AUSA SERIES LIFE ACCOUNT, S-6/A, 1998-06-24

AUSA SERIES LIFE ACCOUNT
S-6/A, 1998-06-24

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As filed with the Securities and Exchange Commission on June 24, 1998
Registration File Nos. 333-38343/811-8878

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
--------------------------------
FORM S-6
---------------------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
---------------------------------

AUSA SERIES LIFE ACCOUNT
(Exact Name of Trust)

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

4 Manhattanville Road
Purchase, New York 10577
(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
(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.

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 FINANCIAL FREEDOM BUILDERSM
INDIVIDUAL FLEXIBLE
PREMIUM VARIABLE LIFE
INSURANCE POLICY

Issued by
AUSA LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road
Purchase, New York 10577
1-800-322-7160

The individual 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 Issue Ages 0-45 is $50,000, declining to $25,000 for Issue
Ages 46 to 80.

The Policy provides a death benefit payable at the Insured's death, 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 allowing the Policyowner to cancel
the Policy within 10 days after receipt.

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.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

This 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 July , 1998

<PAGE>

TABLE OF CONTENTS

PAGE
-----

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 ........................ 13
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
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
Surrender Charge .............................. 26
Pro Rata Decrease Charge ...................... 27
Cash Value Charges ............................ 27
Optional Cash Value Charges ................... 28
Charges Against the Series Account ............ 28
Expenses of the Fund .......................... 28
Group or Sponsored Policies ................... 28
Associate Policies ............................ 29
Builder Plus Programsm ........................ 29
POLICY RIGHTS .................................. 30
Loan Privileges ............................... 30
Surrender Privileges .......................... 31
Examination of Policy Privilege
("Free-Look") ............................. 32
Conversion Rights ............................. 32
Benefits at Maturity .......................... 32
Payment of Policy Benefits .................... 32

PAGE
-----

GENERAL PROVISIONS ............................. 33
Postponement of Payments ...................... 33
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 ................... 34
Terminal Illness Accelerated Death
Benefit Rider ............................. 35
THE FIXED ACCOUNT .............................. 35
Fixed Account Value ........................... 35
Minimum Guaranteed and Current
Interest Rates ............................ 36
Allocations, Transfers and Withdrawals ........ 36
DISTRIBUTION OF THE POLICIES ................... 36
FEDERAL TAX MATTERS ............................ 37
Introduction .................................. 37
Tax Charges ................................... 37
Tax Status of the Policy ...................... 37
Tax Treatment of Policy Benefits .............. 38
Possible Tax Law Changes ...................... 39
Employment-Related Benefit Plans .............. 39
SAFEKEEPING OF THE SERIES
ACCOUNT'S ASSETS ............................... 39
VOTING RIGHTS OF THE SERIES
ACCOUNT ........................................ 40
STATE REGULATION OF AUSA LIFE .................. 40
REINSURANCE .................................... 40
EXECUTIVE OFFICERS AND DIRECTORS
OF AUSA LIFE ................................... 40
LEGAL MATTERS .................................. 41
LEGAL PROCEEDINGS .............................. 41
EXPERTS ........................................ 41
ADDITIONAL INFORMATION ......................... 42
YEAR 2000 MATTERS .............................. 42
INFORMATION ABOUT
AUSA LIFE'S
FINANCIAL STATEMENTS ........................... 42
APPENDIX A - ILLUSTRATION
OF BENEFITS .................................... 43
APPENDIX B - WEALTH INDICES OF
INVESTMENTS IN THE U.S. CAPITAL
MARKETS ..................................... 46
INDEX TO FINANCIAL
STATEMENTS ..................................... 48
APPENDIX C - SURRENDER CHARGE .................. 49

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 mailing address of the Administrative Office
of AUSA Life is P.O. Box 9054, Clearwater, Florida 33758-9054.

ATTAINED AGE -- 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. The
Fixed Account is 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.

IN FORCE -- Condition under which the coverage is active and the
Insured's life remains insured.

INITIAL PREMIUM -- The amount which must be paid before coverage begins.

INSURED -- The person upon whose life the Policy is issued.

ISSUE AGE -- Issue Age refers to the age on the Insured's birthday
nearest the Policy Date.

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 the Insured is living and the Policy is In Force.

MINIMUM MONTHLY GUARANTEE PREMIUM -- During the No Lapse Period, an
amount as shown on the Policy Schedule Page, used to determine whether a grace
period will begin whenever Net Surrender Value is insufficient to meet monthly
deductions for cost of insurance, the Policy Charge and any optional cash value
charges.

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 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.

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.

NO LAPSE DATE -- The No Lapse Date as specified in the Policy, which is
the fifth Policy Anniversary.

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
deductions.

PLANNED PERIODIC PREMIUM -- A scheduled premium of a level amount at a
fixed interval over a specified period of time.

POLICY -- The 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 ("OWNER") -- The person who owns the Policy and who may
exercise all rights under the Policy while living.

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. 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.

1
<PAGE>

TERMINATION -- Condition when the Insured's life 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
LIFE INSURANCE POLICY?

Like conventional fixed-benefit life insurance, as long as the Policy
remains In Force, the Policy can provide: (1) the payment of a
minimum death benefit to a Beneficiary upon the Insured's death;
(2) the accumulation of Cash Value; and (3) 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 Sub-Accounts.
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 DEATH BENEFIT OPTIONS ARE AVAILABLE UNDER THE POLICY?

The Policy provides the payment of benefits upon the death of the Insured.
The Policy contains three 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 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 Insured, or a specified percentage times
the Cash Value of the Policy on the date of death of the Insured.
Under Death Benefit Option C, the death benefit is equal to the
greater of the amount payable under Death Benefit Option A, or the
Specified Amount times a factor equal to the lesser of 1.0, and
four one-hundredths (.04) times the result of 95 minus the Insured's
Attained Age at death, plus the Cash Value of the Policy as of the date
of death of the Insured.
As long as the Policy remains In Force, the minimum death benefit payable
under any 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 for Issue Ages 0-45 is $50,000, declining to
$25,000 for Issue Ages 46 to 80. 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 Children's
Insurance Rider; an Other Insured Rider; an Accidental Death
Benefit Rider; a Disability Waiver Rider; a Disability Waiver and
Monthly Income Rider; a Primary Insured Rider, and a Primary
Insured Rider Plus 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 the 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 General Provisions -
Terminal Illness Accelerated Death Benefit Rider, p. 35.)

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.)
3. HOW MAY THE AMOUNT OF THE DEATH BENEFIT AND CASH VALUE VARY?
Under any of the death benefit options, as long as the Policy remains In
Force, the death benefit will not be less than the current
Specified Amount of the Policy. 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

3
<PAGE>

Sub-Accounts of the Series Account, any cash withdrawals, 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.)
4. WHAT FLEXIBILITY DOES A POLICYOWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH
BENEFIT?
The Policyowner has significant flexibility to adjust the death benefit
payable by changing the Death Benefit Option, 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 made
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 Policy Benefits - Change in Death Benefit Option, p. 16,
and Death Benefit - Decrease in Specified Amount, p. 17.)
5. WHAT FLEXIBILITY DOES A POLICYOWNER HAVE IN CONNECTION WITH PREMIUM
PAYMENTS?
A Policyowner has considerable flexibility concerning the amount and
frequency of premium payments. AUSA Life will require the
Policyowner to pay an Initial Premium, at least equal to a minimum
monthly guarantee premium set forth in the Policy, before insurance
coverage is In Force. 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 a premium payment of a
level amount at a fixed interval over a specified period of time.
The amount and frequency of Planned Periodic 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.)
6. 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), and a grace period expires without a sufficient
payment by the Policyowner. (See Loan Privileges - Indebtedness, p.
31.) 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, the total
premiums received (minus any withdrawals, any outstanding loans,
and any pro rata Decrease Charge deducted from the Cash Value)
equals or exceeds the Minimum Monthly Guarantee Premium shown in
the Policy times the number of months since the Policy Date,
including the current month. The Minimum Monthly Guarantee Premium
is set forth in the Policy, unless changed due to a requested
change under the Policy by the Policyowner, at which time the
Policyowner will be notified of the new Minimum Monthly Guarantee
Premium and its effective date. 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 deductions. If the Insured is alive and
the Policy is In Force on the Maturity Date, which is the Insured's
95th 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.)
7. 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. AUSA Life reserves the right to impose a charge of
$25 for each change in allocation instructions in excess of one per
Policy quarter.
8. 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. AUSA
Life will make a refund in accordance with a calculation described
under Policy Rights - Examination of Policy Privilege
("Free-Look"), p. 32. If the Policy is returned within the
Free-Look period, it will be void from the beginning and a refund
will be made to the Owner. The refund will equal the total of all
premiums paid for this Policy.

4
<PAGE>

9. 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. 31.)
If Death Benefit Option A is in effect, cash withdrawals will
reduce the Policy's Specified Amount by the amount of the cash
withdrawal.
10. 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 Federal income tax penalty. (See Federal Tax Matters, p. 37.)
The interest rate on a Policy loan is 5.66% payable annually in advance
(equivalent to an effective annual rate of 6.00%). 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 credited with a rate higher than 4%
per year. The minimum loan amount is generally $500. (See Policy
Rights - Loan Privileges, p. 30.) 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. 35.)
There are risks involved in taking a Policy loan, including the potential
for a Policy to lapse if anticipated 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.
38.)

11. WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE POLICY?
Certain charges are deducted from each premium. A Premium Expense Charge
equal to 6.0% 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%. In addition, $3.00 per premium payment is
deducted to compensate AUSA Life for costs associated with premium
billing and collection. (See Charges and Deductions - Premium
Expense Charge, p. 26.)

A "surrender charge" is deducted if the Policy is surrendered during the
first fifteen Policy years. The Surrender Charge imposed upon early
surrender or a decrease in Specified Amount will be significant. As
a result, you should purchase a Policy only if you have the
financial capability to keep it In Force for a substantial period
of time. The surrender charge is calculated by multiplying the
Specified Amount as of the Policy Date by the Surrender Charge per
$1,000 of Specified Amount as shown in the Policy for the Policy
year during which surrender occurs. In addition, a pro rata
Decrease Charge equal to a pro rata portion of the Surrender Charge
will be calculated and charged to the Cash Value for any decreases
in the Policy's Specified Amount which occur during the first
fifteen Policy years. Any future Surrender Charges will be reduced
proportionately according to the amount of any previous pro rata
Decrease Charge. (See Charges and Deductions - Surrender Charge, p.
26 and Pro Rata Decrease Charge, p. 27.) Cost of insurance charges and a
current $5.00 monthly Policy Charge, guaranteed never to exceed
$7.50, 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 experience of the Portfolios in which the Policy is
invested. (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 rate of 0.90% of the average daily net assets of
each Sub-Account of the Series Account. AUSA Life currently intends
to reduce this charge to 0.75% after the first fifteen Policy
years. However, such reduction is not guaranteed, and AUSA Life
reserves the right to maintain this charge at the 0.90% level after
the first fifteen Policy years. (See Charges and Deductions -
Charges Against the Series Account, p. 28.)

5
<PAGE>

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,
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-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 incurred 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. 37.)

12. ARE TRANSFERS PERMITTED AMONG THE ACCOUNTS?
Yes. A Policyowner may transfer Cash Value 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. 36.) AUSA Life
reserves the right to charge a $25 fee for each transfer in excess
of one per Policy month or twelve per Policy year. This charge will
not be increased. (See Payment and Allocation of Premiums -
Allocation of Premiums and Cash Value - Transfers, p. 23.)
13. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PURCHASING A POLICY?
At present, there is limited guidance for determining whether a Policy
meets the requirements prescribed by tax legislation for tax
treatment as a life insurance contract under Section 7702 of the
Internal Revenue Code. With respect to a Policy that is issued on
the basis of a rate class using Ultimate Select, non-tobacco use,
Select, non-tobacco use, Ultimate Standard, tobacco use, Standard,
tobacco use, while there is some uncertainty due to the limited
guidance on Section 7702, AUSA Life nonetheless believes that a
Policy should meet the Section 7702 definition of a life insurance
contract. With respect to a Policy that is issued on a substandard
rate class, there is less guidance to determine whether such a
Policy meets the Section 7702 definition of a life insurance
contract. Thus, it is not clear whether such a Policy would satisfy
Section 7702, particularly if the Policyowner pays the full amount
of premiums permitted under the Policy. If it is subsequently
determined that a Policy does not qualify as a life insurance
contract, AUSA Life will take whatever steps are appropriate and
reasonable to attempt to have such a Policy comply with Section
7702. 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. Assuming that a Policy qualifies as a
life insurance contract for Federal income tax purposes, the death
benefit paid under the Policy generally should be fully excludable
from the gross income of the Beneficiary for Federal income tax
purposes. Moreover, the Owner should not be deemed in constructive
receipt of Cash Values under a Policy until there is a distribution
from the Policy.

