As filed with the Securities and Exchange Commission on October 20, 1997
Registration File Nos. 33-86696/811-8878
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
FORM S-6
---------------------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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AUSA SERIES LIFE ACCOUNT
------------------------
(Exact Name of Trust)
AUSA LIFE INSURANCE COMPANY, INC.
---------------------------------
(Name of Depositor)
4 Manhattanville Road
Purchase, New York 10577
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(Complete Address of Depositor's Principal Executive Offices)
Thomas E. Pierpan, Esq.
Assistant Secretary
AUSA Life Insurance Company, Inc.
P.O. Box 9054
Clearwater, Florida 34618-9054
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(Name and Complete Address of Agent for Service)
Copies to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
---------------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
hereby elects to register an indefinite amount of securities being offered.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- -------------------------------------------------------
1 Cover Page; The Series Account
2 Cover Page; AUSA Life Insurance Company, Inc.
3 Not Applicable
4 Distribution of the Policies
5 The Series Account
6 The Series Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Introduction; Policy Benefits; Payment and Allocation
of Premiums; Investments of the Series Account;
Policy Rights
11 The Series Account; WRL Series Fund, Inc.
12 The Series Account; WRL Series Fund, Inc.
13 Charges and Deductions;The Series Account;
Investments of the Series Account
14 Introduction; Allocation of Premiums and Cash Values
15 Allocation of Premiums and Cash Value
16 The Series Account
17 Cash Value; The Series Account; Policy Rights
18 Payment and Allocation of Premiums; Cash Value
19 Voting Rights of the Series Account; Reports and
Records
20 Not Applicable
<PAGE>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- -------------------------------------------------------
21 Loan Privileges
22 Not Applicable
23 Safekeeping of the Series Account's Assets
24 Policy Rights
25 AUSA Life Insurance Company, Inc.
26 Not Applicable
27 AUSA Life Insurance Company, Inc.; The Series
Account; WRL Series Fund, Inc.
28 AUSA Life Insurance Company, Inc.; Executive Officers
and Directors of AUSA Life
29 AUSA Life Insurance Company, Inc.
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 AUSA Life Insurance Company, Inc.
36 Not Applicable
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Not Applicable
41 Distribution of the Policies; AUSA Life Insurance
Company, Inc.
42 Not Applicable
43 Not Applicable
ii
<PAGE>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- -------------------------------------------------------
44 Cash Value
45 Not Applicable
46 Cash Value
47 Introduction; Allocation of Premiums and Cash Values
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Introduction; AUSA Life Insurance Company, Inc.;
Policy Benefits; Charges and Deductions
52 The Series Account; WRL Series Fund, Inc.
53 Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Not Applicable
iii
<PAGE>
AUSA FREEDOM WEALTH PROTECTORSM
JOINT SURVIVORSHIP FLEXIBLE
PREMIUM VARIABLE LIFE
INSURANCE POLICY
Issued by
AUSA LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road
Purchase, New York 10577
(800) 322-7160
The joint survivorship flexible premium variable life insurance policy
("Policy") issued by AUSA Life Insurance Company, Inc. ("AUSA Life") and
described in this Prospectus is designed to provide lifetime insurance
protection and maximum flexibility in connection with premium payments and
death benefits. A Policyowner may, subject to certain restrictions, vary the
timing and amount of premium payments and increase or decrease the level of
life insurance benefits payable under the Policy. This flexibility allows a
Policyowner to provide for changing insurance needs under a single life
insurance policy. The minimum Specified Amount for a Policy at issue is
generally $100,000.
The Policy provides a death benefit payable upon the death of the
Surviving Insured, and a Net Surrender Value that can be obtained by completely
or partially surrendering the Policy. Net premiums are allocated according to
the Policyowner's directions among the Sub-Accounts of the AUSA Series Life
Account ("Series Account"), or to a fixed interest account ("Fixed Account") or
a combination of both. With respect to amounts allocated to Sub-Accounts of the
Series Account, the amount of the death benefit may, and the Cash Value will,
vary to reflect both the investment experience of the Sub-Accounts and the
timing and amount of additional premium payments. However, as long as the
Policy remains In Force, AUSA Life guarantees that the death benefit will never
be less than the Specified Amount of the Policy. While additional premium
payments are not required under the Policy, additional premium payments may be
necessary to prevent Lapse if there is insufficient Net Surrender Value.
The Policy provides a free-look period. The Policyowner may cancel the
Policy within 10 days after the Policyowner receives it, or 10 days after AUSA
Life mails or delivers a written notice of withdrawal right to the Policyowner,
or within 45 days after signing the application, whichever is latest.
The assets of each Sub-Account of the Series Account will be invested
solely in a corresponding Portfolio of the WRL Series Fund, Inc. (the "Fund").
The Prospectus for the Fund describes the investment objectives and the risks
of investing in the Portfolios of the Fund corresponding to the Sub-Accounts
currently available under the Policy. The Policyowner bears the entire
investment risk for all amounts allocated to the Series Account; there is no
guaranteed minimum Cash Value.
It may not be to your advantage to replace existing insurance or
supplement an existing flexible premium variable life insurance policy with a
policy described in this Prospectus.
Please read this Prospectus and the Prospectus for the Fund carefully and
retain for future reference.
THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK OR DEPOSITORY INSTITUTION, AND THE POLICY IS NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY, AND INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY THE CURRENT PROSPECTUS
FOR THE WRL SERIES FUND, INC. CERTAIN PORTFOLIOS MAY NOT BE AVAILABLE IN ALL
STATES. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
Prospectus Dated
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS .......................................... 1
INTRODUCTION ....................................... 3
INVESTMENT EXPERIENCE INFORMATION .................. 7
Rates of Return .................................... 7
Death Benefit, Cash Value and Net Surrender
Value Illustrations ........................... 8
Other Performance Data .............................. 14
AUSA LIFE AND THE
SERIES ACCOUNT ....................................... 14
AUSA Life Insurance Company, Inc. .................. 14
The Series Account ................................. 14
POLICY BENEFITS .................................... 14
Death Benefit ....................................... 14
When Insurance Coverage Takes Effect ............... 17
Terminal Illness Accelerated Death
Benefit Rider ................................. 17
Cash Value .......................................... 18
INVESTMENTS OF THE SERIES ACCOUNT .................. 18
WRL Series Fund, Inc. .............................. 18
Addition, Deletion, or Substitution
of Investments ................................. 21
PAYMENT AND ALLOCATION OF PREMIUMS .................. 22
Issuance of a Policy .............................. 22
Premiums .......................................... 22
Allocation of Premiums and Cash Value ............... 23
Dollar Cost Averaging .............................. 24
Asset Rebalancing Program ........................... 24
Policy Lapse and Reinstatement ..................... 25
CHARGES AND DEDUCTIONS .............................. 26
Premium Expense Charge .............................. 26
Contingent Surrender Charges ..................... 26
Cash Value Charges ................................. 27
Optional Cash Value Charges ........................ 28
Charges Against the Series Account .................. 28
Expenses of the Fund .............................. 28
Group or Sponsored Policies ........................ 29
Employee/Associate Policies ........................ 29
POLICY RIGHTS ....................................... 29
Loan Privileges .................................... 29
Surrender Privileges .............................. 30
Examination of Policy Privilege ("Free-Look") ...... 31
Conversion Rights ................................. 31
Policy Split Option ................................. 31
Benefits at Maturity .............................. 32
Payment of Policy Benefits ........................ 32
PAGE
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<S> <C>
GENERAL PROVISIONS ................................. 32
Postponement of Payments ........................... 32
The Contract ....................................... 33
Suicide ............................................. 33
Incontestability ................................. 33
Change of Owner or Beneficiary ..................... 33
Assignment .......................................... 33
Misstatement of Age or Sex ........................ 33
Reports and Records ................................. 33
Optional Insurance Benefits ........................ 33
THE FIXED ACCOUNT .................................... 34
Fixed Account Value ................................. 34
Minimum Guaranteed and Current
Interest Rates ................................. 34
Allocations, Transfers and Withdrawals ............ 34
DISTRIBUTION OF THE POLICIES ........................ 35
FEDERAL TAX MATTERS ................................. 35
Introduction ....................................... 35
Tax Charges ....................................... 35
Tax Status of the Policy ........................... 35
Tax Treatment of Policy Benefits .................. 36
Employment-Related Benefit Plans .................. 38
SAFEKEEPING OF THE SERIES
ACCOUNT'S ASSETS .................................... 38
VOTING RIGHTS OF THE SERIES ACCOUNT .................. 38
STATE REGULATION OF AUSA LIFE ..................... 38
REINSURANCE .......................................... 38
EXECUTIVE OFFICERS AND DIRECTORS
OF AUSA LIFE ....................................... 39
LEGAL MATTERS ....................................... 39
LEGAL PROCEEDINGS .................................... 40
EXPERTS ............................................. 40
ADDITIONAL INFORMATION .............................. 40
INFORMATION ABOUT
AUSA LIFE'S
FINANCIAL STATEMENTS ................................. 40
APPENDIX A - ILLUSTRATION
OF BENEFITS .......................................... 41
APPENDIX B - LONG TERM MARKET
TRENDS ............................................. 44
INDEX TO FINANCIAL
STATEMENTS .......................................... 46
</TABLE>
The Policy is available only in the State of New York.
i
<PAGE>
DEFINITIONS
ACCOUNTS -- Allocation options including the Fixed Account and
Sub-Accounts of the Series Account.
ADMINISTRATIVE OFFICE -- The administrative office of AUSA Life whose
mailing address is P. O. Box 9054, Clearwater, Florida 34618-9054.
ATTAINED AGE -- For each Joint Insured, the Issue Age plus the number of
completed Policy years.
ANNIVERSARY -- The same day and month as the Policy Date for each
succeeding year the Policy remains In Force.
BENEFICIARY -- The person or persons specified by the Owner as entitled
to receive the death benefit proceeds under the Policy.
CASH VALUE -- The sum of the values in each Sub-Account plus the Policy's
value in the Fixed Account.
FIXED ACCOUNT -- An allocation option other than the Series Account. Part
of AUSA Life's General Account.
FUND -- WRL Series Fund, Inc., a registered management investment company
in which the assets of the Series Account are invested.
GENERAL ACCOUNT -- The assets of AUSA Life other than those allocated to
the Series Account or any other separate account.
GUIDELINE PREMIUM -- The level annual premium payment necessary to
provide the benefits selected by the Policyowner under the Policy through its
Maturity Date, based on the particular facts relating to the Insureds and
certain assumptions allowed by law. The dollar amount of the Guideline Premium
is shown on the Policy's Schedule Page.
IN FORCE -- Condition under which the coverage is active and both
Insureds' lives remain insured.
INITIAL PREMIUM -- The amount which must be paid before coverage begins.
ISSUE AGE -- For each Joint Insured, issue age refers to the age on the
Insured's birthday nearest the Policy Date.
JOINT INSUREDS -- The persons whose lives are insured under the Policy.
LAPSE -- Termination of the Policy at the end of the grace period.
LOAN RESERVE -- A part of the Fixed Account to which amounts are
transferred as collateral for Policy loans.
MATURITY DATE -- The date when coverage under the Policy will terminate
if either of the Insureds is living and the Policy is In Force.
MONTHLY ANNIVERSARY OR MONTHIVERSARY -- The same date in each succeeding
month as the Policy Date. For purposes of the Series Account, whenever the
Monthly Anniversary falls on a date other than a Valuation Date, the Monthly
Anniversary will be deemed to be the next Valuation Date.
NET SURRENDER VALUE -- The amount payable upon surrender of the Policy
equal to the Cash Value as of the date of surrender, less any surrender charge,
and less any outstanding Policy loan, plus any unearned loan interest.
NET PREMIUM -- The portion of the premium available for allocation to
either the Fixed Account or the Sub-Accounts of the Series Account equal to the
premium paid by the Policyowner less the applicable premium expense charges.
NO LAPSE DATE -- Either, (1) the later of attained target premium age 65
or five Policy years, or (2) the later of attained target premium age 75 or
five Policy years, as selected by the Policyowner at time of application for
the Policy.
NO LAPSE PERIOD -- The period of time between the Policy Date and the No
Lapse Date, during which the Policy will not Lapse if certain conditions are
met, even though Net Surrender Value is insufficient to meet the monthly
deduction.
PLANNED PERIODIC PREMIUM -- A scheduled premium of a level amount at a
fixed interval over a specified period of time.
POLICY -- The joint survivorship flexible premium variable life insurance
policy offered by AUSA Life and described in this Prospectus.
POLICY DATE -- The date set forth in the Policy when insurance coverage
is effective and monthly deductions commence under the Policy. The Policy Date
is used to determine Policy years and Policy Months. Policy Anniversaries are
measured from the Policy Date.
POLICY MONTH -- A month beginning on the Monthly Anniversary.
POLICYOWNER(S) ("OWNER(S)") -- The person(s) who owns the Policy, and who
may exercise all rights under the Policy while either or both Joint Insureds
are living. If two Owners are named, the Policy will be owned jointly and the
consent of each Owner will be required to exercise ownership rights.
PORTFOLIO -- A separate investment portfolio of the Fund.
RECORD DATE -- The date the Policy is recorded on the books of AUSA Life
as an In Force Policy.
SERIES ACCOUNT -- AUSA Series Life Account, a separate investment account
established by AUSA Life to receive and invest Net Premiums allocated under the
Policy.
SPECIFIED AMOUNT -- The minimum death benefit payable under the Policy as
long as the Policy remains In Force.
1
<PAGE>
The death benefit proceeds will be reduced by any outstanding indebtedness and
any due and unpaid charges.
SUB-ACCOUNT -- A sub-division of the Series Account. Each Sub-Account
invests exclusively in the shares of a specified Portfolio of the Fund.
SURVIVING INSURED -- The Joint Insured who remains alive after the other
Joint Insured has died.
TERMINATION -- Condition when either of the Joint Insured's lives is no
longer insured under the coverage provided.
VALUATION DATE -- Each day on which the New York Stock Exchange is open
for business.
VALUATION PERIOD -- The period commencing at the end of one Valuation
Date and continuing to the end of the next succeeding Valuation Date.
2
<PAGE>
INTRODUCTION
1. WHAT IS THE DIFFERENCE BETWEEN THE POLICY AND A CONVENTIONAL FIXED-BENEFIT
POLICY PRIOR TO THE DEATH OF AN INSURED?
Like conventional fixed-benefit life insurance, as long as the Policy
remains In Force, the Policy will provide: (1) the accumulation of Cash
Value; and (2) surrender rights and Policy loan privileges.
The Policy differs from conventional fixed-benefit life insurance by
allowing Policyowners to allocate Net Premiums to one or more Sub-Accounts
of the Series Account, or to the Fixed Account, or to a combination of
both. Each Sub-Account invests in a designated Portfolio of the Fund. The
amount and/or duration of the life insurance coverage and the Cash Value of
the Policy are not guaranteed and may increase or decrease depending upon
the investment experience of the Series Account. Accordingly, the
Policyowner bears the investment risk of any depreciation in value of the
underlying assets of the Series Account but reaps the benefits of any
appreciation in value. (See Allocation of Premiums and Cash Value -
Allocation of Net Premiums, p. 23.) Unlike conventional fixed-benefit life
insurance, a Policyowner also has the flexibility, subject to certain
restrictions (see Premiums - Premium Limitations, p. 22), to vary the
frequency and amount of premium payments and to decrease the Specified
Amount. Thus, unlike conventional fixed-benefit life insurance, the Policy
does not require a Policyowner to adhere to a fixed premium schedule.
Moreover, the failure to pay a scheduled premium ("Planned Periodic
Premium") will not itself cause the Policy to lapse, although additional
premium payments may be necessary to prevent lapse if Net Surrender Value
is insufficient to pay certain monthly charges, and a grace period expires
without a sufficient payment. (See Policy Lapse and Reinstatement - Lapse,
p. 25.)
2. WHAT IS THE DIFFERENCE BETWEEN THE POLICY AND A CONVENTIONAL FIXED-BENEFIT
POLICY UPON THE DEATH OF AN INSURED?
Under a conventional fixed-benefit life insurance Policy, only one
person is insured. Upon the insured's death, the Policy terminates and the
death benefit is paid to the beneficiary. Under a joint survivorship
Policy, two people are insured. When one of the two insureds dies with the
other insured still living, no death benefit is paid, and the Policy
continues without any change in the Policy provisions, charges or cash
value accumulation. The Owner(s) may continue to pay premiums, as necessary
or desired, and exercise all rights as Owner(s) under the Policy.
3. WHAT DEATH BENEFIT OPTIONS ARE AVAILABLE UNDER THE POLICY?
The Policy provides the payment of benefits upon the death of the
Surviving Insured. The Policy contains two death benefit options. Under
Death Benefit Option A, the death benefit is the greater of the Specified
Amount of the Policy or a specified percentage times the Cash Value of the
Policy on the date of death of the Surviving Insured. Under Death Benefit
Option B, the death benefit is the greater of the Specified Amount of the
Policy plus the Cash Value of the Policy on the date of death of the
Surviving Insured or a specified percentage times the Cash Value of the
Policy on the date of death of the Surviving Insured. As long as the Policy
remains In Force, the minimum death benefit payable under either option
will be the current Specified Amount. The amount of death benefit will be
reduced by any outstanding indebtedness and any due and unpaid charges, and
increased by any additional insurance benefits added by rider and any
unearned loan interest. Under AUSA Life's current rules, the minimum
Specified Amount for a Policy at issue is generally $100,000. The minimum
Specified Amount will be set forth in the Policyowner's Policy. (See Policy
Benefits - Death Benefit, p. 14.)
Optional insurance benefits offered under the Policy include a Joint
Insured Term Rider; an Individual Insured Rider; and a Wealth Protector
Rider. (See Optional Cash Value Charges - Optional Insurance Benefits, p.
28.) The cost of these optional insurance benefits will be deducted from
Cash Value as part of the monthly deduction. (See Charges and Deductions -
Cash Value Charges, p. 27.)
A Terminal Illness Accelerated Death Benefit Rider is automatically
included with every Policy at no additional charge. This rider makes a
"Single Sum Benefit" available prior to an Insured's death if the Insured
has incurred a condition resulting from illness which, as determined by a
Physician, has reduced the Insured's life expectancy as defined in the
rider. (See Policy Benefits - Terminal Illness Accelerated Death Benefit
Rider, p. 17.)
Benefits under the Policy may be paid in a lump sum or under one of
the settlement options set forth in the Policy. (See Payment of Policy
Benefits - Settlement Options, p. 32.)
4. HOW MAY THE AMOUNT OF THE DEATH BENEFIT AND CASH VALUE VARY?
Under either death benefit option, as long as the Policy remains In
Force, the death benefit will not be less than the current Specified Amount
of the Policy.
3
<PAGE>
The amount of death benefit will be reduced by any outstanding policy
loan, plus any unearned loan interest, and any due and unpaid charges. The
death benefit may, however, exceed the Specified Amount under certain
circumstances. The amount by which the death benefit exceeds the Specified
Amount depends upon the option chosen and the Cash Value of the Policy.
(See Policy Benefits - Death Benefit, p. 14.)
The Policy's Cash Value in the Series Account will reflect the amount
and frequency of premium payments, the investment experience of the chosen
Sub-Accounts of the Series Account, any partial surrenders, and any charges
imposed in connection with the Policy. The entire investment risk for
amounts allocated to the Sub-Accounts of the Series Account is borne by the
Policyowner; AUSA Life does not guarantee a minimum Cash Value. (See Policy
Benefits - Cash Value, p. 18.)
5. WHAT FLEXIBILITY DOES A POLICYOWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH
BENEFIT?
The Policyowner has the flexibility to adjust the death benefit
payable by changing the Death Benefit Option type, by decreasing the
Specified Amount of the Policy or by adding riders to increase the total
death benefit payable. No such change or decrease may be requested during
the first three Policy years. The Policyowner may either change the death
benefit option or decrease the Specified Amount, but not both, only once
each Policy year after the third Policy year. (See Death Benefit - Change
in Death Benefit Option, p. 16.)
6. WHAT FLEXIBILITY DOES A POLICYOWNER HAVE IN CONNECTION WITH PREMIUM
PAYMENTS?
A Policyowner has considerable flexibility concerning the amount and
frequency of premium payments. An Initial Premium at least equal to a
minimum monthly first year premium as set forth in the Policy must be paid
before insurance coverage is In Force. (See Policy Benefits - When
Insurance Coverage Takes Effect, p. 17.) Thereafter, a Policyowner may,
subject to certain restrictions, make premium payments in any amount and at
any frequency. (See Payment and Allocation of Premiums - Premiums, p. 22.)
Each Policyowner will also determine a Planned Periodic Premium schedule.
The schedule will provide Planned Periodic Premium payments of a level
amount at a fixed interval over a specified period of time. The amount and
frequency of planned premium payments will be set forth in the Policy. The
amount and frequency of Planned Periodic Premium payments may be changed
upon written request. (See Premiums - Planned Periodic Premiums, p. 22.)
7. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy will Lapse only when Net Surrender Value is insufficient to
pay the monthly deduction (see Charges and Deductions - Cash Value Charges,
p. 27), providing excess indebtedness does not exceed the Policy's Cash
Value, and a grace period expires without a sufficient payment by the
Policyowner. (See Loan Privileges - Indebtedness, p. 30.) However, until
the No Lapse Date as provided in the Policy, the Policy will remain In
Force and no grace period will begin provided the total premiums received
(minus any withdrawals and minus any outstanding loans) equal or exceed the
minimum monthly guarantee premium shown in the Policy times the number of
months since the Policy Date, including the current month. The Policy,
therefore, differs in two important respects from a conventional life
insurance policy. First, the failure to pay a Planned Periodic Premium will
not automatically cause the Policy to Lapse. Second, after the No Lapse
Date, the Policy can Lapse even if Planned Periodic Premiums or premiums in
other amounts have been paid, if Net Surrender Value is insufficient to pay
the monthly deduction, and a grace period expires without a sufficient
payment. Such a Lapse could happen if the investment experience has been
sufficiently unfavorable to have resulted in a decrease in the Net
Surrender Value, or the Net Surrender Value has decreased because not
enough premiums have been paid to offset the monthly deduction. If either
Insured is alive and the Policy is In Force on the Maturity Date, which is
the younger Insured's 100th birthday, the Policy will then terminate and no
longer be In Force. Upon request, AUSA Life will extend the Maturity Date
as long as there appears to be no unfavorable tax consequences. The Net
Surrender Value as of the Maturity Date will be paid to the Policyowner.
(See Policy Rights - Benefits at Maturity, p. 32.)
8. HOW ARE NET PREMIUMS ALLOCATED?
The portion of the premium available for allocation ("Net Premium")
equals the premium paid less the Premium Expense Charge. (See Charges and
Deductions - Premium Expense Charge, p. 26.) The Policyowner initially
determines the allocation of the Net Premium among the Sub-Accounts of the
Series Account, each of which invests in shares of a designated Portfolio
of the Fund, or to the Fixed Account, or a combination. Each Portfolio has
a different investment objective. (See Investments of the Series Account -
WRL Series Fund, Inc., p. 18.) The allocation of future Net Premiums may be
changed without charge at any time by providing AUSA Life with written
notification from the Policyowner, or by calling AUSA Life's toll-free
number, 1-800-322-7160.
4
<PAGE>
9. IS THERE A "FREE-LOOK" PERIOD?
Yes, the Policy provides a free-look period. The Policyowner may
cancel the Policy within 10 days after the Policyowner receives it, or 10
days after AUSA Life mails or delivers a written notice of withdrawal right
to the Policyowner. The refund will equal the sum of: (i) the difference
between the premiums paid and the amounts allocated to any Accounts under
the Policy; (ii) the total amount of monthly deductions made and any other
charges imposed on amounts allocated to the Accounts; and (iii) the value
of amounts allocated to the Accounts on the date AUSA Life or its agent
receives the returned Policy. (See Policy Rights - Examination of Policy
Privilege, p. 31.)
10. MAY THE POLICY BE SURRENDERED?
Yes, the Policyowner may totally surrender the Policy at any time and
receive the Net Surrender Value of the Policy. Subject to certain
limitations, the Policyowner may also make cash withdrawals from the Policy
at any time after the first Policy year and prior to the Maturity Date.
(See Policy Rights - Surrender Privileges, p. 30.) If Death Benefit Option
A is in effect, cash withdrawals will reduce the Policy's Specified Amount
by the amount of the cash withdrawal.
11. WHAT IS THE LOAN PRIVILEGE?
After the first Policy Anniversary, a Policyowner may obtain a Policy
loan in any amount which is not greater than 90% of the Cash Value less any
surrender charge and any already outstanding loan. AUSA Life reserves the
right to permit a Policy loan prior to the first Policy Anniversary for
Policies issued pursuant to a transfer of cash values from another life
insurance policy, under Section 1035(a) of the Internal Revenue Code of
1986, as amended. It should be noted, however, that a loan taken from, or
secured by, a Policy may be treated as a taxable distribution, and also may
be subject to a penalty tax. (See Federal Tax Matters, p. 35.)
The interest rate on a loan is 5.2% payable annually in advance. The
requested loan amount, plus interest in advance, will be transferred from
the Accounts to the Loan Reserve and credited at the end of each Policy
year with guaranteed interest at a rate of 4% per year. AUSA Life may from
time to time, and in its sole discretion, credit the Loan Reserve with
additional interest at a rate higher than 4% per year. The Loan Reserve is
currently being credited with a rate higher than 4% per year. The minimum
loan amount is generally $500. (See Policy Rights - Loan Privileges, p.
29.) Upon repayment of a loan, amounts in the Loan Reserve in excess of the
outstanding value of the loan are currently transferred to the Accounts in
the same manner as Net Premium allocations; however, AUSA Life may in the
future require these amounts to be transferred to the Fixed Account. (See
The Fixed Account, p. 34.)
There are risks involved in taking a Policy loan, including the
potential for a Policy to lapse if projected earnings, taking into account
any outstanding loans, are not achieved, as well as adverse tax
consequences which occur if a Policy lapses with loans outstanding. (See
Federal Tax Matters - Tax Treatment of Policy Benefits, p. 36.)
12. WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE POLICY?
Certain charges are deducted from each premium. A Premium Expense
Charge equal to 6.00% of the premiums paid through the end of the tenth
Policy year is deducted to compensate AUSA Life for distribution expenses
incurred in connection with the Policy and for state premium taxes. After
the tenth Policy year, the Premium Expense Charge reduces to 2.5%. (See
Charges and Deductions - Premium Expense Charge, p. 26.)
A "surrender charge" (part of which is a contingent deferred sales
charge) is deducted if the Policy is surrendered during the first 15 Policy
years. The surrender charge consists of a deferred issue charge of $5.00
per $1,000 of Specified Amount; the surrender charge also consists of a
deferred sales charge equal to 26.5% of one Guideline Premium and not more
than 4.2% of premiums above that amount. A declining percentage of the
surrender charge is assessed after the tenth year. (See Charges and
Deductions - Contingent Surrender Charges, p. 26.)
A cost of insurance charge and a $5.00 monthly administration charge
are deducted monthly from the Cash Value of each Policy to compensate AUSA
Life for the cost of insurance and the cost of administering the Policy.
Cost of insurance charges will vary with the Policy's Specified Amount, the
death benefit option chosen and the investment experiences of the
Portfolios in which the Policy is invested. (See Charges and Deductions -
Cash Value Charges, p. 27.) A Death Benefit Guarantee Charge is deducted up
until the No Lapse Date selected by the Policyowner on the application. The
amount of this charge is set forth on the Policy Schedule Page and will be
$0.04 per $1,000 of Specified Amount for all classes of Policies. On and
after the No Lapse Date selected, this charge will be zero. (See Charges
and Deductions - Cash Value Charges, p. 27.)
Optional Cash Value charges are deducted from the Policy as a result
of Policyowner changes or elections made to the Policy. Optional Cash Value
charges include charges for: optional insurance benefits, certain Cash
Value transfers and cash withdrawals. (See Charges and Deductions -
Optional Cash Value Charges, p. 28.)
AUSA Life charges the Sub-Accounts of the Series Account for the
mortality and expense risks AUSA Life assumes. The charge is made daily at
an effective annual
5
<PAGE>
rate of 0.90% of the average daily net assets of each Sub-Account of the
Series Account. (See Charges and Deductions - Charges Against the Series
Account, p. 28.)
Each Sub-Account invests in a corresponding Portfolio of the Fund.
Each Portfolio pays investment management fees based on a percentage of the
Portfolio's average daily net assets. The annual management fees and other
Fund expenses for the Portfolios are provided on p. 7, under the heading
Fund Annual Expenses. Effective January 1, 1997, the Fund adopted a Plan of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act") ("Distribution Plan") and pursuant to the
Plan, has entered into a Distribution Agreement with InterSecurities, Inc.
("ISI"), principal underwriter for the Fund.
Under the Distribution Plan, the Fund, on behalf of the Portfolios, is
authorized to pay to various service providers, as direct payment for
expenses incurred in connection with the distribution of a Portfolio's
shares, amounts equal to actual expenses associated with distributing a
Portfolio's shares, up to a maximum rate of 0.15% (fifteen one-hundreths of
one percent) on an annualized basis of the average daily net assets. This
fee is measured and accrued daily and paid monthly. ISI has determined that
it will not seek payment by the Fund of distribution expenses with respect
to any Portfolio during the fiscal year ending December 31, 1998. Prior to
ISI's seeking reimbursement, Policyowners will be notified in advance. In
addition, the Portfolios incur certain operating expenses. (See Investments
of the Series Account - WRL Series Fund, Inc., p. 18.)
No charges are currently made from the Series Account for Federal or
state income taxes. Should AUSA Life determine that such taxes may be
imposed by Federal or state agencies, AUSA Life may make deductions from
the Series Account to pay these taxes. (See Federal Tax Matters, p. 35.)
13. ARE TRANSFERS PERMITTED AMONG THE ACCOUNTS?
Yes. Twelve Cash Value transfers are permitted among the Sub-Accounts
of the Series Account or from the Sub-Accounts to the Fixed Account without
charge in a Policy year. AUSA Life will impose a $10 charge for each
subsequent transfer. (See Payment and Allocation of Premiums - Allocation
of Premiums and Cash Value, p. 23.) Transfers may also be made from the
Fixed Account to the Sub-Accounts subject to certain restrictions. (See The
Fixed Account - Allocations, Transfers and Withdrawals, p. 34.)
14. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PURCHASING A POLICY?
Under current Federal tax law, life insurance policies receive
tax-favored treatment. The death benefit is generally excludable from the
beneficiary's gross income for Federal income tax purposes, according to
Section 101(a)(1) of the Internal Revenue Code. Owners of a life insurance
policy are not taxed on any increase in the cash value while the policy
remains In Force.
If a second-to-die life insurance policy is a modified endowment
contract under Federal tax law, certain distributions made during either
insured's lifetime, such as loans and partial withdrawals from, and
collateral assignments of, the policy are includable in gross income on an
income-first basis. A 10% penalty tax may also be imposed on distributions
made before the policyowner attains age 591/2. Life insurance policies that
are not modified endowment contracts under Federal tax law receive
preferential tax treatment with respect to certain distributions.
For a discussion of tax issues associated with this Policy, see
"Federal Tax Matters" on p. 35.
6
<PAGE>
FUND ANNUAL EXPENSES* (AS A % OF FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Aggressive Emerging
Growth Growth Growth Global
Portfolio Portfolio Portfolio Portfolio
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Management Fees ..................... 0.80% 0.80% 0.80% 0.80%
Other Expenses (after reimbursement) 0.18% 0.14% 0.08% 0.19%
Total Fund Annual Expenses ............ 0.98% 0.94% 0.88% 0.99%
<CAPTION>
C.A.S.E. Third Avenue
Balanced Value Equity Growth Value
Portfolio Portfolio Portfolio Portfolio**
----------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Management Fees ..................... 0.80% 0.80% 0.80% 0.80%
Other Expenses (after reimbursement) 0.17% 0.20% 0.20% 0.20%
Total Fund Annual Expenses ............ 0.97% 1.00% 1.00% 1.00%
</TABLE>
<TABLE>
<CAPTION>
Tactical
Strategic Growth & Money Asset International
Bond Total Return Income Market Allocation Equity U.S. Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
----------- -------------- ----------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees ..................... 0.45% 0.80% 0.75% 0.40% 0.80% 1.00% 0.80%
Other Expenses (after reimbursement) 0.14% 0.11% 0.25% 0.12% 0.10% 0.30% 0.25%
Total Fund Annual Expenses ......... 0.64% 0.91% 1.00% 0.52% 0.90% 1.30% 1.05%
</TABLE>
* Effective January 1, 1997, the Fund adopted a Plan of Distribution pursuant
to Rule 12b-1 under the 1940 Act ("Distribution Plan") and pursuant to the
Plan, has entered into a Distribution Agreement with ISI, principal
underwriter for the Fund. Under the Distribution Plan, the Fund, on behalf
of the Portfolios, is authorized to pay to various service providers, as
direct payment for expenses incurred in connection with the distribution
of a Portfolio's shares, amounts equal to actual expenses associated with
distributing a Portfolio's shares, up to a maximum rate of 0.15% (fifteen
one-hundredths of one percent) on an annualized basis of the average daily
net assets. This fee is measured and accrued daily and paid monthly. ISI
has determined that it will not seek payment by the Fund of distribution
expenses with respect to any Portfolio during the fiscal year ending
December 31, 1998. Prior to ISI's seeking reimbursement, Policyowners will
be notified in advance.
** Because the Third Avenue Value Portfolio commenced operations on January 2,
1998, the percentages set forth as "Other Expenses" and "Total Fund Annual
Expenses" are estimates.
The purpose of the preceding Table is to assist the Policyowner in
understanding the various costs and expenses that a Policyowner will bear
directly and indirectly. The Table reflects charges and expenses of the
Separate Account as well as the Portfolios of the Fund for the fiscal year
ended December 31, 1997, except that the "Other Expenses" and "Total Fund
Annual Expenses" for the Third Avenue Portfolio are estimates. Expenses of the
Fund may be higher or lower in the future. Certain states and other
governmental entities may impose a premium tax, which the Table does not
include. For more information on the charges described in this Table, see
"Charges And Deductions" on page 26 and the Fund Prospectus which accompanies
this Prospectus.
WRL Investment Management, Inc. ("WRL Management") has undertaken, until
at least April 30, 1998, to pay Fund expenses on behalf of the Portfolios to
the extent normal operating expenses of a Portfolio exceed a stated percentage
of each Portfolio's average daily net assets. The expense limitation for the
Aggressive Growth, Emerging Growth, Growth, Global, Balanced, Value Equity,
C.A.S.E. Growth, Third Avenue Value, Strategic Total Return, Growth & Income
and Tactical Asset Allocation Portfolios is 1.00% of the average daily net
assets; 0.70% of the average daily net assets of the Bond and Money Market
Portfolios; 1.50% of the average daily net assets of the International Equity
Portfolio; and 1.30% of the average daily net assets of the U.S. Equity
Portfolio. In 1997, WRL Management reimbursed the C.A.S.E. Growth Portfolio in
the amount of $ . Without such reimbursement, the total annual Fund
expenses during 1997 for the C.A.S.E. Growth Portfolio would have been %.
