<PAGE>
As filed with the Securities and Exchange Commission on October 3, 2000
Registration No. 33- 83560
811-8750
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.___
Post-Effective Amendment No. 11 X
--
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 12 X
--
AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
--------------------------------------
(Exact Name of Registrant)
AUSA LIFE INSURANCE COMPANY, INC.
---------------------------------
(Name of Depositor)
666 Fifth Avenue, New York, New York 10103
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code
(212) 246-5234
Frank A. Camp, Esquire
AUSA Life Insurance Company, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
(Name and Address of Agent for Service)
Copy to:
Frederick R. Bellamy, Esquire
Sutherland, Asbill & Brennan L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
1
<PAGE>
Title of Securities Being Registered:
Flexible Premium Variable Annuity Policies
______________
It is proposed that this filing will become effective:
______________
X immediately upon filing pursuant to paragraph (b) of Rule
-----
485.
_____ on __________ pursuant to paragraph (b) of Rule 485.
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule
485.
_____ on ______ pursuant to paragraph (a)(1) 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
<PAGE>
THE ENDEAVOR VARIABLE ANNUITY
Issued Through
AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
by
AUSA LIFE INSURANCE COMPANY, INC.
Prospectus October 9, 2000
This prospectus and the mutual fund prospectuses give you important
information about the policies and the mutual funds. Please read them
carefully before you invest and keep them for future reference.
If you would like more information about The Endeavor Variable Annuity policy,
you can obtain a free copy of the Statement of Additional Information (SAI)
dated October 9, 2000. Please call us at (800) 525-6205 or write us at: AUSA
Life Insurance Company, Inc., Financial Markets Division, Variable Annuity
Department, 4333 Edgewood Road N.E., Cedar Rapids, Iowa, 52499-0001. A
registration statement, including the SAI has been filed with the Securities
and Exchange Commission (SEC) and is incorporated herein by reference.
Information about the variable annuity can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. You may obtain information about the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains a web site (http://www.sec.gov) that contains the
prospectus, the SAI, material incorporated by reference, and other
information. The table of contents of the SAI is included at the end of this
prospectus.
Please note that the policies and the separate account investment choices:
. are not bank deposits
. are not federally insured
. are not endorsed by any bank or government agency
. are not guaranteed to achieve their goal
. are subject to risks, including loss of premium
The Securities and Exchange Commission has not approved or disapproved these
securities, or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
This flexible premium deferred annuity policy has many investment choices.
There is a separate account that currently offers thirty-one mutual fund
portfolios from the underlying funds listed below. There is also a fixed
account, which offers interest at rates that are guaranteed by AUSA Life
Insurance Company, Inc. (AUSA Life). You can choose any combination of these
investment choices. You bear the entire investment risk for all amounts you
put in the separate account.
ENDEAVOR SERIES TRUST
Capital Guardian Global Portfolio
Capital Guardian U.S. Equity Portfolio
Capital Guardian Value Portfolio
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
Endeavor Enhanced Index Portfolio
Endeavor High Yield Portfolio
Endeavor Janus Growth Portfolio
Jennison Growth Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price International Stock Portfolio
JANUS ASPEN SERIES--SERVICE SHARES
Janus Aspen--Aggressive Growth Portfolio
Janus Aspen--Strategic Value Portfolio
Janus Aspen--Worldwide Growth Portfolio
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Transamerica VIF Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND (VIP)--SERVICE CLASS 2
Fidelity--VIP Equity-Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)--SERVICE CLASS 2
Fidelity--VIP II Contrafund(R) Portfolio
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)--SERVICE CLASS 2
Fidelity--VIP III Growth Opportunities Portfolio
Fidelity--VIP III Mid Cap Portfolio
WRL SERIES FUND, INC.
WRL Alger Aggressive Growth
WRL Gabelli Global Growth
WRL Goldman Sachs Growth
WRL Great Companies--Global/2/
WRL NWQ Value Equity
WRL Pilgrim Baxter Mid Cap Growth
WRL Salomon All Cap
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
GLOSSARY OF TERMS.......................................................... 3
SUMMARY.................................................................... 4
ANNUITY POLICY FEE TABLE................................................... 8
EXAMPLES................................................................... 11
1.THE ANNUITY POLICY....................................................... 14
2.PURCHASE................................................................. 14
Policy Issue Requirements................................................ 14
Premium Payments......................................................... 14
Initial Premium Requirements............................................. 14
Additional Premium Payments.............................................. 14
Maximum Total Premium Payments........................................... 15
Allocation of Premium Payments........................................... 15
Policy Value............................................................. 15
3.INVESTMENT CHOICES....................................................... 15
The Separate Account..................................................... 15
The Fixed Account........................................................ 16
Transfers................................................................ 17
4.PERFORMANCE.............................................................. 17
5.EXPENSES................................................................. 18
Surrender Charges........................................................ 18
Mortality and Expense Risk Fee........................................... 18
Administrative Charges................................................... 19
Premium Taxes............................................................ 19
Federal, State and Local Taxes........................................... 19
Transfer Fee............................................................. 19
Portfolio Management Fees................................................ 19
6.ACCESS TO YOUR MONEY..................................................... 19
Withdrawals.............................................................. 19
Delay of Payment and Transfers........................................... 20
7. ANNUITY PAYMENTS
(THE INCOME PHASE)...................................................... 20
Annuity Payment Options.................................................. 20
8.DEATH BENEFIT............................................................ 22
When We Pay A Death Benefit.............................................. 22
When We Do Not Pay A Death Benefit....................................... 22
Amount of Death Benefit.................................................. 23
Guaranteed Minimum Death Benefit......................................... 23
Adjusted Partial Withdrawal.............................................. 23
9.TAXES.................................................................... 23
Annuity Policies in General.............................................. 24
Qualified and Nonqualified Policies...................................... 24
Withdrawals--Qualified Policies.......................................... 24
Withdrawals--403(b) Policies............................................. 24
Diversification and Distribution Requirements............................ 25
Withdrawals--Nonqualified Policies....................................... 25
Taxation of Death Benefit Proceeds....................................... 25
Annuity Payments......................................................... 25
Transfers, Assignments or Exchanges of Policies.......................... 26
Possible Tax Law Changes................................................. 26
10.ADDITIONAL FEATURES..................................................... 26
Systematic Payout Option................................................. 26
Dollar Cost Averaging Program............................................ 26
Asset Rebalancing........................................................ 27
11.OTHER INFORMATION....................................................... 27
Ownership................................................................ 27
Assignment............................................................... 27
AUSA Life Insurance Company, Inc......................................... 27
The Separate Account..................................................... 27
Mixed and Shared Funding................................................. 28
Reinstatements........................................................... 28
Voting Rights............................................................ 28
Distributor of the Policies.............................................. 28
Variations in Policy Provisions.......................................... 29
IMSA..................................................................... 29
Legal Proceedings........................................................ 29
Financial Statements..................................................... 29
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............... 29
APPENDIX A
Condensed Financial Information.......................................... 30
APPENDIX B
Historical Performance Data.............................................. 33
</TABLE>
2
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit--An accounting unit of measure used in calculating the policy
value in the separate account before the annuity commencement date.
Annuitant--The person 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 be any date at least thirty days after the policy date
and may not be later than the last day of the policy month starting after the
annuitant attains age 85, except as expressly allowed by AUSA Life. In no event
will this date be later than the last day of the policy month following
annuitant's 90th birthday.
Annuity Payment Option--A method of receiving a stream of annuity payments
selected by the owner.
Cash Value--The policy value less the surrender charge, service charge, and
premium tax charge, if any.
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 the separate
account.
Guaranteed Period Option--The one year guaranteed interest rate period of the
fixed account which AUSA Life may offer into which premiums may be paid or
amounts transferred.
Owner--The person who may exercise all rights and privileges under the policy.
The owner during the lifetime of the annuitant and prior to the annuity
commencement date is the person designated as the owner or a successor owner in
the information that we require to issue a policy.
Policy Value--The policy form refers to this as "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:
. the premiums paid; minus
. partial withdrawals taken; plus
. interest credited in the fixed account; plus
. accumulated gains in the separate account; minus
. losses in the separate account; minus
. any applicable service charges, premium taxes, and transfer fees.
Separate Account--AUSA Endeavor Variable Annuity Account, a separate account
established and registered as a unit investment trust under the Investment
Company Act of 1940, as amended (the "1940 Act"), to which premium payments
under the policies may be allocated.
Subaccount--A subdivision within the separate account, the assets of which are
invested in specified portfolios of the underlying funds.
(Note: The SAI contains a more
extensive Glossary.)
3
<PAGE>
SUMMARY
The sections in this summary correspond to sections in this prospectus, which
discuss the topics in more detail.
1.THE ANNUITY POLICY
The flexible premium variable annuity policy offered by AUSA Life Insurance
Company, Inc. (AUSA Life, we, us or our) provides a way for you to invest on a
tax-deferred basis in the following investment choices: thirty-one subaccounts
of the separate account and a fixed account of AUSA Life. The policy is
intended to accumulate money for retirement or other long-term investment
purposes.
This policy offers thirty-one subaccounts in the separate account that are
listed in Section 3. Each subaccount invests exclusively in shares of one of
the portfolios of the underlying funds. The policy value may depend on the
investment experience of the selected subaccounts. Therefore, you bear the
entire investment risk with respect to all policy value in any subaccount. You
could lose the amount that you invest.
The fixed account offers an interest rate that AUSA Life guarantees. We
guarantee to return your investment with at least 3% annual interest for all
amounts allocated to the fixed account.
You can transfer money between any of the investment choices. We reserve the
right to impose a $10 fee for each transfer in excess of 12 transfers per
policy year.
The policy, like all deferred annuity policies, has two phases: the
"accumulation phase" and the "income phase." During the accumulation phase,
earnings accumulate on a tax-deferred basis and are taxed as ordinary income
when you take them out of the policy. The income phase occurs when you begin
receiving regular payments from your policy. The money you can accumulate
during the accumulation phase will largely determine the income payments you
receive during the income phase.
2.PURCHASE
You can buy a nonqualified policy with $5,000 or more, and a qualified policy
with $1,000 or more, under most circumstances. You may also buy a tax deferred
403(b) annuity policy with $50 or more. You can add as little as $50 at any
time during the accumulation phase.
3.INVESTMENT OPTIONS
You can allocate your premium payments to one or more of the following mutual
fund portfolios described in the underlying fund prospectuses:
Capital Guardian Global Portfolio(/1/)
Capital Guardian U.S. Equity Portfolio(/2/)
Capital Guardian Value Portfolio(/3/)
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
Endeavor Enhanced Index Portfolio
Endeavor High Yield Portfolio
Endeavor Janus Growth Portfolio
Jennison Growth Portfolio(/4/)
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price International Stock Portfolio
Janus Aspen--Aggressive Growth Portfolio--Service Shares
Janus Aspen--Strategic Value Portfolio-- Service Shares
Janus Aspen--Worldwide Growth Portfolio-- Service Shares
Transamerica VIF Growth Portfolio
Fidelity--VIP Equity-Income Portfolio-- Service Class 2
Fidelity--VIP II Contrafund(R) Portfolio-- Service Class 2
Fidelity--VIP III Growth Opportunities Portfolio--Service Class 2
Fidelity--VIP III Mid Cap Portfolio --Service Class 2
WRL Alger Aggressive Growth
WRL Gabelli Global Growth
WRL Goldman Sachs Growth
WRL Great Companies--Global/2/
WRL NWQ Value Equity
WRL Pilgrim Baxter Mid Cap Growth
WRL Salomon All Cap
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
(/1/) Formerly known as Endeavor Select Portfolio.
(/2/) Formerly the AUSA Endeavor Target Account.
(/3/) Formerly known as Endeavor Value Equity Portfolio.
(/4/) Formerly known as Endeavor Opportunity Value Portfolio.
4
<PAGE>
Depending upon their investment performance, you can make or lose money in any
of the subaccounts.
You can also allocate your premium payments to the fixed account.
4.PERFORMANCE
The value of the policy will vary up or down depending upon the investment
performance of the subaccounts you choose. We provide past performance
information in Appendix B and in the SAI. This data does not indicate future
performance.
5.EXPENSES
No deductions are made from premium payments at the time you buy the policy so
that the full amount of each premium payment is invested in one or more of your
investment choices.
We may deduct a surrender charge of up to 7% of premium payments withdrawn
within seven years after the premium is paid. To calculate surrender charges,
we consider the premium you paid to come out before any earnings.
We deduct daily mortality and expense risk fees and administrative charges each
year from the assets in each subaccount. The charges are the following annual
percentages of assets:
. 1.55% in the first seven policy years and 1.40% thereafter, for the Annual
Step-Up Death Benefit; and
. 1.40% in the first seven policy years and 1.25% thereafter, for the Return
of Premium Death Benefit.
During the accumulation phase, we deduct an annual service charge of no more
than $35 from the policy value on each policy anniversary. The charge is waived
if the sum of all premium payments, minus all partial withdrawals, is at least
$50,000.
We will deduct state premium taxes, which currently range from 0% to 3.50%,
upon total surrender, payment of a death benefit or when annuity payments
begin.
The value of the net assets of the subaccounts will reflect the management fee
and other expenses incurred by the underlying portfolios.
6.ACCESS TO YOUR MONEY
You can generally take out $500 or more anytime during the accumulation phase
(except under certain qualified policies). After one year, you may take out up
to 10% of the policy value free of surrender charges once each year. Amounts
withdrawn in the first year, or in excess of the 10% free amount, may be
subject to a surrender charge.
You may have to pay income tax and a tax penalty on any money you take out.
Access to amounts held on qualified plans may be restricted or prohibited.
7. ANNUITY PAYMENTS (THE INCOME PHASE)
The policy allows you to receive income under one of five annuity payment
options. You may choose from fixed payment options, variable payment options,
or a combination of both. If you select a variable payment option, the dollar
amount of your payments may go up or down.
8.DEATH BENEFIT
If you are both the owner and the annuitant and you die before the income phase
begins, then your beneficiary will receive a death benefit.
Naming different persons as owner and annuitant can affect whether the death
benefit is payable and to whom amounts will be paid. Use care when naming
owners, annuitants, and beneficiaries, and consult your agent if you have
questions.
You generally may choose one of the following guaranteed minimum death
benefits:
. Annual Step-Up
. Return of Premium
Charges are lower for the Return of Premium Death Benefit, than they are for
the Annual Step-Up Death Benefit.
If an owner is not the annuitant, no death benefit is paid if that owner dies.
5
<PAGE>
9.TAXES
Your earnings, if any, are not taxed until you take them out. If you take money
out during the accumulation phase, earnings come out first for federal tax
purposes, and are taxed as ordinary income. If you are younger than 59 1/2 when
you take money out, you may be charged a 10% federal penalty tax on the
earnings. Payments during the income phase may be considered partly a return of
your original investment so that part of each payment would not be taxable as
income.
10.ADDITIONAL FEATURES
This policy has additional features that might interest you. These include the
following:
. You can arrange to have money automatically sent to you monthly, quarterly,
semi-annually or annually while your policy is in the accumulation phase.
This feature is referred to as the "systematic payout option." Amounts you
receive may be included in your gross income, and in certain circumstances,
may be subject to penalty taxes.
. You can arrange to have a certain amount of money (at least $500)
automatically transferred from the fixed account, the Endeavor Money Market
Subaccount, or the Dreyfus U.S. Government Securities Subaccount, either
monthly or quarterly, into your choice of one or more subaccounts. This
feature is called "dollar cost averaging."
. We will, upon your request, automatically transfer amounts among the
subaccounts on a regular basis to maintain a desired allocation of the
policy value among the various subaccounts. This feature is called "asset
rebalancing."
These features may not be suitable for your particular situation.
11.OTHER INFORMATION
Right to Cancel Period. You may return your policy for a refund within 20 days
after you receive it. The amount of the refund will be the total of all premium
payments made and the accumulated gains or losses in the policy value, if any.
We will pay the refund within 7 days after we receive written notice of
cancellation and the returned policy. The policy will then be deemed void.
No Probate. Usually, when the annuitant dies, the person you choose as your
beneficiary will receive the death benefit under this policy without going
through probate. State laws vary on how the amount that may be paid is treated
for estate tax purposes.
Who should purchase the policy? This policy is designed for people seeking
long-term tax-deferred accumulation of assets, generally for retirement or
other long-term purposes; and for persons who have maximized their use of other
retirement savings methods, such as 401(k) plans. The tax-deferred feature is
most attractive to people in high federal and state tax brackets. The tax
deferral features of variable annuities are unnecessary when purchased to fund
a qualified plan. You should not buy this policy if you are looking for a
short-term investment or if you cannot take the risk of losing the money that
you put in.
There are various fees and charges associated with variable annuities. You
should consider whether the features and benefits of this policy, such as the
opportunity for lifetime income payments, a guaranteed death benefit, and the
guaranteed level of certain charges, make this policy appropriate for your
needs.
Financial Statements. Financial Statements for AUSA Life and the separate
account are in the SAI.
12.INQUIRIES
If you need more information, please contact us at:
Service Office:
Financial Markets Division
Variable Annuity Department
AUSA Life Insurance Company, Inc.
4333 Edgewood Road N.E.
P.O. Box 3183
Cedar Rapids, IA 52406-3183
6
<PAGE>
Administrative Office:
AUSA Life Insurance Company, Inc.
666 Fifth Avenue, 25th Floor
New York, NY 10103
Home Office:
4 Manhattanville Road
Purchase, NY 10577
You may check your policy at www.ausalife.com/fmd. Follow the logon procedures.
You will need your pre-assigned Personal Identification Number ("PIN") to
access information about your policy.
7
<PAGE>
ANNUITY POLICY FEE TABLE
<TABLE>
<CAPTION>
Policy Owner Transaction Expenses
------------------------------------
<S> <C>
Sales Load On Purchase
Payments...................... 0
Maximum Surrender Charge
(as a % of premium
withdrawal)(/1/)(/2/)......... 7%
Annual Service Charge(/1/).. $35 Per
Policy
Transfer Fee(/1/).. Currently No Fee
</TABLE>
<TABLE>
<CAPTION>
Separate Account Annual Expenses (as
a percentage of
average account value)
<S> <C>
Mortality and Expense Risk
Fee(/3/)..................... 1.40%
Administrative Charge......... 0.15%
-----
TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES .................... 1.55%
</TABLE>
------------------------------------------------------------------------------
Portfolio Annual Expenses(/4/)
(as a percentage of average net assets and after expense reimbursements)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Total Account
Rule Portfolio and
Management Other 12b-1 Annual Portfolio
Fees Expenses Fees Expenses Expenses
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Guardian
Global(/5/)................. 1.05% 0.39% -- 1.44% 2.99%
Capital Guardian U.S.
Equity(/6/)................. 0.85% 0.15% -- 1.00% 2.55%
Capital Guardian
Value(/5/)(/7/) ............ 0.85% 0.07% 0.08% 1.00% 2.55%
Dreyfus Small Cap
Value(/7/).................. 0.80% 0.10% 0.32% 1.22% 2.77%
Dreyfus U.S. Government
Securities.................. 0.65% 0.12% -- 0.77% 2.32%
Endeavor Asset
Allocation(/7/)............. 0.75% 0.10% 0.02% 0.87% 2.42%
Endeavor Money Market........ 0.50% 0.05% -- 0.55% 2.10%
Endeavor Enhanced Index...... 0.75% 0.04% -- 0.79% 2.34%
Endeavor High Yield(/8/)..... 0.78% 0.50% -- 1.28% 2.83%
Endeavor Janus Growth(/8/)... 0.80% 0.05% -- 0.85% 2.40%
Jennison Growth(/5/)(/7/) ... 0.85% 0.05% 0.06% 0.96% 2.51%
T. Rowe Price Equity
Income(/7/)................. 0.80% 0.07% 0.01% 0.88% 2.43%
T. Rowe Price Growth
Stock(/7/).................. 0.80% 0.07% 0.01% 0.88% 2.43%
T. Rowe Price International
Stock....................... 0.90% 0.10% -- 1.00% 2.55%
Janus Aspen--Aggressive
Growth--
Service Shares(/9/)......... 0.65% 0.02% 0.25% 0.92% 2.47%
Janus Aspen--Strategic
Value--Service Shares(/9/).. 0.65% 0.04% 0.25% 0.94% 2.49%
Janus Aspen--Worldwide
Growth--
Service Shares(/9/)......... 0.65% 0.05% 0.25% 0.95% 2.50%
Transamerica VIF Growth...... 0.70% 0.15% -- 0.85% 2.40%
Fidelity--VIP Equity-Income--
Service Class 2(/10/)....... 0.48% 0.10% 0.25% 0.83% 2.38%
Fidelity--VIP II
Contrafund(R)--Service Class
2(/10/)..................... 0.58% 0.12% 0.25% 0.95% 2.50%
Fidelity--VIP III Growth
Opportunities--
Service Class 2(/10/)....... 0.58% 0.13% 0.25% 0.96% 2.51%
Fidelity--VIP III Mid Cap--
Service Class 2(/10/)....... 0.57% 0.43% 0.25% 1.25% 2.80%
WRL Alger Aggressive Growth.. 0.80% 0.09% -- 0.89% 2.44%
WRL Gabelli Global
Growth(/11/)(/12/) ......... 1.00% 0.20% -- 1.20% 2.75%
WRL Goldman Sachs
Growth(/11/)................ 0.90% 0.10% -- 1.00% 2.55%
WRL Great Companies--
Global/2/ (/11/)............ 0.80% 0.20% -- 1.00% 2.55%
WRL Janus Global(/13/)....... 0.80% 0.12% -- 0.92% 2.47%
WRL NWQ Value Equity......... 0.80% 0.10% -- 0.90% 2.45%
WRL Pilgrim Baxter Mid Cap
Growth(/11/)(/12/) ......... 0.90% 0.10% -- 1.00% 2.55%
WRL Salomon All Cap(/11/).... 0.90% 0.10% -- 1.00% 2.55%
WRL T. Rowe Price Dividend
Growth(/11/)(/12/) ......... 0.90% 0.10% -- 1.00% 2.55%
WRL T. Rowe Price Small
Cap(/11/)................... 0.75% 0.25% -- 1.00% 2.55%
</TABLE>
8
<PAGE>
(/1/) The surrender charge and transfer fee, if any are imposed, apply to each
policy, regardless of how the policy value is allocated among the
separate account and the fixed account. The annual service charge, if
any is imposed, applies only to the separate account, and is assessed on
a pro rata basis relative to each account's policy value as a percentage
of the policy's total policy value. The service charge is deducted on
each policy anniversary. If applicable, a surrender charge will only be
applied to withdrawals that exceed the amount available under certain
listed exceptions. There is no transfer fee for the first 12 transfers
per year. For additional transfers, AUSA Life may charge a fee of $10
per transfer, but currently does not charge for any transfers.
(/2/) The surrender charge is decreased based on the number of years since the
premium payment was 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.
(/3/) Mortality and expense risk fees and the administrative charges shown are
for the Annual Step-Up Death Benefit which apply during the first seven
policy years. After the seventh policy year the total separate account
charges are 1.40%. The corresponding fees for the Return of Premium
Death Benefit are 1.40% during the first seven policy years and 1.25%
thereafter. The administrative charge may be increased in the future.
However, in no event will the total separate account charges exceed
1.55% before the annuity commencement date. And, in no event will the
total separate account charges 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/) The fee table information relating to the underlying funds was provided
to AUSA Life by the underlying funds, their investment advisers or
managers, and AUSA Life has not and cannot independently verify the
accuracy or completeness of such information. Actual future expenses of
the portfolios may be greater or less than those shown in the Table.
Therefore, AUSA Life disclaims any and all liability for such
information.
(/5/) Capital Guardian Global Portfolio was formerly Endeavor Select
Portfolio, Capital Guardian Value Portfolio was formerly Endeavor Value
Equity Portfolio and Jennison Growth Portfolio was formerly Endeavor
Opportunity Value Portfolio. On October 9, 2000, each Portfolio's
advisor and investment policy were changed. The "Other Expenses" shown
for 1999 were before these changes occurred. The "Management Fees" shown
are the current fees.
(/6/) Capital Guardian U.S. Equity Portfolio commenced operations on October
9, 2000, so the expenses shown are estimates for the first year of
operations.
(/7/) The Board of Trustees of Endeavor Series Trust (the "Trust") have
authorized an arrangement whereby, subject to best price and execution,
executing brokers will share commissions with the Trust's affiliated
broker. Under supervision of the Trustees, the affiliated broker will
use the "recaptured commissions" to promote marketing of the Trust's
shares. The staff of the Securities and Exchange Commission believes
that, through the use of these recaptured commissions, the Trust is
indirectly paying for distribution expenses, and therefore, such amounts
are shown as 12b-1 fees in the above table. This use of recaptured
commissions to promote the sale of the Trust's shares involves no
additional costs to the Trust or any owner. Endeavor Series Trust, based
on advice of counsel, do not believe that recaptured brokerage
commissions should be treated as 12b-1 fees. For more information on the
Trust's Brokerage Enhancement Plan, see the Trust's prospectus
accompanying this Prospectus.
9
<PAGE>
(/8/) The "Management Fees" have been restated to reflect current fees.
(/9/) The expenses in the Annuity Policy Fee Table are based on estimated
expenses the new Service Shares Class of each portfolio expects to incur
in its initial fiscal year.
(/10/) Service Class 2 expenses are based on estimated expenses for the first
year. Fidelity VIP expenses are without any reimbursement.
(/11/) Because WRL Goldman Sachs Growth, WRL Pilgrim Baxter Mid Cap Growth,
WRL Salomon All Cap, WRL T. Rowe Price Dividend Growth and WRL T. Rowe
Price Small Cap commenced operations on May 3, 1999, and because WRL
Gabelli Global Growth and WRL Great Companies--Global/2/ commenced
operations on September 1, 2000, the percentages set forth as "Other
Expenses" and "Total Portfolio Annual Expenses" are estimated.
(/12/) The Management Fee in the Fee Table is based on portfolio average
daily net assets of up to $500 million for WRL Gabelli Global Growth,
and up to $100 million for WRL Pilgrim Baxter Mid Cap Growth and WRL T.
Rowe Price Dividend Growth. See the underlying fund prospectus for more
information.
(/13/) Effective September 1, 2000, the WRL Janus Global portfolio was closed
to new investors.
10
<PAGE>
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, and assuming the entire policy value
is in the applicable subaccount.
The expenses reflect different mortality and expense risk fees depending on
which death benefit you select:
A = Annual Step-Up Death Benefit (1.40% in the first seven policy years and
1.25% thereafter)
B = Return of Premium Death Benefit (1.25% in the first seven policy years and
1.10% thereafter)
<TABLE>
<CAPTION>
If the Policy is
annuitized at
the end of the
If the Policy is applicable time period
surrendered at the end or if the Policy
of the applicable time is still in the
period. accumulation phase.
----------------------------------------------
Subaccounts 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Guardian Global A $101 $139 $186 $336 $31 $94 $160 $336
-------------------------------------------------
B $ 99 $134 $179 $322 $29 $90 $152 $322
-------------------------------------------------------------------------------
Capital Guardian U.S.
Equity A $ 96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $ 95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
Capital Guardian Value
Portfolio A $ 96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $ 95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
Dreyfus Small Cap Value A $ 99 $132 $176 $315 $29 $87 $149 $315
-------------------------------------------------
B $ 97 $128 $168 $301 $27 $83 $142 $301
-------------------------------------------------------------------------------
Dreyfus U.S. Government
Securities A $ 94 $119 $153 $271 $24 $74 $127 $271
-------------------------------------------------
B $ 93 $114 $146 $256 $23 $70 $119 $256
-------------------------------------------------------------------------------
Endeavor Asset Allocation A $ 95 $122 $158 $281 $25 $77 $132 $281
-------------------------------------------------
B $ 94 $117 $151 $266 $24 $73 $124 $266
-------------------------------------------------------------------------------
Endeavor Money Market A $ 92 $112 $142 $249 $22 $67 $116 $249
-------------------------------------------------
B $ 90 $107 $134 $233 $20 $63 $108 $233
-------------------------------------------------------------------------------
Endeavor Enhanced Index A $ 94 $119 $154 $273 $24 $75 $128 $273
-------------------------------------------------
B $ 93 $115 $147 $258 $23 $70 $120 $258
-------------------------------------------------------------------------------
Endeavor High Yield A $ 99 $134 $179 $321 $29 $89 $152 $321
-------------------------------------------------
B $ 98 $129 $171 $306 $28 $85 $145 $306
-------------------------------------------------------------------------------
Endeavor Janus Growth A $ 95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------
B $ 93 $117 $150 $264 $23 $72 $123 $264
-------------------------------------------------------------------------------
Jennison Growth A $ 96 $124 $163 $290 $26 $80 $136 $290
-------------------------------------------------
B $ 94 $120 $155 $275 $24 $75 $129 $275
-------------------------------------------------------------------------------
T. Rowe Price Equity
Income A $ 95 $122 $159 $282 $25 $77 $132 $282
-------------------------------------------------
B $ 94 $117 $151 $267 $24 $73 $125 $267
-------------------------------------------------------------------------------
T. Rowe Price Growth Stock A $ 95 $122 $159 $282 $25 $77 $132 $282
-------------------------------------------------
B $ 94 $117 $151 $267 $24 $73 $125 $267
-------------------------------------------------------------------------------
T. Rowe Price
International Stock A $ 96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $ 95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
Janus Aspen--Aggressive
Growth A $ 96 $123 $161 $286 $26 $79 $134 $286
-------------------------------------------------
Service Shares B $ 94 $119 $153 $271 $24 $74 $127 $271
</TABLE>
11
<PAGE>
EXAMPLES continued........
<TABLE>
<CAPTION>
If the Policy is
annuitized at
the end of the
If the Policy is applicable time period
surrendered at the end or if the Policy
of the applicable time is still in the
period. accumulation phase.