A Policy may be treated as a "modified endowment contract" depending upon
the amount of premiums paid in relation to the death benefit. (See
Tax Treatment of Policy Benefits - Modified Endowment Contracts, p.
38.) If the Policy is a modified endowment contract, then all
pre-death distributions, including Policy loans and loans secured
by a Policy, will be treated first as a distribution of taxable
income to the extent of any gain and then as a return of basis or
investment in the contract. In addition, prior to age 591/2 any
distributions of gains generally will be subject to a 10% Federal
income tax penalty.
If the Policy is not a modified endowment contract, distributions
generally will be treated first as a return of basis or investment
in the contract and then as disbursing taxable income. Moreover,
Policy loans and loans secured by a Policy will not be treated as
distributions. Finally, neither distributions nor loans from a
Policy that is not a modified endowment contract are subject to the
10% Federal income tax penalty. For further elaboration on the tax
consequences of a Policy, see Federal Tax Matters, p. 37.

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) ......... 0.16% 0.13% 0.07% 0.20%
Total Fund Annual Expenses ................... 0.96% 0.93% 0.87% 1.00%

<CAPTION>
C.A.S.E. Real Estate
Balanced Value Equity Growth Securities
Portfolio Portfolio Portfolio Portfolio**
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Management Fees .............................. 0.80% 0.80% 0.80% 0.80%
Other Expenses (after reimbursement) ......... 0.14% 0.09% 0.20% 0.20%
Total Fund Annual Expenses ................... 0.94% 0.89% 1.00% 1.00%
</TABLE>

<TABLE>
<CAPTION>
Third
Avenue Strategic
Value Bond Total Return
Portfolio** Portfolio*** Portfolio
------------- -------------- --------------
<S> <C> <C> <C>
Management Fees .............................. 0.80% 0.45% 0.80%
Other Expenses (after reimbursement) ......... 0.20% 0.14% 0.08%
Total Fund Annual Expenses ................... 1.00% 0.59% 0.88%

<CAPTION>
Tactical
Growth & Money Asset International
Income Market Allocation Equity U.S. Equity
Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Management Fees .............................. 0.75% 0.40% 0.80% 1.00% 0.80%
Other Expenses (after reimbursement) ......... 0.21% 0.08% 0.07% 0.50% 0.50%
Total Fund Annual Expenses ................... 0.96% 0.48% 0.87% 1.50% 1.30%
</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, 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 incurred with respect to any Portfolio during the fiscal year
ending December 31, 1998. Prior to ISI seeking reimbursement, Policyowners
will be notified in advance.
** Because the Third Avenue Value Portfolio commenced operations on January 2,
1998, and the Real Estate Securities Portfolio commenced operations on May
1, 1998, the percentages set forth as "Other Expenses" and "Total Fund
Annual Expenses" reflect estimates of "Other Expenses" for the first year
of operations.
*** Effective January 1, 1998, the management fees for the Bond Portfolio were
reduced from 0.50% to 0.45% of the Portfolio's average daily net assets.

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
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
Value and Real Estate Securities Portfolios 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, 1999, 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, Strategic Total
Return, Growth & Income, Tactical Asset Allocation, Value Equity, C.A.S.E.
Growth, Third Avenue Value and Real Estate Securities 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, the Fund's investment
adviser, reimbursed the C.A.S.E. Growth Portfolio in the amount of $50,000, the
International Equity Portfolio in the amount of $179,000 and the U.S. Equity
Portfolio in the amount of $29,000. Without such reimbursement, the total
annual Fund expenses during 1997 for the C.A.S.E. Growth Portfolio, the
International Equity Portfolio and the U.S. Equity Portfolio would have been
1.13%, 3.12% and 1.49%, respectively.

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 1998. The Series Account was
established on October 24, 1994 and commenced operations on , 1998. The
Fund commenced operations on October 2, 1986. The rates of return shown below
depict the actual investment experience of each Portfolio of the Fund for the
periods shown. 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 by an Insured in the age
and risk classes indicated, based on the historical investment experience of
the Portfolio indicated since January 1, of the year following a Portfolio's
inception. 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 actual investment
performance, as described above, after the deduction of investment management
fees and direct Fund expenses, of the Portfolios of the Fund. The rates are
average annual compounded rates of return for the

7
<PAGE>

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; Surrender Charge, 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, p 9.)
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 (S&P 500), a widely used measure of stock market
performance. 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* 10 Years 5 Years 3 Years 1 Year
- ------------------------ ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Growth 17.65% 18.66% 14.23% 26.83% 17.54%
Global 20.41% N/A 20.38% 23.13% 18.75%
Bond 7.77% 8.98% 7.24% 10.37% 9.16%
Money Market 5.00% 5.06% 4.31% 5.22% 5.24%
Emerging Growth 20.33% N/A N/A 28.45% 21.45%
Strategic Total Return 15.07% N/A N/A 20.43% 21.85%
Aggressive Growth 17.72% N/A N/A 23.73% 24.25%
Balanced 10.44% N/A N/A 15.81% 17.10%
Growth & Income 14.17% N/A N/A 20.35% 24.65%
Tactical Asset
Allocation 17.04% N/A N/A 17.01% 16.59%
C.A.S.E Growth 20.09% N/A N/A N/A 15.03%
Value Equity 23.14% N/A N/A N/A 25.04%
U.S. Equity 27.01% N/A N/A N/A 27.01%
International Equity 7.50% N/A N/A N/A 7.50%
S&P 500 16.95% 18.06% 20.27% 31.15% 33.36%
</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 International Equity Portfolios commenced operations on January
2, 1997. The S&P 500 returns are based on an inception date of October 2,
1986.

Because the Third Avenue Value and Real Estate Securities Portfolios had not
yet commenced operations as of December 31, 1997, the above chart does not
reflect rates of return for these Portfolios.

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 actual investment experience of the
Portfolios could have affected the Option A death benefits, the Policy Cash
Value and the Net Surrender Value, the following hypothetical illustrations are
based on the actual investment experience of each Portfolio. These hypothetical
illustrations are designed to show the performance that could have resulted if
the Policy available for purchase today had been in existence during the period
of time illustrated. The actual 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, resulting in
variable monthly deductions from Cash Value that could affect performance.
These illustrations do not represent what may happen in the future.

For each Portfolio, the illustrations show Option A based on the payment
of annual premiums of $2,000 at the beginning of each Policy year, and a
Specified Amount of $165,000 for a male age 35. The illustrations assume that
the Insured is placed in AUSA Life's Ultimate Select, non-tobacco use,
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. These illustrated
values would be different if the Policyowner had chosen Death Benefit Option B
or C.

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 age, sex, 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, pages 43-45.)

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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
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 ............................... $ 1,753 $ 1,728 $ 0 $ 0
1989* .............................. 3,851 3,792 1,290 1,231
1990* .............................. 8,090 7,957 5,530 5,397
1991* .............................. 9,356 9,181 6,796 6,620
1992* .............................. 17,476 17,133 14,915 14,572
1993* .............................. 19,276 18,878 16,971 16,573
1994* .............................. 21,289 20,827 19,240 18,778
1995* .............................. 20,672 20,197 18,879 18,404
1996* .............................. 32,641 31,888 31,105 30,351
1997* .............................. 39,657 38,740 38,376 37,459
1998* .............................. 48,707 47,595 47,682 46,571
</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 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
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 ............................... $ 1,479 $ 1,457 $ 0 $ 0
1989* .............................. 3,230 3,176 669 615
1990* .............................. 5,506 5,405 2,945 2,844
1991* .............................. 7,492 7,336 4,931 4,775
1992* .............................. 10,500 10,265 7,940 7,705
1993* .............................. 12,899 12,593 10,595 10,288
1994* .............................. 16,010 15,611 13,962 13,562
1995* .............................. 16,202 15,774 14,410 13,982
1996* .............................. 21,595 21,021 20,059 19,485
1997* .............................. 22,700 22,093 21,420 20,813
1998* .............................. 26,445 25,752 25,421 24,728
</TABLE>

* For each year 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
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 ............................... $ 1,654 $ 1,631 $ 0 $ 0
1989* .............................. 3,394 3,339 833 778
1990* .............................. 5,313 5,216 2,752 2,655
1991* .............................. 7,315 7,163 4,754 4,602
1992* .............................. 9,238 9,028 6,677 6,467
1993* .............................. 11,000 10,732 8,695 8,428
1994* .............................. 12,690 12,361 10,642 10,313
1995* .............................. 14,546 14,146 12,753 12,354
1996* .............................. 16,713 16,247 15,177 14,711
1997* .............................. 18,883 18,355 17,603 17,075
1998* .............................. 21,218 20,638 20,193 19,614
</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 Global
Portfolio of the Fund would have affected benefits for a Policy dated January
1, 1993, if the Global Portfolio had been offered by 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* 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
Emerging Growth Portfolio of the Fund would have affected benefits for a Policy
dated 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* For each year 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
Strategic Total Return Portfolio of the Fund would have affected benefits for a
Policy dated 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* 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
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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* 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
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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* 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 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* 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. 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* 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
C.A.S.E. Growth Portfolio of the Fund would have affected benefits for a Policy
dated January 1, 1997, 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

* For each year 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 Value
Equity Portfolio of the Fund would have affected benefits for a Policy dated
January 1, 1997, 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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

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 35, $2,000 Annual Premium
($165,000 Specified Amount, Ultimate Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates

Because the Third Avenue Value and Real Estate Securities Portfolios had
not yet commenced operations as of December 31, 1997, there are no hypothetical
illustrations for these Portfolios.

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

13
<PAGE>

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.

AUSA Life is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.

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
33758-9054. 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). These ratings do not apply to the Series Account, its
Sub-Accounts, the Fund, its Portfolios, or to their performance.

THE SERIES ACCOUNT

AUSA Series Life Account ("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 Law, 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 sixteen 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 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 three death
benefit options offered under the Policy: Death Benefit Option A ("Option A"),
Death Benefit Option B ("Option B") and Death Benefit Option C ("Option C"). 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 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 Insured

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<PAGE>

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 Payment 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 any 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 Insured. The
limitation percentage is 250% for an Insured age 40 or below on the Policy
Anniversary prior to the date of death. For an 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 Insured's Attained Age is under 40 and that there is no outstanding
indebtedness. Under Option A, a Policy with a $50,000 Specified Amount will
generally pay $50,000 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 $20,000, the death benefit will exceed the $50,000
Specified Amount. Each additional dollar added to the Cash Value above $20,000
will increase the death benefit by $2.50.

Similarly, so long as the Cash Value exceeds $20,000, each dollar taken
out of the 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

ATTAINED AGE PER YEAR
OF INSURED LESS OVER AGE
- ------------------ ------ ---------
under 40 ......... 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

OPTION B. The death benefit is equal to the greater of (i) the
Specified Amount plus the Cash Value of the Policy on the date of death of the
Insured or (ii) the limitation percentage times the Cash Value of the Policy on
the date of death of the Insured. The applicable percentage is 250% for an
Insured age 40 or below on the Policy Anniversary prior to the date of death.
For Insureds 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 Insured is under the age of 40 and that there is no outstanding
indebtedness. Under Option B, a Policy with a Specified Amount of $50,000 will
generally pay a death benefit of $50,000 plus Cash Value. Thus, for example, a
Policy with a Cash Value of $10,000 will have a death benefit of $60,000
($50,000 + $10,000). The death benefit, however, must be at least 250% of Cash
Value. As a result, if the Cash Value of the Policy exceeds $33,333, the death
benefit will be greater than the Specified Amount plus Cash Value. Each
additional dollar of Cash Value above $33,333 will increase the death benefit
by $2.50.