INVESTMENT EXPERIENCE INFORMATION
The information provided in this section shows the historical investment
experience of the Fund and hypothetical illustrations of the Policy based on
the historical investment experience of the Fund. It does not represent or
project future investment performance.
The Policies became available for sale in of 1998. The Series
Account was established on October 24, 1994 and commenced operations ,
1998. The Fund commenced operations on October 2, 1986. The rates of return
shown below depict the historic investment experience of each Portfolio of the
Fund for the periods shown and assumes that the rate of return for each
Portfolio in each calendar year was uniformly earned throughout the year. The
actual performance of the Portfolios, however, has and will vary throughout the
year, and will result in variable monthly deductions from Cash Value that could
affect performance. The illustrations of death benefits, Cash Values and Net
Surrender Values shown below depict these Policy features for a hypothetical
Policy as if it had been purchased on January 1, 1987 for Insureds in the age
and risk classes indicated, based on the historical investment experience of
the Portfolio indicated since January 1, 1987. The actual rate of return for
each Portfolio in each calendar year was assumed to be uniformly earned
throughout that year. The actual performance of the Portfolios, however, has
and will vary throughout the year.
RATES OF RETURN
The rates of return shown below are based on the investment performance,
as described above, after the deduction of investment management fees and
direct Fund expenses, of the
7
<PAGE>
Portfolios of the Fund. The rates are average annual compounded rates of return
for the periods ended on December 31, 1997. (See Investments of the Series
Account - WRL Series Fund, Inc., p. 18.)
These rates of return do not reflect the annual charge against the assets
of the Series Account of 0.90% for mortality and expense risks. These rates of
return also do not reflect the charges deducted from premiums, monthly
deductions from Cash Value, or surrender charges. (See Charges and Deductions -
Premium Expense Charge, p. 26; Contingent Surrender Charges, p. 26; and Cash
Value Charges, p. 27.) Accordingly, these rates of return do not illustrate how
actual investment performance will affect benefits under the Policies. (See,
however, Death Benefit, Cash Value and Net Surrender Value Illustrations,
below.) Moreover, these rates of return are not an estimate, projection or
guarantee of future performance.
Also shown are comparable figures for the unmanaged Standard & Poor's
Index of 500 Common Stocks, a widely used measure of stock market performance.
As an unmanaged index, the Standard & Poor's Index of 500 Common Stocks (S&P
500) does not reflect any deductions for the expense of operating and managing
an investment portfolio. As an unmanaged index, the S&P 500 does not reflect
any deduction for the expenses of operating and managing an investment
Portfolio.
AVERAGE ANNUAL COMPOUNDED RATES OF RETURN
FOR THE PERIODS ENDED ON DECEMBER 31, 1997
<TABLE>
<CAPTION>
Fund Portfolio Inception* 5 Years 3 Years 1 Year
- ------------------------ ------------ --------- --------- -------
<S> <C> <C> <C> <C>
Growth % % % %
Global % % % %
Bond % % % %
Money Market % % % %
Emerging Growth % N/A % %
Strategic Total Return % N/A % %
Aggressive Growth % N/A % %
Balanced % N/A % %
Growth & Income % N/A % %
Tactical Asset
Allocation % N/A % %
C.A.S.E. Growth % N/A N/A %
Value Equity % N/A N/A %
U.S. Equity % N/A N/A %
International Equity % N/A N/A %
S&P 500 % % % %
</TABLE>
* The Growth, Bond and Money Market Portfolios of the Fund commenced
operations on October 2, 1986. The Global Portfolio commenced operations
on December 3, 1992. The Emerging Growth and Strategic Total Return
Portfolios commenced operations on March 1, 1993. The Aggressive Growth,
Balanced and Growth & Income Portfolios commenced operations on March 1,
1994. The Tactical Asset Allocation Portfolio commenced operations on
January 3, 1995. The C.A.S.E. Growth Portfolio commenced operations on
May 1, 1995. The Value Equity Portfolio commenced operations on May 1,
1996. The U.S. Equity and the International Equity Portfolios commenced
operations on January 2, 1997. The Standard & Poor's Index of 500 Common
Stocks returns are based on an inception date of October 2, 1986.
Because the Third Avenue Value Portfolio had not yet commenced operations as of
December 31, 1997, the chart above does not reflect rates of return for this
Portfolio.
Additional information regarding the investment performance of the
Portfolios of the Fund appears in the attached Prospectus for the Portfolios of
the Fund.
DEATH BENEFIT, CASH VALUE AND NET SURRENDER VALUE
ILLUSTRATIONS
In order to demonstrate how the historic investment experience of the
Portfolios would have affected the Option B death benefits, the Policy Cash
Value and Net Surrender Value, the following hypothetical illustrations are
based on the historic investment experience of each Portfolio as if the Policy
had been available for sale and issued on January 1 of the year following or
coincident with each Portfolio's inception. The historic rate of return in each
calendar year was assumed to be uniformly earned throughout that year. The
actual performance of the Portfolios, however, has and will vary throughout the
year, and will result in variable monthly deductions from Cash Values that
could affect performance. These illustrations do not represent what may happen
in the future.
For each Portfolio, the illustrations show Option B based on the payment
of annual premiums of $4,000 at the beginning of each Policy year, and a
Specified Amount of $250,000 for a male age 55 and a female age 55. The
illustrations also assume that the Joint Insureds are placed in AUSA Life's
Select underwriting rate class. (See Cash Value Charges - Cost of Insurance, p.
27.) The illustrations also assume that the Policy's entire Cash Value is
allocated to the Sub-Account corresponding to the Portfolio shown. The
illustrated values would be different if the Policyowner had chosen Option A
death benefits.
The amounts shown for death benefits, Cash Values and Net Surrender
Values take into account all charges and deductions from the Policy, the Series
Account and the Fund (see Charges and Deductions - Premium Expense Charge, p.
26, Charges Against the Series Account, p. 28, and Investments of the Series
Account - WRL Series Fund, Inc., p. 18).
For each Portfolio of the Fund, one illustration is based on the
guaranteed cost of insurance rates, while the other illustration is based on
the current cost of insurance rates. These examples of Policy performance are
for the specific ages, sexes, rate class, premium payment pattern and Policy
set forth above. The amount and timing of premium payments would affect
individual Policy benefits as would any withdrawals or loans.
This Prospectus also contains illustrations based on hypothetical rates
of return. See Appendix A, pp. 41-43.
The following example shows how the hypothetical net return of the Growth
Portfolio of the Fund would have affected benefits for a Policy dated January
1, 1987. This example assumes that the Net Premiums and related Cash Values
were in the Sub-Account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
8
<PAGE>
GROWTH PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1988 .............................. $ $ $ $
1989* ...........................
1990* ...........................
1991* ...........................
1992* ...........................
1993* ...........................
1994* ...........................
1995* ...........................
1996* ..............................
1997* ..............................
1998* ..............................
</TABLE>
* For the years shown, benefits and values reflect only premiums paid during
previous Policy years.
The following example shows how the hypothetical net return of the Bond
Portfolio of the Fund would have affected benefits for a Policy dated January
1, 1987. This example assumes that Net Premiums and related Cash Values were in
the Sub-Account for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
BOND PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1988 .............................. $ $ $ $
1989* ...........................
1990* ...........................
1991* ...........................
1992* ...........................
1993* ...........................
1994* ...........................
1995* ...........................
1996* ..............................
1997* ..............................
1998* ..............................
</TABLE>
* For the years shown, benefits and values reflect only premiums paid during
previous Policy years.
9
<PAGE>
The following example shows how the hypothetical net return of the Money
Market Portfolio of the Fund would have affected benefits for a Policy dated
January 1, 1987. This example assumes that Net Premiums and related Cash Values
were in the Sub-Account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
MONEY MARKET PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1988 .............................. $ $ $ $
1989* ...........................
1990* ...........................
1991* ...........................
1992* ...........................
1993* ...........................
1994* ...........................
1995* ...........................
1996* ..............................
1997* ..............................
1998* ..............................
</TABLE>
* For the years shown, benefits and values reflect only premiums paid during
previous Policy years.
The following example shows how the hypothetical net return of the Global
Portfolio of the Fund would have affected benefits for a Policy dated January
1, 1993, and if the Global Portfolio had been offered through the Policy as of
January 1, 1993. This example assumes that Net Premiums and related Cash Values
were in the Sub-Account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
GLOBAL PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1994 .............................. $ $ $ $
1995* ...........................
1996* ..............................
1997* ..............................
1998* ..............................
</TABLE>
* For the years shown, benefits and values reflect only premiums paid during
previous Policy years.
10
<PAGE>
The following example shows how the hypothetical net return of the
Emerging Growth Portfolio of the Fund would have affected benefits for a Policy
dated January 1, 1994, if the Emerging Growth Portfolio had been offered by the
Policy as of January 1, 1994. This example assumes that Net Premiums and
related Cash Values were in the Sub-Account for the entire period and that the
values were determined on the first Valuation Date following January 1st of
each year.
EMERGING GROWTH PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1995 .............................. $ $ $ $
1996* ..............................
1997* ..............................
1998* ..............................
</TABLE>
* For the years shown, benefits and values reflect only premiums paid during
previous Policy years.
The following example shows how the hypothetical net return of the
Strategic Total Return Portfolio of the Fund would have affected benefits for a
Policy dated January 1, 1994, if the Strategic Total Return Portfolio had been
offered by the Policy as of January 1, 1994. This example assumes that Net
Premiums and related Cash Values were in the Sub-Account for the entire period
and that the values were determined on the first Valuation Date following
January 1st of each year.
STRATEGIC TOTAL RETURN PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------- -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1995 .............................. $ $ $ $
1996* ..............................
1997* ..............................
1998* ..............................
</TABLE>
* For the years shown, benefits and values reflect only premiums paid during
previous Policy years.
The following example shows how the hypothetical net return of the
Aggressive Growth Portfolio of the Fund would have affected benefits for a
Policy dated January 1, 1995. This example assumes that Net Premiums and
related Cash Values were in the Sub-Account for the entire period and that the
values were determined on the first Valuation Date following January 1st of
each year.
AGGRESSIVE GROWTH PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1996 .............................. $ $ $ $
1997* ..............................
1998* ..............................
</TABLE>
* For each year shown, benefits and values reflect only premiums paid during
previous Policy years.
11
<PAGE>
The following example shows how the hypothetical net return of the
Balanced Portfolio of the Fund would have affected benefits for a Policy dated
January 1, 1995. This example assumes that Net Premiums and related Cash Values
were in the Sub-Account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
BALANCED PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1996 .............................. $ $ $ $
1997* ..............................
1998* ..............................
</TABLE>
* For each year shown, benefits and values reflect only premiums paid during
previous Policy years.
The following example shows how the hypothetical net return of the Growth
& Income Portfolio of the Fund would have affected benefits for a Policy dated
January 1, 1995. This example assumes that Net Premiums and related Cash Values
were in the Sub-Account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
GROWTH & INCOME PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1996 .............................. $ $ $ $
1997* ..............................
1998* ..............................
</TABLE>
* For each year shown, benefits and values reflect only premiums paid during
previous Policy years.
The following example shows how the hypothetical net return of the
Tactical Asset Allocation Portfolio of the Fund would have affected benefits
for a Policy dated January 1, 1995, if the Tactical Asset Allocation Portfolio
had been offered by the Policy as of January 1, 1995. This example assumes that
Net Premiums and related Cash Values were in the Sub-Account for the entire
period and that the values were determined on the first Valuation Date
following January 1st of each year.
TACTICAL ASSET ALLOCATION PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1996 .............................. $ $ $ $
1997* ..............................
1998* ..............................
</TABLE>
* For the years shown, benefits and values reflect only premiums paid during
previous Policy years.
12
<PAGE>
The following example shows how the hypothetical net return of the
C.A.S.E. Growth Portfolio of the Fund would have affected benefits for a Policy
dated January 1, 1996, if the C.A.S.E. Growth Portfolio had been offered by the
Policy as of January 1, 1996. This example assumes that Net Premiums and
related Cash Values were in the Sub-Account for the entire period and that the
values were determined on the first Valuation Date following January 1st of
each year.
C.A.S.E. GROWTH PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1997 .............................. $4,125 $4,125 $1,815 $1,815
1998* ..............................
</TABLE>
The following example shows how the hypothetical net return of the Value
Equity Portfolio of the Fund would have affected benefits for a Policy dated
January 1, 1996, if the Value Equity Portfolio had been offered by the Policy
as of January 1, 1996. This example assumes that Net Premiums and related Cash
Values were in the Sub-Account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
VALUE EQUITY PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1997 ..............................
1998* .............................. $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the
International Equity Portfolio of the Fund would have affected benefits for a
Policy dated January 1, 1997. This example assumes that Net Premiums and
related Cash Values were in the Sub-Account for the entire period and that the
values were determined on the first Valuation Date following January 1st of
each year.
INTERNATIONAL EQUITY PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1998 .............................. $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the U.S.
Equity Portfolio of the Fund would have affected benefits for a Policy dated
January 1, 1997. This example assumes that Net Premiums and related Cash Values
were in the Sub-Account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
U.S. EQUITY PORTFOLIO
Male, Issue Age 55, Female, Issue Age 55, $4,000 Annual Premium
($250,000 Specified Amount, Non-Smoker Ultimate Select Risk)
Death Benefit Option B
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
Cash Value Net Surrender Value
------------------------ -----------------------
Policy Anniversary on January 1 of
- ------------------------------------ Current Guaranteed Current Guaranteed
<S> <C> <C> <C> <C>
1998 .............................. $ $ $ $
</TABLE>
For the years shown, benefits and values reflect only premiums paid during
previous Policy years the Third Avenue Value Portfolio had not commenced
operations as of December 31, 1997, there are no hypothetical illustrations for
this Policy years Portfolio.
13
<PAGE>
OTHER PERFORMANCE DATA
AUSA Life may compare the performance of each Sub-Account in advertising and
sales literature to the performance of other variable life issuers in general,
or to the performance of particular types of variable life insurance policies
investing in mutual funds, or investment series of mutual funds, with
investment objectives similar to each of the Sub-Accounts whose performance is
reported by Lipper Analytical Services, Inc. ("Lipper") and Morningstar, Inc.
("Morningstar") or reported by other services, companies, individuals or other
industry or financial publications of general interest, such as Forbes, Money,
The Wall Street Journal, Business Week, Barron's, Kiplinger's Personal Finance
and Fortune. Lipper and Morningstar are widely used independent research
services which monitor and rank the performance of variable life insurance
policies in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable annuity contracts as
well as variable life insurance policies. The performance analyses prepared by
Lipper and Morningstar rank such policies and contracts on the basis of total
return, assuming reinvestment of distributions, but do not take sales charges,
redemption fees or certain expense deductions at the separate account level
into consideration.
AUSA Life may also compare the performance of each Sub-Account in
advertising and sales literature to the S&P 500, a widely used measure of stock
market performance, or other widely recognized indices. Unmanaged indices may
assume the reinvestment of dividends, but usually do not reflect any
"deduction" for the expense of operating or managing an investment portfolio.
In addition, AUSA Life may, as appropriate, compare each Sub-Account's
performance to that of other types of investments such as certificates of
deposit, savings accounts and U.S. Treasuries, or to certain interest rate and
inflation indices, such as the Consumer Price Index, which is published by the
U.S. Department of Labor and measures the average change in prices over time of
a fixed "market basket" of certain specified goods and services. Similar
comparisons of Sub-Account performance may also be made with appropriate
indices measuring the performance of a defined group of securities widely
recognized by investors as representing a particular segment of the securities
markets. For example, Sub-Account performance may be compared with Donoghue
Money Market Institutional Average (money market rates), Lehman Brothers
Corporate Bond Index (corporate bond interest rates) or Lehman Brothers
Government Bond Index (long-term U.S. Government obligation interest rates).
AUSA LIFE AND THE SERIES ACCOUNT
AUSA LIFE INSURANCE COMPANY, INC.
AUSA Life is incorporated under the laws of New York. AUSA Life is a
stock life insurance company engaged in the business of writing life insurance
policies and annuity contracts. AUSA Life is admitted to do business in 39
states and the District of Columbia. AUSA Life's principal business office is
located in Purchase, New York; however, the Administrative Office and mailing
address for all Policy transactions is P.O. Box 9054, Clearwater, FL
34618-9054. AUSA Life is a wholly-owned subsidiary of First AUSA Life Insurance
Company ("First AUSA"), a stock life insurance company which is wholly-owned by
AEGON USA, Inc. ("AEGON USA"). AEGON USA is a financial services holding
company whose primary emphasis is on life and health insurance and annuity and
investment products. AEGON USA is a wholly-owned indirect subsidiary of AEGON
nv, a Netherlands corporation, which is a publicly traded international
insurance group.
PUBLISHED RATINGS OF AUSA LIFE. AUSA Life may from time to time publish
in advertisements, sales literature and reports to Policyowners, the ratings
and other information assigned to it by one or more independent rating
organizations such as A.M. Best Company ("A.M. Best"), Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Insurance Rating Services
("Standard & Poor's"), and Duff & Phelps Credit Rating Co. ("Duff & Phelps").
A.M. Best's and Moody's 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. Standard &
Poor's and Duff & Phelps provide ratings which measure the claims-paying
ability of insurance companies. 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).
THE SERIES ACCOUNT
The Series Account was established by AUSA Life as a separate account on
October 24, 1994. The Series Account meets the definition of a "separate
account" under the Federal securities laws. The Series Account will receive and
invest the Net Premiums paid under this Policy and other flexible premium
variable life insurance policies issued by AUSA Life.
Although the assets of the Series Account are the property of AUSA Life,
the New York Code, under which the Series Account was established, provides
that the assets in the Series Account attributable to the Policies are not
chargeable with liabilities arising out of any other business which AUSA Life
may conduct. The assets of the Series Account shall, however, be available to
cover the liabilities of the General Account of AUSA Life to the extent that
the Series Account's assets exceed its liabilities arising under the Policies
supported by it.
The Series Account is currently divided into fifteen Sub-Accounts. Each
Sub-Account invests exclusively in shares of a single Portfolio of the Fund.
Income and both realized and unrealized gains or losses from the assets of each
Sub-Account of the Series Account are credited to or charged against that
Sub-Account without regard to income, gains or
14
<PAGE>
losses from any other Sub-Account of the Series Account or arising out of any
other business AUSA Life may conduct.
POLICY BENEFITS
DEATH BENEFIT
Policyowners designate in the initial application one of two death
benefit options offered under the Policy: Death Benefit Option A ("Option A")
or Death Benefit Option B ("Option B"). As long as the Policy remains In Force,
(see Policy Lapse and Reinstatement - Lapse, p. 25), AUSA Life will, upon
receiving due proof of the Surviving Insured's death, pay the death benefit
proceeds of a Policy to the named Beneficiary in accordance with the designated
death benefit option. The amount of the death benefit proceeds payable will be
determined at the end of the Valuation Period during which the Surviving
Insured dies. The proceeds may be paid in a lump sum or under one or more of
the settlement options set forth in the Policy. (See Payments of Policy
Benefits - Settlement Options, p. 32.) AUSA Life guarantees that as long as the
Policy remains In Force (see Policy Lapse and Reinstatement - Lapse, p. 25),
the death benefit proceeds under either option will never be less than the
Specified Amount of the Policy, but the proceeds will be reduced by any
outstanding indebtedness and any due and unpaid charges. These proceeds will be
increased by any additional insurance In Force provided by rider and any
unearned loan interest.
OPTION A. The death benefit is the greater of (i) the Specified Amount
of the Policy or (ii) a specified percentage (the "limitation percentage")
times the Cash Value of the Policy on the date of death of the Surviving
Insured. The limitation percentage is a percentage based on the Attained Age of
the younger Joint Insured and is 250% for a younger Joint Insured age 40 or
below on the Policy Anniversary prior to the date of death. For a younger Joint
Insured with an Attained Age over 40 on a Policy Anniversary, the percentage
declines as shown in the following Limitation Percentage Table. Accordingly,
under Option A the death benefit will remain level unless the limitation
percentage times the Cash Value exceeds the Specified Amount, in which case the
amount of the death benefit will vary as the Cash Value varies.
ILLUSTRATION OF OPTION A. For purposes of this illustration, assume that
the younger Joint Insured's Attained Age is under 40 and that there is no
outstanding indebtedness. Under Option A, a Policy with a $250,000 Specified
Amount will generally pay $250,000 in death benefits. However, because the
death benefit must be equal to or be greater than 250% of Cash Value, any time
the Cash Value of the Policy exceeds $100,000, the death benefit will exceed
the $250,000 Specified Amount. Each additional dollar added to Cash Value above
$100,000 will increase the death benefit by $2.50.
Similarly, so long as Cash Value exceeds $100,000, each dollar taken out
of Cash Value will reduce the death benefit by $2.50. If at any time, however,
the Cash Value multiplied by the limitation percentage is less than the
Specified Amount, the death benefit will equal the Specified Amount of the
Policy.
LIMITATION PERCENTAGE TABLE
<TABLE>
<CAPTION>
ATTAINED AGE
OF YOUNGER PER YEAR
JOINT INSURED LESS OVER AGE
- -------------------- ------ ---------
<S> <C> <C> <C>
40 and under ...... 250%
41 - 45 ............ 250% 7% 40
46 - 50 ......... 215% 6% 45
51 - 55 ......... 185% 7% 50
56 - 60 ......... 150% 4% 55
61 - 65 ......... 130% 2% 60
66 - 70 ......... 120% 1% 65
71 - 75 ......... 115% 2% 70
76 - 90 ......... 105% 0% 75
91 - 95 ......... 105% 1% 90
96 and older ...... 100% 0% 95
</TABLE>
OPTION B. The death benefit is equal to (i) the greater of the Specified
Amount plus the Cash Value of the Policy on the date of death of the Surviving
Insured or (ii) the limitation percentage times the Cash Value of the Policy on
or prior to the date of death of the Surviving Insured. The applicable
percentage is 250% for the younger Joint Insured age 40 or below on the Policy
Anniversary prior to the date of death of the Surviving Insured. For the
younger Joint Insured with an Attained Age over 40 on a Policy Anniversary, the
percentage declines as shown in the Limitation Percentage Table above.
Accordingly, under Option B the amount of the death benefit will always vary as
the Cash Value varies.
ILLUSTRATION OF OPTION B. For purposes of this illustration, assume that
the younger Joint Insured is under the age of 40 and that there is no
outstanding indebtedness. Under Option B, a Policy with a Specified Amount of
$250,000 will generally pay a death benefit of $250,000 plus Cash Value. Thus,
for example, a Policy with a Cash Value of $50,000 will have a death benefit of
$300,000 ($250,000 + $50,000). The death benefit, however, must be at least
250% of Cash Value. As a result, if the Cash Value of the Policy exceeds
$166,666, the death benefit will be greater than the Specified Amount plus Cash
Value. Each additional dollar of Cash Value above $166,666 will increase the
death benefit by $2.50.
Similarly, any time Cash Value exceeds $166,666, each dollar taken out of
Cash Value will reduce the death benefit by $2.50. If at any time, however,
Cash Value multiplied by the limitation percentage is less than the Specified
Amount plus the Cash Value, then the death benefit will be the Specified Amount
plus the Cash Value of the Policy.
CHOOSING DEATH BENEFIT OPTION A OR OPTION B. Assuming the death benefit
is not determined by reference to the limitation percentage, Option A will
provide a Specified Amount of death benefit which does not vary with changes in
Cash Value. Thus, under Option A, as Cash Value increases, AUSA Life's net
amount at risk and therefore the pure insurance protection under the Policy
will decline. In contrast, Option B involves a constant net amount at risk,
assuming that the death benefit is not determined by reference to the
15
<PAGE>
limitation percentage. Assuming positive investment experience, the deduction
for cost of insurance under a Policy with an Option A death benefit will be
less than under a corresponding policy with an Option B death benefit. Because
of this, if investment performance is positive, Cash Value under Option A will
increase faster than under Option B but the total death benefit under Option B
will generally be greater. Thus, Option A could be considered more suitable for
Policyowners whose goal is increasing Cash Value based upon positive investment
experience while Option B could be considered more suitable for Policyowners
whose goal is increasing total death benefit.
CHANGE IN DEATH BENEFIT OPTION. Generally, the death benefit option in
effect may be changed by the Policyowner once each Policy year after the third
Policy year, provided that no decrease in Specified Amount is made that year. A
change in death benefit option may be made by sending AUSA Life a written
request for a change. A change in death benefit option may have Federal income
tax consequences. (See Federal Tax Matters, p. 35.) The Policyowner may either
change the death benefit option or decrease the Specified Amount, but not both,
only once each Policy year after the third Policy year.
Under AUSA Life's current rules, no change may be made if it would result
in a Specified Amount less than the minimum Specified Amount set forth in the
Policy. The effective date of any change will be the Monthly Anniversary on or
following receipt of the request. No charges will be imposed for making a
change in death benefit option.
If the death benefit option is changed from Option B to Option A, the
Specified Amount will be increased by an amount equal to the Policy's Cash
Value on the effective date of change. If the death benefit option is changed
from Option A to Option B, the Specified Amount will be decreased by an amount
equal to the Cash Value on the effective date of the change.
CORRIDOR PERCENTAGE. If pursuant to requirements of the Internal Revenue
Code of 1986, as amended, the death benefit under a Policy is determined by
reference to the limitation percentages discussed above, the Policy is
described as "in the corridor," and an increase in the Cash Value of the Policy
will increase the net amount at risk assumed by AUSA Life and consequently
increase the cost of insurance deducted from the Cash Value of the Policy. (See
Cash Value Charges - Cost of Insurance, p. 27.)
INSURANCE PROTECTION. A Policyowner may increase or decrease the pure
insurance protection provided by a Policy (i.e., the difference between the
death benefit and the Cash Value) in one of several ways as insurance needs
change. These ways include decreasing the Specified Amount of insurance,
changing the level of premium payments, and, to a lesser extent, making a cash
withdrawal from the Policy. Although the consequences of each of these methods
will depend upon the individual circumstances, they may be generally summarized
as follows:
(a) A decrease in the Specified Amount will, subject to the limitation
percentage (see Policy Benefits - Death Benefit, p. 14), in general
decrease the insurance protection and the charges under the Policy
without reducing the Cash Value.
(b) If Option A is elected, an increased level of premium payments will
reduce the pure insurance protection, until the limitation
percentage times the Cash Value exceeds the Specified Amount.
Increased premiums should increase the amount of funds available to
keep the Policy In Force.
(c) A cash withdrawal will reduce the death benefit. (See Surrender
Privileges - Cash Withdrawals, p. 31.) It has no effect on the
amount of pure insurance protection and charges under the Policy,
unless the death benefit payable is governed by the limitation
percentages. It results in a reduced amount of Net Surrender Value
available to pay the monthly deduction, thereby increasing the
possibility that the Policy will lapse.
(d) A reduced level of premium payments generally increases the amount of
pure insurance protection if Option A is elected, or maintains the
same amount of pure insurance protection if Option B is elected,
again depending on the limitation percentage. It results in a
reduced amount of Cash Value and increases the possibility that the
Policy will lapse.
HOW DEATH BENEFITS MAY VARY IN AMOUNT. As long as the Policy remains In
Force, AUSA Life guarantees that the death benefit will never be less than the
Specified Amount of the Policy. These proceeds will be reduced by any
outstanding indebtedness and any due and unpaid charges. The death benefit may,
however, vary with the Policy's Cash Value. Under Option A, the death benefit
will only vary when the Cash Value multiplied by the limitation percentage
exceeds the Specified Amount of the Policy. The death benefit under Option B
will always vary with the Cash Value because the death benefit equals either
the Specified Amount plus the Cash Value or the limitation percentage times the
Cash Value.
DECREASE IN SPECIFIED AMOUNT. Subject to certain limitations, a
Policyowner may decrease the Specified Amount of a Policy. A decrease in
Specified Amount may affect the net amount at risk, which may affect a
Policyowner's cost of insurance charge. (See Cash Value Charges - Cost of
Insurance, p. 27.) A decrease in Specified Amount could also have Federal
income tax consequences. (See Federal Tax Matters, p. 35.) The Policyowner may
either change the death benefit option or decrease the Specified Amount, but
not both, only once each Policy year after the third Policy year.
No requested decrease in the Specified Amount will be permitted during
the first three Policy years. Thereafter, any decrease in the Specified Amount
will become effective on the Monthly Anniversary date on or following receipt
of a written request from the Policyowner by AUSA Life. The
16
<PAGE>
Specified Amount remaining In Force after any requested decrease may not be
less than the minimum Specified Amount set forth in the Policy. AUSA Life
reserves the right to limit any decrease to no more than 20% of the Specified
Amount immediately prior to the decrease. If, following the decrease in
Specified Amount, the Policy would not comply with the maximum premium
limitations required by Federal tax law (see Premiums - Premium Limitations, p.
22), the decrease may be limited to the extent necessary to meet these
requirements.
WHEN INSURANCE COVERAGE TAKES EFFECT
No life insurance coverage shall take effect unless the proposed Joint
Insureds are alive and in the same condition of health as described in the
application when the Policy is delivered to the Policyowner and the full
Initial Premium is paid. However, if the full Initial Premium is paid as set
forth in the conditional receipt attached to the application, and the
conditional receipt is delivered to the Policyowner, the terms of the
conditional receipt shall apply.
CONDITIONAL INSURANCE COVERAGE. The proposed Joint Insureds must be
insurable and acceptable to AUSA Life under its underwriting rules for the
amount, plan and risk classification applied for on the later of: (a) the date
of application, or (b) the date of completion of all medical tests and
examinations required by AUSA Life. Any check given for payment must be honored
on first presentation. The conditional receipt and all coverages applied for on
the application are void if a check or draft received for payment of the
Initial Premium is not honored when first presented for payment.
AMOUNT OF CONDITIONAL LIFE INSURANCE COVERAGE. If conditional insurance
coverage becomes effective under the terms of the conditional receipt, then the
amount of conditional life insurance coverage on any person proposed for
insurance is the lesser of: (a) the amount of life insurance applied for on
such person, or (b) $300,000 reduced by the amounts payable under all other
life insurance or accidental death benefits then in force or pending with AUSA
Life.
WHEN CONDITIONAL LIFE INSURANCE COVERAGE BEGINS. If the conditions listed
above are fulfilled, then the amount of conditional insurance coverage
specified above shall take effect on the later of: (a) the date of the
application, or (b) the date of the completion of all medical tests and
examinations required by AUSA Life. All conditional coverages for the proposed
Joint Insureds will be deemed void if the application contains material
misrepresentation or is fraudulently completed. Benefits under the conditional
receipt coverage will be denied if any proposed Joint Insured commits suicide.
WHEN CONDITIONAL LIFE INSURANCE COVERAGE ENDS. Conditional life insurance
coverage shall terminate automatically, without notice, on the earliest of the
following dates: (a) the date AUSA Life approves the Policy as applied for, or
(b) 10 days following any counteroffer by AUSA Life to offer insurance to any
person proposed for insurance under a different plan or at an increased premium
or on a different rate class or (c) at the end of the fraction of a year which
the payment bears to the premium required to provide one month of insurance
coverage in the amount as described above, or (d) at the beginning of the 60th
day following the date of the conditional receipt.
TERMINAL ILLNESS ACCELERATED DEATH BENEFIT RIDER
In states where this rider has been approved by that state's department
of insurance, upon receipt of proof satisfactory to AUSA Life that the
Surviving Insured has incurred a condition resulting from illness which, as
determined by a Physician, has reduced life expectancy to not more than 12
months from the date of the Physician's Statement (a "Terminal Condition"),
AUSA Life will pay to the Policyowner a "Single Sum Benefit", equal to:
(a) the Death Benefit in effect on the date the Single Sum Benefit is
paid; multiplied by
(b) the Election Percentage; divided by
(c) 1 + i, where i equals the greater of (A) and (B) on the date the
Single Sum Benefit is paid. (A) equals the interest rate determined
under Internal Revenue Code section 846(c)(2), as it may be amended
from time to time; and (B) equals the Policy Loan Interest Rate;
minus
(d) indebtedness, if any, at the time the Single Sum Benefit is paid,
multiplied by the Election Percentage.
"Death Benefit" under the Rider means the amount payable at death of the
Surviving Insured under the Policy, plus the benefit payable under any In Force
Joint Insured Term Rider or Wealth Protector Rider. (See Optional Insurance
Benefits, p. 33.) "Election Percentage" means a percentage, selected by the
Policyowner, not to exceed 100% of the Policy's Death Benefit, as defined under
the Rider; however, in no event will the Election Percentage result in a Single
Sum Benefit greater than $500,000. A "Physician" may be a Doctor of Medicine or
a Doctor of Osteopathy, licensed to practice medicine and treat injury or
illness in the state in which treatment is received and who is acting within
the scope of that license, and must be someone other than the Surviving
Insured, the Policyowner, a person who lives with the Surviving Insured or
Policyowner, or a person who is part of the Surviving Insured's or
Policyowner's "Immediate Family" (spouse, child, brother, sister, parent,
grandparent or grandchild of the Surviving Insured). The "Physician's
Statement" must be a written statement signed by a Physician which provides the
Physician's diagnosis of the Surviving Insured's non-correctable medical
condition. It must state with reasonable medical certainty that the
non-correctable medical condition will result in the death of the Surviving
Insured within 12 months of the Physician's Statement, taking into
consideration the ordinary and reasonable medical care, advice and treatment
available in the same or similar communities.
The Rider will not pay benefits for a Terminal Condition resulting from
self-inflicted bodily injuries occurring within the same period specified in
the Policy's suicide provision. The Rider terminates at the earliest of (a) the
date the Policy terminates, (b) the effective date of a settlement option
17
<PAGE>
elected under the Policy, (c) the date the Single Sum Benefit is paid, or (d)
the date the Policyowner elects to terminate the Rider.
Pursuant to the recently enacted Health Insurance Portability and
Accountability Act of 1996, Western Reserve believes that for Federal income
tax purposes a Single Sum Benefit payment made under the Terminal Illness
Accelerated Death Benefit Rider should be fully excludable from the gross
income of the Beneficiary, as long as the Beneficiary is the Insured under the
Policy. However, a Policyowner should consult a qualified tax advisor about the
consequences of adding this Rider to a Policy or requesting a Single Sum
Benefit payment under this Rider. There is no additional charge for this
benefit. As stated above, this Rider may not be available in all states, or, if
available, the terms of the Rider may vary in accordance with each state's
insurance laws.
CASH VALUE
At the end of any Valuation Period, the Cash Value of the Policy is equal
to the sum of the Policy's value in each Sub-Account of the Series Account plus
the Fixed Account Value. There is no guaranteed minimum Cash Value.
NET SURRENDER VALUE. A Policyowner may at any time surrender the Policy
and receive the Policy's Net Surrender Value. (See Policy Rights - Surrender
Privileges, p. 30.) The Net Surrender Value as of any date is equal to:
(1) the Cash Value as of such date; minus
(2) any surrender charge as of such date (as described on p. 30); minus
(3) any outstanding Policy loan; plus
(4) any unearned loan interest.