----------------------------------------------
Subaccounts 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Janus Aspen--Strategic
Value A $96 $124 $162 $288 $26 $79 $135 $288
-------------------------------------------------
Service Shares B $94 $119 $154 $273 $24 $75 $128 $273
-------------------------------------------------------------------------------
Janus Aspen--Worldwide
Growth A $96 $124 $162 $289 $26 $79 $136 $289
-------------------------------------------------
Service Shares B $94 $120 $155 $274 $24 $75 $128 $274
-------------------------------------------------------------------------------
Transamerica VIF Growth A $95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------
B $93 $117 $150 $264 $23 $72 $123 $264
-------------------------------------------------------------------------------
Fidelity--VIP Equity-
Income A $95 $120 $156 $277 $25 $76 $130 $277
-------------------------------------------------
Service Class 2 B $93 $116 $149 $262 $23 $71 $122 $262
-------------------------------------------------------------------------------
Fidelity--VIP II
Contrafund(R) A $96 $124 $162 $289 $26 $79 $136 $289
-------------------------------------------------
Service Class 2 B $94 $120 $155 $274 $24 $75 $128 $274
-------------------------------------------------------------------------------
Fidelity--VIP III Growth
Opportunities A $96 $124 $163 $290 $26 $80 $136 $290
-------------------------------------------------
Service Class 2 B $94 $120 $155 $275 $24 $75 $129 $275
-------------------------------------------------------------------------------
Fidelity--VIP III Mid Cap A $99 $133 $177 $318 $29 $88 $150 $318
-------------------------------------------------
Service Class 2 B $97 $129 $170 $303 $27 $84 $143 $303
-------------------------------------------------------------------------------
WRL Alger Aggressive
Growth A $95 $122 $159 $283 $25 $78 $133 $283
-------------------------------------------------
B $94 $118 $152 $268 $24 $73 $125 $268
-------------------------------------------------------------------------------
WRL Gabelli Global Growth A $98 $132 $175 $313 $28 $87 $148 $313
-------------------------------------------------
B $97 $127 $167 $299 $27 $82 $141 $299
-------------------------------------------------------------------------------
WRL Goldman Sachs Growth A $96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
WRL Great Companies--
Global/2/ A $96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
WRL Janus Global A $95 $123 $161 $286 $26 $79 $134 $286
-------------------------------------------------
B $94 $119 $153 $271 $24 $74 $127 $271
-------------------------------------------------------------------------------
WRL NWQ Value Equity A $95 $123 $160 $284 $25 $78 $133 $284
-------------------------------------------------
B $94 $118 $152 $269 $24 $73 $126 $269
-------------------------------------------------------------------------------
WRL Pilgrim Baxter Mid Cap
Growth A $96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
WRL Salomon All Cap A $96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
WRL T. Rowe Price Dividend
Growth A $96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $95 $121 $157 $279 $25 $76 $131 $279
-------------------------------------------------------------------------------
WRL T. Rowe Price Small
Cap A $96 $126 $165 $294 $26 $81 $138 $294
-------------------------------------------------
B $95 $121 $157 $279 $25 $76 $131 $279
</TABLE>
12
<PAGE>
The above tables will assist you in understanding the costs and expenses that
you will bear, directly or indirectly. These include the 1999 expenses of the
underlying portfolios, except for Capital Guardian U.S. Equity, Endeavor Janus
Growth, WRL Goldman Sachs Growth, WRL Pilgrim Baxter Mid Cap Growth, WRL
Salomon All Cap, WRL T. Rowe Price Dividend Growth, and WRL T. Rowe Price Small
Cap (whose expenses listed above are estimated for the first full year of
operations). In addition to the expenses listed above, premium taxes may be
applicable.
These examples should not be considered a representation of past or future
expenses, and 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.
In these examples, the $35 annual service charge is reflected as a charge of
0.0358% based on an average policy value of $97,708.00. Normally, the service
charge would be waived if the premium payment, less partial withdrawals, is at
least $50,000 on a policy anniversary. However, $35 has been included in these
examples for illustrative purposes.
Financial Information. Condensed financial information for the subaccounts is
in Appendix A to this prospectus.
13
<PAGE>
1.THE ANNUITY POLICY
This prospectus describes The Endeavor Variable Annuity policy offered by AUSA
Life Insurance Company, Inc.
An annuity is a policy between you, the owner, and an insurance company (in
this case AUSA Life), where the insurance company promises to pay you an income
in the form of annuity payments. These payments begin on a designated date,
referred to as the annuity commencement date. Until the annuity commencement
date, your annuity is in the accumulation phase and the earnings (if any) are
tax deferred. Tax deferral means you generally are not taxed on your annuity
until you take money out of your annuity. After the annuity commencement date,
your annuity switches to the income phase.
The policy is a flexible premium variable annuity. You can use the policy to
accumulate funds for retirement or other long-term financial planning purposes.
The policy 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. But you are not required to make any additional
investments.
The policy is a "variable" annuity because the value of your investments can go
up or down based on the performance of your investment choices. If you invest
in the separate account, the amount of money you are able to accumulate in your
policy during the accumulation phase depends upon the performance of your
investment choices. The amount of annuity payments you receive during the
income phase from the separate account also depends upon the investment
performance of your investment choices for the income phase.
The policy also contains a fixed account. The fixed account offers a one year
interest rate that AUSA Life guarantees will not decrease during each one year
period.
2.PURCHASE
Policy Issue Requirements
AUSA Life will not issue a policy unless:
. AUSA Life receives all information needed to issue the policy,
. AUSA Life receives a minimum initial premium payment;
. The annuitant and any joint owner are age 84 or younger; and
. You meet our underwriting standards.
Premium Payments
You should make checks for premium payments payable only to AUSA Life Insurance
Company, Inc. and send them to the administrative and service office. Your
check must be honored in order for AUSA Life to pay any associated payments and
benefits due under the policy.
Initial Premium Requirements
The initial premium payment for nonqualified policies must be at least $5,000,
and at least $1,000 for qualified policies. The initial premium payment for
policies issued under section 403(b) of the Internal Revenue Code is $50. We
will credit your initial premium payment to your policy within two business
days after the day we receive it and your complete policy information. If we
are unable to credit your initial premium payment, we will contact you within
five business days and explain why. We will also return your initial premium
payment at that time unless you let us keep it and credit it as soon as
possible.
The date on which we credit your initial premium payment to your policy is the
policy date. The policy date is used to determine policy years, policy months
and policy anniversaries.
Additional Premium Payments
You are not required to make any additional premium payments. However, you can
make additional premium payments as often as you like during the lifetime of
the annuitant and during the accumulation phase. Additional
14
<PAGE>
premium payments must be at least $50. We will credit additional premium
payments to your policy as of the business day we receive your premium and
required information. Additional premium payments must be received before the
New York Stock Exchange closes to get same-day pricing of the additional
premium payment.
Maximum Total Premium Payments
We allow premium payments up to a total of $1,000,000 without prior approval.
Allocation of Premium Payments
When you purchase a policy, we will allocate your premium payments to the
investment choices you select. Your allocation must be in whole percentages and
must total 100%. We will allocate additional premium payments the same way,
unless you request a different allocation.
If you allocate premium payment to the dollar cost averaging fixed account, you
must give us instructions regarding the subaccount(s) to which transfers are to
be made or we cannot accept your premium payment.
You may change allocations for future additional premium payments by sending us
written instructions. The allocation change will apply to premium payments
received on or after the date we receive the change request.
Policy Value
You should expect your policy value to change from valuation period to
valuation period. A valuation period begins at the close of trading on the New
York Stock Exchange on each business day and ends at the close of trading on
the next succeeding business day. A business day is each day that the New York
Stock Exchange is open. The New York Stock Exchange generally closes at 4:00
p.m. eastern time. Holidays are generally not business days.
3.INVESTMENT CHOICES
The Separate Account
There are currently thirty-one variable subaccounts available under the
policies for new investors.
The subaccounts invest in shares of the various underlying fund portfolios. The
companies that provide investment advice and administrative services for the
underlying fund portfolios offered through this policy are listed below. The
following variable investment choices are currently offered through this
policy:
ENDEAVOR SERIES TRUST
Subadvised by Capital Guardian Trust Company
Capital Guardian Global Portfolio
Capital Guardian U.S. Equity Portfolio
Capital Guardian Value Portfolio
Subadvised by The Dreyfus Corporation
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Subadvised by Morgan Stanley Asset Management
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
Subadvised by J.P. Morgan Investment Management Inc.
Endeavor Enhanced Index Portfolio
Subadvised by Massachusetts Financial Services Company
Endeavor High Yield Portfolio
Subadvised by Janus Capital Corporation
Endeavor Janus Growth Portfolio
Subadvised by Jennison Associates LLC
Jennison Growth Portfolio
Subadvised by T. Rowe Price Associates, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Subadvised by T. Rowe Price International, Inc.
T. Rowe Price International Stock Portfolio
JANUS ASPEN SERIES--SERVICE SHARES
Managed by Janus Capital Corporation
Janus Aspen--Aggressive Growth Portfolio
Janus Aspen--Strategic Value Portfolio
Janus Aspen--Worldwide Growth Portfolio
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Managed by Transamerica Investment Management, LLC
Transamerica VIF Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND--SERVICE CLASS 2
Managed by Fidelity Management & Research Company
Fidelity--VIP Equity-Income Portfolio
15
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND II--SERVICE CLASS 2
Managed by Fidelity Management & Research Company
Fidelity--VIP II Contrafund(R) Portfolio
VARIABLE INSURANCE PRODUCTS FUND III--SERVICE CLASS 2
Managed by Fidelity Management & Research Company
Fidelity--VIP III Growth Opportunities Portfolio
Fidelity--VIP III Mid Cap Portfolio
WRL SERIES FUND, INC.
Subadvised by Fred Alger Management, Inc.
WRL Alger Aggressive Growth
Subadvised by Gabelli Asset Management Company
WRL Gabelli Global Growth
Subadvised by Goldman Sachs Asset Management
WRL Goldman Sachs Growth
Subadvised by Great Companies, L.L.C.
WRL Great Companies--Global/2/
Subadvised by NWQ Investment Management Company, Inc.
WRL NWQ Value Equity
Subadvised by Pilgrim Baxter & Associates, Ltd.
WRL Pilgrim Baxter Mid Cap Growth
Subadvised by Salomon Brothers Asset Management Inc
WRL Salomon All Cap
Subadvised by T. Rowe Price Associates, Inc.
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
The following subaccount is only available to owners that held an investment in
this subaccount on September 1, 2000. However, if you withdraw all your money
from this subaccount after September 1, 2000, you may not reinvest in this
subaccount.
WRL SERIES FUND, INC.
Subadvised by Janus Capital Corporation
WRL Janus Global
The general public may not purchase shares of these underlying fund portfolios.
The investment objectives and policies may be similar to other portfolios and
mutual funds managed by the same investment adviser or manager that are sold
directly to the public. You should not expect the investment results of the
underlying fund portfolios to be the same as those of other portfolios or
mutual funds.
More detailed information, including an explanation of the portfolio's
investment objectives, may be found in the current prospectuses for the
underlying funds, which are attached to this prospectus. You should read the
prospectuses for the underlying funds carefully before you invest.
We may receive expense reimbursements or other revenues from the underlying
funds or their managers. The amount of these reimbursements or revenues, if
any, may be different for different funds and portfolios and may be based on
the amount of assets that AUSA Life or the separate account invests in the
underlying fund portfolios.
We do not guarantee that any of the subaccounts will always be available for
premium payments, allocations, or transfers. See the SAI for more information
concerning the possible addition, deletion or substitution of investments.
The Fixed Account
Premium payments allocated and amounts transferred to the fixed account become
part of AUSA Life's general account. 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. AUSA Life has
been advised that the staff of the SEC has not reviewed the disclosures in this
prospectus which relate to the fixed account.
16
<PAGE>
We guarantee that the interest credited to the fixed account will not be less
than 3% per year. At the end of the guaranteed period option, the value in that
guaranteed period option will automatically be transferred into a new
guaranteed period option of the same length (or the next shorter period if the
same period is no longer offered) at the current interest rate for that period.
You can transfer to another investment choice by giving us notice within 30
days before the end of the expiring guaranteed period.
If you select the fixed account, your money will be placed with the other
general assets of AUSA Life. The amount of money you are able to accumulate in
the fixed account during the accumulation phase depends upon the total interest
credited. The amount of annuity payments you receive during the income phase
from the fixed portion of your policy will remain level for the entire income
phase.
Transfers
During the accumulation phase, you may make transfers to or from any subaccount
or the fixed account as often as you wish within certain limitations.
Transfers from the guaranteed period option of the fixed account are limited as
follows:
. Transfers at the end of a guaranteed period, if you notify us within 30 days
prior to the end of the guaranteed period that you wish to transfer the
amount in that guaranteed period option to another investment choice.
. Transfers of amounts equal to interest credited in the one year guaranteed
period option may be made to any subaccount prior to the end of the
guaranteed period on a monthly, quarterly, semi-annual or annual basis. This
may affect your overall interest-crediting rate, because transfers are
deemed to come from the oldest premium payment first.
. Transfers of other amounts from the one year guaranteed period option prior
to the end of the guaranteed period option are limited to 25% of the policy
value in that guaranteed period option, less any previous transfer during
the current policy year.
There are no transfers permitted out of the dollar cost averaging fixed account
option except through the dollar cost averaging program.
Each transfer must be at least $500, or the entire subaccount or guaranteed
period option policy value. If less than $500 remains, then we reserve the
right to either deny the transfer or include that amount in the transfer.
Currently, there is no charge for transfers and no limit on the number of
transfers during the accumulation phase. However, in the future, the number of
transfers permitted may be limited and a $10 charge per transfer may apply. We
reserve the right to prohibit transfers to the fixed account if we are
crediting an effective annual interest rate of 3.0% (the guaranteed minimum).
During the income phase of your policy, you may transfer values out of any
subaccount up to four times per year. However, you cannot transfer values out
of the fixed account in this phase. The minimum amount that can be transferred
during this phase is the lesser of $10 of monthly income, or the entire monthly
income of the annuity units in the subaccount from which the transfer is being
made.
The policy you are purchasing was not designed for professional market timing
organizations or other persons that use programmed, large, or frequent
transfers. The use of such transfers may be disruptive to an underlying fund
portfolio. We reserve the right to reject any premium payment or transfer
request from any person, if, in our judgment, an underlying fund portfolio
would be unable to invest effectively in accordance with its investment
objectives and policies or would otherwise be potentially adversely affected or
if an underlying portfolio would reject our purchase order.
4.PERFORMANCE
AUSA Life periodically advertises performance of the various subaccounts. We
may disclose at least three different kinds of performance. First, we may
calculate performance by determining the percentage change in the value of an
accumulation unit by dividing the increase
17
<PAGE>
(decrease) for that unit by the value of the accumulation unit at the beginning
of the period. This performance number reflects the deduction of the mortality
and expense risk fees and administrative charges. It does not reflect the
deduction of any applicable premium taxes or surrender charges. The deduction
of any applicable premium taxes or surrender charges would reduce the
percentage increase or make greater any percentage decrease.
Second, any advertisement will also include total return figures, which reflect
the deduction of the mortality and expense risk fees, administrative charges
and surrender charges.
Third, in addition, for certain investment portfolios, performance may be shown
for the period commencing from the inception date of the investment portfolio.
These figures should not be interpreted to reflect actual historical
performance of the subaccounts.
We also may, from time to time, include in our advertising and sales materials,
tax deferred compounding charts and other hypothetical illustrations, which may
include, comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
Appendix B contains performance information that you may find useful. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and future results will not be the same as
the results shown.
5.EXPENSES
There are charges and expenses associated with your policy that reduce the
return on your investment in the policy.
Surrender Charges
During the accumulation phase, you can withdraw part or all of the cash value
(restrictions may apply to qualified policies). Cash value is the policy value
decreased by any applicable surrender charge, service charge, and premium tax
charge. After the first year, you can withdraw up to 10% of your policy value
once each year free of surrender charges. This amount is referred to as the
free percentage and is determined at the time of the withdrawal. If you
withdraw money in excess of 10% of your policy value, you might have to pay a
surrender charge, which is a contingent deferred sales charge, on the excess
amount. (The free percentage is not cumulative, so not withdrawing anything in
one year does not increase the free percentage for subsequent years.) The
following schedule shows the surrender charges that apply during the seven
years following each premium payment:
<TABLE>
<CAPTION>
Surrender Charge
Number of Years (as a percentage of
Since Premium premium payment
Payment Date withdrawn)
------------------------------------------------------------------------------
<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 your policy value is $100,000 at the beginning of policy
year 2 and you withdraw $30,000. Since that amount is more than your free
percentage, you would pay a surrender charge of $1,200 on the remaining $20,000
(6% of $30,000--$10,000).
You will receive the full amount of a requested partial withdrawal because we
deduct any applicable surrender charge from your remaining value. You receive
your cash value upon full surrender. For surrender charge purposes, the oldest
premium is considered to be withdrawn first.
Keep in mind that withdrawals may be taxable, and if made before age 59 1/2,
may be subject to a 10% federal penalty tax. For tax purposes, withdrawals are
considered to come from earnings first.
Mortality and Expense Risk Fee
We charge a fee as compensation for bearing certain mortality and expense risks
under the policy. Examples include a guarantee of annuity rates, the death
benefits, certain expenses of the policy, and assuming the risk that the
current charges will be insufficient in the future to cover costs of
administering the policy.
18
<PAGE>
For the Annual Step-Up Death Benefit, the mortality and expense risk fee is at
an annual rate of 1.40% of assets for the first seven policy years and 1.25% of
assets thereafter. For the Return of Premium Death Benefit the mortality and
expense risk fee is at an annual rate of 1.25% of assets for the first seven
policy years and 1.10% thereafter. This annual fee is assessed daily based on
the net asset value of each subaccount.
If this charge does not cover our actual costs, we absorb the loss. Conversely,
if the charge more than covers actual costs, the excess is added to our
surplus. We expect to profit from this charge. We may use any profit for any
proper purpose, including distribution expenses.
Administrative Charges
We deduct an administrative charge to cover the costs of administering the
policy. This charge is at an annual rate of 0.15% of the daily net asset value
of the separate account.
In addition, an annual service charge of the lesser of $35 or 2% of the policy
value is charged on each policy anniversary and at surrender. The service
charge is waived if your policy value or the sum of your premium(s), less all
partial withdrawals, is at least $50,000.
Premium Taxes
Some states assess premium taxes on the premium payments you make. We currently
do not deduct for these taxes at the time you make a premium payment. However,
we will deduct the total amount of premium taxes, if any, from the policy value
when:
. you elect to begin receiving annuity payments;
. you surrender the policy; or
. you die and a death benefit is paid (you must also be the annuitant for the
death benefit to be paid).
Generally, premium taxes range from 0% to 3.50%, depending on the state.
Federal, State and Local Taxes
We may in the future deduct charges from the policy for any taxes we incur
because of the policy. However, no deductions are being made at the present
time.
Transfer Fee
You are allowed to make 12 free transfers per year before the annuity
commencement date. If you make more than 12 transfers per year, we reserve the
right to charge $10 for each additional transfer. Premium payments, asset
rebalancing and dollar cost averaging transfers are not considered transfers.
All transfer requests made at the same time are treated as a single request.
Portfolio Management Fees
The value of the assets in each subaccount will reflect the fees and expenses
paid by the underlying fund. A description of these expenses is found in the
prospectuses for the underlying funds.
6.ACCESS TO YOUR MONEY
During the accumulation phase, you can have access to the money in your policy
in two ways:
. by making a withdrawal (either a complete or partial withdrawal); or
. by taking systematic payouts.
Withdrawals
If you want to make a complete withdrawal, you will receive your cash value.
If you want to take a partial withdrawal, in most cases it must be for at least
$500. Unless you tell us otherwise, we will take the withdrawal from each of
the investment choices in proportion to the policy value.
After one year, you may take up to 10% of your policy value free of surrender
charges once each year. Remember that any withdrawal you take will reduce the
policy value, and might reduce the amount of the death benefit. See Section 8,
Death Benefit, for more details.
19
<PAGE>
Withdrawals may be subject to a surrender charge. Income taxes, federal tax
penalties and certain restrictions may apply to any withdrawals you make.
Withdrawals from qualified policies may be restricted or prohibited.
During the income phase, you will receive annuity payments under the annuity
payment option you select; however, you generally may not take any other
withdrawals, either complete or partial.
Delay of Payment and Transfers
Payment of any amount due from the separate account for a surrender, a death
benefit, or the death of the owner of a nonqualified policy, will generally
occur within seven business days from the date AUSA Life receives all required
information. AUSA Life may defer such payment from the separate account if:
. the New York Stock Exchange is closed other than for usual weekends or
holidays or trading on the Exchange is otherwise restricted;
. an emergency exists as defined by the SEC or the SEC requires that trading
be restricted; or
. the SEC permits a delay for the protection of owners.
In addition, transfers of amounts from the subaccounts may be deferred under
these circumstances.
Pursuant to the requirements of certain state laws, we reserve the right to
defer payment of the cash value from the fixed account for up to six months. We
may defer payment of any amount until your premium check has cleared your bank.
7. ANNUITY PAYMENTS (THE INCOME PHASE)
You choose the annuity commencement date. You can change this date by giving us
30 days written notice before the current annuity commencement date. The new
annuity commencement date must be at least 30 days after we receive notice of
the change. The latest annuity commencement date generally cannot be after the
policy month following the month in which the annuitant attains age 90.
Election of Annuity Payment Option. Before the annuity commencement date, if
the annuitant is alive, you may choose an annuity payment option or change your
election. If the annuitant dies before the annuity commencement date, the
beneficiary may elect to receive the death benefit in a lump sum or under one
of the annuity payment options (unless you become the new annuitant).
Unless you specify otherwise, the annuitant will receive the annuity payments.
After the annuitant's death, the beneficiary will receive any remaining
guaranteed payments.
Annuity Payment Options
The policy provides five annuity payment options that are described below. You
may choose any combination of annuity payment options. We will use your policy
value to provide these annuity payments. If the policy 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. You can
receive annuity payments monthly, quarterly, semi-annually, or annually. (We
reserve the right to change the frequency if payments would be less than $50.)
Unless you choose to receive variable payments under annuity payment options 3
or 5, the amount of each payment will be set on the annuity commencement date
and will not change. You may, however, choose to receive variable payments
under payment options 3 and 5. The dollar amount of the first variable payment
will be determined in accordance with the annuity payment rates set forth in
the applicable table contained in the policy. The dollar amount of additional
variable payments will vary based on the investment performance of the
subaccount(s). The dollar amount of each variable payment after the first may
increase, decrease, or remain constant. If the actual investment performance
exactly matched the assumed investment return of 5% at all times,
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the amount of each variable annuity payment would remain equal. If actual
investment performance exceeds the assumed investment return, the amount of the
variable annuity payments would increase. Conversely, if actual investment
performance is lower than the assumed investment return, the amount of the
variable annuity payments would decrease.
A charge for premium taxes may be made when annuity payments begin.
The annuity payment options are explained below. Options 1, 2, and 4 are fixed
only. Options 3 and 5 can be fixed or variable.
Payment Option 1--Interest Payments. We will pay the interest on the amount we
use to provide annuity payments in equal payments or this amount may be left to
accumulate for a period of time you and AUSA Life agree to. You and AUSA Life
will agree on withdrawal rights when you elect this option.
Payment Option 2--Income for a Specified Period. We will make level payments
only for the fixed period you choose. No funds will remain at the end.
Payment Option 3--Life Income. You may choose between:
Fixed Payments
. No Period Certain--We will make level payments only during the annuitant's
lifetime.
. 10 Years Certain--We will make level payments for the longer of the
annuitant's lifetime or ten years.
. Guaranteed Return of Policy Proceeds--We will make level payments for the
longer of the annuitant's lifetime or until the total dollar amount of
payments we made to you equals the amount applied to this option.
Variable Payments
. No Period Certain--Payments will be made only during the lifetime of the
annuitant.
. 10 Years Certain--Payments will be made for the longer of the annuitant's
lifetime or ten years.
Payment Option 4--Income of a Specified Amount. Payments are made for any
specified amount until the amount applied to this option, with interest, is
exhausted. This will be a series of level payments followed by a smaller final
payment.
Payment Option 5--Joint and Survivor Annuity. You may choose between:
Fixed Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either person
is living.
Variable Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either person
is living.
NOTE CAREFULLY:
IF:
. you choose Life Income with No Period Certain or a Joint and Survivor
Annuity; and
. the annuitant(s) dies before the due date of the second (third, fourth,
etc.) annuity payment;
THEN:
. we may make only one (two, three, etc.) annuity payments.
IF:
. you choose Income for a Specified Period, Life Income with 10 years Certain,
Life Income with Guaranteed Return of Policy Proceeds, or Income of a
Specified Amount; and
. the person receiving payments dies prior to the end of the guaranteed
period;
THEN:
. the remaining guaranteed payments will be continued to that person's
beneficiary, or their present value may be paid in a single sum.
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We will not pay interest on amounts represented by uncashed annuity payment
checks if the postal or other delivery service is unable to deliver checks to
the payee's address of record. The person receiving payments is responsible for
keeping AUSA Life informed of their current address.
Other annuity payment options may be arranged by agreement with AUSA Life.
8.DEATH BENEFIT
We will pay a death benefit to your beneficiary, under certain circumstances,
if the annuitant dies before the accumulation phase and the annuitant was also
an owner. (If the annuitant was not an owner, a death benefit may or may not be
paid. See below). The beneficiary may choose an annuity payment option, or may
choose to receive a lump sum.
When We Pay A Death Benefit
Before the Annuity Commencement Date
We will pay a death benefit to your beneficiary IF:
. you are both the annuitant and an owner of the policy; and
. you die before the annuity commencement date.
If the only beneficiary is your surviving spouse, then he or she may elect to
continue the policy as the new annuitant and owner, instead of receiving the
death benefit. All future surrender charges will be waived.
We will also pay a death benefit to your beneficiary IF:
. you are not the annuitant; and
. the annuitant dies before the annuity commencement date; and
. you specifically requested that the death benefit be paid upon the
annuitant's death.
Distribution requirements apply to the policy value upon the death of any
owner. These requirements are detailed in the SAI.
After the Annuity Commencement Date
The death benefit payable, if any, on or after the annuity commencement date
depends on the annuity payment option selected.
IF:
. you are not the annuitant; and
. you die on or after the annuity commencement date; and
. the entire interest in the policy has not been paid;
THEN:
. 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 your death.
When We Do Not Pay A Death Benefit
No death benefit is paid in the following cases:
IF:
. you are not the annuitant; and
. the annuitant dies prior to the annuity commencement date; and
. you did not specifically request that the death benefit be paid upon the
annuitant's death;
THEN:
. you will become the new annuitant and the policy will continue.
IF:
. you are not the annuitant; and
. you die prior to the annuity commencement date;
THEN:
. the new owner (unless it is a spouse) must generally surrender the policy
within five years of your death for the policy value.
Note carefully. If the owner does not name a contingent owner, the owner's
estate will become the new owner. If no probate estate is opened (because, for
example, the owner has
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precluded the opening of a probate estate by means of a trust or other
instrument), and AUSA Life has not received written notice of the trust as a
successor owner signed prior to the owner's death, then that trust may not
exercise ownership rights to the policy. It may be necessary to open a probate
estate in order to exercise ownership rights to the policy if no contingent
owner is named in a written notice received by AUSA Life.
Amount of Death Benefit
The death benefit may be paid as a lump sum or as annuity payments. The amount
of the death benefit depends on the guaranteed minimum death benefit option you
chose when you bought the policy. The death benefit will be the greater of:
. the policy value on the date we receive the required information; or
. the guaranteed minimum death benefit (discussed below), plus premium
payments, less partial withdrawals from the date of death to the date the
death benefit is paid.
Guaranteed Minimum Death Benefit
On the policy application, you generally may choose one of the following two
guaranteed minimum death benefit options listed below.
After the policy is issued, you cannot make an election and the death benefit
cannot be changed.
A.Annual Step-Up Death Benefit
The Annual Step-Up Death Benefit is:
. the largest policy value on 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 partial withdrawals taken, subsequent to the date
of the policy anniversary with the largest policy value.
The Annual Step-Up Death Benefit is not available if the owner or annuitant is
81 or older on the policy date.
B.Return of Premium Death Benefit
The Return of Premium Death Benefit is:
. total premium payments; less
. any partial withdrawals (discussed below) as of the date of death.
The Return of Premium Death Benefit will be in effect if you do not choose
one of the options on the policy application.
IF, under both death benefit options:
. the surviving spouse elects to continue the policy instead of receiving the
death benefit; and
. the guaranteed minimum death benefit is greater than the policy value;
THEN:
. we will increase the policy value to be equal to the guaranteed minimum
death benefit. This increase is made only at the time the surviving spouse
elects to continue the policy.
Adjusted Partial Withdrawal
When you request a partial withdrawal, your guaranteed minimum death benefit
will be reduced by an amount called the adjusted partial withdrawal. Under
certain circumstances, the adjusted partial withdrawal may be more than the
amount of your withdrawal request. It is also possible that if a death benefit
is paid after you have made a partial withdrawal, then the total amount paid
could be less than the total premium payments. We have included an explanation
of this adjustment in the SAI.
9.TAXES
NOTE: AUSA Life has prepared the following information on federal income taxes
as a general discussion of the subject. It is not intended as tax advice to any
individual. You should consult your own tax adviser about your own
circumstances. AUSA Life has included an additional discussion regarding taxes
in the SAI.
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Annuity Policies in General
Deferred annuity policies are a way of setting aside money for future needs
like retirement. Congress recognized how important saving for retirement is
and provided special rules in the Internal Revenue Code for annuities.
Simply stated, these rules provide that generally you will not be taxed on the
earnings, if any, on the money held in your annuity policy until you take the
money out. This is referred to as tax deferral. There are different rules as
to how you will be taxed depending on how you take the money out and the type
of policy--qualified or nonqualified (discussed below).
You will not be taxed on increases in the value of your policy until a
distribution occurs--either as a withdrawal or as annuity payments.
When a non-natural person (e.g., corporation or certain other entities other
than tax-qualified trusts) owns a nonqualified policy, the policy will
generally not be treated as an annuity for tax purposes.
Qualified and Nonqualified Policies
If you purchase the policy under an individual retirement annuity, a pension
plan, or specially sponsored program, your policy is referred to as a
qualified policy.
Qualified policies are issued in connection with the following plans:
. Individual Retirement Annuity (IRA): A traditional IRA allows individuals
to make contributions, which may be deductible, to the contract. A Roth IRA
also allows individuals to make contributions to the contract, but it does
not allow a deduction for contributions, and distributions may be tax-free
if the owner meets certain rules.