Similarly, any time Cash Value exceeds $33,333, 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.

OPTION C. The death benefit is equal to the greater of (i) the Option A
death benefit; or (ii) the Specified Amount times a "Factor", plus the Cash
Value of the Policy on the Insured's date of death. The "Factor" is equal to
the lesser of 1.0, and, four one-hundreths (0.04) times the difference of 95
minus the Insured's Attained Age on the date of death.

Accordingly, under Option C the amount of the death benefit will vary as
the Cash Value and the Insured's Attained Age varies.

THREE ILLUSTRATIONS OF OPTION C.

First illustration: assume that the Insured is under the age of 40 and
that there is no outstanding indebtedness. Under Option C, a Policy with a
Specified Amount of $50,000 and with a Cash Value of $10,000 will have a death
benefit of $60,000 ($50,000 x the minimum of (1.0 and (0.04 x (95-40))) +
$10,000). So long as the Insured is under age 71, this benefit is the same as
the Option B benefit.

Second illustration: assume that the Insured is Attained Age 75 and that
there is no outstanding indebtedness. Under Option C, a Policy with a Specified
Amount of $50,000 and with a Cash Value of $12,000 will have a death benefit of
$52,000 ($50,000 x the minimum of (1.0 and (0.04 x (95 - 75))) + $12,000). The
death benefit, however, must be at least 105% of Cash Value as shown in the
Limitation Percentage Table above.

15
<PAGE>

Third illustration: assume that the Insured is Attained Age 75 and that
there is no outstanding indebtedness. Under Option C, a Policy with a Specified
Amount of $50,000 and with a Cash Value of $9,000 will have a death benefit
equal to the Specified Amount of $50,000 since the calculation of $50,000 times
the minimum of (1.0 and (0.04 x (95 - 75))) plus $9,000 is less than the
Specified Amount.

CHOOSING DEATH BENEFIT OPTION A, OPTION B OR OPTION C. 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
limitation percentage. Therefore, 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.
Option C involves a constant net amount at risk at Attained Ages 70 or less,
assuming that the death benefit is not determined by reference to the
limitation percentage. At Attained Ages greater than 70, the net amount at risk
under Option C will decline, assuming that the death benefit is not determined
by reference to the limitation percentage.

Assuming positive investment experience, the deduction for cost of
insurance under a Policy with an Option C death benefit will ultimately be less
than under a 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 or Option C, but the total death benefit under
Option B and Option C 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,
and Option C could be considered more suitable for Policyowners whose goal is
increasing total death benefit prior to Attained Age 70 and increasing Cash
Value based upon positive investment experience after Attained Age 70.

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 the Option may be made by sending AUSA Life a written request for
change. A change in death benefit Option may have Federal income tax
consequences. (See Federal Tax Matters, p. 37.)

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.

On the effective date of change to a new Option the Specified Amount will
be adjusted so that the Monthly Cost of Insurance on the effective date of
change under the new Option will be equal to the Monthly Cost of Insurance that
would have been deducted on that date under the prior Option. Upon such change,
the Policyowner will be notified by AUSA Life of the new Specified Amount.

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 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. A pro rata Decrease Charge will be assessed against
Cash Value at the time of decrease during the first fifteen Policy
years. (See Charges and Deductions - Pro Rata Decrease Charge, p.
27.)

(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. 32.) 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 Cash Value and
increases the possibility that the Policy will Lapse.

(d) A reduced level of premium payments also generally increases the
amount of pure insurance protection if Option A is elected, or
maintains

16
<PAGE>

the same amount of pure insurance protection if Option B or Option
C 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.

An Owner may increase insurance protection without increasing the
Policy's Specified Amount by purchasing a lower cost Primary Insured Rider
("PIR") at any time, or Primary Insured Rider Plus ("PIR Plus") at the time of
application for the Policy. PIR or PIR Plus increases the death benefit under a
Policy by the face amount of the rider. In addition, PIR or PIR Plus may be
canceled separately from the Policy (I.E., it can be canceled without causing
the Policy to be canceled or to lapse), and no additional Surrender Charge is
assessed in connection with cancellation of these riders (see Optional
Insurance Benefits - Primary Insured Rider and Primary Insured Plus Rider, p.
34).

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 policy
loan, plus any unearned loan interest, 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. The death benefit under Option C
will vary with the Cash Value and the Insured's Attained Age because the death
benefit equals either the Factor times the Specified Amount plus the Cash
Value, or the Specified Amount, 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 may also have Federal income
tax consequences. (See Federal Tax Matters, p. 37.) 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. A pro rata Decrease
Charge will be assessed against Cash Value at the time of decrease during the
first fifteen Policy years. (See Charges and Deductions - Pro Rata Decrease
Charge, p. 27.)

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 on or following receipt of a
written request from the Policyowner by AUSA Life. The 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 Insured
and all additional Insureds proposed for coverage 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. Each and every person proposed for
insurance must be insurable and acceptable to AUSA Life under its underwriting
rules for the amount, Policy 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 each and
every person proposed for insurance 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 person proposed
for insurance 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

17
<PAGE>

applied for, or (b) 10 days following any counteroffer by AUSA Life to offer
insurance to any person proposed for insurance under a different policy 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.

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. 31.) 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. 26); minus
(3) any outstanding Policy loan; plus
(4) any unearned loan interest.

DETERMINATION OF VALUES IN THE SERIES ACCOUNT. On the Record 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 a 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; minus

(7) Units that are redeemed to pay any pro rata Decrease Charge incurred
as a result of a decrease in the Specified Amount.

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.
35.) 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. This
charge is used to compensate AUSA Life for its assumption of
certain mortality and expense risks. The daily amount of this
charge is equal to the net assets of the Sub-Account times the
daily pro rata portion of the annual Mortality and Expense Risk
Charge rate. This annual rate is equal to ninety one-hundredths of
one percent (0.90%). AUSA Life currently intends to reduce this
rate to 0.75% after the first fifteen Policy years, however, such
reduction is not guaranteed; 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 ("SEC") 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,

18
<PAGE>

Growth Portfolio, Global Portfolio, Balanced Portfolio, Strategic Total Return
Portfolio, Bond Portfolio, Growth & Income Portfolio, Money Market Portfolio,
Tactical Asset Allocation Portfolio, C.A.S.E. Growth Portfolio, Value Equity
Portfolio, U.S. Equity Portfolio, International Equity Portfolio, Third Avenue
Value Portfolio and Real Estate Securities 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 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 objective 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 seeks growth of capital by investing
primarily in common stocks listed on a national securities exchange or traded
on NASDAQ.

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.

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 common stocks, income producing securities convertible
into common stocks, 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 by investing at least 65% and usually a higher percentage of its assets
in debt securities issued by the U.S. Government and its agencies and
instrumentalities and in other medium to high-quality debt securities.

GROWTH & INCOME PORTFOLIO: This Portfolio seeks 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 seeks to obtain maximum current
income consistent with preservation of principal and maintenance of liquidity.
The Portfolio maintains a dollar-weighted average portfolio maturity of not
more than 90 days by investing in U.S. dollar-denominated securities which have
effective maturities of not more than 13 months and present minimal credit
risks.

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 seeks 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.

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.

REAL ESTATE SECURITIES PORTFOLIO: This Portfolio seeks long-term total
return from investments primarily in equity securities of real estate
companies. Total return will consist of realized and unrealized capital gains
and losses plus income.

WRL Management, 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 the Fund and manages the Fund in
accordance with policies 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.

Janus Capital Corporation ("Janus") is sub-adviser to the Growth and
Global Portfolios of the Fund. WRL Management and Janus will divide equally
monthly compensation at the current annual rate of 0.80% of the

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aggregate average daily net assets each of the Growth Portfolio and Global
Portfolio.

AEGON USA Investment Management, Inc. ("AIMI") is sub-adviser to the
Balanced and Bond Portfolios 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 the current annual rate of 0.45% 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 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. 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 for its services,
Federated will receive payment 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 and the Real Estate Securities Portfolios 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
and 0.80% of the aggregate average daily net assets of the Real Estate
Securities 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 and 0.40% of the average daily net assets of the Real Estate
Securities 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 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 WRL Management on behalf of the Value Equity Portfolio pursuant to any
expense limitation or other reimbursement.

Scottish Equitable Investment Management Limited ("Scottish Equitable")
is 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.

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<PAGE>

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.

GE Investment Management Incorporated ("GEIM") is a co-sub-adviser to the
International Equity Portfolio and is 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,
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, receives 0.50% of
average daily net assets managed by GEIM.

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.

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, the PFL
Endeavor Platinum Variable Annuity Account, and the PFL Life Variable Annuity
Account A, separate accounts of PFL Life Insurance Company; the AUSA Endeavor
Variable Annuity Account, a separate account of AUSA Life, 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 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

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<PAGE>

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.

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 33758-9054. Under
AUSA Life's current rules, the minimum Specified Amount of a Policy at issue
for Issue Ages 0-45 is generally $50,000, declining to $25,000 for Issue Ages
46 to 80. Policies will generally be issued only to Insureds who supply
evidence of insurability satisfactory to AUSA Life. AUSA Life may, however, at
its sole discretion, issue a Policy to an individual above the age of 80.
Acceptance is subject to AUSA Life's underwriting rules and AUSA Life 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, any outstanding loans, and any
pro rata Decrease Charge deducted from the Cash Value) 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.) The minimum monthly guarantee premium is set
forth in the Policy unless changed due to a requested change under the Policy
by the Policyowner, at which time the Policyowner will be notified of the new
minimum monthly guarantee premium.

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 $50. 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.)

Payments must be sent to AUSA Life at the Post Office Box listed above
under Payment and Allocation of Premiums - Issuance of a Policy. 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
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 - Allocation of Net Premiums, p. 23. 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

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<PAGE>

Life to retain the Initial Premium until the required FAX or essential
information is received.

In the event the application with original signature is later 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:

Barnett Bank of Pinellas County
ABA #
For credit to: AUSA Life
Account #:
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 page 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. 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 currently
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. 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. AUSA Life
also reserves the right to impose a charge of $25 for each change of allocation
in excess of one per quarter. 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. 36.) 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 instructions 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 its 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

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<PAGE>

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 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.

AUSA Life reserves the right to charge a $25 fee for each transfer in
excess of one per Policy month or twelve per Policy year. The transfer charge
will not be increased. (See Optional Cash Value Charges - Cash Value Transfers,
p. 28.) All transfers made in 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.

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 extra 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 strategy 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 $5,000 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. 36.)

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 Payment and Allocation of Premiums - 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

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<PAGE>

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 $5,000 for an
existing Policy, or a minimum Initial Premium of $5,000 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 Request 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 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 Payment
and Allocation of Premiums - 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.
Conversely, paying all Planned Periodic Premium payments will not necessarily
guarantee that the Policy will not lapse. For instance, the Policy may lapse
prior to the No Lapse Date if the conditions explained below are not met. In
any event, lapse will only occur where Net Surrender Value is insufficient to
cover the monthly deduction, and a grace period expires without a sufficient
payment by the Policyowner. If the Net Surrender Value on any Monthly
Anniversary is insufficient to cover the monthly deduction on such day, AUSA
Life will mail a notice to the last known address of the Policyowner 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.) 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 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.

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, including the current month, and (2) the total of
the premiums received (minus any withdrawals, any outstanding loans and any pro
rata Decrease Charge deducted from the Cash Value) equals or exceeds the
minimum monthly guarantee premium shown in the Policy times the number of
months since the Policy Date, including the current month. Should the
Policyowner request the addition of any rider after the Policy Date but prior
to the No Lapse Date, the Policyowner 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 No Lapse Period, as
long as the conditions in (1) and (2) above have been met, and even though Net
Surrender Value at any point during the No Lapse Period is insufficient to
cover the monthly deduction and a 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.

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:

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1. A written application for reinstatement from the Policyowner;

2. Evidence of insurability 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

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: (a) a Premium
Expense Charge of 6.00% of premiums to compensate AUSA Life for distribution
expenses and state premium taxes incurred in connection with the Policy and;
(b) a Premium Collection Charge of $3.00 per premium payment that will
compensate AUSA Life for costs associated with premium billing and collection.
The Premium Collection Charge will not be increased in the future. After the
tenth Policy year, the Premium Expense Charge reduces to 2.5%.