DETERMINATION OF VALUES IN THE SERIES ACCOUNT. On the Policy Date, the
Policy's value in a Sub-Account of the Series Account will equal the portion of
any Net Premium allocated to the Sub-Account, reduced by the portion of the
first monthly deduction allocated to that Sub-Account. (See Payment and
Allocation of Premiums - Allocation of Premiums and Cash Value, p. 23.)
Thereafter, on each Valuation Date, the Policy's value in a Sub-Account of the
Series Account will equal the number of units in the Sub-Account, multiplied by
the unit value of that Sub-Account.
The number of units that the Policy has in each Sub-Account is equal to:
(1) The initial units purchased on the Policy Date; plus
(2) Units purchased at the time additional Net Premiums are allocated to
the Sub-Account; plus
(3) Units purchased through transfers from another Sub-Account or
the Fixed Account; minus
(4) Units that are redeemed to pay for monthly deductions as they are
due; minus
(5) Units that are redeemed to pay for any cash withdrawals; minus
(6) Units that are redeemed as part of any transfer to another
Sub-Account or the Fixed Account.
The Policy's total value in the Series Account equals the sum of the
Policy's value in each Sub-Account. (For a description of how the values of the
Fixed Account are calculated, see The Fixed Account - Fixed Account Value, p.
34.) Because the Cash Value is dependent upon a number of variables, including
the investment experience of the chosen Sub-Accounts of the Series Account, the
frequency and amount of premium payments, transfers and surrenders, and charges
assessed in connection with the Policy, a Policy's Cash Value cannot be
predetermined.
UNIT VALUE. The unit value of each Sub-Account was originally
established at $10 per unit. The unit value may increase or decrease from one
Valuation Period to the next. Unit values also will vary between Sub-Accounts.
The unit value of any Sub-Account at the end of a Valuation Period is the
result of:
(1) The total value of the assets held in the Sub-Account,
determined by multiplying the number of shares of the designated
Portfolio owned by the Sub-Account times the Portfolio's net asset
value per share; minus
(2) A deduction for the charge for mortality and expense risks. The daily
amount of this charge is equal to an annual amount of ninety
one-hundredths of one per cent (0.90%), and is used to compensate
AUSA Life for its assumption of certain mortality and expense
risks, and is multiplied times the net assets of the Sub-Account;
minus
(3) The accrued amount of reserve for any taxes or other economic burden
resulting from the application of tax laws that are determined by
AUSA Life to be properly attributable to the Sub-Account; and the
result divided by
(4) The number of outstanding units in the Sub-Account.
VALUATION DATE AND VALUATION PERIOD. The net asset value per share of
shares of the Fund is determined, once daily, as of the close of the regular
session of business on the New York Stock Exchange ("Exchange") (usually 4:00
p.m., Eastern time), on each day the Exchange is open.
INVESTMENTS OF THE SERIES ACCOUNT
WRL SERIES FUND, INC.
The Series Account invests in shares of the Fund, a series mutual fund
which is registered with the Securities and Exchange Commission ("Commission")
as an open-end diversified management investment company. Such registration
does not involve supervision of the management or investment practices or
policies of the Fund by the Commission.
Currently, the Portfolios of the Fund corresponding to the Sub-Accounts
of the Series Account are: Aggressive Growth Portfolio, Emerging Growth
Portfolio, Growth Portfolio, Global Portfolio, Balanced Portfolio, Strategic
Total Return Portfolio, Bond Portfolio, Growth & Income Portfolio,
18
<PAGE>
Money Market Portfolio, Tactical Asset Allocation Portfolio, C.A.S.E. Growth
Portfolio, Value Equity Portfolio, U.S. Equity Portfolio, International Equity
Portfolio and Third Avenue Value Portfolio. The assets of each Portfolio are
held separate from the assets of the other Portfolios, and each Portfolio has
an investment objective and policies which are different from those of the
other Portfolios. Thus, each Portfolio operates as a separate investment fund,
and the income or losses of one Portfolio generally have no effect on the
investment performance of any other Portfolio. Pending any prior approval by a
state insurance regulatory authority, certain Sub-Accounts and corresponding
Portfolios may not be available to residents of some states.
The investment objectives and policies of each Portfolio are summarized
below. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS STATED
OBJECTIVE. More detailed information, including a description of risks, can be
found in the Prospectus for the Fund which should be read carefully.
AGGRESSIVE GROWTH PORTFOLIO: This Portfolio seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities.
EMERGING GROWTH PORTFOLIO: This Portfolio seeks capital appreciation by
investing primarily in common stocks of small and medium sized companies.
GROWTH PORTFOLIO: This Portfolio's objective is growth of capital.
GLOBAL PORTFOLIO: This Portfolio seeks long-term growth of capital in a
manner consistent with preservation of capital, primarily through investments
in common stocks of foreign and domestic issuers.
THIRD AVENUE VALUE PORTFOLIO: This Portfolio seeks long-term capital
appreciation, primarily through equity securities of well financed companies
believed to be priced below their private market values and debt securities
providing strong protective covenants and high, effective yields.
BALANCED PORTFOLIO: This Portfolio seeks preservation of capital,
reduced volatility, and superior long-term risk adjusted returns by investing
primarily in common stock, convertible securities and fixed-income securities.
STRATEGIC TOTAL RETURN PORTFOLIO: This Portfolio seeks to provide
current income, long-term growth of income and capital appreciation by
investing primarily in a blend of equity and fixed-income securities, including
common stocks, income producing securities convertible into common stock, and
fixed-income securities.
BOND PORTFOLIO: This Portfolio seeks the highest possible current income
within the confines of the primary goal of insuring the protection of capital.
GROWTH & INCOME PORTFOLIO: This Portfolio's objective is to seek total
return by investing in securities that have defensive characteristics. The
Portfolio will invest primarily in a diversified portfolio of equity and debt
securities with an emphasis on sector investing.
MONEY MARKET PORTFOLIO: This Portfolio's objective is to obtain maximum
current income consistent with preservation of principal and maintenance of
liquidity.
TACTICAL ASSET ALLOCATION PORTFOLIO: This Portfolio seeks preservation
of capital and competitive investment returns by investing primarily in stocks,
United States Treasury bonds, notes and bills, and money market funds.
C.A.S.E. GROWTH PORTFOLIO: This Portfolio's objective is annual growth
of capital through investment in companies whose management, financial
resources and fundamentals appear attractive on a scale measured against each
company's present value.
VALUE EQUITY PORTFOLIO: This Portfolio seeks to achieve maximum,
consistent total return with minimum risk to principal by investing primarily
in common stocks with above-average statistical value which, in the
Sub-Adviser's opinion, are in fundamentally attractive industries and are
undervalued at the time of purchase.
INTERNATIONAL EQUITY PORTFOLIO: This Portfolio seeks long-term growth of
capital by investing primarily in the common stock of foreign issuers traded on
overseas exchanges and in foreign over-the-counter markets.
U.S. EQUITY PORTFOLIO: This Portfolio seeks long-term growth of capital
by investing primarily in equity securities of U.S. companies.
WRL Management, an affiliate of AUSA Life, located at 201 Highland
Avenue, Largo, FL 33770, a wholly-owned subsidiary of Western Reserve Life
Assurance Co. of Ohio ("Western Reserve"), serves as investment adviser to each
Portfolio of the Fund and manages its assets in accordance with policies,
programs and guidelines established by the Board of Directors of the Fund. AUSA
Life, WRL Management and Western Reserve are affiliates.
Each Sub-Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. The Sub-Advisers for the Portfolios of the
Fund are as follows:
Janus Capital Corporation ("Janus") serves as sub-adviser to the Growth and
Global Portfolios of the Fund. WRL Management and Janus will divide equally
monthly compensation at current annual rates of 0.80% of the aggregate average
daily net assets each of the Growth Portfolio and the Global Portfolio.
AEGON USA Investment Management, Inc. ("AIMI") is sub-adviser to the
Balanced Portfolio and the Bond Portfolio of the Fund. AIMI is a wholly-owned
subsidiary of AEGON USA and thus is an affiliate of AUSA Life. WRL Management
and AIMI will divide equally monthly compensation at the current annual rate of
0.80% of the aggregate average daily net assets of the Balanced Portfolio. WRL
Management will receive monthly compensation at a current annual rate of 0.25%
and AIMI will receive 0.20% of the aggregate average daily net assets of the
Bond Portfolio. AIMI's compensation will be reduced by 50% of the amount
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paid by WRL Management on behalf of the Balanced and Bond Portfolios pursuant
to any expense limitation or other reimbursement.
Van Kampen American Capital Asset Management, Inc. ("Van Kampen American
Capital") is sub-adviser to the Emerging Growth Portfolio of the Fund. Van
Kampen American Capital is an indirect wholly-owned subsidiary of VK/AC
Holding, Inc., ("VK/AC Holding"). VK/AC Holding is a wholly-owned subsidiary of
MSAM Holdings II, Inc., which, in turn, is a wholly-owned subsidiary of Morgan
Stanley Group, Inc. It is anticipated that in mid-June, 1997, Morgan Stanley
Group Inc. will merge with Dean Witter, Discover & Co., a financial services
company. WRL Management and Van Kampen American Capital will divide equally
monthly compensation at the current annual rate of 0.80% of the aggregate
average daily net assets of the Emerging Growth Portfolio. Van Kampen American
Capital's compensation will be reduced by 50% of the amount paid by WRL
Management on behalf of the Emerging Growth Portfolio pursuant to any expense
limitation or other reimbursement.
Luther King Capital Management Corporation ("Luther King") is sub-adviser
to the Strategic Total Return Portfolio of the Fund. Ultimate control of Luther
King is exercised by J. Luther King, Jr. WRL Management and Luther King will
divide equally monthly compensation at the current annual rate of 0.80% of the
aggregate average daily net assets of the Strategic Total Return Portfolio.
Federated Investment Counseling ("Federated") is sub-adviser to the Growth &
Income Portfolio of the Fund. Federated is a wholly-owned subsidiary of
Federated Investors. WRL Management will receive monthly compensation at the
current annual rate of 0.75% of the aggregate average daily net assets of the
Growth & Income Portfolio. From this amount, as compensation of its services,
Federated will receive payments of fees equal to 0.50% of the first $30 million
of average daily net assets, 0.35% of the next $20 million of average daily net
assets, and 0.25% of average daily net assets in excess of $50 million of the
Growth & Income Portfolio.
Fred Alger Management, Inc. ("Fred Alger") is sub-adviser to the Aggressive
Growth Portfolio of the Fund. Fred Alger is a wholly-owned subsidiary of Fred
Alger & Company, Incorporated, which in turn is a wholly-owned subsidiary of
Alger Associates, Inc., a financial services holding company controlled by Fred
M. Alger. WRL Management and Fred Alger will divide equally monthly
compensation at the current annual rate of 0.80% of the aggregate average daily
net assets of the Aggressive Growth Portfolio.
Dean Investment Associates, a Division of C.H. Dean and Associates, Inc.
("Dean") is sub-adviser to the Tactical Asset Allocation Portfolio of the Fund.
Dean is wholly-owned by C.H. Dean and Associates, Inc. WRL Management and Dean
will divide equally monthly compensation at the current annual rate of 0.80% of
the aggregate average daily net assets of the Tactical Asset Allocation
Portfolio. Dean's compensation will be reduced by 50% of the amount paid by WRL
Management on behalf of the Tactical Asset Allocation Portfolio pursuant to any
expense limitation or other reimbursement.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan" is sub-adviser to
the Money Market Portfolio of the Fund. J.P. Morgan is a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated. WRL Management will receive
monthly compensation at the current annual rate of 0.40% of the aggregate
average daily net assets of the Money Market Portfolio. From this amount, as
compensation for its services, J.P. Morgan will receive 0.15% of the average
daily net assets of the Money Market Portfolio.
C.A.S.E. Management, Inc. ("C.A.S.E.") is sub-adviser to the C.A.S.E.
Growth Portfolio of the Fund. C.A.S.E. is a wholly-owned subsidiary of C.A.S.E.
Inc. C.A.S.E. Inc. is indirectly controlled by William Edward Lange, president
and chief executive officer of C.A.S.E. WRL Management and C.A.S.E. will divide
equally monthly compensation at the current annual rate of 0.80% of the
aggregate average daily net assets of the C.A.S.E. Growth Portfolio.
NWQ Investment Management Company, Inc. ("NWQ Investment") is sub-adviser
to the Value Equity Portfolio of the Fund. NWQ Investment was founded in 1982
and is a wholly-owned subsidiary of United Asset Management Corporation. WRL
Management and NWQ Investment will divide equally monthly compensation at the
current annual rate of 0.80% of the aggregate average daily net assets of the
Value Equity Portfolio. NWQ Investment's compensation will be reduced by 50% of
the amount paid by AUSA Life on behalf of the Value Equity Portfolio pursuant
to any expense limitation or other reimbursement.
Scottish Equitable Investment Management Limited ("Scottish Equitable")
serves as a co-sub-adviser to the International Equity Portfolio. Scottish
Equitable is a wholly-owned subsidiary of Scottish Equitable plc, successor to
Scottish Equitable Life Assurance Society, which was founded in Edinburgh in
1831. Scottish Equitable is also an indirect wholly-owned subsidiary of AEGON
nv. WRL Management receives monthly compensation at the annual rate of 1.00% of
the aggregate average daily net assets of the International Equity Portfolio.
From this amount, Scottish Equitable receives 0.50% of average daily net assets
of the Portfolio managed by Scottish Equitable, less 50% of the amount of
excess expenses attributable to such assets.
GE Investment Management Incorporated ("GEIM") also serves as a
co-sub-adviser to the International Equity Portfolio and as sub-adviser to the
U.S. Equity Portfolio. GEIM is a wholly-owned subsidiary of General Electric
Company ("GE"). GEIM's principal officers and directors serve in similar
capacities with respect to General Electric Investment Corporation ("GEIC,"
and, together with GEIM and their predecessors, collectively referred to as "GE
Investments"), which like GEIM is a wholly-owned subsidiary of GE. WRL
Management receives monthly compensation at the annual rate of 1.00% of the
aggregate average daily net assets of the International Equity Portfolio. From
this amount, GEIM,
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receives 0.50% of average daily net assets of the Portfolio managed by GEIM,
less 50% of amount of excess expenses attributable to such assets.
With respect to the U.S. Equity Portfolio, WRL Management and GEIM will
divide equally monthly compensation at the current annual rate of 0.80% of the
aggregate average daily net assets of the U.S. Equity Portfolio. GEIM's
compensation will be reduced by 50% of the amount paid by WRL Management on
behalf of the U.S. Equity Portfolio pursuant to any expense limitation or other
reimbursement. Any amount borne by GEIM pursuant to any expense limitation
constitutes an agreement between the Investment Adviser and GEIM only for the
first twelve months following each Portfolio's commencement of operations.
Thereafter, any such arrangements will be as mutually agreed upon by GEIM and
the Investment Adviser.
EQSF Advisers, Inc. ("EQSF") is sub-adviser to the Third Avenue Value
Portfolio. EQSF is a New York corporation organized in 1988 and is controlled
by Martin J. Whitman. WRL Management and EQSF will divide equally monthly
compensation at the current annual rate of 0.80% of the aggregate average daily
net assets of the Third Avenue Value Portfolio. EQSF's compensation will be
reduced by 50% of the amount paid by WRL Management on behalf of the Third
Avenue Value Portfolio pursuant to any expense limitation or other
reimbursement.
In addition to the Series Account, shares of the Fund are also sold to
the WRL Series Life Account and WRL Series Annuity Account, separate accounts
established by Western Reserve for its variable life insurance policies and
variable annuity contracts, the PFL Endeavor Variable Annuity Account, PFL
Endeavor Platinum Variable Annuity Account, and the PFL Life Variable Annuity
Account A, separate accounts of PFL Life Insurance Company, and to the AUSA
Endeavor Variable Annuity Account, a separate account of AUSA Life Insurance
Company, Inc., all affiliates of AUSA Life. Shares of the Fund may in the
future be sold to other separate accounts, including separate accounts
established for variable life insurance policies or variable annuity contracts
issued by AUSA Life or its affiliates. It is conceivable that, in the future,
it may become disadvantageous for variable life insurance separate accounts and
variable annuity separate accounts to invest in the Fund simultaneously.
Although neither AUSA Life nor the Fund currently foresees any such
disadvantages, either to variable life insurance policyowners or to variable
annuity contract owners, the Fund's Board of Directors intends to monitor
events in order to identify any material conflicts between the interests of
such variable life insurance policyowners and variable annuity contract owners
and to determine what action, if any, it should take. Such action could include
the sale of Fund shares by one or more of the separate accounts, which could
have adverse consequences. Material conflicts could result from, for example,
(1) changes in state insurance laws, (2) changes in Federal income tax laws, or
(3) differences in voting instructions between those given by variable life
insurance policyowners and those given by variable annuity contract owners. If
the Board of Directors were to conclude that separate funds should be
established for variable life and variable annuity separate accounts, AUSA Life
will bear the attendant expenses, but variable life insurance policyowners and
variable annuity contract owners would no longer have the economies of scale
resulting from a larger combined fund.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
AUSA Life reserves the right to transfer assets of the Series Account to
another separate account which AUSA Life determines to be associated with the
class of contracts to which the Policy belongs. AUSA Life also reserves the
right, subject to compliance with applicable law, to make additions to,
deletions from, or substitutions for the investments that are held by any
Sub-Account or that any Sub-Account may purchase. Any such addition, deletion
or substitution by AUSA Life of shares of another Portfolio of the Fund or of
another open-end, registered investment company, will only be taken if the
shares of a Portfolio are no longer available for investment, or if in AUSA
Life's judgment further investment in any Portfolio should become inappropriate
in view of the purposes of the Series Account. AUSA Life will not add, delete
or substitute any shares attributable to a Policyowner's interest in a
Sub-Account of the Series Account without notice to and prior approval of the
Commission, to the extent required by the 1940 Act or other applicable law.
Nothing contained herein shall prevent the Series Account from purchasing other
securities for other Portfolios or classes of policies, or from permitting a
conversion between Portfolios or classes of policies on the basis of requests
made by Policyowners.
AUSA Life also reserves the right to establish additional Sub-Accounts of
the Series Account, each of which would invest in a new Portfolio of the Fund,
or in shares of another investment company, with a specified investment
objective. New Sub-Accounts may be established when, in the sole discretion of
AUSA Life, marketing, tax or investment conditions warrant, and any new
Sub-Accounts will be made available to existing Policyowners on a basis to be
determined by AUSA Life. AUSA Life may also eliminate one or more Sub-Accounts
if, in its sole discretion, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, AUSA Life may by
appropriate endorsement make such changes in this and other policies as may be
necessary or appropriate to reflect such substitution or change. If deemed by
AUSA Life to be in the best interests of persons having voting rights under the
Policies, and when permitted by law, the Series Account may be (1) operated as
a management company under the 1940 Act, (2) deregistered under the 1940 Act
in the event such registration is no longer required, (3) managed under the
direction of a committee, or (4) combined with one or more other separate
accounts, or sub-accounts.
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PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must send a completed
application to AUSA Life, P.O. Box 9054, Clearwater, Florida 34618-9054. Under
AUSA Life's current rules, the minimum Specified Amount of a Policy is
generally $100,000. Policies will generally be issued only to Joint Insureds
ages 1 to 85 who supply satisfactory evidence of insurability sufficient to
AUSA Life. (Because a few state insurance regulatory authorities have not yet
approved Policies for issue to Joint Insureds ages 1-19, AUSA Life will only
issue Policies for Joint Insureds ages 1-19 of these states upon approval by
their regulatory authorities.)
The younger Joint Insured must be no older than age 80. Further, the sum
of the ages of the Joint Insureds cannot exceed the total of 160 years (see
Policy Lapse and Reinstatement - Lapse, p. 24). AUSA Life may, however, at its
sole discretion, issue a Policy with a younger Joint Insured above the age of
80. Acceptance is subject to AUSA Life's underwriting rules and Western Reserve
reserves the right to reject an application for any reason permitted by law.
PREMIUMS
Subject to certain limitations, a Policyowner has flexibility in
determining the frequency and amount of premiums.
PREMIUM FLEXIBILITY. Unlike conventional insurance policies, this Policy
frees the Policyowner from the requirement that premiums be paid in accordance
with a rigid and inflexible premium schedule. AUSA Life may require the
Policyowner to pay an Initial Premium at least equal to a minimum monthly
guarantee premium set forth in the Policy before issuing the Policy. (See
Charges and Deductions - Premium Expense Charge, p. 26.) Thereafter, subject to
the minimum and maximum premium limitations described below, a Policyowner may
make unscheduled premium payments at any time in any amount.
PLANNED PERIODIC PREMIUMS. Each Policyowner will determine a Planned
Periodic Premium schedule that provides for the payment of a level premium at a
fixed interval over a specified period of time. The Policyowner is not required
to pay premiums in accordance with this schedule. Furthermore, the Policyowner
has considerable flexibility to alter the amount, frequency, and the time
period over which Planned Periodic Premiums are paid.
The payment of a Planned Periodic Premium will not guarantee that the
Policy remains In Force. Instead, the duration of the Policy depends upon the
Policy's Net Surrender Value. Thus, even if Planned Periodic Premiums are paid
by the Policyowner, the Policy will nonetheless lapse any time Net Surrender
Value is insufficient to pay certain monthly charges, and a grace period
expires without a sufficient payment. However, until the No Lapse Date as
provided in the Policy, the Policy will remain In Force and no grace period
will begin provided there has been no addition of any riders and the total of
the premiums received (minus any withdrawals and any outstanding loans) is
equal to or exceeds the minimum monthly guarantee premium set forth in the
Policy times the number of months since the Policy Date, including the current
month. (See Policy Lapse and Reinstatement - Lapse, p. 25.)
PREMIUM LIMITATIONS. In no event may the total of all premiums paid,
both scheduled and unscheduled, exceed the current maximum premium limitations
which qualify the Policy as life insurance according to Federal tax laws. If at
any time a premium is paid which would result in total premiums exceeding the
current maximum premium limitation, AUSA Life will only accept that portion of
the premium which will make total premiums equal the maximum. Any part of the
premium in excess of that amount will be returned and no further premiums will
be accepted until allowed by the current maximum premium limitations set forth
in the Policy. Every premium payment, whether scheduled or unscheduled, must be
at least the minimum payment amount required. Under AUSA Life's current rules,
the minimum payment amount is $100. Premium payments less than this minimum
amount may be returned to the Policyowner.
PAYMENT OF PREMIUMS. Payments made by the Policyowner will be treated as
a premium payment unless clearly marked as loan repayments. Certain charges
will be deducted from each premium payment. (See Charges and Deductions -
Premium Expense Charge, p. 26.)
As an accommodation to Policyowners, AUSA Life will accept transmittal of
Initial and subsequent Premiums of at least $1,000 by wire transfer. For an
Initial Premium, the wire transfer must be accompanied by a simultaneous
telephone facsimile transmission ("FAX") of a completed application. An Initial
Premium of $2,000 or more accepted via wire transfer with FAX will be allocated
in accordance with current procedures explained in the next section entitled
"Allocation of Premiums and Cash Value - Allocations of Net Premiums," below.
An Initial Premium made by wire transfer not accompanied by a simultaneous FAX,
or accompanied by a FAX of an incomplete application, will be retained for a
period up to five business days while AUSA Life attempts to obtain the FAX or
complete the essential information required to establish the Policy and
allocate the Initial Premium at the unit value next determined after receipt of
the FAX or information necessary to complete the application. If AUSA Life
cannot obtain the FAX or essential information within five business days, AUSA
Life will return the Initial Premium to the applicant, unless the applicant
consents to allow AUSA Life to retain the Initial Premium until the required
FAX or essential information is received.
In the event the application with original signature is received and the
allocation instructions in that application, for any reason, are inconsistent
with those previously designated on the FAX, the Initial Premium will be
reallocated on the first Valuation Date on or following the Record Date in
accordance with the allocation instructions in the application with original
signature.
Policyowners wishing to make payments via bank wire should instruct their
banks to wire Federal Funds as follows:
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Barnett Bank of Pinellas County
ABA #
For credit to: AUSA Life
Account #: 1263627596
Policyowner's Name:
Policy Number:
Attention: General Accounting
Fax Number: (813) 588-1620
ALLOCATION OF PREMIUMS AND CASH VALUE
NET PREMIUMS. The Net Premium equals the premium paid less the premium
expense charges. (See Charges and Deductions - Premium Expense Charge, p. 26.)
When an Initial Premium accompanies the application, monthly deductions from
the Cash Value of the Policy commence on the Policy Date.
ALLOCATION OF NET PREMIUMS. In the application for a Policy, the
Policyowner will allocate Net Premiums to one or more of the Sub-Accounts of
the Series Account, to the Fixed Account, or to a combination of both.
Notwithstanding the allocation in the application, the Initial Premium, less
charges, will first be allocated, on the first Valuation Date on or following
the Policy Date, to the Sub-Account of the Series Account that invests
exclusively in shares of the Money Market Portfolio, and will be reallocated in
accordance with the Policyowner's directions in the application on the first
Valuation Date on or following the Record Date. The Record Date of the Policy
will be the date on which the Policy is recorded on AUSA Life's books as an In
Force Policy. (See Payment and Allocation of Premiums beginning on p. 22, and
Policy Benefits - When Conditional Life Insurance Coverage Begins p. 17.)
Net Premiums paid after the Record Date will be allocated in accordance
with the Policyowner's instructions in the application. AUSA Life does not
currently require that allocation of Net Premiums to an Account meet a minimum
percentage. AUSA Life does reserve the right to limit allocation of Net
Premiums to any Account to no less than 10% of each Net Premium payment. No
fractional percentages are permitted. The allocation of future Net Premiums may
be changed without charge at any time by providing AUSA Life with written
notification from the Policyowner, or by telephone by calling AUSA Life's
toll-free number, 1-800-322-7160. AUSA Life will employ the same procedures to
confirm that such telephone instructions are genuine as it employs regarding
transfers among Sub-Accounts and the Fixed Account by telephone. Upon
instructions from the Policyowner, the registered representative/agent of
record may also change the allocation of future Net Premiums. AUSA Life
reserves the right to limit the number of changes of the allocation of Net
Premiums to one per year. Investment returns from the amounts allocated to
Sub-Accounts of the Series Account will vary with the investment experience of
these Sub-Accounts and the Policyowner bears the entire investment risk.
TRANSFERS. Cash Value may be transferred among the Sub-Accounts of the
Series Account or from the Sub-Accounts to the Fixed Account. Transfers may
also be made from the Fixed Account to the Sub-Accounts, subject to certain
restrictions. (See The Fixed Account - Allocations, Transfers and Withdrawals,
p. 34.) The amount of Cash Value available for transfer from any Sub-Account,
or the Fixed Account, is determined at the end of the Valuation Period during
which the transfer request is received at AUSA Life's Administrative Office.
The net asset value for each share of the corresponding Portfolio of any
Sub-Account is determined, once daily, as of the close of the regular business
session of the New York Stock Exchange ("Exchange") (usually 4:00 p.m. Eastern
time), which coincides with the end of each Valuation Period. (See Policy
Benefits - Cash Value - Valuation Date and Valuation Period, p. 18.) Therefore,
any transfer request received after the close of the regular business session
of the Exchange, on any day the Exchange is open, will be processed on the next
day the Exchange is open for business, utilizing the net asset value for each
share of the applicable Portfolio determined as of the close of the regular
business session of the Exchange. Cash Value available for transfer from the
Fixed Account will be determined in the same manner.
Policyowners may make transfer requests in writing, or by telephone.
Written requests must be in a form acceptable to AUSA Life. The registered
representative/agent of record for the Policy may, upon instruction from the
Policyowner for each transfer, make telephone transfers upon request without
the necessity for the Policyowner to have previously authorized telephone
transfers in writing. If, for any reason, a Policyowner does not want the
ability to make transfers by telephone, the Policyowner should provide written
notice to AUSA Life at its Administrative Office. All telephone transfers
should be made by calling AUSA Life at the toll-free number: 1-800-322-7160.
AUSA Life will not be liable for complying with telephone instructions it
reasonably believes to be authentic, nor for any loss, damage, cost or expense
in acting on such telephone instructions, and Policyowners will bear the risk
of any such loss. AUSA Life will employ reasonable procedures to confirm that
telephone instructions are genuine. If AUSA Life does not employ such
procedures, it may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, among others, requiring forms of
personal identification prior to acting upon such telephone instructions,
providing written confirmation of such transactions to Policyowners and/or tape
recording of telephone transfer request instructions received from
Policyowners. AUSA Life may, at any time, revoke or modify the transfer
privilege. Under AUSA Life's current procedures, it will effect transfers and
determine all values in connection with transfers at the end of the Valuation
Period during which the transfer request is received at AUSA Life's
Administrative Office.
Twelve Cash Value transfers are permitted without charge during any one
Policy year. AUSA Life will impose a charge of $10 for each subsequent
transfer. The transfer charge will not be increased. (See Optional Cash Value
Charges - Cash Value Transfers, p. 28.) All transfers made in
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any one day will be considered a single transfer and any transfer charges will
be deducted in an equal amount from each Sub-Account from which a transfer was
made. Transfers resulting from policy loans, the exercise of conversion rights,
and the reallocation of Cash Value immediately after the Record Date, will not
be treated as a transfer for the purpose of this charge. No transfer charge
will apply to transfers from the Fixed Account to a Sub-Account or to the
exercise of the conversion rights. (See Policy Rights - Conversion Rights, p.
31.)
AUSA Life or an affiliate may provide administrative or other support
services to independent third parties authorized by Policyowners to conduct
transfers on a Policyowner's behalf, or who provide recommendations as to how
Sub-Account values should be allocated. This includes, but is not limited to,
transferring Sub-Account values among Sub-Accounts in accordance with various
investment allocation strategies such third party may employ. Such independent
third parties may or may not be appointed AUSA Life agents for the sale of
Policies. However, AUSA LIFE DOES NOT ENGAGE ANY THIRD PARTIES TO OFFER
INVESTMENT ALLOCATION SERVICES OF ANY TYPE, SO THAT PERSONS OR FIRMS OFFERING
SUCH SERVICES DO SO INDEPENDENT FROM ANY AGENCY RELATIONSHIP THEY MAY HAVE WITH
AUSA LIFE FOR THE SALE OF POLICIES. AUSA LIFE THEREFORE TAKES NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATIONS AND TRANSFERS TRANSACTED ON A POLICYOWNER'S
BEHALF BY SUCH THIRD PARTIES OR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE
BY SUCH PARTIES. AUSA Life does not currently charge a Policyowner any
additional fees for providing these support services.
DOLLAR COST AVERAGING
The Policyowner may direct AUSA Life to automatically transfer specified
amounts from the Money Market Sub-Account, the Bond Sub-Account, the Fixed
Account or any combination of these Accounts on a monthly basis to a Sub-
Account. This service is intended to allow the Owner to utilize "Dollar Cost
Averaging," a long-term investment method which provides for regular, level
investments over time. AUSA Life makes no guarantees that Dollar Cost Averaging
will result in a profit or protect against loss. To qualify for Dollar Cost
Averaging a minimum of $10,000 must be in each Account from which transfers
will be made and at least $1,000, in the aggregate, must be transferred each
month, unless AUSA Life consents to a smaller amount.
To further qualify for Dollar Cost Averaging from the Fixed Account, no
more than one-tenth (1/10) of the amount in the Fixed Account at the
commencement of Dollar Cost Averaging can be transferred each month. Other
types of transfers from the Fixed Account may also be subject to certain other
restrictions. (See The Fixed Account -- Allocations, Transfers and Withdrawals
on p. 34.)
A written election of this service, on a form provided by AUSA Life, must
be completed by the Policyowner in order to begin transfers. The first transfer
will occur during the month which follows receipt of the form, providing the
form is received by the 25th day of the month. Once elected, transfers from the
Money Market or Bond Sub-Accounts or the Fixed Account will be processed
monthly until the entire value of each Account from which transfers are made is
completely depleted or the Policyowner instructs AUSA Life in writing to cancel
the monthly transfers. For example, if $15,000 was allocated to the Money
Market Sub-Account and $10,000 was allocated to the Bond Sub-Account and
transfers of $500 are made each month from each of these Sub-Accounts to the
Growth Sub-Account, transfers of $500 per month would continue to be made from
the Money Market Sub-Account even though transfers from the Bond Sub-Account
had ceased as a result of depletion of value.
There is no charge for Dollar Cost Averaging. However, each transfer
which occurs under the Dollar Cost Averaging service will be counted towards
the twelve free transfers allowed during each Policy year. (See Allocation of
Premiums and Cash Value - Transfers on p. 23.) AUSA Life may discontinue,
modify, or suspend Dollar Cost Averaging at any time, following prior written
notice to Policyowners. Dollar Cost Averaging is not available if the Owner has
elected the Asset Rebalancing Program, or has elected an asset allocation
service provided by a third party.
ASSET REBALANCING PROGRAM
AUSA Life will offer a program under which the Policyowner may authorize
AUSA Life to transfer automatically Cash Value periodically to maintain a
particular percentage allocation among the Sub-Accounts. The Cash Value
allocated to each Sub-Account will grow or decline in value at different rates.
The Asset Rebalancing Program automatically reallocates the Cash Value in the
Sub-Accounts at the end of each period to match the Contract's currently
effective Net Premium allocation schedule. The Asset Rebalancing Program is
intended to transfer Cash Value from those Sub-Accounts that have increased in
value to those Sub-Accounts that have declined in value. Over time, this method
of investing may help an Owner buy low and sell high. This investment method
does not guarantee gains, nor does it assure that any Sub-Account will not have
losses.
To qualify for Asset Rebalancing, a minimum Cash Value of $10,000 for an
existing Policy, or a minimum Initial Premium of $10,000 for a new Policy, is
required. To participate in the Asset Rebalancing Program, a properly completed
Asset Rebalancing Request Form must be received by AUSA Life at its
Administrative Office. An Asset Rebalancing Form is available upon request.
Owners may elect rebalancing to occur on each quarterly, semi-annual or
annual anniversary of the Policy Date. Following receipt of the Asset
Rebalancing Request Form, AUSA Life will effect the initial rebalancing of Cash
Value on the next such anniversary, in accordance with the Policy's current Net
Premium allocation schedule. The amounts transferred will be credited at the
unit value next determined on the dates the transfers are made. If a day on
which rebalancing would ordinarily occur falls on a day on which the New York
Stock Exchange is closed, rebalancing will occur on the next day the New York
Stock Exchange is open. The Asset
24
<PAGE>
Rebalancing Program is available only before the Maturity Date, and is not
available if the Policyowner has elected Dollar Cost Averaging, or has elected
an asset allocation service provided by a third party. There is no charge for
the Asset Rebalancing Program. However, each reallocation which occurs under
the Asset Rebalancing Program will be counted towards the twelve free transfers
allowed during each Policy year. (See Allocation of Premiums and Cash Value -
Transfers on p. 23.)