. Tax-Sheltered Annuity (403(b) Plan): A 403(b) Plan may be made available to
employees of certain public school systems and tax-exempt organizations and
permits contributions to the contract on a pre-tax basis.
. Corporate Pension and Profit-Sharing and H.R. 10 Plan: Employers and self-
employed individuals can establish pension or profit-sharing plans for
their employees or themselves and make contributions to the contract on a
pre-tax basis.
. Deferred Compensation Plan (457 Plan): Certain governmental and tax-exempt
organizations can establish a plan to defer compensation on behalf of their
employees through contributions to the contract.
If you purchase the policy as an individual and not under an individual
retirement annuity, 403(b) plan, 457 plan, or pension or profit sharing plan,
your policy is referred to as a nonqualified policy.
Withdrawals--Qualified Policies
The information herein describing the taxation of nonqualified policies does
not apply to qualified policies.
There are special rules that govern with respect to qualified policies.
Generally, these rules restrict:
. the amount that can be contributed to the policy during any year; and
. the time when amounts can be paid from the policies.
In addition, a penalty tax may be assessed on amounts withdrawn from the
policy prior to the date you reach age 59 1/2, unless you meet one of the
exceptions to this rule. You may also be required to begin taking minimum
distributions from the policy by a certain date. The terms of the plan may
limit the rights otherwise available to you under the policies. We have
provided more information in the SAI.
You should consult your legal counsel or tax adviser if you are considering
purchasing a policy for use with any retirement plan.
Withdrawals--403(b) Policies
The Internal Revenue Code limits withdrawals from certain 403(b) policies.
Withdrawals can generally only be made when an owner:
. reaches age 59 1/2
. leaves his/her job;
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<PAGE>
. dies;
. becomes disabled (as that term is defined in the Internal Revenue Code); or
. declares hardship. However, in the case of hardship, the owner can only
withdraw the premium payments and not any earnings.
Diversification and Distribution Requirements
The Internal Revenue Code provides that the underlying investments for a
variable annuity must satisfy certain diversification requirements in order to
be treated as an annuity. The policy must also meet certain distribution
requirements at the death of an owner in order to be treated as an annuity.
These diversification and distribution requirements are discussed in the SAI.
AUSA Life may modify the policy to attempt to maintain favorable tax treatment.
Withdrawals--Nonqualified Policies
If you make a withdrawal from your policy before the annuity commencement date,
the Internal Revenue Code treats that withdrawal as first coming from earnings
and then from your premium payments. When you make a withdrawal you are taxed
on the amount of the withdrawal that is earnings. Different rules apply for
annuity payments. See "Annuity Payments" below.
The Internal Revenue Code also provides that withdrawn earnings may be subject
to a penalty. The amount of the penalty is equal to 10% of the amount that is
includable in income. Some withdrawals will be exempt from the penalty. They
include any amounts:
. paid on or after the taxpayer reaches age 59 1/2;
. paid after an owner dies;
. paid if the taxpayer becomes totally disabled (as that term is defined in
the Internal Revenue Code);
. paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity;
. paid under an immediate annuity; or
. which come from premium payments made prior to August 14, 1982.
All deferred nonqualified annuity policies that are issued by AUSA Life (or its
affiliates) to the same owner during any calendar year are treated as one
annuity for purposes of determining the amount includable in the owner's income
when a taxable distribution occurs.
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:
. if distributed in a lump sum, these amounts are taxed in the same manner as
a full surrender; or
. if distributed under an annuity payment option, these amounts are taxed in
the same manner as annuity payments.
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). The same tax treatment applies to any amounts
distributed after an owner's death.
Annuity Payments
Although the tax consequences may vary depending on the annuity payment option
you select, in general, for nonqualified and certain qualified policies, only a
portion of the annuity payments you receive will be includable in your gross
income.
In general, the excludable portion of each annuity payment you receive will be
determined as follows:
. Fixed payments--by dividing the "investment in the contract" on the annuity
commencement date by the total expected value of the annuity payments for
the term of the payments. This is the percentage of each annuity payment
that is excludable.
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. Variable payments--by dividing the "investment in the contract" on the
annuity commencement date by the total number of expected periodic payments.
This is the amount of each annuity payment that is excludable.
The remainder of each annuity payment is includable in gross income. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional annuity payments is includable in gross income.
If you select more than one annuity payment option, special rules govern the
allocation of the policy's entire "investment in the contract" to each such
option, for purposes of determining the excludable amount of each payment
received under that option. We advise you to consult a competent tax adviser as
to the potential tax effects of allocating amounts to any particular annuity
payment option.
If, after the annuity commencement date, annuity payments stop because an
annuitant died, the excess (if any) of the "investment in the contract" as of
the annuity commencement date over the aggregate amount of annuity payments
received that was excluded from gross income is generally allowable as a
deduction for your last taxable year.
Transfers, Assignments or Exchanges of Policies
A transfer of ownership or assignment of a policy, the designation of an
annuitant or payee or other beneficiary who is not also the owner, the
selection of certain annuity commencement dates, or a change of annuitant, may
result in certain income or gift tax consequences to the owner that are beyond
the scope of this discussion. An owner contemplating any such transfer,
assignment, selection, or change should contact a competent tax adviser with
respect to the potential tax effects of such a transaction.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is always
the possibility that the tax treatment of the policy could change by
legislation or otherwise. You should consult a tax adviser with respect to
legal developments and their effect on the policy.
10.ADDITIONAL FEATURES
Systematic Payout Option
You can select at any time (during the accumulation phase) to receive regular
payments from your policy by using the systematic payout option. Under this
option, you can receive up to 10% (annually) of the policy value free of
surrender charges.
Payments can be made monthly, quarterly, semi-annually, or annually. Each
payment must be at least $50. Monthly and quarterly payments must be made by
electronic funds transfer directly to your checking or savings account. There
is no charge for this benefit.
Dollar Cost Averaging Program
During the accumulation phase, you may instruct us to automatically transfer
money from the dollar cost averaging fixed account option, the Endeavor Money
Market Subaccount, or the Dreyfus U.S. Government Securities Subaccount, into
any other subaccounts. There is no charge for this program.
Complete and clear instructions must be received before a dollar cost averaging
program will begin. The instructions must include:
. the subaccounts into which money from the dollar cost averaging fixed
account (or other subaccount(s) used for dollar cost averaging) is to be
transferred; and
. either the dollar amount to transfer monthly or quarterly (each transfer
must be at least $500) or the number of transfers (minimum of 6 monthly or 4
quarterly and maximum of 24 monthly or 8 quarterly).
Transfers must begin within 30 days. We will make the transfers on the 28th day
of the applicable month. You may change your allocations at anytime.
Only one dollar cost averaging program can run at one time. This means that any
addition to a dollar cost averaging program must change either the length of
the program or the dollar amount of the transfers. New instructions must be
received each time there is an addition to a dollar cost averaging program.
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Any amount in the dollar cost averaging fixed account (or other subaccount(s)
used for dollar cost averaging) for which we have not received complete and
clear instructions will remain in the dollar cost averaging fixed account (or
other such subaccount) until we receive the instructions. If we have not
received complete and clear instructions within 30 days, the interest credited
in the dollar cost averaging fixed account may be adjusted downward, but not
below the guaranteed effective annual interest rate of 3%.
Dollar cost averaging buys more accumulation units when prices are low and
fewer accumulation units when prices are high. It does not guarantee profits or
assure that you will not experience a loss. You should consider your ability to
continue the dollar cost averaging program during all economic conditions.
We may credit different interest rates for dollar cost averaging programs of
varying time periods. If you discontinue the dollar cost averaging program
before its completion, then the interest credited on amounts in the dollar cost
averaging fixed account may be adjusted downward, but not below the minimum
guaranteed effective annual interest rate of 3%.
Asset Rebalancing
During the accumulation phase you can instruct us to automatically rebalance
the amounts in your subaccounts to maintain your desired asset allocation. This
feature is called asset rebalancing and can be started and stopped at any time
free of charge. However, we will not rebalance if you are in the dollar cost
averaging program or if any other transfer is requested. If you request a
transfer, we will honor the requested transfer and discontinue asset
rebalancing. New instructions are required to start asset rebalancing. Asset
rebalancing ignores amounts in the fixed account. You can choose to rebalance
monthly, quarterly, semi-annually, or annually.
11.OTHER INFORMATION
Ownership
You, as owner of the policy, exercise all rights under the policy. You can
change the owner at any time by notifying us in writing. An ownership change
may be a taxable event.
Assignment
You can also assign the policy any time during your lifetime. AUSA Life will
not be bound by the assignment until we receive written notice of the
assignment. We will not be liable for any payment or other action we take in
accordance with the policy before we receive notice of the assignment. There
may be limitations on your ability to assign a policy. An assignment may have
tax consequences.
AUSA Life Insurance Company, Inc.
AUSA Life Insurance Company, Inc. was incorporated under the laws of the State
of New York on October 3, 1947. It is engaged in the sale of life and health
insurance and annuity policies. AUSA Life is a Transamerica Company and a
wholly-owned indirect subsidiary of AEGON USA, Inc., which conducts most 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, the securities of which
are publicly traded. AEGON N.V., a holding company, conducts its business
through subsidiary companies engaged primarily in the insurance business. AUSA
Life is licensed in the District of Columbia, and in all states except Hawaii.
All obligations arising under the policies, including the promise to make
annuity payments, are general corporate obligations of AUSA Life.
The Separate Account
AUSA Life established a separate account, called the AUSA Endeavor Variable
Annuity Account, under the laws of the State of New York on September 27, 1994.
The separate account receives and currently invests the premium payments that
are allocated to it for investment in shares of the underlying mutual fund
portfolios.
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The separate account is registered with the SEC as a unit investment trust
under the 1940 Act. However, the SEC does not supervise the management, the
investment practices, or the policies of the separate account or AUSA Life.
Income, gains and losses, whether or not realized from assets allocated to the
separate account, are in accordance with the policies, credited to or charged
against the separate account without regard to AUSA Life's other income, gains
or losses.
The assets of the separate account are held in AUSA Life's name on behalf of
the separate account and belong to AUSA Life. However, those assets that
underlie the policies are not chargeable with liabilities arising out of any
other business AUSA Life may conduct. The separate account includes other
subaccounts that are not available under these policies.
Mixed and Shared Funding
Before making a decision concerning the allocation of premium payments to a
particular subaccount, please read the prospectuses for the underlying funds.
The underlying funds are not limited to selling their shares to this separate
account and can accept investments from any separate account or qualified
retirement plan of an insurance company. Since the portfolios of the underlying
funds are available to registered separate accounts offering variable annuity
products of AUSA Life, as well as variable annuity and variable life products
of other insurance companies, there is a possibility that a material conflict
may arise between the interests of this separate account and one or more of the
other accounts of another participating insurance company. In the event of a
material conflict, the affected insurance companies, including AUSA Life, agree
to take any necessary steps to resolve the matter. This includes removing their
separate accounts from the underlying funds. See the underlying funds'
prospectuses for more details.
Reinstatements
You may surrender your policy and transfer your money directly to another life
insurance company (sometimes referred to as a 1035 Exchange or a trustee-to-
trustee transfer). You may also request us to reinstate your policy after such
a transfer by returning the same total dollar amount of funds to the applicable
investment choices. The dollar amount will be used to purchase new accumulation
units at the then-current price. Because of changes in market value, your new
accumulation units may be worth more or less than the units you previously
owned. We recommend that you consult a tax professional to explain the possible
tax consequences of exchanges and/or reinstatements.
Voting Rights
AUSA Life will vote all shares of the underlying funds in accordance with
instructions we receive from you and other owners that have voting interests in
the portfolios. We will send you and other owners written requests for
instructions on how to vote those shares. When we receive those instructions,
we will vote all of the shares in proportion to those instructions. If,
however, we determine that we are permitted to vote the shares in our own
right, we may do so.
Each person having a voting interest will receive proxy material, reports, and
other materials relating to the appropriate portfolio.
Distributor of the Policies
AFSG Securities Corporation is the principal underwriter of the policies. Like
AUSA Life, it is a Transamerica Company and an indirect wholly-owned subsidiary
of AEGON USA, Inc. It is located at 4333 Edgewood Road N.E., Cedar Rapids, IA
52499-0001. AFSG Securities Corporation is registered as a broker/dealer under
the Securities Exchange Act of 1934. It is a member of the National Association
of Securities Dealers, Inc.
Commissions of up to 6% of premium payments will be paid to broker/dealers who
sell the policies under agreements with AFSG Securities Corporation. These
commissions are not deducted from premium payments. In addition, certain
production, persistency and managerial bonuses may be paid. AUSA Life may also
pay compensation to financial institutions for their services in connection
with the sale and servicing of the policies.
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Variations in Policy Provisions
Certain provisions of the policies may vary from the descriptions in this
prospectus in order to comply with different state laws. See your policy for
variations since any such state variations will be included in your policy or
in riders or endorsements attached to your policy.
IMSA
AUSA Life is a member of the Insurance Marketplace Standards Association
(IMSA). IMSA is an independent, voluntary organization of life insurance
companies. It promotes ethical standards in the sales and advertising of
individual life insurance and annuity products. Companies must undergo a
rigorous self and independent assessment of their practices to become a member
of IMSA. The IMSA logo in our sales literature shows our ongoing commitment to
these standards.
Legal Proceedings
There are no legal proceedings to which the separate account is a party or to
which the assets of the account are subject. AUSA Life, like other life
insurance companies, is involved in lawsuits. In some class action and other
lawsuits involving other insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, AUSA Life believes that at the
present time there are no pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the separate account or AUSA Life.
Financial Statements
The financial statements of AUSA Life and the subaccounts are included in the
SAI.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Glossary of Terms
The Policy--General Provisions
Certain Federal Income Tax Consequences
Investment Experience
Historical Performance Data
Published Ratings
State Regulation of AUSA Life
Records and Reports
Distribution of the Policies
Voting Rights
Other Products
Custody of Assets
Legal Matters
Independent Auditors
Other Information
Financial Statements
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APPENDIX A
CONDENSED FINANCIAL INFORMATION
The accumulation unit values and the number of accumulation units outstanding
for each mutual fund subaccount from the date of inception are shown in the
following tables.
Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.55%)
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation
at Beginning at End of Units at End
of Year Year of Year
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Small Cap Value Subaccount
1999................................ $ 1.781675 $ 2.270110 92,417.541
1998(/6/)........................... $ 1.780884 $ 1.781675 119,463.216
-------------------------------------------------------------------------------
Dreyfus U.S. Government Securities
Subaccount
1999................................ $ 1.283673 $ 1.253119 123,620.377
1998(/6/)........................... $ 1.231625 $ 1.283673 38,151.310
-------------------------------------------------------------------------------
Endeavor Asset Allocation Subaccount
1999................................ $ 2.529863 $ 3.148754 77,640.163
1998(/6/)........................... $ 2.168718 $ 2.529863 31,242.813
-------------------------------------------------------------------------------
Endeavor Money Market Subaccount
1999................................ $ 1.236621 $ 1.275724 219,081.992
1998(/6/)........................... $ 1.196982 $ 1.236621 52,322.018
-------------------------------------------------------------------------------
Endeavor Enhanced Index Subaccount
1999................................ $ 1.574026 $ 1.831468 511,192.617
1998(/6/)........................... $ 1.199020 $ 1.574026 202,995.681
-------------------------------------------------------------------------------
Endeavor High Yield Subaccount
1999(/7/)........................... $ 1.000000 $ 1.000739 1,010.192
-------------------------------------------------------------------------------
Endeavor Janus Growth Subaccount
1999................................ $31.822714 $49.862043 55,903.910
1998(/6/)........................... $19.428802 $31.822714 18,019.791
-------------------------------------------------------------------------------
Jennison Growth Subaccount*
1999................................ $ 1.197263 $ 1.235481 89,492.709
1998(/6/)........................... $ 1.136598 $ 1.197263 70,958.668
-------------------------------------------------------------------------------
Capital Guardian Value Subaccount*
1999................................ $ 2.207657 $ 2.107532 173,486.830
1998(/6/)........................... $ 2.022644 $ 2.207657 106,211.103
-------------------------------------------------------------------------------
Capital Guardian Global Subaccount*
1999(/7/)........................... $ 1.000000 $ 1.530432 8,817.278
-------------------------------------------------------------------------------
T. Rowe Price Equity Income
Subaccount
1999................................ $ 2.060734 $ 2.099660 331,752.822
1998(/6/)........................... $ 1.885394 $ 2.060734 145,891.829
-------------------------------------------------------------------------------
T. Rowe Price Growth Stock Subaccount
1999................................ $ 2.586964 $ 3.112902 380,267.267
1998(/6/)........................... $ 2.011973 $ 2.586964 206,657.078
-------------------------------------------------------------------------------
T. Rowe Price International Stock
Subaccount
1999................................ $ 1.529380 $ 1.993345 113,650.831
1998(/6/)........................... $ 1.313338 $ 1.529380 39,361.912
</TABLE>
30
<PAGE>
Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation
at Beginning at End of Units at End
of Year Year of Year
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Small Cap Value Subaccount
1999............................... $ 1.785929 $ 2.278888 2,799,571.395
1998............................... $ 1.851229 $ 1.785929 2,915,575.262
1997............................... $ 1.496065 $ 1.851229 2,294,637.110
1996............................... $ 1.206843 $ 1.496065 1,239,443.264
1995............................... $ 1.072941 $ 1.206843 535,283.029
-------------------------------------------------------------------------------
Dreyfus U.S. Government Securities
Subaccount
1999............................... $ 1.286733 $ 1.255919 1,896,613.591
1998............................... $ 1.215033 $ 1.286733 1,728,824.679
1997............................... $ 1.128769 $ 1.215033 1,093,934.793
1996............................... $ 1.124292 $ 1.128769 589,779.900
1995(/1/).......................... $ 0.985803 $ 1.124292 204,813.593
-------------------------------------------------------------------------------
Endeavor Asset Allocation Subaccount
1999............................... $ 2.535888 $ 3.160924 2,173,009.491
1998............................... $ 2.171948 $ 2.535888 2,197,971.735
1997............................... $ 1.833135 $ 2.171948 1,871,808.286
1996............................... $ 1.577873 $ 1.833135 1,123,469.170
1995............................... $ 1.301669 $ 1.577873 607,869.454
-------------------------------------------------------------------------------
Endeavor Money Market Subaccount
1999............................... $ 1.239556 $ 1.280646 1,064,268.075
1998............................... $ 1.196418 $ 1.239556 1,017,991.339
1997............................... $ 1.154219 $ 1.196418 611,981.762
1996............................... $ 1.115718 $ 1.154219 665,174.123
1995............................... $ 1.072424 $ 1.115718 271,034.756
-------------------------------------------------------------------------------
Endeavor Enhanced Index Subaccount
1999............................... $ 1.577775 $ 1.838549 1,383,754.938
1998............................... $ 1.217647 $ 1.577775 1,007,218.727
1997(/5/).......................... $ 1.000000 $ 1.217647 422,227.210
-------------------------------------------------------------------------------
Endeavor High Yield Subaccount
1999(/7/).......................... $ 1.000000 $ 1.003083 1,008.622
-------------------------------------------------------------------------------
Endeavor Janus Growth Subaccount
1999............................... $31.898334 $50.054351 644,989.894
1998............................... $19.665157 $31.898334 636,917.148
1997............................... $16.964068 $19.665157 557,897.978
1996............................... $14.583843 $16.964068 306,855.075
1995............................... $10.051117 $14.583843 97,436.321
-------------------------------------------------------------------------------
Jennison GrowthSubaccount*
1999............................... $ 1.200101 $ 1.240246 931,919.689
1998............................... $ 1.156993 $ 1.200101 886,891.881
1997............................... $ 1.004355 $ 1.156993 869,832.105
1996(/4/).......................... $ 1.000000 $ 1.004355 178,913.412
-------------------------------------------------------------------------------
Capital Guardian Value Subaccount*
1999............................... $ 2.212928 $ 2.115695 3,372,816.213
1998............................... $ 2.086130 $ 2.212928 3,668,656.747
1997............................... $ 1.694854 $ 2.086130 2,981,906.712
1996............................... $ 1.387903 $ 1.694854 1,565,599.143
1995............................... $ 1.045610 $ 1.387903 547,233.586
-------------------------------------------------------------------------------
Capital Guardian Global Subaccount*
1999(/7/).......................... $ 1.000000 $ 1.534754 33,757.092
-------------------------------------------------------------------------------
T. Rowe Price Equity Income
Subaccount
1999............................... $ 2.065623 $ 2.107761 3,519,301.115
1998............................... $ 1.925022 $ 2.065623 3,702,824.740
1997............................... $ 1.521680 $ 1.925022 2,982,510.532
1996............................... $ 1.287240 $ 1.521680 1,387,607.312
1995(/2/).......................... $ 1.000000 $ 1.287240 293,619.530
-------------------------------------------------------------------------------
T. Rowe Price Growth Stock
Subaccount
1999............................... $ 2.593121 $ 3.124914 2,752,366.635
1998............................... $ 2.043480 $ 2.593121 2,640,487.984
1997............................... $ 1.611613 $ 2.043480 1,925,118.021
1996............................... $ 1.353339 $ 1.611613 964,658.085
1995(/3/).......................... $ 1.000000 $ 1.353339 189,613.999
-------------------------------------------------------------------------------
T. Rowe Price International Stock
Subaccount
1999............................... $ 1.533035 $ 2.001071 4,799,569.572
1998............................... $ 1.346560 $ 1.533035 4,958,037.992
1997............................... $ 1.330640 $ 1.346560 4,334,553.810
1996............................... $ 1.171039 $ 1.330640 2,084,832.841
1995............................... $ 1.073958 $ 1.171039 681,093.799
-------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
(/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.
(/5/) Period from May 1, 1997 through December 31, 1997.
(/6/) Period from January 14, 1998 through December 31, 1998.
(/7/) Period from June 21, 1999 through December 31, 1999.
* Prior to October 9, 2000, the Capital Guardian Global Subaccount was called
the Endeavor Select Subaccount; the Capital Guardian Value Subaccount was
called the Endeavor Value Equity Subaccount; and the Jennison Growth
Subaccount was called the Endeavor Opportunity Value Subaccount. Their
names were changed at that time to reflect changes in the underlying
portfolios' advisors and investment policies. The unit values shown reflect
the portfolios' performance before those changes.
The target account had not commended operations as of December 31, 1999,
therfore comparable data is not available. Effective October 9, 2000, the
target account was closed.
The Transamerica VIF Growth Subaccount, Janus Aspen--Aggressive Growth
Subaccount--Service Shares, Janus Aspen--Strategic Value Subaccount--Service
Shares, Janus Aspen--Worldwide Growth Subaccount--Service Shares, Fidelity--VIP
Equity-Income Subaccount, Fidelity--VIP II Contrafund(R) Subaccount, Fidelity--
VIP III Growth Opportunities Subaccount, Fidelity--VIP III Mid Cap Subaccount,
WRL Alger Aggressive Growth Subaccount, WRL Gabelli Global Growth Subaccount,
WRL Goldman Sachs Growth Subaccount, WRL Great Companies--Global/2/ Subaccount,
WRL Janus Global Subaccount, WRL NWQ Value Equity Subaccount, WRL Pilgrim
Baxter Mid Cap Growth Subaccount , WRL Salomon All Cap Subaccount, WRL T. Rowe
Price Dividend Growth Subaccount and WRL T. Rowe Price Small Cap Subaccount had
not commenced operations as of December 31, 1999, therefore, comparable data is
not available.
32
<PAGE>
APPENDIX B
HISTORICAL PERFORMANCE DATA
Standard Performance Data
AUSA Life may advertise historical yields and total returns for the subaccounts
of the separate account. In addition, AUSA Life may advertise the effective
yield of the subaccount investing in the Endeavor Money Market Portfolio (the
"Endeavor Money Market Subaccount"). These figures will be calculated according
to standardized methods prescribed by the SEC. They are based on historical
earnings and are not intended to indicate future performance.
Endeavor Money Market Subaccount. The yield of the Endeavor 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 mutual fund subaccount (other than the
Endeavor Money Market Subaccount) for a policy refers to the annualized income
generated by an investment under a policy in the subaccount over a specified
thirty-day period. The yield is calculated by assuming that the income
generated by the investment during that thirty-day period is generated each
thirty-day period over a 12-month period and is shown as a percentage of the
investment.
The total return of a subaccount refers to return quotations assuming an
investment under a policy has been held in the subaccount for various periods
of time including 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 last 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, the average annual total returns for periods from inception of the
subaccounts to December 31, 1999, and for the one and five year periods ended
December 31, 1999, are shown in Table 1 below. Total returns shown reflect
deductions for the mortality and expense risk fee and administrative charges.
Performance figures may reflect the 1.25% mortality and expense risk fee for
the Annual Step-Up Death Benefits, or the 1.10% mortality and expense risk fee
for the Return of Premium Death Benefit. Standard total return calculations
will reflect the effect of surrender charges that may be applicable to a
particular period.
33
<PAGE>
TABLE 1--A
Standard Average Annual Total Returns(/1/)
(Assuming A Surrender Charge)
--------------------------------------------------------------------------------
Annual Step-Up Death Benefit
(Total Separate Account Annual Expenses: 1.55%)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Inception
of the
1 Year 5 Year Subaccount Subaccount
Ended Ended to Inception
Subaccount 12/31/99 12/31/99 12/31/99 Date
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Guardian
Global(/2/)................. N/A N/A 20.07% June 21, 1999
Capital Guardian U.S.
Equity(/3/)................. N/A N/A N/A October 9, 2000
Capital Guardian Value(/2/).. (10.00%) N/A 14.75% January 1, 1995
Dreyfus Small Cap
Value(/4/).................. 22.14% N/A 15.88% January 1, 1995
Dreyfus U.S. Government
Securities.................. (7.83%) N/A 2.87% June 16, 1995
Endeavor Asset Allocation.... 19.17% N/A 19.05% January 1, 1995
Endeavor Enhanced Index...... 11.02% N/A 24.36% May 1, 1997
Endeavor High Yield.......... N/A N/A (5.93%) June 21, 1999
Endeavor Janus Growth(/5/)... 51.59% N/A 37.56% January 1, 1995
Jennison Growth(/2/)......... (2.23%) N/A 6.15% December 13, 1996
T. Rowe Price Equity Income.. (3.54%) N/A 14.58% June 28, 1995
T. Rowe Price Growth Stock... 15.01% N/A 23.47% April 28, 1995
T. Rowe Price International
Stock(/6/).................. 25.08% N/A 12.85% January 1, 1995
Janus Aspen--Aggessive
Growth--Service
Shares(/7/)................. N/A N/A N/A N/A
Janus Aspen--Strategic
Value--Service Shares(/7/).. N/A N/A N/A N/A
Janus Aspen--Worldwide
Growth--Service
Shares(/7/)................. N/A N/A N/A N/A
Transamerica VIF
Growth(/7/)................. N/A N/A N/A May 1, 2000
Fidelity--VIP Equity-Income--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
Fidelity--VIP II
Contrafund(R)--Service Class
2(/7/)...................... N/A N/A N/A May 1, 2000
Fidelity--VIP III Growth
Opportunities--Service Class
2(/7/)...................... N/A N/A N/A May 1, 2000
Fidelity--VIP III Mid Cap--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
WRL Alger Aggressive
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Gabelli Global
Growth(/7/)................. N/A N/A N/A N/A
WRL Goldman Sachs
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Great Companies--
Global/2/(/7/).............. N/A N/A N/A N/A
WRL Janus Global(/7/)(/8/)... N/A N/A N/A May 1, 2000
WRL NWQ Value Equity(/7/).... N/A N/A N/A May 1, 2000
WRL Pilgrim Baxter Mid Cap
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Salomon All Cap(/7/)..... N/A N/A N/A May 1, 2000
WRL T. Rowe Price Dividend
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL T. Rowe Price Small
Cap(/7/).................... N/A N/A N/A May 1, 2000
</TABLE>
34
<PAGE>
TABLE 1-B
Standard Average Annual Total Returns(/1/)
(Assuming A Surrender Charge)
--------------------------------------------------------------------------------
Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Inception
of the
1 Year 5 Year Subaccount Subaccount
Ended Ended to Inception
Subaccount 12/31/99 12/31/99 12/31/99 Date
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Guardian
Global(/2/)................. N/A N/A 20.17% June 21, 1999
Capital Guardian U.S.
Equity(/3/)................. N/A N/A N/A October 9, 2000
Capital Guardian Value(/2/).. (9.86%) N/A 14.92% January 1, 1995
Dreyfus Small Cap
Value(/4/).................. 22.33% N/A 16.05% January 1, 1995
Dreyfus U.S.Government
Securities.................. (7.85%) N/A 2.99% June 16, 1995
Endeavor Asset Allocation.... 19.36% N/A 19.23% January 1, 1995
Endeavor Enhanced Index...... 11.19% N/A 24.54% May 1, 1997
Endeavor High Yield.......... N/A N/A (5.85%) June 21, 1999
Endeavor Janus Growth(/5/)... 51.82% N/A 37.77% January 1, 1995
Jennison Growth(/2/)......... (2.07%) N/A 6.31% December 13, 1996
T.Rowe Price Equity Income... (3.39%) N/A 14.75% June 28, 1995
T. Rowe Price Growth Stock... 15.19% N/A 23.66% April 28, 1995
T. Rowe Price International
Stock(/6/).................. 25.28% N/A 13.02% January 1, 1995
Janus Aspen--Aggressive
Growth--Service
Shares(/7/)................. N/A N/A N/A N/A
Janus Aspen--Strategic
Value--Service Shares(/7/).. N/A N/A N/A N/A
Janus Aspen--Worldwide
Growth--Service
Shares(/7/)................. N/A N/A N/A N/A
Transamerica VIF
Growth(/7/)................. N/A N/A N/A May 1, 2000
Fidelity--VIP Equity-Income--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
Fidelity--VIP II
Contrafund(R)--Service Class
2(/7/)...................... N/A N/A N/A May 1, 2000
Fidelity--VIP III Growth
Opportunities--Service Class
2(/7/)...................... N/A N/A N/A May 1, 2000
Fidelity--VIP III Mid Cap--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
WRL Alger Aggressive
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Gabelli Global
Growth(/7/)................. N/A N/A N/A N/A
WRL Goldman Sachs
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Great Companies--
Global/2/(/7/).............. N/A N/A N/A N/A
WRL Janus Global(/7/)(/8/)... N/A N/A N/A May 1, 2000
WRL NWQ Value Equity(/7/).... N/A N/A N/A May 1, 2000
WRL Pilgrim Baxter Mid Cap
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Salomon All Cap(/7/)..... N/A N/A N/A May 1, 2000
WRL T. Rowe Price Dividend
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL T. Rowe Price Small
Cap(/7/).................... N/A N/A N/A May 1, 2000
</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
35
<PAGE>
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/) Prior to October 9, 2000, the Capital Guardian Global Subaccount was
called the Endeavor Select Subaccount; the Capital Guardian Value
Subaccount was called the Endeavor Value Equity Subaccount; and the
Jennison Growth Subaccount was called the Endeavor Opportunity Value
Subaccount. Their names were changed at that time to reflect changes in
the underlying portfolios' advisors and investment policies. The
performance figures shown reflect the portfolios' performance before those
changes.
