies, and strategies
substantially similar to those of certain Portfolios ("Similar Subadviser
Funds"). NONE OF THE FEES AND CHARGES UNDER THE POLICY HAVE BEEN DEDUCTED FROM
SUCH SUBADVISER PERFORMANCE DATA. IF THOSE FEES AND CHARGES WERE DEDUCTED, THE
INVESTMENT RETURNS WOULD BE LOWER. THE SIMILAR SUBADVISER FUNDS ARE NOT
AVAILABLE FOR INVESTMENT UNDER THE POLICY. For more information on Subadviser
performance, see the appropriate prospectus for the Underlying Fund.
PUBLISHED RATINGS
AUSA Life 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, Moody's Investors Service, Inc. and Duff & Phelps Credit Rating Co.
The purpose of the ratings is to reflect the financial strength and/or claims-
paying ability of AUSA Life 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 Life as
measured by Standard & Poor's Insurance Ratings Services, Moody's Investors
Service, Inc. or Duff & Phelps Credit Rating Co. 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.
- 29 -
<PAGE>
AUSA LIFE INSURANCE COMPANY, INC.
AUSA Life Insurance Company, Inc. 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 and
Hawaii. As of December 31, 1996, AUSA Life had assets of approximately $9.0
billion. AUSA Life 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.
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 (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 Life's former
affiliate, International Life Investors Insurance Company ("ILI"). The ILI
policies were transferred to allow AUSA Life to succeed to the variable
annuity business of ILI. The Mutual Fund Account currently receives and
invests the Premium Payments under the Policies that are allocated to it for
investment in shares of the Growth Portfolio of the WRL Series Fund, Inc., and
the Endeavor Series Trust.
The Mutual Fund Account currently is divided into twelve Subaccounts.
Additional Subaccounts may be established, or Subaccounts may be removed, in
the future at the discretion of AUSA Life subject to applicable law. 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 Life, but they are held separately from the other assets of
AUSA Life, and are not chargeable with liabilities incurred in any other
business operation of AUSA Life (except to the extent that assets in the
Mutual Fund Account exceed the reserves and other liabilities of the Mutual
Fund Account). 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 Life. Therefore, the
investment performance of any Subaccount should be entirely independent of the
investment performance of AUSA Life's general account assets or any other
Account or Subaccount maintained by AUSA Life.
- 30 -
<PAGE>
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 Life.
Underlying Funds. The Mutual Fund Account invests 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. 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. The Underlying Funds currently consist of the following twelve
Portfolios: the WRL Growth Portfolio, managed by Janus Capital Corporation,
the TCW Managed Asset Allocation Portfolio, the TCW Money Market Portfolio,
the T. Rowe Price International Stock Portfolio, the Value Equity Portfolio,
the Dreyfus Small Cap Value Portfolio, the Dreyfus U.S. Government Securities
Portfolio, the T. Rowe Price Equity Income Portfolio, the T. Rowe Price Growth
Stock Portfolio, the Opportunity Value Portfolio, the Enhanced Index
Portfolio, and the Montgomery Select 50 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, an investment adviser registered with the SEC
under the Investment Advisers Act of 1940, is the Endeavor Series Trust's
manager. Endeavor Investment Advisers is a general partnership of which
Endeavor Management Co. is the managing partner. Endeavor Management Co. holds
a 50.01% interest in Endeavor Investment Advisers. AUSA Financial Markets,
Inc., an affiliate of AUSA Life, holds the remaining 49.99% interest.
Endeavor Investment Advisers 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. Six advisers (the "Advisers") each
perform investment advisory services for particular Portfolios of Endeavor
Series Trust.
TCW Funds Management, Inc. (a wholly-owned subsidiary of The TCW Group,
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. (a joint venture between T.
Rowe Price Associates, Inc. and Robert Fleming Holdings Limited), is the
Adviser for the T. Rowe Price International Stock
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Portfolio. OpCap Advisors (formerly known as Quest for Value Advisors), is the
Adviser for the Value Equity Portfolio and the Opportunity Value Portfolio.
J.P. Morgan Investment Management Inc. (a wholly owned subsidiary of J.P.
Morgan and Co. Incorporated) is the Adviser for the Enhanced Index Portfolio.
The Dreyfus Corporation (a wholly owned subsidiary of Mellon Bank, N.A.), as
successor to The Boston Company Asset Management, Inc., is the Adviser for the
Dreyfus U.S. Government Securities Portfolio, and the Dreyfus Small Cap Value
Portfolio. Montgomery Asset Management, LLC, is the Adviser for the Montgomery
Select 50 Portfolio.
WRL Investment Management, Inc., a subsidiary of Western Reserve Life
Assurance Co. of Ohio, (an affiliate of AUSA Life), 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.
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.
Dreyfus Small Cap Value Portfolio--seeks capital appreciation through
investments in a diversified portfolio consisting primarily of equity
securities of companies with a median capitalization of approximately $750
million, provided that under normal market conditions at least 75% of the
Portfolio's investments will be in equity securities of companies with
capitalizations at the time of purchase between $150 million and $1.5 billion.
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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.
Opportunity Value Portfolio--seeks growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based upon the Portfolio
Adviser's assessment of relative values.
Enhanced Index Portfolio--seeks to earn a total return modestly in excess of
the total return performance of the Standard & Poor's 500 Composite Stock
Index (the "S&P 500 Index") while maintaining a volatility of return similar
to the S&P 500 Index.
Montgomery Select 50 Portfolio--seeks capital appreciation by investing in
at least 50 different equity securities of companies of all sizes throughout
the world. Each of five teams from different investment management disciplines
of the portfolio's investment adviser selects ten equity securities based on
the potential for capital appreciation.
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.
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.
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Addition, Deletion, or Substitution of Investments. AUSA Life cannot and
does not guarantee that any of the Portfolios will always be available for
Premium Payments, allocations, or transfers. AUSA Life retains the right, with
prior approval of the New York Insurance Superintendent, to make changes in
the Mutual Fund Account and its investments. AUSA Life 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
Life'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 in this Prospectus prevents 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
Life, 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 Life. Each additional Subaccount will purchase shares in a
mutual fund portfolio or other investment vehicle. AUSA Life may also
eliminate one or more Subaccounts if, in its sole discretion, marketing, tax,
investment or other conditions warrant such change. AUSA Life may receive
expense reimbursements or other revenues from the Underlying Funds, their
portfolios, or their investment advisers.
In the event any Subaccount is eliminated, AUSA Life 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 Life 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 Life 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 Life also may transfer the assets of the Mutual Fund
Account associated with the Policies to another account or accounts.
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THE FIXED ACCOUNT
This Prospectus is generally intended to serve as a disclosure document only
for the Policy and the Mutual Fund Account. 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 Life, 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 Life has been advised that the
staff of the SEC has not reviewed the disclosures in this Prospectus which
relate to the fixed portion.
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 Life bears
the full investment risk for all Annuity Purchase Value in the Fixed Account.
AUSA Life has sole discretion to invest the assets of its general account,
including the Fixed Account, subject to applicable law. All guaranteed rates
or benefits provided by AUSA Life are subject to AUSA Life's claims-paying
ability.
Premium Payments applied to and any amounts transferred to the Fixed Account
will reflect a fixed interest rate. The interest rates AUSA Life 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% during the term of a Policy.
Guaranteed Period. AUSA Life will offer a one year guaranteed interest rate
period ("Guaranteed Period Option" or "GPO") into which Premium Payments may
be paid or amounts transferred. The current effective annual interest rate
AUSA Life sets for funds entering the One Year Guaranteed Period Option will
be guaranteed until the end of the Guaranteed Period Option. At the end of the
Guaranteed Period, the Premium Payment or amount transferred into the
Guaranteed Period Option less any withdrawals or transfers from that Option,
including the effect of any Surrender Charge due to withdrawals prior to the
end of the Guaranteed Period, plus accrued interest, will be rolled into a new
Guaranteed Period Option, unless the Owner requests otherwise.
AUSA Life will mail a preliminary notice to the Owner at least 45 days prior
to the end of a Guaranteed Period, which will indicate the alternatives that
are available to the Owner at the end of the Guaranteed Period, including the
new interest rate, (or if the new rate has not yet been determined, the rate
currently in effect). The Policy Owner may choose from among the available
alternatives by giving AUSA Life a written election within 30 days before the
end of the expiring Guaranteed Period. If the
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Owner does not make an election, funds will be rolled into the new One Year
Guaranteed Period Option, and the Owner will be mailed a notice of the
completion of the rollover with the new interest rate. AUSA Life will deem the
new Guaranteed Period Option to be accepted by the Owner if AUSA Life does not
receive a written rejection from the Owner within 30 days after the completion
notice.
Upon full surrender, the Owner is guaranteed return of Premium Payments to
the Fixed Account, less partial withdrawals and transfers from the Fixed
Account.
For purposes of crediting interest, the oldest Premium Payment or transfer
into the One Year 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). (See "THE ENDEAVOR ACCOUNTS--Transfers," p.
37.)
Dollar Cost Averaging Fixed Account Option. AUSA Life may offer a Dollar
Cost Averaging Fixed Account Option separate from the One Year Guaranteed
Period Option. 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. 30.) The Current Interest Rate AUSA Life sets for
the Dollar Cost Averaging Fixed Account may differ from the rates credited on
the One Year Guaranteed Period Option in the Fixed Account. The credited
interest rate will never be less than the minimum annual effective interest
rate of 3%. The Dollar Cost Averaging Fixed Account Option will only be
available under a Dollar Cost Averaging program as described below.
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.
Current Interest Rates. AUSA Life periodically will establish an applicable
Current Interest Rate for the One Year Guaranteed Period Option within the
Fixed Account, and the Dollar Cost Averaging Fixed Account Option. Current
Interest Rates may be changed by AUSA Life frequently or infrequently
depending on interest rates on investments available to AUSA Life and other
factors as described below, but once established, the rate will be guaranteed
for the entire duration of the Guaranteed Period.
The Current Interest Rate will not be less than an effective annual interest
rate of 3%. AUSA Life has no specific formula for determining the rate of
interest that it will declare as a Current Interest Rate, as this rate will be
reflective of interest rates available on the types of debt instruments in
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which AUSA Life intends to invest amounts allocated to the Fixed Account. In
addition, AUSA Life's management may consider other factors in determining
Current Interest Rates for a Guaranteed Period including but not limited to:
regulatory and tax requirements; sales commissions and administrative expenses
borne by the Company; general economic trends; and competitive factors. There
is no obligation to declare a rate in excess of 3%; the Policy Owner assumes
the risk that declared rates will not exceed 3%. AUSA Life has complete
discretion to declare any rate of at least 3%, regardless of market interest
rates, the amounts earned by AUSA Life on its investments, or any other
factors.
AUSA LIFE'S MANAGEMENT HAS COMPLETE AND SOLE DISCRETION TO DETERMINE THE
GUARANTEED INTEREST RATES. AUSA LIFE CANNOT PREDICT OR GUARANTEE THE LEVEL OF
FUTURE CURRENT INTEREST RATES, EXCEPT THAT AUSA LIFE GUARANTEES THAT FUTURE
CURRENT INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE ANNUAL INTEREST RATE OF
3%.
TRANSFERS
Prior to the Annuity Commencement Date, an Owner can transfer Annuity
Purchase Value from one Investment Option to another within certain limits.
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 Period Option Annuity Purchase
Value. If the Subaccount or Guaranteed Period Option Annuity Purchase Value
remaining after a transfer is less than $500, AUSA Life reserves the right to
include that amount as part of the transfer. Authorization of transfers by
telephone or other electronic means of communication is not permitted.
The Owner may transfer an amount up to the interest credited in the One Year
Guaranteed Period Option to any Subaccount(s) of the Mutual Fund Account prior
to the end of the Guaranteed Period. Such interest transfers may affect the
interest crediting rates on the remaining funds in the Guaranteed Period
Option. This is because interest transfers may have the effect of reducing or
eliminating principal amounts in the Guaranteed Period Option, since, for
purposes of crediting interest, AUSA Life considers the oldest Premium Payment
or transfer into the Guaranteed Period Option, plus interest allocable to that
particular Premium Payment or transfer to be withdrawn first.
The maximum Annuity Purchase Value that can be transferred from the One Year
Guaranteed Period Option prior to the end of the Guaranteed Period is 25% of
that Option's Annuity Purchase Value, less amounts
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previously transferred out of that Option during the current Policy Year. The
entire Annuity Purchase Value may be transferred from the One Year Guaranteed
Period Option at the end of the Guaranteed Period.
Transfers prior to the Annuity Commencement Date currently may be made
without charge as often as the Owner wishes, subject to the minimum dollar
amount specified above. AUSA Life reserves the right to limit these transfers
prior to the Annuity Commencement Date to no more than 12 per Policy Year in
the future or to charge up to $10 per transfer in excess of 12 per Policy
Year; however, currently there is no charge for any transfers.
Transfers out of the Dollar Cost Averaging Fixed Account, except through an
automatic Dollar Cost Averaging program, are not allowed.
After the Annuity Commencement Date, transfers between the Fixed Account and
Mutual Fund Account are not permitted.
REINSTATEMENTS
Requests are occasionally received by AUSA Life to reinstate funds which had
been transferred to another company by a Section 1035 exchange or trustee-to-
trustee transfer under the Code. In this situation AUSA Life will require the
Owner to replace the same total amount of money in the applicable Subaccounts
and/or Fixed Accounts as taken from them to effect the exchange. The total
amount of money reapplied to the Separate Account will be used to purchase a
number of Accumulation Units available for each Subaccount based on the
Accumulation Unit prices at the date of reinstatement (within two days of the
date the funds are received by AUSA Life). The number of Accumulation Units
available on the reinstatement date may be more or less than the number
surrendered for the exchange. Amounts reapplied to the Fixed Account will
receive the effective annual 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 Life 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 Life to automatically transfer an
amount specified by the Policy Owner (subject to minimum requirements) 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. The automatic transfers can be scheduled to occur
monthly or quarterly. DCA transfers will occur on the 28th day of each month,
or each third month, as the case may be. 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,
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the first transfer will occur on the 28th day of the following month. The
Owner may start a Dollar Cost Averaging program at any time. The amount
transferred each time must be at least $500. A minimum of six (but not more
than 24) monthly or four (but not more than eight) quarterly transfers is
required each time the Dollar Cost Averaging program is started or restarted.
Dollar Cost Averaging results in the purchase of more Accumulation Units
when the unit value is low, and fewer Accumulation 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.
Dollar Cost Averaging requires regular investment regardless of fluctuating
prices, and does not guarantee profits nor prevent losses in a declining
market. Before electing this option, individuals should consider their
financial ability to continue transfers through periods of both high and low
price levels.
The Policy Owner may request Dollar Cost Averaging when purchasing the
Policy or later. 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 will be 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 Life 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 (six
monthly or four quarterly) requirement must be satisfied each time the DCA
program is restarted. There is no charge for this program.
ASSET REBALANCING
Prior to the Annuity Commencement Date the Policy Owner may instruct AUSA
Life to automatically transfer amounts among the Subaccounts of the Mutual
Fund Account on a regular basis to maintain a desired allocation of the
Annuity Purchase Value among the various Subaccounts selected. Rebalancing
will occur on a monthly, quarterly, semi-annual, or annual basis, beginning on
a date selected by the Policy Owner. If no date is selected, the account will
be rebalanced on the day of the month the Policy was effective. 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. There is no charge for
participation in this program. 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.
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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 Life. 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--PREMIUM PAYMENTS
Before it will issue a Policy, AUSA Life must receive a completed Policy
application or transmittal form containing the information AUSA Life needs and
a minimum initial Premium Payment. The minimum initial Premium Payment is
$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 from younger than age 80. The initial Premium Payment is the only
Premium Payment required to be paid under a Policy. Acceptance or declination
of an application shall be based on AUSA Life's underwriting standards, and
AUSA Life 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
Life'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.
All checks or drafts for Premium Payments should be made payable to AUSA
Life Insurance Company, Inc. and sent to the Administrative Office. The Death
Benefit will not take effect until the check or draft for the Premium Payment
is honored.
Additional Premium Payments. While the Annuitant is living and prior to the
Annuity Commencement Date, the Owner may make Additional Premium Payments at
any time, and in any frequency. The minimum Additional Premium Payment under
both a Nonqualified Policy and a Qualified Policy is $50, including payments
through automatic deduction. 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.
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Maximum Total Premium Payments. The maximum total Premium Payments allowed
without prior approval of AUSA Life 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 Additional Premium Payments unless the Owner requests a change of
allocation. All allocations must be made in whole percentages and must total
100%. If Premium Payments are allocated to the Dollar Cost Averaging Fixed
Account, complete directions regarding the Subaccount(s) to which transfers
are to be made must be specified on the application or other proper Written
Request.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 Additional
Premium Payments by sending Written Notice, signed by the Owner, to AUSA
Life'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 Life by check or draft
may be postponed until such time as AUSA Life 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 Annuity Purchase Value
will increase by (1) any Additional Premium Payments received by AUSA Life;
(2) any increases in the Annuity Purchase Value due to investment results of
the selected Subaccount(s); and (3) interest credited in the Fixed Account.
The Annuity Purchase Value will decrease by (1) any surrenders, including
applicable Surrender Charges; (2) any decreases in the Annuity Purchase Value
due to investment results of the selected Subaccounts; and (3) the charges and
deductions imposed by AUSA Life.
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 the New
York Stock Exchange is 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
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distinct Accumulation Unit value (the "Unit Value"). The number of
Accumulation 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,
Accumulation 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.
AMENDMENTS
No change in the Policy is valid unless made in writing by AUSA Life and
approved by one of AUSA Life's officers. No registered representative has
authority to change or waive any provision of the Policy.
AUSA Life reserves the right to amend the Policies to meet the requirements
of the Code, regulations or published rulings. An Owner can refuse such a
change by Written Notice to AUSA Life, but a refusal may result in adverse tax
consequences to the Owner.
NON-PARTICIPATING POLICY
The Policy does not participate or share in the profits or surplus earnings
of AUSA Life. No dividends are payable on the Policy.
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
Life. The Cash Value is the Annuity Purchase Value less any applicable
Surrender Charge. (See "DISTRIBUTIONS UNDER THE POLICY--Annuity Payment
Options," p. 45.) The Policy will become irrevocable after the Annuity
Commencement Date. (See "DISTRIBUTIONS UNDER THE POLICY--Annuity Payments," p.
44.)
When requesting a partial withdrawal ($500 minimum), the Owner must instruct
AUSA Life how the withdrawal is to be allocated among various Investment
Options. If the Owner's request for a partial withdrawal from the Investment
Option is greater than the Cash Value of that Investment Option, AUSA Life
will pay the Owner the amount of the Cash Value of that Investment Option. If
no allocation instructions are given, the withdrawal will be deducted from
each Investment Option in the same proportion that the Owner's interest in
each Investment Option bears to the Policy's total Annuity Purchase Value.
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Surrenders from the Fixed Account may be delayed for up to six months.
Interest will be paid on any amount deferred for ten days or more. Interest
will be computed daily at the interest rate currently paid on proceeds left
under the Interest Payment Annuity Option.
Beginning in the second Policy Year, an Owner may surrender up to 10% of the
Annuity Purchase Value at the time of withdrawal without a Surrender Charge if
no withdrawal has been made in the current Policy Year ("10% Withdrawals").
Premium amounts withdrawn from the Policy in excess of the 10% 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 Surrender Charge. In
addition, a Surrender Charge will not 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.
10% Withdrawals will reduce the Policy Value by the amount withdrawn.