The Policyowner may terminate participation at any time in the Asset
Rebalancing Program by oral or written request to AUSA Life. Participation in
the Asset Rebalancing Program will terminate automatically if any transfer is
made to, or from, any Sub-Account, other than on account of a scheduled
rebalancing. If the Policyowner wishes to resume the Asset Rebalancing Program
after it has been canceled, a new Asset Rebalancing Request Form must be
completed and sent to AUSA Life. The Policyowner may start and stop
participation in the Asset Rebalancing Program at any time; however, AUSA Life
reserves the right to restrict entry into the Asset Rebalancing Program to once
per Policy year. Cash Value allocated to the Fixed Account may not be included
in the Asset Rebalancing Program.
AUSA Life may discontinue, modify, or suspend, the Asset Rebalancing
Program at any time following prior written notice to Policyowners.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike conventional life insurance policies, the failure to make
a Planned Periodic Premium payment will not itself cause the Policy to lapse.
Lapse will only occur where Net Surrender Value is insufficient on any Monthly
Anniversary to cover the monthly deductions, and a grace period expires without
a sufficient payment by the Policyowner. If the Net Surrender Value on any
Monthly Anniversary is not sufficient to cover the monthly deductions on such
day, AUSA Life will mail a notice to the last known address of the
Policyowner(s) and any assignee of record. A grace period of 61 days after the
mailing date of the notice will be allowed for the payment of premiums. The
notice will specify the minimum payment and the final date on which such
payment must be received by AUSA Life to keep the Policy In Force. (See Charges
and Deductions, p. 26.)
However, until the No Lapse Date as provided in the Policy, the Policy
will not lapse and no grace period will begin, provided: (1) no riders have
been added since the Policy Date, and (2) the total of the premiums received
(minus any withdrawals and any outstanding loans) equal or exceed the minimum
monthly guarantee premium shown in the Policy times the number of months since
the Policy Date, including the current month and, (3) the excess indebtedness
(total of all Policy loans less any unearned loan interest on Policy loans)
does not exceed the Cash Value (see Policy Rights - Loan Privileges, p. 29).
Should the Policyowner(s) request the addition of any rider after the Policy
Date but prior to the No Lapse Date, the Policyowner(s) will be notified as to
the effect on grace period processing prior to the date the rider is effective.
Essentially, the Policy will not lapse during the period from the Policy
Date until the No Lapse Date (the "No Lapse Period"), as long as the conditions
in (1), (2) and (3) immediately above have been met, and even though Net
Surrender Value at any point during the No Lapse Period is insufficient to
cover a monthly deduction and the grace period has expired without a payment
sufficient to cover the monthly deduction. Such a Lapse could happen if the
investment experience has been sufficiently unfavorable to have resulted in a
decrease in the Net Surrender Value, or the Net Surrender Value has decreased
because not enough premiums have been paid to offset the monthly charges.
When the conditions in (1), (2) and (3) above have not been met, or they
have been met, but the Policy is beyond the No Lapse Date, and Net Surrender
Value is insufficient to cover the monthly deduction, AUSA Life will notify the
Policyowner and any assignee of record of the minimum payment needed to keep
the Policy In Force. The Policyowner will then have a grace period of 61 days,
measured from the date notice is mailed to the Policyowner, for AUSA Life to
receive sufficient payments. If AUSA Life does not receive a sufficient payment
within the grace period, Lapse of the Policy will result. If a sufficient
payment is received during the grace period, any resulting Net Premium will be
allocated among the Accounts, and any monthly deductions due will be charged to
such Accounts, in accordance with the Policyowner's then current instructions.
(See Allocation of Premiums and Cash Value - Allocation of Net Premiums, p. 23,
and Charges and Deductions - Cash Value Charges, p. 27.) If the Surviving
Insured dies during the grace period, the death benefit proceeds will equal the
amount of the death benefit proceeds immediately prior to the commencement of
the grace period, reduced by any due and unpaid charges.
The duration of the period of time between the Policy Date and the No
Lapse Date is selected by the Policyowner at time of application for the
Policy, and may be either, (1) the later of attained target premium age 65 or
five Policy years, or (2) the later of attained target premium age 75 or five
Policy years. The amount of the minimum monthly guarantee premium will vary
according to whether (1) or (2) is chosen. Neither (1) nor (2) may exceed
target premium age 85. The target premium age equals the average of the ages of
the Joint Insureds at time of Policy issue, rounded down to the closer age, not
to exceed the younger Joint Insured's age, plus ten years. For example, if the
ages of the Joint Insureds at time of Policy issue are 46 and 48, the target
premium age is 47. If the ages at time of Policy issue are 45 and 48, the
target premium age is 46. If the ages at time of Policy issue are 50 and 80,
the target premium age is 60. The target premium attained age equals the target
premium age plus the number of completed Policy years.
25
<PAGE>
REINSTATEMENT. A lapsed Policy may be reinstated any time within five
years after the date of lapse and before the Maturity Date by submitting the
following items to Western Reserve:
1. A written application for reinstatement from the Policyowner;
2. Evidence of insurability from each Joint Insured satisfactory to AUSA
Life; and
3. A premium that, after the deduction of premium expense charges, is
large enough to cover:
(a) one monthly deduction at the time of termination;
(b) the next two monthly deductions which will become due after the
time of reinstatement; and
(c) an amount sufficient to cover any surrender charge (as described
below) as of the date of reinstatement.
AUSA Life reserves the right to decline a reinstatement request. Any
indebtedness on the date of Lapse will not be reinstated. The Cash Value of the
Loan Reserve on the date of reinstatement will be zero. The amount of Net
Surrender Value on the date of reinstatement will be equal to the Net Premiums
paid at reinstatement, less the amounts paid in accordance with (a) and (c)
above.
Upon approval of the application for reinstatement, the effective date of
reinstatement will be the first Monthly Anniversary on or next following the
date AUSA Life approves the application for reinstatement.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate AUSA
Life for: (1) providing the insurance benefits set forth in the Policy and any
optional insurance benefits added by rider; (2) administering the Policy; (3)
assuming certain risks in connection with the Policy; and (4) incurring
expenses in distributing the Policy. The nature and amount of these charges are
described more fully below.
PREMIUM EXPENSE CHARGE
Prior to allocation of Net Premiums among the Accounts, premiums paid
through the end of the tenth Policy year will be reduced by Premium Expense
Charge equal to 6.00% of premium to compensate AUSA Life for distribution
expenses and premium taxes incurred in connection with the Policy. After the
tenth Policy year, the Premium Expense Charge reduces to 2.5%.
CONTINGENT SURRENDER CHARGES
If the Policy is totally surrendered (or the Net Surrender Value is
applied under a settlement option) prior to the end of the fifteenth (15th)
Policy year, a surrender charge for the initial Specified Amount will be
deducted from the Policy's Cash Value. The surrender charge consists of: the
sum of
(a) an administrative component (DEFERRED ISSUE CHARGE), and
(b) a sales component (DEFERRED SALES CHARGE).
The sum of (a) and (b) are multiplied by (c), the applicable SURRENDER
CHARGE PERCENTAGE.
(a) DEFERRED ISSUE CHARGE. The deferred issue charge is a level charge
of $5.00 per thousand of initial Specified Amount. This charge is to assist
AUSA Life in recovering the underwriting, processing and start-up expenses
incurred in connection with the Policy and the Series Account. These expenses
include the cost of processing applications, conducting medical examinations,
determining insurability and the Joint Insured's rate class, and establishing
Policy records.
(b) DEFERRED SALES CHARGE. The deferred sales charge is (1) 26.5% of the
sum of all premiums paid up to the Guideline Premium shown in the Policy and,
(2) for the sum of all premiums paid in excess of the first Guideline Premium
("excess premium charge"), a percentage which varies by the Issue Age and sex
of the younger Joint Insured as follows:
<TABLE>
<CAPTION>
Excess Premium Issue Age Range
Charge (Younger Joint Insured)
- ---------------- ------------------------
<S> <C>
4.2% 1-55
3.7% 56-63
3.1% 64-68
2.5% 69-73
2.0% 74-76
1.6% 77-78
1.2% 79-80
</TABLE>
The deferred sales charge is designed to assist AUSA Life in recovering
distribution expenses incurred in connection with the Policy, including agent
sales commissions, the cost of printing prospectuses and sales literature, and
any advertising costs. The proceeds of the charge may not be sufficient to
cover these expenses. To the extent they are not, AUSA Life will cover the
shortfall from its General Account assets, which may include profits from the
mortality and expense risk charge under the Policy.
(c) SURRENDER CHARGE PERCENTAGE. As stated above, the percentage is
applied to the sum of the deferred issue charge and deferred sales charge due
upon any surrender of a Policy during the first fifteen Policy years. In Policy
years 1-10 this percentage is 100% for Joint Insureds when the age of the
younger of the Joint Insureds is between Ages 0-74, and then declines at the
rate of 20% per year until reaching zero at the end of the fifteenth (15th)
Policy year as shown below. For Joint Insureds when the age of the younger of
the Joint Insureds is between Issue Ages 75-80, this percentage is 100% until
the end of the sixth (6th) Policy year, and declines to 0% at the end of the
fifteenth (15th) Policy year. Therefore, application of the percentage to the
deferred issue charge and deferred sales charge in the event of any surrender
during the eleventh through fifteenth Policy year will result in reduced
surrender charges. If a surrender occurs after the fifteenth (15th) Policy
year, there are no deferred issue or deferred sales charges due. See Example
(2) on p. 27.
26
<PAGE>
SURRENDER CHARGE PERCENTAGES
<TABLE>
<CAPTION>
Younger Age
------------------
Less 75 or
End of Policy Year* Than 75 Above
- -------------------- --------- ------
<S> <C> <C>
At Issue 100% 100%
1-6 100% 100%
7 100% 97%
8 100% 88%
9 100% 80%
10 100% 73%
11 80% 66%
12 60% 60%
13 40% 40%
14 20% 20%
15+ 0% 0%
</TABLE>
* THE CHARGE ON ANY DATE OTHER THAN AN ANNIVERSARY WILL BE INTERPOLATED BETWEEN
THE TWO END OF YEAR CHARGES.
(d) EXAMPLE (1) Assume a male non-tobacco user age 35 and a female
non-tobacco user age 35 purchase a Policy for $100,000 of Specified Amount,
paying the Guideline Premium of $806.11, and an additional premium amount of
$193.89 in excess of the Guideline Premium, for a total premium of $1,000 per
year for four years ($4,000 total for four years), and then surrenders the
Policy. The surrender charge would be calculated as follows:
<TABLE>
<S> <C> <C> <C>
(a) Deferred Issue Charge - [100 x $5.00]
($5.00/$1,000 of Initial Specified Amount) = $500.00
(b) Deferred Sales Charge:
(1) 26.5% of Guideline
Premium paid
[26.5% x $806.11], and = $213.62
(2) 4.2% of premiums paid in excess
of Guideline Premium
[4.2% x ( (4 x 1,000) - $806.11)] = $134.14
(c) Applicable Surrender Charge = 100%
[(a)$500.00 + (b)($213.62 + $134.14)]
x 100%
SURRENDER CHARGE = 847.76 x 100% = $847.76
========
</TABLE>
EXAMPLE (2) - Assume the same facts as in Example (1), EXCEPT the Owner
surrenders the Policy on the 14th Policy Anniversary:
<TABLE>
<S> <C> <C> <C>
(a) Deferred Issue Charge - [100 x $5.00] = $500.00
(b) Deferred Sales Charge:
(1) [26.5% x $806.11], and = $213.62
(2) [4.2% x ( (14 x 1,000) - $806.11)] = $554.14
(c) Applicable Surrender Charge = 20%
<S> <C> <C> <C>
[(a)$500.00 + (b)($213.62 + $554.14)]
x 20%
SURRENDER CHARGE = $1,267.76 x 20% = $253.55
========
</TABLE>
If the Owner waits until the 15th Policy Anniversary or after, there will
be no surrender charge.
For Policies issued in the state of Pennsylvania, the following surrender
charge percentage table applies.
SURRENDER CHARGE PERCENTAGES
<TABLE>
<CAPTION>
Issue Issue Issued
Policy Year Ages 20-69 Ages 70-74 Ages 75-80
- ------------- ------------ ------------ -----------
<S> <C> <C> <C>
1 100% 100% 100%
2 100% 100% 96%
3 100% 100% 89%
4 100% 100% 83%
5 100% 95% 77%
6 100% 90% 73%
7 100% 85% 68%
8 100% 80% 65%
9 95% 76% 61%
10 90% 72% 58%
11 80% 68% 55%
12 60% 60% 51%
13 40% 40% 40%
14 20% 20% 20%
15 0% 0% 0%
</TABLE>
CASH VALUE CHARGES
Charges will be deducted monthly from the Cash Value of each Policy
("monthly deduction") to compensate AUSA Life for certain administrative costs,
the cost of insurance, the monthly death benefit guarantee charge, and optional
benefits added by rider. The monthly deduction will be deducted on each Monthly
Anniversary, and will be allocated among the Accounts on the same basis as Net
Premiums are allocated. If the value of any Account is insufficient to pay its
part of the monthly deduction, the monthly deduction will be taken on a pro
rata basis from all Accounts. Because portions of the monthly deduction, such
as the cost of insurance, can vary from month-to-month, the monthly deduction
itself will vary in amount from month-to-month.
COST OF INSURANCE. AUSA Life will determine the monthly cost of
insurance charge by multiplying the applicable cost of insurance rates by the
net amount at risk for each Policy Month. The net amount at risk for a Policy
Month is (a) the death benefit at the beginning of the Policy Month divided by
1.0032737 (which reduces the net amount at risk, solely for purposes of
computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4%), less (b) the Cash Value at the beginning of
the Policy Month.
Cost of insurance rates will be based on the sex, Attained Age and rate
class of the Joint Insureds, and the length of time a Policy has been In Force.
The actual monthly cost of
27
<PAGE>
insurance rates will be based on AUSA Life's expectations as to future
experience. They will not, however, be greater than the guaranteed cost of
insurance rates set forth in the Policy. These guaranteed rates are based on
the 1980 Commissioners Standard Ordinary ("1980 C.S.O."), age nearest birthday,
Mortality Tables and the sex, Attained Age and rate class of each Joint
Insured. The rate class of each Joint Insured is either Select (non-tobacco
user), or Standard (tobacco user) or a class which reflects some substandard
classification. There is no rate discount for a preferred class. For standard
rate classes, i.e., either tobacco user or non-tobacco user classes not rated,
these rates will not exceed rates contained in the 1980 C.S.O. Tables. AUSA
Life also may guarantee that actual cost of insurance rates will not be changed
for a specified period of time (e.g., one year). Any change in the cost of
insurance rates will apply to all Joint Insureds of the same age, sex, and rate
class whose Policies have been In Force for the same length of time.
The Policies offered by this Prospectus are based on mortality tables
that distinguish between men and women. As a result, the Policy pays different
benefits to Joint Insureds who are either both men or women of the same age.
The rate class of each Joint Insured will affect the cost of insurance
rate. For this Policy, AUSA Life currently places Joint Insureds into the
following three nonsub-standard rate classes: combination of two non-tobacco
users, combination of two tobacco users and the combination of a tobacco user
and a non-tobacco user; as well as various other sub-standard rate classes
involving a higher mortality risk. In an otherwise identical Policy, the cost
of insurance rate is generally higher for tobacco users than for non-tobacco
users.
AUSA Life may also issue certain Policies on a "simplified" or expedited
basis to certain categories of individuals (for example, Policies issued at a
predetermined Specified Amount or underwritten on a group basis). Policies
issued on this basis will have guaranteed cost of insurance rates no higher
than the guaranteed rates for Select or Standard categories (as appropriate);
however, due to the special underwriting criteria established for these issues,
actual rates may be higher or lower than the current cost of insurance rates
charged under otherwise identical Policies that are underwritten using standard
underwriting criteria.
MONTHLY DEATH BENEFIT GUARANTEE CHARGE. AUSA Life will deduct a monthly
death benefit guarantee charge from each Policy to compensate AUSA Life for the
risk of guaranteeing the death benefit for the period chosen by the Owner on
the application provided a minimum level of premiums are received. The amount
of this charge is set forth on the Policy Schedule Page and will be $0.04 per
$1,000 of initial Specified Amount for all classes of Policies. This charge
will only be levied during the period between the Policy Date and the No Lapse
Date. (See Policy Lapse and Reinstatement - Lapse, p. 25.)
MONTHLY POLICY CHARGE. AUSA Life has primary responsibility for the
administration of the Policy and the Series Account. Annual administrative
expenses include recordkeeping, processing death benefit claims, Policy
changes, reporting and overhead costs. As reimbursement for administrative
expenses related to the maintenance of each Policy and the Series Account, AUSA
Life assesses a monthly administration charge from each Policy. This charge is
currently $5.00 per Policy Month. AUSA Life reserves the right to increase this
charge, but it is guaranteed not to exceed $10.00 per Policy Month.
OPTIONAL CASH VALUE CHARGES
The following optional Cash Value charges will be deducted from the
Policy as the result of changes or elections made to the Policy and initiated
by the Policyowner.
OPTIONAL INSURANCE BENEFITS. The monthly deduction will include charges
for any optional insurance benefits added to the Policy by rider.
CASH VALUE TRANSFERS. After twelve (12) free transfers per year, AUSA
Life will impose and deduct from each amount transferred a transfer charge of
$10 to compensate AUSA Life for the costs in effectuating the transfer. The
transfer charge will not be increased in the future.
CASH WITHDRAWALS. A processing fee equal to the lesser of $25 or 2% of
the amount withdrawn will be deducted from amounts withdrawn from the Policy
and the balance will then be paid to the Policyowner. This fee will not be
increased.
CHARGES AGAINST THE SERIES ACCOUNT
Certain expenses will be deducted as a percentage of the value of the net
assets of the Series Account to compensate AUSA Life for certain risks assumed
in connection with the Policy.
MORTALITY AND EXPENSE RISK CHARGE. AUSA Life will deduct a daily charge
from the Series Account at an annual rate of 0.90% of the average daily net
assets of the Series Account. Under AUSA Life's current procedures, these
amounts are paid to the General Account monthly.
The mortality risk assumed by AUSA Life is that the Surviving Insured may
live for a shorter time than projected. The expense risk assumed is that
expenses incurred in issuing and administering the Policies will exceed the
limits on administrative charges set in the Policies. AUSA Life also assumes
risks with respect to other contingencies including the incidence of Policy
loans, which may cause AUSA Life to incur greater costs than anticipated when
designing the Policies.
TAXES. Currently no charge is made to the Series Account for Federal
income taxes that may be attributable to the Series Account. AUSA Life may,
however, make such a charge in the future. Charges for other taxes, if any,
attributable to the Series Account may also be made. (See Federal Tax Matters,
p. 35.)
EXPENSES OF THE FUND
Because the Series Account purchases shares of the Portfolios of the
Fund, the net assets of the Series Account will
28
<PAGE>
reflect the investment management fee and other expenses incurred by the Fund.
(See p. 7 for a table of the Fund Annual Expenses and pp. 19-21 for a
discussion of the investment management fees of each Portfolio.)
Effective January 1, 1997, the Fund adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act ("Distribution Plan") and pursuant to
the Plan, has entered into a Distribution Agreement with ISI, principal
underwriter for the Fund.
Under the Distribution Plan, the Fund, on behalf of the Portfolios, is
authorized to pay to various service providers, as direct payment for expenses
incurred in connection with the distribution of a Portfolio's shares, amounts
equal to actual expenses associated with distributing a Portfolio's shares, up
to a maximum rate of 0.15% (fifteen one-hundredths of one percent) on an
annualized basis of the average daily net assets. This fee is measured and
accrued daily and paid monthly. ISI has determined that it will not seek
payment by the Fund of distribution expenses with respect to any Portfolio
during the fiscal year ending December 31, 1998. Prior to ISI's seeking
reimbursement, Policyowners will be notified in advance.
GROUP OR SPONSORED POLICIES
A different form of the Policy may be purchased under group or sponsored
arrangements ("Group/Sponsored Policies"). Under Group/Sponsored Policies, a
trustee, employer or similar entity purchases individual policies covering a
group of individuals on a group basis. Examples of such arrangements are
employer-sponsored benefit plans which are qualified under Section 401 of the
Internal Revenue Code and deferred compensation plans. A "sponsored
arrangement" includes a program under which an employer permits group
solicitation of its employees or an association permits group solicitation of
its members for the purchase of Policies on an individual basis.
For Group/Sponsored Policies the premium expense charges, contingent
surrender charges, minimum premium and minimum Specified Amount described in
"Charges and Deductions" and "Payment and Allocation of Premiums",
respectively, may be reduced. AUSA Life will issue Group/ Sponsored Policies
in accordance with its rules in effect as of the date an application for a
Policy is approved. To qualify for Group/Sponsored Policies, a group or
sponsored arrangement must satisfy certain criteria as to, for example, size
and number of years in existence. Generally, the sales contacts and effort,
administrative costs and mortality cost for Group/ Sponsored Policies take
into account such factors as the size of the group or sponsored arrangement,
its stability as indicated by its term of existence, the purposes for which
Group/ Sponsored Policies are purchased and certain characteristics of its
members. The Group/Sponsored Policy's amount of reduction and the criteria for
qualification will reflect the reduced sales effort resulting from sales to
qualifying groups and sponsored arrangements. Group/Sponsored Policies may not
be available in certain states.
AUSA Life may modify from time to time on a uniform basis the criteria
for qualification for Group/Sponsored Policies. In no event, however, will
group or sponsored arrangements established for the sole purpose of purchasing
Group/ Sponsored Policies, or which have been in existence for less than six
months, qualify for such Policies. Group/Sponsored Policies will not be
unfairly discriminatory against any person, including the affected Policyowners
and all other Policyowners of other forms of Policies funded by the Series
Account.
In 1983 the United States Supreme Court held that certain insurance
policies, the benefits under which vary based on sex, may not be used to fund
certain employer-sponsored benefit plans and fringe benefit programs. AUSA Life
recommends that any employer proposing to offer the Group/ Sponsored Policies
to employees under a group or sponsored arrangement consult his or her attorney
before doing so. (See Federal Tax Matters - Employment-Related Benefit Plans,
p. 38.)
ASSOCIATE POLICIES
Certain employees, field associates, directors and their relatives may
purchase a different form of the Policy ("Associate Policy") under which AUSA
Life, in addition to waiving or reducing the premium expense charges,
contingent surrender charges, minimum premium and minimum Specified Amount, may
waive or reduce the Monthly Policy Charge and the Surrender Charge. The
Associate Policy is available to (a) current and retired directors, officers,
full-time employees and agents of AUSA Life and its affiliates; (b) current and
retired directors, officers, full-time employees and registered representatives
of ISI and any broker-dealer which has a sales agreement with ISI; (c) any
Trust, pension, profit-sharing or other employee benefit plan of any of the
foregoing persons or entities; (d) current and retired directors, officers and
full-time employees of WRL Series Fund, Inc. and any IDEX mutual fund, and any
investment adviser or investment sub-adviser thereto; and (e) any member of a
family of any of the foregoing (e.g., spouse, child, sibling, parent-in-law).
AUSA Life reserves the right to modify or terminate this arrangement at any
time. The Associate Policy may not be available in certain states.
POLICY RIGHTS
LOAN PRIVILEGES
POLICY LOAN. After the first Policy year and so long as the Policy
remains In Force, the Policyowner may borrow money from AUSA Life using the
Policy as the only security for the loan. AUSA Life reserves the right to
permit a Policy loan prior to the first Policy Anniversary for Policies issued
pursuant to a transfer of cash values from another life insurance policy under
Section 1035(a) of the Internal Revenue Code of 1986, as amended. The maximum
amount that may be borrowed is 90% of the Cash Value, less any surrender charge
and any already outstanding Policy loan. AUSA Life reserves the right to limit
the amount of any Policy loan to no less than $500. Outstanding loans have
priority over the
29
<PAGE>
claims of any assignee or other person. The loan may be repaid totally or in
part before the Maturity Date of the Policy and while the Policy is In Force. A
loan which is taken from, or secured by, a Policy may have Federal income tax
consequences. (See Federal Tax Matters, p. 35.)
An amount equal to the loan plus interest in advance until the next
Policy Anniversary will be withdrawn from the Account or Accounts specified and
transferred to the Loan Reserve until the loan is repaid. The Loan Reserve is a
portion of the Fixed Account used as Collateral for a Policy loan. The
Sub-Accounts of the Series Account may be specified. If no Account is
specified, the loan amount will be withdrawn from each Account in the same
manner as the current allocation instructions.
The amount of the loan will normally be paid within seven days after
receipt of a proper request in a manner permitted by AUSA Life. Postponement of
loans may take place under certain conditions. (See General Provisions -
Postponement of Payments, p. 32.) Under AUSA Life's current procedures, at each
Anniversary, AUSA Life will compare the amount of the outstanding loan
(including loan interest in advance until the next Policy Anniversary, if not
paid) to the amount in the Loan Reserve (including interest credited to the
Loan Reserve during the previous Policy year). AUSA Life will also make this
comparison any time the Policyowner repays all or part of the loan or makes a
request to borrow an additional amount. At each such time, if the amount of the
outstanding loan exceeds the amount in the Loan Reserve, AUSA Life will
withdraw the difference from the Accounts and transfer it to the Loan Reserve
in the same manner as when a loan is made. If the amount in the Loan Reserve
exceeds the amount of the outstanding loan, AUSA Life will withdraw the
difference from the Loan Reserve and transfer it to the Accounts in accordance
with the Policyowner's current allocation instructions. AUSA Life reserves the
right to require the transfer of such amounts to the Fixed Account, if such
loans were originally transferred from the Fixed Account. (See The Fixed
Account, p. 34.) No charge will be imposed for these transfers.
INTEREST RATE CHARGED. The interest rate charged on Policy loans will be
at the rate of 5.2% payable annually in advance. If unpaid when due, interest
will be added to the amount of the loan and will become part of the loan and
bear interest at the same rate. Interest paid on a Policy loan is generally not
tax deductible.
LOAN RESERVE INTEREST RATE CREDITED. The amount transferred to the Loan
Reserve will accrue interest at a minimum effective annual rate not less than
4%. AUSA Life may credit a higher rate, but is not obligated to do so.
Currently, AUSA Life is crediting an effective annual interest rate of 4.75% on
all amounts borrowed during the first ten Policy years. On amounts borrowed,
after the tenth Policy year, that are part of the Cash Value in excess of the
cost basis (premiums less withdrawals) of the Policy the interest rate credited
is currently equal to the interest rate being charged on the total loan while
the remaining portion, if any, of the loan is credited the current rate of
4.75%.
EFFECT OF POLICY LOANS. A Policy loan affects the Policy because the
death benefit and Net Surrender Value under the Policy are reduced by the
amount of the loan. Repayment of the loan causes the death benefit and Net
Surrender Value to increase by the amount of the repayment.
As long as a loan is outstanding, an amount equal to the loan plus
interest in advance until the next Policy Anniversary is held in the Loan
Reserve. This amount will not be affected by the Series Account's investment
performance. Amounts transferred from the Series Account to the Loan Reserve
will affect the Series Account value because such amounts will be credited with
an interest rate declared by AUSA Life rather than a rate of return reflecting
the investment performance of the Series Account. (See The Fixed Account -
Minimum Guaranteed and Current Interest Rates, p. 34.)
There are risks involved in taking a Policy loan, a few of which include
the potential for a Policy to lapse if projected earnings, taking into account
outstanding loans, are not achieved, as well as adverse tax consequences which
occur if a Policy lapses with loans outstanding. (See Federal Tax Matters - Tax
Treatment of Policy Benefits, p. 36.)
INDEBTEDNESS. Indebtedness equals the total of all Policy loans less any
unearned loan interest on the loans. If indebtedness exceeds the Cash Value
less the then applicable surrender charge, AUSA Life will notify the
Policyowner and any assignee of record. If a sufficient payment equal to excess
indebtedness is not received by AUSA Life within 61 days from the date notice
is sent, the Policy will lapse and terminate without value. The Policy,
however, may later be reinstated. (See Policy Lapse and Reinstatement, p. 25.)
REPAYMENT OF INDEBTEDNESS. Indebtedness may be repaid any time before
the Maturity Date of the Policy and while the Policy is In Force. Payments made
by the Policyowner while there is indebtedness will be treated as premium
payments unless the Policyowner indicates that the payment should be treated as
a loan repayment. (See Policy Rights - Benefits at Maturity, p. 32.) If not
repaid, AUSA Life may deduct indebtedness from any amount payable under the
Policy. As indebtedness is repaid, the Policy's value in the Loan Reserve
securing the indebtedness repaid will be transferred from the Loan Reserve to
the Accounts in the same manner as Net Premiums are allocated. However, AUSA
Life reserves the right to require the transfer to the Fixed Account. AUSA Life
will allocate the repayment of indebtedness at the end of the Valuation Period
during which the repayment is received.
SURRENDER PRIVILEGES
At any time before the earlier of the death of the Surviving Insured or
the Maturity Date, the Policyowner may totally surrender the Policy by sending
a written request to AUSA Life. The amount available for surrender is the Net
Surrender Value at the end of the Valuation Period during which the surrender
request is received at AUSA Life's Administrative
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Office. The Net Surrender Value is equal to the Cash Value as of the date of
surrender, less any surrender charge, and less any outstanding Policy loan,
plus any unearned loan interest. A Surrender Charge may apply. (See Charges and
Deductions - Contingent Surrender Charges, p. 26.) Surrenders from the Series
Account will generally be paid within seven days of receipt of the written
request. Postponement of payments may, however, occur in certain circumstances.
(See General Provisions - Postponement of Payments, p. 32.) Additional
restrictions may be applied to surrenders from the Fixed Account. (See The
Fixed Account - Allocations, Transfers and Withdrawals, p. 34.) For the
protection of Policyowners, all requests for cash withdrawals or total
surrenders of more than $100,000, or where the withdrawal or surrender proceeds
are to be sent to an address other than the address of record will require a
signature guarantee. All required guarantees of signatures must be made by a
national or state bank, a member firm of a national stock exchange or any other
institution which is an eligible guarantor institution as defined by rules and
regulations of the Commission. If the Policyowner is a corporation,
partnership, trust or fiduciary, evidence of the authority of the person
seeking redemption is required before the request for withdrawal is accepted,
including withdrawals under $100,000. For additional information, Policyowners
may call AUSA Life at (800) 322-7160. A cash withdrawal or total surrender may
have Federal income tax consequences. (See Federal Tax Matters, p. 35.)
TOTAL SURRENDERS. When the Policy is being totally surrendered, the
Policy itself must be returned to AUSA Life along with the request. A
Policyowner may elect to have the amount paid in a lump sum or under a
settlement option. (See Payment of Policy Benefits - Settlement Options, p.
32.)
CASH WITHDRAWALS. Cash withdrawals are available after the first Policy
year. Cash withdrawals are allowed only once each Policy year. For a cash
withdrawal, the amount available may be limited to no less than $500 and to no
more than 10% of the Net Surrender Value. The amount paid plus a processing fee
equal to the lesser of $25 or 2% of the amount withdrawn will be deducted from
the Policy's Cash Value at the end of the Valuation Period during which the
request is received. The amount will be deducted from the Accounts in the same
manner as the current allocation instructions unless the Policyowner directs
otherwise.
Cash withdrawals will affect both the Policy's Cash Value and the death
benefit payable under the Policy. The Policy's Cash Value will be reduced by
the amount of the cash withdrawal. Moreover, the death benefit proceeds payable
under a Policy will generally be reduced by at least the amount of the cash
withdrawal.
In addition, when death benefit Option A is in effect, the Specified
Amount will be reduced by the cash withdrawal. No cash withdrawal will be
permitted which would result in a Specified Amount lower than the minimum
Specified Amount set forth in the Policy or would deny the Policy status as
life insurance under the Internal Revenue Code and applicable regulations. (See
Cash Value Charges - Cost of Insurance, p. 27; Death Benefit - Insurance
Protection, p. 16; and Federal Tax Matters - Tax Treatment of Policy Benefits,
p. 36.)
EXAMINATION OF POLICY PRIVILEGE ("FREE-LOOK")
The Policyowner may cancel the Policy within 10 days after the
Policyowner receives it, or 10 days after AUSA Life mails or delivers a written
notice of withdrawal right to the Policyowner or within 45 days after signing
the application, whichever is latest. The Policyowner should mail or deliver
the Policy to either AUSA Life or the agent who sold it. If the Policy is
cancelled in a timely fashion, a refund will be made to the Policyowner. The
refund will equal the sum of: (i) the difference between the premiums paid and
the amounts allocated to any Accounts under the Policy; (ii) the total amount
of monthly deductions made and any other charges imposed on amounts allocated
to the Accounts; and (iii) the value of amounts allocated to the Accounts on
the date AUSA Life or its agent receives the returned Policy.
CONVERSION RIGHTS
At any time upon written request within 24 months of the Policy Date, the
Policyowner may elect to transfer all Sub-Account values to the Fixed Account.
No transfer charge will be assessed.
POLICY SPLIT OPTION
Subject to AUSA Life's evidence of insurability requirements, the
Policyowner may request to split the Policy, not including any riders, and
purchase two permanent individual Fixed Account life insurance policies offered
at the time of the request; one on the life of each Joint Insured. The Owner
may request this Split Option by notifying AUSA Life at its Administrative
Office in writing within 90 days following either:
1. The later of the enactment or the effective date of a change in the Federal
estate tax laws that would reduce or eliminate the unlimited marital
deduction; or
2. The date of entry of a final decree of divorce with respect to the Joint
Insureds; or
3. Written confirmation of a dissolution of a business partnership of which the
partners are the Joint Insureds.
The conditions listed above do not apply to Policies issued in the state of
Pennsylvania.
If more than one person owns this Policy, each Owner must agree to the
split. The initial specified amount for each new policy cannot be greater than
50% of the Policy's Specified Amount, not including the face amount of any
riders. The new policies will be subject to AUSA Life's minimum and maximum
specified amounts and issue ages for the plan of insurance selected. If one of
the Joint Insureds is older that the new policy's maximum issue age at the time
the Policy Split Option is requested, AUSA Life's approval must be obtained to
exercise the Policy Split Option.
Cash Value and indebtedness under the Policy will be allocated equally to
each of the new policies. If one Joint Insured does not meet AUSA Life's
insurability requirements,
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AUSA Life will pay the Policyowner one half of the Policy's Net Surrender Value
and issue only the policy covering that Joint Insured who meets AUSA Life's
insurability requirements; or the Policyowner may elect to keep the Policy In
Force on both Joint Insureds and no new policies will be issued.
The premiums for the new policies will be based on each Joint Insured's
Attained Age and premium rate class as determined by current evidence of
insurability. Premiums will be payable as of the policy dates for each new
policy. The policy date for each new policy will be the Monthiversary following
notification to AUSA Life to execute the Policy Split Option. The owner and
beneficiary for the new policies will be those named in this Policy, unless
otherwise specified. Any applicable surrender charge will be deducted from the
Policy's Cash Value prior to allocation of the Cash Value to the new policies.
Premium expense charges, if any, under the new policies will not be deducted
from the Cash Value allocated to the new policies. Any new premium paid to the
new policies will be subject to the normal charges, if any, of the new policies
at the time the premium is paid.