(/3/) Effective October 9, 2000, shares of each series of the target account
were liquidated and the proceeds were used to purchase shares of the
Capital Guardian U.S. Equity Portfolio. This was a fundamental change in
the structure of the target account from an actively managed account to a
passive unit investment trust. In addition, Capital Guardian U.S. Equity
has a different subadviser and fundamentally different investment
policies. Therefore, no performance history is given for periodsprior to
October 9, 2000 because such history is not relevant or applicable to the
Capital Guardian U.S. Equity Subaccount. See the SAI for performance
information for the target account prior to October 9, 2000.
(/4/) Effective September 16, 1996, The Dreyfus Corporation became the adviser
to the Dreyfus Small Cap Value Portfolio, formerly known as Quest for
Value Small Cap Portfolio. The Portfolio was previously advised by OpCap
Advisors.
(/5/) Effective April 30, 1999, shares of the WRL Janus Growth Portfolio were
removed and replaced with shares of the Endeavor Janus Growth Portfolio.
The Endeavor Janus Growth Portfolio has the same investment objectives,
the same investment adviser (Janus Capital Corportion) and the same
advisory fees as the WRL Janus Growth Portfolio. Performance prior to May
1, 1999 reflects performance of the annuity subaccount assuming it was
invested in the WRL Janus Growth Portfolio.
(/6/) 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). Effective August 8, 2000, T. Rowe Price
International, Inc. became the adviser to the Portfolio.
(/7/) The Janus Aspen--Aggressive Growth Subaccount--Service Shares, Janus
Aspen--Strategic Value Subaccount--Service Shares, Janus Aspen--Worldwide
Growth Subaccount--Service Shares, Transamerica VIF Growth Subaccount,
Fidelity--VIP Equity-Income Subaccount, Fidelity--VIP II Contrafund(R)
Subaccount, Fidelity--VIP III Growth Opportunities Subaccount, Fidelity--
VIP III Mid Cap Subaccount, WRL Alger Aggressive Growth Subaccount, WRL
Gabelli Global Growth Subaccount, WRL Goldman Sachs Growth Subaccount, WRL
Great Companies--Global/2/ Subaccount, WRL Janus Global Subaccount, WRL
NWQ Value Equity Subaccount, WRL Pilgrim Baxter Mid Cap Growth Subaccount,
WRL Salomon All Cap Subaccount, WRL T. Rowe Price Dividend Growth
Subaccount, and WRL T. Rowe Price Small Cap Subaccount had not commenced
operations as of December 31, 1999, therefore, comparable information is
not available.
(/8/) The WRL Janus Global Subaccount is only available to owners that held an
investment in this subaccount on September 1, 2000. However, if you
withdraw all your money from this subaccount after September 1, 2000, you
may not reinvest your money in this subaccount.
The figures in the above tables may reflect waiver of advisory fees and
reimbursement of other expenses. In the absence of such waivers, the average
annual total return figures would have been lower. (See the Fee Table.)
36
<PAGE>
Non-Standard Performance Data
In addition to the standard data discussed above, similar performance data for
other periods may also be shown.
AUSA Life may present the total return data described above on a non-standard
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-standard performance data will
only be disclosed if standard performance data for the required periods is also
disclosed. Table 2 shows average annual total returns of the subaccount since
their inception reduced by all fees and charges under the policy except
surrender charges.
37
<PAGE>
TABLE 2--A
Non-Standard Average Annual Total Returns(/1/)
(Assuming No Surrender Charge)
--------------------------------------------------------------------------------
Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.55%)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Inception
of the
1 Year 5 Year Subaccount
Ended Ended to Subaccount
Subaccount 12/31/99 12/31/99 12/31/99 Inception Date
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Guardian
Global(/2/)................. N/A N/A 27.09% June 21, 1999
Capital Guardian U.S.
Equity(/3/)................. N/A N/A N/A October 9, 2000
Capital Guardian Value(/2/).. (4.54%) N/A 14.97% January 1, 1995
Dreyfus Small Cap
Value(/4/).................. 27.41% N/A 16.09% January 1, 1995
Dreyfus U.S. Government
Securities.................. (2.38%) N/A 3.43% June 16, 1995
Endeavor Asset Allocation.... 24.46% N/A 19.24% January 1, 1995
Endeavor Enhanced Index...... 16.36% N/A 25.45% May 1, 1997
Endeavor High Yield.......... N/A N/A 1.09% June 21, 1999
Endeavor Janus Growth(/5/)... 56.69% N/A 37.66% January 1, 1995
Jennison Growth(/2/)......... 3.19% N/A 7.19% December 13, 1996
T.Rowe Price Equity Income... 1.89% N/A 14.95% June 28, 1995
T. Rowe Price Growth Stock... 20.33% N/A 23.73% April 28, 1995
T. Rowe Price International
Stock(/6/).................. 30.34% N/A 13.09% January 1, 1995
Janus Aspen--Aggressive
Growth--
Service Shares(/7/)......... N/A N/A N/A N/A
Janus Aspen--Strategic
Value--Service Shares(/7/).. N/A N/A N/A N/A
Janus Aspen--Worldwide
Growth--
Service Shares(/7/)......... N/A N/A N/A N/A
TransamericaVIF Growth(/7/).. N/A N/A N/A May 1, 2000
Fi1delity--VIP Equity-
Income--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
Fidelity--VIP II
Contrafund(R)--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
Fidelity--VIP III Growth
Opportunities--Service Class
2(/7/)...................... N/A N/A N/A May 1, 2000
Fidelity--VIP III Mid Cap--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
WRL Alger Aggressive
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Gabelli Global
Growth(/7/)................. N/A N/A N/A N/A
WRL Goldman Sachs
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Great Companies--
Global/2/(/7/).............. N/A N/A N/A N/A
WRL Janus Global(/7/)(/8/)... N/A N/A N/A May 1, 2000
WRL NWQ Value Equity(/7/).... N/A N/A N/A May 1, 2000
WRL Pilgrim Baxter Mid Cap
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Salomon All Cap(/7/)..... N/A N/A N/A May 1, 2000
WRL T. Rowe Price Dividend
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL T. Rowe Price Small
Cap(/7/).................... N/A N/A N/A May 1, 2000
</TABLE>
38
<PAGE>
TABLE 2-B
Non-Standard Average Annual Total Returns(/1/)
(Assuming No Surrender Charge)
--------------------------------------------------------------------------------
Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Inception
of the
1 Year 5 Year Subaccount
Ended Ended to Subaccount
Subaccount 12/31/99 12/31/99 12/31/99 Inception Date
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Guardian
Global(/2/)................. N/A N/A 27.19% June 21, 1999
Capital Guardian U.S.
Equity(/3/)................. N/A N/A N/A October 9, 2000
Capital Guardian Value(/2/).. (4.39%) N/A 15.14% January 1, 1995
Dreyfus Small Cap
Value(/4/).................. 27.60% N/A 16.26% January 1, 1995
Dreyfus U.S.Government
Securities.................. (2.39%) N/A 3.54% June 16, 1995
Endeavor Asset Allocation.... 24.65% N/A 19.42% January 1, 1995
Endeavor Enhanced Index...... 16.53% N/A 25.63% May 1, 1997
Endeavor High Yield.......... N/A N/A 1.17% June 21, 1999
Endeavor Janus Growth(/5/)... 56.92% N/A 37.83% January 1, 1995
Jennison Growth(/2/)......... 3.35% N/A 7.35% December 13, 1996
T. Rowe Price Equity Income.. 2.04% N/A 15.12% June 28, 1995
T. Rowe Price Growth Stock... 20.51% N/A 23.91% April 28, 1995
T. Rowe Price International
Stock(/6/).................. 30.53% N/A 13.25% January 1, 1995
Janus Aspen--Aggressive
Growth--Service
Shares(/7/)................. N/A N/A N/A N/A
Janus Aspen--Strategic
Value--Service Shares(/7/).. N/A N/A N/A N/A
Janus Aspen--Worldwide
Growth--Service
Shares(/7/)................. N/A N/A N/A N/A
Transamerica VIF
Growth(/7/)................. N/A N/A N/A May 1, 2000
Fidelity--VIP Equity-Income--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
Fidelity--VIP II
Contrafund(R)--Service Class
2(/7/)...................... N/A N/A N/A May 1, 2000
Fidelity--VIP III Growth
Opportunities--Service Class
2(/7/)...................... N/A N/A N/A May 1, 2000
Fidelity--VIP III Mid Cap--
Service Class 2(/7/)........ N/A N/A N/A May 1, 2000
WRL Alger Aggressive
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Gabelli Global
Growth(/7/)................. N/A N/A N/A N/A
WRL Goldman Sachs
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Great Companies--
Global/2/(/7/).............. N/A N/A N/A N/A
WRL Janus Global(/7/)(/8/)... N/A N/A N/A May 1, 2000
WRL NWQ Value Equity(/7/).... N/A N/A N/A May 1, 2000
WRL Pilgrim Baxter Mid Cap
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL Salomon All Cap(/7/)..... N/A N/A N/A May 1, 2000
WRL T. Rowe Price Dividend
Growth(/7/)................. N/A N/A N/A May 1, 2000
WRL T. Rowe Price Small
Cap(/7/).................... N/A N/A N/A May 1, 2000
</TABLE>
39
<PAGE>
(/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/)Prior to October 9, 2000, the Capital Guardian Global Subaccount was
called the Endeavor Select Subaccount; the Capital Guardian Value
Subaccount was called the Endeavor Value Equity Subaccount; and the
Jennison Growth Subaccount was called the Endeavor Opportunity Value
Subaccount. Their names were changed at that time to reflect changes in
the underlying portfolios' advisors and investment policies. The
performance figures shown reflect the portfolios' performance before those
changes.
(/3/)Effective October 9, 2000, shares of each series of the target account
were liquidated and the proceeds were used to purchase shares of the
Capital Guardian U.S. Equity Portfolio. This was a fundamental change in
the structure of the target account from an actively managed account to a
passive unit investment trust. In addition, Capital Guardian U.S. Equity
has a different subadviser and fundamentally different investment
policies. Therefore, no performance history is given for periods prior to
October 9, 2000 because such history is not relevant or applicable to the
Capital Guardian U.S. Equity Subaccount. See the SAI for performance
information for the target account prior to October 9, 2000.
(/4/)Effective September 16, 1996, The Dreyfus Corporation became the adviser
to the Dreyfus Small Cap Value Portfolio, formerly known as Quest for
Value Small Cap Portfolio. The Portfolio was previously advised by OpCap
Advisors.
(/5/)Effective April 30, 1999, shares of the WRL Janus Growth Portfolio were
removed and replaced with shares of the Endeavor Janus Growth Portfolio.
The Endeavor Janus Growth Portfolio has the same investment objectives,
the same investment adviser (Janus Capital Corportion) and the same
advisory fees as the WRL Janus Growth Portfolio. Performance prior to May
1, 1999 reflects performance of the annuity subaccount assuming it was
invested in the WRL Janus Growth Portfolio.
(/6/)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). Effective August 8, 2000, T. Rowe Price
International, Inc. became the adviser to the Portfolio.
(/7/)The Janus Aspen--Aggressive Growth Subaccount--Service Shares, Janus
Aspen--Strategic Value Subaccount--Service Shares, Janus Aspen--Worldwide
Growth Subaccount--Service Shares, Transamerica VIF Growth Subaccount,
Fidelity--VIP Equity-Income Subaccount, Fidelity--VIP II Contrafund(R)
Subaccount, Fidelity--VIP III Growth Opportunities Subaccount, Fidelity--
VIP III Mid Cap Subaccount, WRL Alger Aggressive Growth Subaccount, WRL
Gabelli Global Growth Subaccount, WRL Goldman Sachs Growth Subaccount, WRL
Great Companies--Global/2/ Subaccount, WRL Janus Global Subaccount, WRL
NWQ Value Equity Subaccount, WRL Pilgrim Baxter Mid Cap Growth Subaccount,
WRL Salomon All Cap Subaccount, WRL T. Rowe Price Dividend Growth
Subaccount, and WRL T. Rowe Price Small Cap Subaccount had not commenced
operations as of December 31, 1999, therefore, comparable information is
not available.
(/8/)The WRL Janus Global Subaccount is only available to owners that held an
investment in this subaccount on September 1, 2000. However, if you
withdraw all your money from this subaccount after September 1, 2000, you
may not reinvest your money in this subaccount.
40
<PAGE>
The figures in the above tables may reflect waiver of advisory fees and
reimbursement of other expenses. In the absence of such waivers, the average
annual total return figures would have been lower.
Adjusted Historical Performance Data. 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 Table 3 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. Table 3 assumes that the policy is
not surrendered, and therefore the surrender charge is not deducted.
The following information is based on the method of calculation described in
the Statement of Additional Information. The adjusted historical average annual
total returns for periods ended December 31, 1999, were as follows:
41
<PAGE>
TABLE 3--A
Adjusted Historical Average Annual Total Returns(/1/)
(Assuming No Surrender Charge)
--------------------------------------------------------------------------------
Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.55%)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10 Year Corresponding
or Portfolio
Portfolio 1 Year 5 Year Inception Inception Date
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Guardian Global.......... 45.59% N/A 24.96% February 2, 1998
Capital Guardian U.S. Equity..... N/A N/A N/A October 9, 2000
Capital Guardian Value........... (4.54%) 14.99% 11.88% May 27, 1993
Dreyfus Small Cap Value(/2/)..... 27.41% 16.09% 12.99% May 4, 1993
Dreyfus U.S. Government
Securities...................... (2.38%) 4.84% 4.01% May 9, 1994
Endeavor Asset Allocation........ 24.46% 19.15% 13.91% April 8, 1991
Endeavor Enhanced Index.......... 16.36% N/A 25.45% May 1, 1997
Endeavor High Yield.............. 4.20% N/A 0.05% June 2, 1998
Endeavor Janus Growth............ 56.69% 37.66% 35.08% May 1, 1999
Jennison Growth.................. 3.19% N/A 6.99% November 18, 1996
T. Rowe Price Equity Income...... 1.89% N/A 15.94% January 3, 1995
T. Rowe Price Growth Stock....... 20.33% N/A 25.45% January 3, 1995
T. Rowe Price International
Stock(/3/)...................... 30.34% 13.09% 8.10% April 8, 1991
Janus Aspen - Aggressive Growth -
Service Shares................. N/A N/A N/A December 31, 1999
Janus Aspen - Strategic Value -
Service Shares.................. N/A N/A N/A December 31, 1999
Janus Aspen - Worldwide
Growth - Service Shares......... N/A N/A N/A December 31, 1999
Transamerica VIF Growth(/4/)..... 35.72% 45.88% 27.77%+ February 26, 1969
Fidelity - VIP Equity - Income -
Service Class 2(/5/)............ 4.63% 16.76% 12.72%+ October 9, 1986
Fidelity - VIP II Contrafund(R)
-
Service Class 2(/5/)............ 22.27% N/A 25.76% January 3, 1995
Fidelity - VIP III Growth
Opportunities - Service Class
2(/5/).......................... 2.58% N/A 19.66% January 3, 1995
Fidelity - VIP III Mid Cap
- Service Class 2(/5/)......... 46.72% N/A 50.74% December 28, 1998
WRL Alger Aggressive Growth...... 66.50% 34.56% 28.38% March 1, 1994
WRL Gabelli Global Growth........ N/A N/A N/A September 1, 2000
WRL Goldman Sachs Growth......... N/A N/A 16.62% May 3, 1999
WRL Great Companies -
Global/2/...................... N/A N/A N/A September 1, 2000
WRL Janus Global................. 68.58% 30.94% 25.98% December 3, 1992
WRL NWQ Value Equity............. 6.29% N/A 9.07% May 1, 1996
WRL Pilgrim Baxter Mid Cap
Growth.......................... N/A N/A 76.30% May 3, 1999
WRL Salomon All Cap.............. N/A N/A 14.41% May 3, 1999
WRL T. Rowe Price Dividend
Growth.......................... N/A N/A (8.36%) May 3, 1999
WRL T. Rowe Price Small Cap...... N/A N/A 37.13% May 3, 1999
-------------------------------------------------------------------------------
+ Ten Year Date
</TABLE>
42
<PAGE>
TABLE 3--B
Adjusted Historical Average Annual Total Returns(/1/)
(Assuming No Surrender Charge)
--------------------------------------------------------------------------------
Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Corresponding
10 Year or Portfolio
Portfolio 1 Year 5 Year Inception Inception Date
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Guardian Global........ 45.08% N/A 25.15% February 2, 1998
Capital Guardian U.S. Equity... N/A N/A N/A October 9, 2000
Capital Guardian Value......... (4.39%) 15.14% 12.02% May 27, 1993
Dreyfus Small Cap Value(/2/)... 27.60% 16.26% 13.16% May 4, 1993
Dreyfus U.S.Government
Securities.................... (2.39%) 4.96% 4.14% May 9, 1994
Endeavor Asset Allocation...... 24.65% 19.42% 14.08% April 8, 1991
Endeavor Enhanced Index........ 16.53% N/A 25.63% May 1, 1997
Endeavor High Yield............ 4.36% N/A 0.19% June 2, 1998
Endeavor Janus Growth.......... 56.92% 37.86% 35.21% May 1, 1999
Jennison Growth................ 3.35% N/A 7.15% November 18, 1996
T. Rowe Price Equity Income.... 2.04% N/A 16.10% January 3, 1995
T. Rowe Price Growth Stock..... 20.51% N/A 25.63% January 3, 1995
T. Rowe Price International
Stock(/3/).................... 30.53% 13.25% 8.26% April 8, 1991
Janus Aspen--Aggressive
Growth--Service Shares........ N/A N/A N/A December 31, 1999
Janus Aspen--Strategic Value--
Service Shares................ N/A N/A N/A December 31, 1999
Janus Aspen--Worldwide Growth--
Service Shares................ N/A N/A N/A December 31, 1999
Transamerica VIF Growth(/4/)... 35.92% 39.58% 25.07%+ February 26, 1969
Fidelity--VIP Equity-Income--
Service Class 2(/5/).......... 4.78% 16.94% 12.89%+ October 9, 1986
Fidelity--VIP II
Contrafund(R)--Service Class
2(/5/)........................ 22.45% N/A 25.95% January 3, 1995
Fidelity--VIP III Growth
Opportunities--Service Class
2(/5/)........................ 2.74% N/A 19.83% January 3, 1995
Fidelity--VIP III Mid Cap--
Service Class 2(/5/).......... 46.94% N/A 50.96% December 28, 1998
WRL Alger Aggressive Growth.... 66.75% 34.76% 28.57% March 1, 1994
WRL Gabelli Global Growth...... N/A N/A N/A September 1, 2000
WRL Goldman Sachs Growth....... N/A N/A 16.74% May 3, 1999
WRL Great Companies--
Global/2/..................... N/A N/A N/A September 1, 2000
WRL Janus Global............... 68.82% 31.13% 26.17% December 3, 1992
WRL NWQ Value Equity........... 6.45% N/A 9.24% May 1, 1996
WRL Pilgrim Baxter Mid Cap
Growth........................ N/A N/A 76.46% May 3, 1999
WRL Salomon All Cap............ N/A N/A 14.52% May 3, 1999
WRL T. Rowe Price Dividend
Growth........................ N/A N/A (8.26%) May 3, 1999
WRL T. Rowe Price Small Cap.... N/A N/A 37.26% May 3, 1999
-------------------------------------------------------------------------------
+Ten Year Date
</TABLE>
43
<PAGE>
(/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 September 16, 1996, The Dreyfus Corporation became the adviser
to the Dreyfus Small Cap Value Portfolio, formerly known as Quest for
Value Small Cap Portfolio. The Portfolio was previously advised by OpCap
Advisors.
(/3/) 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). Effective August 8, 2000, T. Rowe Price
International, Inc. became the adviser to the Portfolio.
(/4/) The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio include
performance of its predecessor.
(/5/) Returns prior to January 12, 2000 for the portfolios are based on
historical returns for Initial Class Shares.
The figures in the above tables may reflect waiver of advisory fees and
reimbursement of other expenses. In the absence of such waivers, the average
annual total return figures would have been lower.
44
<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 offered by AUSA Life
Insurance Company, Inc. ("AUSA Life"). You may obtain a copy of the prospectus
dated October 9, 2000, 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 (SAI) is not a prospectus and should
be read only in conjunction with the prospectuses for the policy and the
underlying fund portfolios.
Dated: October 9, 2000
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GLOSSARY OF TERMS.......................................................... 3
THE POLICY--GENERAL PROVISIONS............................................. 5
Owner.................................................................... 5
Entire Policy............................................................ 5
Misstatement of Age or Sex............................................... 6
Addition, Deletion, Substitution of Investments.......................... 6
Reallocation of Annuity Units After the Annuity Commencement Date........ 6
Annuity Payment Options.................................................. 7
Death Benefit............................................................ 8
Death of Owner........................................................... 10
Assignment............................................................... 10
Evidence of Survival..................................................... 10
Non-Participating........................................................ 11
Amendments............................................................... 11
Employee and Agent Purchases............................................. 11
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 11
Tax Status of the Policy................................................. 11
Taxation of AUSA Life.................................................... 15
INVESTMENT EXPERIENCE...................................................... 15
Accumulation Units....................................................... 16
Annuity Unit Value and Annuity Payment Rates............................. 17
HISTORICAL PERFORMANCE DATA................................................ 19
Money Market Yields...................................................... 19
Other Subaccount Yields.................................................. 20
Total Returns............................................................ 21
Other Performance Data................................................... 21
Adjusted Historical Performance Data..................................... 22
PUBLISHED RATINGS.......................................................... 22
STATE REGULATION OF AUSA LIFE.............................................. 22
RECORDS AND REPORTS........................................................ 22
DISTRIBUTION OF THE POLICIES............................................... 23
VOTING RIGHTS.............................................................. 23
OTHER PRODUCTS............................................................. 24
CUSTODY OF ASSETS.......................................................... 24
LEGAL MATTERS.............................................................. 24
INDEPENDENT AUDITORS....................................................... 24
OTHER INFORMATION.......................................................... 24
FINANCIAL STATEMENTS....................................................... 24
</TABLE>
-2-
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit--An accounting unit of measure used in calculating the policy
value in the separate account before the annuity commencement date.
Annuitant--The person 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 be any date at least thirty days after the policy date
and may not be later than the last day of the policy month starting after the
annuitant attains age 85, except as expressly allowed by AUSA Life. In no event
will this date be later than the last day of the policy month following
annuitant's 90th birthday.
Annuity Payment Option--A method of receiving a stream of annuity payments
selected by the owner.
Annuity Unit--An accounting unit of measure used in the calculation of the
amount of the second and each additional variable annuity payment.
Application--A written application, order form, or any other information
received electronically or otherwise upon which the policy is issued and/or is
reflected on the data or specifications page.
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 policy value less the surrender charge, service charge, and
premium tax charge, if any.
Code--The Internal Revenue Code of 1986, as amended.
Excess Premium Withdrawals--The amount of a premium payment withdrawal which is
more than the amount that may be taken free from surrender charge.
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.
Guaranteed Period Option--The one year guaranteed interest rate period of the
fixed account, which AUSA Life may offer, into which premiums may be paid or
amounts transferred.
Nonqualified Policy--A policy other than a qualified policy.
Owner--The person who may exercise all rights and privileges under the policy.
The owner during the lifetime of the annuitant and prior to the annuity
commencement date is the person designated as the owner or a successor owner in
the application or other information.
Policy Value--The policy form refers to this as "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:
. the premiums paid; minus
. partial withdrawals taken; plus
. interest credited in the fixed account; plus
-3-
<PAGE>
. accumulated gains in the separate account; minus
. losses in the separate account; minus
. any applicable service charges, premium taxes, and transfer fees.
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 owner or on the 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.
Separate Account--AUSA Endeavor Variable Annuity Account, a separate account
established and registered as a unit investment trust under the Investment
Company Act of 1940, as amended (the "1940 Act"), to which premium payments
under the policies may be allocated.
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 separate account the assets of which are
invested in a specified portfolio of the underlying funds.
Successor Owner--A person appointed by the owner to succeed to ownership of the
policy in the event of the death of the 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.
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 separate
account.
Written Notice or Written Request--Written notice, signed by the 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.
-4-
<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 a prospective purchaser.
THE POLICY--GENERAL PROVISIONS
Owner
The policy shall belong to the 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 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.
Note carefully. If the owner does not name a contingent owner, the owner's
estate will become the new owner. If no probate estate is opened because the
owner has precluded the opening of a probate estate by means of a trust or
other instrument, unless AUSA Life has received written notice of the trust as
a successor owner signed prior to the owner's death, that trust may not
exercise ownership rights to the policy. It may be necessary to open a probate
estate in order to exercise ownership rights to the policy if no contingent
owner is named in a written notice received by AUSA Life.
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 not be
effective until it is recorded in our records. Once recorded, it 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, any endorsements thereon, and the applications 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.
-5-
<PAGE>
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.
Addition, Deletion, or Substitution of Investments
AUSA Life cannot and does not guarantee that any of the subaccounts will always
be available for premium payments, allocations, or transfers. AUSA Life retains
the right, subject to any applicable law, to make certain changes in the
separate 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 separate account. To the extent required by the 1940 Act,
substitutions of shares attributable to your interest in a subaccount will not
be made without prior notice to you and the prior approval of the SEC. Nothing
contained herein shall prevent the separate 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 your requests.
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. In the event any subaccount is eliminated, AUSA Life will
notify you and request a reallocation of the amounts invested in the eliminated
subaccount. If no such reallocation is provided by you, AUSA Life will reinvest
the amounts in the subaccount that invests in the Endeavor Money Market
Portfolio (or in a similar portfolio of money market instruments), in another
subaccount, or in the fixed account, 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 separate 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 separate account associated with the
policies to another account or accounts.
Reallocation of Annuity Units After the Annuity Commencement Date
After the annuity commencement date, the owner may reallocate the value of a
designated number of annuity units of a subaccount then credited to a policy
into an equal value of annuity units of one or more other subaccounts or the
fixed 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
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<PAGE>
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. A
reallocation of annuity units may be made up to four times in any given policy
year.
After the annuity commencement date, no transfers may be made from the fixed
account to the separate account.
Annuity Payment Options
During the lifetime of the annuitant and prior to the annuity commencement
date, the owner may choose an annuity payment option or change the election,
but written notice of any election or change of election must be received by
AUSA Life at its service office at least thirty (30) days prior to the annuity
commencement date. If no election is made prior to the annuity commencement
date, annuity payments will be made under (i) Payment Option 3, life income
with level payments for 10 years certain, using the existing policy value of
the fixed account,
or (ii) under Payment Option 3, life income with variable payments for 10 years
certain using the existing policy value of the separate account, or (iii) in a
combination of (i) and (ii).
The person who elects an annuity 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 annuity payment option does not have the right to
advance or assign payments, take the payments in one sum, or make any other
change. However, the payee may be given the right to do one or more of these
things if the person who elects the option tells AUSA Life in writing and AUSA
Life agrees.
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 with projection using
projection Scale G factors, assuming a maturity date in the year 2000. ("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 additional variable annuity payments will vary based
on the investment performance of the subaccount(s) of the separate account
selected by the annuitant or beneficiary.
Determination of the First Variable Payment. The amount of the first variable
payment depends upon the sex (if consideration of sex is allowed under state
law) and adjusted age of the annuitant. The adjusted age is the annuitant's
actual age nearest birthday, on the annuity commencement date, adjusted as
follows:
<TABLE>
<CAPTION>
Annuity Commencement Date Adjusted Age
------------------------- ------------
<S> <C>
Before 2001 Actual Age
2001-2010 Actual Age minus 1
2011-2020 Actual Age minus 2
2021-2030 Actual Age minus 3
2031-2040 Actual Age minus 4
After 2040 As determined by AUSA Life
</TABLE>
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<PAGE>
This adjustment assumes an increase in life expectancy, and therefore it
results in lower payments than without such an adjustment.
Determination of Additional Variable Payments. All variable annuity payments
other than the first are calculated using annuity units and 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 on the annuity commencement date. The number of annuity units of
each particular subaccount credited to the policy then remains fixed, assuming
no transfers to or from that subaccount occur. 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. This amount 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 as of the
first business day of each month.
Death Benefit
Adjusted Partial Withdrawal. The amount of your guaranteed minimum death
benefit is reduced due to an adjusted partial withdrawal. The reduction amount
depends on the relationship between your guaranteed minimum death benefit and
policy value. The adjusted partial withdrawal in the guaranteed minimum death
benefit is the sum of (1) and (2), where:
(1) The surrender-charge-free withdrawal amount taken; and
(2) The amount that an excess partial withdrawal (the portion of a
withdrawal that can be subject to a surrender charge) reduces the
policy value times [(a) divided by (b)] where:
(a) is the amount of the death benefit prior to the excess partial
withdrawal; and
(b) is the policy value prior to the excess partial withdrawal.
The following examples describe the effect of a withdrawal on the guaranteed
minimum death benefit and policy value.