Amounts requested in excess of the 10% Withdrawal are referred to as Excess
Partial Withdrawals. Excess Partial Withdrawals will reduce the Annuity
Purchase Value by an amount equal to (X + Z) where:
X = Excess Partial Withdrawal
Z = Surrender Charge on X.
For a discussion of the Surrender Charge, see "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 52.
Since the Owner assumes the investment risk with respect to Premium Payments
allocated to the Mutual Fund Account, and because withdrawals are subject to a
Surrender 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 Surrender Charge and any applicable premium taxes,
surrenders may be subject to income taxes and, if the Owner is younger than
age 59 1/2, a 10% Federal penalty tax. (See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," p. 56.)
SYSTEMATIC PAYOUT OPTION
Under the Systematic Payout Option Policy Owners can instruct AUSA Life 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 (for example, 12 for monthly). If this amount is below
the minimum distribution
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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 (that is, Systematic Payouts will start at the end
of the payment mode selected, but not earlier than 30 days from the date of
request).
The Surrender Charge will be waived for Policy Owners of Qualified Policies
who are under age 59 1/2 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 Qualified Policies held by
Policy Owners age 59 1/2 or older, the Surrender Charge will be waived if
payments are made using the Life Expectancy Recalculation Option.
In addition, for either Qualified or Non-qualified Policies the Surrender
Charge 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%
Federal penalty tax. Therefore, the Owner should consult a qualified tax
adviser before requesting a Systematic Payout. In certain circumstances
withdrawn amounts may be included in the Owner's gross income. (See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," p. 56.)
ANNUITY PAYMENTS
Annuity Commencement Date. 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 Life, provided that
notice of each change is received by AUSA Life at its Service Office at least
30 days prior to the then current Annuity Commencement Date. Except as
otherwise permitted by AUSA Life, a new Annuity Commencement Date must be a
date which is: (1) at least 30 days after the date notice of the change is
received by AUSA Life; and (2) not later than the last day of the policy month
following the Annuitant's 90th 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
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any election or change of election must be received by AUSA Life at its
Service Office at least 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 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 Annuity Purchase Value of the Mutual Fund Account,
or (iii) in a combination of (i) and (ii). If the Annuity Purchase Value on
the Annuity Commencement Date is less than $2,000, AUSA Life 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 "DISTRIBUTIONS UNDER THE POLICY--Death Benefit," p. 49.) 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 Life 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 so instructs AUSA Life in writing
and AUSA Life agrees.
Unless the Policy Owner specifies otherwise, the payee shall be the
Annuitant, or, after the Annuitant's death, the Beneficiary. AUSA Life 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 Life may be required by state law to pay premium tax on
the amount applied to a payment option or upon withdrawal. If so, AUSA Life
will deduct the premium tax before applying or paying the proceeds.
Supplementary Policy. Once proceeds become payable and a choice has been
made, AUSA Life will issue a Supplementary Policy in settlement of the 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.
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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 Annuity Purchase Value will
be applied to provide for Annuity Payments under the selected Annuity Option
as specified. The Annuity Purchase Value is the Annuity Purchase Value for the
Valuation Period which ends immediately preceding the Annuity Commencement
Date, 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 Annuity Purchase Value will be
transferred to the general account of AUSA Life, 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 Life 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 and results in lower payments.)
Option 1--Interest Payments. The policy proceeds may be left with AUSA Life
for any term as agreed by AUSA Life and the Owner. AUSA Life 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 Life when the option is elected.
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.
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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 Life. 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 rate (guaranteed rates are based upon the tables
contained in the Policy). Current rates may be obtained from AUSA Life.
Current Annuity Payments will not be less than those which would be offered to
new single consideration immediate annuity (as described in Section
4223(a)(1)(E) of the New York Insurance Laws) applicants of the same class.
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. The smallest
annual rate of investment return which would have to be earned on Mutual Fund
Account assets so that the dollar amount of Variable Annuity Payments will not
decrease is 6.4% (equal to 5% Assumed Investment Return and a 1.40% maximum
Mortality and Expense Risk Fee and Administrative Charge). The Mortality and
Expense Risk Fee and Administrative Charge may increase on the Annuity
Commencement Date, however the combined annual rate for such fee and charge
will not be greater than 1.40%
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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 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............................................ Actual Age minus 5
Before 2001........................................... Actual Age
</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.
Transfers. Prior to the Annuity Commencement Date, 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
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Annuity Commencement Date no transfers may be made from the Fixed Account to
the Mutual Fund Account or from the Mutual Fund Account to the Fixed 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 income. If, after a
transfer, the monthly income of the remaining Annuity Units in a Subaccount
would be less than $10, AUSA Life reserves the right to include those Annuity
Units as part of the transfer. AUSA Life reserves the right to limit transfers
between Subaccounts after the Annuity Commencement Date to once per Policy
Year.
Tax Withholding. 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
Owner has not provided AUSA Life with a written election not to have federal
income taxes withheld, AUSA Life 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. 56)
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 Life may change, at its discretion, the frequency of
payments to such intervals as will result in payments of at least $50. If the
Annuity Purchase Value on the Annuity Commencement Date is less than $2,000,
AUSA Life 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. If the Annuitant is
also an Owner and dies before the Annuity Commencement Date, the Death Benefit
is calculated and is payable to the Beneficiary when AUSA Life receives due
proof of death, and election of the method of settlement, and return of the
Policy. The amount of the Death Benefit will be the greatest of (a) the
Annuity Purchase Value, (b) the Cash Value, or (c) the Guaranteed Minimum
Death Benefit (GMDB), plus any additional Premium Payments received, less any
withdrawals from the date of death to the date of the payment. The Death
Benefit is not payable upon the death of the Annuitant if the Annuitant and
the Owner are not the same person, unless the Owner makes a separate election
to do so.
There are two Guaranteed Minimum Death Benefit Options available, the
"Return of Premium Death Benefit" and the "Annual Step-Up Death Benefit." The
Return of Premium Guaranteed Minimum Death Benefit is equal to the total
Premium Payments made, less any "Adjusted Partial Withdrawals" as of the date
of death. The Annual Step-Up Guaranteed Minimum Death Benefit is equal to the
largest Annuity Purchase Value on
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the Date of Issue or 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 taken, subsequent to the date of the Policy
Anniversary with the largest Annuity Purchase Value.
If the surviving spouse is the Beneficiary and 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 Return of Premium Death
Benefit or 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.
Adjusted Partial Withdrawal. To determine the Guaranteed Minimum Death
Benefit for each partial withdrawal, the Adjusted Partial Withdrawal is the
sum of (1) and (2), where
(1) The Surrender charge-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 Guaranteed Minimum Death Benefit
exceeds the Annuity Purchase Value, the Guaranteed Minimum Death Benefit will
be reduced in an amount more than 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
an Owner, not the death of the Owner, if different (if the Annuitant who is
not an 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 to the beneficiary upon the Annuitant's death and AUSA Life
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 Life 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 an Owner, and the Beneficiary was not the Annuitant's
spouse, then (1) the Death Benefit must be distributed within
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five years of the date of the deceased Annuitant's death, or (2) payments
under a Payment Option must begin within one year of the deceased Annuitant'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 Annuitant's death. If the sole Beneficiary is the deceased
Annuitant'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.)
If the Annuitant is not the Owner, and the Owner dies prior to the Annuity
Commencement Date, a Successor Owner may surrender the Policy at any time for
the Cash Value. If the Successor Owner is not the deceased Owner's surviving
spouse, however, this amount must be distributed within five years after the
date of death of the Owner, or 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 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 Owner may change the designated Beneficiary by
sending Written Notice to AUSA Life. 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 Owner may then
designate a new Beneficiary.) The change will take effect as of the date the
Owner signs the Written Notice, whether or not the Owner is living when the
Notice is received by AUSA Life. AUSA Life will not be liable for any payment
made before the Written Notice is received. If more than one Beneficiary is
designated, and the Owner fails to specify their interests, they will share
equally.
DEATH OF OWNER
Federal tax law requires that if any Owner (including any joint Owner or any
Successor Owner who has become a current Owner) dies before the Annuity
Commencement Date, then the Cash Value of the Policy must generally be
distributed within five years of the date of death of such Owner or the
Contingent Owner. Certain rules apply where 1) the spouse of the deceased
Owner is the sole Beneficiary, 2) the Owner is not a natural person and the
primary Annuitant dies or is changed, or 3) any Owner dies after the
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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 "DISTRIBUTIONS UNDER THE POLICY--
Death Benefit," p. 49).
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.
CHARGES AND DEDUCTIONS
No deductions are made from Premium Payments upon purchase of a Policy, so
that the full amount of each Premium Payment is invested in one or more of the
Accounts. AUSA Life 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.
SURRENDER CHARGE
AUSA Life will incur expenses relating to the sale of Policies, including
commissions to registered representatives and other promotional expenses. AUSA
Life may deduct a Surrender Charge from amounts surrendered (i.e., withdrawn)
in connection with a full or partial Policy surrender in order to cover
distribution expenses. A Surrender Charge will not be applied to withdrawals,
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 Surrender 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 Surrender Charge is also waived upon exercise of certain
Systematic Payment Options. (See "DISTRIBUTIONS UNDER THE POLICY--Systematic
Payout Option," p. 43.)
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The amount of the Surrender Charge is determined by multiplying the amount
of the Premium Payment by the applicable Surrender Charge Percentage. The
applicable Surrender 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, that is, 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 Annuity Purchase Value may be withdrawn
without any Surrender Charge. The following is the table of Surrender Charge
Percentages:
<TABLE>
<CAPTION>
NUMBER OF YEARS PERCENTAGE APPLICABLE TO EACH
SINCE PREMIUM PAYMENT EXCESS PREMIUM WITHDRAWAL
--------------------- -----------------------------
<S> <C>
0 - 1........................................ 7%
1 - 2........................................ 6%
2 - 3........................................ 5%
3 - 4........................................ 4%
4 - 5........................................ 3%
5 - 6........................................ 2%
6 - 7........................................ 1%
</TABLE>
AUSA Life anticipates that the Surrender 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 Life's general funds, which will include amounts derived from the
charge for mortality and expense risks.
MORTALITY AND EXPENSE RISK FEE
AUSA Life imposes a daily fee as compensation for bearing certain mortality
and expense risks in connection with the Policies. This fee depends on the
Death Benefit Option selected and the number of Policy Years that have elapsed
since the Date of Issue. For the Annual Step-Up Death Benefit, the fee is
1.40% in the first seven Policy Years and 1.25% thereafter. For the Return of
Premium Death Benefit, the fee is 1.25% in the first seven years and 1.10%
thereafter. The Mortality and Expense Risk Fee is reflected in the
Accumulation or Annuity Unit Values for the Policy for each Subaccount. The
Mortality and Expense Risk Fee may increase on the Annuity Commencement Date.
In no event will the total of the Mortality and Expense Risk Fee and
Administrative Charge exceed 1.40% on or after the Annuity Commencement Date.
Annuity Purchase Values and Annuity Payments are not affected by changes in
actual mortality experience nor by actual expenses incurred by AUSA Life. The
mortality risks assumed by AUSA Life 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
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nor an unanticipated improvement in general life expectancy will adversely
affect the monthly Annuity payments that the Annuitant will receive under the
Policy.
AUSA Life also bears substantial risk in connection with the Death Benefit
Guarantee since AUSA Life 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 Life is the risk that AUSA Life's actual
expenses in administering the Policy and the Accounts will exceed the amount
recovered through the Administrative and Service Charges.
If the Mortality and Expense Risk Fee is insufficient to cover AUSA Life's
actual costs, AUSA Life will bear the loss; conversely, if the charge is more
than sufficient to cover costs, the excess will be profit to AUSA Life. AUSA
Life expects a profit from this charge. To the extent that the Surrender
Charge is insufficient to cover the actual cost of Policy distribution, the
deficiency will be met from AUSA Life's general corporate assets, which may
include amounts, if any, derived from the Mortality and Expense Risk Fee. A
Mortality and Expense Risk Fee is assessed during the accumulation phase and
during the annuity phase for all Variable Annuity Options.
ADMINISTRATIVE CHARGES
In order to cover the costs of administering the Policies and the Accounts,
AUSA Life deducts an annual Service Charge from the Annuity Purchase Value of
each Policy, and also deducts a daily Administrative Charge from the assets of
each Subaccount of the Mutual Fund Account.
The annual Service 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
Service Charge is $35 and it will not be increased during the term of the
Policy. It will also never exceed 2% of the Annuity Purchase Value. 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. The Service
Charge will be deducted only from the Subaccounts in the Mutual Fund Account,
in the same proportion that the Owner's interest in each Subaccount bears to
the Annuity Purchase Value in the Mutual Fund Account.
AUSA Life deducts a daily Administrative 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 net assets in the Mutual Fund Account.
The Administrative Expense Charge may be increased in the future, but the
combined total of this charge and the Mortality and Expense Risk Fee will not
exceed 1.55% in the first seven Policy Years (1.40% after) for the Annual
Step-Up Death Benefit, and 1.40% (1.25% after the first seven Policy Years)
for the Return of Premium Death Benefit.
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<PAGE>
PREMIUM TAXES
AUSA Life currently makes no deduction from the Premium Payments for any
state premium taxes AUSA Life pays in connection with Premium Payments under
the Policies. When permitted by state law, AUSA Life will not deduct the
aggregate premium taxes paid on behalf of a particular Policy from the Annuity
Purchase Value until the earliest of (i) the Annuity Commencement Date, (ii)
the surrender of a Policy, or (iii) payment of the death proceeds of a Policy.
Premium taxes currently range from 0% to 3.50% of Premium Payments.
FEDERAL, STATE AND LOCAL TAXES
No charges are currently made for federal, state, or local taxes other than
premium taxes. However, AUSA Life reserves the right to deduct charges in the
future for any taxes or other economic burden resulting from the application
of any tax laws that AUSA Life 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 Life 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.
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 Life or its affiliated companies or their spouse or minor children. In
such a case, a bonus of 5% of each Premium Payment may be credited to the
Policy due to lower acquisition costs AUSA Life experiences on those
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<PAGE>
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 Life may require that the
prospective purchaser provide information with regard to the federal income
tax status of the previous annuity policy. AUSA Life 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 the same federal
income tax treatment as the initial Premium Payment under the Policy; AUSA
Life 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 Life after
consultation with tax counsel, but no opinion of tax counsel has been
obtained.
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<PAGE>
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 (Cash Value in the event of a 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
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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 or Withdrawals. 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. In the case of a partial surrender
(including systematic withdrawals) under a Qualified Policy (other than one
qualified under Section 457 of the Code), 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 return resulting from 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
received is includable in gross income.
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<PAGE>
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.
Where an Owner allocates a portion of the Annuity Purchase Value on the
Annuity Commencement Date to more than one annuity payment option (fixed or
variable), special rules govern the allocation of the Policy's entire
"Investment in the Contract" on such date to each such option, for purposes of
determining the excludable amount of each payment received under that option.
AUSA Life makes no attempt to describe these allocation rules, because they
would prescribe a complex variety of results, depending on how the allocations
were made among the various types of options. Instead, any Owner is advised to
consult a competent tax adviser as to the potential tax effects of allocating
any amount of Annuity Purchase Value to any particular annuity payment option.
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 includable 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 Payment
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 includable in gross income.
Penalty Taxes. In the case of any amount received or deemed received from
the Policy, e.g., upon a surrender of a Policy (including systematic
withdrawals) 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
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(or life expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of such taxpayer and the taxpayer's 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 Life 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
generally is not 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, except in the case of a rollover amount or contribution under
Section 402(c), 403(a)(4), 403(b)(8) or 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.
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Section 408 of the Code also indicates that no part of the funds for an
individual retirement account or annuity ("IRA") 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
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.
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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 Annuity Purchase 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. 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).
DISTRIBUTOR OF THE POLICIES
AEGON USA Securities, Inc., an affiliate of AUSA Life, 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 on Policy sales are paid to
broker/dealers. Commissions payable to broker/dealers will be up to 6% of
Premium Payments. In addition, certain broker/dealers may receive additional
commissions or expense allowances based upon sales volume, agent or service
training responsibilities, and other factors. These commissions and expense
allowances are not deducted from Premium Payments, they are paid by AUSA Life.
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<PAGE>
VOTING RIGHTS
To the extent required by law, AUSA Life 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 (although the Underlying
Funds do not hold regular annual shareholders meetings). 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 Life 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 Life 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 Life 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.
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 Life 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
Delay 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 Life................................................... 6
Investment Experience..................................................... 6
State Regulation of AUSA Life............................................. 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................................................. 12
Total Returns........................................................... 12
Other Performance Data.................................................. 13
Legal Matters............................................................. 13
Independent Auditors...................................................... 13
Other Information......................................................... 14
Financial Statements...................................................... 14
</TABLE>
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<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. ("AUSA Life"). You may obtain a
copy of the Prospectus dated 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:
- 1 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Policy--General Provisions............................................. 3
Owner.................................................................... 3
Entire Policy............................................................ 3
Delay 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 Life.................................................... 6
Investment Experience...................................................... 6
State Regulation of AUSA Life.............................................. 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.................................................. 12
Total Returns............................................................ 12
Other Performance Data................................................... 13
Legal Matters.............................................................. 13
Independent Auditors....................................................... 13
Other Information.......................................................... 14
Financial Statements (8)................................................... 14
</TABLE>
(Numbers in parenthesis indicate corresponding pages of the Prospectus).
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<PAGE>
In order to supplement the description in the Prospectus, the following
provides additional information about AUSA Life 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 Life'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. A change of ownership may have adverse tax consequences.
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 Life has made or action AUSA Life 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 Life 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.
DELAY 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 Life 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.
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Certain delays and restrictions apply to transfers of amounts out of the
Fixed Account. (See "THE ENDEAVOR ACCOUNTS--The Fixed Account," p. 35 of the
Policy Prospectus.)
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, AUSA Life 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 Life shall be paid in full with the next payment due such person
or the Beneficiary. The dollar amount of any overpayment made by AUSA Life 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 Life.
REALLOCATION OF ANNUITY UNITS 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. The reallocation
shall be based on the relative value of the Annuity Units of the 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 Subaccount from which the
transfer is being made. If the monthly income of the Annuity Units remaining
in a Subaccount after a reallocation is less than $10, AUSA Life reserves the
right to include the value of those Annuity Units as part of the transfer. The
request must be in writing to AUSA Life's Service Office. There is no charge
assessed in connection with such reallocation. AUSA Life reserves the right to
limit the number of times a reallocation of Annuity Units 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
Life 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 Life 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 Life,
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 Life 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 Life receives such evidence.
AMENDMENTS
No change in the Policy is valid unless made in writing by AUSA Life and
approved by one of AUSA Life's officers. No Registered Representative has
authority to change or waive any provision of the Policy.
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<PAGE>
AUSA Life reserves the right to amend the Policies to meet the requirements
of the Internal Revenue Code, regulations or published rulings. An 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 Life 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 certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of
the assets of the separate accounts used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includable in the variable contract owner's gross income. The IRS has stated
in published rulings that a variable contract owner will be considered the
owner of separate account assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury Department has also announced, in connection
with the issuance of regulations concerning diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause
the investor (i.e., the Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets.
For example, the Owner of the Policy has the choice of one or more Subaccounts
in which to allocate premiums and Annuity Purchase Values, and may be able to
transfer among these accounts more frequently than in such rulings. These
differences could result in an Owner being treated as the owner of a pro rata
portion of the assets of the Mutual Fund Account. In addition, AUSA Life does
not know what standards will be set forth, in any, in the regulations or
rulings which the Treasury Department has stated it expects to issue. AUSA
Life therefore reserves the right to modify the Policy as necessary to attempt
to prevent an Owner from being considered the owner of a pro rata share of the
assets of the Mutual Fund Account.