BENEFITS AT MATURITY
If either Joint Insured is living and the Policy is In Force, AUSA Life
will pay the Net Surrender Value of the Policy on the Maturity Date. (See Cash
Value - Net Surrender Value, p. 18.) The Policy will mature on the Anniversary
nearest the younger Joint Insured's 100th birthday, if either Joint Insured is
living and the Policy is In Force. AUSA Life is willing to extend the Maturity
Date provided the Policy is still In Force on the Maturity Date and there are
no unfavorable tax consequences. A tax advisor should be consulted about the
tax consequences associated with any Maturity Date extension. Extension of the
Maturity Date will be made upon mutual agreement between AUSA Life and the
Policyowner provided the Policyowner submits a written request to AUSA Life
between 90 and 180 days prior to the Maturity Date, and provided the Policy may
be extended with no unfavorable tax consequences to the Policyowner.
PAYMENT OF POLICY BENEFITS
Death benefits under the Policy will ordinarily be paid within seven days
after AUSA Life receives due proof of death of the Surviving Insured, and AUSA
Life receives proof that both Joint Insureds died while the Policy was In
Force, and verifies the validity of the claim. Other benefits will ordinarily
be paid within seven days of receipt of proper written request (including an
election as to tax withholding). Payments may be postponed in certain
circumstances. (See General Provisions - Postponement of Payments, below and
The Fixed Account - Allocations, Transfers and Withdrawals, p. 34.) The
Policyowner may decide the form in which the benefits will be paid. During the
lifetime of either Joint Insured, the Policyowner may arrange for the death
benefits to be paid in a lump sum or under one or more of the settlement
options described below. These choices are also available if the Policy is
surrendered or matures. If no election is made, AUSA Life will pay the benefits
in a lump sum.
When death benefits are payable in a lump sum, the Beneficiary may select
one or more of the settlement options. If death benefits become payable under a
settlement option and the Beneficiary has the right to withdraw the entire
amount, the Beneficiary may name and change contingent Beneficiaries.
SETTLEMENT OPTIONS. Policyowners and Beneficiaries, subject to a prior
election of the Policyowner, may elect to have benefits paid in a lump sum or
in accordance with a variety of settlement options offered under the Policy.
Once a settlement option is in effect, there will no longer be value in the
Series Account or the Fixed Account. AUSA Life may make other settlement
options available on the Fixed Account in the future. The effective date of a
settlement provision will be either the date of surrender or the date of death
of the Surviving Insured. For additional information concerning these options,
see the Policy itself.
OPTION A - PAYMENTS FOR A FIXED PERIOD. The proceeds plus interest will
be paid in equal monthly installments for the period chosen until the fund has
been paid in full. The period chosen may not exceed 20 years.
OPTION B - LIFE INCOME. The proceeds will be paid in equal installments
for the guaranteed payment period elected and continue for the life of the
person on whose life the option is based. Such installments will be payable:
(a) during the lifetime of the payee or (b) during a fixed period certain and
for the remaining lifetime of the payee or (c) until the sum of installments
paid equals the proceeds applied and for the remaining life of the payee.
Guaranteed payment periods may be elected for 10 years, or the period in which
the total payments will equal the amount retained.
OPTION C - JOINT AND SURVIVOR LIFE INCOME. The proceeds will be paid
during the joint lifetime of two persons and continue upon the death of the
first payee for the remaining lifetime of the survivor.
GENERAL PROVISIONS
POSTPONEMENT OF PAYMENTS
GENERAL. Payment of any amount from the Series Account upon complete
surrender, cash withdrawal, Policy loan, or benefits payable at death or
maturity may be postponed whenever: (i) the New York Stock Exchange is closed
other than customary weekend and holiday closing, or trading on the New York
Stock Exchange is restricted as determined by the Commission; (ii) the
Commission by order permits postponement for the protection of Policyowners; or
(iii) an emergency exists, as determined by the Commission, as a result of
which disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the Series Account's net
assets. Transfers may also be postponed under these circumstances. For
restrictions applicable to payments from the Fixed Account, see The Fixed
Account - Allocations, Transfers and Withdrawals, p. 34.
PAYMENT BY CHECK. Payments under the Policy of any amounts derived from
premiums paid by check or bank draft
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may be delayed until such time as the check or bank draft has cleared the
Policyowner's bank.
THE CONTRACT
The Policy and attached copy of the application and any supplemental
applications are the entire contract. Only statements in the application and
any supplemental applications can be used to void the Policy or defend a claim.
The statements are considered representations and not warranties. No Policy
provision can be waived or changed except by endorsement. Only the President or
Secretary of AUSA Life can agree to change or waive any provisions of the
Policy.
SUICIDE
If either Joint Insured, while sane or insane, commits suicide within two
years from the Policy Date or two years from the effective date of any
reinstatement of a Policy, the Policy will terminate, and AUSA Life's total
liability, including all riders attached to the Policy, will be limited to the
total premiums paid within such two year period, less any loan and any prior
withdrawals during such period. In that event, such proceeds will be payable to
the Policyowner, if surviving, otherwise to the Policyowner's estate. No other
death benefit will be payable.
INCONTESTABILITY
AUSA Life cannot contest the Policy as to the initial Specified Amount
after it has been In Force while both Joint Insureds are still alive, for two
years from the Policy Date. At the end of the second Policy year, AUSA Life
will send the Policyowner a notice requesting to know whether either Joint
Insured has died. Failure to notify AUSA Life that a Joint Insured has died
will not avoid a contest, if AUSA Life has a basis to contest, even if the
Policy is still In Force. If a lapsed Policy is reinstated, a new two year
contestability period (apart from any remaining contestability period) will
apply from the date of the application for reinstatement and will apply only to
statements made in the application for reinstatement.
CHANGE OF OWNER OR BENEFICIARY
The Beneficiary, as named in the Policy application or subsequently
changed, will receive the Policy benefits at the Surviving Insured's death. If
the named Beneficiary dies before the Surviving Insured, the contingent
Beneficiary, if named, becomes the Beneficiary. If no Beneficiary survives the
Surviving Insured, the benefits payable at the Surviving Insured's death will
be paid to the Policyowner or the Policyowner's estate. As long as the Policy
is In Force, the Policyowner or Beneficiary may be changed by written request
from the Policyowner in a form acceptable to AUSA Life. The Policy need not be
returned unless requested by AUSA Life. The change will take effect as of the
date the request is signed, regardless of whether either or both Joint Insureds
are living when the request is received by AUSA Life. AUSA Life will not,
however, be liable for any payment made or action taken before receipt of the
request.
ASSIGNMENT
The Policy may be assigned by the Policyowner. AUSA Life will not be
bound by the assignment until a written copy has been received at its Office
and will not be liable with respect to any payment made prior to receipt. AUSA
Life assumes no responsibility for determining whether an assignment is valid
or the extent of the assignee's interest.
MISSTATEMENT OF AGE OR SEX
If the age or sex of either Joint Insured has been misstated, the death
benefit will be adjusted based on what the cost of insurance charge for the
most recent monthly deduction would have purchased based on the correct age and
sex.
REPORTS AND RECORDS
AUSA Life will maintain all records relating to the Series Account and
the Fixed Account. AUSA Life will mail to each Policyowner, at the last known
address of record, reports required by applicable laws and or regulations.
AUSA Life will send Policyowners written confirmation within seven days
of the following transactions: unplanned and certain planned premium payments,
Cash Value transfers, change in death benefit option or Specified Amount, total
surrender or cash withdrawals, and Policy loans or repayments. AUSA Life will
also send each Policyowner an annual statement at the end of the Policy year
showing for the year, among other things, the month and amount of each: premium
payment made, monthly deduction, transfer, cash withdrawal and Policy loan or
repayment. The annual statement will also show Policy year-end Net Surrender
Value, death benefit and Policy loan value, as well as other Policy activity
during the year.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more of the following optional
insurance benefits may be added to a Policy by rider. The cost of any optional
insurance benefits, including any applicable charge to provide a death benefit
guarantee, if any, for the optional insurance benefit until the No Lapse Date,
will be deducted as part of the monthly deduction. (See Charges and Deductions
- - Optional Cash Value Charges, p. 28.)
JOINT INSURED TERM RIDER: Provides the payment of the face amount of the
rider to the Beneficiary for the rider upon receipt of due proof that both
Joint Insureds died while the rider was In Force. The cost of insurance rates
for this rider increase each year.
INDIVIDUAL INSURED RIDER: Provides additional life insurance on the life
of either Joint Insured, and for the payment of the face amount of the rider to
the Beneficiary for the rider upon receipt by AUSA Life of written notice that
the Insured's death occurred while the rider was In Force. On any Monthiversary
while the rider is In Force, the Policyowner may exchange the rider without
evidence of insurability for a new policy on the Insured's life. Such new
policy will be issued upon written request subject to the following: (a) the
rider has not reached the Anniversary nearest the Insured's
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70th birthday; (b) the new policy is on any permanent plan of insurance then
offered by AUSA Life; (c) the amount of insurance upon conversion will equal
the face amount then In Force under the rider; and (d) the payment of the
premium based on the Insured's rate class under the rider.
WEALTH PROTECTOR RIDER: Provides the payment of the face amount of the
rider to the Beneficiary for the rider upon receipt of due proof that both
Joint Insureds died while the rider was In Force. The rider has no conversion
or exchange privilege. The rider terminates at the earlier of (a) the date the
Policy terminates, (b) the fourth Anniversary of the Policy, or (c) the
Monthiversary on which the rider is terminated by written notice from the
Policyowner to AUSA Life. The cost of insurance rates for this rider do not
increase while the rider is In Force.
THE FIXED ACCOUNT
A Policyowner may allocate Net Premiums and transfer Cash Value to the
Fixed Account, which is part of AUSA Life's General Account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and neither the Fixed Account
nor the General Account has been registered as an investment company under the
1940 Act. Accordingly, neither the Fixed Account, the General Account nor any
interests therein are generally subject to the provisions of these acts and
AUSA Life has been advised that the staff of the Commission has not reviewed
the disclosures in this Prospectus relating to the Fixed Account. Disclosures
regarding the Fixed Account may, however, be subject to certain generally
applicable provisions of the Federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
The portion of the Cash Value allocated to the Fixed Account (the "Fixed
Account Value") will be credited with rates of interest, as described below.
Because the Fixed Account Value becomes part of AUSA Life's General Account,
AUSA Life assumes the risk of investment gain or loss on this amount. All
assets in the General Account are subject to AUSA Life's general liabilities
from business operations.
FIXED ACCOUNT VALUE
At the end of any Valuation Period, the Fixed Account Value is equal to:
1. The sum of all Net Premium payments allocated to the Fixed Account;
plus
2. Any amounts transferred from a Sub-Account to the Fixed Account; plus
3. Total interest credited to the Fixed Account; minus
4. Any amounts charged to pay for monthly deductions as they are due;
minus
5. Any cash withdrawals or surrenders from the Fixed Account; minus
6. Any amounts transferred to a Sub-Account from the Fixed Account.
MINIMUM GUARANTEED AND CURRENT INTEREST RATES
The Fixed Account Value, including the Loan Reserve, is guaranteed to
accumulate at a minimum effective annual interest rate of 4%. AUSA Life
presently credits the Fixed Account Value with current rates in excess of the
minimum guarantee but it is not obligated to do so. These current interest
rates are influenced by, but do not necessarily correspond to, prevailing
general market interest rates. Because AUSA Life, at its sole discretion,
anticipates changing the current interest rate from time to time, different
allocations to and from the Fixed Account Value will be credited different
current interest rates.
AUSA Life further guarantees that when a higher current interest rate is
declared on an allocation to the Fixed Account, that interest rate will be
guaranteed on such allocation for at least a one year period (the "Guarantee
Period"), unless the Cash Value associated with an allocation has been
transferred to the Loan Reserve. AUSA Life reserves the right to apply a
different current interest rate to that part of the Cash Value equal to the
Loan Reserve. At the end of the Guarantee Period, AUSA Life reserves the right
to declare a new current interest rate on such allocation and accrued interest
thereon (which may be a different current interest rate than the current
interest rate on new allocations to the Fixed Account on that date). The rate
declared on such allocation and accrued interest thereon at the end of each
Guarantee Period will be guaranteed again for another Guarantee Period. At the
end of any Guarantee Period, any interest credited on the Policy's Cash Value
in the Fixed Account in excess of the minimum guaranteed rate of 4% per year
will be determined in the sole discretion of AUSA Life. The Policyowner assumes
the risk that interest credited may not exceed the guaranteed minimum rate.
Allocations from the Fixed Account Value to provide: a) cash withdrawal
amounts, b) transfers to the Series Account, or c) monthly deduction charges
are currently, for the purpose of crediting interest, accounted for on a last
in, first out ("LIFO") method.
AUSA Life reserves the right to change the method of crediting interest
from time to time, provided that such changes will not have the effect of
reducing the guaranteed rate of interest below 4% per annum or shorten the
Guarantee Period to less than one year.
ALLOCATIONS, TRANSFERS AND WITHDRAWALS
Net premium payments and transfers to the Fixed Account will be allocated
to the Fixed Account on the first Valuation Date on or following the date AUSA
Life receives the payment or transfer request at its Office, except that any
allocation of Net Premium received prior to the Policy Date will take place on
the Policy Date (or the Record Date, if later).
For transfers from the Fixed Account to a Sub-Account, AUSA Life reserves
the right to require that transfer requests be in writing and received at AUSA
Life's Office within 30 days of a Policy Anniversary. Under the Policy, the
maximum
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amount that may be transferred is limited to the greater of (a) 25% of the
amount in the Fixed Account, or (b) the amount transferred in the prior Policy
year from the Fixed Account, unless AUSA Life consents otherwise. Currently,
AUSA Life allows 100% of the amount in the Fixed Account to be transferred
within 30 days after each Anniversary. The transfer will take place on the day
AUSA Life receives the request. No transfer charge will apply to transfers from
the Fixed Account to a Sub-Account. Amounts may be withdrawn from the Fixed
Account for Cash Withdrawals and Surrenders only upon written request of the
Policyowner and are subject to any applicable requirement for a signature
guarantee. (See Policy Rights - Surrender Privileges, p. 30.) AUSA Life further
reserves the right to defer payment of transfers, Cash Withdrawals, or
Surrenders from the Fixed Account for up to six months. In addition, Policy
provisions relating to transfers, Cash Withdrawals or Surrenders from the
Series Account will also apply to Fixed Account transactions.
DISTRIBUTION OF THE POLICIES
The Policy will be sold by individuals who, in addition to being licensed
as life insurance agents for AUSA Life, are also registered representatives of
ISI, an affiliate of AUSA Life and the principal underwriter of the Policies,
or of broker-dealers who have entered into written sales agreements with the
principal underwriter. ISI is registered with the Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. No amounts have been retained
by ISI for acting as principal underwriter for the Policies. The maximum sales
commission payable to AUSA Life agents during the first Policy year is 65% of
all premium payments up to the "target" premium (which is less than the
Guideline Premium shown on the Policy) and 2.2% of all premium payments in
excess thereof. During the second through the tenth Policy years only, the
maximum sales commission payable is 2.2% of all premium payments. An additional
sales commission of up to 0.10% (ten one-hundredths of one percent) of the
Policy's Cash Value is payable on the fifth Policy Anniversary, and on each
Anniversary thereafter, provided the Policy's Cash Value at such times, minus
any amounts attributable to Policy loans, is at least $10,000. Certain
production, persistency and managerial bonuses may also be paid.
FEDERAL TAX MATTERS
INTRODUCTION
The ultimate effect of Federal income taxes on the Cash Value of a Policy
and on the economic benefit to the Policyowner or Beneficiary depends on AUSA
Life's tax status and upon the tax status of the individual concerned. The
discussion contained herein is general in nature and is not intended as tax
advice. For complete information on Federal and state tax considerations, a
qualified tax adviser should be consulted. No attempt is made to consider any
applicable state or other tax laws. Because the discussion herein is based upon
AUSA Life's understanding of Federal income tax laws as they are currently
interpreted, AUSA Life cannot guarantee the tax status of any Policy. AUSA Life
makes no representations regarding the likelihood of continuation of the
current Federal income tax laws, Treasury Regulations, or of the current
interpretations by the Internal Revenue Service ("IRS"). AUSA Life reserves the
right to make changes to the Policy in order to assure that it will continue to
qualify as life insurance for tax purposes.
TAX CHARGES
At the present time, AUSA Life makes no charge for any Federal, state or
local taxes (other than premium taxes) that the Company incurs that may be
attributable to such Account or to the Policies. AUSA Life, however, reserves
the right in the future to make a charge for any such tax or other economic
burden resulting from the application of the tax laws that it determines to be
properly attributable to the Series Account or to the Policies.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal tax
purposes, a Policy must meet the definition of a life insurance contract which
is set forth in Section 7702 of the Internal Revenue Code of 1986, as amended
(the "Code"). The manner in which Section 7702 should be applied to certain
features of the Policy is not directly addressed by Section 7702. Nevertheless,
AUSA Life believes it is reasonable to conclude that the Policy will meet the
Section 7702 definition of a life insurance contract. In the absence of final
regulations or other pertinent interpretations of Section 7702, however, there
is necessarily some uncertainty as to whether a Policy will meet the statutory
life insurance contract definition, particularly if it insures substandard
risks. If a Policy were determined not to be a life insurance contract for
purposes of Section 7702, such Policy would not provide most of the tax
advantages normally provided by a life insurance contract.
If it is subsequently determined that a Policy does not satisfy Section
7702, AUSA Life will take whatever steps are appropriate and reasonable to
attempt to cause such a Policy to comply with Section 7702, including possibly
refunding any premiums paid that exceed the limitation allowable under Section
7702 (together with interest or other earnings on any such premiums refunded as
required by law). For these reasons, AUSA Life reserves the right to modify the
Policy as necessary to attempt to qualify it as a life insurance contract under
Section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Series Account to be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal tax purposes. The Series Account, through the
Fund, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. sec. 1.817-5, which affect how the Fund's assets may be
invested. AUSA Life believes that the Fund will be operated in compliance with
the requirements prescribed by the Treasury.
In certain circumstances, owners of variable life insurance policies may
be considered the owners, for Federal
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income tax purposes, of the assets of the separate account used to support
their policies. In those circumstances, income and gains from the separate
account assets would be includible in the owner's gross income. The IRS has
stated in published rulings that the owner of a variable life insurance policy
will be considered the owner of separate account assets if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. The Treasury Department also announced, in
connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in
which investor control of the investment of a segregated asset account may
cause the investor (i.e., the policyowner), rather than the insurance company,
to be treated as the owner of the assets in the account." This announcement
also stated that guidance would be issued by way of regulations or rulings on
the "extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, the Policyowner has additional flexibility in allocating premium
payments and Policy values. These differences could result in a Policyowner
being treated as the owner of a pro rata portion of the assets of the Series
Account. In addition, AUSA Life does not know what standards will be set forth,
if any, in the regulations or rulings which the Treasury Department has stated
it expects to issue. AUSA Life therefore reserves the right to modify the
Policy as necessary to attempt to prevent a Policyowner from being considered
the owner of a pro rata share of the asset of the Series Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
1. In general. AUSA Life believes that the proceeds and Cash Value
increases of a Policy should be treated in a manner consistent with a
fixed-benefit life insurance policy for Federal income tax purposes. Thus, the
death benefit under the Policy should be excludable from the gross income of
the Beneficiary under Section 101(a)(1) of the Code.
A change in a Policy's Specified Amount, the payment of an unscheduled
premium, the taking of a Policy loan, a cash withdrawal, a total surrender, a
change of insured, a Policy Lapse with an outstanding indebtedness, a change in
death benefit options, the exchange of a Policy, or the assignment of a Policy
may have tax consequences depending upon the circumstances. In addition,
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend upon the
circumstances of each Policyowner or Beneficiary. A competent tax adviser
should be consulted for further information.
The Policy may also be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if a
Policyowner is contemplating the use of a Policy in any arrangement the value
of which depends in part on its tax consequences, that Policyowner should be
sure to consult a qualified tax adviser regarding the tax attributes of the
particular arrangement.
Generally, the Policyowner will not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, under the Policy until
there is a distribution. The tax consequences of distributions from, and loans
taken from, or secured by, a Policy depend on whether the Policy is classified
as a "modified endowment contract" under Section 7702A. Section 7702A generally
applies to Policies entered into or materially changed after June 20, 1988.
2. Modified Endowment Contracts. A Policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether such a Policy is a modified endowment contract are
extremely complex. In general, however, a Policy will be a modified endowment
contract if the accumulated premiums paid at any time during the first seven
Policy years exceed the sum of the net level premiums which would have been
paid on or before such time if the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. In addition, if a Policy is
"materially changed," it may cause such Policy to be treated as a modified
endowment contract. The material change rules for determining whether a Policy
is a modified endowment contract are also extremely complex. In general,
however, the determination whether a Policy will be a modified endowment
contract after a material change depends upon the relationship of the death
benefit at the time of change to the Cash Value at the time of such change and
the additional premiums paid in the seven Policy years starting with the date
on which the material change occurs.
The manner in which the premium limitation and material change rules
should be applied to certain features of the Policy and its riders is unclear.
Nonetheless, under AUSA Life's current procedures, the Policyowner will be
notified at the time a Policy is issued whether, according to AUSA Life's
calculations, the Policy is or is not classified as a modified endowment
contract based on the premium then received. The Policyowner will also be
notified of the amount of the maximum annual premium which, according to, AUSA
Life's calculations, can be paid without causing a Policy to be classified as a
modified endowment contract.
Due to the Policy's flexibility, classification of a Policy as a modified
endowment contract will depend upon the circumstances of each Policy.
Accordingly, a prospective Policyowner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In
36
<PAGE>
addition, a Policyowner should contact a competent tax adviser before making
any change to, including an exchange of, a Policy to determine whether such
change would cause the Policy (or the new policy in the case of an exchange) to
be treated as a modified endowment contract.
If a Policy becomes a modified endowment contract, distributions that
occur during the Policy year it becomes a modified endowment contract and any
subsequent Policy year will be taxed as distributions from a modified endowment
contract. In addition, distributions from a Policy within two years before it
becomes a modified endowment contract will be taxed in this manner. This means
that a distribution made from a Policy that is not a modified endowment
contract could later become taxable as a distribution from a modified endowment
contract.
3. Distributions from Policies Classified as Modified Endowment
Contracts. Policies classified as modified endowment contracts are subject to
the following tax rules: First, all pre-death distributions from such a Policy
(including distributions upon surrender, distributions made in anticipation of
the Policy becoming a modified endowment contract, and benefits paid at
maturity) are treated as ordinary income subject to tax up to the amount equal
to the excess (if any) of the Cash Value immediately before the distribution
over the investment in the Policy (described below) at such time. Second, loans
taken from, or secured by, such a Policy are treated as distributions from such
a Policy and taxed accordingly. (Unpaid Policy loan interest will be treated as
a loan for these purposes.) Third, a 10% additional income tax is imposed on
the portion of any distribution from, or loan taken from, or secured by, such a
Policy that is included in income except where the distribution or loan is made
on or after the Policyowner attains age 591/2, is attributable to the
Policyowner's becoming disabled, or is part of a series of substantially equal
periodic payments for the life (or life expectancy) of the Policyowner or the
joint lives (or joint life expectancies) of the Policyowner and the
Policyowner's Beneficiary.
4. Distribution from Policies not Classified as Modified Endowment
Contracts. Distributions from a Policy that is not classified as a modified
endowment contract are generally treated as first recovering the investment in
the Policy (described below) and then, only after the return of all such
investment in the Policy, as distributing taxable income. An exception to this
general rule occurs in the case of a cash withdrawal, a decrease in the
Policy's death benefit, or any other change that reduces benefits under the
Policy in the first 15 years after the Policy is issued and results in a cash
distribution to the Policyowner in order for the Policy to continue complying
with the Section 7702 definitional limits. In that case, such distribution will
be taxed in whole or in part as ordinary income (to the extent of any gain in
the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a modified endowment
contract are not treated as distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
Finally, distributions (including distributions upon surrender or lapse)
or loans from, or secured by, a Policy that is not a modified endowment
contract are not subject to the 10% additional income tax.
5. Policy loan interest. Interest paid on a Policy loan generally is not
tax deductible. Therefore, a Policyowner should consult a competent tax advisor
before deducting any Policy loan interest.
6. Investment in the Policy. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy,
minus (ii) the aggregate amount received under the Policy which is excluded
from the gross income of the Policyowner (except that the amount of any loan
from, or secured by, a Policy that is a modified endowment contract, to the
extent such amount is excluded from gross income, will be disregarded), plus
(iii) the amount of any loan from, or secured by, a Policy that is a modified
endowment contract to the extent that such amount is included in the gross
income of the Policyowner.
7. Multiple Policies. All modified endowment contracts that are issued by
AUSA Life (or its affiliates) to the same Policyowner during any calendar year
are treated as one modified endowment contract for purposes of determining the
amount includable in gross income under Section 72(e) of the Code.
8. Tax Treatment of Policy Split. The Policy Split Option permits a
Policy to be split into two other individual life insurance contracts upon the
occurrence of a divorce of the Joint Insureds, certain changes in Federal
estate tax law, or a dissolution of a business partnership of which the
partners are Joint Insureds. (See Policy Rights - Policy Split Option, p. 31.)
A policy split could have adverse tax consequences. For example, it is not
clear whether a policy split will be treated as a nontaxable exchange under
Sections 1031 through 1043 of the Code. If a policy split is not treated as a
nontaxable exchange, a split could result in the recognition of taxable income
in an amount up to any gain in the Policy at the time of the split. In
addition, it is not clear whether the individual policies that result from a
policy split would in all circumstances be treated as life insurance contracts
for Federal income tax purposes and, if so treated, whether the individual
policies would be classified as modified endowment contracts. Before a
Policyowner exercises rights provided by the Policy Split Option, it is
important that he or she consult with a competent tax advisor regarding the
possible consequences of a policy split.
9. Terminal Illness Accelerated Death Benefit Rider. Pursuant to the
recently enacted Health Insurance Portability and Accountability Act of 1996,
AUSA Life believes that for Federal income tax purposes a Single Sum Benefit
payment made under the Terminal Illness Accelerated Death Benefit Rider should
be fully excludable from the gross income of the beneficiary, as long as the
beneficiary is the Insured under the Policy. However, a Policyowner should
consult a qualified tax
37
<PAGE>
advisor about the consequences of adding this Rider to a Policy or requesting a
Single Sum Benefit payment under this Rider.
10. Other Tax Considerations. The transfer of the Policy or the
definition of a beneficiary may have Federal, state and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
the designation as beneficiary of, or the payment of proceeds to, a person who
is assigned to a generation which is two or more generations below the
generation assignment of the Policyowner, may have generation skipping transfer
tax considerations under Section 2601 of the Code.
The individual situation of each Policyowner or beneficiary will
determine the extent, if any, to which Federal, state and local transfer taxes
may be imposed. Consult with your tax adviser for specific information in
connection with these taxes.
EMPLOYMENT-RELATED BENEFIT PLANS
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. The Policy described in this
Prospectus contains guaranteed cost of insurance rates and guaranteed purchase
rates for certain payment options that distinguish between men and women.
Accordingly, employers and employee organizations should consider, in
consultation with legal counsel, the impact of Norris, and Title VII generally,
on any employment-related insurance or benefit program for which a Policy may
be purchased.
SAFEKEEPING OF THE
SERIES ACCOUNT'S ASSETS
AUSA Life holds the assets of the Series Account. The assets are kept
physically segregated and held separate and apart from the General Account.
AUSA Life maintains records of all purchases and redemptions of Fund shares by
each of the Sub-Accounts. Additional protection for the assets of the Series
Account is provided by a blanket bond issued to AEGON U.S. Holding Corporation
("AEGON U.S.") in the amount of $5 million (subject to a $1 million
deductible), covering all of the employees of AEGON U.S. and its affiliates,
including AUSA Life. A Stockbrokers Blanket Bond, issued to AEGON U.S.A.
Securities, Inc. provides additional fidelity coverage to a limit of $12
million, subject to a $50,000 deductible.
VOTING RIGHTS OF THE SERIES ACCOUNT
To the extent required by law, AUSA Life will vote the Fund shares held
in the Series Account at shareholder meetings of the Fund in accordance with
instructions received from persons having voting interests in the corresponding
Sub-Accounts of the Series Account. Except as required by the 1940 Act, the
Fund does not hold regular or special shareholder meetings. If 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 Fund shares in its own right, it may elect to do so.
The number of votes which a Policyowner has the right to instruct will be
calculated separately for each Sub-Account. The number of votes which each
Policyowner has the right to instruct will be determined by dividing a Policy's
Cash Value in that Sub-Account by $100. Fractional shares will be counted. The
number of votes of the Portfolio which the Policyowner has the right to
instruct will be determined as of the date coincident with the date established
by that Portfolio for determining shareholders eligible to vote at the meeting
of the Fund. Voting instructions will be solicited by written communications
prior to such meeting in accordance with procedures established by the Fund.
AUSA Life will vote Fund shares as to which no timely instructions are
received and Fund shares which are not attributable to Policyowners in
proportion to the voting instructions which are received with respect to all
Policies participating in that Portfolio. Voting instructions to abstain on any
item to be voted upon will reduce the votes eligible to be cast by AUSA Life.
Each person having a voting interest in a Sub-Account will receive proxy
materials, reports and other materials relating to the appropriate Portfolio.
DISREGARD OF VOTING INSTRUCTIONS. AUSA Life may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
sub-classification or investment objective of the Fund or one or more of its
Portfolios or to approve or disapprove an investment advisory contract for a
Portfolio of the Fund. In addition, AUSA Life itself may disregard voting
instructions in favor of changes initiated by a Policyowner in the investment
policy or the investment adviser of a Portfolio of the Fund if AUSA Life
reasonably disapproves of such changes. A change would be disapproved only if
the proposed change is contrary to state law or prohibited by state regulatory
authorities or AUSA Life determined that the change would have an adverse
effect on its General Account in that the proposed investment policy for a
Portfolio may result in overly speculative or unsound investments. In the event
AUSA Life does disregard voting instructions, a summary of that action and the
reasons for such action will be included in the next annual report to
Policyowners.
STATE REGULATION OF AUSA LIFE
As a life insurance company organized and operated under New York law,
AUSA Life is subject to provisions governing such companies and to regulation
by the New York Superintendant of Insurance.
AUSA Life's books and Accounts are subject to review and examination by
the New York Insurance Department at all times and a full examination of its
operations is conducted by the National Association of Insurance Commissioners
at least once every three years.
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<PAGE>
REINSURANCE
AUSA Life intends to reinsure a portion of the risks assumed under the
Policies.
EXECUTIVE OFFICERS AND DIRECTORS
OF AUSA LIFE
LARRY G. BROWN, CHAIRMAN OF THE BOARD, Senior Vice President, Group General
Counsel (Asset Accumulation Group) (January 1995 - present), Western
Reserve Life Assurance Co. of Ohio, 201 Highland Avenue, Largo, Florida
33770. Senior Vice President, General Counsel and Secretary (January, 1989
- January, 1995, AEGON USA, Inc., 1111 North Charles Street, Baltimore,
Maryland 21201.
WILLIAM BROWN, JR., DIRECTOR, Management Consultant (1992 - present),
Brownstone Management Consultants, Inc., 14 Windward Avenue, White Plains,
NY 10605; Vice President (1987 - 1992), Mututal of New York, Purchase, New
York.
WILLIAM L. BUSLER, DIRECTOR, President, Annuity Division (1980 - present),
AEGON USA, Inc., 4333 Edgewood Rd., N.E., Cedar Rapids, Iowa 52499.
JACK R. DYKHOUSE, DIRECTOR, Senior Vice President (1976 - present), AEGON USA,
INC., 9151 Grapevine Highway, North Richland Hills, Texas 76180.
STEVEN E. FRUSHTICK, DIRECTOR, Partner (1961 - present) Wiener, Frushtick &
Straub, 500 Fifth Avenue New York, NY 10110.
VICE ADMIRAL CARL T. HANSON, DIRECTOR, Retired (Ocotber, 1993 - present),
Director (November, 1982 - present), President and Chief Executive Officer
(November, 1982 - October, 1993), National Multiple Sclerosis Society, 900
Birdseye Road, P. O. Box 112 Orient, NY 11957-0112.
B. LARRY JENKINS, DIRECTOR, Chairman and President (September, 1982 - present),
Monumental Life Insurance Company, 2 East Chase Street, Baltimore,
Maryland 21202.
VERA F. MIHAIC, DIRECTOR AND VICE PRESIDENT, Vice President and Director (July
1, 1996 - present), AUSA Life Insurance Company, Inc., 666 Fifth Avenue,
New York, NY 10103-0001, Vice President and Director (1987 - June 30,
1996) International Life Investors Insurance Company, New York, New York.
PETER P. POST, DIRECTOR, Owner and President (December, 1992 - present),
Emmerling Post, Inc., 415 Madison Avenue, New York, New York 10017;
President and Director (January, 1989 - December, 1992), Lintas: Marketing
Communications, New York, New York.
TOM A. SCHLOSSBERG, DIRECTOR AND PRESIDENT, President (September, 1993 -
present), Diversified Investment Advisors, Inc., 4 Manhattanville Road,
Purchase, NY 10577; Executive Vice President (1983 - September 1993),
Mutual of New York, Purchase, New York.
COLETTE F. VARGAS, DIRECTOR AND CHIEF ACTUARY, Actuary (September, 1993 -
present), Diversified Investment Advisors, 4 Manhattanville Road,
Purchase, New York 10577; Actuary (1982 - September, 1993) Mutual of New
York, Purchase, New York.
COR H. VERHAGEN, DIRECTOR, President and Director (1990 - present), CORPA
Reinsurance Co. of America, 51 JFK Parkway, Short Hills, New Jersey 07078;
President (November 1990 - June 30, 1996), International Life Investors
Insurance Company, New York, New York; Vice President (November, 1993 -
present), AEGON USA, Inc., Baltimore, Maryland; Vice President (July, 1985
- present), AEGON US Holding Company, Short Hills, New Jersey.
E. KIRBY WARREN, DIRECTOR, Professor (January, 1961 - present), Columbia
University School of Business, 725 Uris Hall, 116th Street and Broadway,
New York, New York 10025.
PATRICK S. BAIRD, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, Senior Vice
President and Chief Financial Officer (May, 1992 - present), Vice
President and Chief Tax Officer (November, 1980 - May, 1992), AEGON USA,
Inc., 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499.
BRENDA CLANCY, TREASURER, Senior Vice President and Treasurer (August, 1997 -
present), AEGON USA, Inc., 4333 Edgewood Road NE, Cedar Rapids, Iowa
52499; Vice President and Controller (April, 1992 - August, 1997), AEGON
USA, Inc., Cedar Rapids, Iowa.
PATRICK E. FALCONIO, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER, Senior
Vice President and Chief Investment Officer (February, 1989 - present),
AEGON USA, Inc. 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
CHRISTOPHER GARRETT, ACTUARY, Associate Actuary (1983 - present), AEGON USA,
Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
ROBERT J. KONTZ, CONTROLLER, Vice President and Controller (1990 - present),
AEGON USA, Inc., 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499; Vice
President - Corporate Accounting (1982 - 1989), Life Investors, Inc.,
Cedar Rapids, Iowa.
CRAIG D. VERMIE, SECRETARY, Vice President and General Counsel (September, 1986
- present), AEGON USA, Inc., 4333 Edgewood Road NE, Cedar Rapids, Iowa
52499.