SURRENDER CHARGE

During the first fifteen Policy years, a Surrender Charge will be
incurred upon surrender of the Policy. The Surrender Charge consists of the
SURRENDER CHARGE PER THOUSAND multiplied by the applicable SURRENDER CHARGE
FACTOR.

(a) SURRENDER CHARGE PER THOUSAND. The Surrender Charge Per Thousand
Dollars of initial Specified Amount varies with the Insured's Issue Age, gender
and classification. See Appendix C for a table of the charges per thousand
dollars of initial Specified Amount.

(b) SURRENDER CHARGE FACTOR. As stated above, the factor is applied to
the charge per thousand dollars of initial Specified Amount due upon any
Surrender of a Policy during the first fifteen Policy years. In Policy years
1-5 this factor is 1.00 for Insureds at Issue Ages 0 - 39 and then declines at
a rate of 0.10 per year until reaching zero at the end of the fifteenth (15th)
Policy year as shown below. For Insureds with Issue Ages older than 39, this
factor is less than 1.00 at the end of the first (1st) Policy year and declines
to zero at the end of the fifteenth (15th) Policy year. Therefore, application
of the factor to the Surrender Charge Per Thousand in the event of any
surrender during the second through fifteenth Policy years will result in the
same or reduced surrender charges. If a surrender occurs after the fifteenth
(15th) Policy year, there is no Surrender Charge Per Thousand due. See the
example below. Factors for the Builder Plus ProgramSM are different than those
shown below. (See Charges And Deductions - Builder Plus ProgramSM, p. 29.)

SURRENDER CHARGE FACTORS
ISSUE AGES 0 - 39

Surrender Charge Factor
End of Policy Year* Factor
- ------------------------- ---------

At Issue ................ 1.00
1-5 ..................... 1.00
6 ....................... .90
7 ....................... .80
8 ....................... .70
9 ....................... .60
10 ...................... .50
11 ...................... .40
12 ...................... .30
13 ...................... .20
14 ...................... .10
15 ...................... 0
16+ ..................... 0

* THE FACTOR ON ANY DATE OTHER THAN AN ANNIVERSARY WILL BE INTERPOLATED BETWEEN
THE TWO END OF YEAR FACTORS.

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<PAGE>

(c) EXAMPLE: Assume a male tobacco user purchases the Policy at Issue Age
35. The Surrender Charge Per Thousand is $16.48 (see Appendix C). This is
multiplied by the Surrender Charge Factor resulting in the following Table of
Surrender Charges:

TABLE OF SURRENDER CHARGES PER $1,000 OF
SPECIFIED AMOUNT AS OF THE POLICY DATE
SURRENDER SURRENDER
CHARGE CHARGE
PER $1,000 PER $1,000
OF SPECIFIED OF SPECIFIED
END OF AMOUNT ON END OF AMOUNT ON
POLICY POLICY POLICY POLICY
YEAR* PAGE 3A YEAR* PAGE 3A
- ----------- -------------- -------- -------------

At Issue $ 16.48 9 $ 9.89
1 16.48 10 8.24
2 16.48 11 6.59
3 16.48 12 4.94
4 16.48 13 3.30
5 16.48 14 1.65
6 14.83 15 0.00
7 13.18 16+ 0.00
8 11.54

* THE SURRENDER CHARGE ON ANY DATE OTHER THAN AN ANNIVERSARY WILL BE
INTERPOLATED BETWEEN THE TWO END OF YEAR CHARGES.

PRO RATA DECREASE CHARGE

If, during the first 15 Policy years, the Specified Amount is decreased,
a pro rata Decrease Charge will be deducted from the Cash Value. The pro rata
Decrease Charge is equal to:

(1) the amount of the Specified Amount decrease; multiplied by

(2) the Surrender Charge Per Thousand of Specified Amount as of the date
of the decrease applicable to the Specified Amount as of the
Policy Date. See Appendix C for a table of Surrender Charges.

This pro rata Decrease Charge will not be deducted from the Cash Value
when a Specified Amount decrease results from (a) a change in the death benefit
Option, or (b) a withdrawal when the death benefit is Option A, as described in
the Cash Withdrawals section on p. 32. If a pro rata Decrease Charge is
deducted due to a decrease in Specified Amount, any future Surrender Charges
incurred during the first fifteen Policy years will be reduced proportionately.

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 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 Insured, and the length of time a Policy has been In Force. The
actual monthly cost of 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 (C.S.O.)
Mortality Tables and the Insured's sex, Attained Age and rate class. For
standard rate classes, 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 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 men and women of the same age.

The rate class of an Insured will affect the cost of insurance rate. AUSA
Life currently places Insureds into the following four standard rate classes:
Ultimate Select, non-tobacco use, Select, non-tobacco use, Ultimate Standard,
tobacco use, and Standard, tobacco use; 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 use than for
non-tobacco use and, within these two categories, higher for Insureds not in
the Ultimate category than for Insureds in the Ultimate category. Ultimate rate
classes are available only if the Specified Amount (Primary Insured) or Face
Amount of Riders (for other Insureds) require blood testing at the proposed
Insured's age under current AUSA Life underwriting guidelines.

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, non-tobacco use, or Standard, tobacco
use, categories (as appropriate); however, due to

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<PAGE>

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 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 and is guaranteed never to exceed $7.50 per
Policy Month. AUSA Life reserves the right to waive the Monthly Policy Charge on
additional policies issued to existing Policyholders at the time the second
policy is issued.

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.

CHANGE IN NET PREMIUM ALLOCATION. AUSA Life does not currently levy or
charge when changes are made to allocation of Net Premium. However, AUSA Life
reserves the right to impose a $25 charge for each change of Net Premium
allocation in excess of one change per Policy year quarter. If AUSA Life decides
to impose this charge, Policyowners will be notified in writing in advance.

CASH VALUE TRANSFERS. AUSA Life reserves the right to charge a $25 fee for
each transfer in excess of one per month or twelve transfers per Policy year. If
charged, this fee will be imposed and deducted from each amount transferred 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. AUSA Life currently intends to reduce this charge
to 0.75% after the first fifteen Policy years. However, such reduction is not
guaranteed, and AUSA Life reserves the right to maintain this charge at the
0.90% level after the first fifteen Policy years. Under AUSA Life's current
procedures, these amounts are paid to the General Account monthly.

The mortality risk assumed by AUSA Life is that Insureds 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. 37.)

EXPENSES OF THE FUND

Because the Series Account purchases shares of the Portfolios of the
Fund, the net assets of the Series Account will reflect the investment
management fee and other expenses incurred by the Portfolios of the Fund. (See
p. 7 for a table of the Fund Annual Expenses.) (See 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, 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 incurred with respect to any
Portfolio during the fiscal year ending December 31, 1998. Prior to ISI's
seeking reimbursement, Policyowners will be notified in writing 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

28
<PAGE>

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" 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.
39.)

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.

BUILDER PLUS PROGRAMSM

AUSA Life also offers a different form of the Policy to Policyowners who
make an Initial Premium payment of at least $10,000 or more, and which is at
least 90% of the maximum allowable single premium ("Builder Plus Program
Policies"). Under a Builder Plus Program Policy, the underwriting process is
both expedited and shortened in length by reducing the number and extent of the
items required to determine the risk assumed by AUSA Life. The Builder Plus
Program Policy entails fewer administrative costs for AUSA Life and also reduces
distribution costs by relieving sales representatives from some of the burden of
assisting in the underwriting.

A Builder Plus Program Policy sold under this simplified underwriting
arrangement differs from a standard Policy in six principal respects: (1) a
minimum Initial Premium payment which is at least $10,000 and which is at least
90% of the maximum allowable premium, (2) no premium expense charges are
assessed, (3) the underwriting process is shorter and simpler, (4) the cost of
insurance charges may be different for certain policyowners, (5) premium payment
provisions may be more restricted than for Policies issued on a standard basis,
and (6) most policies will be "modified endowment contracts" for Federal income
tax purposes. (See Tax Treatment of Policy Benefits - Modified Endowment
Contracts, p. 38.)

Due to the lower administrative and distribution expenses associated with
the Builder Plus Program Policies, no premium expense charges (i.e., sales
charge, premium tax charge and premium collection charge) are made. (See Charges
and Deductions - Premium Expense Charge, p. 26.) Depending on age of issue and
Specified Amount, certain medical underwriting requirements will be waived.

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<PAGE>

Additionally, the length of time the Surrender Charge Factor applies is
reduced, as follows:

SURRENDER CHARGE FACTORS
ISSUE AGES 0 - 39

Surrender Charge Factor
End of Policy Year* Factor
- ------------------------- ---------

At Issue ................ 1.00
1-5 ..................... 1.00
6 ....................... .80
7 ....................... .60
8 ....................... .40
9 ....................... 0
10+ ..................... 0

* THE SURRENDER CHARGE ON ANY DATE OTHER THAN AN ANNIVERSARY WILL BE
INTERPOLATED BETWEEN THE TWO END OF YEAR SURRENDER CHARGES.

For Insureds Issue Ages older than 39, this factor is less than 1.00 at the end
of the first (1st) Policy year and declines to zero at the end of the ninth
(9th) Policy year. Therefore, application of the factor to the Surrender Charge
Per Thousand in the event of any surrender during the second through ninth
Policy years will result in the same or reduced surrender charges. If a
surrender occurs after the ninth (9th) Policy year, there is no Surrender
Charge Per Thousand due.

For a full explanation of the Surrender Charge, see Charges and Deductions
- - Surrender Charge, p. 26.

Although for non sub-standard rate classes the guaranteed cost of
insurance rates for policies will not be greater than those for standard
Policies, current rates for policies during the first ten policy years may be
higher for certain policyowners (i.e., those who are assigned to Ultimate
Select, non-tobacco use, or Ultimate Standard, tobacco use, rate classes) than
would be the case for standard Policies. (See Cash Value Charges - Cost of
Insurance, p. 27.)

Under AUSA Life's current rules, the minimum possible Specified Amount for
a Builder Plus Program Policy at issue is the amount of insurance that the
$10,000 Initial Premium payment will purchase based on the Insured's age, sex,
and rate class and certain Federal tax law guidelines. Likewise, for any larger
Initial Premium payment there will be a correspondingly larger minimum Specified
Amount at issue.

The maximum Specified Amount for a Builder Plus Program Policy is a
function of the size of the Initial Premium payment and is approximately 111% of
the lowest possible minimum Specified Amount available for the same amount of
Initial Premium payment.

Depending on the Specified Amount selected by the Policyowner, a large
Initial Premium payment, such as that required for a Builder Plus Program
Policy, will generally limit the ability to make additional premium payments.
This limit exists because the total of all premiums paid under a Builder Plus
Program Policy may not exceed the maximum premium limitation imposed by Federal
tax laws. (See Premiums - Premium Limitations, p. 22.) Of course, under a
policy, there are no Planned Periodic Premiums.

Most Builder Plus Program Policies will be modified endowment contracts.
Distributions from modified endowment contracts are generally treated as
ordinary income subject to tax up to the amount equal to the excess of the Cash
Value before the distribution over the investment in the policy. In addition,
the portion of any such distribution that is included in income is subject to a
10% Federal income tax penalty, except where the distribution is made on or
after the Policyowner attains age 591/2, is attributable to the Policyowner
becoming disabled or is part of a series of substantially equal periodic
payments for the life (or the life expectancy) of the policyowner. Such
distributions include surrenders, cash withdrawals and policy loans. (See Tax
Treatment of Policy Benefits - Distributions From Policies Classified as
Modified Endowment Contracts, p. 38.)

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 not less than $500. Outstanding loans have priority over the
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. 37.)

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 any 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. 33.) 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

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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. 35.) No charge will be
imposed for these transfers.

INTEREST RATE CHARGED. The interest rate charged on Policy loans is 5.66%
payable annually in advance (equivalent to an effective annual rate of 6.00%).
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.

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 it 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. 36.)

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. 38.)

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 Insured or the Maturity
Date, the Policyowner may totally surrender or, after the first Policy year,
make a cash withdrawal from 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 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 - Surrender Charge, 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. 33.) Additional
restrictions may be applied to surrenders from the Fixed Account. (See The Fixed
Account - Allocations, Transfers and Withdrawals, p. 36.) 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

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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 1-800-322-7160. A cash withdrawal or total surrender may
have Federal income tax consequences. (See Federal Tax Matters, p. 37.)