EXAMPLE 1
<TABLE>
------------------------------------------------------------------------------
<C> <S>
$75,000 current guaranteed minimum death benefit before withdrawal
------------------------------------------------------------------------------
$50,000 current policy value before withdrawal
------------------------------------------------------------------------------
$75,000 current death benefit (larger of policy value and guaranteed minimum
death benefit)
------------------------------------------------------------------------------
6% current surrender charge percentage
------------------------------------------------------------------------------
$15,000 requested withdrawal
------------------------------------------------------------------------------
$ 5,000 surrender charge-free amount (assumes 10% free percentage is
available)
------------------------------------------------------------------------------
$10,000 excess partial withdrawal--(amount subject to surrender charge)
------------------------------------------------------------------------------
$ 600 surrender charge on (excess partial withdrawal) = 0.06* 10,000
------------------------------------------------------------------------------
$10,600 reduction in policy value due to excess partial
withdrawal = 10,000 + 600
------------------------------------------------------------------------------
$20,000 adjusted partial withdrawal = $5,000 + $10,000* (75,000/50,000)
------------------------------------------------------------------------------
$55,000 new guaranteed minimum death benefit (after withdrawal) = 75,000 -
20,000
------------------------------------------------------------------------------
$34,400 new policy value (after withdrawal) = 50,000 - 5,000 - 10,600
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Summary:
--------
<S> <C>
Reduction in guaranteed minimum death benefit = $20,000
Reduction in policy value = $15,600
</TABLE>
Note, the guaranteed minimum death benefit is reduced more than the policy
value since the guaranteed minimum death benefit was greater than the policy
value just prior to the withdrawal.
EXAMPLE 2
<TABLE>
------------------------------------------------------------------------------
<C> <S>
$50,000 current guaranteed minimum death benefit before withdrawal
------------------------------------------------------------------------------
$75,000 current policy value before withdrawal
------------------------------------------------------------------------------
$75,000 current death benefit (larger of policy value and guaranteed minimum
death benefit)
------------------------------------------------------------------------------
6% current surrender charge percentage
------------------------------------------------------------------------------
$15,000 requested withdrawal
------------------------------------------------------------------------------
$ 7,500 surrender charge-free amount (assumes 10% free percentage is
available)
------------------------------------------------------------------------------
$ 7,500 excess partial withdrawal--(amount subject to surrender charge)
------------------------------------------------------------------------------
$ 450 surrender charge on (excess partial withdrawal) = 0.06* 7,500
------------------------------------------------------------------------------
$ 7,950 reduction in policy value due to excess partial
withdrawal = 7,500 + 450
------------------------------------------------------------------------------
$15,450 adjusted partial withdrawal = $7,500 + $7,950* (75,000/75,000)
------------------------------------------------------------------------------
$34,550 new guaranteed minimum death benefit (after withdrawal) = 50,000 -
15,450
------------------------------------------------------------------------------
$59,550 new policy value (after withdrawal) = 75,000 - 7,500 - 7,950
</TABLE>
<TABLE>
<CAPTION>
Summary:
--------
<S> <C>
Reduction in the guaranteed minimum
death benefit = $15,450
Reduction in policy value = $15,450
</TABLE>
Note, the guaranteed minimum death benefit and policy value are reduced by the
same amount since the policy value was higher than the guaranteed minimum death
benefit just prior to the withdrawal.
Due proof of death of the annuitant is proof that the annuitant who is the
owner died prior to the commencement of annuity payments. 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. 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 owner preventing such election.
If the annuitant was the owner, and the beneficiary was not the annuitant's
spouse, the death benefit must (1) be distributed within five years of the date
of the deceased owner's death, or (2) payments under an annuity payment option
must begin no later than one year after the deceased owner's death and must be
made for the beneficiary's lifetime or for a period certain (so
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<PAGE>
long as any period certain does not exceed the beneficiary's life expectancy).
Death proceeds which are not paid to or for the benefit of a natural person
must be distributed within five years of the date of the deceased owner's
death. If the sole beneficiary is the deceased owner's surviving spouse, such
spouse may elect to continue the policy as the new annuitant and owner instead
of receiving the death benefit.
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 amount of the policy value. If the successor owner is not the deceased
owner's spouse, however, the policy value must be distributed: (1) within five
years after the date of the deceased owner's death, or (2) payments under an
annuity payment option must begin no later than one year after the deceased
owner's death and must be made for the successor owner's lifetime or for a
period certain (so long as any period certain does not exceed the successor
owner's life expectancy).
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 law
requires consent. (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 entire value of the policy must generally be
distributed within five years of the date of death of such 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 annuity commencement date. See "Certain Federal
Income Tax Consequences" for more information about these rules. Other rules
may apply to qualified policies.
Assignment
During the lifetime of the annuitant the owner may assign any rights or
benefits provided by the policy if your policy is a nonqualified 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 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 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.
Ownership of qualified policies is restricted to comply with the Code.
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.
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<PAGE>
Non-Participating
The policy will not share in AUSA Life's surplus earnings; no dividends will be
paid.
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 giving written notice, but a refusal may result in adverse tax consequences.
Employee 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, AUSA Life may credit an amount equal to a percentage of each premium
payment to the policy due to lower acquisition costs AUSA Life experiences on
those purchases. The credit will be reported to the Internal Revenue Service as
taxable income to the employee or registered representative. AUSA Life may
offer certain employer sponsored savings plans, in its discretion, reduced fees
and charges including, but not limited to, the annual service charge, the
surrender charges, the mortality and expense risk fee and the administrative
charge for certain sales under circumstances which may result in savings of
certain costs and expenses. In addition, there may be other circumstances of
which AUSA Life is not presently aware which could result in reduced sales or
distribution expenses. Credits to the policy or reductions in these fees and
charges will not be unfairly discriminatory against any owner.
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, 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.
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.
Distribution Requirements. The Code 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
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<PAGE>
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 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 an owner,
and any death or change of such primary annuitant shall be treated as the death
of an 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.
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. The separate account,
through its underlying funds and their portfolios, intends to comply with the
diversification requirements of the Treasury. AUSA Life has entered into
agreements with each underlying fund company which requires the 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 account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includable in the
variable annuity contract owner's gross income. Several years ago, the IRS
stated in published rulings that a variable annuity 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. More recently, the Treasury Department
announced in connection with the issuance of regulations concerning investment
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., you), 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 contract 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, you have the choice of one or more subaccounts in which to allocate
premiums and policy values, and may be able to transfer among these accounts
more frequently than in such rulings. These differences could result in you
being treated as the owner of the assets of the separate account. In addition,
AUSA Life does not know what standards will be set forth, if any, in the
regulations or rulings that the Treasury
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<PAGE>
Department has stated it expects to issue. AUSA Life therefore reserves the
right to modify the policies as necessary to attempt to prevent you from being
considered the owner of a pro rata share of the assets of the separate account.
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. The withholding rate varies according to the type of distribution and the
owner's tax status. For qualified policies , "eligible rollover distributions"
from Section 401(a) plans, Section 403(a) annuities, and Section 403(b) tax-
sheltered annuities are subject to a mandatory federal income tax withholding
of 20%. An eligible rollover distribution is the taxable portion of any
distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity
form. The 20% withholding does not apply, however, if the owner chooses a
"direct rollover" from the plan to another tax-qualified plan or IRA. Different
withholding requirements may apply in the case of non-United States persons.
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; and in other specified circumstances. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into the policies or 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.
For qualified plans under section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year in which the owner (or plan participant) reaches age 70
1/2. Each owner is responsible for requesting distributions under the policy
that satisfy applicable tax rules.
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 a traditional
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
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<PAGE>
distribution of the policy value. Policies intended to qualify as a traditional
individual retirement annuities under Section 408(b) of the Code contain such
provisions. Amounts in the IRA (other than nondeductible contributions) are
taxed when distributed from the IRA. Distributions prior to age 59 1/2 (unless
certain exceptions apply) are subject to a 10% penalty tax.
No part of the funds for an individual retirement account (including a Roth
IRA) or annuity should be invested in a life insurance contract, but the
regulations thereunder allow such funds to be invested in an annuity contract
that provides a death benefit that equals the greater of the premiums paid or
the cash value for the contract. The policy provides an enhanced death benefit
that could exceed the amount of such a permissible death benefit, but it is
unclear to what extent such an enhanced death benefit could disqualify the
policy as an IRA. 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.
Roth Individual Retirement Annuities (Roth IRA). The Roth IRA, under Section
408A of the Code, contains many of the same provisions as a traditional IRA.
However, there are some differences. First, the contributions are not
deductible and must be made in cash or as a rollover or transfer from another
Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA
may be subject to tax and other special rules may apply to the rollover or
conversion and to distributions attributable thereto. You should consult a tax
adviser before combining any converted amounts with any other Roth IRA
contributions, including any other conversion amounts from other tax years. The
Roth IRA is available to individuals with earned income and whose modified
adjusted gross income is under $110,000 for single filers, $160,000 for married
filing jointly, and $10,000 for married filing separately. The amount per
individual that may be contributed to all IRAs (Roth and traditional) is
$2,000. Secondly, the distributions are taxed differently. The Roth IRA offers
tax-free distributions when made 5 tax years after the first contribution to
any Roth IRA of the individual and made after attaining age 59 1/2, to pay for
qualified first time homebuyer expenses (lifetime maximum of $10,000) or due to
death or disability. All other distributions are subject to income tax when
made from earnings and may be subject to a premature withdrawal penalty tax
unless an exception applies. Unlike the traditional IRA, there are no minimum
required distributions during the owner's lifetime; however, required
distributions at death are generally the same.
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. The policy includes a death benefit that in some cases may
exceed the greater of the premium payments or the policy value. The death
benefit could be characterized as an incidental benefit, the amount of which is
limited in any tax-sheltered annuity under section 403(b). Because the death
benefit may exceed this limitation, employers using the policy in connection
with such plans should consult their tax adviser. 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. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
retirement plans for employees
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<PAGE>
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. The policy includes a death
benefit that in some cases may exceed the greater of the premium payments or
the policy value. The death benefit could be characterized as an incidental
benefit, the amount of which is limited in an pension or profit sharing plan.
Because the death benefit may exceed this limitation, employers using the
policy in connection with such plans should consult their tax adviser.
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. 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. For non-government Section 457 plans 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, a non-government employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan obligations. In general,
all amounts received under a Section 457 plan are taxable and are subject to
federal income tax withholding as wages.
Non-Natural Persons. Pursuant to Section 72(u) of the Code, an annuity contract
held by a taxpayer other than a natural person generally will not be treated as
an annuity contract under the Code; accordingly, an owner who is not a natural
person will recognize as ordinary income for a taxable year the excess of (i)
the sum of the policy 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 where the nominal owner 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 where the annuity commencement date 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."
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 separate 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 separate 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 separate account for federal income
taxes. If, in future years, any federal income taxes are incurred by AUSA Life
with respect to the separate account, AUSA Life may make a charge to that
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.
-15-
<PAGE>
Accumulation Units
Allocations of a premium payment directed to a subaccount are credited in the
form of accumulation units. Each subaccount has a distinct accumulation unit
value. The number of units credited is determined by dividing the premium
payment or amount transferred to the subaccount by the accumulation unit value
of the subaccount as of the end of the valuation period during which the
allocation is made. For each subaccount, the accumulation 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 less any applicable charges or
fees.
Upon allocation to the selected subaccount, 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 application is completed,
whichever is later. The value of an accumulation unit for each subaccount was
arbitrarily established at $1 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.
For the separate account, 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 owner
bears this investment risk. The Net Investment Performance of a subaccount and
deduction of certain charges affects the accumulation unit value.
The investment experience factor for any subaccount for any valuation period is
determined by dividing (a) by (b), and subtracting (c) from the result, where:
(a) is the net result of:
(1) the net asset value per share of the shares held in the subaccount
determined at the end of the current valuation period, plus
(2) The per share amount of any dividend or capital gain distribution
made with respect to the shares held in the subaccount if the ex-
dividend date occurs during the current valuation period, plus or minus
(3) a per share 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 0.15% annual administrative charge.
-16-
<PAGE>
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
<TABLE>
<C> <S> <C>
Where: A = The net asset value of an underlying fund share as of the end
of the current valuation period.
Assume................................. A = $11.57
B = The per share amount of any dividend or capital gains
distribution since the end of the immediately preceding
valuation period.
Assume...................................... B = 0
C = The per share charge or credit for any taxes reserved for at
the end of the current valuation period.
Assume...................................... C = 0
D = The net asset value of an underlying fund share at the end of
the immediately preceding valuation period.
Assume................................. D = $11.40
E = The daily deduction for mortality and expense risk fees and
administrative charges, which totals 1.40% on an annual basis.
On a daily basis = 0.0000380909
</TABLE>
Then, the investment experience
factor = (11.57 + 0 - 0) - 0.0000380909 = Z = 1.0148741898
-------------
11.40
Formula and Illustration for Determining Accumulation Unit Value
Accumulation Unit Value = A * B
<TABLE>
<C> <S> <C>
Where: A = The accumulation unit value for the immediately preceding valuation
period.
Assume............................................ = $X
B = The net investment factor for the current valuation period.
Assume............................................. = Y
</TABLE>
Then, the accumulation unit value = $X * Y = $Z
Annuity Unit Value And Annuity Payment Rates
For the separate account, 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. For the separate account, 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.
-17-
<PAGE>
The investment result adjustment factor for the valuation period is the product
of discount factors of 0.99986634 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 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.
Illustration of Calculations for Annuity Unit Value
and Variable Annuity Payments
Formula and Illustration for Determining Annuity Unit Value
Annuity unit value = A * B * C
<TABLE>
<C> <S> <C>
Where: A = Annuity unit value for the immediately preceding valuation period.
Assume............................................ = $X
B = Investment Experience Factor for the valuation period for which the
annuity unit value is being calculated.
Assume............................................. = Y
C = A factor to neutralize the Assumed Investment Return of 5% built
into the annuity tables used.
Assume............................................. = Z
</TABLE>
Then, the annuity unit value is: $X * Y * Z = $Q
Formula and Illustration for Determining Amount of
First Monthly Variable Annuity Payment
First monthly variable annuity payment = A * B
-----
$1,000
Where: A = The policy value as of the annuity commencement date.
Assume........................................ = $X
B = The annuity purchase rate per $1,000 based upon the option
selected, the sex and adjusted age of the annuitant according to
the tables contained in the policy.
Assume........................................ = $Y
Then, the first monthly variable annuity payment = $X * $Y = $Z
-------
1,000
-18-
<PAGE>
Formula and Illustration for Determining the Number of Annuity Units
Represented by Each Monthly Variable Annuity Payment
Number of annuity units = A
-
B
Where: A = The dollar amount of the first monthly variable annuity payment.
Assume........................................... = $X
B = The annuity unit value for the valuation date on which the first
monthly payment is due.
Assume............................................= $Y
Then, the number of annuity units = $X = $Z
--
$Y
HISTORICAL PERFORMANCE DATA
Money Market Yields
AUSA Life may from time to time disclose the current annualized yield of the
Endeavor Money Market Subaccount, which invests in the Endeavor Money Market
Portfolio, for a 7-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the
Endeavor 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 and income other than investment income) at the end of the 7-
day period in the value of a hypothetical account; having a balance of 1 unit
of the Endeavor 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 fee. 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 and income other than investment income) 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
Endeavor Money Market Subaccount will be lower than the yield for the Endeavor
Money Market Portfolio. The yield calculations do not reflect the effect of any
premium taxes or surrender charges that may be applicable to a particular
policy. Surrender charges range from 7% to 0% of the amount of premium
withdrawn based on the policy year since payment of the premium.
-19-
<PAGE>
AUSA Life may also disclose the effective yield of the Endeavor Money Market
Subaccount for the same 7-day period, determined on a compounded basis. The
effective yield is calculated by compounding the base period return according
to the following formula:
Effective Yield = (1 + ((NCS - ES)/UV))/365///7/ - 1
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 and income other than investment income) 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 Endeavor 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 Endeavor Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio
maturity of the Endeavor Money Market Portfolio, the types and quality of
portfolio securities held by the Endeavor Money Market Portfolio and its
operating expenses. For the seven days ended December 31, 1999, the yield of
the Endeavor Money Market Subaccount was 3.82%, and the effective yield was
3.89% for the Annual Step-Up Death Benefit. For the seven days ended December
31, 1999, the yield of the Endeavor Money Market Subaccount was 4.01%, and the
effective yield was 4.09% for the Return of Premium Death Benefit.
Other Subaccount Yields
AUSA Life may from time to time advertise or disclose the current annualized
yield of one or more of the subaccounts (except the Endeavor 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* ((((NI - ES)/(U - 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 separate account, the
yield for a subaccount will be lower than the yield for its corresponding
portfolio. The yield calculations do not reflect the effect of any premium
taxes or surrender charges that may be applicable to a particular policy.
Surrender 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.
-20-
<PAGE>
The yield on amounts held in the subaccounts 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. The types and quality of
its investments and its operating expenses affect a subaccount's actual yield.
Total Returns
AUSA Life may from time to time also advertise or disclose total returns for
one or more of the subaccounts for various periods of time. One of the periods
of time will include the period measured from the date the subaccount commenced
operations. When a subaccount has been in operation for 1, 5 and 10 years,
respectively, the total return for these periods will be provided. Total
returns for other periods of time may from time to time also be disclosed.
Total returns represent the average annual compounded rates of return that
would equate an initial investment of $1,000 to the redemption value of that
investment as of the last day of each of the periods. The ending date for each
period for which total return quotations are provided will be for the most
recent month end practicable, considering the type and media of the
communication and will be stated in the communication.
Total returns will be calculated using subaccount unit values, which AUSA Life
calculates on each business day, based on the performance of the separate
account's underlying portfolio and the deductions for the mortality and expense
risk fee and the administrative charges. Standard total return calculations
will reflect the effect of surrender 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
assuming that the surrender charge percentage will 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 surrender
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.
-21-
<PAGE>
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.
Adjusted Historical Performance Data
From time to time, sales literature or advertisements may quote average annual
total returns for periods prior to the date a particular subaccount commenced
operations. Such performance information for the subaccounts will be calculated
based on the performance of the various portfolios and the assumption that the
subaccounts were in existence for the same periods as those indicated for the
portfolios, with the level of policy charges that are currently in effect.
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 Insurance Ratings Services, Moody's Investors Service 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. The ratings should not be
considered as bearing on the investment performance of assets held in the
separate account or of the safety or riskiness of an investment in the separate
account. Each year the A.M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect 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 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).
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 separate account will be maintained by
AUSA Life. As presently required by the 1940 Act and regulations promulgated
thereunder, AUSA Life will mail to all 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. Owners
will also receive confirmation of each financial transaction and any other
reports required by law or regulation.
-22-
<PAGE>
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 do so.
AFSG Securities Corporation, an affiliate of AUSA Life, is the principal
underwriter of the policies and may enter into agreements with broker/dealers
for the distribution of the policies. During 1999 and 1998 the amount paid to
AFSG Securities Corporation was $310,880.08 and $202,758.60, respectively.
Prior to May 1, 1998, AEGON USA Securities, Inc. (also an affiliate of AUSA
Life) was the principal underwriter. During 1998 and 1997, the amount paid to
AEGON USA Securities, Inc. and/or broker/dealers for their services was
$412,538.27 and $1,430,319.48, respectively.
VOTING RIGHTS
To the extent required by law, AUSA Life will vote the underlying funds' shares
held by the separate 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 none of the underlying funds hold
regular annual shareholder 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, you hold the voting interest in the
selected portfolios. The number of votes that you have the right to instruct
will be calculated separately for each subaccount. The number of votes that you
have the right to instruct for a particular subaccount will be determined by
dividing your policy 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 you or the person receiving income payments has the
right to instruct will be determined as of the date established by the
underlying fund for determining shareholders eligible to vote at the meeting of
the underlying fund. AUSA Life will solicit voting instructions by sending you,
or other persons entitled to vote, written requests for instructions prior to
that meeting in accordance with procedures established by the underlying fund.
Portfolio shares as to which no timely instructions are received and shares
held by AUSA Life in which you, 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.
-23-
<PAGE>
OTHER PRODUCTS
AUSA Life may make other variable annuity policies available that may also be
funded through the separate account. These variable annuity policies may have
different features, such as different investment options or charges.
CUSTODY OF ASSETS
The assets of each of the subaccounts are held by AUSA Life. The assets of each
of the subaccounts 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 separate 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.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP, of Washington D.C. has provided legal advice
for AUSA Life relating to certain matters under the federal securities laws
applicable to the issue and sale of the policies.
INDEPENDENT AUDITORS
The statutory-basis financial statements of AUSA Life as of December 31, 1999
and 1998, and for each of the three years in the period ended December 31,
1999, and the financial statements of subaccounts of the AUSA Endeavor Variable
Annuity Account, which are available for investment by The Endeavor Variable
Annuity contract owners as of December 31, 1999, and for each of the two years
in the period then ended, included in this SAI have been audited by Ernst &
Young LLP, Independent Auditors, 801 Grand Avenue, Suite 3400, Des Moines,
Iowa, 50309.
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 SAI. Not all of the information set forth in the
Registration Statement, amendments and exhibits thereto has been included in
the prospectus or this SAI. Statements contained in the prospectus and this SAI
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 owners in the separate account will be affected
solely by the investment results of the selected subaccount(s). Financial
statements of certain subaccounts of the AUSA Endeavor Variable Annuity
Account, which are available for investment by The Endeavor Variable Annuity
contract owners, are contained herein. The statutory-basis financial statements
of AUSA Life, which are included in this SAI, 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 separate account.
-24-
<PAGE>
Financial Statements - Statutory Basis
AUSA Life Insurance Company, Inc.
Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors
<PAGE>
AUSA Life Insurance Company, Inc.
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
Contents
<TABLE>
<S> <C>
Report of Independent Auditors.................................. 1
Audited Financial Statements
Balance Sheets - Statutory Basis................................ 3
Statements of Operations - Statutory Basis...................... 5
Statements of Changes in Capital and Surplus - Statutory Basis.. 6
Statements of Cash Flow - Statutory Basis....................... 7
Notes to Financial Statements - Statutory Basis................. 8
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
AUSA Life Insurance Company, Inc.
We have audited the accompanying statutory-basis balance sheets of AUSA Life
Insurance Company, Inc., an indirect wholly-owned subsidiary of AEGON N.V., as
of December 31, 1999 and 1998 and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flow for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
"Separate Account Assets" and "Separate Account Liabilities" in the statutory-
basis balance sheets of the Company. The Separate Account financial statements
were audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the data included for the Separate Accounts,
is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Department of Insurance of the State of New York, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of AUSA Life Insurance Company, Inc. at December 31, 1999 and 1998, or the
results of its operations or its cash flows for each of the three years in the
period ended December 31, 1999.
1
<PAGE>
However, in our opinion, based on our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of AUSA Life Insurance Company, Inc. at
December 31, 1999 and 1998, and the results of its operations and its cash flow
for each of the three years in the period ended December 31, 1999, in conformity
with accounting practices prescribed or permitted by the Department of Insurance
of the State of New York.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 18, 2000
2
<PAGE>
AUSA Life Insurance Company, Inc.
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------
<S> <C> <C>
Admitted assets
Cash and invested assets:
Bonds $ 3,864,509 $ 4,151,780
Stocks:
Preferred 6,789 2,582
Common, at market (cost: $14 in 1999 and 1998) 2 2
Mortgage loans on real estate 449,603 413,107
Real estate acquired in satisfaction of debt, at cost
less accumulated depreciation ($1,239 in 1999 and
$2,474 in 1998) 16,865 33,986
Policy loans 3,276 3,181
Cash and short-term investments 81,390 61,065
Other invested assets 62,759 30,795
Short-term notes receivable from affiliates 136,300 10,400
--------------------------------
Total cash and invested assets 4,621,493 4,706,898
Receivable from affiliates 17,851 14,731
Premiums deferred and uncollected 6,572 6,408
Accrued investment income 58,103 64,859
Federal income taxes recoverable - 527
Other assets 14,901 12,567
Separate account assets 6,881,195 6,517,152
--------------------------------
Total admitted assets $11,600,115 $11,323,142
================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------
<S> <C> <C>
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 138,147 $ 109,132
Annuity 796,401 868,294
Accident and health 16,432 16,416
Policy and contract claim reserves:
Life 5,004 4,927
Accident and health 8,190 10,302
Other policyholders' funds 3,145,632 3,267,417
Remittances and items not allocated 44,643 58,724
Asset valuation reserve 82,997 84,077
Interest maintenance reserve 27,244 37,253
Deferred interest on assets purchased 733 5,230
Payable under assumption reinsurance agreement 39,118 52,837
Other liabilities 23,566 7,422
Federal income taxes payable 4,507 -
Separate account liabilities 6,874,006 6,497,865
--------------------------------
Total liabilities 11,206,620 11,019,896
Commitments and contingencies (Note 10)
Capital and surplus:
Common stock, $125 par value, 20,000 shares authorized,
issued and outstanding 2,500 2,500
Paid-in surplus 319,180 319,180
Special surplus funds 2,017 1,827
Unassigned surplus (deficit) 69,798 (20,261)
--------------------------------
Total capital and surplus 393,495 303,246
--------------------------------
Total liabilities and capital and surplus $11,600,115 $11,323,142
================================
</TABLE>
See accompanying notes.
4
<PAGE>
AUSA Life Insurance Company, Inc.
Statements of Operations - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Revenue:
Premiums and other considerations, net of
reinsurance:
Life $ 48,276 $ 22,664 $ 71,899
Annuity 1,475,991 1,132,120 1,199,470
Accident and health 29,748 32,869 39,999
Net investment income 325,049 345,660 341,540
Amortization of interest maintenance reserve 4,078 6,116 3,392
Commissions and expense allowances on
reinsurance ceded 424 302 374
Separate account fee income 51,872 43,525 -
Other income 5,531 - 17,240
-----------------------------------------------------
1,940,969 1,583,256 1,673,914
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits 32,871 32,464 39,045
Surrender benefits 1,937,450 1,117,653 1,175,051
Other benefits 21,747 20,886 14,316
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 29,016 5,762 52,500
Annuity (71,893) (42,781) 65,982
Accident and health 16 (131) (1,357)
Other 778 (67) 580
Increase (decrease) in liability for premium
and other deposit type funds (122,644) 85,461 92,280
-----------------------------------------------------
1,827,341 1,219,247 1,438,397
Insurance expenses:
Commissions 50,265 69,009 79,099
General insurance expenses 58,034 95,169 92,613
Taxes, licenses and fees 1,836 1,466 3,717
Net transfers to (from) separate accounts (79,470) 174,435 42,490
Other (16) 978 181
-----------------------------------------------------
30,649 341,057 218,100
-----------------------------------------------------
1,857,990 1,560,304 1,656,497
-----------------------------------------------------
Gain from operations before federal income tax
expense and net realized capital gains on
investments 82,979 22,952 17,417
Federal income tax expense 7,976 4,021 5,247
-----------------------------------------------------
Gain from operations before net realized
capital gains on investments 75,003 18,931 12,170
Net realized capital gains on investments (net
of related federal income taxes and amounts
transferred to interest maintenance reserve) 11,471 3,770 831
-----------------------------------------------------
Net income $ 86,474 $ 22,701 $ 13,001
=====================================================
</TABLE>
See accompanying notes.
5
<PAGE>
AUSA Life Insurance Company, Inc.
Statements of Changes in Capital and
Surplus - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Special Unassigned Total
Common Paid-in Surplus Surplus Capital
Stock Surplus Funds (Deficit) and Surplus
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $2,500 $319,180 $1,473 $ (4,246) $318,907
Net income - - 134 12,867 13,001
Change in net unrealized capital gains
(losses) - - - (2,710) (2,710)
Change in non-admitted assets - - - (8,483) (8,483)
Change in liability for reinsurance in
unauthorized companies - - - 29 29
Change in asset valuation reserve - - - (20,446) (20,446)
Net change in separate account surplus - - - (49) (49)
Prior year federal income tax adjustment - - - 59 59
---------------------------------------------------------------------------
Balance at December 31, 1997 2,500 319,180 1,607 (22,979) 300,308
Net income - - 220 22,481 22,701
Change in net unrealized capital gains
(losses) - - - 4,439 4,439
Change in non-admitted assets - - - (291) (291)
Change in liability for reinsurance in
unauthorized companies - - - 18 18
Change in asset valuation reserve - - - (16,753) (16,753)
Net change in separate account surplus - - - 824 824
Dividend to stockholder - - - (8,000) (8,000)
---------------------------------------------------------------------------
Balance at December 31, 1998 2,500 319,180 1,827 (20,261) 303,246
Net income - - 190 86,284 86,474
Change in net unrealized capital gains
(losses) - - - (2,666) (2,666)
Change in non-admitted assets - - - 8,957 8,957
Change in liability for reinsurance in
unauthorized companies - - - (394) (394)
Change in asset valuation reserve - - - 1,080 1,080
Net change in separate account surplus - - - (3,202) (3,202)
---------------------------------------------------------------------------
Balance at December 31, 1999 $2,500 $319,180 $2,017 $ 69,798 $393,495
===========================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
AUSA Life Insurance Company, Inc.
Statement of Cash Flow - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Premiums and other considerations, net of reinsurance $ 1,569,443 $ 1,191,035 $ 1,340,757
Net investment income 343,327 353,054 340,150
Life and accident and health claims (34,919) (33,979) (40,151)
Surrender benefits and other fund withdrawals (1,937,450) (1,117,653) (1,175,051)
Other benefits to policyholders (21,733) (20,876) (14,290)
Commissions, other expenses and other taxes (125,507) (169,784) (184,457)
Net transfers (to) from separate account 131,083 (130,976) (43,309)
Federal income taxes paid (2,942) (5,558) (4,704)
Other, net (26,319) (3,806) (3,744)
--------------------------------------------------------
Net cash provided by (used in) operating activities (105,017) 61,457 215,201
Investing activities
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 1,843,152 1,381,784 968,184
Common stocks 55,050 164 -
Mortgage loans on real estate 144,620 138,723 179,810
Real estate 46,449 22,067 25,104
Policy loans - - 16
Other 3,847 (21) -
--------------------------------------------------------
2,093,118 1,542,717 1,173,114
Cost of investments acquired:
Bonds and preferred stocks (1,588,268) (1,554,838) (1,260,122)
Common stocks (55,050) - (103)
Mortgage loans on real estate (178,473) (51,862) (60,722)
Real estate (27,721) (561) -
Policy loans (95) (135) (146)
Other 7,731 5,756 (17,805)
--------------------------------------------------------
(1,841,876) (1,601,640) (1,338,898)
--------------------------------------------------------
Net cash provided by (used in) investing activities 251,242 (58,923) (165,784)
Financing activities
Issuance of intercompany notes, net (125,900) (1,600) (9,400)
Dividends to stockholders - (8,000) -
--------------------------------------------------------
Net cash used in financing activities (125,900) (9,600) (9,400)
--------------------------------------------------------
Increase (decrease) in cash and short-term investments 20,325 (7,066) 40,017
Cash and short-term investments at beginning of year 61,065 68,131 28,114
--------------------------------------------------------
Cash and short-term investments at end of year $ 81,390 $ 61,065 $ 68,131
========================================================
</TABLE>
See accompanying notes.