LEGAL MATTERS
Sutherland, Asbill & Brennan LLP, Washington, D.C., has provided advice
on certain legal matters concerning Federal securities laws in connection with
the Policies. All matters of New York law pertaining to the Policy, including
the validity of the Policy and AUSA Life's right to issue the Policy under New
York Insurance Law, have been passed
39
<PAGE>
upon by Robert F. Colby, Esq., Vice President and Assistant Secretary of AUSA
Life.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Series Account is a party or
to which the assets of the Series Account are subject. AUSA Life is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Series Account.
EXPERTS
There are no financial statements of AUSA Series Life Account because the
Series Account has not yet commenced operations as of the date of this
Prospectus.
The financial statements of AUSA Life Life Insurance Company, Inc. at
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, appearing in this Prospectus have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein. The financial statements referred to above are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Alan
Yaeger as stated in the opinion filed as an exhibit to the registration
statement.
ADDITIONAL 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
Policy offered hereby. This Prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Series Account, AUSA Life and the Policy offered
hereby. Statements contained in this Prospectus as to the contents of the
Policy and other legal instruments are summaries. For a complete statement of
the terms thereof reference is made to such instruments as filed.
INFORMATION ABOUT AUSA LIFE'S
FINANCIAL STATEMENTS
The financial statements of AUSA Life which are included in this
Prospectus (see p. 70) 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
Series Account.
Financial statements for AUSA Life for the years ended December 31, 1997,
1996 and 1995, have been prepared on the basis of statutory accounting
principles, rather than generally accepted accounting principles ("GAAP").
40
<PAGE>
APPENDIX A
ILLUSTRATION OF BENEFITS
The tables in Appendix A illustrate the way in which a Policy operates.
They show how the death benefit, Cash Value and Net Surrender Value of a Policy
issued to Joint Insureds of given ages and a given premium could vary over an
extended period of time assuming hypothetical gross rates of return equivalent
to constant after tax annual rates of 0%, 6% and 12%. The tables illustrate the
Policy values that would result based on the assumptions that the premium is
paid as indicated, that the Policyowner has not requested a decrease in the
Specified Amount of the Policy, that no cash withdrawals or Policy loans have
been made, and that less than twelve transfers per year have been made.
The death benefits, Cash Values and Net Surrender Values under a Policy
would be different from those shown if the actual rate of return averages 0%,
6% or 12% over a period of years, but fluctuated above and below those averages
for individual Policy years. They would also differ if any Policy loans were
made during the period of time illustrated.
The illustration on p. 42 is based on a Policy for Joint Insureds who are
a 55 year old male and a 55 year old female, both in the Select rate class,
annual premiums of $4,000, a $250,000 Specified Amount and death benefit Option
B. The illustrations on that page also assume cost of insurance charges based
on AUSA Life's CURRENT cost of insurance rates.
The illustration on p. 43 is based on the same factors as those on p. 42,
except that cost of insurance charges are based on the GUARANTEED cost of
insurance rates (based on the 1980 Commissioners Standard Ordinary Mortality
Table).
The amounts shown for the death benefits, Cash Values and Net Surrender
Values take into account (1) the daily charge for assuming mortality and
expense risks assessed against each Sub-Account which is equivalent to an
annual charge of 0.90% of the average net assets of the Sub-Accounts; (2)
estimated daily expenses equivalent to an effective average annual expense
level of % of the average daily net assets of the Portfolios of the Fund;
and (3) all applicable premium expense charges and Cash Value charges. The
% average Portfolio expense level assumes an equal allocation of amounts
among the fifteen Sub-Accounts and is based on an average % investment
advisory fee and estimated 1997 average normal operating expenses of % for
each of the Portfolios in operation during 1997. Calculation of the average
annual expense level utilized annualized actual audited expenses incurred
during 1997 as adjusted for anticipated expense modifications incurring in 1998
for the Money Market (0. %), Bond (0. %), Growth (0. %), Strategic Total
Return ( %), Global ( %), Emerging Growth ( %), Aggressive Growth
( %), Balanced ( %), Growth & Income ( %), C.A.S.E. Growth ( %),
and Tactical Asset Allocation ( %), Value Equity (0. %), U.S. Equity
(0. %), and International Equity (0. %). In addition, because the Third
Avenue Value Portfolio had not commenced operations as of December 31, 1997,
the estimated average annual Portfolio expense level reflects estimated
expenses for this Portfolio at 1.00%, for 1998. WRL Management has undertaken
until to pay expenses to the extent normal operating expenses of a
Portfolio exceed a stated percentage of the Portfolio's average daily net
assets. Taking into account the assumed charges of %, the gross annual
investment return rates of 0%, 6% and 12% are equivalent to net annual
investment return rates of %, %, and %.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the Series Account because AUSA Life is not
currently making such charges. In order to produce after tax returns of 0%, 6%
or 12% if such charges are made in the future, the Series Account would have to
earn a sufficient amount in excess of 0%, 6% or 12% to cover any tax charges.
(See Charges Against the Series Account - Taxes, p. 28.)
The "Premium Accumulated at 5%" column of each table shows the amount
which would accumulate if an amount equal to the premium were invested to earn
interest at 5% per year, compounded annually.
AUSA Life will furnish, upon request, a comparable illustration
reflecting each proposed Joint Insured's age, sex, risk classification and
desired plan features.
41
<PAGE>
AUSA LIFE LIFE INSURANCE COMPANY, INC.
MALE AND FEMALE BOTH ISSUE AGE 55
$4,000 ANNUAL PREMIUM FOR NON-SMOKER SELECT RATE CLASS
$250,000 SPECIFIED AMOUNT
OPTION B - INCREASING DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
PREMIUMS NET
ACCUMULATED DEATH BENEFIT SURRENDER VALUE CASH VALUE
END OF AT 5% ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY INTEREST GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
YEAR PER YEAR RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
- -------- ------------- ----------------------------- ------------------------------ -----------------------------
0% 6% 12% 0% 6% 12% 0% 6% 12%
--------- --------- --------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
25
30
35
40
45
<CAPTION>
INTERNAL RATE OF
INTERNAL RATE OF RETURN ON NET INTERNAL RATE OF
RETURN ON CASH SURRENDER VALUE RETURN ON
VALUE ASSUMING ASSUMING DEATH BENEFIT
END OF HYPOTHETICAL HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
YEAR RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
- -------- ----------------------------- ----------------------------- -----------------------------
0% 6% 12% 0% 6% 12% 0% 6% 12%
--------- --------- --------- --------- --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
25
30
35
40
45
</TABLE>
* In the absence of an additional payment, the Policy would lapse.
The Hypothetical Investment Rates of Return Shown Above and Elsewhere in this
Prospectus Are Illustrative Only and Should Not Be Deemed A Representation of
Past or Future Investment Rates of Return.
Actual Investment Rates of Return May be More or Less Than Those Shown And Will
Depend on a Number of Factors, Including the Investment Allocations By An Owner
and Different Investment Rates of Return For the Fund. The Death Benefit, Cash
Value and Net Surrender Value for a Policy Would be Different From Those Shown
if the Actual Investment Rates of Return Averaged 0%, 6%, and 12% Over a Period
of Years, But Fluctuated Above or Below that Average for Individual Policy
Years. No Representation Can Be Made by AUSA Life or the Fund that These
Hypothetical Investment Rates of Return Can Be Achieved For Any One Year or
Sustained Over Any Period of Time. This Illustration Must Be Preceded or
Accompanied By A Current Prospectus.
42
<PAGE>
AUSA LIFE INSURANCE COMPANY, INC.
MALE AND FEMALE BOTH ISSUE AGE 55
$4,000 ANNUAL PREMIUM FOR NON-SMOKER SELECT RATE CLASS
$250,000 SPECIFIED AMOUNT
OPTION B - INCREASING DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
PREMIUMS NET
ACCUMULATED DEATH BENEFIT SURRENDER VALUE CASH VALUE
END OF AT 5% ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY INTEREST GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
YEAR PER YEAR RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
- -------- ------------- ------------------------------ ----------------------------- -----------------------------
0% 6% 12% 0% 6% 12% 0% 6% 12%
--------- --------- ---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
25
30
35
40
45
<CAPTION>
INTERNAL RATE OF
INTERNAL RATE OF RETURN ON NET INTERNAL RATE OF
RETURN ON CASH SURRENDER VALUE RETURN ON
VALUE ASSUMING ASSUMING DEATH BENEFIT
END OF HYPOTHETICAL HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
YEAR RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
- -------- ------------------------------ ----------------------------- ----------------------------
0% 6% 12% 0% 6% 12% 0% 6% 12%
--------- --------- ---------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
25
30
35
40
45
</TABLE>
* In the absence of an additional payment, the Policy would lapse.
The Hypothetical Investment Rates of Return Shown Above and Elsewhere in this
Prospectus Are Illustrative Only and Should Not Be Deemed A Representation of
Past or Future Investment Rates of Return.
Actual Investment Rates of Return May be More or Less Than Those Shown And Will
Depend on a Number of Factors, Including the Investment Allocations By An Owner
and Different Investment Rates of Return For the Fund. The Death Benefit, Cash
Value and Net Surrender Value for a Policy Would be Different From Those Shown
if the Actual Investment Rates of Return Averaged 0%, 6%, and 12% Over a Period
of Years, But Fluctuated Above or Below that Average for Individual Policy
Years. No Representation Can Be Made by AUSA Life or the Fund that These
Hypothetical Investment Rates of Return Can Be Achieved For Any One Year or
Sustained Over Any Period of Time. This Illustration Must Be Preceded or
Accompanied By A Current Prospectus.
43
<PAGE>
APPENDIX B
LONG TERM MARKET TRENDS
The information below is a record of the average annual returns of common
stock, high grade corporate bonds and 30-day U.S. Treasury bills over 20 year
holding periods.* The average annual returns assume the reinvestment of
dividends, capital gains and interest. This is a historical record and is not
intended as a projection of future performance. Charges associated with a
variable life insurance policy are not reflected.
The data indicates that, historically, the investment performance of
common stocks over long periods of time has been positive and has generally
been superior to that of long-term, high grade debt securities. Common stocks
have, however, been subject to more dramatic market adjustments over short
periods of time. These trends indicate the potential advantages of holding a
variable life insurance policy for a long period of time.
The following chart illustrates the average annual returns of the
Standard & Poor's Index of 500 Common Stocks ("S&P 500 Stock Index") for each
of the 20 year periods shown. These returns are compared to the average annual
returns of high grade corporate bonds and U.S. Treasury bills for the same
periods. (The 20-year periods selected for the chart begin in 1936 and have
ending periods at five year intervals.)
AVERAGE ANNUAL RETURNS
TWENTY YEAR HOLDING PERIODS
[GRAPHIC OMITTED]
* Source: (c) Stocks, Bonds, Bills and Inflation 1997 Yearbook/trademark/,
Ibbotson Associates, Chicago (annually updates work by Roger G. Ibbotson and
Rex A. Sinquefield). Used with permission. All rights reserved.
44
<PAGE>
Over the 52 20-year time periods beginning in 1927 and ending in 1996
(i.e. 1927-1946, 1928-1947, and so on through 1977-1996):
-- The average annual return of common stocks was superior to that of
high grade, long-term corporate bonds in 48 of the 52 periods.
-- The average annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 52 periods.
-- Common stock average annual returns exceeded the average annual rate
of inflation in each of the 52 periods.
From 1927 through 1996 the average annual return for common stocks was
10.7%, compared to 5.6% for high grade, long-term corporate bonds, 3.7% for
U.S. Treasury bills and 3.1% for the Consumer Price Index.
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index, with dividends reinvested, over one-year, five-year,
ten-year and twenty-year periods beginning in 1927 and ending 1996.
The chart shows that, historically, the longer that a portfolio matching
the S&P 500 Stock Index was held, the less likely was the chance of a loss.
Conversely, the shorter the holding period of such a portfolio, the more likely
was the chance of a loss. The chart also shows that shorter term results tend
to be more extreme than longer term results.
The chart is not a projection or representation of future stock market
results. It cannot be taken as representative of the performance of any one
fund. Rather it shows the historic performance of a broad index of stocks.
---------------------
COMPOUND ANNUAL RATES OF RETURN BY DECADE
<TABLE>
<CAPTION>
1920s* 1930s 1940s 1950s 1960s 1970s 1980s 1990s** 1987-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large Company .........
Small Company .........
Long-Term Corp. ......
Long-Term Govt. ......
Inter-Term Govt. ......
Treasury Bills .........
Inflation ............
</TABLE>
- ----------------
* Based on the period 1926-1929.
** Based on the period 1990-1996.
Source: (c) Stocks, Bonds, Bills and Inflation 1998 Yearbook/trademark/,
Ibbotson Associates, Inc., Chicago (annually updates work by Roger G. Ibbotson
and Rex A. Sinquefield). Used with permission. All rights reserved.
THE AUSA FREEDOM WEALTH PROTECTORSM
AND THE "DOLLAR COST AVERAGING" INVESTMENT METHOD
As the Long Term Market Trends graph indicates, the investment
performance of many common stocks has generally been positive over certain
relatively long periods. Common stocks have, however, also been subject to
market declines, often dramatic ones, and general volatility of prices over
shorter time periods. The price fluctuations of common stocks has historically
been greater than that of high grade debt securities.
The relative volatility of common stock prices as compared with prices of
high grade debt instruments offers both advantages and disadvantages to
investors. Unfortunately, many investors who otherwise might be interested in
common stocks see only the disadvantages and not the advantages of stock price
fluctuation. The primary disadvantage, of course, is that price declines can be
prolonged and substantial, and when this occurs, investors cannot liquidate
their investments without realizing losses. Price declines, however, also offer
investors important opportunities.
Opportunity arises from the fact that investors can purchase more common
stock for the same amount of money than they would before prices declined.
Investors may take advantage of this if they remain willing to continue
investing in both rising and falling markets. The dollar cost averaging method
of investing demonstrates this.
In this method of investing:
/bullet/ Relatively constant dollar amounts are invested at regular
intervals (monthly, quarterly, or annually),
/bullet/ Stock Market fluctuations, especially the savings on purchases
from price declines, are exploited for the investor's benefit.
HOW DOLLAR COST AVERAGING WORKS
<TABLE>
<CAPTION>
Investments at Common Stock Shares
Regular Intervals Market Price Purchased
- ------------------- -------------- ----------
<S> <C> <C>
$150 $20 7.5
150 15 10.0
150 10 15.0
150 5 30.0
150 10 15.0
150 15 10.0
------------ -----
$900 87.5
</TABLE>
45
<PAGE>
<TABLE>
<S> <C>
Total Value of 87.5 shares @ $15/share $ 1,312.50
Less Investment made (900.00)
-----------
Gain/Profit $ 412.50
</TABLE>
Though the market price has not returned to the initial high of $20 per
share, dollar cost averaging has permitted the investor to purchase more shares
at a savings and thus realize a significant gain. Obviously, the dollar cost
averaging method only works if the investor continues to invest relatively
constant amounts over a long period of time.
This plan of investing does not assure a profit or protect against a loss
in declining markets; it does allow investors to take advantage of market
fluctuations. Since the success of this strategy is dependent on systematic
investing, purchasers should consider their ability to sustain their payments
through all periods of market fluctuations.
How does the dollar cost averaging method relate to the AUSA Freedom
Wealth ProtectorSM? A Policyowner may invest his or her Net Premium in a
Sub-Account, and although a Policy's value in a Sub-Account or Sub-Accounts is
affected by several factors other than investment experience (e.g., Cash Value
charges and charges against the Series Account), the dollar cost averaging
method can be generally applied to the Policy to the extent that the
Policyowner pays a Planned Periodic Premium on a regular basis and he or she
allocates Net Premium resulting from those Planned Periodic Premiums to the
Sub-Accounts in relatively constant amounts.
INDEX TO FINANCIAL STATEMENTS
There are no financial statements for the Series Account as of the date of this
Prospectus.
AUSA Life Insurance Company, Inc.:
Report of Independent Auditors dated , 1998
Statutory-basis balance sheets at December 31, 1997 and 1996
Statutory-basis statements of operations for the years ended December 31,
1997, 1996 and 1995
Statutory-basis statements of changes in capital and surplus for the
years ended December 31, 1997, 1996 and 1995
Statutory-basis statements of cash flows for the years ended December 31,
1997, 1996 and 1995
Notes to Statutory-basis financial statements
Statutory-basis financial statement schedules
WRL -05/98
46
<PAGE>
PART II.
OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
AUSA Life Insurance Company, Inc. ("AUSA Life") hereby represents that the
fees and charges deducted under the Contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by AUSA Life.
STATEMENT WITH RESPECT TO INDEMNIFICATION
Provisions exist under the New York Law, the Articles of Incorporation of
AUSA Life and the Amended and Restated By-Laws of AUSA Life whereby AUSA Life
may indemnify certain persons against certain payments incurred by such persons.
The following excerpts contain the substance of these provisions.
NEW YORK BUSINESS CORPORATION LAW
SECTION 722. AUTHORIZATION FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) A corporation may indemnify any person made, or threatened to be made, a
party to an action or proceeding (other than one by or in the right of the
corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation or that he had reasonable
cause to believe that his conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened to be made, a
party to an action by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he, this testator or intestate, is or
was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of any other corporation of
any type or kind, domestic or foreign, of any partnership, joint venture, trust,
employee benefit plan or other enterprise, against amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him
II-1
<PAGE>
in connection with the defense or settlement of such action, or in connection
with an appeal therein, if such director or officer acted in good faith, for a
purpose which he reasonably believed to be in, or, in the case of service for
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise, not opposed to, the best interests of the corporation,
except that no indemnification under this paragraph shall be made in respect of
(1) a threatened action, or a pending action which is settled or otherwise
disposed of, or (2) any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which the action was brought, or, if no action was
brought, any court of competent jurisdiction, determines upon application that,
in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnify for such portion of the settlement amount and
expenses as the court deems proper.
(d) For the purpose of this section, a corporation shall be deemed to have
requested a person to serve an employee benefit plan where the performance by
such person of his duties to the corporation also imposes duties on, or
otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines; and
action taken or omitted by a person with respect to an employee benefit plan in
the performance of such person's duties for a purpose reasonably believed by
such person to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to the best
interests of the corporation.
AMENDED AND RESTATED BYLAWS
ARTICLE II
DIRECTORS AND THEIR MEETINGS
SEC. 7. Any person made a party to any action, suit, or proceeding by
reason of the fact that he, his testator or intestate, is or was a director,
officer, or employee of the Company or of any Company which he served as such at
the request of the Company, shall be indemnified by the Company against the
reasonable expenses, including attorney's fees, actually and necessarily
incurred by him in connection with the defense of such action, suit or
proceeding, or in connection with appeal therein, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
officer, Director, or employee is liable for negligence or misconduct in the
performance of his duties. The Company may also reimburse to any Director,
officer, or employee the reasonable costs of settlement of any such action,
suit, or proceeding, if it shall be found by a majority of a committee composed
of the Directors not involved in the matter of controversy (whether or not a
quorum) that it was in the interest of the Company that such settlement be made
and that such Director, officer or employee was not guilty of negligence or
misconduct. The amount to be paid, in each instance, pursuant to action of the
Board of Directors, and the stockholders shall be given notice thereof in
accordance with applicable provisions of law. Such right of indemnification
shall not be deemed exclusive of any other rights to which such Director,
officer, or employee may be entitled.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant 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
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant 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.
II-2
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet
The Prospectus, consisting of __ pages
The undertaking to file reports
Representation Pursuant to Section 26(e)(2)(A)
Statement with respect to indemnification
Rule 484 undertaking
The signatures
Written consent of the following persons:
(a) Alan Yaeger
(b) Robert F. Colby, Esq.
(c) Sutherland, Asbill & Brennan LLP
(d) Ernst & Young LLP
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of AUSA Life establishing the
Series Account
(2) Not Applicable
(3) Distribution of Policies:
(a) Form of Participation Agreement Among AUSA Life Insurance
Company, Inc., Western Reserve Life Assurance Co. of Ohio
and WRL Series Fund, Inc. (1)
(b)(i) Form of Master Service and Distribution Compliance
Agreement
(b)(ii) Form of Broker/Dealer Supervisory and Service Agreement
(c) See Exhibit 1.A.(3)(b)(ii)
(4) Not Applicable
(5) (a Specimen Flexible Premium Variable Life Insurance Policy (1)
(b) Joint Insured Term Rider (1)
(c) Individual Insured Rider (1)
(d) Wealth Protector Rider (1)
(6) (a) Certificate of Incorporation of AUSA Life
(b) Amended and Restated By-Laws of AUSA Life
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10) Application for Flexible Premium Variable Life Insurance Policy
(11) Memorandum describing issuance, transfer and redemption
procedures(1)
2. See Exhibit 1.A.
3. Opinion of Counsel as to the legality of the securities being registered
4. No financial statement will be omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I
5. Not Applicable
6. Opinion and consent of Alan Yaeger as to actuarial matters pertaining to
the securities being registered
7. Consent of Robert F. Colby, Esq. (1)
II-3
<PAGE>
8. Consent of Sutherland, Asbill & Brennan, LLP (1)
9. Consent of Ernst & Young LLP (1)
10. Power(s) of Attorney
- ----------------------------------------
(1) To be filed by amendment.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
AUSA Series Life Account, has duly caused this Pre-Effective Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Largo, County of Pinellas, Florida on the 16th day of October,
1997.
(SEAL) AUSA SERIES LIFE ACCOUNT
------------------------
Registrant
AUSA LIFE INSURANCE COMPANY, INC.
---------------------------------
Depositor
ATTEST:
/s/ THOMAS E. PIERPAN By: /s/ LARRY G. BROWN
- ----------------------- ------------------------
Thomas E. Pierpan Larry G. Brown
Assistant Secretary Chairman of the Board
(SEAL) (SEAL)
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 2 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
SIGNATURE AND TITLE DATE
/s/ LARRY G. BROWN October 16, 1997
- -------------------------
Larry G. Brown, Chairman of the
Board and Secretary
/s/ WILLIAM BROWN, JR. October 16, 1997
- -------------------------
William Brown, Jr., Director*
/s/ PATRICK S. BAIRD October 16, 1997
- -------------------------
Patrick S. Baird, Vice President
and Chief Financial Officer*
/s/ WILLIAM L. BUSLER October 16, 1997
- -------------------------
William L. Busler, Director*
/s/ JACK R. DYKHOUSE October 16, 1997
- -------------------------
Jack R. Dykhouse, Director*
<PAGE>
/s/ STEVEN E. FRUSHTICK October 16, 1997
- -------------------------
Steven E. Frushtick, Director*
/s/ C. THOR HANSON October 16, 1997
- -------------------------
C. Thor Hanson, Director*
/s/ B. LARRY JENKINS October 16, 1997
- -------------------------
B. Larry Jenkins, Director*
/s/ PETER P. POST October 16, 1997
- -------------------------
Peter P. Post, Director*
/s/ COR H. VERHAGEN October 16, 1997
- -------------------------
Cor H. Verhagen, Director*
/s/ E. KIRBY WARREN October 16, 1997
- -------------------------
E. Kirby Warren, Director*
/s/ TOM A. SCHLOSSBERG October 16, 1997
- -------------------------
Tom A. Schlossberg, Director
and President*
/s/ COLETTE F. VARGAS October 16, 1997
- -------------------------
Colette F. Vargas, Director
and Chief Actuary*
/s/ VERA F. MIHAIC October 16, 1997
- -------------------------
Vera F. Mihaic, Director
and Vice President*
/s/ BRENDA CLANCY October 16, 1997
- -------------------------
Brenda Clancy, Treasurer*
/s/ PATRICK E. FALCONIO October 16, 1997
- -------------------------
Patrick E. Flaconio, Senior
Vice President and Chief
Investment Officer*
* /s/ THOMAS E. PIERPAN
----------------------
Signed by Thomas E. Pierpan
as Attorney-in-Fact
<PAGE>
Exhibit Index
EXHIBIT DESCRIPTION
NO. OF EXHIBIT
1(A)(1). Resolution of the Board of Directors of AUSA Life
establishing the Series Account
1(A)(3)(b)(i). Form of Master Service and Distribution Compliance Agreement
(b)(ii). Form of Broker/Dealer Supervisory and Service Agreement
1(A)(6)(a). Certificate of Incorporation of AUSA Life
(b). Amended and Restated By-Laws of AUSA Life
1(A)(10). Application for Flexible Premium Variable Life Insurance
Policy
3. Opinion of Counsel as to the legality of the securities
being registered
6. Opinion and Consent of Alan Yaeger as to actuarial matters
pertaining to the securities being registered
10. Powers of Attorney
EXHIBIT 1(A)(1)
Resolution of the Board of Directors of AUSA Life establishing the
Series Account
CERTIFICATION
I, Craig D. Vermie, being the duly constituted Vice President and
Assistant Secretary of AUSA Life Insurance Company, Inc., a New York
corporation, hereby certify that the following is a true and correct copy of a
resolution adopted by the Board of Directors of said corporation by Written
Consent dated October 24, 1994, and that said resolution is still in full force
and effect:
RESOLVED, that the officers of the Company be and they hereby are
authorized to establish the "AUSA Series Life Account" for the purpose
of selling variable life insurance policies, and the "AUSA Series
Annuity Account B" for the purpose of selling variable annuity
contracts.
FURTHER RESOLVED, that the officers of this Company be and they hereby
are authorized and instructed to take any and all actions necessary in
order to carry out the powers hereby conferred, including but not
limited to, the filing of any and all exemptive applications,
registration statements and amendments thereto with the Securities and
Exchange Commission, execution of any and all required underwriting
agreements, state regulatory filings, Blue Sky filings, policy filings,
and to execute any and all other documents that may be required by any
Federal, state or local regulatory agency in order to operate the
separate accounts.
Dated at Cedar Rapids, Iowa, this 25th day of September, 1997.
BY: /s/ Craig D. Vermie
CRAIG D. VERMIE
EXHIBIT 1(A)(3)(b)(i)
Form of Master Service and Distribution Compliance Agreement
MASTER SERVICE AND DISTRIBUTION COMPLIANCE AGREEMENT
This Agreement, made this 1st day of March, 1995, by and among
InterSecurities, Inc.("ISI")and AUSA Life Insurance Company, Inc.("AUSA Life"),
on its own behalf and on behalf of AUSA Series Life Account (the "Series
Account"), a separate account of AUSA Life.
WHEREAS, AUSA Life offers for sale certain variable life insurance policies
(the "Policies") funded by the Series Account, unit investment trusts registered
under the Investment Company Act of 1940, as amended ("1940 Act"), pursuant to
effective registration statements filed with the Securities and Exchange
Commission under the Securities Act of 1933 ("Securities Act"); and
WHEREAS, ISI is registered as a broker-dealer with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934 ("1934
Act") and is a member of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, AUSA Life desires to engage ISI in connection with the
distribution of the Policies to maintain certain books and records, perform
certain administrative and marketing services, and to fulfill certain regulatory
requirements as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
I. SERVICES OF ISI
A. APPOINTMENT. AUSA Life hereby appoints ISI, and ISI accepts the
appointment as, Master Servicer and Distributor of the Policies.
B. DUTIES. ISI shall perform certain administrative, regulatory and other
services with respect to the distribution of the Policies as described herein.
ISI agrees to use its best efforts in performing such activities.
C. WRITTEN AGREEMENTS. ISI shall enter into Agreements with broker-dealer
firms ("Broker-Dealers") whose registered representatives have been or shall be
licensed and appointed as life insurance agents of AUSA Life. AUSA Life shall
pay all fees associated with the appointment of such registered representatives
as insurance agents of AUSA Life. Such written Agreements with Broker-Dealers
shall provide that such Broker-Dealers' properly licensed registered
representatives shall be authorized to solicit applications for the purchase of
the Policies. Such Agreements shall include such terms and conditions as ISI may
determine not inconsistent with this Agreement. Provided, however, any such
Agreement shall provide in substance:
1. Broker-Dealer shall ensure that the Policies will be offered, sold
and serviced only through persons who comply with all appropriate
state insurance licensing requirements.
2. Broker-Dealer shall agree that in performing its duties under the
Policies, Broker-Dealer shall be acting as an independent
contractor, and not as an agent or employee of AUSA Life or ISI.
3. Broker-Dealer shall indemnify and hold harmless AUSA Life and ISI
from any claims,damages, expenses, liabilities or causes of action,
asserted or brought by anyone, resulting from any negligent,
fraudulent, or intentional acts, omissions, or errors of Broker-
Dealer, its employees, registered representatives, other
representatives, or agents in the offering for sale, solicitation,
or servicing of the Policies, and from any negligent, fraudulent,
or intentional acts, omissions, or errors of Broker-Dealer, its
employees, registered representatives, other representatives, or
agents in violation of Federal or state laws or regulations and
NASD rules of any nature, applicable to the offering for sale,
solicitation, or servicing of the Policies.
4. Broker-Dealer shall assume full responsibility for the activities
of all persons associated with it who are engaged directly or
indirectly in the sales and securities operations of
Broker-Dealer. Broker-
<PAGE>
Dealer shall indemnify and hold harmless ISI and AUSA Life from any
claims, damages, expenses, liabilities or causes of action,
asserted or brought by anyone, resulting from any private business
transactions of any associated persons which are the subject of
this paragraph.
In obtaining and entering into written Agreements with Broker-Dealers,
ISI will in all respects conform to the requirements of all state and Federal
law, and the Rules of Fair Practice of the NASD.
D. RECORDKEEPING. ISI shall maintain and preserve, or cause to be
maintained and preserved, such accounts, books, and other documents as are
required of it by the 1940 Act, the 1934 Act and any other applicable laws and
regulations, including without limitation Rules 17a-3 and 17a-4 under the 1934
Act. The books, accounts and records of ISI as to services provided hereunder
shall be maintained so as to disclose clearly and accurately the nature and
details of the transactions.
The payment of premiums, purchase payments, commissions and other fees
and payments in connection with the Policies shall be reflected on the books,
records and accounts of ISI as required under applicable NASD regulations and
Federal and state securities law requirements. AUSA Life and ISI, from time to
time during the term of this Agreement, shall agree as to the ministerial
responsibility for maintaining and preserving the books, records and accounts
kept in connection with the Policies; provided, however, in the case of books,
records and accounts kept pursuant to a requirement of applicable law or
regulation, the ultimate and legal responsibility for maintaining and preserving
such books, records and accounts shall be that of the party which is required to
maintain or preserve such books, records and accounts under the applicable law
or regulation, and such books, records and accounts shall be maintained and
preserved under the supervision of that party.
E. PROMOTIONAL PROGRAM. ISI shall prepare a sales promotional program for
the Policies and assist agents in utilizing the program. In addition, ISI shall
provide Broker-Dealers and agents with sufficient quantities of sales
promotional materials, prospectuses, sample Policies, applications and any
necessary service forms.
F. SALES MATERIAL AND OTHER DOCUMENTS.
1. ISI'S RESPONSIBILITIES. ISI shall be responsible for:
(a) the design, preparation and printing of promotional material
to be used in the distribution of the Policies, subject to
AUSA Life's approval; and
(b) the approval of promotional material by the SEC and the NASD,
where required.
2. AUSA LIFE'S RESPONSIBILITIES.
(a) AUSA Life shall provide ISI with sufficient quantities of
prospectuses regarding the Policies and the Series Account.
(b) AUSA Life shall be responsible for the approval of promotional
material by state and other local insurance regulatory
authorities, if required.
G. PAYMENTS TO BROKER-DEALERS. Commissions or other fees due to the
Broker-Dealer or its representatives in connection with the sale of the Policies
shall be paid by AUSA Life acting on behalf of and as a ministerial duty for ISI
to the persons entitled thereto in accordance with the applicable agreement
between each such Broker-Dealer or representative and ISI and/or AUSA Life. ISI
shall assist AUSA Life in the payment of such amounts as AUSA Life shall
reasonably request, provided that ISI shall not be required to perform any acts
that would subject it to registration under the insurance laws of any state. The
responsibility of ISI shall include the performance of all activities by ISI
necessary in order that the payment of such amounts fully complies with all
applicable state and Federal securities laws. Unless otherwise agreed to by AUSA
Life in writing, neither ISI nor any representatives shall have an interest in
any surrender charges, deductions or other fees payable to AUSA Life as set
forth herein.
2
<PAGE>
H. COMPLIANCE. ISI shall, at all times, when performing its functions under
this Agreement, be registered as a securities broker-dealer with the SEC and be
a member of the NASD and licensed or registered as a securities broker-dealer in
those jurisdictions where the performance of the duties contemplated by this
Agreement would require such licensing or registration. ISI represents and
warrants that it shall otherwise comply with provisions of Federal and state law
in performing its duties hereunder.
I. PAYMENT OF EXPENSES BY AUSA LIFE. AUSA Life shall pay the costs incurred
in connection with ISI's provision of services hereunder and the distribution of
the Policies, including those expenses incurred in connection with the printing
of the prospectuses of the Series Account and for WRL Series Fund, Inc. (the
"Fund") to be used in connection with the distribution of the Policies (to the
extent that the Fund does not incur such expenses), and the preparation of sales
literature and promotional materials for the Policies. AUSA Life shall furnish
ISI with copies of all documents that ISI reasonably requests for use in
connection with the distribution of the Policies.
II. GENERAL PROVISIONS
A. INSPECTION OF BOOKS AND RECORDS. ISI and AUSA Life agree that all
records relating to services provided hereunder shall be subject to reasonable
periodic, special or other audit or examination by the SEC, NASD, or any state
insurance commissioner or any other regulatory body having jurisdiction. ISI and
AUSA Life agree to cooperate fully in any securities, insurance or judicial
regulatory investigation, inspection, inquiry or proceeding arising in
connection with the services provided under this Agreement, or with respect to
ISI or AUSA Life or their affiliates, to the extent related to the distribution
of the Policies. ISI and AUSA Life will notify each other promptly of any
substantive customer complaint or notice of regulatory proceeding, and, in the
case of customer complaint, will cooperate in arriving at a mutually
satisfactory response. AUSA Life and ISI shall each cause the other to be
furnished with such reports as it may reasonably request for the purpose of
meeting its reporting and recordkeeping requirements.
B. COMPENSATION. Unless otherwise agreed to by the parties hereto, ISI will
receive no compensation for the services ISI performs hereunder. ISI
acknowledges the receipt of good and valid consideration in connection with this
Agreement in that ISI and AUSA Life are each a wholly-owned indirect subsidiary
of AEGON USA, Inc. and ISI recognizes that it is beneficial to it to perform the
duties required of it hereunder.
C. TERMINATION. Subject to termination as hereinafter provided, the
Agreement shall remain in full force and effect until terminated as herein
provided.
1. This Agreement may be terminated by either partner hereto upon
60 days written notice to the other party.
2. This Agreement may be terminated upon written notice of one party
hereto in the event of the bankruptcy or insolvency of such part
to which the notice is given.
3. This Agreement may be terminated at any time upon the mutual written
consent of the parties hereto.
4. This Agreement shall automatically be terminated in the event of its
assignment.