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 applied to provide an immediate annuity
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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 "Designated Beneficiary" as defined in Section
72(s) of the Code. 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. Under the Policy, the Beneficiary is the Designated
Beneficiary of an Owner/Annuitant and the Successor Owner is the Designated
Beneficiary of an Owner who is not the Annuitant. 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
Nonqualified Policies contain 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 maintain their compliance with the Code requirements when
clarified by regulation or otherwise.
TAXATION OF AUSA LIFE
AUSA Life 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
Life and, accordingly, will not be taxed separately as a "regulated investment
company" under Subchapter M of the Code. AUSA Life 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 Life with respect to the Mutual Fund Account, AUSA Life 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 is 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.
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<PAGE>
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 credit or charge for any taxes determined by AUSA
Life to have resulted from the investment operations of the Subaccount
and for which it has created a reserve;
(b) is the net asset value per share of the shares held in the Subaccount
determined as of the end of the immediately preceding Valuation Period; and
(c) is the charge for mortality and expense risk during the Valuation
Period equal on an annual basis to X percent of the daily net asset value
of the Subaccount, where "X" depends on the Death Benefit Option and Policy
Year, plus the .15% annual administrative charge.
ILLUSTRATION OF ACCUMULATION UNIT VALUE CALCULATIONS
FORMULA AND ILLUSTRATION FOR DETERMINING
THE INVESTMENT EXPERIENCE FACTOR
(ASSUMES THE RETURN OF PREMIUM DEATH BENEFIT IS STILL IN EFFECT
AND THAT THE POLICY IS WITHIN THE FIRST SEVEN POLICY YEARS.)
Investment Experience Factor = (A + B - C) - E
----------
D
Where: The Net Asset Value of an Underlying Fund share as of the end of
A = 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 daily deduction for Mortality and Expense Risk Fees 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
-------------
11.40
= 1.0148741898
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<PAGE>
FORMULA AND ILLUSTRATION FOR DETERMINING ACCUMULATION UNIT VALUE
Accumulation Unit Value = A x B
Where: The Accumulation Unit Value for the immediately preceding
A = 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
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 Investment Return of 5% annually. Conversely, Annuity Unit
Values fall if the net investment performance of the Subaccount is less than
the Assumed Investment Return. 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
(c) is the investment result adjustment factor for the valuation period.
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. Assume this factor is currently 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.
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<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: Annuity Unit Value for the immediately preceding Valuation Period.
A = 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 Investment Return 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: The Annuity Purchase Value as of the Annuity Commencement Date.
A = 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: The dollar amount of the first monthly Variable Annuity Payment.
A = 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
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<PAGE>
STATE REGULATION OF AUSA LIFE
AUSA Life 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 Life 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 Life's contract
liabilities and reserves so that the Department may determine the items are
correct. AUSA Life'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 Life 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 Life. As presently required by the Investment Company Act
of 1940 and regulations promulgated thereunder, AUSA Life 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 Life does not anticipate discontinuing the offering of
the Policies. However, AUSA Life reserves the right to discontinue the
offering of the Policies.
AEGON USA Securities, Inc., an affiliate of AUSA Life, is the principal
underwriter of the Policies. AEGON USA Securities, Inc. has entered into
agreements with broker-dealers for the distribution of the Policies. During
1996, the amount paid to AEGON USA Securities, Inc. and/or broker-dealers for
their services was $1,115.508. Amount paid for these services in 1995 were
$397,382. 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 Life. 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 Life's general account assets. AUSA Life 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 Life's fidelity bond, presently in the
amount of $5,000,000, covering the acts of officers and employees of AUSA
Life.
HISTORICAL PERFORMANCE DATA
MONEY MARKET YIELDS
AUSA Life 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
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<PAGE>
manner which does not take into consideration any realized or unrealized gains
or losses on shares of the 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)* (365/7)
Where:
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.
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 Life 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))/3//6//5///7/ - 1
Where:
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.
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
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<PAGE>
31, 1996, the yield of the TCW Money Market Subaccount was %, and the
effective yield was %.
OTHER SUBACCOUNT YIELDS
AUSA Life 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 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:
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.
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 the
Excess Premium Withdrawal based on the number of years 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 Life 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.
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<PAGE>
Total returns will be calculated using Subaccount Unit Values which AUSA
Life calculates on each Business Day based on the performance of the
Subaccount's underlying Portfolio, and the deductions for the Mortality and
Expense Risk Fee 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
Where:
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.
OTHER PERFORMANCE DATA
AUSA Life 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 Life 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:
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.
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
Life by Sutherland, Asbill & Brennan, L.L.P., of Washington D.C.
INDEPENDENT AUDITORS
The Financial Statements of AUSA Life, at December 31, 1996 and 1995, and
for each of the three years in the period ended December 31, 1996, and the
Financial Statements of the AUSA Endeavor Variable Annuity Account at December
31, 1996, and for each of the two years in the period then ended, included in
this Statement of Additional Information have been audited by
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<PAGE>
Ernst & Young LLP, Independent Auditors, 801 Grand Avenue, Suite 3400, Des
Moines, Iowa, 50309-2764.
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 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 Life, which are included in
this Statement of Additional Information, should be considered only as bearing
on the ability of AUSA Life 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>
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 5.
(4) (a) Form of Policy for the Endeavor Variable
Annuity. Note 2.
(b) Form of Policy Endorsement. (Dollar Cost Averaging)
Note 4.
(c) Form of Policy Endorsement. (Annuity Commencement
Date, Service Charge) Note 4.
(d) Form of Policy for the Endeavor Variable Annuity.
Note 5.
(5) (a) Form of Application for the Endeavor Variable
Annuity. Note 2.
(b) Form of Application for the Endeavor Variable
Annuity. Note 4.
(c) Form of Application for the Endeavor Variable
Annuity. Note 5.
(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.
(c) Amendment to Participation Agreement by and between
AUSA Life Insurance Company, Inc., and Endeavor
Series Trust. Note 4.
(d) Amendment to Participation Agreement by and between
AUSA Life Insurance Company, Inc., and Endeavor
Series Trust. Note 5.
(9) (a) Opinion and Consent of Counsel. Note 2.
1
<PAGE>
(b) Consent of Counsel. Note 2.
(10) (a) Consent of Independent Auditors. Note 6.
(b) Opinion and consent of Actuary Note 5.
(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) Note 3. (William Brown, Jr.,
Colette Vargas), (Brenda K. Clancy) Note 4.
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 with Post-Effective Amendment No.3 to Form N-4
Registration Statement (File No. 33-83560) on April 24,
1996.
Note 4. Filed with Post-Effective Amendment No. 4 to Form N-4
Registration Statement (File No. 33-83560) on April 30,
1997.
Note 5. Filed Herewith.
Note 6. To be filed by a future Amendment.
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
Brenda K. Clancy 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
<TABLE>
<CAPTION>
-------------------------
VERENIGING AEGON
NETHERLANDS MEMBERSHIP
ASSOCIATION
-------------------------
53.63%
-------------------------
AEGON N.V.
NETHERLANDS CORPORATION
-------------------------
<S> <C> <C> <C>
100% 100% 100% 100%
------------------------- ------------------------- ------------------------- -----------------------------
AEGON Nederland N.V. AEGON INTERNATIONAL N.V. AEGON NEVAK HOLDING B.V. GRONINGER FINANCIERINGEN B.V.
Netherlands Corporation Netherlands Corporation Netherlands Corporation Netherlands Corporation
------------------------- ------------------------- ------------------------- -----------------------------
DE
-------------------------
VOTING TRUST
Trustees: K.J. Storm
Donald J. Sheperd
H.B. Van Wijk
Dennis Hersch
-------------------------
DE 100%
-------------------------
AEGON U.S. HOLDING
CORPORATION
-------------------------
IA 100%(1)
-------------------------
AEGON USA, INC.
-------------------------
MD 100% MD 100%
----------------------------- -----------------------------
FIRST AUSA LIFE AUSA HOLDING
INSURANCE COMPANY COMPANY
----------------------------- -----------------------------
NJ 100% NY 100% MD 100%
- ----------------------------- --------------------------- ---------------------------
SHORT HILLS AUSA LIFE INSURANCE MONUMENTAL LIFE
MANAGEMENT COMPANY COMPANY, INC. INSURANCE COMPANY
- ----------------------------- --------------------------- ---------------------------
NY 100% IA 100% MD 100%
- ----------------------------- --------------------------- ---------------------------
CORPA REINSURANCE LIFE INVESTORS MONUMENTAL GENERAL
COMPANY INSURANCE COMPANY CASUALTY COMPANY
- ----------------------------- OF AMERICA ---------------------------
---------------------------
IN 100% MD 100%
- ----------------------------- IA 100% ---------------------------
AEGON MANAGEMENT --------------------------- UNITED FINANCIAL
COMPANY BANKERS UNITED LIFE SERVICES, INC.
- ----------------------------- ASSURANCE COMPANY ---------------------------
---------------------------
DE 100%(8) AZ (8)
- ----------------------------- IA 100% ---------------------------
RCC NORTH AMERICA --------------------------- BANKERS FINANCIAL LIFE
INC. PFL LIFE INSURANCE COMPANY
- ----------------------------- INSURANCE COMPANY ---------------------------
---------------------------
IA 100%
AZ 100% Voting Common (2) ---------------------------
--------------------------- THE WHITESTONE
SOUTHWEST EQUITY LIFE CORPORATION
INSURANCE COMPANY ---------------------------
---------------------------
IA 100%
AZ 100% Voting Common ---------------------------
--------------------------- CADET HOLDING CORP.
IOWA FIDELITY LIFE ---------------------------
INSURANCE COMPANY
---------------------------
OH 100%
---------------------------
WESTERN RESERVE LIFE
ASSURANCE CO. OF OHIO
---------------------------
(3)
MD
----------------------
WRL SERIES FUND
INC.
----------------------
FL
----------------------
WRL INVESTMENT
SERVICES, INC.
----------------------
FL
----------------------
WRL INVESTMENT
MANAGEMENT, INC.
----------------------
MD 100%
----------------------
AUSA HOLDING
COMPANY
----------------------
MD 100% IA 100% DE 100%
----------------------------- --------------------------- ---------------------------
MONUMENTAL GENERAL AUSA FINANCIAL DIVERSIFIED INVESTMENT
INSURANCE GROUP, INC. MARKETS, INC. ADVISORS, INC.
----------------------------- --------------------------- ---------------------------
MD 100% IA 100% DE 100%
----------------------------- --------------------------- ---------------------------
MONUMENTAL GENERAL UNIVERSAL BENEFITS DIVERSIFIED INVESTORS
ADMINISTRATORS, INC. CORPORATION SECURITIES CORP.
----------------------------- --------------------------- ---------------------------
MD 100% IA 100% IA 100%
----------------------------- --------------------------- ---------------------------
EXECUTIVE MANAGEMENT INVESTORS WARRANTY AEGON USA
AND CONSULTANT OF AMERICA, INC. SECURITIES, INC.
SERVICES, INC. --------------------------- ---------------------------
----------------------------- (3)
IA 100% MD
MD 100% --------------------------- ---------------------------
----------------------------- MASSACHUSETTS FIDELITY AEGON USA MANAGED
MONUMENTAL GENERAL TRUST COMPANY PORTFOLIOS, INC.
MASS MARKETING, INC. --------------------------- ---------------------------
-----------------------------
DE 100% IA 100%
--------------------------- ---------------------------
MONEY SERVICES, INC. AMERICAN FORUM FOR
--------------------------- FISCAL FITNESS, INC.
---------------------------
CA 100%
--------------------------- TN 100%
ZAHORIK COMPANY, INC. ---------------------------
--------------------------- SUPPLEMENTAL
INSURANCE
AL 100% DIVISION, INC.
---------------------- ---------------------------
ZCI, INC.
---------------------- MI 100%
---------------------------
DE 100% MN 100% CREDITOR RESOURCES,
(3) ----------------------------- --------------------------- INC.
INTERSECURITIES, AUSA INSTITUTIONAL ---------------------------
INC. MARKETING GROUP, INC.
----------------------------- --------------------------- CN 100%
---------------------------
MA CA 100%(8) MN 100% CRC CREDITOR
--------------- ----------------------------- --------------------------- RESOURCES CANADIAN
INDEX FUND ISI INSURANCE AEGON ASSET MANAGEMENT DEALER NETWORK, INC.
--------------- AGENCY, INC. AND SERVICES, INC. ---------------------------
ITS SUBSIDIARIES ---------------------------
----------------------------- IA 100%
MA ---------------------------
--------------- MI 100% AEGON USA INVESTMENT
IDEX II ----------------------------- MANAGEMENT, INC.
SERIES FUND ASSOCIATED MARINER ---------------------------
--------------- FINANCIAL GROUP, INC.
----------------------------- IA 100%(12)
MA ---------------------------
--------------- MI 100% AEGON USA REALTY (3)
INDEX FUND 3 ----------------------------- ADVISORS, INC.
--------------- MARINER FINANCIAL ---------------------------
SERVICES, INC.
----------------------------- DE 100%
---------------------------
MI 100% QUANTRA
----------------------------- CORPORATION
MARINER PLANNING ---------------------------
CORPORATION
----------------------------- DE 100%
---------------------------
MI 100%(10) QUANTRA SOFTWARE
----------------------------- CORPORATION
ASSOCIATED MARINER ---------------------------
AGENCY, INC. AND ITS
SUBSIDIARIES IA 100%
----------------------------- ---------------------------
LANDAUER REALTY
MI 100% ADVISORS, INC.
----------------------------- ---------------------------
MARINER MORTGAGE
CORP. IA 100%
----------------------------- ---------------------------
LANDAUER
FL 100% ASSOCIATES, INC.
----------------------------- ---------------------------
IDEX INVESTOR
SERVICES, INC. IA 100%
----------------------------- ---------------------------
AEGON USA REALTY
DE 50%(7) MANAGEMENT, INC.
----------------------------- ---------------------------
IDEX MANAGEMENT,
INC. IA 100%(11)
----------------------------- ---------------------------
REALTY INFORMATION
SYSTEMS, INC.
---------------------------
IA (4)
---------------------------
USP REAL ESTATE
INVESTMENT TRUST
---------------------------
IA (5)
---------------------------
CEDAR INCOME FUND
LTD.
---------------------------
</TABLE>
See Footnotes Page 2
Effective May 1, 1997
Page 2
Footnotes
(1) 150,000 shares of Class B Non-Voting Common Stock owned by Ennia
Reinsurance Antilles N.V.
(2) Ordinary common stock is allowed 60% of total cumulative vote.
Participating common stock is allowed 40% of total cumulative vote.
(3) Denotes relationships as advisor, administrator, sponsor, underwriter or
general partner.
(4) First AUSA Life Insurance Company owns 12.89%. PFL Life Insurance Company
owns 13.11%. Bankers United Life Assurance Company owns 4.86%.
(5) PFL Life Insurance Company owns 16.73%. Bankers United Life Assurance
Company owns 3.77%. Life Investors Insurance Company of America owns
3.38%. AEGON USA Realty Advisors, Inc. owns 1.97%. First AUSA Life
Insurance Company owns .18%.
(6) Class B Common stock is allocated 75% of total cumulative vote. Class A
Common stock is allocated 25% of total cumulative vote.
(7) 50% of Idex Management, Inc. is owned by Janus Capital Corporation, a
Colorado corporation.
(8) RCC Group: FGH Realty Credit Corp., FGH USA, Inc., RCC North America,
Inc., FGH USA Realty, Inc., FGH Eastern Region, Inc., FGH Appraisal
Services, Inc., FGH Western Region, Inc., ALH Properties, Inc., First FGP,
Inc., Second FGP, Inc., Third FGP, Inc., Fourth FGP, Inc., Fifth FGP, Inc.,
Sixth FGP, Inc., Seventh FGP, Inc., FGP Midwood, Inc., FGP Parsippany,
Inc., ALH Properties Two, Inc., ALH Properties Three, Inc., ALH Properties
Four, Inc., ALH Properties Five, Inc., ALH Properties Six, Inc., ALH
Properties Seven, Inc., ALH Properties Eight, Inc., ALH Properties Nine,
Inc., ALH Properties Ten, Inc., ALH Properties Eleven, Inc., ALH Properties
Twelve, Inc., ALH Properties Thirteen, Inc., ALH Properties Fourteen, Inc.,
ALH Properties Fifteen, Inc., ALH Properties Sixteen, Inc., ALH Properties
Seventeen, Inc., FGP Keene, Inc., FGP Broadway, Inc., FGP West Street,
Inc., FGP West Street Two, Inc., FGP 90 West Street, Inc., FGP Branford,
Inc., FGP Franklin, Inc., FGP Bala, Inc., FGP Twenty-One, Inc., FGP Twenty-
Two, Inc., FGP Twenty-Five, Inc., FGP Schenectady, Inc., FGP Country
Estates, Inc., FGP Eleventh Street, Inc., FGP 109th Street, Inc., FGP
Seventy-Second Street, Inc., FGP Gaithersburg, Inc., FGP West 32nd Street,
Inc., FGP Beekman, Inc., Dutch Hotel Management, Inc., FGP Landmark, Inc.,
FGP Islandia, Inc., FGP Bridgeport, Inc., FGP Varick, Inc., The RCC Group,
Inc., FGP Union Gardens, Inc., FGP Burkewood, Inc., FGP Stamford, Inc., FGP
Meadow Lane, Inc., FGP Main Street, Inc., FGP Property Services, Inc., FGP
Merrick, Inc., FGP West 14th Street, Inc., FGP 106 Fulton, Inc., FGP Bush
Terminal, Inc., FGP Northern Boulevard, Inc., FGP Seventh Avenue, Inc., FGP
Parsons, Inc., FGP City Hall, Inc., FGP West 88th Street, Inc., FGP
Lincoln, Inc., FGP Emerson, Inc., FGP Brooke, Inc., FGP 86th Street, Inc.,
FGP Edison, Inc., FGP Rider Avenue, Inc., FGP Remsen, Inc., FGP Rockbeach,
Inc., FGP Carter Drive, Inc., FGP Centereach, Inc., FGP Colonial Plaza,
Inc., FGP Coram, Inc., FGP Herald Center, Inc., Eighty Six Yorkville, Inc.
(9) Subsidiaries of ISI Insurance Agency, Inc. are: ISI Insurance Agency of
Ohio, Inc., ISI Insurance Agency of Massachusetts, Inc., and ISI Insurance
Agency of Texas, Inc.
(10) Subsidiaries of Associated Mariner Agency, Inc. are Associated Mariner
Agency of Hawaii, Inc., Associated Mariner Insurance Agency of
Massachusetts, Inc., Associated Mariner Agency Ohio, Inc., Associated
Mariner Agency Texas, Inc., and Associated Mariner Agency New Mexico, Inc.
(11) Owns 50% interest in DJA Partners (a.k.a. "Teleres"), a Delaware general
partnership. Also owns 10% interest in Datalytics, Inc., an Ohio
corporation.
(12) Owns 49% of Quantra Consulting, Inc., a Delaware corporation.
*Includes qualifying shares for Directors.
<TABLE>
<CAPTION>
Percent of
Jurisdiction of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
AUSA Holding Company Maryland 100% AEGON USA, Holding company
Inc.
Monumental General Maryland 100% AUSA Holding Co. Holding company
Insurance Group, Inc.