7
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis
(Dollars in thousands)
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization
AUSA Life Insurance Company, Inc. ("the Company") is a stock life insurance
company and is 82 percent owned by First AUSA Life Insurance Company ("First
AUSA"), a wholly-owned subsidiary of AEGON USA, Inc. ("AEGON"), and 18 percent
owned by Veterans Life Insurance Company, an indirect wholly-owned subsidiary of
AEGON. AEGON is a wholly-owned subsidiary of AEGON N.V., a holding company
organized under the laws of The Netherlands. Effective September 24, 1993, First
AUSA purchased from The Dreyfus Corporation ("Dreyfus"), its entire interest in
Dreyfus Life Insurance Company and subsequently changed the name to AUSA Life
Insurance Company, Inc. On December 31, 1993, the Company entered into an
assumption reinsurance agreement with Mutual of New York ("MONY") to transfer
certain group pension business of MONY to the Company.
On October 1, 1998, the Company completed a merger with First Providian Life and
Health Insurance Company ("FPLH"), an indirect wholly-owned subsidiary of
Commonwealth General Corporation which, in turn, is an indirect wholly-owned
subsidiary of AEGON, whereby FPLH was merged directly into the Company. The
accompanying financial statements give retroactive effect as if the merger had
occurred on January 1, 1997 in conformity with the practices of the National
Association of Insurance Commissioners (NAIC) and accounting practices
prescribed or permitted by the Department of Insurance of the State of New York.
This merger was accounted for as a statutory merger, which is similar to the
pooling of interests method of accounting and, accordingly, the historical book
values carried over from the separate companies to the Company.
Nature of Business
The Company primarily sells group fixed and variable annuities and group life
coverages. The Company is licensed in 49 states and the District of Columbia and
is in the process of becoming licensed in New Jersey. Sales of the Company's
products are primarily through brokers.
Basis of Presentation
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
8
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract reserves, guarantee fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and assumptions
utilized which could have a material impact on the financial statements.
The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Department of Insurance of
the State of New York ("Insurance Department"), which practices differ in some
respects from generally accepted accounting principles. The more significant of
these differences are as follows: (a) bonds are generally reported at amortized
cost rather than segregating the portfolio into held-to-maturity (reported at
amortized cost), available-for-sale (reported at fair value), and trading
(reported at fair value) classifications; (b) acquisition costs of acquiring new
business are charged to current operations as incurred rather than deferred and
amortized over the life of the policies; (c) certain separate accounts provide
policyholders with a guaranteed return; these separate accounts are included in
the general account assets and liabilities for GAAP purposes due to the nature
of the guaranteed return, (d) policy reserves on traditional life products are
based on statutory mortality rates and interest which may differ from reserves
based on reasonable assumptions of expected mortality, interest, and withdrawals
which include a provision for possible unfavorable deviation from such
assumptions; (e) policy reserves on certain investment products use discounting
methodologies utilizing statutory interest rates rather than full account
values; (f) reinsurance amounts are netted against the corresponding asset or
liability rather than shown as gross amounts on the balance sheet; (g) deferred
income taxes are not provided for the difference between the financial statement
and income tax bases of assets and liabilities; (h) net realized gains or losses
attributed to changes in the level of interest rates in the market are deferred
and amortized over the remaining life of the bond or mortgage loan, rather than
recognized as gains or losses in the statement of operations when the sale is
completed; (i) declines in the estimated realizable value of investments are
provided for through the establishment of a formula-determined statutory
investment reserve (reported as a liability), changes to which are charged
directly to surplus, rather than through recognition in the statement of
operations for declines in value, when such declines are judged to be other than
temporary; (j) certain assets designated as "non-admitted assets" have been
charged to surplus rather than being reported as assets; (k) revenues for
universal life and investment products consist of premiums received rather than
policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed; (l)
pension expense is recorded as amounts are paid; (m) stock options settled in
cash are recorded as an expense of the Company's indirect parent rather than
charged to current operations; (n) adjustments to federal income taxes of prior
years are charged or
9
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
credited directly to unassigned surplus, rather than reported as a component of
expense in the statement of operations; and (o) gains or losses on dispositions
of business are charged or credited directly to unassigned surplus rather than
being reported in the statement of operations. The effects of these variances
have not been determined by the Company, but are presumed to be material.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification"), effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the State of New York must adopt Codification
as the prescribed basis of accounting on which domestic insurers must report
their statutory-basis results to the Insurance Department. At this time, it is
unclear whether the State of New York will adopt Codification. However, based on
current guidance, management believes that the impact of Codification will not
be material to the Company's statutory-basis financial statements.
Cash and Short-Term Investments
For purposes of the statements of cash flow, the Company considers all highly
liquid investments with remaining maturity of one year or less when purchased to
be short-term investments.
Investments
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortized costs for bonds and mortgage loans on real
estate that were acquired through the reinsurance agreement described earlier
were initially recorded at market value, consistent with the aforementioned
agreement and as prescribed by the Department of Insurance of the State of New
York. Amortization is computed using methods which result in a level yield over
the expected life of the security. The Company reviews its prepayment
assumptions on mortgage and other asset-backed securities at regular intervals
and adjusts amortization rates retrospectively when such assumptions are changed
due to experience and/or expected future patterns. Investments in preferred
stocks in good standing are reported at cost. Investments in preferred stocks
not in good standing are reported at the lower of cost or market. Common stocks
are carried at
10
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
market. Real estate is reported at cost less allowances for depreciation.
Depreciation is computed principally by the straight-line method. Policy loans
are reported at unpaid principal. Other invested assets consist principally of
investments in various joint ventures and are recorded at equity in underlying
net assets. Other "admitted assets" are valued, principally at cost, as required
or permitted by New York Insurance Laws.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. During 1999, 1998 and 1997, the Company
excluded investment income due and accrued of $261, $216 and $473, respectively,
with respect to such practices.
The Company uses interest rate swaps as part of its overall interest rate risk
management strategy for certain life insurance and annuity products. The net
interest effect of such swap transactions is reported as an adjustment of
interest income from the hedged items as incurred.
Deferred income for unrealized gains and losses on the securities valued at
market at the time of the assumption reinsurance agreement (described in Note 4)
are returned to MONY at the time of realization pursuant to the agreement.
Aggregate Policy Reserves
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using statutorily
specified interest rates and valuation methods that will provide, in the
aggregate, reserves that are greater than or equal to the minimum required by
law.
11
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality Tables.
The reserves are calculated using interest rates ranging from 2.50 to 6.50
percent and are computed principally on the Net Level Premium Valuation and the
Commissioners' Reserve Valuation Method. Reserves for universal life policies
are based on account balances adjusted for the Commissioners' Reserve Valuation
Method.
Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with life contingencies are equal to the
present value of future payments assuming interest rates ranging from 3.00 to
8.50 percent and mortality rates, where appropriate, from a variety of tables.
Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.
Separate Accounts
Assets held in trust for purchases of separate account contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. Income and gains and losses with respect to these assets
accrue to the benefit of the contract owners and, accordingly, the operations of
the separate accounts are not included in the accompanying financial statements.
Certain separate account assets and liabilities reported in the accompanying
financial statements contain contractual guarantees. Guaranteed separate
accounts represent funds invested by the Company for the benefit of individual
contract holders who are guaranteed certain returns as specified in the
contracts. Separate account asset performance different than guaranteed
requirements is either transferred to or received
12
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
from the general account and reported in the statements of operations.
Guaranteed separate account assets and liabilities are reported at estimated
fair value except for certain government and fixed-rate separate accounts, which
are carried at amortized cost. The assets and liabilities of the nonguaranteed
separate accounts are carried at estimated fair value.
Stock Option Plan
AEGON N.V. sponsors a stock option plan for eligible employees of the Company.
Under this plan, certain employees have indicated a preference to immediately
sell shares received as a result of their exercise of the stock options; in
these situations, AEGON N.V. has settled such options in cash rather than
issuing stock to these employees. These cash settlements are paid by the
Company, and AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any expense
related to this plan, as the expense is recognized by AEGON N.V. However, the
Company is allowed to record a deduction in the consolidated tax return filed by
the Company and certain affiliates.
Reclassifications
Certain reclassifications have been made to the 1999 financial statements to
conform to the 1998 and 1997 presentation.
2. Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures About Derivative Financial Instruments and Fair
Value of Financial Instruments, requires additional disclosures about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
13
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their fair
values.
Investment securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments. The fair values for equity securities are based on
quoted market prices.
Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal its carrying amount.
Short-term notes receivable from affiliates: The fair values for short-term
notes receivable from affiliates are assumed to equal their carrying value.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash flow
calculations, based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
Interest rate swaps: Estimated fair value of interest rate swaps are based upon
the pricing differential for similar swap agreements.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
14
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
The following sets forth a comparison of the fair values and carrying amounts of
the Company's financial instruments subject to the provisions of SFAS No. 107
and No. 119:
<TABLE>
<CAPTION>
December 31
1999 1998
---------------------------------- ----------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Admitted assets
Cash and short-term investments $ 81,390 $ 81,390 $ 61,065 $ 61,065
Bonds 3,864,509 3,767,465 4,151,780 4,246,901
Preferred stock 6,789 6,579 2,582 2,529
Common stock 2 2 2 2
Mortgage loans on real estate 449,603 439,799 413,107 429,716
Interest rate swap - (174) - -
Policy loans 3,276 3,276 3,181 3,181
Short-term notes receivable from
affiliates 136,000 136,300 10,400 10,400
Separate account assets 6,881,195 6,866,675 6,517,152 6,527,180
Liabilities
Investment contract liabilities 3,940,657 3,841,080 4,134,507 4,057,004
Separate account annuities 6,798,987 6,753,227 6,408,436 6,387,445
</TABLE>
3. Investments
The carrying amounts and estimated fair values of investments in debt securities
were as follows:
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated Fair
Amount Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1999
Bonds:
United States Government and agencies $ 59,439 $ 85 $ 2,589 $ 56,935
State, municipal and other government 74,897 454 1,410 73,941
Public utilities 281,024 693 9,538 272,179
Industrial and miscellaneous 2,190,297 10,886 69,634 2,131,549
Mortgage-backed and asset-backed securities
1,258,852 4,816 30,807 1,232,861
----------------------------------------------------------------
3,864,509 16,934 113,978 3,767,465
Preferred stocks 6,789 8 218 6,579
----------------------------------------------------------------
$3,871,298 $16,942 $114,196 $3,774,044
================================================================
</TABLE>
15
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated Fair
Amount Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1998
Bonds:
United States Government and agencies $ 99,834 $ 1,776 $ 285 $ 101,325
State, municipal and other government 38,387 1,427 1,625 38,189
Public utilities 355,719 10,239 825 365,133
Industrial and miscellaneous 2,398,132 88,051 25,538 2,460,645
Mortgage-backed and asset-backed securities 1,259,708 27,387 5,486 1,281,609
----------------------------------------------------------------
4,151,780 128,880 33,759 4,246,901
Preferred stocks 2,582 - 53 2,529
----------------------------------------------------------------
$4,154,362 $128,880 $33,812 $4,249,430
================================================================
</TABLE>
The carrying amounts and estimated fair values of bonds at December 31, 1999, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
--------------------------------
<S> <C> <C>
Due in one year or less $ 182,460 $ 182,521
Due after one year through five years 1,643,466 1,601,064
Due after five years through ten years 592,008 574,987
Due after ten years 187,723 176,032
--------------------------------
2,605,657 2,534,604
Mortgage-backed and asset-backed securities 1,258,852 1,232,861
--------------------------------
$3,864,509 $3,767,465
================================
</TABLE>
16
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
A detail of net investment income is presented below:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Interest on bonds and notes $290,534 $290,967 $285,730
Mortgage loans 34,863 46,027 57,659
Real estate 7,176 12,741 13,976
Dividends on equity investments - 254 223
Interest on policy loans 49 317 168
Derivative instruments (2,600) (3,265) 100
Other investment income 9,139 9,568 1,543
--------------------------------------------------
Gross investment income 339,161 356,609 359,399
Less investment expenses 14,112 10,949 17,859
--------------------------------------------------
Net investment income $325,049 $345,660 $341,540
==================================================
</TABLE>
Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Proceeds $1,843,152 $1,381,784 $968,184
==================================================
Gross realized gains $ 11,207 $ 19,871 $ 19,165
Gross realized losses (22,545) (5,974) (11,997)
--------------------------------------------------
Net realized gains (losses) $ (11,338) $ 13,897 $ 7,168
==================================================
</TABLE>
At December 31, 1999, investments with an aggregate carrying amount of $2,853
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required by
statute.
17
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
Realized investment gains (losses) for investments are summarized below:
<TABLE>
<CAPTION>
Realized
----------------------------------------------------
Year ended December 31
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Debt securities $(11,338) $ 13,897 $ 7,168
Common stock - 60 -
Preferred stock - 170 (7)
Short-term investments 373 (41) (6)
Mortgage loans on real estate 1,161 325 287
Real estate 2,463 3,967 4,059
Other invested assets 9,407 2,859 5,035
----------------------------------------------------
2,066 21,237 16,536
Federal income tax effect 3,474 20 (747)
Transfer (to) from interest maintenance
reserve 5,931 (17,487) (14,958)
----------------------------------------------------
Total realized gains $ 11,471 $ 3,770 $ 831
====================================================
</TABLE>
During 1999, the Company issued mortgage loans with interest rates ranging from
6.77% to 8.49%. The maximum percentage of any one loan to the value of the
underlying real estate at origination was 95%. No mortgage loans were non-income
producing for the previous twelve months and, accordingly, no accrued interest
related to these mortgage loans was excluded from investment income. The Company
requires all mortgage loans to carry fire insurance equal to the value of the
underlying property.
During 1999, 1998 and 1997, there were $17,959, $2,796 and $4,427, respectively,
in foreclosed mortgage loans that were transferred to real estate. At December
31, 1999 and 1998, the Company held a mortgage loan loss reserve in the asset
valuation reserve of $36,273 and $34,083, respectively. The mortgage loan
portfolio is diversified by geographic region and specific collateral property
type as follows:
18
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
<TABLE>
<CAPTION>
Geographic Distribution Property Type Distribution
-------------------------------------------------- ---------------------------------------------
December 31 December 31
1999 1998 1999 1998
--------------------- ---------------------
<S> <C> <C> <C> <C> <C>
South Atlantic 26% 22% Office 37% 37%
E. North Central 15 20 Retail 23 24
Mountain 14 20 Industrial 20 29
Mid-Atlantic 13 9 Apartment 6 4
W. South Central 12 9 Agricultural 8 2
Pacific 10 8 Other 6 4
New England 4 7
W. North Central 4 3
E. South Central 2 2
</TABLE>
At December 31, 1999, the Company had no investments, excluding U. S. Government
guaranteed or insured issues, which individually represented more than ten
percent of capital and surplus and the asset valuation reserve.
The Company utilizes interest rate swap agreements as part of its efforts to
hedge and manage fluctuations in the market value of its investment portfolio
attributable to changes in general interest rate levels and to manage duration
mismatch of assets and liabilities. The contract or notional amounts of those
instruments reflect the extent of involvement in the various types of financial
instruments.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract) that
would result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance by
a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.
At December 31, 1999 and 1998, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:
<TABLE>
<CAPTION>
Notional Amount
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Derivative securities:
Interest rate swaps:
Receive fixed - pay floating $103,700 $74,588
Receive floating- pay fixed 10,000 -
</TABLE>
19
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
4. Reinsurance
The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to meet
its obligation under the reinsurance treaty.
Premiums earned reflect the following reinsurance assumed and ceded amounts for
the year ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,548,392 $1,183,777 $1,309,731
Reinsurance assumed 8,301 6,415 6,905
Reinsurance ceded (2,678) (2,539) (5,268)
--------------------------------------------------
Net premiums earned $1,554,015 $1,187,653 $1,311,368
==================================================
</TABLE>
The Company received reinsurance recoveries in the amounts of $2,983, $2,493 and
$1,992 during 1999, 1998 and 1997, respectively.
The aggregate reserves for policies and contracts were reduced for reserve
credits for reinsurance ceded at December 31, 1999 and 1998 of $118,070 and
$143,819, respectively.
On December 31, 1993, the Company and MONY entered into an assumption
reinsurance agreement whereby all of the general account liabilities were
novated to the Company from MONY as state approvals were received. In accordance
with the agreement, MONY will receive payments relating to the performance of
the assets and liabilities that existed at the date of closing for a period of
nine years. These payments will be reduced for certain administrative expenses
as defined in the agreement. The Company will recognize operating gains and
losses on renewal premiums received after December 31, 1993 of the business in-
force at December 31, 1993, and on all new business written after that date. At
the end of nine years from the date of closing, the Company will purchase from
MONY the remaining transferred business inforce based upon a formula described
in the agreement. At December 31, 1999 and 1998, the Company owed MONY $39,118
and $52,837, respectively, which represents the amount earned by MONY under the
gain sharing calculation and certain fees for investment management services for
the respective years. In connection with the transaction, MONY purchased
$150,000 and $50,000 in Series A and Series B notes, respectively, of AEGON. The
proceeds were used to enhance the surplus of the Company. Both the Series A and
Series B notes bear a market rate of interest and mature in nine years from the
date of closing.
20
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
4. Reinsurance (continued)
AEGON provides general and administrative services for the transferred business
under a related agreement with MONY. The agreement specifies prescribed rates
for expenses to administer the business up to certain levels. In addition, AEGON
also provides investment management services on the assets underlying the new
business written by the Company while MONY continues to provide investment
management services for assets supporting the remaining policy liabilities which
were transferred at December 31, 1993.
5. Income Taxes
For federal income tax purposes, the Company joins in a consolidated income tax
return filing with certain affiliated companies. Under the terms of a tax-
sharing agreement between the Company and its affiliates, the Company computes
federal income tax expense as if it were filing a separate income tax return,
except that tax credits and net operating loss carryforwards are determined on
the basis of the consolidated group. Additionally, the alternative minimum tax
is computed for the consolidated group and the resulting tax, if any, is
allocated back to the separate companies on the basis of the separate companies'
alternative minimum taxable income.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before federal income
tax expense and net realized capital gains (losses) on investments primarily due
to differences in the statutory and tax treatment of certain investments,
deferred policy acquisition costs, stock options exercised, dividends received
deduction, carryforward (utilization) of net operating loss, IMR amortization,
and certain adjustments related to the agreement between MONY and the Company.
These adjustments caused the Company to calculate federal income tax expense
using alternative minimum tax requirements in 1998.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to net realized capital gains (losses) on
investments due to the agreement between MONY and the Company, as discussed in
Note 4 to the financial statements. In accordance with this agreement, these
gains and losses are included in the net payments MONY will receive relating to
the performance of the assets that existed at the date of closing. Accordingly,
income taxes relating to gains and losses on such assets are not provided for on
the income tax return filed by the Company.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($2,427 at December 31, 1999). To the extent dividends are paid from the
amount accumulated in the policyholders' surplus
21
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
5. Income Taxes (continued)
account, net earnings would be reduced by the amount of tax required to be paid.
Should the entire amount in the policyholders' surplus account become taxable,
the tax thereon computed at current rates would amount to approximately $849.
The Company expects to utilize a net operating loss carryforward of $32,539 in
the 1999 consolidated tax return.
In 1998, the Company reached a final settlement with the Internal Revenue
Service for years 1993 through 1995 resulting in no tax due or refunded. An
examination of 1996 and 1997 is currently in process.
6. Policy and Contract Attributes
A portion of the Company's policy reserves and other policyholders' funds relate
to liabilities established on a variety of the Company's products that are not
subject to significant mortality or morbidity risk; however, there may be
certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics, are summarized as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------- -----------------------------
Percent of Percent of
Amount Total Amount Total
--------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment $ 924,075 8% $ 912,692 9%
Subject to discretionary withdrawal at book
value less surrender charge 998,443 9 1,013,495 10
Subject to discretionary withdrawal at
market value 4,418,345 41 3,678,649 34
Subject to discretionary withdrawal at book
value (minimal or no charges or adjustments) 2,395,732 22 2,666,670 25
Not subject to discretionary withdrawal 2,121,526 20 2,416,602 22
---------------------------- -------------------------
10,858,121 100% 10,688,108 100%
=========== ========
Less reinsurance ceded 117,178 143,475
------------- -------------
Total policy reserves on annuities and
deposit fund liabilities $10,740,943 $10,544,633
============= =============
</TABLE>
22
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
Separate account assets held by the Company represent contracts where the
benefit is determined by the performance of the investments held in the separate
account. Information regarding the separate accounts of the Company as of and
for the years ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Guaranteed Non-guaranteed
Separate Separate
Account Account Total
----------------------------------------------------
<S> <C> <C> <C>
Premiums, deposits and other
considerations for the year ended
December 31, 1999 $ 205,834 $1,002,770 $1,208,604
====================================================
Reserves for separate accounts with
assets at:
Fair value $1,925,973 $4,310,332 $6,236,305
Amortized cost 562,682 - 562,682
----------------------------------------------------
Total $2,488,655 $4,310,332 $6,798,987
====================================================
Premiums, deposits and other
considerations for the year ended
December 31, 1998 $ 84,150 $ 767,676 $ 851,826
====================================================
Reserves for separate accounts with
assets at:
Fair value $2,350,983 $3,461,715 $5,812,698
Amortized cost 595,738 - 595,738
----------------------------------------------------
Total $2,946,721 $3,461,715 $6,408,436
====================================================
Premiums, deposits and other
considerations for the year ended
December 31, 1997 $ 147,638 $ 648,056 $ 795,694
====================================================
Reserves for separate accounts with
assets at:
Fair value $2,204,931 $2,767,245 $4,972,176
Amortized cost 622,703 - 622,703
----------------------------------------------------
Total $2,827,634 $2,767,245 $5,594,879
====================================================
</TABLE>
23
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
There may be certain restrictions placed upon the amount of funds that can be
withdrawn without penalty. The amount of separate account liabilities on these
products, by withdrawal characteristics, is summarized as follows:
<TABLE>
<CAPTION>
Guaranteed Non-guaranteed
Separate Separate
Account Account Total
----------------------------------------------------
<S> <C> <C> <C>
December 31, 1999
Subject to discretionary withdrawal
with market value adjustment $ 335,351 $ - $ 335,351
Subject to discretionary withdrawal at
book value less surrender charge 227,331 - 227,331
Subject to discretionary withdrawal at
market value 108,013 4,310,332 4,418,345
Not subject to discretionary withdrawal 1,817,960 - 1,817,960
----------------------------------------------------
$2,488,655 $4,310,332 $6,798,987
====================================================
December 31, 1998
Subject to discretionary withdrawal
with market value adjustment $ 345,379 $ - $ 345,379
Subject to discretionary withdrawal at
book value less surrender charge 250,359 - 250,359
Subject to discretionary withdrawal at
market value 216,935 3,461,715 3,678,650
Not subject to discretionary withdrawal 2,134,048 - 2,134,048
----------------------------------------------------
$2,946,721 $3,461,715 $6,408,436
====================================================
</TABLE>
A reconciliation of the amounts transferred to and from the separate accounts is
presented below:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
Transfers as reported in the summary of operations of
the separate accounts annual statement:
Transfers to separate accounts $ 1,207,636 $ 851,826 $ 795,663
Transfers from separate accounts (1,290,346) (679,796) (767,049)
--------------------------------------------------------
Net transfers to (from) separate accounts (82,710) 172,030 28,614
Reconciling adjustments - HUB level fees not paid to
AUSA general account 3,240 1,317 13,756
Fees paid to external fund manager - - 120
Assumption of liabilities via merger of FPLH - 1,088 -
--------------------------------------------------------
Net adjustments 3,240 2,405 13,876
--------------------------------------------------------
Net transfers as reported in the summary of operations
of the life, accident and health annual statement $ (79,470) $ 174,435 $ 42,490
========================================================
</TABLE>
24
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1999 and 1998, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:
<TABLE>
<CAPTION>
Gross Loading Net
--------------------------------------
<S> <C> <C> <C>
December 31, 1999
Life and annuity:
Ordinary direct first year business $ 400 $ 276 $ 124
Ordinary direct renewal business 6,454 1,080 5,374
Group life direct business 1,030 427 603
Credit life 42 - 42
Reinsurance ceded (15) - (15)
--------------------------------------
7,911 1,783 6,128
Accident and health:
Direct 484 - 484
Reinsurance ceded (40) - (40)
--------------------------------------
Total accident and health 444 - 444
--------------------------------------
$8,355 $1,783 $6,572
======================================
December 31, 1998
Life and annuity:
Ordinary direct first year business $ 351 $ 339 $ 12
Ordinary direct renewal business 6,760 1,087 5,673
Group life direct business 851 482 369
Credit life 37 - 37
Reinsurance ceded (6) - (6)
--------------------------------------
7,993 1,908 6,085
Accident and health:
Direct 363 - 363
Reinsurance ceded (40) - (40)
---------------------------------------
Total accident and health 323 - 323
--------------------------------------
$8,316 $1,908 $6,408
======================================
</TABLE>
At December 31, 1999 and 1998, the Company had insurance in force aggregating
$425,151 and $474,471, respectively, in which the gross premiums are less than
the net premiums required by the valuation standards established by the
Department of Insurance of the State of New York. The Company established policy
reserves of $1,250 and $1,348 to cover these deficiencies at December 31, 1999
and 1998, respectively.
25
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
7. Dividend Restrictions
The Company is subject to certain limitations relative to statutory surplus,
imposed by the State of New York, on the payment of dividends to its parent
company.
The Company paid dividends to its parent of $8,000 in 1998. The Company is not
entitled to pay out any dividends in 1999 without prior approval.
8. Retirement and Compensation Plans
The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The
pension expense is allocated among the participating companies based on the SFAS
87 expense as a percent of salaries. The benefits are based on years of service
and the employee's compensation during the highest five consecutive years of
employment. The Company's allocation of pension expense for each of the years
ended December 31, 1999, 1998 and 1997 was negligible. The plan is subject to
the reporting and disclosure requirements of the Employee Retirement Income
Security Act of 1974.
The Company's employees also participate in a contributory defined contribution
plan sponsored by AEGON which is qualified under Section 401(k) of the Internal
Revenue Service Code. Employees of the Company who customarily work at least
1,000 hours during each calendar year and meet the other eligibility
requirements are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement Income Security Act of 1974. The Company
was allocated $10, $9 and $12 of expense for the years ended December 31, 1999,
1998 and 1997, respectively.
In addition to pension benefits, the Company participates in plans sponsored by
AEGON that provide postretirement medical, dental and life insurance benefits to
employees meeting certain eligibility requirements. Portions of the medical and
dental plans are contributory. The expenses of the postretirement plans
calculated on the pay-as-you-go basis are charged to affiliates in accordance
with an intercompany cost sharing arrangement. The Company's allocation of
postretirement expenses was negligible for each of the years ended December 31,
1999, 1998 and 1997.
26
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
9. Related Party Transactions
In accordance with an agreement between AEGON and the Company, AEGON will ensure
the maintenance of certain minimum tangible net worth, operating leverage and
liquidity levels of the Company, as defined in the agreement, through the
contribution of additional capital by the Company's parent as needed.
The Company shares certain officers, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1999, 1998
and 1997, the Company paid $6,940, $5,650 and $7,330, respectively, for these
services, which approximates their costs to the affiliates.
Payable to affiliates and intercompany borrowings bear interest at the thirty-
day commercial paper rate of 5.7% at December 31, 1999. During 1999, 1998 and
1997, the Company paid net interest of $485, $232 and $142, respectively, to
affiliates.
10. Commitments and Contingencies
The Company has issued Trust (synthetic) GIC contracts to plan sponsors totaling
$186,478 and $153,146 at December 31, 1999 and 1998, respectively, pursuant to
terms under which the plan sponsor retains ownership of the assets related to
these contracts. The Company guarantees benefit responsiveness in the event that
plan benefit requests and other contractual commitments exceed plan cash flows.
The plan sponsor agrees to reimburse the Company for such benefit payments with
interest, either at a fixed or floating rate, from future plan and asset cash
flows. In return for this guarantee, the Company receives a premium which varies
based on such elements as benefit responsive exposure and contract size. The
Company underwrites the plans for the possibility of having to make benefit
payments and also must agree to the investment guidelines to ensure appropriate
credit quality and cash flow matching. Funding requirements to date have been
minimal and management does not anticipate any future material funding
requirements that would have a material effect on reported financial results.
The assets relating to such contracts are not recognized in the Company's
statutory-basis financial statements.
The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages, in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.
27
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
10. Commitments and Contingencies (continued)
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. In accordance with the purchase agreement,
assessments related to periods prior to the purchase of the Company will be paid
by Dreyfus and assessments attributable to business reinsured from MONY for
premiums received prior to the date of the transaction will be paid by MONY (see
Note 1). The Company will be responsible for assessments, if any, attributable
to premium income after the date of purchase. Assessments are charged to
operations when received by the Company except where right of offset against
other taxes paid is allowed by law; amounts available for future offsets are
recorded as an asset on the Company's balance sheet. Potential future
obligations for unknown insolvencies are not determinable by the Company. The
future obligation has been based on the most recent information available from
the National Organization of Life and Health Insurance Guaranty Associations.
The guaranty fund expense was $46, $126 and $586 for the years ended December
31, 1999, 1998 and 1997, respectively.
28
<PAGE>
Financial Statements
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Year ended December 31, 1999
with Report of Independent Auditors
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Financial Statements
Year ended December 31, 1999
Contents
Report of Independent Auditors............................................. 1
Financial Statements
Balance Sheets............................................................. 2
Statements of Operations................................................... 6
Statements of Changes in Contract Owners' Equity........................... 10
Notes to Financial Statements.............................................. 14
<PAGE>
Report of Independent Auditors
The Board of Directors and Contract Owners
of The Endeavor Variable Annuity,
AUSA Life Insurance Company, Inc.