5. Upon termination of this Agreement, all authorizations, rights,
and obligations shall cease except the obligations to settle
accounts hereunder, including payments of premiums subsequently
received for Policies in effect at the time of termination or
issued pursuant to applications received by AUSA Life prior to
termination.
D. REGISTRATION. AUSA Life agrees to use its best efforts to effect and
maintain the registration of the Policies under the Securities Act and the
Series Account under the 1940 Act, and to qualify the Policies under the state
securities and insurance laws. AUSA Life will pay or cause to be paid expenses
(including the fees and disbursements of its own counsel) of the registration
and maintaining of the Policies under the Securities
3
<PAGE>
Act and the Series Account under the 1940 Act, and to qualify the Policies under
the state securities and insurance laws.
E. EXCLUSIVITY. The services of ISI to the Series Account hereunder are not
to be deemed exclusive and ISI shall be free to render similar services to
others so long as its services hereunder are not impaired or interfered with
hereby.
F. AUTHORITY. ISI shall have authority hereunder only as expressly granted
in this Agreement.
G. BINDING EFFECT. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement constitutes the entire
Agreement between the parties hereto and may not be modified except in written
instrument executed by all parties hereto. This Agreement supersedes in its
entirety any and all previous agreements among the parties hereto with respect
to the Policies; provided, however, any former agreement shall survive with
respect to any Policies offered or sold during the term thereof.
H. MISCELLANEOUS. This Agreement shall be subject to the provisions of the
1940 Act and the 1934 Act and the rules, regulations, and rulings thereunder and
of the NASD, from time to time in effect, including such exemptions from the
1940 Act as the SEC may grant, and the terms hereof shall be interpreted and
construed in accordance therewith. Without limiting the generality of the
foregoing, the term "assignment" shall not include any transaction exempted from
Section 15(b)(2) of the 1940 Act.
I. GOVERNING LAW. This Agreement shall be governed by and continued in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunto duly authorized, as of the day
and year first above written.
AUSA LIFE INSURANCE COMPANY, INC.,
on its own behalf and on behalf of
AUSA SERIES LIFE ACCOUNT
By: ____________________________________
Title: ___________________________________
INTERSECURITIES, INC.
By: ____________________________________
Title: PRESIDENT
ausamast.doc
4
EXHIBIT 1(A)(3)(b)(ii)
Form of Broker/Dealer Supervisory and Service Agreement
Principal Underwriter for
The AUSA Series Life Account
BROKER-DEALER SUPERVISORY AND SERVICE AGREEMENT
This Broker-Dealer Supervisory and Service Agreement (the "Agreement") is
made this Day day of Month, Year, by and between AUSA Life Insurance Company,
Inc. ("AUSA") , InterSecurities , Inc. ("ISI") , formerly known as IDEX
Distributors, Inc., a broker-dealer registered with the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934 ("1934 Act") and a
member of the National Association of Securities Dealers, Inc. ("NASD"), and
BrokerDealer ("Broker-Dealer"), also a broker-dealer registered with the SEC
under the 1934 Act and a member of the NASD, and any and all insurance agency
subsidiaries ("Agencies") of this broker-dealer, (hereinafter Broker/Dealer and
Agencies are collectively referred to as "Producers"). Such subsidiaries are
named in the Appendix of this Agreement. The Appendix lists any assumed names
used by Broker-Dealer in any state in order to comply with state insurance
licensing requirements.
RECITALS
WHEREAS, AUSA offers for sale certain variable life insurance policies and
variable annuity contracts (hereinafter referred to as the "Plans");
WHEREAS, ISI is the principal underwriter of the Plans;
WHEREAS, ISI proposes to have Broker-Dealer's registered representatives
("Representatives") who are also licensed and appointed as life insurance agents
of AUSA solicit and sell the Plans, which are deemed to be securities under the
Securities Act of 1933; and
WHEREAS, AUSA and ISI propose to have Producers provide certain supervisory
and administrative services in connection with the distribution of the Plans.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. AUSA and ISI hereby appoint Agency under the insurance
laws and authorize Broker-Dealer under the securities laws to supervise
Representatives in connection with the distribution of the Plans and to
provide certain services as described herein.
2. Supervision of Representatives. Broker-Dealer shall have full
responsibility for the training and supervision of all Representatives
associated with Broker-Dealer who are engaged directly or indirectly
in the offer or sale of the Plans and all such persons shall be subject
to the control of Broker-Dealer with respect to such persons'
securities-regulated activities in connection with the Plans.
Broker-Dealer will establish rules, procedures and supervisory and
inspection techniques necessary to diligently supervise the activities
of its Representatives.
Producers will cause the Representatives to be trained in the sale of
the Plans; will use their best efforts to cause such Representatives to
qualify under applicable federal and state laws to engage in the sale
of the Plans; and will cause such Representatives to be registered
representatives of Broker-Dealer before such Representatives engage in
the solicitation of applications for the Plans and will cause such
Representatives to limit solicitation of applications for the Plans to
jurisdictions where AUSA has authorized such solicitation.
Broker-Dealer has full responsibility in connection with the training,
supervision and control of the Representatives as contemplated by
Section 15(b)(4)(E) of the Securities Exchange Act of 1934.
Broker-Dealer shall certify Representatives' qualifications to the
satisfaction of ISI , including certifying a General Letter of
Recommendation set forth in Exhibit A hereto. Producers shall ensure
that the Plans are offered , sold and serviced only through
Representatives who comply with all appropriate state insurance
licensing requirements.
<PAGE>
3. Representative's Application. Producers shall cause each such
Representative to execute a Registered Representative's Agent
Application with AUSA before a Representative shall be permitted to
solicit applications for the sale of the Plans. AUSA shall furnish
Producers with copies of Registered Representative's Agent Application
for execution by the Representatives.
4. Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer, ceases to be a registered representative of
Broker-Dealer, or fails to meet the rules and standards imposed by
Producers on their Representatives, Producers shall certify such fact
to AUSA and shall immediately notify such Representative that he or
she is no longer authorized to sell the Plans, and Producers shall
take whatever additional action may be necessary to terminate the sales
activities of such Representative relating to the Plans.
5. Compliance with NASD Rules of Fair Practice and Federal and State
Security and Insurance Laws. Producers shall fully comply with the
requirements of the 1934 Act and all other applicable federal or state
laws applicable to the solicitation and service of the Plans and will
establish such rules and procedures as may be necessary to cause
diligent supervision of the securities and insurance activities
of Representatives. Producers agree to maintain appropriate books and
records concerning the activities of their Representatives as required
by the SEC, NASD or other regulatory agencies having jurisdiction,
or under applicable state insurance laws or regulations. Upon request
by AUSA or ISI, Producers shall furnish such appropriate records as may
be necessary to establish such diligent supervision.
6. Prospectus, Sales Promotion Material and Advertising. Producers shall
be provided with, and Producers shall forward to Representatives,
prospectuses relating to the Plans and such other material as ISI
determines to be necessary or desirable for use in connection with
sales of the Plans. Producers shall ensure that no sales promotion
materials or advertising related to the Plans shall be used by
Representatives unless the specific item has been approved by ISI in
writing.
7. Applications. Producers shall cause all applications for Plans to be
made on application forms supplied by AUSA and all payments collected
by Producers or any Representative to be remitted promptly in full,
together with such application forms and any other documentation,
directly to AUSA at the address indicated on such application.
Producers shall review all such applications for completeness. Checks
or money orders in payment on any such Plan shall be drawn to the order
of AUSA. All applications are subject to acceptance or rejection by
AUSA at its sole discretion. Producers agree to remit in full to AUSA
immediately upon receipt all premiums received on such applications,
forms and any other required documentation obtained in respect of
participants in the Plans.
8. Compensation. Broker-Dealer or Agency shall serve as Paymaster for
amounts due Representatives. Such amounts shall be paid to
Broker-Dealer or Agency , whichever is authorized to receive
insurance commissions under applicable insurance laws, by AUSA acting
on behalf of ISI in accordance with the Service Fee and Commission
Schedule attached hereto as Exhibit C. Broker-Dealer or Agency shall,
in turn, pay Representatives amounts due them in connection with the
sales of the Plans and Representatives shall solely look to
Broker-Dealer or Agency for payment of such amounts. Broker-Dealer or
Agency shall be compensated for the services provided hereunder in
accordance with the Service Fee and Commission Schedule. Such amounts
payable to Representatives and Broker-Dealer or Agency will be paid
in cash or other legal tender based upon Plans accepted by AUSA on
applications obtained by the Representatives. Upon termination of this
Agreement , all compensation to Broker-Dealer or Agency and
Representatives hereunder shall cease; however, (i) Broker-Dealer or
Agency shall continue to be liable for chargebacks pursuant to the
provisions of Service Fee and Commission Schedule or for any other
amounts advanced by or otherwise due AUSA hereunder, and (ii)
Broker-Dealer or Agency shall receive any commissions due under such
Schedule (continuing or otherwise) arising out of a Plan sold by a
Representative prior to termination of this Agreement, provided that
the obligation to pay such commissions shall cease after the tenth year
following the date of issue of the Plan. Broker-Dealer or Agency shall
have no interest in any surrender charges, deductions or other fees
payable to AUSA.
9. Investigations. Producers, ISI and AUSA agree to cooperate fully in any
investigation or proceeding with respect to any Representative or other
agent or the Producers to the extent that such investigation or
proceeding is in connection with the Plans. Without limiting the
foregoing:
a. ISI and AUSA will promptly notify Producers of any substantive
customer complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by it with respect to
Producers or any Representative or other agent of Producers or
with respect to ISI or AUSA which may affect the issuance of the
Plans marketed under this Agreement.
b. Producers will promptly notify ISI and AUSA of any substantive
customer complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by Producers with
respect to Producers or to any Representative or other agent of
Producers in connection with the Plans or any activity in
connection therewith.
<PAGE>
In the case of a substantive customer complaint in connection
with the Plans, ISI, AUSA and Producers will cooperate in
investigating such complaint, but any response to such complaint
will be the sole responsibility of ISI or AUSA, as appropriate.
10. Independent Contractors. Producers in performing their duties hereunder
shall be acting as an independent contractors, and not as agents or
employees of AUSA or ISI.
11. Indemnification. Producers shall indemnity and hold harmless ISI and
AUSA from any claims, damages, expenses, liabilities or causes of
action, asserted or brought by anyone, resulting from any negligent,
fraudulent, or intentional acts, omissions, or errors of Producers,
their employees, registered representatives, other representatives, or
agents in the offering for sale, solicitation, or servicing of the
Plans, and from any negligent, fraudulent, or intentional acts,
omissions, or errors of Producers , their employees , registered
representatives, other representatives, or agents in violation of
Federal or State laws or regulations and NASD rules of any nature,
applicable to the offering for sale, solicitation, or servicing of the
Plans.
Broker-Dealer shall assume full responsibility for the activities of
all persons associated with it who are engaged directly or indirectly
in the sales and securities operations of Broker-Dealer. Broker-Dealer
shall indemnify and hold harmless ISI and AUSA from any claims,
damages, expenses, liabilities or causes of action, asserted or brought
by anyone, resulting from any private business transactions of any
associated persons which are the subject of this paragraph.
ISI and AUSA shall indemnify and hold harmless Producers from any
claims, damages, expenses, liabilities or causes of action, asserted or
brought by anyone, resulting from any negligent, fraudulent, or
intentional acts, omissions, or errors of ISI or AUSA or their
employees in the offering for sale, solicitation, or servicing of the
Plans, and from any negligent, fraudulent, or intentional acts,
omissions, or errors of ISI or AUSA or their employees in violation of
Federal or State laws or regulations and NASD rules of any nature,
applicable to the offering for sale, solicitation, or servicing of the
Plans.
12. Termination. ISI may terminate this Agreement immediately and without
notice if the Broker-Dealer fails to maintain its registration as a
Broker-Dealer or a member of the NASD. ISI may terminate this Agreement
immediately upon providing written notice to Broker-Dealer or Agency if
Broker-Dealer or Agency violates this Agreement or fails to perform to
ISI's satisfaction under the terms and conditions of this Agreement, or
if Broker-Dealer or Agency becomes insolvent. ISI and Broker-Dealer or
Agency shall each have the right, upon thirty days' written notice to
the other, to terminate this agreement for whatever reason deemed
appropriate by such party. Notwithstanding the termination of this
Agreement, ISI, Broker-Dealer and Agency acknowledge that each of them
shall be individually and respectively liable, responsible and
accountable for any and all actions undertaken prior to the effective
date of the termination of this Agreement.
13. Fidelity Bond. Broker-Dealer shall secure and maintain a fidelity bond
in at least the amounts prescribed under Article III, Section 32 of the
NASD Rules of Fair Practice. Broker-Dealer shall provide ISI with a
copy of said bond within thirty days after executing this Agreement.
14. Miscellaneous. ISI and AUSA reserve the right, without notice to
Producers, to suspend, withdraw, or modify the offering of the Plans or
to change the conditions of their offering with respect to anyone.
Producers are not authorized to market any Plan until notified by ISI
or AUSA of an effective registration statement therefor with the
Securities and Exchange Commission.
The right is reserved to AUSA and ISI to contract separately with any
employee, representative or agent of Producers in connection with the
Plans, provided that the terms of any such contract do not conflict
with the provisions of this Agreement. Nothing contained herein shall
prevent or restrict (i) AUSA or ISI from marketing said Plans through
other stock brokerage firms, insurance agents and brokers, and through
its own organization, or (ii) Producers from acting as agents and/or
brokers for other insurance companies, whether or not affiliated with
Producers, in any jurisdiction with respect to any insurance or
securities product, including securities products similar or identical
to those of AUSA or ISI.
Any manuals, guides, books, tapes, programs and other materials, if
any, developed by ISI or AUSA, which may be delivered to Producers from
time to time will be owned solely by ISI or AUSA, as the case may be;
however, during such time as this Agreement is in effect between the
parties hereto, if the Producers elect to do so, Representatives may
use any such manuals, guides, books, programs and other materials which
may have been delivered to the Producers but may use them solely in the
Producers' business hereunder , and upon such terms and conditions as
ISI or AUSA may establish at the time of such delivery. Upon
termination of this Agreement, such items will be returned promptly to
ISI.
<PAGE>
Attached hereto as Exhibit B is a list of jurisdictions in which
Broker-Dealer or Agency is duly authorized to sell the Plans and
receive commissions thereon.
Certain of the Representatives may, from time to time, request access
to certain account information with respect to the Plans (the "Account
Information") via downloading of such Account Information to an
electronic mailbox which will be accessed by the Representatives
through their personal computers. The Account Information will be
accessed by the Representatives via software purchased from an outside
vendor to whom AUSA and ISI provide access to the Account Information.
In exchange for the cooperation of AUSA and ISI in providing access to
the Account Information for the convenience of the Representatives,
Broker-Dealer agrees to assume sole responsibility to oversee and
supervise the Representatives in the utilization of such Account
Information, including verification of the accuracy of all written
material produced by a Representative from the Account Information.
Further, Broker-Dealer is solely responsible for ensuring that all
NASD, SEC and other regulations are fully complied with by the
Representatives in connection with the utilization of and preparation
of any written or oral material from, the Account Information.
Broker-Dealer shall fully indemnify and hold harmless AUSA and ISI from
any and all claims made against them by any party with respect to the
Representatives' use of such Account Information.
15. Governing Law. This Agreement shall be interpreted in accordance with
the laws of the State of Florida. The parties hereto agree that the
Circuit Court for Pinellas County, Florida shall have jurisdiction and
be the appropriate venue for any required judicial interpretation and
enforcement of this Agreement.
16. Binding Effect. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule, or otherwise, the
remainder of this Agreement shall not be affected thereby.
This Agreement shall be effective as of the date it is fully executed by
all parties. This Agreement constitutes the entire Agreement between the parties
hereto. However, AUSA and ISI reserve the right to modify the Service Fee and
Commission Schedule ("Schedule") under this Agreement by publishing from time to
time a revised schedule; such revised schedule will govern only new business
applications written on or after the effective date of the revised schedule.
AUSA and ISI further reserve the right to amend from time to time this
Agreement, other than its schedule, by providing thirty (30) days written notice
to the Broker-Dealer; Broker-Dealer shall be deemed to have accepted all terms
and conditions set forth in such amendment if no objections are received in
writing by AUSA and ISI within fifteen (15) days after notification is mailed.
This Agreement supersedes in its entirety any and all previous agreements among
the parties hereto with respect to the Plans; provided, however, any former
agreement shall survive with respect to any Plans offered or sold during the
term thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunto duly authorized, as of the day
and year first above written.
AUSA LIFE INSURANCE COMPANY, INC. INTERSECURITIES, INC.
By: _________________________________ By: ______________________________
Title: Vice President Title: ____________________________
BROKER-DEALER
Broker-Dealer~
By: _______________________________
(Signature)
-----------------------------------
(Print Full Name)
Title: ____________________________
Contact Person ____________________
(Print Full Name)
<PAGE>
APPENDIX TO BROKER-DEALER SUPERVISORY AND SERVICE AGREEMENT
The Agencies herein are wholly-owned subsidiaries of the Broker-Dealer named in
Paragraph 1 of this Agreement.
Broker-Dealer: Broker-Dealer~
Subsidiary Name: _______________________________________________________________
Federal Tax ID: _______________________________
States in which this Subsidiary is insurance licensed: ____________________
Officers:
Name: __________________________ Title: _________________________
Name: __________________________ Title: _________________________
Officers Signature: _______________________________________________________
Subsidiary Name: _______________________________________________________________
Federal Tax ID: _______________________________
States in which this Subsidiary is insurance licensed: ____________________
---------------------------------------------------------------------------
Officers:
Name: _________________________ Title: _________________________
Name: _________________________ Title: _________________________
Officer's Signature: ______________________________________________________
Subsidiary Name: _______________________________________________________________
Federal Tax ID: _______________________________
States in which this Subsidiary is insurance licensed: ____________________
---------------------------------------------------------------------------
Officers:
Name: __________________________ Title: ________________________
Name: __________________________ Title: ________________________
Officer's Signature: ___________________________________________________________
<PAGE>
APPENDIX TO BROKER-DEALER SUPERVISORY AND SERVICE AGREEMENT
The Broker-Dealer named in this Agreement has adopted the use of the following
assumed names and is doing business under such names in the states listed: 1) as
required by State Departments of Insurance for the purpose of obtaining
insurance licenses in those states; or 2) in compliance with NASD Rules of Fair
Practice Art III, Sec. 35. These are not and cannot be considered to be
"Agencies" as defined in Paragraph 1 of this Agreement.
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
Assumed Name ("DBA"): _________________________________ STATE: _____________
<PAGE>
EXHIBIT A
General Letter of Recommendation
BROKER-DEALER hereby certifies to AUSA that all the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as agents of AUSA
submitted by BROKER-DEALER. BROKER-DEALER will, upon request, forward
proof of compliance with same to AUSA in a timely manner.
1. We have made a thorough and diligent inquiry and investigation
relative to each applicant's identity, residence and business
reputation and declare that each applicant is personally known
to us, has been examined by us, is known to be of good moral
character, has a good business reputation, is reliable, is
financially responsible and is worthy of a license. Each
individual is trustworthy, competent and qualified to act as an
agent for AUSA to hold himself out in good faith to the general
public.
2. We have on file a U-4 form which was completed by each
applicant. We have fulfilled all the necessary investigative
requirements for the registration of each applicant as a
registered representative through our NASD member firm, and each
applicant is presently registered as an NASD registered
representative.
The above information in our files indicates no fact or
condition which would disqualify the applicant from receiving a
license and all the findings of all investigative information is
favorable.
3. We certify that all educational requirements have been met for
the specified state each applicant is requesting a license in,
and that all such persons have fulfilled the appropriate
examination, education and training requirements.
4. If the applicant is required to submit his picture, his
signature, and securities registration in the state in which he
is applying for a license, we certify that those items forwarded
to AUSA are those of the applicant and the securities
registration is a true copy of the original.
5. We hereby warrant that the applicant is not applying for a
license with AUSA in order to place insurance chiefly and solely
on his life or property, or lives or property of his relatives,
or property or liability of his associates.
6. We will not permit any applicant to transact insurance as an
agent until duly licensed therefore. No applicants have been
given a contract or furnished supplies, nor have any applicants
been permitted to write, solicit business, or act as an agent in
any capacity, and they will not be so permitted until the
certificate of authority or license applied for is received.
<PAGE>
EXHIBIT B
TO
BROKER-DEALER SUPERVISORY AND SERVICE AGREEMENT
1.The following is a list of jurisdictions in which Broker-Dealer is duly
registered or licensed as a dealer or broker and is fully authorized to
sell the securities described in the Agreement:
---------------------------- ----------------------------
----------------------------
---------------------------- ----------------------------
----------------------------
---------------------------- ----------------------------
----------------------------
---------------------------- ----------------------------
----------------------------
(OR) All states of the United States except: __________________________
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2.Notices permitted or required to be given to Broker-Dealer shall be
given to:
Name: Name
Address: Address
City, State and Zip Code: City_State_Zip
Telephone Number: _____________________________
3.Broker-Dealer's Taxpayer Identification Number:
-----------------------------------------------
EXHIBIT 1(A)(6)(a)
Certificate of Incorporation of AUSA Life
International Life Investors Insurance Company Letterhead
June 20, 1995
John Lucchesi
NEW YORK INSURANCE DEPARTMENT
Life Companies Bureau
160 West Broadway
New York, NY 10013
Dear John:
Pursuant to our telephone conversation of June 20, 1995, enclosed please find
the AUSA Charter. This will be the surviving Charter once AUSA and ILI merge.
If you have any questions or need additional information, please do not hesitate
to contact me.
Sincerely,
/s/ Vera F. Mihaic
Vera F. Mihaic
Vice President
VFM:el
Enclosure
cc: Craig D. Vermie
<PAGE>
STATE OF NEW YORK
INSURANCE DEPARTMENT
EDWARD J. MUHL
SUPERINTENDENT OF INSURANCE
It is hereby certified that the annexed copy of Certificate of Amendment of
Certificate of Incorporation of AUSA LIFE INSURANCE COMPANY, INC., of New York,
New York, to change the location of the principal office to Purchase, New York,
as approved by this Department February 14, 1995 pursuant to Section 1206 of the
New York Insurance Law has been compared with the original on file in this
Department and that it is a correct transcript therefrom and of the whole of
said original.
In Witness Whereof, I have here-
NY STATE SEAL unto set my hand and affixed the
official seal of this Department at
the City of Albany, this 14th day
of February, 1995.
/S/ ROBERT A. GINNELLY
Robert A. Ginnelly
Special
Deputy Superintendent of Insurance
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AUSA LIFE INSURANCE COMPANY, INC.
(Under Section 805 of the Business Corporation Law)
We, the undersigned, being the President and Secretary of AUSA LIFE
INSURANCE COMPANY, INC., do hereby certify as follows:
1. The name of the Corporation is AUSA LIFE INSURANCE COMPANY, INC. The
Corporation was originally incorporated under the name of ZURICH LIFE INSURANCE
COMPANY, and its name was thereafter changed to DREYFUS LIFE INSURANCE COMPANY,
and then to AUSA LIFE INSURANCE COMPANY, INC., the Corporation's present name.
2. The Certificate of Incorporation was filed in the Office of the
Department of Insurance of the State of New York on the 3rd day of October,
1947.
3. As authorized by Section 801(b) (3) of the Business Corporation Law,
the Certificate of Incorporation is amended to change the location of the
principal office of the corporation to Purchase, New York.
4. To accomplish the foregoing, the first sentence of Article II of the
Certificate of Incorporation is amended to read as follows:
"The principal office of the Company is to be located in the Town
of Purchase, County of Westchester, State of New York, and it
shall have power to conduct its business wherever authorized by
laws."
<PAGE>
5. The amendment to the Certificate of Amendment was authorized by
resolution of the Board of Directors of the Corporation at a meeting held on
December 6, 1994 and by Written Consent of the Sole Shareholder of the
Corporation dated December 6, 1994.
IN WITNESS WHEREOF, we have made, subscribed and acknowledged this
Certificate this 19TH day of December, 1994.
/S/ TOM SCHLOSSBERG
President
/S/ LARRY BROWN
Secretary
VERIFICATION
State of New York )
) ss:
County of WESTCHESTER )
On the 19TH day of December, 1994, before me personally came TOM
SCHLOSSBERG and persons who executed the foregoing instrument, and they duly
acknowledged before me that they executed the same.
/S/ CATHERINE A. MOHR
Notary Public
NOTARY SEAL
EXHIBIT 1(A)(6)(b)
Amended and Restated By-Laws of AUSA Life
AUSA LIFE INSURANCE COMPANY, INC.
(Formerly DREYFUS LIFE INSURANCE COMPANY)
AMENDED AND RESTATED BYLAWS
AS OF JUNE 1, 1989
ARTICLE I.
MEETINGS OF STOCKHOLDERS
SEC. 1. Annual meetings of the stockholders shall be held at the
principal office of the Company, or at such other place within or without the
State of New York as may be designated in the notice of meeting, on the date
fixed by the Board of Directors within the thirty-one day period commencing with
the first day of March.
SEC. 2. Special meetings of the stockholders shall be held at the
principal office of the Company, or in such other place within or without the
state of New York as may be designated in the notice of the meeting.
Special meetings of the stockholders, other than those regulated
by the statute, may be called by the president and shall be called whenever a
meeting is ordered by a resolution of the Board of Directors or whenever the
owners of one-fourth in amount of the capital stock of the company shall, in
writing, request the same. Business transacted at special meetings of the
stockholders shall be confined to the purposes stated in the notice and matters
germane thereto.
SEC. 3. The president and a secretary shall act, respectively, as
chairman and secretary of all meetings of the stockholders, unless the
stockholders qualified to vote thereat shall determine otherwise.
SEC. 4. Notice of all meetings of stockholders shall be given by a
secretary; such notice shall state the place and time of meeting and the purpose
for which the meeting is to be held, and a copy thereof shall be served, either
personally or by mail, on each stockholder of record entitled to vote at such
meeting, not less than ten (10) or more than forty (40) days before the meeting.
If mailed, such notice shall be directed to the stockholder at this address as
it appears on the stock book, unless he shall have filed with a secretary a
written request that notices intended for him be mailed to some other address -
in which case it shall be mailed to the address designated in such request. No
notice of any meeting of stockholders need be published.
SEC. 5. Any stockholder may waive notice of any annual or special
meeting of stockholders by filing with a secretary a written waiver and, in that
event, shall be deemed to have received such notice.
SEC. 6. At each annual meeting not less than thirteen nor more than
twenty-one Directors shall be elected to hold office for one year and until
their successors are elected.
The exact number of Directors shall be that number designated by
resolution of the Board of Directors adopted prior to the annual meeting of the
stockholders, or in the absence of such resolution, the number last fixed by the
Directors. No decrease in the number of Directors shall shorten the term of any
incumbent Director. Stockholders by majority vote at any meeting may remove any
Director.
<PAGE>
ARTICLE II.
DIRECTORS AND THEIR MEETINGS
SEC. 1. The Board of Directors shall hold regular meetings on such
dates as shall from time to time be determined by the Board. All regular
meetings shall be held at the principal office of the Company, or at such other
placed either within or without the State of New York as may be designated in
the notice of meeting.
SEC. 2. Special meetings of the Board of Directors may be held
whenever the president or two (2) of the Directors shall call the same. Business
transacted at special meetings shall be confined to the purposes stated in the
notice and matters germane thereto.
SEC. 3. Notice of regular meetings need not be given; but, if given,
shall be given by a secretary, be in writing, and be served, either personally
or by mail, on each Director at least five (5) days before the date set for such
meeting. Notice of special meetings, stating the purposes of the same, shall be
given by a secretary at the direction of the president or the Directors calling
the same, be in writing, and be served, either personally or by mail, on each
Director at least three (3) days before the date set for such meeting. Any
Director may waive notice of any regular or special meeting by filing with a
secretary a written waiver and, in that event, shall be deemed to have received
such notice. Special meetings may be held without notice, provided every
Director is present.
SEC. 4. A majority of the number of Directors as last fixed by
resolution of the Board of Directors shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but a lesser
number may adjourn a meeting from time to time until a quorum be present.
SEC. 5. Any vacancy in the Board of Directors which shall occur by
death, resignation, removal or otherwise shall be filled by a new incumbent
elected for the balance of the unexpired term of the outgoing Director by the
remaining members of the Board of Directors at any regular or special meeting.
SEC. 6. The Board of Directors may limit, define, increase or decrease
at any time the duties or powers of any officer, or create other offices, and
may elect or appoint persons to fill such other offices and prescribe their
duties and powers, and may remove such persons filling such other offices and/or
abolish such duties, powers, and offices.
SEC. 7. Any person made a party to any action, suit, or proceeding by
reason of the fact that he, his testator or intestate, is or was a director,
officer, or employee of the Company or of any Company which he served as such at
the request of the Company, shall be indemnified by the Company against the
reasonable expenses, including attorney's fees, actually and necessarily
incurred by him in connection with the defense of such action, suit or
proceeding, or in connection with appeal therein, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
officer, Director, or employee is liable for negligence or misconduct in the
performance of his duties. The Company may also reimburse to any Director,
officer, or employee the reasonable costs of settlement of any such action,
suit, or proceeding, if it shall be found by a majority of a committee composed
of the Directors not involved in the matter in controversy (whether or not a
quorum) that it was in the interest of the Company that such settlement be made
and that such Director, officer or employee was not guilty of negligence or
misconduct. The amount to be paid by way of indemnity shall be determined and
paid, in each instance, pursuant to action of the Board of Directors, and the
stockholders shall be given notice thereof in accordance with applicable
provisions of law. Such right of indemnification shall not be deemed exclusive
of any other rights to which such Director, officer, or employee may be
entitled.
<PAGE>
SEC. 8. Any one or more members of the Board of Directors, or any
Committee designated thereby, may participate in a meeting of such Board or
Committee by means of a conference telephone or similar equipment which allows
all persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at such a
meeting.
ARTICLE III.
OFFICERS AND THEIR DUTIES
SEC. 1. The Board of Directors shall elect from their members a
president. It shall also elect one or more vice presidents, a secretary and a
treasurer, and such other officers as it may determine. All such elected persons
shall be deemed the officers of the Company. If any such office shall become
vacant, such vacancy shall be filled by the Board. The Board at any regular or
special meeting by a vote of two-thirds of the Directors then in office, may
remove any elected officer, provided that the notice of such meeting shall
contain a statement of such proposed action.
SEC. 2. The president shall be the chief executive officer of the
Company and shall be a member of the executive committee and of any special
committees. He shall have charge of the business and affairs of the Company and
shall report thereon at each regular meeting of the Board and at such other
times as the Board may require. He shall have the selection of all employees and
have supervision of and may suspend or remove any employee of the company. The
president may authorize or instruct any of the elected or appointed officers to
perform any duty or duties or to exercise any one or more of the powers with
which he is vested pursuant to these bylaws. The president, a vice president, or
an assistant vice president in a written instrument attested by a secretary or
an assistant secretary may appoint any person, legally qualified to act,
attorney-in-fact with authority to accept on behalf of the Company any summons
or other process, including federal process. Any such officers may revoke the
powers granted to any attorney-in-fact. In the absence of the president or in
the event of his inability to act, his powers and duties shall be exercised by a
person designated by the executive committee, but the Board of Directors may
remove such person and appoint any person to exercise the powers and duties of
the president.
SEC. 3. All other officers shall have such powers and duties as may be
given to them from time to time by the president, the Board of Directors, or the
executive committee, and generally shall consult with and advise the president
and aid the president in the discharge of his duties.
SEC. 4. A secretary or an assistant secretary shall make up and sign
the minutes of all meetings of the Board of Directors, of the executive
committee, and of any special committee, as well as of the meetings of the
stockholders; shall send notices of such meetings when such notices are
required; shall countersign stock certificates and affix the corporate seal
thereto; shall certify, under the seal of the Company, extracts from its
minutes, shall sign or countersign and affix such corporate seal to any other
instruments, documents or contracts; shall keep suitable books for the registry
and transfer of the shares of the capital stock of the Company; and, generally,
shall perform such other duties as may be incident to the office of secretary.
SEC. 5. The Board of Directors may appoint a chairman of the Board,
whose duty it shall be to preside at the meetings of the Board and to assist the
president in the performance of his duties.
SEC. 6. All policies of insurance and other formal underwriting
contracts of the Company in reference thereto shall be signed by the president,
or a vice president, and attested by a secretary or an assistant secretary. Such
signatures may be facsimiles, but when such is the case, such policies of
insurance and other formal underwriting contracts in reference thereto shall be
countersigned by a duly authorized representative. All documents or instruments
required in connection with applications for
<PAGE>
licenses from any states or the United States, all documents or instruments
thereafter required for any purpose by any states of the United States, and all
other documents or instruments (except checks, drafts, and other negotiable
instruments) shall be signed by the president, or a vice president, an assistant
vice president or a person authorized by the president to sign such documents or
instruments. When the corporate seal is required, it shall be attached by a
secretary or any other person authorized by the Board of Directors or the
executive committee to attach the corporate seal.
ARTICLE IV.
COMMITTEES
SEC. 1. There may be an executive committee to be elected by the Board
of Directors. Such committee shall organize by the election of its own chairman.
Members of such committee shall be elected by ballot of the Board of Directors,
and shall hold their offices during the pleasure of the Board. All vacancies
shall be filled by the Board of Directors. In case any vacancy shall occur in
the office of chairman of the executive committee, such vacancy shall be filled
by the committee.
Sec. 2. Any action taken by a majority of the members of the executive
committee and evidenced by their signatures to or approval of such action, shall
be deemed action by the committee, even though the committee shall not actually
have met; but such action shall be reported at the next meeting of the committee
and be included in its minutes. The executive committee shall hold meetings at
such time or times as it shall fix, and shall also meet at the call of the
president or chairman of the committee.
SEC. 3. Minutes of the proceedings of the executive committee shall be
kept in the minute book provided for that purpose, and shall always be open for
the inspection of any director. The proceedings of the committee shall be
reported at the succeeding regular meeting of the Board of Directors.
SEC. 4. When the Board of Directors is not in session, the executive
committee shall have and may exercise all of the powers of the Board, except the
declaration of dividends.
SEC. 5. The executive committee shall have power to delegate to one of
its members or to a subcommittee any of the powers or duties of the executive
committee.
SEC. 6. The Board of Directors, by resolution adopted by a majority of
the entire Board, may designate other committees to serve at the Board's
pleasure, with such powers and duties as the Board of Directors determines, to
the extent permitted by law.
ARTICLE V.
STOCK AND CERTIFICATES OF STOCK
SEC. 1. The Board of Directors shall cause suitable books to be kept
for the registry and transfer of the shares of the capital stock of the Company,
and shall have power to close the transfer books, from time to time, not
exceeding the period of thirty (30) days at any one time, as the convenience of
the Company may require. No transfer of stock shall be valid unless made upon
the books of the Company by authority of the person owning such stock or by his
duly authorized legal representative and upon the surrender and cancellation of
the certificate or certificates owned by such person.
<PAGE>
SEC. 2. Certificates of stock, numbered in the order in which they are
issued, shall be issued to the holders of fully paid stock and shall be signed
by the president or a vice president, and countersigned by a secretary and the
corporate seal affixed thereto.