TOTAL SURRENDERS. When the Policy is 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, below.)

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. 38.)

EXAMINATION OF POLICY PRIVILEGE ("FREE-LOOK")

The Policyowner may cancel the Policy within 10 days after the Policyowner
receives it. 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. If the Policy is returned within the 10
day "Free-Look" period, it will be void from the beginning and a refund will be
made to the Owner. The refund will equal the total of all premiums paid for this
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.

BENEFITS AT MATURITY

If the 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 Insured's 95th birthday, if the 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 thus 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, 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, p. 33 and The Fixed Account - Allocations, Transfers
and Withdrawals, p. 36.) The Policyowner may decide the form in which the
benefits will be paid. During the Insured's lifetime, 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
Insured. For additional information concerning these options, see the Policy
itself.

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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 30 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 5 and 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 (a) continue upon the death of the
first payee for the remaining lifetime of the survivor or (b) be reduced by
one-third upon the death of the first payee and continue 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 SEC; (ii) the SEC by order
permits postponement for the protection of Policyowners; or (iii) an emergency
exists, as determined by the SEC, 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. 36.

PAYMENT BY CHECK. Payments under the Policy of any amounts derived from
premiums paid by check or bank draft 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 the Insured, while sane or insane, commits suicide within two years
after the Policy Date, AUSA Life will pay only the premiums received, less any
cash withdrawals and outstanding indebtedness. In the event of Lapse of the
Policy, the suicide period will be measured from the effective date of
reinstatement. If the Insured, while sane or insane, commits suicide within two
years after the effective date of any increase in insurance or any
reinstatement, AUSA Life's total liability with respect to such increase or
reinstatement will be the cost of insurance charges deducted for such increase
or reinstatement.

INCONTESTABILITY

AUSA Life cannot contest the Policy as to the initial Specified Amount
after it has been In Force during the lifetime of the Insured for two years
from the Policy Date. If the 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 Insured's death. If the named
Beneficiary dies before the Insured, the contingent Beneficiary, if named,
becomes the Beneficiary. If no Beneficiary survives the Insured, the benefits
payable at the 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 the Insured is 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
Administrative 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 the 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.

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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 will be deducted as part of the monthly deduction. (See
Charges and Deductions - Optional Cash Value Charges, p. 28.) For purposes of
the riders, the person insured under the Policy is referred to as the Primary
Insured, and the term "Face Amount" refers to the level term insurance amount
payable at death.

CHILDREN'S INSURANCE RIDER: Provides a Face Amount on each of the
Primary Insured's children, as defined in the rider. Under the terms of the
rider, the death benefit will be payable to the Insured upon receipt of proof
that the death of an insured child occurred while the rider and coverage on
such child was In Force. Upon the Primary Insured's death, while the rider is
in force, the rider will terminate 31 days after such death and a separate life
insurance policy will be offered to each insured child for an amount equal to
the level death benefit amount of the rider at a premium based upon the
Attained Age of each insured child.

ACCIDENTAL DEATH BENEFIT RIDER: Provides a Face Amount if the Primary
Insured's death results from accidental bodily injury, as defined in the rider.
Certain risks, as defined in the rider, are not covered. Under the terms of the
rider, the additional benefits provided in the rider will be paid upon receipt
of proof by AUSA Life that death resulted from bodily injuries effected
directly and independently of all other causes through external, violent and
accidental means; occurred within 90 days from the date of accident causing
such injuries; and occurred while the rider was In Force. The rider will
terminate on the earliest of the Policy Anniversary nearest the Primary
Insured's 70th birthday, the date the Policy terminates, or the Monthiversary
on which the rider is terminated on request by the Policyowner.

OTHER INSURED RIDER: Provides that AUSA Life will pay the Face Amount
of the rider to the Primary Insured upon receipt of due proof of the other
Insured's death. 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 other Insured's life upon written request subject to the
following: (a) the rider has not reached the Anniversary nearest the other
Insured's 70th birthday; (b) the new policy is 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 will be based on the other Insured's rate class under the rider.

DISABILITY WAIVER RIDER: Provides a waiver of the monthly deductions
for the Policy while the Insured is disabled. Under the terms of the rider, the
monthly deductions will be waived upon receipt of proof adequate to AUSA Life
that: the Insured is totally disabled, as defined in the rider; the disability
commenced while the rider was In Force; the disability began before the
Anniversary nearest the Insured's 60th birthday; and total disability has
existed continuously for at least six months. No monthly deduction will be
waived which falls due more than one year prior to receipt by AUSA Life of
written notice of a claim. Certain risks, as defined in the rider, are not
covered.

DISABILITY WAIVER AND MONTHLY INCOME RIDER: Provides the identical
benefit as the Disability Waiver Rider and, in addition, a monthly income
benefit up to a maximum 120 monthly payments.

PRIMARY INSURED RIDER ("PIR") AND PRIMARY INSURED RIDER PLUS ("PIR
PLUS"): Provides term insurance coverage for the insured on a basis different
from the coverage provided under the Policy. The PIR may be purchased at any
time, either at the time of application for the Policy, or after the Record
Date. The PIR Plus may only be purchased at the time of application.

PIR or PIR Plus increases the death benefit provided under the Policy by
the Face Amount of the rider. The PIR terminates at age 90; the PIR Plus
terminates at age 85. No additional Surrender Charge is assessed in connection
with PIR or PIR Plus coverage. Generally, coverage provided by PIR or PIR Plus
has a lower cost than that provided under the Policy, but has no Cash Value
associated with it. Owners may reduce or cancel coverage under a PIR or PIR
Plus rider separately from reducing the Specified Amount of a Policy. Likewise,
the Specified Amount of a Policy may be decreased, subject to certain minimums,
without reducing the coverage under PIR or PIR Plus.

Because no Surrender Charge is assessed in connection with a reduction of
coverage under PIR or PIR Plus, such a reduction may be less expensive than a
decrease in Specified Amount under the Policy if the increment of Specified
Amount that is reduced is subject to a Surrender Charge. On the other hand,
continuing coverage on an increment of Specified Amount under the Policy may
have a cost of insurance that is higher than the cost of the same amount of
coverage under PIR or PIR Plus.

There may be circumstances in which it will be to your advantage to
obtain a portion of your insurance coverage under PIR or PIR Plus. These
circumstances depend on many factors, including the premium levels, amounts and
duration of coverage needed, as well as the

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age, sex and risk classification of the Insured. Your registered representative
can provide you with further information explaining how PIR and PIR Plus
coverage can affect your Policy values under different assumptions. AUSA Life
reserves the right to discontinue the availability of these riders for new
Policies at any time, and also reserves the right to modify the terms of these
riders for new Policies, subject to approval by the state insurance
departments.

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 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
Insured under the Policy, plus the benefit payable under any In Force Primary
Insured Rider. (See Optional Insurance Benefits - Primary Insured Rider and
Primary Insured Rider Plus, above.) "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
Insured, the Policyowner, a person who lives with the Insured or Policyowner,
or a person who is part of the Insured's or Policyowner's "Immediate Family"
(spouse, child, brother, sister, parent, grandparent or grandchild of the
Insured). The "Physician's Statement" must be a written statement signed by a
Physician which provides the Physician's diagnosis of the 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
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
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, 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 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 rider. This rider may not be
available in all states or, if available, the terms of the rider may vary, in
accordance with the requirements of each state's insurance laws.

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

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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; minus
7. Any amounts withdrawn from the Fixed Account to pay the pro rata
Decrease Charge incurred as a result of a decrease in the Specified
Amount.

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. AUSA Life has no specific
formula for determining current interest rates. Some of the factors that AUSA
Life may consider, in its sole discretion, in determining whether to credit
interest in excess of the 4% guaranteed rate are: general economic trends,
rates of return currently available and anticipated on the company's
investments, regulatory and tax requirements, and competitive factors. The
Fixed Account Value will not share in the investment performance of the
company's general account or any portion thereof. 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 Administrative 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 after a Policy Anniversary. The maximum 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. Please consult your
Policy for details. 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. 31.) 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 ("Sales
Agreements") with the principal underwriter for promotion and sales of the
Policies. 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 compensation payable to registered
representatives who are appointed agents of AUSA Life for sales of the Policies
may vary with the Sales Agreement, but is not expected to exceed 60% of all
premiums paid during the first Policy year, plus 3% on all premiums paid in
years 2 through 10. 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

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Cash Value at such times, minus any amounts attributable to Policy loans, is at
least $5,000. In addition, certain production, persistency and managerial
bonuses may be paid.

FEDERAL TAX MATTERS

INTRODUCTION

The ultimate effect of federal income taxes on the Cash Value 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
advisor 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

Section 7702 of the Code sets forth a definition of a life insurance
contract for federal tax purposes. The Secretary of the Treasury (the
"Treasury") has recently issued proposed regulations that would specify what
will be considered reasonable mortality charges under Section 7702. Guidance as
to how Section 7702 is to be applied is, however, limited. 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 policy.

With respect to a Policy that is issued on the basis of a rate class
using Ultimate Select, non-tobacco use, Select, non-tobacco use, Ultimate
Standard, tobacco use, or Standard, tobacco use, guaranteed rates, while there
is some uncertainty due to the limited guidance on Section 7702, AUSA Life,
nonetheless, believes that such a Policy should meet the Section 7702
definition of a life insurance contract. With respect to a Policy that is
issued on a substandard rate class, there is even less guidance to determine
whether such a Policy meets the Section 7702 definition of a life insurance
contract. Thus, it is not clear whether such a Policy would satisfy Section
7702, particularly if the Policyowner pays the full amount of premiums
permitted under the Policy. 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 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 includable 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 investments 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 sub-account 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

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to modify the Policy as necessary to attempt to prevent a Policyowner from
being considered the owner of a pro rata share of the assets 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
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 advisor 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 exceeds 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.

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 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 addition, a Policyowner
should contact a competent tax advisor 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. A Builder Plus Program Policy, however, will in most instances be
treated as a Modified Endowment Contract. (See Charges and Deductions - Builder
Plus Program,SM p. 29.)

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

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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% Federal income tax penalty 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 Owner 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. DISTRIBUTIONS 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 generally not treated as distributions. Instead, such loans are
treated as indebtedness of the Policyowner. However, the tax treatment of a
loan from a Policy that is not a modified endowment contract is uncertain to
the extent that the interest rate credited is equal to the interest rate
charged on the amount borrowed. A tax advisor should be consulted.

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% Federal income tax penalty.

5. POLICY LOAN INTEREST. The deductibility of Policy loan interest may be
limited by the Code. For example, interest paid on any loan under a Policy
which is owned by an individual generally is not deductible. Therefore, a
Policyowner should consult a competent tax advisor as to whether Policy loan
interest will be deductible.

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. 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 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 Benefit payment under this Rider.

9. BUSINESS-OWNED LIFE INSURANCE. In recent years, Congress has adopted
new rules relating to life insurance owned by businesses. Any business
contemplating the purchase of a new Policy or a change in an existing Policy
should consult a tax advisor.

POSSIBLE TAX LAW CHANGES

Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Policy could change by
legislation or otherwise. For instance, the President's 1999 Budget Proposal
recommended legislation that, if enacted, would adversely modify the Federal
taxation of this Policy. It is possible that any legislative change could be
retroactive (that is, effective prior to the date of the change.) A tax advisor
should be consulted with respect to legislative developments and their effect
on the Policy.

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

39
<PAGE>

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.

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.

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, Executive Vice President (April 1996 - present),
AEGON Insurance Group, Suite 302, Brown Trail, Bedford, TX 76201; Senior
Vice President (1976 - April 1996), 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 (October 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.

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<PAGE>

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, 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 upon by Robert F. Colby, Esq., Vice
President, Associate General Counsel and Assistant Secretary of AUSA Life.

LEGAL PROCEEDINGS

AUSA Life, like other life insurance companies, is involved in lawsuits.
AUSA Life is not aware of any class action lawsuits naming it as a Defendant or
involving the Series Account. In some lawsuits involving other insurers,
substantial damages have been sought and/or material settlement payments have
been made. Although the outcome of any litigation cannot be predicted with
certainty, AUSA Life believes that at the present time there are no pending or
threatened lawsuits that are reasonably likely to have a material adverse
impact on the Series Account or AUSA Life.