We have audited the accompanying balance sheets of AUSA Endeavor Variable
Annuity Account (the "Separate Account", comprised of the Endeavor Money Market,
Endeavor Asset Allocation, T. Rowe Price International Stock, Endeavor Value
Equity, Dreyfus Small Cap Value, Dreyfus U.S. Government Securities, T. Rowe
Price Equity Income, T. Rowe Price Growth Stock, Endeavor Opportunity Value,
Endeavor Enhanced Index, Endeavor Janus Growth, Endeavor Select 50, and Endeavor
High Yield subaccounts), which are available for investment by contract owners
of The Endeavor Variable Annuity, as of December 31, 1999, and the related
statements of operations for the period then ended as indicated thereon and
changes in contract owners' equity for the periods indicated thereon. These
financial statements are the responsibility of the Separate Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of mutual fund shares owned as of December 31,
1999, by correspondence with the mutual fund's transfer agent. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts of AUSA Endeavor Variable Annuity which are available for investment
by contract owners of the Endeavor Variable Annuity at December 31, 1999, and
the results of their operations for the period then ended as indicated thereon
and changes in their contract owners' equity for the periods indicated thereon
in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 28, 2000
1
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Balance Sheets
December 31, 1999
<TABLE>
<CAPTION>
Endeavor
Money Market
Subaccount
-----------------
<S> <C>
Assets
Cash $ 2
Investments in mutual funds, at current market value:
Endeavor Series Trust:
Endeavor Money Market Portfolio 1,642,437
Endeavor Asset Allocation Portfolio -
T. Rowe Price International Stock Portfolio -
Endeavor Value Equity Portfolio -
Dreyfus Small Cap Value Portfolio -
Dreyfus U. S. Government Securities Portfolio -
T. Rowe Price Equity Income Portfolio -
T. Rowe Price Growth Stock Portfolio -
Endeavor Opportunity Value Portfolio -
Endeavor Enhanced Index Portfolio -
Endeavor Janus Growth Portfolio -
Endeavor Select 50 Portfolio -
Endeavor High Yield Portfolio -
-----------------
Total investments in mutual funds 1,642,437
-----------------
Total assets $1,642,439
=================
Liabilities and contract owners' equity Liabilities:
Contract terminations payable $ -
-----------------
Total liabilities -
Contract owners' equity:
Deferred annuity contracts terminable by owners 1,642,439
-----------------
Total liabilities and contract owners' equity $1,642,439
=================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
Dreyfus U. S.
Endeavor Asset T. Rowe Price Endeavor Dreyfus Small Government
Allocation International Value Equity Cap Value Securities
Subaccount Stock Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ - $ - $ - $ - $ -
- - - - -
7,113,204 - - - -
- 9,830,966 - - -
- - 7,501,568 - -
- - - 6,589,852 -
- - - - 2,536,904
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
-----------------------------------------------------------------------------------------------------------
7,113,204 9,830,966 7,501,568 6,589,852 2,536,904
-----------------------------------------------------------------------------------------------------------
$7,113,204 $9,830,966 $7,501,568 $6,589,852 $2,536,904
===========================================================================================================
$ 16 $ 142 $ 89 $ 144 $ -
-----------------------------------------------------------------------------------------------------------
16 142 89 144 -
7,113,188 9,830,824 7,501,479 6,589,708 2,536,904
-----------------------------------------------------------------------------------------------------------
$7,113,204 $9,830,966 $7,501,568 $6,589,852 $2,536,904
===========================================================================================================
</TABLE>
3
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
T. Rowe Price
Equity T. Rowe Price
Income Growth Stock
Subaccount Subaccount
----------------------------------
<S> <C> <C>
Assets
Cash $ - $ -
Investments in mutual funds, at current market value:
Endeavor Series Trust:
Endeavor Money Market Portfolio - -
Endeavor Asset Allocation Portfolio - -
T. Rowe Price International Stock Portfolio - -
Endeavor Value Equity Portfolio - -
Dreyfus Small Cap Value Portfolio - -
Dreyfus U. S. Government Securities Portfolio - -
T. Rowe Price Equity Income Portfolio 8,114,462 -
T. Rowe Price Growth Stock Portfolio - 9,784,725
Endeavor Opportunity Value Portfolio - -
Endeavor Enhanced Index Portfolio - -
Endeavor Janus Growth Portfolio - -
Endeavor Select 50 Portfolio - -
Endeavor High Yield Portfolio - -
----------------------------------
Total investments in mutual funds 8,114,462 9,784,725
----------------------------------
Total assets $ 8,114,462 $ 9,784,725
==================================
Liabilities and contract owners' equity Liabilities:
Contract terminations payable $ 48 $ 81
----------------------------------
Total liabilities 48 81
Contract owners' equity:
Deferred annuity contracts terminable by owners 8,114,414 9,784,644
----------------------------------
Total liabilities and contract owners' equity $ 8,114,462 $ 9,784,725
==================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
Endeavor Endeavor Endeavor Janus Endeavor Endeavor
Opportunity Enhanced Index Growth Select 50 High Yield
Value Subaccount Subaccount Subaccount Portfolio Portfolio
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ - $ - $ 127 $ - $ -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
1,266,387 - - - -
- 3,480,347 - - -
- - 35,071,907 - -
- - - 65,304 -
- - - - 2,023
------------------------------------------------------------------------------------------------------------
1,266,387 3,480,347 35,071,907 65,304 2,023
------------------------------------------------------------------------------------------------------------
$1,266,387 $3,480,347 $35,072,034 $65,304 $2,023
============================================================================================================
$ 10 $ 13 $ - $ 1 $ -
------------------------------------------------------------------------------------------------------------
10 13 - 1 -
1,266,377 3,480,334 35,072,034 65,303 2,023
------------------------------------------------------------------------------------------------------------
$1,266,387 $3,480,347 $35,072,034 $65,304 $2,023
============================================================================================================
</TABLE>
5
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Statements of Operations
Year ended December 31, 1999, except as noted
<TABLE>
<CAPTION>
Endeavor Money
Market
Subaccount
----------------
<S> <C>
Net investment income (loss)
Income:
Dividends $ 54,524
Expenses:
Administrative, mortality and expense risk charges 16,711
----------------
Net investment income (loss) 37,813
Net realized and unrealized capital gain (loss) from investments
Net realized capital gain from sales of investments:
Proceeds from sales 1,091,568
Cost of investments sold 1,091,568
----------------
Net realized capital gain from sales of investments -
Net change in unrealized appreciation/depreciation of investments:
Beginning of the period -
End of the period -
----------------
Net change in unrealized appreciation/depreciation of investments -
----------------
Net realized and unrealized capital gain (loss) from investments -
----------------
Increase (decrease) from operations $ 37,813
================
</TABLE>
(1) For the period January 1, 1999 through April 30, 1999, activity reflected
in this subaccount is related to investments in the Growth Portfolio of the
WRL Series Fund, Inc. As of the close of business on April 30, 1999, the
investments in the Growth Portfolio of the WRL Series Fund, Inc. were
replaced by investments in the Endeavor Janus Growth Portfolio of the
Endeavor Series Trust. The investment results of the Endeavor Janus Growth
Portfolio of the Endeavor Series Trust are reflected in this subaccount for
the period May 1, 1999 through December 31, 1999.
(2) Commencement of operations, June 21, 1999.
See accompanying notes.
6
<PAGE>
<TABLE>
<CAPTION>
Dreyfus U. S.
Endeavor Asset T. Rowe Price Endeavor Dreyfus Small Government
Allocation International Value Equity Cap Value Securities
Subaccount Stock Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,480,494 $ 200,697 $ 426,492 $ 579,837 $ 133,541
88,796 115,112 115,507 82,093 34,702
-----------------------------------------------------------------------------------------------------------
1,391,698 85,585 310,985 497,744 98,839
757,774 956,671 1,275,625 777,604 213,260
576,068 739,343 929,764 674,920 200,936
-----------------------------------------------------------------------------------------------------------
181,706 217,328 345,861 102,684 12,324
822,028 812,805 958,553 (325,370) 126,060
655,494 2,812,967 (47,927) 508,721 (39,105)
-----------------------------------------------------------------------------------------------------------
(166,534) 2,000,162 (1,006,480) 834,091 (165,165)
-----------------------------------------------------------------------------------------------------------
15,172 2,217,490 (660,619) 936,775 (152,841)
-----------------------------------------------------------------------------------------------------------
$1,406,870 $ 2,303,075 $ (349,634) $ 1,434,519 $ (54,002)
===========================================================================================================
</TABLE>
7
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Statements of Operations (continued)
<TABLE>
<CAPTION>
T. Rowe Price T. Rowe Price
Equity Income Growth Stock
Subaccount Subaccount
------------------ ----------------
<S> <C> <C>
Net investment income (loss)
Income:
Dividends $ 518,675 $ 646,509
Expenses:
Administrative, mortality and expense risk charges 118,735 115,969
------------------ ----------------
Net investment income (loss) 399,940 530,540
Net realized and unrealized capital gain (loss) from investments
Net realized capital gain from sales of investments:
Proceeds from sales 1,023,316 600,104
Cost of investments sold 699,862 332,134
------------------ ----------------
Net realized capital gain from sales of investments 323,454 267,970
Net change in unrealized appreciation/depreciation of investments:
Beginning of the period 1,032,364 1,627,770
End of the period 467,957 2,468,646
------------------ ----------------
Net change in unrealized appreciation/depreciation of investments (564,407) 840,876
------------------ ----------------
Net realized and unrealized capital gain (loss) from investments (240,953) 1,108,846
------------------ ----------------
Increase (decrease) from operations $ 158,987 $1,639,386
================== ================
</TABLE>
(1) For the period January 1, 1999 through April 30, 1999, activity reflected
in this subaccount is related to investments in the Growth Portfolio of the
WRL Series Fund, Inc. As of the close of business on April 30, 1999, the
investments in the Growth Portfolio of the WRL Series Fund, Inc. were
replaced by investments in the Endeavor Janus Growth Portfolio of the
Endeavor Series Trust. The investment results of the Endeavor Janus Growth
Portfolio of the Endeavor Series Trust are reflected in this subaccount for
the period May 1, 1999 through December 31, 1999.
(2) Commencement of operations, June 21, 1999.
See accompanying notes.
8
<PAGE>
<TABLE>
<CAPTION>
Endeavor Endeavor Endeavor Janus Endeavor Endeavor
Opportunity Enhanced Index Growth Select 50 High Yield
Value Subaccount Subaccount Subaccount (1) Portfolio (2) Portfolio (2)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 23,557 $125,500 $ - $ - $ -
17,230 40,104 376,721 178 14
-----------------------------------------------------------------------------------------------------------
6,327 85,396 (376,721) (178) (14)
116,259 571,088 3,909,487 2,245 14
102,877 439,617 2,028,664 2,167 14
-----------------------------------------------------------------------------------------------------------
13,382 131,471 1,880,823 78 -
40,842 266,268 7,143,916 - -
59,274 471,297 18,094,008 13,209 22
-----------------------------------------------------------------------------------------------------------
18,432 205,029 10,950,092 13,209 22
-----------------------------------------------------------------------------------------------------------
31,814 336,500 12,830,915 13,287 22
-----------------------------------------------------------------------------------------------------------
$ 38,141 $421,896 $12,454,194 $13,109 $ 8
===========================================================================================================
</TABLE>
9
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Statements of Changes in Contract Owners' Equity
Years ended December 31, 1999 and 1998, except as noted
<TABLE>
<CAPTION>
Endeavor Money Market Endeavor Asset T. Rowe Price International
Subaccount Allocation Subaccount Stock Subaccount
--------------------------- ---------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
--------------------------- ---------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 37,813 $ 31,229 $1,391,698 $ 411,793 $ 85,585 $ (1,178)
Net realized capital gain - - 181,706 219,224 217,328 186,963
Net change in unrealized
appreciation/depreciation of
investments - - (166,534) 111,477 2,000,162 653,025
--------------------------- ---------------------------- --------------------------
Increase (decrease) from operations 37,813 31,229 1,406,870 742,494 2,303,075 838,810
Contract transactions:
Net contract purchase payments 382,999 99,464 107,809 133,924 174,803 236,000
Transfer payments from (to)
other subaccounts or general
account 73,411 463,681 259,722 1,084,068 2,862 1,092,159
Contract terminations,
with-drawals and other deductions (178,344) - (314,063) (373,106) (310,961) (342,661)
--------------------------- ---------------------------- --------------------------
Increase (decrease) from contract
transactions 278,066 563,145 53,468 844,886 (133,296) 985,498
--------------------------- ---------------------------- --------------------------
Net increase (decrease) in
contract owners' equity 315,879 594,374 1,460,338 1,587,380 2,169,779 1,824,308
Contract owners' equity:
Beginning of the period 1,326,560 732,186 5,652,850 4,065,470 7,661,045 5,836,737
--------------------------- ---------------------------- --------------------------
End of the period $1,642,439 $1,326,560 $7,113,188 $5,652,850 $9,830,824 $7,661,045
=========================== ============================ ==========================
</TABLE>
(1) For the period January 1, 1999 through April 30, 1999 and the year ended
December 31, 1988, activity reflected in this subaccount is related to
investments in the Growth Portfolio of the WRL Series Fund, Inc. As of the
close of business on April 30, 1999, the investments in the Growth Portfolio
of the WRL Series Fund, Inc. were replaced by investments in the Endeavor
Janus Growth Portfolio of the Endeavor Series Trust. The investment results
and contract transactions of the Endeavor Janus Growth Portfolio of the
Endeavor Series Trust are reflected in this subaccount for the period May 1,
1999 through December 31, 1999.
(2) Commencement of operations, June 21, 1999.
See accompanying notes.
10
<PAGE>
<TABLE>
<CAPTION>
Endeavor Value Dreyfus Small Cap Dreyfus U. S. Government
Equity Subaccount Value Subaccount Securities Subaccount
------------------------------- ------------------------------ ------------------------------
1999 1998 1999 1998 1999 1998
------------------------------- ------------------------------ -----------------------------
<S> <C> <C> <C> <C> <C>
$ 310,985 $ 102,850 $ 497,744 $ 576,504 $ 98,839 $ 30,921
345,861 327,682 102,684 48,069 12,324 6,651
(1,006,480) (98,837) 834,091 (829,907) (165,165) 60,628
------------------------------- ------------------------------ -----------------------------
(349,634) 331,695 1,434,519 (205,334) (54,002) 98,200
142,625 352,811 181,842 289,404 136,319 58,235
(315,172) 1,879,751 (143,596) 1,356,749 253,882 852,781
(329,291) (431,951) (302,912) (268,863) (72,805) (64,873)
-------------------- --------- ------------------------------ -----------------------------
(501,838) 1,800,611 (264,666) 1,377,290 317,396 846,143
-------------------- --------- ------------------------------ -----------------------------
(851,472) 2,132,306 1,169,853 1,171,956 263,394 944,343
8,352,951 6,220,645 5,419,855 4,247,899 2,273,510 1,329,167
------------------------------- ------------------------------ -----------------------------
$7,501,479 $ 8,352,951 $ 6,589,708 $ 5,419,855 $ 2,536,904 $ 2,273,510
================================ ============================== =============================
</TABLE>
11
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
T. Rowe Price Equity T. Rowe Price Growth Endeavor Opportunity
Income Subaccount Stock Subaccount Value Subaccount
------------------------ --------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------------------ -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 399,940 $ 226,051 $ 530,540 $ 156,515 $ 6,327 $ (4,780)
Net realized capital gain 323,454 269,090 267,970 299,881 13,382 122,312
Net change in unrealized
appreciation/depreciation of
investments (564,407) (13,069) 840,876 864,822 18,432 (39,530)
------------------------ -------------------------- --------------------------
Increase (decrease) from operations 158,987 482,072 1,639,386 1,321,218 38,141 78,002
Contract transactions:
Net contract purchase payments 386,844 653,419 434,749 511,952 81,846 225,557
Transfer payments from (to)
other subaccounts or general
account (203,955) 1,474,782 553,994 1,984,283 12,791 (124,265)
Contract terminations,
with-drawals and other
deductions (176,746) (402,387) (225,204) (369,688) (15,717) (36,368)
------------------------ -------------------------- --------------------------
Increase (decrease) from contract
transactions 6,143 1,725,814 763,539 2,126,547 78,920 64,924
------------------------ -------------------------- --------------------------
Net increase (decrease) in
contract owners' equity 165,130 2,207,886 2,402,925 3,447,765 117,061 142,926
Contract owners' equity:
Beginning of the period 7,949,284 5,741,398 7,381,719 3,933,954 1,149,316 1,006,390
------------------------ -------------------------- --------------------------
End of the period $ 8,114,414 $ 7,949,284 $ 9,784,644 $ 7,381,719 $ 1,266,377 $ 1,149,316
======================== =========================== ==========================
</TABLE>
(1) For the period January 1, 1999 through April 30, 1999 and the year ended
December 31, 1988, activity reflected in this subaccount is related to
investments in the Growth Portfolio of the WRL Series Fund, Inc. As of the
close of business on April 30, 1999, the investments in the Growth
Portfolio of the WRL Series Fund, Inc. were replaced by investments in the
Endeavor Janus Growth Portfolio of the Endeavor Series Trust. The
investment results and contract transactions of the Endeavor Janus Growth
Portfolio of the Endeavor Series Trust are reflected in this subaccount for
the period May 1, 1999 through December 31, 1999.
(2) Commencement of operations, June 21, 1999.
See accompanying notes.
12
<PAGE>
<TABLE>
<CAPTION>
Endeavor Endeavor
Endeavor Enhanced Endeavor Janus Select 50 High Yield
Index Subaccount Growth Subaccount (1) Subaccount (2) Subaccount (2)
--------------------------------- ------------------------------- ------------------------------------
1999 1998 1999 1998 1999 1999
--------------------------------- ------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
$ 85,396 $ (13,800) $ (376,721) $ (55,111) $ (178) $ (14)
131,471 82,535 1,880,823 621,541 78 -
205,029 248,529 10,950,092 6,944,045 13,209 22
--------------------------------- ------------------------------- ------------------------------------
421,896 317,264 12,454,194 7,510,475 13,109 8
516,702 491,065 1,476,686 860,004 12,006 2,001
806,569 915,841 1,715,238 2,519,412 40,188 14
(173,518) (329,609) (1,464,119) (971,007) - -
--------------------------------- ------------------------------- ------------------------------------
1,149,753 1,077,297 1,727,805 2,408,409 52,194 2,015
--------------------------------- ------------------------------- ------------------------------------
1,571,649 1,394,561 14,181,999 9,918,884 65,303 2,023
1,908,685 514,124 20,890,035 10,971,151 - -
--------------------------------- ------------------------------- ------------------------------------
$ 3,480,334 $ 1,908,685 $ 35,072,034 $ 20,890,035 $ 65,303 $ 2,023
================================= =============================== =====================================
</TABLE>
13
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Notes to Financial Statements
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization
The AUSA Endeavor Variable Annuity Account (the "Mutual Fund Account") is a
segregated investment account of AUSA Life Insurance Company, Inc. ("AUSA"), an
indirect wholly-owned subsidiary of AEGON N.V., a holding company organized
under the laws of The Netherlands.
The Mutual Fund Account is registered with the Securities and Exchange
Commission as a Unit Investment Trust pursuant to provisions of the Investment
Company Act of 1940. The Mutual Fund Account consists of thirteen investment
subaccounts, all of which are invested in specified portfolios of the Endeavor
Series Trust (the "Series Fund"). Activity in these thirteen investment
subaccounts is available to contract owners of The Endeavor Variable Annuity.
Prior to April 30, 1999, the Growth Portfolio of the WRL Series Fund, Inc. was
available to contract owners of the AUSA Endeavor Variable Annuity as an
investment option. As of the close of business on April 30, 1999, all shares of
the Growth Portfolio of the WRL Series Fund, Inc. were exchanged for shares of
the Endeavor Janus Growth Portfolio of the Endeavor Series Trust. This exchange
had no impact at the date of transfer on investments in mutual funds or total
contract owner's equity.
Investments
Net purchase payments received by the Mutual Fund Account for The Endeavor
Variable Annuity are invested in the portfolios of the Series Fund, as selected
by the contract owner. Investments are stated at the closing net asset values
per share on December 31, 1999.
Realized capital gains and losses from the sale of shares in the Series Fund are
determined on the first-in, first-out basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date. Unrealized gains or losses
from the investments in the Series Fund are credited or charged to contract
owners' equity.
Dividend Income
Dividends received from the Series Fund investments are reinvested to purchase
additional mutual fund shares.
14
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Notes to Financial Statements (continued)
2. Investments
A summary of the mutual fund investments at December 31, 1999 follows:
<TABLE>
<CAPTION>
Net Asset
Number of Value Per Market
Shares Held Share Value Cost
------------------------------------------------------------------
Endeavor Series Trust:
<S> <C> <C> <C> <C>
Endeavor Money Market Portfolio 1,642,436.730 $ 1.00 $ 1,642,437 $ 1,642,437
Endeavor Asset Allocation Portfolio 310,755.960 22.89 7,113,204 6,457,710
T. Rowe Price International Stock
Portfolio 470,831.715 20.88 9,830,966 7,017,999
Endeavor Value Equity Portfolio 375,266.041 19.99 7,501,568 7,549,495
Dreyfus Small Cap Value Portfolio 399,143.072 16.51 6,589,852 6,081,131
Dreyfus U. S. Government Securities
Portfolio 220,026.353 11.53 2,536,904 2,576,009
T. Rowe Price Equity Income Portfolio 416,126.277 19.50 8,114,462 7,646,505
T. Rowe Price Growth Stock Portfolio 340,456.665 28.74 9,784,725 7,316,079
Endeavor Opportunity Value Portfolio 100,826.976 12.56 1,266,387 1,207,113
Endeavor Enhanced Index Portfolio 191,649.050 18.16 3,480,347 3,009,050
Endeavor Janus Growth Portfolio 367,745.696 95.37 35,071,907 16,977,899
Endeavor Select 50 Portfolio 4,143.679 15.76 65,304 52,095
Endeavor High Yield Portfolio 200.467 10.09 2,023 2,001
</TABLE>
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
Period ended December 31
1999 1998
----------------------------- ----------------------------
Purchases Sales Purchases Sales
----------------------------- ----------------------------
Endeavor Series Trust:
<S> <C> <C> <C> <C>
Endeavor Money Market Portfolio $ 1,407,437 $ 1,091,568 $ 1,067,902 $ 473,509
Endeavor Asset Allocation Portfolio 2,202,894 757,774 1,845,113 588,460
T. Rowe Price International Stock Portfolio 909,026 956,671 1,894,226 909,942
Endeavor Value Equity Portfolio 1,084,624 1,275,625 2,901,255 997,731
Dreyfus Small Cap Value Portfolio 1,010,524 777,604 2,504,908 550,950
Dreyfus U. S. Government Securities Portfolio 629,485 213,260 1,002,274 125,201
T. Rowe Price Equity Income Portfolio 1,429,373 1,023,316 2,782,124 830,323
T. Rowe Price Growth Stock Portfolio 1,894,138 600,104 3,090,633 807,578
Endeavor Opportunity Value Portfolio 201,497 116,259 643,438 583,296
Endeavor Enhanced Index Portfolio 1,806,233 571,088 1,526,385 462,884
Endeavor Janus Growth Portfolio 5,260,257 3,909,487 4,282,983 1,929,892
Endeavor Select 50 Portfolio 54,262 2,245 - -
Endeavor High Yield Portfolio 2,015 14 - -
</TABLE>
15
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity
A summary of deferred annuity contracts terminable by owners at December 31,
1999 follows:
<TABLE>
<CAPTION>
Return of Premium Death Benefit
-------------------------------------------------------------
Total
Accumulation Accumulation Contract
Subaccount Units Owned Unit Value Value
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Endeavor Money Market 1,064,268.075 $ 1.280646 $ 1,362,951
Endeavor Asset Allocation 2,173,009.491 3.160924 6,868,718
T. Rowe Price International Stock 4,799,569.572 2.001071 9,604,279
Endeavor Value Equity 3,372,816.213 2.115695 7,135,850
Dreyfus Small Cap Value 2,799,571.395 2.278888 6,379,910
Dreyfus U.S. Government Securities 1,896,613.591 1.255919 2,381,993
T. Rowe Price Equity Income 3,519,301.115 2.107761 7,417,846
T. Rowe Price Growth Stock 2,752,366.635 3.124914 8,600,909
Endeavor Opportunity Value 931,919.689 1.240246 1,155,810
Endeavor Enhanced Index 1,383,754.938 1.838549 2,544,101
Endeavor Janus Growth 644,989.894 50.054351 32,284,551
Endeavor Select 50 33,757.092 1.534754 51,809
Endeavor High Yield 1,008.622 1.003083 1,012
</TABLE>
<TABLE>
<CAPTION>
Annual Step-Up Death Benefit
-------------------------------------------------------------
Total
Accumulation Accumulation Contract
Subaccount Units Owned Unit Value Value
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Endeavor Money Market 219,081.992 $ 1.275724 $ 279,488
Endeavor Asset Allocation 77,640.163 3.148754 244,470
T. Rowe Price International Stock 113,650.831 1.993345 226,545
Endeavor Value Equity 173,486.830 2.107532 365,629
Dreyfus Small Cap Value 92,417.541 2.270110 209,798
Dreyfus U.S. Government Securities 123,620.377 1.253119 154,911
T. Rowe Price Equity Income 331,752.822 2.099660 696,568
T. Rowe Price Growth Stock 380,267.267 3.112902 1,183,735
Endeavor Opportunity Value 89,492.709 1.235481 110,567
Endeavor Enhanced Index 511,192.617 1.831468 936,233
Endeavor Janus Growth 55,903.910 49.862043 2,787,483
Endeavor Select 50 8,817.278 1.530432 13,494
Endeavor High Yield 1,010.192 1.000739 1,011
</TABLE>
16
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
Endeavor Endeavor T. Rowe Price
Money Asset International Endeavor
Market Allocation Stock Value Equity
Subaccount Subaccount Subaccount Subaccount
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Units outstanding at January 1, 1998 611,982 1,871,808 4,334,554 2,981,907
Units purchased 81,621 57,867 163,951 158,049
Units redeemed and transferred 376,710 299,540 498,895 634,912
--------------------------------------------------------------
Units outstanding at December 31, 1998 1,070,313 2,229,215 4,997,400 3,774,868
Units purchased 302,711 39,106 107,582 63,646
Units redeemed and transferred (89,674) (17,671) (191,762) (292,211)
--------------------------------------------------------------
Units outstanding at December 31, 1999 1,283,350 2,250,650 4,913,220 3,546,303
==============================================================
</TABLE>
<TABLE>
<CAPTION>
T. Rowe
Dreyfus Dreyfus U. S. T. Rowe Price Price
Small Cap Government Equity Growth
Value Securities Income Stock
Subaccount Subaccount Subaccount Subaccount
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Units outstanding at January 1, 1998 2,294,637 1,093,935 2,982,511 1,925,118
Units purchased 156,808 46,241 330,034 231,910
Units redeemed and transferred 583,593 626,800 536,173 690,117
-------------------------------------------------------------
Units outstanding at December 31, 1998 3,035,038 1,766,976 3,848,718 2,847,145
Units purchased 91,092 107,577 181,988 165,336
Units redeemed and transferred (234,141) 145,681 (179,652) 120,153
-------------------------------------------------------------
Units outstanding at December 31, 1999 2,891,989 2,020,234 3,851,054 3,132,634
=============================================================
</TABLE>
<TABLE>
<CAPTION>
Endeavor Endeavor Endeavor
Opportunity Enhanced Janus Endeavor Endeavor
Value Index Growth Select 50 High Yield
Subaccount Subaccount Subaccount Subaccount Subaccount
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1, 1998 869,832 422,227 557,898 - -
Units purchased 195,802 362,815 35,902 - -
Units redeemed and transferred (107,783) 425,172 61,137 - -
------------------------------------------------------------------------
Units outstanding at December 31, 1998 957,851 1,210,214 654,937 - -
Units purchased 65,228 315,232 39,972 9,515 2,021
Units redeemed and transferred (1,667) 369,502 5,985 33,059 (2)
------------------------------------------------------------------------
Units outstanding at December 31, 1999 1,021,412 1,894,948 700,894 42,574 2,019
========================================================================
</TABLE>
17
<PAGE>
AUSA Endeavor Variable Annuity Account -
The Endeavor Variable Annuity
Notes to Financial Statements (continued)
4. Administrative, Mortality and Expense Risk Charges
Administrative charges include an annual charge of the lesser of 2% of the
policy value or $35 per contract which will commence on the first policy
anniversary of each contract owner's account. For policies issued on or after
May 1, 1995, this charge is waived if the sum of the premium payments made less
the sum of all partial withdrawals equals or exceeds $50,000 on the policy
anniversary. Charges for administrative fees to the variable annuity contracts
are an expense of the Mutual Fund Account. AUSA also deducts a daily charge
equal to an annual rate of .15% of the contract owner's account for
administrative expenses.
AUSA deducts a daily charge for assuming certain mortality and expense risks.
For policies sold prior to December 1, 1998, this charge is equal to an
effective annual rate of 1.25% of the value of the contract owner's individual
account. For policies sold on or after December 1, 1998, 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.
5. Taxes
Operations of the Mutual Fund Account form a part of AUSA, which is taxed as a
life insurance company under Subchapter L of the Internal Revenue Code of 1986,
as amended (the "Code"). The operations of the Mutual Fund Account are accounted
for separately from other operations of AUSA for purposes of federal income
taxation. The Mutual Fund Account is not separately taxable as a regulated
investment company under Subchapter M of the Code and is not otherwise taxable
as an entity separate from AUSA. Under existing federal income tax laws, the
income of the Mutual Fund Account, to the extent applied to increase reserves
under the variable annuity contracts, is not taxable to AUSA.
18
<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.
(3) (a) (1) 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 AFSG Securities Corporation.
Note 7.
(b) Form of Broker/Dealer Supervision and Sales
Agreement by and between AFSG Securities
Corporation and the Broker/Dealer. Note 7.
(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.