SEC. 3. If the holder of any certificate of stock shall lose such
certificate, the Board of Directors may, on the fact becoming known to them,
cause a new certificate to be issued to such stockholder, subject to the deposit
of a bond or other engagement in such form - if a bond - with such surety of
sureties as the Board may require.
ARTICLE VI.
DEPOSITS, CHECKS, DRAFTS, ETC.
SEC. 1. All uninvested funds of the Company, except petty cash to
cover office expenses, shall be deposited in the name of the Company with such
banks or trust companies as may be designated by the Board of Directors or the
executive committee.
SEC. 2. Checks on the Company's bank deposits and all drafts or other
negotiable instruments creating a liability of the Company shall be signed and
countersigned by such persons as may be authorized by the Board of Directors or
the executive committee to sign and/or countersign the same, but no person shall
have authority to sign and countersign the same check, draft or other negotiable
instrument, provided the president or a vice president or any person authorized
by any such officer may appoint any person to sign drafts on the Company (but
not against its bank deposits) and such drafts need not be countersigned.
ARTICLE VII.
CORPORATE SEAL
The design of the corporate seal of the Company shall contain the name
of the Company and the date of incorporation.
ARTICLE VIII.
AMENDMENTS
These bylaws may be repealed, altered, or modified and further bylaws
may be adopted by a majority vote at any regular or special meeting of the Board
of Directors, provided the notice of such meeting includes the proposed changes
or substance thereof.
EXHIBIT 1(A)(10)
Application for Flexible Premium Variable Life Insurance Policy
AUSA Life Insurance Company, Inc.
Application
for
Life Insurance
Agent Name: ____________________________________________
Agent Number: __________________________________________
Broker/Dealer: __________________________________________
Date Faxed to Application Link: ____________________________
Administrative Office:
P.O. Box 5068 o Clearwater, FL o 34618-5068
1-800-443-9975
Application Link Fax: 1-800-473-9161
U00283NY
<PAGE>
Instructions for Completing the Application &
Using Application Link
DO NOT USE APPLICATION LINK FOR JOINT AND SURVIVOR CASES
A. Application Completion Instructions
1. Complete all sections in their entirety. All questions must be
answered and details provided for any "YES" answers.
2. If more than 3 other insureds, use additional application for
each additional insured. Reference the primary insured and their
APP numbers so that applications can be combined.
3. If additional space for primary and contingent beneficiary
designations is required, use a separate sheet of paper signed
and dated by the applicant.
4. Obtain all required signatures of the "Proposed Insured",
"Additional Insureds" and "Applicant/Owners" on the application
and the medical authorization. See Page 4.
5. If any premium is collected with the application, be certain to
leave the conditional receipt with the client.
6. Always leave the "Notice to Applicant" with the client.
B. Using Application Link
1. Fax application pages 1, 2, 3, 4 & 6 and cover sheet to
1-800-572-0152.
2. There will be no need for you to order Exam and Blood
Requirements, Attending Physician Statements, Inspection Reports.
u If you wish to order your own Medical Requirements,
please check the boxes in #5 for the requirements you
are ordering.
u If you want Application Link to order the requirements,
check the box in #5 indicating Application Link will
order requirements.
Application Link will do it for you !
3. If you need to check the status on any underwriting requirement
ordered by Application Link, call:
1-800-473-9158
4. For an update on all underwriting and issue activity, check the
System for details.
5. Mail original application along with the initial premium to WRL.
C. If NOT Using Application Link
1. Order all necessary Medical Requirements through one of our
Approved Paramed Services.
2. Mail completed Application, Additional forms, etc. to WRL.
<PAGE>
No.
CONDITIONAL RECEIPT
AUSA Life Insurance Company, Inc. ("AUSA") has received
from ______________________________________ this __________ day of
_____________________, 19____ a premium deposit of $____________ in connection
with an application for life insurance, said application bearing the same number
as set forth above. Unless the conditions stated on the back of this receipt are
fulfilled, no conditional coverage shall take effect and this payment will be
refunded. All premium checks must be made payable to AUSA. Do not make checks
payable to the agent or leave payee blank.
No Agent can waive any of the conditions stated on this receipt
I have received and read this Conditional Receipt. It has been explained to me
by the Agent and I understand and agree to all the conditions and limitations.
Signature of Agent
Signature of Applicant
NOTE: If you do not receive a policy or refund of the amount you paid within
60 days from the date of this receipt, please notify AUSA Life Insurance
Company, Inc., P.O. Box 5068, Clearwater, FL 34618-5068.
(This receipt must not be detached unless payment is made at time of
application)
(over)
NOTICE OF INFORMATION PRACTICES
AUSA Life Insurance Company, Inc.
IMPORTANT: This notice must be given to the Proposed Insured(s) whenever an
application is completed.
Sources of
Information
We value your privacy. Your application is our main source of
information. As a part of this application, we may,
at our expense:
o ask you to have an examination, which may include special
tests such as an electrocardiogram, chest x-ray, blood
studies, or urinalysis;
o ask physicians, medical practitioners, clinics, hospitals,
or other health care providers for information about you;
o obtain information from the Medical Information Bureau and/
or a consumer reporting agency. Please refer to the lower
portion of this notice for further details about this
procedure;
o obtain information from other insurance companies you have
applied to in the past. We use this information only for
evaluating your insurance application.
Safeguarding
Your Privacy
We treat all information about you confidentially. Ordinarily,
it will be provided to third parties only if you authorize us
in writing to do so. In rare instances, we may be required to
provide some or all of the information without your consent.
We may send information to state insurance departments at
their request as part of their regulatory duties, or to law
enforcement facilities in response to a summons or subpoena.
We may also release information in our files to our reinsurers
and to other life insurance companies to whom you have applied
for life and health insurance or to whom a claim for benefits
may be submitted.
On your written request, we will send you a summary or copy of
the relevant information obtained in connection with your
application.
Confidential or detailed medical information will only be
disclosed through the physician of your choice, with whom you
may discuss it. Also, on your request, a copy of any consumer
report or credit report we obtain on you will be provided to
you by the responsible agency.
<PAGE>
We will not send you information we might collect in
expectation of or in connection with any claim or civil or
criminal proceeding such as information relating to suspected
fraud or material misrepresentation. We may gather information
from you which is used for statistical purposes or marketing
research, which will not identify you individually.
Correcting
Information
If you feel any information in our file is incorrect or
incomplete, you may ask us to review it. If we agree, we will
make any necessary corrections and inform anyone who received
such information within the past two years. If we do not
agree, you may file a statement of dispute with us. We will
send that statement to anyone receiving such information in
the past two years. We will also include it in any future
disclosure of the disputed information.
<PAGE>
CONDITIONS UNDER WHICH THIS PAYMENT SHALL CAUSE CONDITIONAL COVERAGE
TO TAKE EFFECT
(1) Each and every person proposed for insurance must be insurable and
acceptable to AUSA under its underwriting rules for the amount, plan and risk
classification applied for on the later of: (A) the date of application, or (B)
the date of completion of all initial medical tests and examinations required by
AUSA. (2) Any check given for payment must be honored on first presentation.
(This receipt and all coverages applied for on the application are void if a
check or draft received for payment of the initial premium is not honored for
payment when presented for payment on first presentation.)
AMOUNT OF CONDITIONAL LIFE INSURANCE COVERAGE
If conditional coverage becomes effective under the terms of this receipt, then
the amount of conditional life insurance coverage on any person proposed for
insurance is the lesser of: (1) the amount of life insurance applied for on such
person, or (2) $300,000 reduced by the amounts payable under all other life
insurance or accidental death benefits then in force or pending with AUSA.
WHEN CONDITIONAL COVERAGE BEGINS
If the conditions listed above are fulfilled, then the amount of conditional
coverage specified above shall take effect on the later of: (1) the date of the
application, or (2) the date of the completion of all initial medical tests and
examinations required by AUSA.
All conditional coverages for each and every person proposed for insurance will
be deemed void if the application contains material misrepresentations.
Benefits under this conditional receipt coverage will be denied if any person
proposed for insurance commits suicide.
WHEN CONDITIONAL COVERAGE ENDS
Conditional coverage shall terminate automatically, without notice, on the
earliest of the following dates: (1) the date AUSA approves the policy as
applied for; (2) 10 days following any counteroffer by AUSA to offer insurance
to any person proposed for insurance under a different plan or at an increased
premium or on a different rate class; (3) at the end of the fraction of a year
which the payment bears to the premium required to provide one month of
insurance coverage in the amount as described above; or (4) at the beginning of
the 60th day following the date of this receipt. U00256NY
FAIR CREDIT REPORTING ACT
We may request an investigative consumer report to help us determine your
eligibility for the insurance you have requested. This report may concern
your: a) character, b) general reputation, and c) personal characteristics
such as health, occupation, and finances, except as may be related directly
or indirectly to your sexual orientation. When applicable, it will also
concern information on such matters as your driving record, health history,
use of alcohol or drugs and hazardous sports participation.
The consumer reporting agency may obtain information by interviewing you or
members of your family, business associates, financial institutions, and
acquaintances. You may ask that the agency interview you in person or by
telephone.
The agency may also check public records such as police and motor vehicle
records.
This information is for insurance purposes only. We will not reveal it to
anyone without your authorization. However, the consumer reporting agency
may retain and release information to others under certain circumstances.
If you ask and give proper identification, the agency will provide you with
a copy of the report and explain their retention and release practices.
Please contact us if you wish to know more about the nature and scope of
these reports and how we use them.
THE MEDICAL INFORMATION BUREAU PRE-NOTICE
The Medical Information Bureau ("MIB") is a non-profit organization of life
insurance companies which operates as an information exchange for its
members.
We may make reports to the MIB regarding factors affecting your
insurability. Underwriting decisions, however, are not reported to the MIB.
If you apply to another Bureau member company for life or health insurance
or submit a claim for benefits, the MlB will, upon request, provide that
company with information in its file.
Upon your written request, the MIB will arrange for disclosure to you of
any information it has in your file.
<PAGE>
If you feel the information in the MIB's file is incorrect, you may contact
the MIB and seek a correction in accordance with procedures outlined in the
Federal Fair Credit Reporting Act. The address of the MIB's office is: MIB,
Inc.; P.O. Box 105, Essex Station; Boston, MA 02112. MIB's telephone
number: (617) 426-3660
If you would like to know more about how we collect, evaluate and control
information about you as one of our applicants for insurance, our sales
representatives will be happy to assist you or you may contact us at our
office:
Any Other
Questions?
Administrative Office: AUSA Life Insurance Company, Inc.
P.O. Box 5068
Clearwater, Florida 34618-5068
1-813-587-1800
<PAGE>
APP
LIFE APPLICATION -Page One
APPLICATION FOR LIFE INSURANCE TO
AUSA Life Insurance Company, Inc.
Administrative Office: P.O.BOX 5068 CLEARWATER, FL 34618-5068
PLEASE USE BLACK INK.
Questions 1 through 14 relate to the
PROPOSED PRIMARY INSURED
1. NAME (First,Middle,Last)
2. SEX 3. BIRTHDATE (Mo./Day/Yr.)4. BIRTHPLACE (State)
M F
5. SOCIAL SECURITY NUMBER 6. HEIGHT 7. WEIGHT
8. RESIDENCE
Street_____________________________________________________
City _____________________________ County _________________
State ________________ Zip _______________ Years _____________
Address for past 3 years ______________________________________
Telephone Number: _________________________________________
9. OCCUPATION __________________________________________
Duties __________________________________________________
Annual Income _____________ Net Worth __________________
Employer ________________________________________________
Address ________________________________________________
_________________________ Zip ___________ Years _________
Telephone Number: _______________________________________
10. LIFE INSURANCE IN FORCE ON PROPOSED PRIMARY INSURED None
Issued Year Company Amounts of Ins.
11. NAME AND ADDRESS OF APPLICANT (OWNER)
If other than primary insured
Telephone Number: ____________________________________
TAX I.D. or SOCIAL SECURITY NUMBER RELATIONSHIP DOB
12. SEND PREMIUM
NOTICES TO:
Owner's Residence Owner's Business
Other (Indicate in special instructions)
13. PREMIUMS PAYABLE
Annual Semi-Annual
Checkomatic Other ______________
Modal Premium $ ______________
<PAGE>
Is this intended to be a 1035 Exchange o Yes o No
14. BENEFICIARY (Print Full Names)
Primary- Percent % Relationship
Contingent- Percent % Relationship
If more than one primary or contingent beneficiary is designated, proceeds will
be divided equally among the survivors within class unless otherwise indicated.
Questions 15 through 22 relate to the
JOINT OR OTHER INSURED (If Insurance Applied For)
15. NAME (First,Middle,Last)
16. BIRTHDATE (Mo./Day/Yr.)
17. BIRTHPLACE (State)
18. SOCIAL SECURITY NUMBER 19. HEIGHT 20. WEIGHT
21. OCCUPATION 22. LIFE INSURANCE (IN FORCE) $______________
23. DEPENDENT CHILDREN PROPOSED FOR INSURANCE
Name Relationship Birth Date Height Weight
A)
B)
C)
D)
Are all children listed? Yes No
Are all children living with the primary insured?
Yes No If not, explain why: ____________________
24. PROPOSED INSURANCE
1. BASIC PLAN____________________________________
2. SPECIFIED AMOUNT $_______________
3. OPTION TYPE:
A o Level Benefit
B o Increasing Benefit
C o Option B to age 70 then grading down
4. NO LAPSE GUARANTEE OPTION
o 5yr. (FWP) o 10yr. (FWP)
5. RIDERS
o PRIMARY INSURED RIDER $__________
o PRIMARY INSURED RIDER PLUS $__________
o OTHER INSURED RIDER (A) $__________
PROPOSED INSURED___________________________
o OTHER INSURED RIDER (B) $__________
PROPOSED INSURED___________________________
o OTHER INSURED RIDER (C) $__________
PROPOSED INSURED___________________________
o CHILDREN'S INSURANCE RIDER $__________
o INDIVIDUAL INSURED RIDER (FWP) $__________
o INDIVIDUAL INSURED RIDER (FWP) $__________
o JOINT INSURED RIDER (FWP) $__________
<PAGE>
o WEALTH PROTECTION RIDER (FWP) $__________
Additional Benefits (Primary Insured only)
Disability Waiver Rider $__________
Disability Waiver and Income Rider $__________
Accidental Death Benefit $__________
<PAGE>
LIFE APPLICATION - Page Two
Part II
PLEASE CHECK
APPROPRIATE COLUMN. NOTE: QUESTIONS APPLY TO EACH PERSON PROPOSED FOR INSURANCE
Yes No
25. To the best of your knowledge, has any Proposed Insured within the last 10
years had or been told by a member of the medical profession that he or she
had: A. Heart murmur, high blood pressure, chest pain, heart
attack, stroke, or other disorder of the heart or circulatory
system? o o
B. Asthma, Emphysema, Chronic Bronchitis or any other
Respiratory disorder; colitis, ulcer or any other
gastrointestinal disorder; hepatitis, liver or kidney
disorder? o o
C. Cancer, tumor, polyp, breast, prostate or any other reproductive
disorder; or any thyroid or endocrine disorder? o o
D. Brain, mental, nervous or seizure disorder; or any
paralysis or suicide attempt? o o
E. Diabetes, sugar, albumin, blood or pus in the urine? o o
26. To the best of your knowledge has any Proposed Insured
within the last 10 years had or been told by a member of the
medical profession that he or she had:
A. A diagnosis of AIDS (Acquired Immune Deficiency
Syndrome), or tested positive for HIV (Human
Immunodeficiency Virus)? o o
B. Used amphetamines, heroin, cocaine, marijuana or any
other illegal or controlled substance except as prescribed
by a physician? o o
C. Been on or are now on prescribed medication or diet? o o
D. Had or been
advised to have any hospitalization, surgery
or any diagnostic test including, but not limited to,
electrocardiograms, blood studies, scans, MRI's or other
test? o o
E. An examination, treatment, or consultation with a doctor
other than above? o o
F. Have or have had a parent, brother or sister who has/had coronary artery
death or disease prior to age 60? o o
G. Sought or been advised to seek treatment, limit or
discontinue use of alcohol? o o
27. To the best of your knowledge have you or any Proposed
Insured in the last 10 years:
A. Ever piloted a plane, helicopter or glider, or have any
intentions of piloting an aircraft? o o
B. Ever participated in any sport, avocation or hobby such
as skin-diving, skydiving, automobile or motorcycle
racing, mountain climbing, or have you any intention
to do so? o o
C. Has any Proposed Insured had their driver's license
restricted, revoked, or been cited for a moving violation?
Give reason, Driver's License Number and Licensed State. o o
28. Has any Proposed Insured ever been convicted of a misdemeanor or felony? o
o
29. Ever been declined, rated, postponed for insurance or reinstatement of
life, accident or sickness insurance or has a policy ever been
cancelled or renewal refused? o o
<PAGE>
30. Will the insurance applied for on any proposed
insured replace or change any existing annuity or life policy issued by
this or any other company?
If yes, complete replacement forms. o o
31. Is there an application for life, accident, or
sickness insurance now pending or contemplated
on any proposed insured with this or any other
company? o o
Details of "Yes" answers. Include: a. Identity of person, b. Question Number,
c. Diagnosis and treatment, d. Results, e. Dates and durations, f. Names and
addresses of all attending physicians and medical facilities.
<PAGE>
LIFE APPLICATION - Page Three
32. Have any proposed insured(s) used tobacco in the last twelve months?
r Yes r No Name:_____________________
<TABLE>
<CAPTION>
33. RATE CLASS QUOTED (Must be completed)
<S> <C> <C> <C> <C> <C>
Primary Insured r Ult. Select r Select r Ult. Standard r Standard r Juvenile
Other Insured (A) r Ult. Select r Select r Ult. Standard r Standard r Juvenile
Other Insured (B) r Ult. Select r Select r Ult. Standard r Standard r Juvenile
Other Insured (C) r Ult. Select r Select r Ult. Standard r Standard r Juvenile
</TABLE>
34. Name and address of personal physician (If none, so state)
PRIMARY INSURED JOINT OR OTHER INSURED CHILDREN
Date and reason last consulted a physician Date and reason last consulted a
physician Date and reason last consulted a physician
35. Personal Financial Statement
(a) Gross Income Current Year $____________
(b) Marginal Tax Bracket $____________
(c) Assets $____________
(d) Liabilities $____________
(e) Net Worth $____________
(f) Net Worth (exclusive of $____________
home furnishings, automobiles)
Complete for Corporation, Partnership, Pension or Trust
(a) Current estimated value $_________________
(b) Assets Liquid $_________________
Nonliquid $_________________
(c) Liabilities $_________________
For over $1 million applied coverage complete a separate financial
questionnaire.
<TABLE>
<CAPTION>
36. Sub-Account Allocation
Allocation Election* (For variable plans only)
Subaccount Allocation Subaccount Allocation Subaccount Allocation
<S> <C> <C> <C> <C>
Growth _________ Global _________ C.A.S.E. Growth _________
Strategic Total Return _________ Growth & Income _________ U.S. Equity _________
Emerging Growth _________ Aggressive _________ Int'l Equity _________
Money Market _________ Balanced _________ Other _________
Bond _________ Tactical Asset _________ Other _________
Fixed _________ Value Equity _________ Other _________
* Allocation must be at least 10% and a whole number 100%
</TABLE>
Customer's Main Investment Objectives:q Safety of Principal q Income q Long-Term
Growth
q Trading Profits q Other
37. Suitability for Variable Life Insurance Policy
Complete for all variable plans:
(a) Have you, the Proposed Insured, and Purchaser, if other than the Proposed
Insured, received the current Prospectus for the
policy?............................................................ (b) DO YOU
UNDERSTAND THAT UNDER THE POLICY APPLIED FOR (EXCLUSIVE OF ANY OPTIONAL
BENEFITS), THE AMOUNT OF DEATH BENEFIT AND THE ENTIRE
<PAGE>
AMOUNT OF THE POLICY CASH VALUE MAY INCREASE OR DECREASE DEPENDING
UPON INVESTMENT EXPERIENCE?.....................................................
(c) With this in mind, is the policy in accord with your insurance objectives
and your anticipated financial needs?...........................................
<PAGE>
To Be Completed by The Registered Representative
Will the policy applied for replace or change any existing life insurance policy
or annuity? p Yes p No
If replacement of existing insurance is involved, have you complied with all
state requirements, including any Disclosure and Comparison Statements?
p Yes p No
If "No", explain
________________________________________________________________________________
AUTHORIZATION TO OBTAIN INFORMATION
I authorize any physician, medical professional, hospital, clinic, other medical
care institution, the Medical Information Bureau, Inc., insurance company,
consumer reporting agency, or employer having information available as to
employment, other insurance coverage, medical care, advice or treatment with
respect to any physical or mental condition regarding me or my children who are
to be insured, to give such information to AUSA Life Insurance Company, Inc.,
its reinsurers, or any consumer reporting agency except the Medical Information
Bureau acting on AUSA's behalf.
I authorize AUSA to obtain an investigative consumer report on me.
I understand that this information will be used by AUSA or its reinsurers, to
determine eligibility for life insurance. I agree that this authorization is
valid for two and one-half years from the date signed. I know that I have the
right to receive a copy of this authorization upon request. I agree that a
photographic copy of this authorization is as valid as the original.
I have received a copy of the "Notice of Information Practices" attached to this
application.
I also hereby authorize AUSA to provide it's affiliated companies any and all
information provided herein and obtained hereafter on me. This authorization
shall be valid from the date signed below until affirmatively withdrawn in
writing by myself.
I elect not to have personal information disclosed to non-affiliates of AUSA for
marketing purposes.
I elect to be interviewed if an investigative consumer report is prepared in
connection with this application.
CERTIFICATION
Under penalties of perjury, I (the owner) certify (1) that the number shown in
question 5 (or the number shown in question 11, if the owner is other than the
primary insured) is my correct Taxpayer Identification Number, and (2) that I am
not subject to backup withholding because (a) I have not been notified by the
IRS that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (b) if I ever was so notified, the IRS has
notified me that I am no longer subject to backup withholding. (If the Internal
Revenue Service has notified you that you are subject to backup withholding and
you have not received notice from the Service that backup withholding has
terminated, you should strike out the language in (2) above that you are not
subject to backup withholding due to notified payee underreporting.)
REPRESENTATIONS
I represent that the statements and answers in this application are true and
complete to the best of my knowledge and belief. I understand that I should
consult my own tax advisor and/or legal counsel as to the consequences of using
this product in conjunction with my own particular tax or financial plan. It is
agreed that:
(a) the statements and answers given in this application, and any
amendments or application supplements to it or statements made to the
medical examiner, will be the basis of any insurance issued;
(b) no agent or medical examiner has the authority to make or alter any
contract for the Company;
(c) if a premium deposit is given in exchange for the Conditional Receipt,
no insurance shall take effect unless all of the conditions set out in
that receipt are satisfied;
(d) if a premium deposit is not given, no insurance shall take effect
unless all of the following conditions are satisfied; (1) a policy
issued by the Company is delivered to and accepted by the owner during
the lifetime of each person to be
covered by such policy, (2) the full first premium is paid, and
(3) the health and insurability of each person proposed for
insurance has not changed since the date of this application.
"ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING
ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING,
INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE
ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY NOT TO
EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH SUCH
VIOLATION."
Signed at ______________________________________________
(City and State)
<PAGE>
on______________________________________, 19__________
- -----------------------------------------------------
Signature of proposed insured (Child over age 15 must sign)
- -----------------------------------------------------
Signature of Agent State License Number
- -----------------------------------------------------
Social Security Number of Agent Print Agent Name
- ------------------------------------------------------
Signature of Joint Insured or OIR (A)
- -----------------------------------------------------
Signature of OIR (B)
- -----------------------------------------------------
Signature of OIR (C)
- -----------------------------------------------------
Signature of applicant (owner) other than proposed insured (If business
insurance, show title of officer and name of firm.) (If proposed insured is
under age 18, parent must sign.)
<PAGE>
AUSA Life Insurance Company, Inc.
The "Company"
Administrative Office: P.O. Box 5068 o Clearwater, FL 34618-5068
AGENT'S REPORT
1. How long have you known the Proposed Insured? _____________________________
2. To your knowledge, has any Proposed Insured used tobacco within the past 12
months? p Yes p No
3. Did you give the "Notice of Information Practices" to the Proposed Insured?
(If applicable) p Yes p No
4. Are you submitting or do you plan to submit an application on any Proposed
Insured on this application to any other company? p Yes p No
Company Name______________________________
Amount $___________________________________
Total amount to be placed with all companies $ ________________________
5. MEDICAL EXAMINATION
If you are arranging for the Medical Requirements, please check the items
ordered:
p SMA-Blood Profile p HOS
p Paramedical Exam p EKG
p Doctor's Exam p TVC
p Stress EKG p Request that Application
Paramedical Service Used: Link order Medical __________________
Requirements
6. Was money taken with the application? p Yes p No
Amount $______________________
If "Yes," was the Conditional Receipt completed and given to the applicant?
p Yes p No
7. Did you ask all questions in the presence of the Proposed Insureds
p Yes p No
Is any insured traveling or residing in a foreign country within the next
12 months? p Yes p No
8. Are you aware of anything about the health, habits, avocation, environment
or mode of life, except as may be related directly or indirectly to sexual
orientation, which may affect the insurability of any person proposed for
insurance? p Yes p No
_____________________________________
_____________________________________
9. If Proposed Insured is a juvenile (ages 0 through 15):
(a) Did you personally see child? p Yes p No
(b) Does child live with parents? p Yes p No
(If "No," explain.)_______________________________
--------------------------------------------------------------------------
(c) Life Insurance in force on Payor's life. $_____________
(d) Life Insurance applied for or in force on brothers and
sisters:_____________________________________
-------------------------------------------
10. Is Proposed Insured or Owner related to any InterSecurities, Inc. officer or
employee? p Yes p No
11. Is Proposed Insured or Owner a licensed Representative of any Broker/Dealer
p Yes p No If "Yes" Name and Address of Broker/Dealer
----------------------------------------------
12. Type of Sale (check two)
p Direct p Pension or Profit Sharing
<PAGE>
p Personal Needs Analysis p Salary Savings (EICS)
p Estate Planning p Gift
p Business Insurance p Salary Allotment
Purpose of Policy
Personal Insurance Business Insurance
p Mortgage p Buy-Sell
p Retirement p Key Employee
p Education p Executive Bonus
p Estate Liquidity p Deferred Compensation
p Income to Family p Split Dollar
p Cash Accumulation p Reserve Split Dollar
p Wealth Replacement p Other___________
13. REMARKS: (Check the address provided by the Applicant for each attending
physician against your local directory. If different, state correct
address.)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
PLEASE PRINT
I submit this application assuming full responsibility for delivery of any
coverage issued and for immediate transmittal to the Company of the first
premium when collected. I know of no condition affecting the insurability of any
person proposed for insurance not fully set forth herein. I certify that a
Notice of Information Practices statement was given to the Applicant when this
application was taken. (If applicable)
$ has been paid by the Applicant with this application.
_________________________________________
Signature of Writing Agent
<PAGE>
CMC____________
AUTHORIZATION AGREEMENT FOR PREAUTHORIZED PAYMENTS
ATTACH VOIDED SAMPLE
OF YOUR PERSONAL
CHECK HERE
So that you may comply with your depositor's authorization and direction as
set forth on the reverse side hereof, this Company agrees:
1. To indemnify you and hold you harmless from any loss you may suffer
as a consequence of your actions resulting from or in connection with
the execution and issuance of any check or draft, whether or not
genuine, or payment of any preauthorized ACH electronic fund transfer
debit received by you in the regular course of business for the
purpose of payment to this Company, including any cost or expenses
reasonably incurred in connection therewith.
2. In the event that any such check, draft or debit shall be dishonored
whether with or without cause, and whether intentionally or
inadvertently, to indemnify you for any loss even though dishonor
results in a forfeiture of the insurance.
3. To defend at our own cost and expense any action which might be
brought by any depositor or any other persons because of your actions
taken pursuant to the foregoing request, or in any manner arising by
reason of your participation in the foregoing plan of premium
collections.
AUSA Life Insurance Company, Inc.
Secretary
TO: AUSA Life Insurance Company, Inc.
As a convenience to me, I hereby request and authorize you to obtain payment of
amounts becoming due you by initiating charges in the form of check, drafts or
debits via ACH electronic fund transfers on my account maintained at the
(Name of Bank) (Address of Bank)
for the payment of each monthly premium under Policy No.____________________ on
the life of __________________________ This authority is to remain in effect
until revoked by me in writing, and until you actually receive such notice, I
agree that you shall be fully protected in drawing any such check or draft or
initiating such debit. I understand that if any such check, draft or debit be
dishonored by my Bank and any monthly amount due the AUSA Life Insurance
Company, Inc. is not paid within the time stipulated in the policy, said policy
shall become null and void except as otherwise provided therein.
LIST ANY OTHER POLICIES TO BE PAID BY SAME CHECK, DRAFT OR DEBIT
To:____________________________________Bank
Street Address ______________________________
City __________________ST_______Zip_________
AUTHORIZATION FOR PREAUTHORIZED
PAYMENTS TO:
<PAGE>
Western Reserve Life Assurance Co. of Ohio
P.O.BOX 5068, CLEARWATER, FL 34618-5068
As a convenience to me, I hereby request and authorize you to pay and charge to
my bank checking account checks or drafts drawn by and payable to the order of
AUSA Life Insurance Company, Inc. or to debit my account identified below via
ACH electronic fund transfers provided there are sufficient collected funds in
said account to pay the same upon presentation. This authority is to remain in
effect until revoked by me in writing, and until you actually receive such
notice I agree that you shall be fully protected in honoring any such check,
draft or debit. I further agree that if any such check, draft or debit be
dishonored, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever even though such
dishonor results in the forfeiture of insurance.
_______________ 1 (X)______________________________________
_______________ 2 (X)______________________________________
Both Authorized Signatures Required on Joint Accts.
PLEASE NOTE: There is an Indemnification
Agreement stated above.
EXHIBIT 3
Opinion of Counsel as to the legality of the securities being registered
<PAGE>
AUSA Life Letterhead
October 16, 1997
Board of Directors
AUSA Life Insurance Company, Inc.
AUSA Series Life Account
4 Manhattanville Road
Purchase, New York 10577
Gentlemen:
In my capacity as Vice President, Assistant Secretary and Counsel of AUSA Life
Insurance Company, Inc. ("AUSA Life"), I have participated in the preparation
and review of a Pre-Effective Amendment No. 2 to the Registration Statement on
Form S-6 filed with the Securities and Exchange Commission (Reg. No. 33-86696)
under the Securities Act of 1933 for the registration of flexible premium
variable life insurance policies (the "Policies") to be issued with respect to
the AUSA Series Life Account (the "Account"). The Account was established on
October 24, 1994, by the Board of Directors of AUSA Life as a separate account
for assets applicable to the Policies, pursuant to the provisions of the New
York Insurance Law.
I am of the following opinion:
1. AUSA Life has been duly organized under the laws of New York and is a
validly existing corporation.
2. The Account has been duly created and is validly existing as a separate
account pursuant to New York Insurance Law.
3. Section 4240 of the New York Insurance Law provides that the portion of the
assets of the Account equal to the reserves and other liabilities for
variable benefits under the Policies is not chargeable with liabilities
arising out of any other business AUSA Life may conduct. Assets allocated
to the Fixed Account under the Policies, however, are part of AUSA Life's
general account and are subject to AUSA Life's general liabilities from
business operations.
4. The Policies, when issued as contemplated by the Registration Statement,
will be legal and binding obligations of AUSA Life in accordance with their
terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Robert F. Colby
- ------------------------
Robert F. Colby
Vice President,
Assistant Secretary and Counsel
EXHIBIT 6
Opinion and Consent of Alan Yaeger as to actuarial matters
pertaining to the securities being registered
<PAGE>
October 17, 1997
AUSA Life Insurance Company, Inc.
4 Manhattanville Road
Purchase, New York 10577
RE: Registration No. 33-86696
Gentlemen:
This opinion is furnished in connection with the Pre-Effective Amendment
No. 2 registration by AUSA Life Insurance Company, Inc. of flexible premium
variable life insurance policies ("Policies") under the Securities Act of 1933.
The Prospectus included in the Registration Statement on Form S-6 describes the
Policies. The forms of Policies were prepared under my direction, and I am
familiar with the Registration Statement and Exhibits thereof.
In my opinion, the illustrations of death benefits, cash values and net
surrender values included in the sections entitled "Death Benefit, Cash Value
and Net Surrender Value Illustrations" and "Illustration of Benefits" (Appendix
A) and the illustrations of death benefits and cash values included in Appendix
B of the Prospectus, based on the assumptions stated in the illustrations, are
consistent with the provisions of the respective forms of the Policies.
I hereby consent to use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
Prospectus.
Very truly yours,
/s/ Alan M. Yaeger
- --------------------
Alan M. Yaeger
Actuary
EXHIBIT 10
Powers of Attorney
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ PATRICK S. BAIRD
------------------------
Patrick S. Baird
Vice President and
Chief Financial Officer
NOVEMBER 4, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ WILLIAM BROWN, JR.
--------------------------
William Brown, Jr.
Director
OCTOBER 15, 1997
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ WILLIAM L. BUSLER
------------------------
William L. Busler
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ JACK R. DYKHOUSE
-------------------------
Jack R. Dykhouse
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ STEVEN E. FRUSHTICK
-----------------------
Steven E. Frushtick
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ C. THOR HANSON
-----------------------
C. Thor Hanson
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ B. LARRY JENKINS
-----------------------
B. Larry Jenkins
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ PETER P. POST
-----------------------
Peter P. Post
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ COR H. VERHAGEN
-----------------------
Cor H. Verhagen
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s E. KIRBY WARREN
-----------------------
E. Kirby Warren
Director
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s TOM A. SCHLOSSBERG
-----------------------
Tom A. Schlossberg
Director and President
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s COLETTE F. VARGAS
-----------------------
Colette F. Vargas
Director and Chief Actuary
OCTOBER 1, 1997
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s VERA F. MIHAIC
-----------------------
Vera F. Mihaic
Director and Vice President
NOVEMBER 18, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s/ BRENDA CLANCY
-----------------------
Brenda Clancy
Treasurer
OCTOBER 2, 1997
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints WILLIAM H. GEIGER, THOMAS E. PIERPAN and PRISCILLA I.
HECHLER, and each of them, severally, his true and lawful attorneys and agents
in his name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of AUSA Series Life Account under the Securities Act of
1933 and the Investment Company Act of 1940, and all amendments, consents and
exhibits thereto; (b) to withdraw such statements or any amendments or exhibits
and make requests for acceleration in connection therewith; (c) to take all
other action of whatever kind or nature in connection with such registration
statements which said attorneys may deem advisable; and (d) to make, file,
execute, amend and withdraw documents of every kind, and to take other action of
whatever kind they may elect, for the purpose of complying with the laws of any
state relating to the sale of securities of the AUSA Series Life Account, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
/s PATRICK E. FALCONIO
-----------------------
Patrick E. Falconio
Senior Vice President and
Chief Investment Officer
OCTOBER 2, 1997
Date