Monumental General Maryland 100% Monumental General Provides management srvcs.
Administrators, Inc. Insurance Group Inc. to unaffiliated third party
administrator
Executive Management and Maryland 100% Monumental General Provides actuarial consulting
Consultant Services, Inc. Administrators, Inc. services
Monumental General Mass Maryland 100% Monumental General Marketing arm for sale of
Marketing, Inc. Insurance Group, Inc. mass marketed insurance
coverages
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.
Diversified Investors Delaware 100% Diversified
Securities Corp. Investment Advsiors, Inc. Broker-Dealer
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer
American Forum For Fiscal Iowa 100% AUSA Holding Co. Marketing
Fitness, Inc.
Supplemental Ins. Tennessee 100% AUSA Holding Co. Insurance
Division, Inc.
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Insurance agency
Canadian Dealer Network Inc. Inc
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment services
Quantra Corporation Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales
Quantra Software Delaware 100% Quantra Manufacture and sell
Corporation Corporation mortgage loan and security
management software
Landauer Realty Advisors, Iowa 100% AEGON USA Realty Real estate counseling
Inc. Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Realty Information Iowa 100% AEGON USA Realty Information Systems for
Systems, Inc. Advisors, Inc. real estate investment
management
AEGON USA Realty Iowa 100% AEGON USA Real estate management
Management, Inc Realty Advisors, Inc.
USP Real Estate Investment Iowa 21.89% First AUSA Life Real estate investment trust
Trust Ins. Co.
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Real estate investment trust
Ins. Co.
3.77% Bankers United
Life Assurance Company
3.38% Life Investors
Co. of America
1.97% AEGON USA
Realty Advisors, Inc.
.18% First AUSA
Life Ins. Co.
AUSA Financial Markets, Iowa 100% AUSA Holding Co. Marketing
Inc.
Universal Benefits Iowa 100% AUSA Holding Co. Third party administrator
Corporation
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Iowa 100% AUSA Holding Co. Trust company
Trust Co.
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Insurance agency
Inc.
AUSA Institutional Minnesota 100% AUSA Holding Co. Insurance agency
Marketing Group, Inc.
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment advisor
Services, Inc.
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
ISI Insurance Agency, Inc. California 100% Intersecurities, Insurance agency
Inc.
ISI Insurance Agency Ohio 100% ISI Insurance Insurance agency
of Ohio, Inc. Agency, Inc.
ISI Insurance Agency Texas 100% ISI Insurance Insurance agency
of Texas, Inc. Agency, Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Insurance agency
of Massachusetts, Inc. Agency Inc.
Associated Mariner Michigan 100% Intersecurities, Holding co./management
Financial Group, Inc. - Inc. services
Holding company
Mariner Financial Michigan 100% Associated Broker/Dealer
Services, Inc. Mariner Financial
Group, Inc.
Mariner Planning Michigan 100% Mariner Financial Financial planning
Corporation Services, Inc.
Associated Mariner Michigan 100% Associated Insurance agency
Agency, Inc. Mariner Financial Group,
Inc.
Mariner Agency of Hawaii, Hawaii 100% Associated Insurance agency
Inc. Mariner Agency, Inc.
Associated Mariner Ins. Massachusetts 100% Associated Insurance agency
Agency of Massachusetts, Mariner Agency, Inc.
Inc.
Associated Mariner Agency Ohio 100% Associated Insurance agency
Ohio, Inc. Mariner Agency, Inc.
Associated Mariner Agency Texas 100% Associated Insurance agency
Texas, Inc. Mariner Agency, Inc.
Associated Mariner Agency New Mexico 100% Associated Insurance agency
New Mexico, Inc. Mariner Agency, Inc.
Mariner Mortgage Corp. Michigan 100% Associated Mortgage origination
Mariner Financial Group,
Inc.
Idex Investor Services, Florida 100% AUSA Holding Co. Shareholder services
Inc.
Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital Corp.
IDEX II Series Fund Massachusetts Various Mutual fund
IDEX Fund Massachusetts Various Mutual fund
IDEX Fund 3 Massachusetts Various Mutual fund
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Co.
AUSA Life Insurance Co. New York 100% First AUSA Life Insurance
Inc. Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Insurance
Company of America Ins. Co.
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Insurance
Co.
Southwest Equity Life Ins. Arizona 100% of Common Voting Insurance
Co. Stock First AUSA Life
Ins. Co.
Iowa Fidelity Life Arizona 100% of Common Voting Insurance
Insurance Co. Stock First AUSA Life
Ins. Co.
Western Reserve Life Ohio 100% First AUSA Life Insurance
Assurance Co. of Ohio Ins. Co.
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Florida 100% Western Reserve Provides administration for
Inc. Life Assurance Co. of affiliated mutual fund
Ohio
WRL Investment Florida 100% Western Reserve Registered investment advisor
Management, Inc. Life Assurance Co. of
Ohio
Monumental Life Insurance Maryland 100% First AUSA Life Insurance
Co. Ins. Co.
Monumental General Maryland 100% Monumental Life Insurance
Casualty Co. Ins. Co.
United Financial Services, Maryland 100% Monumental Life General agency
Inc. Ins. Co.
Bankers Financial Life Arizona 100% Monumental Life Insurance
Ins. Co. Insurance Company
The Whitestone Corporation Maryland 100% Monumental Life Insurance agency
Ins. Co.
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Providian Corporation Delaware 100% AEGON N.V. Holding company
Providian Series Trust Massachusetts N/A Mutual fund
Providian Agency Group, Inc. Kentucky 100% Providian Corp. Provider of services to ins.
cos.
Benefit Plans, Inc. Delaware 100% Providian Corp. TPA for Peoples Security Life
Insurance Company
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Providian Assignment Corp. Kentucky 100% Providian Corp. Administrator of structured
settlements
Providian Financial Pennsylvania 100% Providian Corp. Financial services
Services, Inc.
Providian Securities Pennsylvania 100% Providian Financial Broker-Dealer
Corporation Services, Inc.
Wannalancit Corp. Massachusetts 100% Providian Corp. Real estate holding company
Providian Investment Delaware 100% Providian Corp. Registered investment advisor
Advisors, Inc.
Providian Capital Delaware 100% Providian Corp. Provider of investment,
Management, Inc. marketing and admin. services
to ins. cos.
Providian Capital Delaware 100% Providian Capital Real estate and mortgage
Management Real Estate Management, Inc. holding company
Services, Inc.
Capital Real Estate Delaware 100% Providian Corp. Furniture and equiment lessor
Development Corporation
Capital General Delaware 100% Providian Corp. Holding company
Development Corporation
Commonwealth Life Kentucky 100% Capital General Insurance company
Insurance Company Development Corporation
Agency Holding I, Inc. Delaware 100% Commonwealth Life Investment subsidiary
Insurance Company
Agency Investments I, Inc. Delaware 100% Agency Holding I, Investment subsidiary
Inc.
Commonwealth Agency, Inc. Kentucky 100% Commonwealth Life Special purpose subsidiary
Insurance Company
Camden Asset Management California 51% Commonwealth Life Investment entity
L.P. Insurance Company
Peoples Security Life North Carolina 100% Capital General Insurance company
Insurance Company Development Corporation
Ammest Realty Corporation Texas 100% Peoples Security Special purpose subsidiary
Life Insurance Company
Agency Holding II, Inc. Delaware 100% Peoples Security Investment subsidiary
Life Insurance Company
Agency Investments II, Inc. Delaware 100% Agency Investment subsidiary
Holding II, Inc.
Agency Holding III, Inc. Delaware 100% Peoples Security Investment subsidiary
Life Insurance Company
Agency Investments III, Inc. Delaware 100% Agency Investment subsidiary
Holding III, Inc.
JMH Operating Company, Inc. Mississippi 100% Peoples Security Real estate
Life Insurance Company holdings
Capital Security Life Ins. North Carolina 100% Capital General Insurance company
Co. Development Corporation
Independence Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company
Independence Automobile Georgia 100% Capital Security Automobile Club
Club, Inc. Life Insurance Company
Capital 200 Block Delaware 100% Providian Corp. Real estate holdings
Corporation
Capital Broadway Kentucky 100% Providian Corp. Real estate holdings
Corporation
Southlife, Inc. Tennessee 100% Providian Corp. Investment subsidiary
Providian Insurance Pennsylvania 100% Providian Corp. Provider of management
Agency, Inc. support services
National Home Life Pennsylvania 100% Providian Special-purpose subsidiary
Corporation Insurance Agency, Inc.
Compass Rose Development Pennsylvania 100% Providian Special-purpose subsidiary
Corporation Insurance Agency, Inc.
Association Consultants, Illinois 100% Providian TPA license-holder
Inc. Insurance Agency, Inc.
Valley Forge Associates, Pennsylvania 100% Providian Furniture & equipment lessor
Inc. Insurance Agency, Inc.
Veterans Benefits Plans, Pennsylvania 100% Providian Administator of group
Inc. Insurance Agency, Inc. insurance programs
Veterans Insurance Delaware 100% Providian Special-purpose subsidiary
Services, Inc. Insurance Agency, Inc.
Financial Planning Dist. Columbia 100% Providian Special-purpose subsidiary
Services, Inc. Insurance Agency, Inc.
Providian Auto and Home Missouri 100% Providian Corp. Insurance company
Insurance Company
Academy Insurance Group, Delaware 100% Providian Auto and Holding company
Inc. Home Insurance Company
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.
Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Kansas 100% Academy Insurance Special-purpose subsidiary
Inc. Group, Inc.
Ammest Insurance Agency, California 100% Academy Insurance General agent
Inc. Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
AMPAC, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
AMPAC Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy Insurance Provider of mgmt. services
Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Massachusetts 100% Force Fin. Special-purpose subsidiary
Inc. Group, Inc.
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin.
Services, Inc. Group, Inc. services
Unicom Administrative Germany 100% Unicom Provider of admin.
Services, GmbH Administrative services
Services, Inc.
Providian Property and Kentucky 100% Providian Auto Insurance company
Casualty Insurance and Home Insurance
Company Company
Providian Fire Insurance Kentucky 100% Providian Property Insurance company
Co. and Casualty Insurance
Co.
Capital Liberty, L.P. Delaware 78% Commonwealth Holding Company
Life Insurance Company
19% Peoples Security
Life Insurance Company
3% Providian Corp.
Providian LLC Turks & 100% Providian Corp. Special-purpose subsidiary
Caicos Islands
Providian Life and Health Missouri 4% Providian Corp. Insurance company
Insurance Company 15% Peoples Security
Life Insurance Company
20% Capital Liberty,
L.P.
61% Commonwealth Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Providian Life and Insurance company
Health Insurance
Company
Providian Services, Inc. Pennsylvania 100% Veterans Life Special-purpose subsidiary
Ins. Co.
First Providian Life and New York 100% Veterans Life Insurance Company
Health Insurance Company Ins. Co.
</TABLE>
<PAGE>
Item 27. Number of Policyowners
As of December 31, 1996, there were 783 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/
4
<PAGE>
Patrick E. Falconio
Director
William L. Busler
Director
Brenda K. Clancy
Director
Robert A. Thelen
Senior Vice-President
Lorri E. Mehaffey
President
Billy J. Berger
Vice President and Assistant Treasurer
Lisa Wachendorf
Vice President
Linda Gilmer
Vice President and Treasurer
Donna M. Craft
Vice President
Frank A. Camp
Secretary
Shelley Davenport
Assistant Vice President
_____________________
/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 $1,628,150 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,
5
<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.
(d) AUSA Life Insurance Company hereby represents that the fees and
charges deduted under the policies, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the risks
assumed by AUSA Life Insurance Company.
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.
6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Cedar Rapids and State of Iowa, on this 25th day of
September, 1997.
AUSA ENDEAVOR VARIABLE ANNUITY
ACCOUNT
AUSA LIFE INSURANCE COMPANY, INC.
Depositor
*
-------------------------------
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.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
* Director September 25, 1997
- -------------------------------
William Brown, Jr.
/s/ Larry G. Brown Director September 25, 1997
- -------------------------------
Larry G. Brown
* Director September 25, 1997
- -------------------------------
William L. Busler
* Director September 25, 1997
- -------------------------------
Jack R. Dykhouse
* Director September 25, 1997
- -------------------------------
Steven E. Frushtick
* Director September 25, 1997
- -------------------------------
Carl T. Hanson
* Director September 25, 1997
- -------------------------------
B. Larry Jenkins
* Director September 25, 1997
- -------------------------------
Colette Vargas
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
* Director September 25, 1997
- -------------------------------
Vera F. Mihaic
* Director September 25, 1997
- -------------------------------
Peter P. Post
* Director September 25, 1997
- ------------------------------- (Principal
Tom A. Schlossberg Executive Officer)
* Director September 25, 1997
- -------------------------------
Cor H. Verhagen
* Director September 25, 1997
- -------------------------------
E. Kirby Warren
* Treasurer September 25, 1997
- -------------------------------
Brenda K. Clancy
</TABLE>
* By: Larry G. Brown, attorney in fact.
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page No.*
- ----------- ---------------------- ---------
<S> <C> <C>
(3)(b) Form of Broker/Dealer Supervision and Sales Agreement by and between AEGON USA
Securities, Inc. and the Broker/Dealer.
(4)(d) Form of Policy.
(5)(c) Form of Application.
(8)(d) Amendment to Participation Agreement by and between AUSA Life Insurance
Company, Inc. and Endeavor Series Trust.
(10)(b) Opinion and Consent of Actuary
</TABLE>
- ------------------------------
*Page numbers included only in manually executed original.
<PAGE>
Registration No.
33-83560
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
EXHIBITS
TO
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
_______________
<PAGE>
EXHIBIT (3)(b)
--------------
FORM OF BROKER/DEALER SUPERVISION AND SALES AGREEMENT
BY AND BETWEEN AEGON USA SECURITIES, INC.
AND THE BROKER/DEALER.
<PAGE>
SELECTED BROKER AGREEMENT
AGREEMENT dated__________________________,19____, by and between AEGON USA
Securities, Inc.
(Distributor), an Iowa corporation and ________________________________________
(Broker), a __________________________________corporation. This Agreement
supersedes and replaces any prior Selected Broker Agreement regarding the
subject matter between the parties hereto.
WITNESSETH:
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
A. Definitions
-----------
(1) Contracts--Variable life insurance contracts and/or variable annuity
contracts described in Schedule A attached hereto and issued by AUSA
Life Insurance Company, Inc. ("Company") and for which Distributor
has been appointed the principal underwriter pursuant to Distribution
Agreements, copies of which have been furnished to Broker.
(2) Accounts--Separate accounts established and maintained by Company
pursuant to the laws of New York, as applicable, to fund the benefits
under the Contracts.
(3) The Funds--, open-end management investment companies registered
under the 1940 Act, shares of which are sold to the Accounts in
connection with the sale of the Contracts, as described in the
Prospectus for the Contracts.
(4) Registration Statement--The registration statements and amendments
thereto relating to the Contracts, the Accounts, and the Funds,
including financial statements and all exhibits.
(5) Prospectus--The prospectuses included within the Registration
Statements.
(6) 1933 Act--The Securities Act of 1933, as amended.
(7) 1934 Act--The Securities Exchange Act of 1934, as amended.
(8) 1940 Act--The Investment Company Act of 1940, as amended.
(9) SEC--The Securities and Exchange Commission.
(10) NASD--The National Association of Securities Dealers, Inc.
B. Agreements of Distributor
-------------------------
(1) Pursuant to the authority delegated to it by Company, Distributor
hereby authorizes Broker during the term of this Agreement to solicit
applications for Contracts from eligible persons provided that there
is an effective Registration Statement relating to such Contracts and
provided further that Broker has been notified by Distributor that
the Contracts are qualified for sale under all applicable securities
and insurance laws of the state or jurisdiction in which the
application will be solicited. In connection with the solicitation of
applications for Contracts, Broker is hereby authorized to offer
riders that are available with the Contracts in accordance with
instructions furnished by Distributor or Company.
(2) Distributor, during the term of this Agreement, will notify Broker of
the issuance by the SEC of any stop order with respect to the
Registration Statement or any amendments thereto or the initiation of
any proceedings for that purpose or for any other purpose relating to
the registration and/or offering of the Contracts and of any other
action or circumstance that may prevent the lawful sale of the
Contracts in any state or jurisdiction.
(3) During the term of this Agreement, Distributor shall advise Broker of
any amendment to the Registration Statement or any amendment or
supplement to any Prospectus.
C. Agreements of Broker
--------------------
(1) It is understood and agreed that Broker is a registered broker/dealer
under the 1934 Act and a member of the NASD and that the agents or
representatives of Broker who will be soliciting applications for the
Contracts also will be duly registered representative of Broker.
(2) Commencing at such time as Distributor and Broker shall agree upon,
Broker agrees to use commercially reasonable efforts to find
purchasers for the Contracts acceptable to Company. In meeting its
obligation to use its commercially reasonable efforts to solicit
applications for Contracts, Broker shall, during the term of this
Agreement, engage in the following activities:
(a) Regularly utilize only training, sales and promotional materials
relating to the Contracts which have been approved by Company.
(b) Establish and implement reasonable procedures for periodic
inspection and supervision of sales practices of its agents or
representatives and submit periodic reports to Distributor as may be
requested on the results of such inspections and the compliance with
such procedures.
<PAGE>
(c) Broker shall take reasonable steps to ensure that the various
representatives appointed by it shall not make recommendations to an
applicant to purchase a Contract in the absence of reasonable grounds
to believe that the purchase of the Contract is suitable for such
applicant. While not limited to the following, a determination of
suitability shall be based on information furnished to a
representative after reasonable inquiry of such applicant concerning
the applicant's insurance and investment objectives, financial
situation and needs, and, if applicable, the likelihood that the
applicant will make the premium payments contemplated by the
Contract.
(3) All payments for Contracts collected by agents or representatives of
Broker shall be held at all times in a fiduciary capacity and shall
be remitted promptly in full together with such applications, forms
and other required documentation to an office of the Company
designated by Distributor. Checks or money orders in payment of
initial premiums shall be drawn to the order of "AUSA Life Insurance
Company, Inc." Broker acknowledges that the Company retains the
ultimate right to control the sale of the Contracts and that the
Distributor or Company shall have the unconditional right to reject,
in whole or part, any application for the Contract. In the event
Company or Distributor rejects an application, Company immediately
will return all payments directly to the purchaser and Broker will be
notified of such action. In the event that any purchaser of an
Contract elects to return such Contract pursuant to the free look
right, the purchaser will receive a refund of the greater of premium
payments or the value of the invested portion of such premiums. The
Broker will be notified of any such action.
(4) Broker shall act as an independent contractor, and nothing herein
contained shall constitute Broker, its agents or representatives, or
any employees thereof as employees of Company or Distributor in
connection with solicitation of applications for Contracts. Broker,
its agents or representatives, and its employees shall not hold
themselves out to be employees of Company or Distributor in this
connection or in any dealings with the public.
(5) Broker agrees that any material, including material it develops,
approves or uses for sales, training, explanatory or other purposes
in connection with the solicitation of applications for Contracts
hereunder (other than generic advertising materials which do not make
specific reference to the Company or the Contracts) will only be used
after receiving the written consent of Distributor to such material
and, where appropriate, the endorsement of Company to be obtained by
Distributor.