(1) Amendment No. 12 to Participation Agreement
among WRL Series Fund, Inc., PFL Life Insurance
Company, AUSA Life Insurance Company, Inc., and
Peoples Benefit Life Insurance Company. Note
11.
(8) (b) (2) Amendment No. 15 to Participation Agreement among
WRL Series Fund, Inc., PFL Life Insurance Company,
AUSA Life Insurance Company, Inc., and Peoples
Benefit Life Insurance Company. Note 12
(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.
(8) (d) (1) Amendment to Schedule A of the Participation
Agreement by and between AUSA Life Insurance
Company, Inc. and Endeavor Series Trust. Note
12
(e) Participation Agreement by and between PFL Life
Insurance Company and Transamerica Varible
Insurance Fund, Inc. Note 11.
(f) Participation Agreement by and between variable
Insuarnce Product Funds and Variable Insurance
Products Fund II, Fidelity Distributors
Corporation, and PFL Life Insurance Company, and
Addendums thereto. Note 9.
(1) Amended Schedule A to Participation Agreement
by and between Variable Insurance Product Funds
and Variable Insurance Products Fund II,
Fidelity Distributors Corporation, and PFL Life
Insurance Company. Note 11.
(g) Participation Agreement between Variable Insurance
Products Fund III, Fidelity Distributors
Corporation, and PFL Life Insurance Company. Note
10.
(1) Amended Schedule A to Participation Agreement
between Variable Insurance Products Fund III,
Fidelity Distributors Corporation, and PFL Life
Insurance Company. Note 11.
(8) (h) Participation Agreement by and between Janus Aspen
Series and AUSA Life Insurance Company, Inc. Note
12.
(9) (a) Opinion and Consent of Counsel. Note 2.
1
<PAGE>
(b) Consent of Counsel. Note 2.
(10) (a) Consent of Independent Auditors. Note 12.
(b) Opinion and Consent of Actuary Note 7.
(11) Not Applicable.
(12) Not Applicable.
(13) Performance Data Calculations. Note 8.
(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 with Post-Effective Amendment No. 5 to Form N-4
Registration Statement (File No. 33-83560) on September 26,
1997.
Note 6. Filed with Post-Effective Amendment No. 6 to Form N-4
Registration Statement (File No. 33-83560) on November 24,
1997.
Note 7. Filed with Post-Effective Amendment No. 7 to Form N-4
Registration Statement (File No. 33-83560) on April 29,
1998.
Note 8. Filed with Post-Effective Amendment No. 9 to Form N-4
Registration Statement (File No. 33-83560) on April 29,
1999.
Note 9. Incorporated by reference to Pre-Effective Amendment No. 1
to Form N-4 Registration Statement (File No. 333-07509) on
December 6, 1996.
Note 10. Incorporated by reference to Post-Effective Amendment No. 1
to Form N-4 Registration Statement (File No. 333-07509) on
April 29, 1997.
Note 11. Filed with Post-Effective Amendment No.10 to this Form N-4
Registration Statement (33-83560) on April 28, 2000.
Note 12. Filed herewith.
Item 25. Directors and Officers of the Depositor
Principal
Positions
Name and and Offices with
Business Address Depositor
---------------- ---------
Tom A. Schlossberg Director, Chairman of the Board
4 Manhattanville Road and President
Purchase, NY 10577
William L. Busler Director and Vice President
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Patrick S. Baird Vice President and Chief Operating
4333 Edgewood Road NE Officer
Cedar Rapids, IA 52499
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Craig D. Vermie Secretary
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Colette Vargas Director and Chief Actuary
4 Manhattanville Road
Purchase, NY 10577
Brenda K. Clancy Treasurer
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
3
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
---- ------------- ---------------- --------
<S> <C> <C> <C>
AEGON N.V. Netherlands 51.16% of Vereniging Holding company
AEGON Netherlands
Membership Association
Groninger Financieringen B.V. Netherlands 100% AEGON N.V. Holding company
AEGON Netherland N.V. Netherlands 100% AEGON N.V. Holding company
AEGON Nevak Holding B.V. Netherlands 100% AEGON N.V. Holding company
AEGON International N.V. Netherlands 100% AEGON N.V. Holding company
Voting Trust Trustees: Delaware Voting Trust
K.J. Storm
Donald J. Shepard H.B.
Van Wijk Dennis Hersch
AEGON U.S. Holding Corporation Delaware 100% Voting Trust Holding company
Short Hills Management Company New Jersey 100% AEGON U.S. Holding company
Holding Corporation
CORPA Reinsurance Company New York 100% AEGON U.S. Holding company
Holding Corporation
AEGON Management Company Indiana 100% AEGON U.S. Holding company
Holding Corporation
RCC North America Inc. Delaware 100% AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
Transamerica Holding Company Delaware 100% AEGON USA, Inc. Holding Company
AEGON Funding Corp. Delaware 100% Transamerica Issue debt securities-net
Holding Company proceeds used to make
loans to affiliates
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Company
AUSA Life Insurance New York 82.33% First AUSA Life Insurance
Company, Inc. Insurance Company
17.67% Veterans Life
Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Life Investors Alliance, LLC Delaware 100% LIICA Purchase, own, and hold the
equity interest of other
entities
Great American Insurance Iowa 100% LIICA Marketing
Agency, Inc.
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.
AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
of Kentucky Services Group, Inc. settlements
AEGON Assignment Corporation Illinois 100% AEGON Financial Administrator of structured
Services Group, Inc. settlements
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Western Reserve Life Assurance Ohio 100% First AUSA Life Ins. Co. Insurance
Co. of Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund
WRL Investment Florida 100% Western Reserve Life Registered investment advisor
Management, Inc. Assurance Co. of Ohio
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
And Subsidiaries Assurance Co. of Ohio
ISI Insurance Agency Alabama 100% ISI Insurance Agency, Inc. Insurance Agency
of Alabama, Inc.
ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
of Massachusetts, Inc.
ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
ISI Insurance Agency Hawaii 100% ISI Insurance Insurance agency
of Hawaii, Inc. Agency, Inc.
ISI Insurance Agency New Mexico 100% ISI Insurance Insurance agency
New Mexico, Inc. Agency, Inc.
AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance Agency
Assurance Co. of Ohio
Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance
United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency
Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance
The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Monumental General Life Puerto Rico 51% First AUSA Life Insurance
Insurance Company of Insurance Company
Puerto Rico 49% Baldrich & Associates
of Puerto Rico
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. insurance
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
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Transamerica Capital, Inc. California 100% AUSA Holding Co. Broker/Dealer
Endeavor Management Company California 100% AUSA Holding Co. Investment Management
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies
ADB Corporation Delaware 100% Money Services, Inc. Special purpose limited
Liability company
ORBA Insurance Services, Inc. California 10.56% Money Services, Inc. Insurance agency
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
Zahorik Texas, Inc. Texas 100% Zahorik Company, Inc. Insurance agency
Long, Miller & Associates, L.L.C. California 33-1/3% AUSA Holding Co. Insurance agency
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment advisor
Services, Inc.
InterSecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
Associated Mariner Financial Michigan 100% InterSecurities, Inc. Holding co./management
Group, Inc. services
Associated Mariner Ins. Agency Massachusetts 100% Associated Mariner Insurance agency
of Massachusetts, Inc. Agency, Inc.
Associated Mariner Agency Ohio 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.
Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.
Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services
Idex Management, Inc. Delaware 100% AUSA Holding Co. Investment advisor
IDEX Mutual Funds Massachusetts Various Mutual fund
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.
Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advisors, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
George Beram & Company, Inc. Massachusetts 100% Diversified Investment Employee benefit and
Advisors, Inc. actuarial consulting
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer (De-registered)
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.
Weiner Agency, Inc. Maryland 100% Creditor Resources, Inc. Insurance agency
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
AEGON USA Real Estate Delaware 100% AEGON USA Realty Real estate and mortgage
Services, Inc. Advisors, Inc. holding company
QSC Holding, Inc. Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales
LRA, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Realty Associates, Inc. Texas 100% Landauer Associates, Inc. Real estate counseling
Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management
USP Real Estate Investment Trust Iowa 12.89% First AUSA Life Ins. Co. Real estate investment trust
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner.
Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")
AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life
Insurance Company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Capital 200 Block Corporation Delaware 100% CGC Real estate holdings
Capital Real Estate Delaware 100% CGC Furniture and equipment
Development Corporation lessor
Commonwealth General. Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements
Diversified Financial Products Inc. Delaware 100% CGC Provider of investment,
marketing and admin. services
to ins. cos.
Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. to ins. cos.
PB Investment Advisors, Inc. Delaware 100% CGC Registered investment advisor
(de-registered)
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands
Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management
(EIN 23-1720755) support services
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
National Home Life Corporation Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment lessor
Agency, Inc.
Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administrator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Academy Insurance Group, Inc. Delaware 100% CGC Holding company
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Life Insurance company
Company of America Insurance Company
FED Financial, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
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
(EIN 23-2364438) Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.
Unicom Administrative Germany 100% Unicom Administrative Provider of admin. services
Services, GmbH Services, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Capital General Development Delaware 100% CGC Holding company
Corporation
Monumental Life Maryland 73.23% Capital General Insurance company
Insurance Company Development Company
26.77% First AUSA Life
Insurance Company
AEGON Special Markets Maryland 100% Monumental Life Marketing company
Group, Inc. Insurance Company
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20.0% Capital Liberty, L.P.
76.3% Monumental Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
Coverna Direct Insurance Maryland 100% Peoples Benefit Insurance agency
Insurance Services, Inc. Life Insurance Company
Ammest Realty Corporation Texas 100% Monumental Life Special purpose subsidiary
Insurance Company
JMH Operating Company, Inc. Mississippi 100% Monumental Life Real estate holdings
Insurance Company
Capital Liberty, L.P. Delaware 99.0% Monumental Life Holding Company
Insurance Company
1.0% CGC
Transamerica Corporation Delaware 100% AEGON NV Major interest in insurance
and finance
Transamerica Pacific Insurance Hawaii 100% Transamerica Corp. Life insurance
Company, Ltd.
TREIC Enterprises, Inc. Delaware 100% Transamerica Corp. Investments
ARC Reinsurance Corporation Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Transamerica Management, Inc. Delaware 100% ARC Reinsurance Corp. Asset management
Inter-America Corporation California 100% Transamerica Corp. Insurance Broker
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Pyramid Insurance Company, Ltd. Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Pacific Cable Ltd. Bmda. 100% Pyramid Ins. Co., Ltd. Sold 25% of TC Cable, Inc.
stock in 1998
Transamerica Business Tech Corp. Delaware 100% Transamerica Corp. Telecommunications and
data processing
Transamerica CBO I, Inc. Delaware 100% Transamerica Corp. Owns and manages a pool of
high-yield bonds
Transamerica Corporation (Oregon) Oregon 100% Transamerica Corp. Name holding only-Inactive
Transamerica Finance Corp. Delaware 100% Transamerica Corp. Commercial & Consumer
Lending & equip. leasing
TA Leasing Holding Co., Inc. Delaware 100% Transamerica Fin. Corp. Holding company
Trans Ocean Ltd. Delaware 100% TA Leasing Hldg Co. Inc. Holding company
Trans Ocean Container Corp. Delaware 100% Trans Ocean Ltd. Intermodal Leasing
("TOCC")
SpaceWise Inc. Delaware 100% TOCC Intermodal leasing
Trans Ocean Container
Finance Corp. Delaware 100% TOCC Intermodal leasing
Trans Ocean Leasing
Deutschland GmbH Germany 100% TOCC Intermodal leasing
Trans Ocean Leasing PTY Ltd. Austria 100% TOCC Intermodal leasing
Trans Ocean Management S.A. Switzerland 100% TOCC Intermodal leasing
Trans Ocean Regional
Corporate Holdings California 100% TOCC Holding company
Trans Ocean Tank Services Corp. Delaware 100% TOCC Intermodal leasing
Transamerica Leasing Inc. Delaware 100% TA Leasing Holding Co. Leases & Services intermodal
equipment
Transamerica Leasing Holdings Delaware 100% Transamerica Leasing Inc. Holding Company
Inc. ("TLHI")
Greybox Logistics Services Inc. Delaware 100% TLHI Intermodal Leasing
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Greybox L.L.C. Delaware 100% TLHI Intermodal freight container
interchange facilitation
service
Transamerica Trailer France 100% Greybox L.L.C. Leasing
Leasing S.N.C.
Greybox Services Limited U.K. 100% TLHI Intermodal Leasing
Intermodal Equipment, Inc. Delaware 100% TLHI Intermodal leasing
Transamerica Leasing N.V. Belg. 100% Intermodal Equipment Inc. Leasing
Transamerica Leasing SRL Italy 100% Intermodal Equipment Inc. Leasing
Transamerica Distribution Delaware 100% TLHI Provided door-to-door
Services, Inc. services for the domestic
transportation of temperature-
sensitive products
Transamerica Leasing Belg. 100% TLHI Leasing
Coordination Center
Transamerica Leasing do Braz. 100% TLHI Container Leasing
Brasil Ltda.
Transamerica Leasing GmbH Germany 100% TLHI Leasing
Transamerica Leasing Limited U.K. 100% TLHI Leasing
ICS Terminals (UK) Limited U.K. 100% Transamerica. Leasing
Leasing Limited
Transamerica Leasing Pty. Ltd. Australia 100% TLHI Leasing
Transamerica Leasing (Canada) Inc. Canada 100% TLHI Leasing
Transamerica Leasing (HK) Ltd. H.K. 100% TLHI Leasing
Transamerica Leasing S. Africa 100% TLHI Intermodal leasing
(Proprietary) Limited
Transamerica Tank Container Australia 100% TLHI The Australian (domestic)
Leasing Pty. Limited leasing of tank containers
Transamerica Trailer Holdings I Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Holdings II, Inc. Delaware 100% TLHI Holding company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Trailer Holdings III, Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Leasing AB Swed. 100% TLHI Leasing
Transamerica Trailer Leasing AG Swetzerland 100% TLHI Leasing
Transamerica Trailer Leasing A/S Denmark 100% TLHI Leasing
Transamerica Trailer Leasing GmbH Germany 100% TLHI Leasing
Transamerica Trailer Leasing Belgium 100% TLHI Leasing
(Belgium) N.V.
Transamerica Trailer Leasing Netherlands 100% TLHI Leasing
(Netherlands) B.V.
Transamerica Trailer Spain S.A. Spain 100% TLHI Leasing
Transamerica Transport Inc. New Jersey 100% TLHI Dormant
Transamerica Commercial Delaware 100% Transamerica Fin. Corp. Holding company for
Finance Corporation, I ("TCFCI") Commercial/consumer
finance subsidiaries
Transamerica Equipment Financial Delaware 100% TCFCI
Services Corporation
BWAC Credit Corporation Delaware 100% TCFCI
BWAC International Corporation Delaware 100% TCFCI
BWAC Twelve, Inc. Delaware 100% TCFCI Holding company for
premium finance subsidiaries
TIFCO Lending Corporation Illinois 100% BWAC Twelve, Inc. General financing & other
services in the US &
elsewhere
Transamerica Insurance Finance Maryland 100% BWAC Twelve, Inc. Provides insurance premium
Corporation ("TIFC") financing in the US with the
exception of CA and HI
Transamerica Insurance Finance Maryland 100% TIFC Provides Insurance premium
Company (Europe) financing in California
Transamerica Insurance Finance California 100% TIFC Disability ins. & holding co.
Corporation, California for various insurance
subsidiaries of Transamerica
Corporation
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Insurance Finance ON 100% TIFC Provides ins. premium
Corporation, Canada financing in Canada
Transamerica Business Credit Delaware 100% TCFCI Provides asset based lending
Corporation ("TBCC") leasing & equip. financing
Transamerica Mezzanine Delaware 100% TBCC Holds investments in several
Financing, Inc. joint ventures/partnerships
Transamerica Business Advisory Grp. Delaware 100% TBCC
Bay Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Coast Funding Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Transamerica Small Business Delaware 100% TBCC
Capital, Inc. ("TSBC")
Emergent Business Capital Delaware 100% TSBC
Holdings, Inc.
Gulf Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Direct Capital Equity Investment, Inc. Delaware 100% TBCC Small business loans
TA Air East, Corp Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air I, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air II, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air III, Corp. Delaware 100% TBCC special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TA Air IV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air V, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air VIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air IX, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air X, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TA Marine I Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TA Marine II Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TBC I, Inc. Delaware 100% TBCC Special purpose corp.
TBC II, Inc. Delaware 100% TBCC Special purpose corp.
TBC III, Inc. Delaware 100% TBCC Special purpose corp.
TBC IV, Inc. Delaware 100% TBCC Special purpose corp.
TBC V, Inc. Delaware 100% TBCC Special purpose corp.
TBC VI, Inc. Delaware 100% TBCC Special purpose corp.
TBC Tax I, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax II, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax III, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IV, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax V, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VI, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VIII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IX, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
The Plain Company Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft.
Transamerica Distribution Delaware 100% TCFCI Holding corp. for inventory,
Finance Corporation ("TDFC") comm. Leasing, retail finance
comm. Recovery service and
accounts
Transamerica Accounts Holding Corp. Delaware 100% TDFC
Transamerica Commercial Delaware 100% TDFC Wholesale floor plan for
Finance Corporation ("TCFC") appliances, electronics,
computers, office equip. and
marine equipment.
Transamerica Acquisition Canada 100% TCFC Holding company
Corporation, Canada
Transamerica Distribution Finance Delaware 100% TCFC
Corporation - Overseas, Inc.
("TDFCO")
TDF Mauritius Limited Mauritius 100% TDFCO Mauritius holding company
of our Indian Joint Venture
Inventory Funding Trust Delaware 100% TCFC
Inventory Funding Company, LLC Delaware 100% Inventory Funding Trust
TCF Asset Management Corporation Colorado 100% TCFC A depository for foreclosed
real and personal property
Transamerica Joint Ventures, Inc. Delaware 100% TCFC To enter into general partner-
ships for the ownership of
comm. & finance business
Transamerica Inventory Delaware 100% TDFC Holding co. for inventory
Finance Corporation ("TIFC") finance subsidiaries
Transamerica GmbH, Inc. Delaware 100% TIFC Commercial lending in
Germany
Transamerica Fincieringsmaatschappij Netherlands 100% Trans. GmbH, Inc. Commercial lending in
B.V. Europe
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
BWAC Seventeen, Inc. Delaware 100% TIFC Holding co. for principal
Canadian operation, Trans-
America Comm. Finance
Corp, Canada
Transamerica Commercial ON 100% BWAC Seventeen, Inc. Shell corp.- Dormant
Finance Canada, Limited
Transamerica Commercial Canada 100% BWAC Seventeen, Inc. Commercial finance
Finance Corporation, Canada
BWAC Twenty-One, Inc. Delaware 100% TIFC Holding co. for United
Kingdom operation, Trans-
America Comm. Finance
Limited
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Commercial lending in the
Finance Limited ("TCFL") United Kingdom.
Whirlpool Financial Corporation 100% TCFL Inactive commercial finance
Polska Spzoo Company in Poland
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Holding Company
Holdings Limited
Transamerica Commercial Finance U.K. 100% Trans. Commercial
Limited Holdings Limited
Transamerica Commercial Finance France 100% BWAC Twenty-One Inc. Carries out factoring trans-
France S.A. actions in France & abroad
Transamerica GmbH Inc. Delaware 100% BWAC Twenty-One Inc. Holding co. for Transamerica
Financieringsmaatschappij
B.V.
Transamerica Retail Financial Delaware 100% TIFC Provides retail financing
Services Corporation ("TRFSC")
Transamerica Bank, NA Delaware 100% TRFSC Bank (Credit Cards)
Transamerica Consumer Finance Delaware 100% TRFSC Consumer finance holding
Holding Company ("TCFHC") company
Transamerica Mortgage Company Delaware 100% TCFHC Consumer mortgages
Transamerica Consumer Mortgage Delaware 100% TCFHC Securitization company
Receivables Company
Metropolitan Mortgage Company Florida 100% TCFHC Consumer mortgages
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Easy Yes Mortgage, Inc. Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Easy Yes Mortgage, Inc. Georgia 100% Metropolitan Mtg. Co. No active business/Name
holding only
First Florida Appraisal Services, Inc. Georgia 100% Metropolitan Mtg. Co. Appraisal and inspection
services
First Georgia Appraisal Services, Inc. Georgia 100% First FL App. Srvc, Inc. Appraisal services
Freedom Tax Services, Inc. Florida 100% Metropolitan Mtg. Co. Property tax information
services
J.J. & W. Advertising, Inc. Florida 100% Metropolitan Mtg. Co. Advertising and marketing
services
J.J. & W. Realty Corporation Florida 100% Metropolitan Mtg. Co. To hold problem REO
properties
Liberty Mortgage Company of Florida 100% Metropolitan Mtg. Co. No active business/Name
Ft. Myers, Inc. holding only
Metropolis Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Perfect Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Transamerica Vendor Financial Srvc. Delaware 100% TDFC Provides commercial lease
Transamerica Distribution Finance 100% TCFCI
Corporation de Mexico ("TDFCM")
TDF de Mexico Mexico 100% TDFCM
Transamerica Corporate Services 100% TDFCM
De Mexico
Transamerica Home Loan California 100% TFC Consumer mortgages
Transamerica Lending Company Delaware 100% TFC Consumer lending
Transamerica Financial Products, Inc. California 100% Transamerica Corp. Service investments
Transamerica Insurance Corporation California 100% Transamerica Corp. Provides insurance premium
of California ("TICC") financing in California
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Arbor Life Insurance Company Arizona 100% TICC Life insurance, disability
insurance
Plaza Insurance Sales Inc. California 100% TICC Casualty insurance placement
Transamerica Advisors, Inc. California 100% TICC Retail sale of investment
advisory services
Transamerica Annuity Services Corp. New Mexico 100% TICC Performs services required for
structured settlements
Transamerica Financial Resources, Inc. Delaware 100% TICC Retail sale of securities
products
Financial Resources Insurance Texas 100% Transamerica Fin. Res. Retail sale of securities
Agency of Texas products
TBK Insurance Agency of Ohio, Inc. Ohio 100% Transamerica Fin. Res. Variable insurance contract
sales in state of Ohio
Transamerica Financial Resources Alabama 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Alabama, Inc.
Transamerica Financial Resources Ins. Massachusetts 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Massachusetts, Inc.
Transamerica International Insurance Delaware 100% TICC Holding & administering
Services, Inc. ("TIIS") foreign operations
Home Loans and Finance Ltd. U.K. 100% TIIS Inactive
Transamerica Occidental Life California 100% TICC Licensed in all forms of life
Insurance Company ("TOLIC") insurance, accident and
sickness insurance
NEF Investment Company California 100% TOLIC Real estate development
Transamerica Life Insurance and N. Carolina 100% TOLIC Writes life and pension ins.
Annuity Company ("TLIAC") originally incorporated in CA
April 14, 1966
Transamerica Assurance Company Missouri 100% TLIAC Life and disability insurance
Gemini Investments, Inc. Delaware 100% TLIAC Investment subsidiary
Transamerica Life Insurance Company Canada 100% TOLIC Sells individual life insurance
of Canada & investment products in all
provinces and territories of
Canada
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Life Insurance Company New York 100% TOLIC Licensed in NY to market life
of New York insurance, annuities and
health insurance
Transamerica South Park Delaware 100% TOLIC Provide market analysis of
Resources, Inc. certain undeveloped land
holdings held by TOLIC
Transamerica Variable Insurance Maryland 100% TOLIC Mutual Fund
Fund, Inc.
USA Administration Services, Inc. Kansas 100% TOLIC Third party administrator
Transamerica Products. Inc. California 100% TICC Parent co. of various
subsidiary corp. which are
formed to be co-general
partners of proprietary limited
Transamerica Securities Sales Corp. Maryland 100% Transamerica Prod. Inc. Retail sale of the variable life
ins. and variable annuity
products of the Transamerica
life companies
Transamerica Service Company Delaware 100% Transamerica Prod. Inc. Passive loss tax service for
Lloyd's U.S. names
Transamerica Intellitech, Inc. Delaware 100% TICC Real estate information and
technology services
Transamerica International Delaware 100% TICC Investments
Holdings, Inc.
Transamerica Investment Services, Inc. Delaware 100% TICC Investment adviser
Transamerica Income Shares, Inc. Maryland 100% Trans. Invest. Srvc. Inc. Transamerica investment
services
Transamerica LP Holdings Corp. Delaware 100% TICC Limited partnership Investment
(initial limited partner of
Transamerica Delaware, L.P.)
Transamerica Real Estate Tax Service N/A 100% TICC Real estate tax reporting and
(A Division of Transamerica Corp) processing services
Transamerica Realty Services, Inc. Delaware 100% TICC Responsible for real estate
investments for Transamerica
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Bankers Mortgage Company of CA California 100% Transamerica Realty Srv. Holds bank account and owns
certain residual investments in
certain French real estate
projects which are managed
special purpose company for
the purchase of real estate tax
liens.
Pyramid Investment Corporation Delaware 100% Transamerica Realty Srv. Owns office buildings in San
Francisco and other properties
The Gilwell Company California 100% Transamerica Realty Srv. Ground lessee of 517
Washington Street,
San Francisco
Transamerica Affordable Housing, Inc. California 100% Transamerica Realty Srv. Owns general partnership
interests in low-income
housing tax credit
partnerships
Transamerica Minerals Company California 100% Transamerica Realty Srv. Owner and lessor of oil and
gas properties
Transamerica Oakmont Corporation California 100% Transamerica Realty Srv. General partner in
Transamerica/Oakmont
Retirement Associates
Transamerica Senior Properties, Inc. Delaware 100% TICC Owns congregate care and
assisted living retirement
Properties
Transamerica Senior Living, Inc. Delaware 100% Trans. Sr. Prop. Inc. Manages congregate care and
assisted living retirement
properties.
</TABLE>
<PAGE>
Item 27. Number of Policyowners
As of December 31, 1999, there were 1,356 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
AFSG Securities Corporation
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499-0001
The directors and officers of
AFSG Securities Corporation
are as follows:/5/
4
<PAGE>
Larry N. Norman Ann Spaes
Director and President Director and Vice President
Frank A. Camp Darin Smith
Secretary Assistant Vice President and
Assistant Secretary
Lisa Wachendorf Linda Gilmer
Director, Vice President and Chief Treasurer/Controller
Compliance Officer
Thomas R. Moriarty Robert Warner
Vice President Assistant Compliance Officer
Priscilla Hechler Emily Bates
Assistant Vice President and Assistant Treasurer
Assistant Secretary
Thomas Pierpan Clifton Flenniken
Assistant Vice President and Assistant Treasurer
Assistant Secretary
---------------------
/5/ The principal business address of each person listed is AFSG Securities
Corporation, 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001.
Commissions and Other Compensation Received by Principal Underwriter.
--------------------------------------------------------------------
AFSG Securities Corporation, the broker/dealer, received $310,880.08 and
$202,758.60 from the Registrant for the year ending December 31, 1999 and for
the period from May 1, 1998 through December 31, 1998, respectively, 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
AFSG Securities Corporation serves as the principal underwriter for the PFL
Endeavor Variable Annuity Account, the PFL Endeavor Platinum Variable Annuity
Account, the PFL Retirement Builder Variable Annuity Account, the PFL Life
Variable Annuity Account A, the PFL Life Variable Annuity Account C, the PFL
Life Variable Annuity Account D, PFL Life Variable Annuity Account E, the PFL
Wright Variable Annuity Account and the AUSA Endeavor Variable Annuity Account.
These accounts are separate accounts of PFL Life Insurance Company or AUSA Life
Insurance Company, Inc. AFSG Securities Corporation also serves as principal
underwriter for Separate Account I, Separate Account II, Separate Account IV,
and Separate Account V of Peoples Benefit Life Insurance Company, and for
Separate Account B and Separate Account C of AUSA Life Insurance Company,
Inc.
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 hereby certifies that this Amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Registration Statement to be signed on its behalf,
in the City of Cedar Rapids and State of Iowa, on this 2nd day of October,
2000.
AUSA ENDEAVOR VARIABLE
ANNUITY ACCOUNT
AUSA LIFE INSURANCE
COMPANY, INC.
Depositor
/s/ Tom A. Schlossberg
----------------------------------
Tom A. Schlossberg
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.
Signatures Title Date
---------- ----- ----
/s/ Willima Brown, Jr. Director
---------------------------------- October 2, 2000
William Brown, Jr.
/s/ Robert F. Colby Director October 2, 2000
----------------------------------
Robert F. Colby
/s/ William L. Busler Director October 2, 2000
----------------------------------
William L. Busler
/s/ Jack R. Dykhouse Director October 2, 2000
----------------------------------
Jack R. Dykhouse
/s/ Steven E. Frushtick Director October 2, 2000
----------------------------------
Steven E. Frushtick
/s/ Eric Goodman Director October 2, 2000
----------------------------------
Eric Goodman
/s/ Thor Hanson Director October 2, 2000
----------------------------------
Thor Hanson
<PAGE>
/s/ Colette F. Vargas Director October 2, 2000
----------------------------------
Colette F. Vargas
/s/ Robert S. Rubinstein Director October 2, 2000
----------------------------------
Robert S. Rubinstein
/s/ Peter P. Post Director October 2, 2000
----------------------------------
Peter P. Post
/s/ Tom A. Schlossberg Director October 2, 2000
----------------------------------
Tom A. Schlossberg (Principal
Executive Officer)
/s/ Cor H. Verhagen Director October 2, 2000
----------------------------------
Cor H. Verhagen
/s/ E. Kirby Warren Director October 2, 2000
----------------------------------
E. Kirby Warren
/s/ Brenda K. Clancy Treasurer October 2, 2000
----------------------------------
Brenda K. Clancy
<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 INDEX
-------------
Exhibit No. Description of Exhibit Page No.*
----------- ---------------------- ---------
(8)(b)(2) Amendment No. 15 to Participation Agreement among
WRL Series Fund, Inc., PFL Life Insurance Company,
AUSA Life Insurance Company, Inc., and Peoples Life
Insurance Company.
(8)(d)(1) Amendment to Schedule A of the Participation
Agreement by and between AUSA Life Insurance
Company, Inc. and Endeavor Series Trust.
(8)(h) Participation Agreement by and between Janus Aspen
Series and AUSA Life Insurance Company, Inc.
(10)(a) Consent of Independent Auditor
_________________________
* Page numbers included only in manually executed original.