EXPERTS

There are no financial statements of AUSA Series Life Account since the
Series Account has not yet commenced operations as of the date of this
Prospectus.

The financial statements and schedules of AUSA Life at December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997,
appearing in this Prospectus and Registration Statement 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 and registration statement
have been examined by Alan Yaeger as stated in the opinion filed as an exhibit
to the registration statement.

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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.

YEAR 2000 MATTERS

In October 1996, AUSA Life adopted and presently has in place a Year 2000
Assessment and Planning Project (the "Plan") to review and analyze existing
hardware and software systems, as well as voice and data communications
systems, to determine if they are Year 2000 compatible. AUSA Life has also
engaged the services of a third-party provider that is specialized in Year 2000
issues to work on the Plan.

As of the date of this Prospectus, AUSA Life has identified and made
available what it believes are the appropriate resources of hardware, people,
and dollars, including the engagement of outside third parties, to ensure that
the Plan will be completed.

The Year 2000 computer problem, and its resolution, is complex and
multifaceted, and success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that the systems or
equipment addresses Year 2000 data prior to the Year 2000). Even with the
appropriate and diligent pursuit of a well-conceived response plan, including
testing procedures, there is no certainty that any company will achieve
complete success. Further, notwithstanding its efforts or results, AUSA Life's
ability to function unaffected to and through the Year 2000 may be adversely
affected by actions (or failure to act) of third parties beyond our knowledge
or control. See the Fund's prospectus for information on the Fund's preparation
for Year 2000.

INFORMATION ABOUT AUSA LIFE'S FINANCIAL STATEMENTS

The financial statements of AUSA Life which are included in this
Prospectus (see p. 50) 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").

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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 an Insured of a given age 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 Owner has not requested a decrease in the Specified
Amount of the Policy, and that no cash withdrawals or Policy loans 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 fluctuates 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 page 44 is based on a Policy for an Insured who is a
35 year old male in the Ultimate Select, non-tobacco use, rate class, annual
premiums of $2,000, a $165,000 Specified Amount and death benefit Option A. The
illustration on that page also assume cost of insurance charges based on AUSA
Life's CURRENT cost of insurance rates.

The illustration on page 45 is based on the same factors as those on page
44, except that cost of insurance rates 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 during the
first 15 Policy years (AUSA Life currently intends to reduce this charge to
0.75% after the first fifteen Policy years. However, such reduction is not
guaranteed, and AUSA Life reserves the right to maintain this charge at the
0.90% level after the first fifteen Policy years); (2) estimated daily expenses
equivalent to an effective average annual expense level of 0.95% of the average
daily net assets of the Portfolios of the Fund; and (3) all applicable premium
expense charges and Cash Value charges using the current monthly Policy Charge.
The 0.95% average Portfolio expense level assumes an equal allocation of
amounts among the sixteen Sub-Accounts and is based on an average 0.76%
investment advisory fee and 1997 average normal operating expenses of 0.19% for
each of the Portfolios in operation during 1997. Calculation of the average
annual expense level utilized annualized actual audited expenses incurred
during 1997 for the Money Market (0.48%), Bond (0.64%), Growth (0.87%),
Strategic Total Return (0.88%), Emerging Growth (0.93%), Global (1.00%),
Aggressive Growth (0.96%), Balanced (0.94%), Growth & Income (0.96%), C.A.S.E.
Growth (1.00%), Tactical Asset Allocation (0.87%), Value Equity (0.89%), U.S.
Equity (1.30%), and International Equity (1.50%) Portfolios. In addition,
because the Third Avenue Value and Real Estate Securities Portfolios had not
commenced operations as of December 31, 1997, the estimated average annual
Portfolio expense level reflects estimated expenses for each of these
Portfolios at 1.00% for 1998. WRL Management has undertaken until April 30,
1999 to pay Fund 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 1.85%, the gross annual
investment return rates of 0%, 6% and 12% are equivalent to net annual
investment return rates of -1.85%, 4.15%, and 10.15%.

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 the proposed Insured's age, sex, risk classification and desired
plan features.

43
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35

Specified Amount $165,000 Ultimate Select Class
Annual Premium $2,000 Option Type A

Using Current Cost of Insurance Rates

<TABLE>
<CAPTION>
END OF PREMIUMS DEATH BENEFIT
POLICY ACCUMULATED ASSUMING HYPOTHETICAL GROSS AND NET
YEAR AT 5% ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.85% (Net) Years 1-15 4.15% (Net) Years 1-15 10.15% (Net) Years 1-15
-1.70 (Net) Years 16+ 4.30% (Net) Years 16+ 10.30% (Net) Years 16+
<S> <C> <C> <C> <C>
1 2,100 165,000 165,000 165,000
2 4,305 165,000 165,000 165,000
3 6,620 165,000 165,000 165,000
4 9,051 165,000 165,000 165,000
5 11,604 165,000 165,000 165,000
6 14,284 165,000 165,000 165,000
7 17,098 165,000 165,000 165,000
8 20,053 165,000 165,000 165,000
9 23,156 165,000 165,000 165,000
10 26,414 165,000 165,000 165,000
15 45,315 165,000 165,000 165,000
20 69,439 165,000 165,000 165,000
30(AGE 65) 139,522 165,000 165,000 350,392
40(AGE 75) 253,680 165,000 165,000 835,319
50(AGE 85) 439,631 * 243,143 2,180,297
60(AGE 95) 742,526 * 370,066 5,464,998
</TABLE>

<TABLE>
<CAPTION>
END OF CASH VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND NET
YEAR ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.85% (Net) Years 1-15 4.15% (Net) Years 1-15 10.15% (Net) Years 1-15
-1.70% (Net) Years 16+ 4.30% (Net) Years 16+ 10.30% (Net) Years 16+
<S> <C> <C> <C>
1 1,533 1,636 1,739
2 3,034 3,335 3,650
3 4,500 5,099 5,748
4 5,933 6,930 8,055
5 7,323 8,822 10,581
6 8,671 10,775 13,348
7 9,973 12,790 16,377
8 11,230 14,870 19,699
9 12,423 16,995 23,320
10 13,560 19,179 27,285
15 18,707 31,403 54,102
20 22,563 45,876 98,120
30(AGE 65) 24,844 83,234 287,206
40(AGE 75) 15,092 139,423 780,672
50(AGE 85) * 231,565 2,076,473
60(AGE 95) * 366,402 5,410,889

<CAPTION>
END OF NET SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND NET
YEAR ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.85% (Net) Years 1-15 4.15% (Net) Years 1-15 10.15% (Net) Years 1-15
-1.70% (Net) Years 16+ 4.30% (Net) Years 16+ 10.30% (Net) Years 16+
<S> <C> <C> <C>
1 0 0 0
2 473 775 1,089
3 1,939 2,538 3,187
4 3,372 4,369 5,494
5 4,763 6,261 8,020
6 6,366 8,470 11,043
7 7,924 10,741 14,329
8 9,438 13,077 17,906
9 10,886 15,459 21,784
10 12,280 17,899 26,004
15 18,707 31,403 54,102
20 22,563 45,876 98,120
30(AGE 65) 24,844 83,234 287,206
40(AGE 75) 15,092 139,423 780,672
50(AGE 85) * 231,565 2,076,473
60(AGE 95) * 366,402 5,410,889
</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 the 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.

44
<PAGE>

AUSA LIFE INDSURANCE COMPANY, INC.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35

Specified Amount $165,000 Ultimate Select Class
Annual Premium $2,000 Option Type A
Using Guaranteed Cost of Insurance Rates

<TABLE>
<CAPTION>
END OF PREMIUMS DEATH BENEFIT
POLICY ACCUMULATED ASSUMING HYPOTHETICAL GROSS AND NET
YEAR AT 5% ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.85% (Net) Years 1-15 4.15% (Net) Years 1-15 10.15% (Net) Years 1-15
-1.70% (Net) Years 16+ 4.30% (Net) Years 16+ 10.30% (Net) Years 16+
<S> <C> <C> <C> <C>
1 2,100 165,000 165,000 165,000
2 4,305 165,000 165,000 165,000
3 6,620 165,000 165,000 165,000
4 9,051 165,000 165,000 165,000
5 11,604 165,000 165,000 165,000
6 14,284 165,000 165,000 165,000
7 17,098 165,000 165,000 165,000
8 20,053 165,000 165,000 165,000
9 23,156 165,000 165,000 165,000
10 26,414 165,000 165,000 165,000
15 45,315 165,000 165,000 165,000
20 69,439 165,000 165,000 165,000
30(AGE 65) 139,522 165,000 165,000 338,577
40(AGE 75) 253,680 * 165,000 790,954
50(AGE 85) 439,631 * 168,822 2,009,977
60(AGE 95) 742,526 * 251,743 4,793,024
</TABLE>

<TABLE>
<CAPTION>
END OF CASH VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND NET
YEAR ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.85% (Net) Years 1-15 4.15% (Net) Years 1-15 10.15% (Net) Years 1-15
-1.70% (Net) Years 16+ 4.30% (Net) Years 16+ 10.30% (Net) Years 16+
<S> <C> <C> <C>
1 1,533 1,636 1,739
2 3,005 3,306 3,619
3 4,435 5,030 5,676
4 5,822 6,810 7,926
5 7,165 8,646 10,386
6 8,462 10,538 13,078
7 9,711 12,485 16,021
8 10,912 14,490 19,244
9 12,063 16,552 22,772
10 13,164 18,674 26,638
15 18,158 30,576 52,833
20 21,549 44,341 95,606
30(AGE 65) 18,675 76,012 277,522
40(AGE 75) * 111,214 739,210
50(AGE 85) * 160,783 1,914,264
60(AGE 95) * 249,250 4,745,568

<CAPTION>
END OF NET SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND NET
YEAR ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.85% (Net) Years 1-15 4.15% (Net) Years 1-15 10.15% (Net) Years 1-15
-1.70% (Net) Years 16+ 4.30% (Net) Years 16+ 10.30% (Net) Years 16+
<S> <C> <C> <C>
1 0 0 0
2 444 745 1,058
3 1,874 2,469 3,115
4 3,261 4,249 5,365
5 4,604 6,085 7,825
6 6,157 8,233 10,773
7 7,662 10,436 13,973
8 9,120 12,697 17,452
9 10,526 15,015 21,235
10 11,884 17,394 25,357
15 18,158 30,576 52,833
20 21,549 44,341 95,606
30(AGE 65) 18,675 76,012 277,522
40(AGE 75) * 111,214 739,210
50(AGE 85) * 160,783 1,914,264
60(AGE 95) * 249,250 4,745,568
</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.

45
<PAGE>

APPENDIX B

WEALTH INDICES OF INVESTMENTS IN THE U.S. CAPITAL MARKETS

The information below graphically depicts the growth of $1.00 invested in
large company stocks, small company stocks, long-term government bonds,
Treasury bills, and hypothetical asset returning the inflation rate over the
period from the end of 1925 to the end of 1997. All results assume reinvestment
of dividends on stocks or coupons on bonds and no taxes. Transaction costs are
not included, except in the small stock index starting in 1982.

Each of the cumulative index values is initialized at $1.00 at year-end
1925. The graph illustrates that large company stocks and small company stocks
have the best performance over the entire 72-year period: investments of $1.00
in these assets would have grown to $1,828.33 and $5,519.97, respectively, by
year-end 1997. This higher growth was earned by investments involving
substantial risk. In contrast, long-term government bonds (with an approximate
20-year maturity), which exposed the holder to much less risk, grew to only
$39.07.

The lowest-risk strategy over the past 72 years (for those with
short-term time horizons) was to buy U.S. Treasury bills. Since Treasury bills
tended to track inflation, the resulting real (inflation-adjusted) returns were
near zero for the entire 1926 - 1997 period.