(6) Solicitation and other activities by Broker shall be undertaken only
in accordance with applicable laws and regulations. No agent or
representative of Broker shall solicit applications for the contracts
until duly licensed and appointed by Company (such appointment not to
be unreasonably withheld by the Company) as a life insurance and
variable contract broker or agent of Company in the appropriate
states or other jurisdictions. Broker shall ensure that such agents
or representatives fulfill any training requirements necessary to be
licensed and that such agents or representatives are properly
supervised and controlled pursuant to the rules and regulations of
the SEC and the NASD. Broker shall certify agents' and
representatives' qualifications to the satisfaction of Distributor,
including certifying a General Letter of Recommendation set forth in
Exhibit A hereto. Broker understands and acknowledges that neither it
nor its agents or representatives is authorized by Distributor or
Company to give any information or make any representation in
connection with this Agreement or the offering of the Contracts other
than those contained in the Prospectus or other solicitation material
authorized in writing by Distributor or Company.
(7) Broker shall not have authority on behalf of Distributor or Company
to: make, alter or discharge any Contract or other form; waive any
forfeiture, extend the time of paying any premium; receive any monies
or premiums due, or to become due, to Company, except as set forth in
Section C(3) of this Agreement. Broker shall not expend, nor contract
for the expenditure of the funds of Distributor, nor shall Broker
possess or exercise any authority on behalf of Broker by this
Agreement.
(8) Broker shall have the responsibility for maintaining the records of
its representatives licensed, registered and otherwise qualified to
sell the Contracts. Broker shall maintain such other records as are
required of it by applicable laws and regulations. The books,
accounts and records of the Company, the Account, Distributor and
Broker relating to the sale of the Contracts shall be maintained so
as to clearly and accurately disclose the nature and details of the
transactions. All records maintained by the Broker in connection with
this Agreement shall be the property of the Company and shall be
returned to the Company upon termination of this Agreement, free from
any claims or retention of rights by the Broker. Nothing in this
Section C(8) shall be interpreted to prevent the Broker from
retaining copies of any such records which the Broker, in its
discretion, deems necessary or desirable to keep. The Broker shall
keep confidential any information obtained pursuant to this Agreement
and shall disclose such information only if the Company has
authorized such disclosure or if such disclosure is expressly
required by applicable federal or state regulatory authorities.
D. Compensation
------------
(1) Pursuant to the Distribution Agreement between Distributor and
Company, Distributor shall cause Company to arrange for the payment
of commissions to Broker as compensation for the sale of each
contract sold by an agent or representative of Broker. Such amounts
shall be paid to Broker or its subsidiary insurance agency, whichever
is authorized to receive insurance commissions under applicable
insurance laws, in accordance with
<PAGE>
the schedules attached hereto, the General Agent Agreement, and the
commission schedules attached thereto. All terms and conditions of
the General Agent Agreement not otherwise conflicting with the terms
herein, shall be incorporated by reference herein. Company shall
identify to Broker with each such payment the name of the agent or
representative of Broker who solicited each Contract covered by the
payment.
(2) Neither Broker nor any of its agents or representatives shall have
any right to withhold or deduct any part of any premium it shall
receive for purposes of payment of commission or otherwise. Neither
Broker nor any of its agents or representatives shall have an
interest in any compensation paid by Company to Distributor, now or
hereafter, in connection with the sale of any Contracts hereunder.
E. Complaints and Investigations
-----------------------------
(1) Broker and Distributor jointly agree to cooperate fully in any
insurance or securities regulatory investigation or proceeding or
judicial proceeding arising in connection with the Contracts marketed
under this Agreement. Broker, upon receipt, will notify Distributor
of any customer complaint or notice of any regulatory investigation
or proceeding or judicial proceeding in connection with the
Contracts. Broker and Distributor further agree to cooperate fully in
any securities regulatory investigation or proceeding or judicial
proceeding with respect to Broker, Distributor, their affiliates and
their agents or representatives to the extent that such investigation
or proceeding is in connection with Contracts marketed under this
Agreement. Broker shall furnish applicable federal and state
regulatory authorities with any information or reports in connection
with its services under this Agreement which such authorities may
request in order to ascertain whether the Company's operations are
being conducted in a manner consistent with any applicable law or
regulation. Each party shall bear its own costs and expenses of
complying with any regulatory requests, subject to any right of
indemnification that may be available pursuant to Section G of this
Agreement.
F. Term of Agreement
-----------------
(1) This Agreement shall continue in force for one year from its
effective date and thereafter shall automatically be renewed every
year for a further one year period; provided that either party may
unilaterally terminate this Agreement upon thirty (30) days' written
notice to the other party of its intention to do so.
(2) Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except (a) the agreements contained in
Section E hereof; (b) the indemnity set forth in Section G hereof;
and (c) the obligations to settle accounts hereunder, including
commission payments on premiums subsequently received for Contracts
in effect at the time of termination or issued pursuant to
applications received by Broker prior to termination.
(3) Distributor and Company reserve the right, without notice to Broker,
to suspend, withdraw or modify the offering of the Contracts or to
change the conditions of their offering.
G. Indemnity
---------
(1) Broker shall be held to the exercise of reasonable care in carrying
out the provisions of this Agreement.
(2) Distributor agrees to indemnify and hold harmless Broker and each
officer or director of Broker against any losses, claims, damages or
liability, joint or several, to which Broker or such officer or
director become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact, required to be stated
therein or necessary to make the statements therein not misleading,
contained in any Registration Statement or any post-effective
amendment thereto or in the Prospectus or any amendment or supplement
to the Prospectus, or any sales literature provided by the Company or
by the Distributor.
(3) Broker agrees to indemnify and hold harmless Company and Distributor
and each of their current and former directors and officers and each
person, if any, who controls or has controlled Company or Distributor
within the meaning of the 1933 Act or the 1934 Act, against any
losses, claims, damages or liabilities to which Company or
Distributor and any such director or officer or controlling person
may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (a) Any unauthorized use of
sales materials or any verbal or written misrepresentations or any
unlawful sales practices concerning the Contracts by Brokers, its
agents, employees or representatives; or (b) Claims by agents or
representatives or employees of Broker for commissions, service fees,
development allowances or other compensation or remuneration of any
type; (c) The failure of Broker, its officers, employees, or agents
to comply with the provisions of this Agreement; and Broker will
reimburse Company and Distributor and any director or officer or
controlling person of either for any legal or other expenses
reasonably incurred by Company, Distributor, or such director,
officer of controlling person in connection with investigating or
defending any such loss, claims, damage, liability or action. This
indemnity agreement will be in addition to any liability which Broker
may otherwise have.
H. Assignability
-------------
This Agreement shall not be assigned by either party without the
written consent of the other.
<PAGE>
I. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Iowa.
J. Notices
-------
All communications under the Agreement shall be in writing and shall
be deemed delivered when mailed by certified mail, postage prepaid.
Alternatively, communications shall be deemed delivered by timely
transmission of the writing, delivery charges prepaid, to a third
party company or governmental entity providing delivery services in
the ordinary course of business, which guarantees delivery to the
other party on the next business day. Notices shall be sent to the
following addresses unless and until the addressee notifies the other
party of a change in address according to the terms of this Section:
<TABLE>
<S> <C>
(1) if to Broker, to: (2) if to the Distributor, to:
AEGON USA Securities, Inc.
--------------------------------------------------------- 4333 Edgewood Road NE
----------------------------------------------- Cedar Rapids, Iowa 52499-0001
(street address) (319) 369-2345 (telephone no.)
----------------------------------------------- (319) 369-2591 (fax no.)
(telephone no.) Attention: Lorri E Mehaffey,
----------------------------------------------- President
(fax no.)
-----------------------------------------------
Attention:
-------------------------------------
-------------------------------------
</TABLE>
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
------------------------------------
(Broker Name)
By:
---------------------------------
Title:
------------------------------
AEGON USA SECURITIES, INC.
(Distributor)
By:
---------------------------------
President
<PAGE>
EXHIBIT A
General Letter of Recommendation
BROKER-DEALER hereby certifies to the Company that all the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as agents of the Company
submitted by BROKER-DEALER. BROKER-DEALER will, upon request, forward proof of
compliance with same to the Company in a timely manner.
1. We have made a thorough and diligent inquiry and investigation
relative to each applicant's identity, residence and business
reputation and declare that each applicant is personally known to us,
has been examined by us, is known to be of good moral character, has
a good business reputation, is reliable, is financially responsible
and is worthy of a license. Each individual is trustworthy, competent
and qualified to act as an agent for the Company to hold himself out
in good faith to the general public.
2. We have on file a U-4 form which was completed (and has been amended,
as required) by each applicant. We have fulfilled all the necessary
investigative requirements for the registration of each applicant as
a registered representative through our NASD member firm, including
but not limited to: (i) checking for and investigating criminal
arrest and conviction records available to Broker-Dealer on the CRD
system; and (ii) communicating with each employer of the applicant
for 3 years prior to the applicant's registration with our firm. Each
applicant is presently registered as an NASD registered
representative.
The above information in our files indicates no fact or condition
which would disqualify the applicant from receiving a license and all the
findings of all investigative information is favorable.
At the time of application, in those states required by the Company,
we shall provide the Company with a copy of the entire U-4 form, or
designated pages, thereof, completed by each applicant, including any
amendments or updates thereto, and we certify those items are true
copies of the original.
3. We certify that all educational requirements have been met for the
specified state each applicant is requesting a license in, and that
all such persons have fulfilled the appropriate examination,
education and training requirements.
4. If the applicant is required to submit his picture, his signature,
and securities registration in the state in which he is applying for
a license, we certify that those items forwarded to the Company are
those of the applicant and the securities registration is a true copy
of the original.
5. We hereby warrant that the applicant is not applying for a license
with the Company in order to place insurance chiefly and solely on
his life or property, or lives or property of his relatives, or
property or liability of his associates.
6. We will not permit any applicant to transact insurance in a state as
an agent until duly licensed and appointed therefor with the
appropriate State Insurance Department. No applicants have been given
a contract or furnished supplies, nor have any applicants been
permitted to write, solicit business, or act as an agent in any
capacity, and they will not be so permitted until the certificate of
authority or license applied for is received.
<PAGE>
EXHIBIT (4)(d)
--------------
FORM OF POLICY
<PAGE>
AUSA LIFE INSURANCE COMPANY, INC.
A Stock Company Home Office located at: 4 Manhattanville Road, Purchase, New
York Adm. Office located at: 4333 Edgewood Road NE Cedar Rapids, Iowa 52499
(800) 553-5957 (Hereinafter called the Company, we, our or us)
- --------------------------------------------------------------------------------
================================================================================
================================================================================
ANNUITANT JOHN DOE
OWNER(S): JOHN DOE
POLICY NUMBER: 10-00000001
POLICY DATE: January 10, 1997
WE AGREE
. To provide annuity payments as set forth in this policy:
. Or to pay withdrawal benefits in accordance with Section 5 of this policy;
. Or to pay death proceeds in accordance with Section 9 of this policy.
The smallest annual rate of investment return which would have to be earned on
Separate Account assets so that the dollar amount of variable account annuity
payments will not decrease, is 6.4% (equal to 5% assumed investment return and a
1.40% maximum mortality and expense risk fee and administrative charge.)
Accumulation unit values reflect a per year mortality and expense risk fee and
administrative charge, shown on page 3 of this policy.
These agreements are subject to the provisions of this policy. This policy is
issued in consideration of any application and payment of the initial premium.
This policy may be issued to qualify as a tax deferred annuity under the
applicable sections of the Internal Revenue Code.
20 DAY RIGHT TO CANCEL
You may cancel this policy by delivering or mailing a written notice or sending
a telegram to us. You must return the policy before midnight of the twentieth
day after the day you receive it. Notice given by mail and return of the policy
by mail are effective on being postmarked, properly addressed and postage
prepaid.
We will pay you an amount equal to the sum of:
. the premiums paid; and
. the accumulated gains or losses, if any, in the Separate Account on the date
of cancellation;
unless otherwise required by law.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ Tom Schlossberg
SECRETARY PRESIDENT
This policy is a legal contract between the policyowner and the company.
READ YOUR POLICY CAREFULLY
Flexible Premium Variable Annuity
Income Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount (See Sections 6 and 10C)
AV343 101 90 396 Non-Participating
<PAGE>
SECTION 1
DEFINITIONS
ANNUITANT
The person to whom annuity payments will be made.
ANNUITY COMMENCEMENT DATE
Date the annuitant will begin receiving payments from this annuity, which may
not be later than the last day of the policy month starting after the Annuitant
attains age 90.
ANNUITY PURCHASE VALUE
Amount defined in Section 4, that can be used to fund one of the Payment
Options.
CASH VALUE
Amount defined in Section 5, that can be withdrawn if the annuity is
surrendered.
DISTRIBUTION
A withdrawal or disbursement of funds from the Annuity Purchase Value or Cash
Value.
PAYMENT OPTIONS
Options through which the distribution of the Annuity Purchase Value can be
directed.
POLICY YEAR
The 12 month periods following the Policy Date shown on the Policy Data page.
The first Policy Year starts on the Policy Date. Each subsequent year starts on
the anniversary of the Policy Date.
SEPARATE ACCOUNT
The separate investment account established by us, as described in Section 6.
SUB-ACCOUNT
A division of the Separate Account, as described in Section 6.
WITHDRAWAL
A distribution of funds from the Annuity Purchase Value or Cash Value.
YOU, YOUR
The owner of this policy. Unless otherwise specified on the Policy Data page,
the annuitant and the owner shall be one and the same person.
PAGE 2
<PAGE>
SECTION 2 - POLICY DATA
POLICY NUMBER: 10 - 000001
INITIAL PREMIUM PAYMENT: $5,000.00
POLICY DATE: January 10, 1997
ANNUITY COMMENCEMENT DATE: February l, 2046
ANNUITANT: JOHN DOE
ISSUE AGE/SEX: 35 / MALE
OWNER(S): JOHN DOE
DEATH BENEFIT OPTION: B
Death Benefit Option A -
Mortality and Expense Risk Fee and
Administrative Charge: 1.40% (Policy Years 1 - 7)
Mortality and Expense Risk Fee and
Administrative Charge: 1.25% (Policy Years 8 and thereafter)
Death Benefit Option B -
Mortality and Expense Risk Fee and
Administrative Charge: 1.55% (Policy Years 1 - 7)
Mortality and Expense Risk Fee and
Administrative Charge: 1.40% (Policy Years 8 and thereafter)
Service Charge:
Annual charge equal to the lesser of 2% of the Annuity Purchase Value or
$35.00.
Fixed Account:
Guaranteed Period Option available: 1 year
Minimum Interest Rate: 3%
Page 3
<PAGE>
SECTION 3 - PREMIUMS
PAYMENT OF PREMIUMS
Premiums may be paid any time while this policy is in force before the Annuity
Commencement Date. You may start or stop, increase or decrease, or skip any
premium payments.
MAXIMUM AND MINIMUM PREMIUM
The premiums paid may not be more than the amount permitted by law if this is a
tax-qualified annuity. The minimum initial premium is $5,000. If this policy is
being used as a tax-qualified annuity, the minimum initial premium is $1,000
($50 for Tax Deferred 403(b) Annuities). The minimum subsequent premium payment
we will accept is $50. including payments through automatic deduction The
maximum total premiums which we will accept is $1,000,000 without prior Company
approval.
PREMIUM PAYMENT DATE
The premium payment date is the date on which the premium is credited to the
policy. The initial premium payment will be credited to the policy within two
business days of receipt of the premium and the information needed. Subsequent
additional premium payments will be credited to the policy as of the business
day when the premium and required information are received. A business day is
any day on which the New York Stock Exchange is open for trading.
ALLOCATION OF PREMIUM PAYMENTS
Premium payments may be applied to the one year Guaranteed Period of the Fixed
Account, to the Dollar Cost Averaging Fixed Account Option, and/or to one or
more of the Sub-accounts which we make available. You must indicate what percent
of each premium payment to allocate to the one year Guaranteed Period of the
Fixed Account, to the Dollar Cost Avenging Fixed Account Option, and/or among
one or more of the Sub-accounts (making a total of 100%). Each percent may be
either zero or any whole number.
We will use the allocation percentages you choose for the first and any later
premium payments until you change the allocation percentages.
CHANGE OF ALLOCATION
You may change the allocation of premium payments to the one year Guaranteed
Period of the Fixed Account, the Dollar Cost Averaging Fixed Account Option,
and/or among the Sub-accounts. You must tell us in a notice you sign which gives
us the facts that we need Payments received after the date on which we receive
your notice will be applied on the basis of the new allocation
SECTION 4 - ANNUITY PURCHASE VALUE
ANNUITY PURCHASE VALUE
On or before the Annuity Commencement Date the Annuity Purchase Value is equal
to your:
(a) premiums paid: minus
(b) partial withdrawals taken: plus
(c) interest credited in the Fixed Account plus
(d) accumulated gains or losses in the Separate Account minus
(e) service charges, premium taxes and transfer fees, if any.
You may use the Annuity Purchase Value on the Annuity Commencement Date to
provide lifetime income or income for a period of five or more years under the
Annuity Payment Options in Section 10.
SERVICE CHARGE
On each policy anniversary before the Annuity Commencement Date we reserve the
right to charge the lesser of 2% of the Annuity Purchase Value on that
anniversary, or $35 for policy administration expenses. It will be deducted from
each Sub-account in proportion to their percentage of the Annuity Purchase Value
in the Sub-accounts before such charge on that policy anniversary This fee will
not be deducted from the Fixed Account.
The Service Charge will not be deducted on a policy anniversary if the sum of
all premiums paid minus the sum of all withdrawals taken equals at least $50,000
on that policy anniversary
SECTION 5 - CASH VALUE AND PARTIAL WITHDRAWALS
CASH VALUE
The Cash Value may be partially withdrawn or will be paid in the event of a full
surrender of the policy. We must receive your written withdrawal or surrender
request before the Annuity Commencement Date.
Before the Annuity Commencement Date, the Cash Value is equal to the Annuity
Purchase Value less any surrender charges. On the Annuity Commencement Date, the
Cash Value is equal to the Annuity Purchase Value. There is no Cash Value after
the Commencement Date. When you ask, we will tell you how much the Cash Value
is.
Page 4
<PAGE>
SECTION 5 - CONTD
PARTIAL WITHDRAWALS
We will pay you a portion of or all of the Cash Value as a lump sum partial
withdrawal ($500 minimum) provided we receive your written request while the
policy is in effect and before the Annuity Commencement Date. When you request a
partial withdrawal you must tell us how it is to be allocated among the one year
Guaranteed Period of the Fixed Account and/or the Sub-accounts. If your request
for a partial withdrawal from the one year Guaranteed Period of the Fixed
Account and/or a Sub-account is greater than the Cash Value in that account, we
will pay you the Cash Value of that account.
Partial Withdrawals may be made free of Surrender Charges in three different
ways:
1. Lump Sum
After the first policy year, amounts up to 10% of the Annuity Purchase Value
at the time of withdrawal are available as a lump sum distribution once per
policy year with no Surrender Charges.
2. Systematic Payout Option
During any policy year, including the first, a Systematic Payout Option (SPO)
is available on a monthly, quarterly, semi-annual or annual basis. SPO
payouts must be at least $50 each and may not exceed 10% of the Annuity
Purchase Value at the time SPO is elected divided by the number of payouts
made per year (e.g. 12 f or monthly). Monthly and quarterly payouts must be
sent through electronic funds transfer directly to your checking or savings
account. No Surrender Charges will apply to the SPO payout. You may start or
stop SPO payouts only one time in any twelve months.
Twelve months must pass from the date a SPO is stopped before you may elect a
partial lump sum distribution under number 1 above. If you have elected a
partial lump sum distribution prior to a SPO or if you elected SPO in the
first policy year, you must wait a minimum time before beginning the SPO: one
month for a monthly SPO, three months for quarterly, six months for
semi-annual, or twelve months for annual.