<TABLE>
<CAPTION>
COMPOUND
ANNUAL
RETURN
<S> <C> <C>
- Small Company Stocks 12.7%
Dimensional Fund Advices
Small Company Fund
- Large Company Stocks 11.0%
S&P 500
- Long-Term Government Bonds 5.2%
20-year U.S. Government Bonds
- Treasury Bills 3.8%
30-day U.S. T-Bills
- Inflation 3.1%
Consumer Price Index
</TABLE>

[GRAPHIC OMITTED]

* Used with permission. /copyright/1998 Ibbotson Associates, Inc. All rights
reserved. [Certain portions of this work were derived from copyrighted works of
Roger G. Ibbotson and Rex Sinquefield.]

<PAGE>

COMPOUND ANNUAL RATES OF RETURN BY DECADE

<TABLE>
<CAPTION>
1920s* 1930s 1940s 1950s 1960s 1970s 1980s 1990s** 1987-97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large Company ............. 19.2% -0.1% 9.2% 19.4% 7.8% 5.9% 17.5% 16.6% 18.0%
Small Company ............. -4.5 1.4 20.7 16.9 15.5 11.5 15.8 16.5 16.5
Long-Term Corp. ........... 5.2 6.9 2.7 1.0 1.7 6.2 13.0 10.2 10.8
Long-Term Govt. ........... 5.0 4.9 3.2 -0.1 1.4 5.5 12.6 10.7 11.3
Inter-Term Govt. .......... 4.2 4.6 1.8 1.3 3.5 7.0 11.9 8.0 8.3
Treasury Bills ............ 3.7 0.6 0.4 1.9 3.9 6.3 8.9 5.0 5.4
Inflation ................. -1.1 -2.0 5.4 2.2 2.5 7.4 5.1 3.1 3.4
</TABLE>

- ------------------------------
* Based on the period 1926-1929.

** Based on the period 1990-1997.

* Used with permission. /copyright/1998 Ibbotson Associates, Inc. All rights
reserved. [Certain portions of this work were derived from copyrighted works
of Roger G. Ibbotson and Rex Sinquefield.]

THE AUSA FINANCIAL FREEDOM BUILDERSM
AND THE "DOLLAR COST AVERAGING" INVESTMENT STRATEGY

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
strategy 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

Investments at
Regular Common Stock Shares
Intervals Market Price Purchased
- --------------- -------------- ----------
$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

Total Value of 87.5 shares @ $15/ $1,312.50
share
Less Investment made (900.00)
---------
Gain/Profit $ 412.50

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 Financial
Freedom Builder/SM/? 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

47
<PAGE>

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 Sub-Accounts in relatively
constant amounts.

INDEX TO FINANCIAL STATEMENTS

AUSA SERIES LIFE ACCOUNT:

There are no financial statements for the Series Account as of the date
of this Prospectus.

AUSA LIFE INSURANCE COMPANY, INC.:

Statutory-Basis Balance Sheet at March 31, 1998 (unaudited)

Statutory-Basis Statement of Operations as of March 31, 1998 (unaudited)

Statutory-Basis Statement of Changes in Capital and Surplus as of March
31, 1998 (unaudited)

Statutory-Basis Statement of Cash Flow as of March 31, 1998 (unaudited)

Note to Statutory-Basis Financial Statements

Report of Independent Auditors dated February 27, 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

48
<PAGE>

APPENDIX C
(BASED ON THE SEX AND RATE CLASS OF THE INSURED)

SURRENDER CHARGE PER THOUSAND

<TABLE>
<CAPTION>
MALE MALE FEMALE FEMALE
ISSUE ULTIMATE SELECT/ ULTIMATE STANDARD/ ULTIMATE SELECT/ ULTIMATE STANDARD/
AGE SELECT STANDARD SELECT STANDARD
<S> <C> <C> <C> <C>
0 N/A 10.94 N/A 10.35
1 N/A 8.16 N/A 8.16
2 N/A 8.16 N/A 8.16
3 N/A 7.92 N/A 7.92
4 N/A 7.68 N/A 7.68
5 N/A 7.68 N/A 7.68
6 N/A 7.68 N/A 7.68
7 N/A 7.68 N/A 7.68
8 N/A 7.68 N/A 7.68
9 N/A 7.68 N/A 7.68
10 N/A 7.68 N/A 7.68
11 N/A 7.68 N/A 7.68
12 N/A 7.68 N/A 7.68
13 N/A 7.92 N/A 7.92
14 N/A 8.16 N/A 8.16
15 N/A 8.40 N/A 8.40
16 N/A 8.52 N/A 8.52
17 N/A 8.88 N/A 8.88
18 8.72 9.20 8.72 9.20
19 8.84 9.32 8.84 9.32
20 8.96 9.44 8.96 9.44
21 9.16 9.88 9.16 9.64
22 9.32 10.04 9.32 9.80
23 9.52 10.24 9.52 10.00
24 9.68 10.40 9.68 10.40
25 9.88 10.84 9.88 10.60
26 10.56 11.28 10.32 11.04
27 11.00 11.72 10.76 11.48
28 11.40 12.12 11.16 12.12
29 12.08 12.80 11.84 12.56
30 12.52 13.24 12.28 13.00
31 13.04 14.00 12.80 13.52
32 13.76 14.48 13.52 14.24
33 14.28 15.24 14.04 14.76
34 14.76 15.96 14.52 15.48
35 15.52 16.48 15.04 16.00
</TABLE>

<TABLE>
<CAPTION>
MALE MALE FEMALE FEMALE
ISSUE ULTIMATE SELECT/ ULTIMATE STANDARD/ ULTIMATE SELECT/ ULTIMATE STANDARD/
AGE SELECT STANDARD SELECT STANDARD
<S> <C> <C> <C> <C>
36 16.20 17.40 15.34 16.56
37 16.85 18.40 15.65 16.93
38 17.25 19.56 15.98 17.32
39 17.66 20.56 16.32 17.73
40 20.28 21.96 19.32 20.52
41 21.64 23.56 20.68 22.12
42 23.08 25.24 21.30 23.24
43 23.90 27.08 21.80 23.82
44 24.57 29.12 22.33 24.43
45 25.27 30.04 22.89 25.06
46 26.02 31.02 23.48 25.73
47 26.81 32.05 24.10 26.43
48 27.64 33.13 24.75 27.16
49 28.53 34.28 25.45 27.94
50 29.47 35.49 26.18 28.75
51 30.47 36.77 26.95 29.61
52 31.53 38.12 27.76 30.51
53 32.66 39.55 28.63 31.46
54 33.86 41.05 29.54 32.45
55 35.12 42.62 30.51 33.51
56 36.47 44.29 31.53 34.62
57 37.90 46.04 32.63 35.80
58 39.43 47.89 33.80 37.07
59 41.05 49.86 35.05 38.43
60 42.78 51.94 36.40 39.89
61 44.63 54.15 37.84 41.45
62 46.60 56.48 39.39 43.11
63 48.69 57.00 41.03 44.88
64 50.91 57.00 42.79 46.75
65 53.28 57.00 44.66 48.73
66 55.80 57.00 46.66 50.84
67 57.00 57.00 48.81 53.09
68 57.00 57.00 51.13 55.53
69 57.00 57.00 53.64 57.00
70 57.00 57.00 56.37 57.00
71 and over 57.00 57.00 57.00 57.00
</TABLE>

WRL00004-07/98

<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
BALANCE SHEET - STATUTORY BASIS
AS OF MARCH 31, 1998
(IN THOUSANDS)(UNAUDITED)

ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 39,424
Bonds 3,823,668
Common stock, at market 163
Mortgage loans on real estate 467,559
Properties acquired in satisfaction of debt 45,521
Policy loans 740
Short-term note receivable from affiliate 39,400
Other invested assets 31,584
-----------
Total cash and invested assets 4,448,059

Premiums deferred and uncollected 2,862
Accrued investment income 56,510
Transfers from separate accounts 11,264
Federal income tax recoverable 159
Other assets 1,092
Separate account assets 5,811,337

-----------
Total admitted assets 10,331,283
===========

<PAGE>

LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life 72,459
Annuity 841,919
Accident and Health 9,837
Supplementary contracts 3,264
Policy and contract claim reserves:
Life 3,063
Accident and Health 8,584
Other policyholders' funds 3,195,538
Remittances and items not allocated 57,255
Asset valuation reserve 69,189
Interest maintenance reserve 14,726
Payable to affiliate 7,296
Deferred income 9,659
Payable under assumption reinsurance 16,979
agreement
Other liabilities 26,547
Separate account liabilities 5,788,997
-----------
Total liabilities 10,125,312

Capital and surplus:
Common stock, $1.00 par value, 2,500 shares
authorized, issued and outstanding 2,500
Paid-in surplus 306,694
Unassigned deficit (103,223)
-----------
Total capital and surplus 205,971
-----------
Total liabilities and capital and surplus 10,331,283
===========

<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
STATEMENT OF OPERATIONS - STATUTORY BASIS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)(UNAUDITED)

Revenues:
Premiums and other considerations, net of reinsurance
Life $ 13,056
Annuity 277,355
Net investment income 84,386
Amortization of interest maintenance reserve 2,546
Commissions and expense allowances on
reinsurance ceded 47
Other income 4,346
---------
381,736

Benefits and expenses:
Benefits paid or provided for:
Life 5,632
Surrender benefits 245,275
Other benefits 4,434
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 1,127
Annuity (1,222)
Accident and health 574
Increase in liability for premium and
other deposit type funds 17,356
Other 139
---------
273,315

Insurance expenses:
Commissions 20,698
General insurance expenses 21,203
Taxes, licenses and fees 278
Transfer to separate accounts 61,537
---------
103,716
---------
377,031
---------
Gain from operations before federal income taxes
and realized capital gains (losses) on 4,705
Federal income tax expense 0
---------
Loss from operations before realized capital gains on
investments 4,705
Net realized capital losses on investments (net of related
federal income taxes and amounts transferred to interest
maintenance reserve) (700)
---------
Net income 4,005
=========

<PAGE>
<TABLE>
<CAPTION>
AUSA LIFE INSURANCE COMPANY, INC.
STATEMENT OF CHANGES IN CAPITAL AND SURPLUS - STATUTORY BASIS
(IN THOUSANDS)(UNAUDITED)

TOTAL
CAPITAL
COMMON PAID-IN UNASSIGNED AND
STOCK SURPLUS SURPLUS SURPLUS
-------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $ 2,500 $306,694 $ (103,073) $206,121
Net income 0 0 4,005 4,005
Net unrealized gains 0 0 29 29
Increase in non-admitted assets 0 0 (654) (654)
Increase in asset valuation reserve 0 0 (4,131) (4,131)
Seed money contributed to separate
account, net of redemptions 0 0 612 612
Decrease in surplus in separate
accounts 0 0 (11) (11)
-------------------------------------------------
Balance at March 31, 1998 2,500 306,694 (103,223) 205,971
=================================================
</TABLE>

<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
STATEMENT OF CASH FLOW - STATUTORY BASIS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)(UNAUDITED)

OPERATING ACTIVITIES

Premiums and other considerations, net of reinsurance $ 295,336
Net investment income 93,328
Life and accident and health claims (7,222)
Surrender benefits to policyholders (245,275)
Other benefits to policyholders (4,434)
Commissions, other expenses and other taxes (82,369)
Federal income taxes 0
Net transfers to separate accounts (61,693)
Other, net 42,024
---------
Net cash provided by operating activities 29,695

INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 260,815
Mortgage loans on real estate 34,947
Other 21
Gain on cash and short-term investment 2
---------
295,785
Cost of investments acquired:
Bonds and preferred stocks 301,806
Mortgage loans on real estate 5,913
Real estate 74
Policy loans 2
Other 31,769
---------

339,564
---------
Net cash used in investing activities (43,779)
---------

Decrease in cash and short-term investments (14,084

Cash and short-term investments at beginning of year 53,508
=========
Cash and short-term investments at end of year 39,424
=========

<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
STATEMENT OF CASH FLOW - STATUTORY BASIS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited statutory basis financial statements have been
prepared in accordance with statutory accounting principles for interim
financial information and the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. For further information, refer to the accompanying statutory
basis financial statements and notes thereto for the year ended December 31,
1997.

<PAGE>
Report of Independent Auditors

The Board of Directors
AUSA Life Insurance Company, Inc.