3. Minimum Required Distribution
For a tax-qualified annuity, partial withdrawals taken to satisfy minimum
distribution requirements under Section 401 (a)(9) of the Internal Revenue
Code (IRC) are available with no Surrender Charge. The amount available from
this annuity with respect to the minimum distribution requirement is based
solely on this policy.
The owner must be at least 70 1/2 years old in the calendar year of
distribution, must submit a written request to us and must take the
distribution before year end. If the owner attains age 70 1/2 in the calendar
year of distribution, a written request which is postmarked no later than the
end of the current calendar year must be submitted to us.
Unless the minimum distribution requirement is met under SPO, twelve months
must pass from the date of each Surrender Charge free withdrawal before
future Surrender Charge free withdrawals are permitted. Any amount in excess
of the IRC minimum required distribution will have the appropriate Surrender
Charge applied.
Surrender Charge free withdrawals will reduce the Annuity Purchase Value by the
amounts withdrawn. Withdrawal amounts in excess of the Surrender Charge free
portion are Excess Partial Withdrawals. Excess Partial Withdrawals will reduce
the Annuity Purchase Value by an amount equal to (X+Z) where:
X = Excess Partial Withdrawal
Z = Surrender Charge on X
PAGE 5
<PAGE>
SECTION 5 - CONTD
If any partial withdrawal reduces the Cash Value below $500, we reserve the
right to pay the full Cash Value and terminate this policy. We may delay payment
of the Cash Value for up to 6 months after we receive your request.
Premiums withdrawn seven or more policy anniversaries after their payment date
are not subject to Surrender Charges.
SURRENDER CHARGES
Surrender Charges only apply to premiums less Surrender Charge-free amounts
(that is, Excess Premium Withdrawals), not to the Annuity Purchase Value. The
Surrender Charge will be the applicable percentage, shown in the table below,
multiplied by each Excess Premium Withdrawal.
<TABLE>
<CAPTION>
Number of Years Percentage Applicable to
Since Premium Each Excess Premium
Payment Date Withdrawal
<S> <C>
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7 or more 0%
</TABLE>
For example, assume one $10,000 premium payment is made under this policy, and
that the owner surrenders the policy at the end of policy year two. The Annuity
Purchase Value at that time is assumed to be $11,025, and the Surrender Charge
percentage is 6%. The Surrender Charge-free amount would be 10% of $11,025, or
$1,102.50. The Surrender Charge would thus be 6% of the Excess Premium
Withdrawal ($10,000 less $1,102.50), or $533.85.
For Surrender Charge purposes, the oldest premium payment is considered to be
withdrawn first.
If the requested withdrawal amount exceeds the oldest premium payment, the next
oldest premium payment is considered to be withdrawn, and so on until the most
recent premium payment is Considered to be withdrawn.
After all premium payments are considered to be withdrawn, the remaining Annuity
Purchase Value may be withdrawn free of any Surrender Charge.
GUARANTEED RETURN OF FIXED ACCOUNT PAYMENTS
Upon full surrender of the policy, you will always receive at least the premiums
paid to, less prior withdrawals and transfers from, the Fixed Account.
SECTION 6 - SEPARATE ACCOUNT
SEPARATE ACCOUNT
We have established and will maintain a Separate Account (AUSA Endeavor Variable
Annuity Account) under the laws of the state of New York. Any realized or
unrealized income, net gains and losses from the assets of the Separate Account
are credited to or charged against it without regard to our other income, gains
or losses. Assets are put in the Separate Account for this policy, as well as
for other variable life insurance and annuity policies. The Separate Account may
invest assets in shares of one or more mutual funds. Fund shares are purchased,
redeemed and valued on behalf of the Separate Account.
The Separate Account is divided into Sub-accounts. Each Sub-account invests
exclusively in shares of one of the portfolios of an underlying fund. We reserve
the right to add or remove any Sub-account of the Separate Account.
The assets of the Separate Account are our property. These assets will equal or
exceed the reserves and other contract liabilities of the Separate Account.
These assets will not be chargeable with liabilities arising out of any other
business we conduct. We reserve the right to transfer assets of a Sub-account in
excess of the reserves and other contract liabilities with respect to that
Sub-account to another Sub-account or to our General Account.
We will determine the fair market value of the assets of the Separate Account in
accordance with a method of valuation which we establish in good faith.
Valuation Period means the period of time from one determination of the value of
each Sub-account to the next. Such determinations are made when the value of the
assets and liabilities of each Sub-account is calculated. This is generally each
day on which the New York Stock Exchange is open.
We also reserve the right, with prior approval of the Insurance Superintendent,
to transfer assets of the Separate Account, which we determine to be associated
with the class of policies to which this policy belongs, to another separate
account. If this type of transfer is made, the term "Separate Account", as used
in this policy, shall then mean the separate account to which the assets were
transferred.
PAGE 6
<PAGE>
SECTION 6 - SEPARATE ACCOUNT - CONTD
We also reserve the right, with prior approval of the Insurance Superintendent,
to:
(a) deregister the Separate Account under the Investment Company Act of 1940;
(b) manage the Separate Account under the direction of a committee at any
time;
(c) restrict or eliminate any voting rights of policyowners or other persons
who have voting rights as to the Separate Account; and
(d) combine the Separate Account with one or more other separate accounts.
CHANGE IN INVESTMENT OBJECTIVE OR POLICY OF A MUTUAL FUND
If required by law or regulation, an investment policy of the Separate Account
will only be changed if approved by the appropriate insurance official of the
state of New York or deemed approved in accordance with such law or regulation.
If so required, the process for obtaining such approval is filed with the
insurance official of the state or district in which this policy is delivered.
ACCUMULATION UNITS
The Annuity Purchase Value in the Separate Account before the Annuity
Commencement Date is represented by accumulation units. The dollar value of
accumulation units for each Sub-account may change from day to day reflecting
the investment experience of the Sub-account.
Payments allocated to and any amounts transferred to the Sub-accounts will be
applied to provide accumulation units in those Sub-accounts. The number of
accumulation units purchased in a Sub-account will be determined by dividing the
premium allocated to or any amount transferred to that Sub-account, by the value
of an accumulation unit for that Sub-account on the payment or transfer date.
The number of accumulation units withdrawn or transferred from the Sub-accounts
will be determined by dividing the amount withdrawn or transferred by the value
of an accumulation unit for that Sub-account on the withdrawal or transfer date.
The value of an accumulation unit on any business day is determined by
multiplying the value of that unit at the end of the immediately preceding
valuation period by the net investment factor for the valuation period.
The net investment factor used to calculate the value of an accumulation unit in
each Sub-account for the valuation period is determined by dividing (a) by (b)
and subtracting (c) from the result, where:
(a) is the result of:
(1) the net asset value of a fund share held in that Sub-account determined
as of 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 that Sub-account if the ex-dividend date
occurs during the valuation period; plus or minus
(3) a per share charge or credit for any taxes reserved for, which we
determine to have resulted from the investment operations of that
Sub-account
(b) is the net asset value of a fund share held in that Sub-account determined
as of the end of the immediately preceding valuation period.
(c) is a factor representing the morality and expense risk fee, and
administrative charge. This factor is less than or equal to, on an annual
basis, the percentage shown on page 3 of the daily net asset value of a
fund share held in that Sub-account.
Since the net investment factor may be greater or less than one, the
accumulation unit value may increase or decrease.
SECTION 7 - FIXED ACCOUNT
FIXED ACCOUNT
Payments applied to and any amounts transferred to the Fixed Account will
reflect a fixed interest rate. The interest rates we set 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 PERIOD
We will offer a one year Guaranteed Period into which premiums may be paid or
amounts transferred. The current interest rate we set for funds entering this
option is guaranteed until the end of the option's guaranteed period. At that
time, the premium paid or amount transferred into the option less my withdrawals
or transfers from that option, plus accrued interest, will be rolled into a new
option.
We will mail a notice to you at least 15 but not more than 45 days prior to the
end of an expiring option's period, which indicates the option(s) available to
you at the end of the expiring option's period as well as other pertinent
information, including the new interest rate specific to the new option(s). You
may choose the option(s) you want the funds rolled into by giving us notice
within 30 days before the end of the expiring option's period. In the absence of
such election, the new option will be the one year Guaranteed Period Option.
PAGE 7
<PAGE>
SECTION 7 - CONT
For purposes of crediting interest when funds are withdrawn from or transferred
into the one year Guaranteed Period, the amount of the oldest premium payment,
transfer, or rollover into that Guaranteed Period plus interest associated with
that amount is considered to be withdrawn or transferred first. If the amount
withdrawn or transferred exceeds this, the next oldest premium payment,
transfer, or rollover plus interest is considered to be withdrawn or transferred
next and so on until the most recent premium payment, transfer or rollover is
considered to be withdrawn (this is a "First-In, First-Out" or FIFO procedure).
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
We may offer a Dollar Cost Averaging (DCA) Fixed Account Option separate from
the one year Guaranteed Period Option (GPO). This option will have a one year
interest rate guarantee. The current interest rate we set for the DCA Fixed
Account may differ from the rates credited on the one year GPO in the Fixed
Account. The credited interest rate will never be less than the minimum
effective annual interest rate of 3%. The DCA Fixed Account Option will only be
available under a Dollar Cost Averaging program as described in Section 8.
SECTION 8 - TRANSFERS
A. TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the Annuity Commencement Date you may transfer the value of the
accumulation units from one Sub-account to another within the Separate Account
or to the Fixed Account or from the one year Guaranteed Period Option (GPO) of
the Fixed Account to the Separate Account. We will offer you the option to
transfer interest earned in the one year GPO to any Sub-account(s) of the
Separate Account. If you want to transfer, you must tell us in a notice you sign
which gives us the facts that we need.
The maximum amount that can be transferred prior to the end of the one year GPO
is 25% of that Guaranteed Period Option's Annuity Purchase Value, less amounts
previously transferred out of that GPO during the current policy year.
No transfers will be allowed out of the Dollar Cost Averaging Fixed Account
Option except through dollar cost averaging.
The minimum amount which may be transferred is the lesser of $500 or the entire
Sub-account or Guaranteed Period value. However, if the remaining Sub-account or
Guaranteed Period value is less than $500, we have the right to include that
amount as part of the transfer.
We reserve the right to limit transfers to no more than 12 in any one policy
year. Any transfers in excess of 12 per policy year may be charged a $10
transfer fee.
DOLLAR COST AVERAGING OPTION
Prior to the Annuity Commencement Date, you may instruct us to automatically
transfer a specified amount from the Money Market Sub-account, the Dollar Cost
Averaging Fixed Account Option or the U.S. Government Securities Sub-account to
any other Sub-account or Sub-accounts of the Separate Account. The automatic
transfers can occur monthly or quarterly and will occur on the 28th day of the
month. If the Dollar Cost Averaging 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
Dollar Cost Averaging 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.
You may elect Dollar Cost Averaging at any time. Transfers will continue until
the Sub-account value is depleted. The amount transferred each time must be at
least $500. A minimum of 6 monthly or 4 quarterly transfers are required each
time the Dollar Cost Averaging program is started or restarted following
termination of the program for any reason.
Except for Dollar Cost Averaging transfers from the Dollar Cost Averaging Fixed
Account Option, you may start or stop, or increase or decrease the amount of the
transfers by sending us a new Dollar Cost Averaging form or you may discontinue
the Dollar Cost Averaging at any time.
ASSET REBALANCING
Prior to the Annuity Commencement Date, you may instruct us to automatically
transfer amounts among the Sub-accounts of the Separate Account on a regular
basis to maintain a desired allocation of the Annuity Purchase Value among the
various Sub-accounts offered. Rebalancing will occur on a monthly, quarterly,
semi-annual or annual basis, beginning on a date you select. You must select the
percentage of the Annuity Purchase Value you desire in each of the various
Sub-accounts offered (totaling 100%). Any amounts in the Fixed Account are
ignored for the purposes of asset rebalancing. Rebalancing ran 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.
PAGE 8
<PAGE>
SECTION 8 - CONT
B. TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
After the Annuity Commencement Date, you may transfer the value of the variable
annuity units from one Sub-account to another within the Separate Account. If
you want to transfer the value of the variable annuity units, you must tell us
in a notice you sign which gives us the facts that we need.
The minimum amount which may be transferred is the lesser of $10 monthly income
or the entire monthly income of the variable annuity units in the Sub-Account
from which the transfer is being made. If the monthly income of the remaining
units in a Sub-account is less than $10 we have the right to include the value
of those variable annuity units as part of the transfer.
After the Annuity Commencement Date, no transfers may be made from the Fixed
Account to the Separate Account or from the Separate Account to the Fixed
Account.
We reserve the right to limit transfers between the Sub-accounts to once per
policy year except under the Dollar Cost Averaging Option.
SECTION 9 - DEATH PROCEEDS
A. DEATH PROCEEDS PRIOR TO ANNUITY COMMENCEMENT DATE
The amount of death proceeds will be the greatest of (a), (b) or (c) where:
(a) is the Annuity Purchase Value on the date we receive due proof of death and
an election of a method of settlement;
(b) is the Cash Value on the date we receive due proof of death and an election
of a method of settlement; and
(c) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional premium
payments received, less any withdrawals from the date of death to the date
of payment of death proceeds.
If you have not selected a payment option by the date of death the beneficiary
may make such election within 60 days of the date we receive due proof of death.
The beneficiary may elect to receive the death proceeds as a lump sum payment or
may use the death proceeds to provide any of the annuity payment options
described in Section 10. Interest on death proceeds will be paid as required by
law.
B. GUARANTEED MINIMUM DEATH BENEFIT
The amount of the Guaranteed Minimum Death Benefit (GMDB) depends on the option
shown on page 3. You may not change the GMDB option after the policy is issued.
Option A: Return of Premium Death Benefit This GMDB is equal to the total
premiums paid for this policy, less any partial withdrawals, as of the date
of death.
Option B: Annual Step-Up Death Benefit This GMDB is equal to the largest
Annuity Purchase Value on the issue date or on any Policy Anniversary prior
to the earlier of the date of death or prior to the owner's first birthday,
plus any premiums paid, less any partial withdrawals taken, subsequent to
me date of the largest anniversary Annuity Purchase Value.
Each partial withdrawal as used in the above GMDB definition is the sum of (1)
and (2) where:
(1) = The Surrender Charge free withdrawals, as described in Section 5 (Partial
Withdrawals), and
(2) = The Excess Partial Withdrawal as described in Section 5 (Partial
Withdrawals), times a) the amount of the death proceeds on the date of,
but prior to the Excess Partial Withdrawal, divided by b) the Annuity
Purchase Value on the date of, but prior to the Excess Partial Withdrawal.
C. DEATH PRIOR TO ANNUITY COMMENCEMENT DATE
Death proceeds are payable contingent upon the relationships between the owner,
annuitant successor owner and beneficiary as outlined below. The policy must be
surrendered upon settlement or on proof of death.
1. Annuitant and owner are the same.
When we have due proof that the owner died before the Annuity Commencement
Date, we will provide the death proceeds to the beneficiary.
a) Beneficiary is the deceased owner's surviving spouse. The beneficiary may
elect to continue this policy rather than receiving the death proceeds. If
the policy is continued an amount equal to the excess, if any, of the
Guaranteed Minimum 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.
If this beneficiary elects to have the death proceeds paid, the death
proceeds must be distributed:
(1) by the end of 5 years after the date of the deceased owner's death, or
(2) payments must begin no later than one year after the deceased owner's
death and must be made for a period certain or for this beneficiary's
lifetime, so long as any period certain does not exceed this beneficiary's
life expectancy.
PAGE 9
<PAGE>
SECTION 9 - CONT.
b) Beneficiary is not the deceased owners surviving spouse. The death
proceeds must be distributed as provided below:
(1) by the end of 5 years after the date of the deceased owner's death, or
(2) payments must begin no later than one year after the deceased owner's
death and must be made for a period certain or for this beneficiary's
lifetime, so long as any period certain does not exceed this beneficiary's
life expectancy.
c) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
deceased owner s death.
II. Annuitant and owner are different and the annuitant dies.
When we have due proof that the annuitant died prior to the Annuity
Commencement Date, the owner will become the new annuitant and no death
proceeds are payable. If the owner is also the deceased annuitants surviving
spouse, an amount equal to the excess, if any, of the Guaranteed Minimum
Death Benefit over the Policy Value will then be added to the Policy Value.
This amount will be added only once.
However, the owner may elect to have the death proceeds paid upon the
annuitant's death if the election is made prior to the annuitants death and
we agree to such an election. In such case, when we have due proof that the
annuitant died prior to the Annuity Commencement Date, we will provide the
death proceeds to the beneficiary.
a) If the owner has elected to have the death proceeds paid as a lump sum,
the beneficiary must, within 60 days of our receipt of due proof of the
annuitant s death, either:
1) receive the lump sum proceeds: or
2) elect to receive annuity payments. Such payments must begin within
one year of our receipt of due proof of the annuitants death and
must be made for a period certain or for this beneficiary's
lifetime, so long as any period certain does not exceed this
beneficiary's life expectancy.
b) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
annuitant s death.
III. Annuitant and owner are different and the owner dies.
If the owner dies prior to the Annuity Commencement Date and before the
entire interest in the policy is distributed, the successor owner will become
the new owner. The remaining portion of any interest in the policy must be
distributed to the extent provided below in II I.a), II I.b) or III.c).
a) Successor owner is the deceased owner's surviving spouse. The successor
owner may elect to continue this policy rather than receive the Cash
Value. If the successor owner elects to receive the Cash Value, the Cash
Value must be distributed:
(1) by the end of 5 years after the date of the deceased owner's death, or
(2) payments must begin no later than one year after the deceased owner's
death and must be made for a period certain or for the successor owner's
lifetime, so long as any period certain does not exceed the successor
owner's life expectancy.
b) Successor owner is not the deceased owners surviving spouse. The Cash
Value must be distributed as provided below:
(1) by the end of 5 years after the date of the deceased owner s death, or
(2) payments must begin no later than one year after the deceased owner's
death and must be made for a period certain or for the successor owner's
lifetime, so long as any period certain does not exceed the successor
owner's life expectancy.
c) No successor owner survives the deceased owner. The deceased owner's
estate will become the new owner and the Cash Value must be distributed by
the end of 5 years after the date of the deceased owner's death.
IV. More than one Owner
If there is more than one owner, then the death of any owner will be boated
the same as the death of the owner.
D. DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
The death proceeds on or after the Annuity Commencement Date depend on the
payment option selected. If any annuitant dies on or after the Annuity
Commencement Date, but before the entire interest under the policy is
distributed, the remaining portion of such interest in the contract will be
distributed at least as rapidly as under the method of distribution being used
as of the date of that annuitant s death.
PAGE 10
<PAGE>
SECTION 9 - CONT.
E. AN OWNER IS NOT AN INDIVIDUAL
In the case of a non tax-qualified annuity, if any owner is not an individual,
then for purposes of the federal income tax mandatory distribution provisions in
subsection C or D above (1) the primary annuitant will be treated as the owner
of the policy, and (2) if there is any change in the primary annuitant such a
change will be treated as the death of the owner.
SECTION 10 - ANNUITY PAYMENTS
A. GENERAL PAYMENT PROVISIONS
Payment
If this policy is in force on the Annuity Commencement Date, we will use the
Annuity Purchase Value to make annuity payments to the Payee under Option 3-V
with 10 years certain or if elected, under one or more of the other options
described in this section. You may become the annuitant at the Annuity
Commencement Date, or the prior annuitant may continue as the annuitant Payments
will be made at 1, 3, 6 or 12 month intervals. We reserve the right to change
the frequency of payments to avoid making payments of less than $50.00. Before
the Annuity Commencement Date if the death proceeds become payable or if you
surrender this policy, we will pay any proceeds in one sum, or if elected, all
or part of these proceeds may be placed under one or more of the options
described in this section. If we agree, the proceeds may be placed under some
other method of payment instead.
Election of Optional Method of Payment
Before the Annuity Commencement Date you can elect or change a payment option.
You may elect, in a notice you sign which gives us the facts that we need,
annuity payments that may be either variable, fixed or a combination of both. If
you elect a combination, you must also tell us what part of the policy proceeds
on the Annuity Commencement Date is to be applied to provide each type of
payment. The amount of a combined payment will be the sum of the variable and
fixed payments. Payments under a variable payment option will reflect the
investment performance of the selected Sub-account of the Separate Account.
Payee
Unless you specify otherwise, the payee shall be the annulment or the
beneficiary as specified in the Beneficiary provision.
Proof of Age
We may require proof of the age of any person who has an annuity purchased under
Options 3, 3-V, 5 and 5-V of this section before we make the first payment.
Minimum Proceeds
If the proceeds are less than $2,000, we reserve the right to pay them out as a
lump sum instead of applying them to a payment option.
Premium Tax
We may be required by law to pay premium tax on the amount applied to a payment
option. If so, we will deduct the premium tax before applying the proceeds.
Supplementary Contract
Once proceeds become payable and a choice has been made, we will issue a
supplementary contract in exchange for this policy. The contract will name the
payees and will describe the payment schedule.
B. FIXED ACCOUNT PAYMENTS
Guaranteed Payment Options
The fixed account payment is determined by multiplying each $1,000 of policy
proceeds allocated to a fixed payment option by the amounts shown on page 12 for
the option you select 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% and the
"1983 Table A" (male, female, and unisex if required by law) morality table
improved to the year 2000 with projection scale G.
Option 1 - Interest Payments
The Annuity Purchase Value may be left with us for any term agreed to. We will
pay the interest in periodic payments or it may be left to accumulate.
Withdrawal rights will be agreed upon by you and us when the option is elected.
Option 2 - Income for a Specified Period
Payments are made for the fixed period elected. In the event of the death of the
person receiving payments prior to the end of the guaranteed period, payments
will be continued to that person's beneficiary or their present value may be
paid in a single sum.
Option 3 - Life Income
An election may be made between "No Period Certain", "10 Years Certain" or
"Guaranteed Return of Policy Proceeds". In the event of the death of the person
receiving payments prior to the end of any guaranteed period, payments will be
continued to that person's beneficiary or their present value may be paid in a
single sum.
Option 4 - Income of a Specified Amount
Payments are made for any specified amount until the proceeds with interest are
exhausted. In the event of the death of the person receiving payments prior to
the end of the guaranteed period, payments will be continued to that person's
beneficiary or their present value may be paid in a single sum.
Option 5 - Joint and Survivor Annuity
Payments are made during the joint lifetime of the payee and a nominee of your
selection. Payments will be made as long as either person is living.
Current Payment Options
The amounts shown in the tables on page 12 are the guaranteed amounts. Current
amounts offered to individuals of the same class may be obtained from us.
Current annuity payments will not be less than those which would be offered to
new single consideration immediate annuity (as described in Section 4223
(a)(1)(E) of New York Insurance laws) applicants of the same class.
PAGE 11
<PAGE>
SECTION 10 - CONT
C. VARIABLE ACCOUNT PAYMENT OPTIONS
Variable Annuity Units
The policy proceeds you tell us to apply to a variable payment option will be
used to purchase variable annuity units in your chosen Sub-accounts. The dollar
value of variable annuity units in your chosen Sub-accounts will increase or
decrease reflecting the investment experience of your chosen Sub-accounts. The
value of a variable annuity unit in a particular Sub-account on any business day
is equal to (a) multiplied by (b) multiplied by (c), where:
(a) is the variable annuity unit value for that Sub-account on the immediately
preceding business day;
(b) is the net investment factor for that Sub-account for the Valuation
Period; and
(c) is the Assumed Investment Return adjustment factor for the Valuation
Period.
The Assumed Investment Return adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5.0% effective
annual Assumed Investment Return.
The net investment factor used to calculate the value of a variable annuity unit
in each Sub-account for the 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 of a fund share held in that Sub-account
determined as of 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 that Sub-account if the
ex-dividend date occurs during the Valuation Period; plus or minus
(3) a per share charge or credit for any taxes reserved for, which we
determine to have resulted from the investment operations of the
Sub-account.
(b) is the net asset value of a fund share held in that Sub-account determined
as of the end of the immediately preceding Valuation Period.
(c) is a factor representing the mortality and expense risk fee and
administrative charge applicable after the Annuity Commencement Date. This
factor is less than or equal to, on an annual basis, 1.40% of the daily
net asset value of a fund share held in the Separate Account for that
Sub-account.
Neither expenses actually incurred, other than taxes on the investment return,
nor mortality actually experienced, shall adversely affect the dollar amount of
variable annuity payments that have commenced.
Determination of the First Variable Payment
The amount of the first variable payment is determined by multiplying each
$1,000 of policy proceeds allocated to a variable payment option by the amounts
shown on page 13 for the variable option you select. 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 amount of the first payment depends upon the adjusted age of the annuitant.
The adjusted age is the annuitant's actual age on the annuitant's 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 Actual age minus 5
</TABLE>
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 10 years.
Option 5-V - Joint and Survivor Annuity
Payments are made as long as either the annuitant or the joint annuitant is
living.
Determination of Subsequent Variable Payments
The amount of each variable annuity payment after the first will increase or
decrease according to the value of the variable annuity units which reflect the
investment experience of the selected Sub-accounts. Each variable annuity
payment after the first will be equal to the number of variable annuity units in
the selected Sub-accounts multiplied by the variable annuity unit value on the
date the payment is made. The number of variable annuity units in each selected
Sub-account is determined by dividing the first variable annuity payment
allocated to the Sub-account by the variable annuity unit value of that
Sub-account on the Annuity Commencement Date.
PAGE 11(A)
<PAGE>
GUARANTEED FIXED ACCOUNT PAYMENT OPTIONS
The amounts shown in these tables are the guaranteed amounts for each $1,000 of
the policy proceeds. Higher current amounts may be available at the time of
settlement.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Option 2, Table 1 Option 3, Table II Option 3, Table III Option 3, Table IV
- ---------------------------- --------------------------------------------------------------------------------------------
Monthly Installment Monthly Installment Monthly Installment For Life
Number Amount For Life For Life Guaranteed Return of
of Years of Monthly No Period Certain 10 Years Certain Policy Proceeds
Payable Installment -----------------------------------------------------------------------------------------------------
Age Male Female Unisex Male Female Unisex Male Female Unisex
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.87 $3.55 $3.71 $3.84 $3.54 $3.70 $3.73 $3.49 $3.61
51 3.93 3.60 3.77 3.90 3.59 3.75 3.79 3.53 3.66
52 4.00 3.65 3.83 3.97 3.64 3.81 3.84 3.58 3.71
53 4.07 3.71 3.90 4.04 3.70 3.87 3.90 3.63 3.76
5 $17.91 54 4.15 3.77 3.97 4.11 3.75 3.94 3.96 3.68 3.82
6 15.14 55 4.23 3.83 4.04 4.19 3.82 4.01 4.03 3.73 3.88
7 13.16 56 4.32 3.90 4.11 4.27 3.88 4.08 4.10 3.79 3.94
8 11.68 57 4.41 3.97 4.19 4.35 3.95 4.15 4.17 3.85 4.00
9 10.53 58 4.50 4.05 4.28 4.44 4.02 4.24 4.24 3.91 4.07
10 9.61 59 4.61 4.13 4.37 4.53 4.10 4.32 4.32 3.97 4.14
11 8.86 60 4.72 4.21 4.47 4.63 4.18 4.41 4.40 4.04 4.22
12 8.24 61 4.84 4.30 4.57 4.74 4.26 4.51 4.49 4.12 4.30
13 7.71 62 4.96 4.40 4.68 4.85 4.35 4.61 4.58 4.19 4.38
14 7.26 63 5.10 4.50 4.80 4.97 4.45 4.71 4.68 4.28 4.47
15 6.87 64 5.24 4.61 4.93 5.09 4.55 4.83 4.78 4.36 4.56
16 6.53 65 5.40 4.73 5.06 5.22 4.66 4.95 4.88 4.45 4.66
17 6.23 66 5.56 4.85 5.21 5.36 4.77 5.07 4.99 4.55 4.76
18 5.96 67 5.74 4.99 5.36 5.50 4.89 5.20 5.11 4.65 4.87
19 5.73 68 5.93 5.13 5.53 5.65 5.02 5.34 5.24 4.76 4.98
20 5.51 69 6.13 5.29 5.71 5.80 5.15 5.49 5.37 4.87 5.10
70 6.34 5.45 5.90 5.96 5.30 5.64 5.51 4.99 5.23
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Option 5, Table V
- ----------------------------------------------------------------------------------------------------------------------------------
Monthly Installment For Joint and Full Survivor
- ----------------------------------------------------------------------------------------------------------------------------------
Age of
Age of Female Annuitant*
Male ------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Annuitant* Less Than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $2.99 $3.05 $3.11 $3.18 $3.25 $3.32 $3.39
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.31 4.53 4.77 5.02
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Monthly Installment for Unisex Joint and Full Survivor
- ----------------------------------------------------------------------------------------------------------------------------------
Age of
Age of Joint Annuitant*
First ------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Annuitant* Less Than Less Than Less Than Less Than Less Than Same As More Than
First First First First First First First
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $3.04 $3.09 $3.15 $3.21 $3.27 $3.33 $3.39
55 3.17 3.24 3.32 3.40 3.48 3.56 3.63
60 3.34 3.44 3.54 3.64 3.75 3.85 3.95
65 3.57 3.70 3.83 3.97 4.11 4.26 4.39
70 3.87 4.04 4.22 4.42 4.62 4.82 5.01
- ----------------------------------------------------------------------------------------------------------------------------------
*Age nearest birthday
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The annual, semi-annual or quarterly installments under Option 2 shall be
the monthly installment shown multiplied by 11.84, 5.96 or 2.99
respectively, and for Options 3 and 5 the monthly installment shown
multiplied by 11.80, 5.95 or 2.99 respectively.
- --------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be
calculated on the same basis as those shown and may be obtained from the
Company.
PAGE 12
<PAGE>
VARIABLE PAYMENT OPTIONS
BASED ON ASSUMED INVESTMENT RETURN
The amounts shown in these tables are the initial payment amounts based on a
5.0% Assumed Investment Return for each $1,000 of the policy proceeds.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Option 3-V, Table II Option 3-V, Table III
- ----------- -----------------------------------------------------------------------------------------------------------
Monthly Installment For Life Monthly Installment For Life
No Period Certain 10 Years Certain
- -----------------------------------------------------------------------------------------------------------------------------------
Age Male Female Unisex Male Female Unisex
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $5.11 $4.81 $4.96 $5.07 $4.79 $4.94
51 5.17 4.85 5.02 5.13 4.83 4.99
52 5.24 4.90 5.07 5.19 4.88 5.04
53 5.31 4.95 5.13 5.25 4.93 5.10
54 5.38 5.01 5.20 5.32 4.98 5.16
55 5.46 5.06 5.26 5.39 5.04 5.22
56 5.54 5.12 5.34 5.47 5.09 5.28
57 5.63 5.19 5.41 5.54 5.16 5.36
58 5.72 5.26 5.49 5.63 5.22 5.43
59 5.82 5.34 5.58 5.72 5.29 5.51
60 5.93 5.42 5.68 5.81 5.37 5.60
61 6.04 5.50 5.78 5.91 5.44 5.69
62 6.17 5.60 5.89 6.02 5.53 5.78
63 6.30 5.69 6.00 6.13 5.62 5.88
64 6.44 5.80 6.13 6.25 5.71 5.99
65 6.60 5.91 6.26 6.37 5.82 6.10
66 6.76 6.04 6.40 6.50 5.92 6.22
67 6.94 6.17 6.56 6.63 6.04 6.35
68 7.13 6.31 6.72 6.77 6.16 6.48
69 7.33 6.46 6.90 6.92 6.29 6.62
70 7.55 6.63 7.09 7.07 6.43 6.76
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Option 5V, Table V
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Installment For Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of Female Annuitant*
Age of ---------------------------------------------------------------------------------------------------------------
Male 15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Annuitant* Less Than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.32 $4.36 $4.41 $4.46 $4.51 $4.57 $4.62
55 4.42 4.47 4.53 4.60 4.67 4.75 4.83
60 4.54 4.62 4.70 4.80 4.90 5.01 5.12
65 4.71 4.82 4.94 5.07 5.22 5.37 5.53
70 4.95 5.10 5.27 5.46 5.67 5.89 6.13
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Monthly Installment For Unisex Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of Joint Annuitant*
Age of ---------------------------------------------------------------------------------------------------------------
First 15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Annuitant* Less Than Less Than Less Than Less Than Less Than Same As More Than
First First First First First First First
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.40 $4.45 $4.50 $4.55 $4.61 $4.67 $4.72
55 4.52 4.59 4.66 4.73 4.81 4.89 4.96
60 4.69 4.78 4.87 4.97 5.08 5.19 5.29
65 4.91 5.04 5.17 5.31 5.46 5.62 5.77
70 5.22 5.40 5.59 5.79 6.02 6.24 6.47
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Age nearest birthday
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly installments shall be the monthly
installment shown for Options 3-V and 5-V multiplied by 11.70, 5.93 or 2.99
respectively.
- --------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be
calculated on the same basis as those shown and may be obtained from the
Company.
PAGE 13
<PAGE>
SECTION 11 - GENERAL PROVISIONS
THE CONTRACT
The entire contract consists of this policy, endorsements, if any, and any
application.
MODIFICATION OF POLICY
No change in this policy is valid unless made in writing by us and approved by
one of our officers. No Registered Representative has authority to change or
waive any provision of your policy.
TAX QUALIFICATION
This policy is intended to qualify as an annuity contract for federal income tax
purposes. The provisions of this policy are to be interpreted to maintain such
qualification. To maintain such tax qualification, we reserve the right to amend
this policy to reflect any clarifications that may be needed or are appropriate
to maintain such tax qualification or to conform this policy to any applicable
changes in the tax qualification requirements. We will send you a copy in the
event of any such amendment. If you refuse such an amendment it must be by
giving us written notice, and your refusal may result in adverse tax
consequences.
NON -PARTICIPATING
This policy will not share in our surplus earnings.
AGE OR SEX CORRECTIONS
If the age or sex of the annuitant has been misstated, the benefits will be
those which the premiums paid would have purchased for the correct age and sex.
If required by law to ignore differences in the sex of the annuitant, the
payment options will be determined using the unisex factors in Section 10.
Any underpayment made by us will be paid with the next payment. Any overpayment
made by us will be deducted from future payments. Any underpayment or
overpayment, will include interest at 5% per year, from the date of the wrong
payment to the date of the adjustment.
INCONTESTABILITY
This policy shall be incontestable from the policy date.
EVIDENCE OF SURVIVAL
We have the right to require satisfactory evidence that a person was alive if a
payment is based on that person being alive. No payment will be made until we
receive the evidence.
SETTLEMENT
Any payment by us under this policy is payable at our Home Office.
PREMIUM TAXES
Your state may impose a premium tax. It may be imposed when a premium payment is
made, or on the Annuity Commencement Date or date of withdrawal. When permitted
by state law, we will not deduct the tax until the Annuity Commencement Date or
date of withdrawal.
RIGHTS OF OWNER
The owner may, while the annuitant is living:
1. Assign this policy.
2. Surrender the policy to us.
3. Amend or modify the policy with our consent.
4. Receive annuity payments or name a Payee to receive the payments. 5.
Exercise, receive and enjoy every other right and benefit contained in the
policy.
The use of these rights may be subject to the consent of any assignee or
irrevocable beneficiary.
SUCCESSOR OWNER
A successor owner can be named in any application, or in a notice you sign which
gives us the facts that we need. The successor owner will become the new owner
when you die, if you die before the annuitant. If no successor owner survives
you and you die before the annuitant, your estate will become the new owner.
CHANGE OF OWNERSHIP
In the case of a non-tax qualified annuity, you can change the owner of this
policy, from yourself to a new owner, in a notice you sign which gives us the
facts that we need. When this change takes effect, all rights of ownership in
this policy will pass to the new owner.
A change of owner or successor owner will not be effective until it is recorded
in our records. After it has been so recorded, the change will take effect as of
the date you signed the notice. However, if the annuitant dies before the notice
has been so recorded, it will not be effective as to those proceeds we have paid
before the change was recorded in our records. We may require that the change be
endorsed in the policy. Changing the owner or naming a new successor owner
cancels any prior choice of successor owner, but does not change the beneficiary
or the annuitant.
OPTION TO CHANGE ANNUITY COMMENCEMENT DATE
You may change the Annuity Commencement Date at any time before the Annuity
Commencement Date. You must give us 30 days written notice. However, the Annuity
Commencement Date may not be later than the last day of the policy month
starting after the Annuitant attains age 90.
PAGE 14
<PAGE>
SECTION 11 - CONT
ASSIGNMENT
(a) In the case of a non-tax qualified annuity, this policy may be assigned.
The assignment must be in writing and filed with us.
(b) We assume no responsibility for the validity of any assignment. Any claim
made under an assignment shall be subject to proof of interest and the
extent of the assignment.
(c) This policy may be applied for and issued to qualify as a tax-qualified
annuity under certain sections of the Internal Revenue Code. Ownership of
this policy then is restricted so that it will comply with provisions of
the Internal Revenue Code.
BENEFICIARY
Death proceeds, when payable in accordance with Section 9, are payable to the
designated beneficiary or beneficiaries. Such beneficiary(ies) must be named in
any application and may be changed without consent (unless irrevocably
designated or required by law) by notifying us in writing on a form acceptable
to us. The change will take effect upon the date you sign it, whether or not you
are living when we receive it. The notice must have been postmarked (or show
other evidence of delivery that is acceptable to us) on or before the date of
death. Your most recent change of beneficiary notice will replace any prior
beneficiary designations. No change will apply to any payment we made before the
written notice was received. If an irrevocable beneficiary dies, you may
designate a new beneficiary.
You may direct that the beneficiary shall not have the right to withdraw, assign
or commute any sum payable under an option. In the absence of such election or
direction, the beneficiary may change the manner of payment or make an election
of any option.
If any primary or contingent beneficiary dies before the annuitant, that
beneficiary's interest in this policy ends with that beneficiary's death. Only
those beneficiaries living at the time of the annuitant's death will be eligible
to receive their share of the Death Proceeds. In the event no contingent
beneficiaries have been named and all primary beneficiaries have died before the
death proceeds become payable, the owner will become the beneficiary unless
elected otherwise in accordance with Section 9. If both primary and contingent
beneficiaries have been named, payment will be made to the named primary
beneficiaries living at the time the death proceeds become payable. If there is
more than one beneficiary and you failed to specify their interest, they will
share equally. Payment will be made to the named contingent beneficiary(ies)
only if all primary beneficiaries have died before the death proceeds become
payable. If any primary beneficiary is alive at the time the death proceeds
become payable, but dies before receiving their payment, their share will be
paid to their estate.
In cases where the annuitant dies and the owner (who is not the annuitant)
elected to receive the death benefit in accordance with Section 9, if the
annuitant's estate has been named as beneficiary, then payment will be made to
the owner.
PROTECTION OF PROCEEDS
Unless you so direct by filing written notice with us, no beneficiary may assign
any payments under this policy before the same are due. To the extent permitted
by law, no payments under this policy will be subject to the claims of creditors
of any beneficiary.
DEFERMENT
We will pay any partial withdrawals or surrender proceeds within 7 days after we
receive all requirements that we need. However, it may happen that the New York
Stock Exchange is closed for trading (other than the usual weekend or holiday
closings), or the Securities and Exchange Commission restricts trading or
determines that an emergency exists. If so, it may not be practical for us to
determine the investment experience of the Separate Account. In that case, we
may defer transfers among the Sub-accounts and to the Fixed Account, and
determination or payment of partial withdrawals or surrender proceeds.
When permitted by law, we may defer paying any partial withdrawals or surrender
proceeds for up to 6 months from the withdrawal or surrender date. Interest will
be paid on any amount deferred for 10 days or more. This rate will be computed
daily at the rate of interest currently paid on proceeds left under the Interest
Payments Settlement Option.
REPORTS TO OWNER
We will give you an annual report at least once each policy year. This report
will show the number and value of the accumulation units held in each of the
Sub-accounts as well as the value of the Fixed Account. It will also give you
the Death Benefit, Surrender Charge, Cash Value, and any other facts required by
law or regulation.
MINIMUM VALUES
Benefits available under this policy are not less than those required by any
statute of the state in which the policy is delivered.
PAGE 15
<PAGE>
AUSA LIFE INSURANCE COMPANY, INC.
Home Office located at 4 Manhattanville Road, Purchase, New York 10577
Flexible Premium Variable Annuity
Income Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount
(See Sections 6 and 10C.) Non -Participating
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Accumulation Units............................................... 7
Age or Sex Corrections.......................................... 14
Annuity Payments................................................ 11
Annuity Purchase Value........................................... 4
Assignment...................................................... 15
Beneficiary..................................................... 15
Cash Value....................................................... 4
Contract........................................................ 14
Death Proceeds............................................... 9, 10
Definitions...................................................... 2
Dollar Cost Averaging............................................ 8
Evidence of Survival............................................ 14
Fixed Account.................................................... 7
Guaranteed Minimum Death Benefit................................. 9
Guaranteed Return of Fixed Account Payments...................... 6
Guaranteed Periods............................................ 7, 8
Incontestability................................................ 14
Modification of Policy.......................................... 14
Nonparticipation................................................ 14
Option to Change Annuity
Commencement Date............................................... 14
Owner........................................................... 14
Partial Withdrawals.............................................. 5
Payee........................................................... 11
Payment Option Tables....................................... 12, 13
Policy Data Page................................................. 3
Premiums......................................................... 4
Proof of Age.................................................... 11
Protection of Proceeds.......................................... 15
Separate Account.............................................. 6, 7
Service Charge................................................ 3, 4
Settlement...................................................... 14
Surrender Charges................................................ 6
Twenty Day Right to Cancel....................................... 1
Transfers..................................................... 8, 9
</TABLE>
<PAGE>
EXHIBIT (5)(c)
--------------
FORM OF APPLICATION
<PAGE>
- --------------------------------------------------------------------------------
AUSA LIFE INSURANCE COMPANY, INC.
HOME OFFICE: 4 MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
ADMINISTRATIVE OFFICE: 4333 EDGEWOOD ROAD N.E.
CEDAR RAPIDS, IOWA 52499
APPLICATION FOR VARIABLE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
1. DESIGNATED ANNUITANT
NAME:
--------------------------------------------------------------------
ADDRESS:
-----------------------------------------------------------------
CITY, STATE:
-------------------------------------------------------------
ZIP: - TELEPHONE: ( ) -
----- ---- ----------------------------------------------
DATE OF BIRTH: AGE: SEX: [_] FEMALE [_]MALE
---------------- ---
SS#: CITIZENSHIP: [_] U.S. [_] OTHER
--------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. CONTRACT OWNER (IF OTHER THAN ABOVE)
In the event the owner is a trust, please provide verification of trustees.
NAME:
--------------------------------------------------------------------
ADDRESS:
-----------------------------------------------------------------
CITY, STATE:
-------------------------------------------------------------
ZIP: - TELEPHONE: ( ) -
----- ----
----------------------------------------------
DATE OF BIRTH: AGE: SEX: [_] FEMALE [_]MALE
---------------- ---
SS#: CITIZENSHIP: [_] U.S. [_] OTHER
--------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. [_] JOINT CONTRACT OWNER [_] SUCCESSOR CONTRACT OWNER
In the event the owner is a trust, please provide verification of trustees.
NAME:
--------------------------------------------------------------------
ADDRESS:
-----------------------------------------------------------------
CITY, STATE:
-------------------------------------------------------------
ZIP: - TELEPHONE: ( ) -
----- ---- ----------------------------------------------
DATE OF BIRTH: AGE: SEX: [_] FEMALE [_]MALE
---------------- ---
SS#: CITIZENSHIP: [_] U.S. [_] OTHER
--------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. BENEFICIARY DESIGNATION (Include Relationship to Annuitant)
PRIMARY:
-----------------------------------------------------------------
RELATIONSHIP:
----------------------------------------------------------
CONTINGENT:
--------------------------------------------------------------
RELATIONSHIP:
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. TYPE OF ANNUITY
[_] NON-QUALIFIED [_] IRA (Also complete Box 6)
[_] HR-10 [_] SEP (Also complete Box 6)
[_] 403(b) [_] OTHER
--------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. IRA/SEP INFORMATION
$ CONTRIBUTION FOR TAX YEAR
---------- ------------------
$ TRUSTEE TO TRUSTEE TRANSFER
----------
$ ROLLOVER FROM: (Check One) [_] 403(b) [_] Pension
----------
[_] HR-10 [_] Other:
-------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. WILL THIS ANNUITY REPLACE ANY EXISTING ANNUITY OR LIFE INSURANCE?
[_] NO [_] YES-Please state Policy No. and Company
Name:
----------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. MINIMUM DEATH BENEFIT OPTION (Select Only One)
This selection cannot be changed after the policy has been issued. If no
option has been specified, the policy will be issued with the Return of Premium
Death Benefit (Option A below).
[_] Option A: Return of Premium Death Benefit
[_] Option B: Annual Step-Up Death Benefit: (Only available if owner(s) and
the annuitant are under age 81 at time of purchase.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. PURCHASE PAYMENT (Make check payable to AUSA Life Insurance Company, Inc.)
INITIAL PREMIUM AMOUNT $
--------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. FUTURE PREMIUM AMOUNT $
--------------------------------
[_] BILL ME MONTHLY; OR [_] BILL ME QUARTERLY; OR
[_] I DO NOT WANT TO BE BILLED FOR FUTURE PREMIUM AMOUNTS.
- --------------------------------------------------------------------------------
11. ALLOCATION OF PREMIUM PAYMENTS (Whole percentages only)
- --------------------------------------------------------------------------------
T. Rowe Price Associates, Inc.
EQUITY INCOME PORTFOLIO .0%
------------------
GROWTH STOCK PORTFOLIO .0%
------------------
- --------------------------------------------------------------------------------
Rowe Price-Fleming International, Inc.
INTERNATIONAL STOCK PORTFOLIO .0%
------------------
- --------------------------------------------------------------------------------
TCW Funds Management, Inc.
MANAGED ASSET ALLOCATION PORTFOLIO .0%
------------------
MONEY MARKET PORTFOLIO .0%
------------------
- --------------------------------------------------------------------------------
OpCap Advisors
OPPORTUNITY VALUE PORTFOLIO .0%
------------------
VALUE EQUITY PORTFOLIO .0%
------------------
- --------------------------------------------------------------------------------
The Dreyfus Corporation
U.S. GOVERNMENT SECURITIES PORTFOLIO .0%
------------------
SMALL CAP VALUE PORTFOLIO .0%
------------------
- --------------------------------------------------------------------------------
Janus
GROWTH PORTFOLIO (WRL SERIES FUND) .0%
------------------
- --------------------------------------------------------------------------------
JP Morgan Investment Management, Inc.
ENHANCED INDEX PORTFOLIO .0%
------------------
- --------------------------------------------------------------------------------
AUSA Life Insurance Company, Inc. - Fixed Account Options
Dollar Cost Averaging (DCA) Fixed Account .0%
------------------
- --------------------------------------------------------------------------------
Guaranteed Period 1 YEAR .0%
-------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional: .0%
----------------------------------------------- ------------------
.0%
- ---------------------------------------------------------- ------------------
.0%
- ---------------------------------------------------------- ------------------
.0%
- ---------------------------------------------------------- ------------------
.0%
- ---------------------------------------------------------- ------------------
.0%
- ---------------------------------------------------------- ------------------
- --------------------------------------------------------------------------------
INVESTMENT ALLOCATIONS MUST TOTAL 100%
- --------------------------------------------------------------------------------
-------------------------------------------
VA-APP 296 (NY) YOUR SIGNATURE IS REQUIRED ON THE BACK PAGE (CONTINUED ON THE
------------------------------------------- BACK PAGE)
<PAGE>
APPLICATION FOR
VARIABLE ANNUITY CONTRACT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
12. DOLLAR COST AVERAGING
By signing below I (We) authorize AUSA Life Insurance Company, Inc. to transfer funds from my selected account to invest in the
portfolio(s), in the amount indicated below. Transfers will be made monthly, unless indicated differently below. I understand
that the transfers will continue until I terminate the program in writing, or until my balance under the program falls below the
minimum transfer amount. If this happens, the balance will be transferred as indicated below, but on a pro-rata basis. I also
understand that AUSA Life's Dollar Cost Averaging program is subject to the rules and restrictions associated with the AUSA Life
contract and at the time the program begins there must be sufficient Annuity Purchase Value to cover six month's transfers.
<S> <C> <C> <C>
PLEASE INVEST IN FOLLOWING ACCOUNTS FOR EACH TRANSFER
TRANSFER FROM: [ ] DCA Fixed Account; or (ALLOCATION MUST TOTAL 100%):
[ ] Money Market Portfolio; or TCW Managed Asset Allocation .0% Dreyfus U.S. Govt. Sec. .0%
[ ] U.S. Govt. Securities Portfolio Janus WRL Series Fund Growth .0% Dreyfus Small Cap Value .0%
PLEASE INVEST: $ _______________ ($500 min.) T. Rowe Price Growth .0% JP Morgan Investment .0%
[ ] Monthly (Six Transfers Minimum) T. Rowe Price Equity Income .0% Additional:
[ ] Quarterly (Four Transfers Minimum) OpCap Opportunity Value .0% .0%
OpCap Value Equity .0% .0%
Rowe Price-Fleming Int'l .0% .0%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
13. ASSET REBALANCING...NOT AVAILABLE WHEN DOLLAR COST AVERAGING IS IN EFFECT OR WHEN ANY OTHER TRANSFER IS REQUESTED.
[ ] Yes, by checking this box I am authorizing AUSA Life Insurance Company, Inc. to automatically transfer amounts among the
sub-accounts (as indicated below) on a regular basis to maintain a desired allocation of the Annuity Purchase Value among the
various sub-accounts offered. ASSET REBALANCING IS NOT AVAILABLE FOR ANY AMOUNTS IN THE FIXED ACCOUNT NOR WHEN DOLLAR COST
AVERAGING IS IN EFFECT.
<S> <C> <C> <C>
REBALANCE:
[ ] Monthly REBALANCE IN FOLLOWING ACCOUNTS (ALLOCATION MUST EQUAL 100%)
[ ] Quarterly TCW Managed Asset Allocation .0% OpCap Value Equity .0% Additional:
[ ] Semi-Annual TCW Money Market .0% Rowe Price-Fleming Int'l .0% .0%
[ ] Annual Janus WRL Series Fund Growth .0% Dreyfus U.S. Govt. Sec. .0% .0%
Date to Begin: T. Rowe Price Growth .0% Dreyfus Small Cap Value .0% .0%
____/____/___ T. Rowe Price Equity Income .0% JP Morgan Investment .0%
OpCap Opportunity Value .0% TOTAL 100.0%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
14. If you have chosen to name someone other than yourself as the Annuitant, please select one of the following regarding payment
of the death benefit. IF NEITHER IS SELECTED, THE FIRST OPTION WILL BE UTILIZED.
[ ] At the Annuitant's death, I wish to become the annuitant and defer _________________________________________________
payout of the death benefit until my death. Signature of Contract Owner
[ ] At the Annuitant's death, I wish to have the death benefit paid to the _________________________________________________
named beneficiary. (Contract Owner Signature required for this option) Signature of Joint/Successor Contract Owner
- ------------------------------------------------------------------------------------------------------------------------------------
To the best of my knowledge and belief, my answers to the questions on this application are correct and true, and I agree that this
application shall be a part of any annuity policy issued to me. I also understand that the Company reserves the right to reject any
application or purchase payment. If this application is declined, there shall be no liability on the part of the Company and any
purchase payments submitted shall be returned.
I UNDERSTAND THAT ANNUITY PAYMENTS AND TERMINATION VALUES, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT OF THE
COMPANY, ARE VARIABLE AND ARE NOT GUARANTEED AS TO A FIXED DOLLAR AMOUNT.
Receipt of a current prospectus of the AUSA Endeavor Variable Annuity Account, Endeavor Series Trust, and WRL Series Fund, Inc.
is hereby acknowledged.
[ ] Please check if you wish to receive the Statement of Additional Information.
I HAVE REVIEWED MY EXISTING ANNUITY COVERAGE AND FIND THIS POLICY IS SUITABLE FOR MY NEEDS.
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL FORMS ARE REQUIRED FOR SYSTEMATIC PAYOUT OPTION.
- ------------------------------------------------------------------------------------------------------------------------------------
15. BE SURE TO COMPLETE THIS SECTION
Signed at __________________________________________ this __________________________ day of ____________________, 19 _______
______________________________ ____________________________________________ ______________________________________
Annuitant Signature Owner Signature (if different from Annuitant) Joint Owner (successor owner signature)
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
16a. SELLING AGENT USE ONLY -- NOT TO BE FILLED IN BY APPLICANT
( ) - / /
- ---------------------------------------------- --------------- ----------------------------------------------- --------------
Agent Name (Please Print) Agent Telephone Agent Signature Date
- ----------------------------------------------------------------- ---------------------------------------------------------------
Agent Address Broker/Dealer Client Account No.
- -------------------------------------------------------- --------------------- ------------------------------------------------
Agent Firm AUSA Life Agent No. (If Applicable) Florida Agent License I.D. No.
16b. DO YOU HAVE REASON TO BELIEVE THE CONTRACT APPLIED FOR IS TO REPLACE ANY EXISTING ANNUITY OR INSURANCE OWNED BY APPLICANT?
[ ] No [ ] Yes, Company Name
--------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE MAKE CHECK PAYABLE TO AUSA LIFE INSURANCE COMPANY, INC. (Use following address for mail, Fed. Express, etc.)
SEND CHECK WITH APPLICATION TO AUSA Life Insurance Company, Inc., Attn: Annuity Department, 4333 Edgewood Road N.E.,
Cedar Rapids, Iowa 52499-0001
</TABLE>
------------------------------
VA-APP 296 B (NY) PLEASE FILL OUT THE FRONT PAGE
------------------------------
<PAGE>
EXHIBIT (8)(d)
--------------
AMENDMENT TO PARTICIPATION AGREEMENT
BY AND BETWEEN
AUSA LIFE INSURANCE COMPANY, INC.
AND ENDEAVOR SERIES TRUST.
<PAGE>
AMENDED
SCHEDULE A
----------
EFFECTIVE SEPTEMBER 15, 1997
Account(s), Policy(ies) and Portfolio(s)
Subject to the Participation Agreement
--------------------------------------
Account: PFL Endeavor Variable Annuity Account
AUSA Endeavor Variable Annuity Account
Policies: The Endeavor Variable Annuity
The Endeavor Platinum Variable Annuity
The AUSA Endeavor Variable Annuity
Portfolios: TCW Managed Asset Allocation
TCW Money Market
Value Equity
Dreyfus Small Cap Value
Dreyfus U.S. Government Securities
T. Rowe Price International Stock
T. Rowe Price Equity Income
T. Rowe Price Growth Stock
Opportunity Value
Enhanced Index
Montgomery Select 50
Approved:
---------
Endeavor Management Co. PFL Life Insurance Company
By: /s/ Vincent J. McGuinness By: /s/ William L. Busler
--------------------------- --------------------------
Title: CEO Title: President
------------------------ ------------------------
Date: September 15, 1997 Date: September 15, 1997
------------------------- -------------------------
AUSA Life Insurance Company, Inc. Endeavor Series Trust
By: /s/ William L. Busler By: /s/ James R. McInnis
--------------------------- ----------------------------
Title: Vice President Title: President
------------------------- -------------------------
Date: September 15, 1997 Date: September 15, 1997
------------------------- --------------------------
<PAGE>
EXHIBIT (10)(b)
---------------
OPINION AND CONSENT OF ACTUARY
<PAGE>
September 15, 1997
AUSA Life Insurance Company, Inc.
666 Fifth Avenue
New York, NY 10103
Re: AUSA Endeavor Variable Annuity Account Registration on Form N-4
SEC File No. 33-83560
Dear Sir/Madam:
With regard to the above registration statement, I have examined such documents
and made such inquiries as I have deemed necessary and appropriate, and on the
basis of such examination, have the following opinions:
Fees and charges deducted under the AUSA Endeavor Variable Annuity policies are
those deemed necessary to appropriately reflect:
(1) the expenses incurred in the acquisition and distribution of the
Policies,
(2) the expenses associated with the development and servicing of the
policies,
(3) the assumption of certain risks arising from the operation and
management of the Policies and that provides for a reasonable margin of
profit.
Fees and charges assessed against the policy values in the Variable Account
include:
(i) Service Charge and Administrative Charge
(ii) Contingent Deferred Sales Charge (Surrender Charge)
(iii) Mortality and Expense Risk Fee (M&E)
(iv) Taxes (including Premium and other Taxes if applicable)
The magnitude of each of the individual charges listed above in (i) through (iv)
is established in the pricing of the AUSA Endeavor Variable Annuity, to achieve
a reasonable Return on Investment (ROI), which is within the range of industry
practice with respect to comparable variable annuity products.
<PAGE>
AUSA Life Insurance Company, Inc.
September 15, 1997
Page 2
In the process of determining the reasonable ROI, each individual charge is also
established within the reasonable range of industry practice. For example, in
conjunction with the pricing process the company has analyzed publicly available
information pertaining to similar industry products, taking into consideration
such factors as current charge levels, the existence of charge level guarantees,
guaranteed death benefits, and guaranteed annuity rates. The methodology and
results of the comparative surveys included in this analysis are maintained at
the company's administrative offices.
Except by coincidence, it is not expected that actual charges assessed in a
given year would exactly offset actual expenses incurred. Acquisition expenses
(as well as major product and/or systems development expenses) are incurred "up
front" and recovered, with a reasonable profit margin, through future years'
charges. In addition, the company cannot increase certain charges under the
Policies in the pricing process.
Therefore, in my opinion, the fees and charges deducted under the Policies, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the company.
I hereby consent to the use of this opinion, which is included as an Exhibit to
the Registration Statement.
/s/ Calvin R. Birkey
- ----------------------------------
Calvin R. Birkey, FSA, MAAA
Managing Actuary
AUSA Life Insurance Company, Inc.