We have audited the accompanying statutory-basis balance sheets of AUSA Life
Insurance Company, Inc. as of December 31, 1997 and 1996, and the related
statutory-basis statements of operations, changes in capital and surplus, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the accompanying statutory-basis financial statement
schedules pursuant to Article 7 of Regulation S-X. These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

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

As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Department of Insurance of the State of New York, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.

In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of AUSA Life Insurance Company, Inc. at December 31, 1997 and 1996, or the
results of its operations or its cash flows for each of the three years in the
period ended December 31, 1997.

<PAGE>

Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AUSA Life Insurance Company,
Inc. at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997 in
conformity with accounting practices prescribed or permitted by the Department
of Insurance of the State of New York. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

ERNST & YOUNG LLP

Des Moines, Iowa
February 27, 1998

<PAGE>

AUSA Life Insurance Company, Inc.

Balance Sheets - Statutory Basis
(Dollars in thousands, except per share data)

DECEMBER 31
1997 1996
---------- ----------
ADMITTED ASSETS Cash and invested assets:
Cash and short-term investments $ 53,508 $ 25,391
Bonds 3,795,509 3,495,667
Stocks:

Preferred -- 125
Common, at market (cost: $118 in 1997 and
$13 in 1996) 144 18
Mortgage loans on real estate 495,009 618,633
Real estate acquired in satisfaction of debt, at
cost less accumulated depreciation
($1,816 in 1997 and $1,087 in 1996) 45,695 58,100
Policy loans 739 755
Other invested assets 22,309 3,393
---------- ----------
Total cash and invested assets 4,412,913 4,202,082

Short-term note receivable from affiliate 8,800 --
Premiums deferred and uncollected 3,247 3,257
Accrued investment income 66,978 62,258
Federal income taxes recoverable -- 416
Other assets 7,479 5,177
Separate account assets 5,452,208 4,755,131

---------- ----------
Total admitted assets $9,951,625 $9,028,321
========== ==========

SEE ACCOMPANYING NOTES.

DECEMBER 31
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 71,331 $ 19,716
Annuity 843,141 768,212
Accident and health 9,264 10,180
Policy and contract claim reserves:
Life 4,187 3,826
Accident and health 9,050 11,160
Other policyholders' funds 3,181,405 3,088,016
Remittances and items not allocated 35,235 16,252
Asset valuation reserve 65,058 44,849
Interest maintenance reserve 16,115 5,494
Payable to affiliates 2,185 8,074
Short-term note payable to affiliate -- 600
Deferred income 13,421 18,023
Payable under assumption reinsurance agreement 56,952 67,217
Other liabilities 7,681 10,748
Separate account liabilities 5,430,479 4,721,974
----------- -----------
Total liabilities 9,745,504 8,794,341

Commitments and contingencies

Capital and surplus:
Common stock, $125 par value, 20 shares authorized,
issued and outstanding 2,500 2,500
Paid-in surplus 306,694 306,694
Unassigned surplus (deficit) (103,073) (75,214)
----------- -----------
Total capital and surplus 206,121 233,980
----------- -----------
Total liabilities and capital and surplus $ 9,951,625 $ 9,028,321
=========== ===========
</TABLE>

SEE ACCOMPANYING NOTES.

AUSA Life Insurance Company, Inc.

Statements of Operations - Statutory Basis
(Dollars in thousands)

YEAR ENDED DECEMBER 31
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations,
net of reinsurance:
Life $ 60,261 $ 9,344 $ 9,066
Annuity 1,146,805 1,060,655 1,144,423
Accident and health 34,846 47,695 53,346
Net investment income 325,181 323,828 318,004
Amortization of interest maintenance
reserve 2,941 1,903 1,931
Commissions and expense allowances on
reinsurance ceded 189 43 40
Other income 15,037 10,739 8,786
----------- ----------- -----------
1,585,260 1,454,207 1,535,596
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits 28,023 39,921 40,719
Surrender benefits 1,156,619 852,745 815,882
Other benefits 12,062 9,778 7,804
Increase (decrease) in aggregate reserves
for policies and contracts:
Life 51,615 1,557 1,570
Annuity 74,929 59,090 127,403
Accident and health (916) (671) 775
Other 580 609 609
Increase in liability for premium and other
deposit type funds 92,280 93,893 229,485
----------- ----------- -----------
1,415,192 1,056,922 1,224,247
Insurance expenses:
Commissions 78,971 87,861 95,900
General insurance expenses 87,782 79,310 69,933
Taxes, licenses and fees 2,872 2,643 1,638
Net transfers to (from) separate accounts (2,304) 227,802 139,912
Other expenses 43 (19) (37)
----------- ----------- -----------
167,364 397,597 307,346
----------- ----------- -----------
1,582,556 1,454,519 1,531,593
----------- ----------- -----------
Gain (loss) from operations before federal
income taxes and net realized capital
gains (losses) on investments 2,704 (312) 4,003
Federal income tax expense 28 1,305 5,588

Gain (loss) from operations before net realized
capital gains (losses) on investments 2,676 (1,617) (1,585)
Net realized capital gains (losses) on investments
(net of related federal income taxes and amounts
transferred to interest maintenance reserve) 827 (12,097) (3,464)
----------- ----------- -----------
Net income (loss) $ 3,503 $ (13,714) $ (5,049)
=========== =========== ===========
</TABLE>

SEE ACCOMPANYING NOTES.

AUSA Life Insurance Company, Inc.

Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)

UNASSIGNED TOTAL
COMMON PAID-IN SURPLUS CAPITAL AND
STOCK SURPLUS (DEFICIT) SURPLUS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ 2,500 $ 265,694 $ (43,044) $ 225,150
Capital contribution -- 41,000 -- 41,000
Net loss for 1995 -- -- (5,049) (5,049)
Net unrealized capital losses -- -- (501) (501)
Increase in non-admitted assets -- -- (920) (920)
Increase in asset valuation reserve -- -- (10,370) (10,370)
Surplus effect of reinsurance -- -- (70) (70)
Seed money contributed to separate
account, net of redemptions -- -- (1,000) (1,000)
Increase in liability for reinsurance in
unauthorized companies -- -- (51) (51)
Increase in surplus in separate account -- -- 3,121 3,121
--------- --------- --------- ---------
Balance at December 31, 1995 2,500 306,694 (57,884) 251,310
Net loss for 1996 -- -- (13,714) (13,714)
Net unrealized capital losses -- -- (486) (486)
Decrease in non-admitted assets -- -- 520 520
Increase in liability for reinsurance
in unauthorized companies -- -- (42) (42)
Increase in asset valuation reserve -- -- (5,891) (5,891)
Seed money contributed to separate
account, net of redemptions -- -- (12,500) (12,500)
Increase in surplus in separate account -- -- 14,783 14,783
--------- --------- --------- ---------
Balance at December 31, 1996 2,500 306,694 (75,214) 233,980
Net gain for 1997 -- -- 3,503 3,503
Net unrealized capital losses -- -- (2,629) (2,629)
Increase in non-admitted assets -- -- (8,505) (8,505)
Decrease in liability for reinsurance in
unauthorized companies -- -- 30 30
Increase in asset valuation reserve -- -- (20,209) (20,309)
Seed money withdrawn from separate
account, net of redemptions -- -- 11,700 11,700
Decrease in surplus in separate account -- -- (11,749) (11,749)
========= ========= ========= =========
Balance at December 31, 1997 $ 2,500 $ 306,694 $(103,073) $ 206,121
========= ========= ========= =========
</TABLE>

SEE ACCOMPANYING NOTES.

AUSA Life Insurance Company, Inc.

Statements of Cash Flows - Statutory Basis
(Dollars in thousands)

YEAR ENDED DECEMBER 31
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and other considerations, net of reinsurance $ 1,268,814 $ 1,128,792 $ 1,215,941
Net investment income 323,269 329,948 316,494
Life and accident and health claims (29,800) (42,143) (39,194)
Surrender benefits and other fund withdrawals (1,156,619) (852,745) (815,882)
Other benefits to policyholders (12,036) (9,776) (7,789)
Commissions, other expenses and other taxes (178,648) (187,930) (183,810)
Net transfer (to) from separate account 1,467 (229,556) (139,912)
Federal income taxes (paid) received 388 (526) (6,299)
Other, net (1,919) (14,820) 7,133
----------- ----------- -----------
Net cash provided by operating activities 214,916 121,244 346,682

INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 808,738 703,936 529,363
Common stocks -- 5,288 2,957
Mortgage loans on real estate 179,810 165,460 138,243
Real estate 25,104 -- 4,953
Policy loans 16 4 --
----------- ----------- -----------
1,013,668 874,688 675,516
Cost of investments acquired:
Bonds and preferred stocks (1,112,481) (1,016,678) (1,018,097)
Common stocks (103) (589) (5,174)
Mortgage loans on real estate (60,722) (42,118) (54,140)
Real estate -- (521) --
Policy loans -- -- (40)
Other (17,761) (2,968) (993)
----------- ----------- -----------
(1,191,067) (1,062,874) (1,078,444)
----------- ----------- -----------
Net cash used in investing activities (177,399) (188,186) (402,928)

FINANCING ACTIVITIES
Issuance (payment) of intercompany notes, net (9,400) (19,200) 14,600
Capital contribution -- -- 41,000
----------- ----------- -----------
Net cash provided by (used in) financing activities (9,400) (19,200) 55,600
----------- ----------- -----------
Increase (decrease) in cash and short-term 28,117 (86,142) (646)
investments

Cash and short-term investments at beginning of year 25,391 111,533 112,179
----------- ----------- -----------
Cash and short-term investments at end of year $ 53,508 $ 25,391 $ 111,533
=========== =========== ===========
</TABLE>

SEE ACCOMPANYING NOTES.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis
(Dollars in thousands)

December 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

AUSA Life Insurance Company, Inc. ("the Company") is a stock life insurance
company and is a wholly-owned subsidiary of First AUSA Life Insurance Company
("First AUSA") which, in turn, is a wholly-owned subsidiary of AEGON USA
("AEGON"). AEGON is a wholly-owned subsidiary of AEGON nv, a holding company
organized under the laws of The Netherlands. On December 31, 1993, the Company
entered into an assumption reinsurance agreement with Mutual of New York
("MONY") to transfer certain group pension business of MONY to the Company.

In July 1996, the Company completed a merger with International Life Investors
Insurance Company ("ILI"), a wholly-owned subsidiary of Life Investors Insurance
Company of America, another wholly-owned subsidiary of First AUSA, whereby ILI
was merged directly into the Company. The Company received assets of $688,233
and liabilities of $635,189. The difference between assets and liabilities was
transferred directly to capital and surplus. In accordance with National
Association of Insurance Commissioners ("NAIC") statutory accounting principles,
all prior period financial statements presented have been restated as if the
merger took place at the beginning of such periods. Historical book values
carried over from the separate companies to the combined entity.

NATURE OF BUSINESS

The Company primarily sells group fixed and variable annuities and group life
coverages. The Company is licensed in 48 states and the District of Columbia and
is actively in the process of becoming licensed in all 50 states. Sales of the
Company's products are primarily through brokers.

BASIS OF PRESENTATION

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

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

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

The National Association of Insurance Commissioners (NAIC) currently is in the
process of recodifying statutory accounting practices, the result of which is
expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be completed in 1998,
will likely change, to some extent, prescribed statutory accounting practices
and may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

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

INVESTMENTS

Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortized costs for bonds and mortgage loans on real
estate that were acquired through the reinsurance agreement, described earlier,
were initially recorded at market value, consistent with the aforementioned
agreement and as prescribed by the Department of Insurance of the State of New
York. Amortization is computed using methods which result in a level yield over
the expected life of the security. The Company reviews its prepayment
assumptions on mortgage and other asset backed securities at regular intervals
and adjusts amortization rates retrospectively when such assumptions are changed
due to experience and/or expected future patterns. Investments in preferred
stocks in good standing are reported at cost. Investments in preferred stocks
not in good standing are reported at the lower of cost or market. Common stocks,
which may include shares of mutual funds (money market and other), are carried
at market. Real estate is reported at cost less allowances for depreciation.
Depreciation is computed principally by the straight-line method. Policy loans
are reported at unpaid principal. Other invested assets consist principally of
investments in various joint ventures and are recorded at equity in underlying
net assets. Other "admitted assets" are valued, principally at cost, as required
or permitted by New York Insurance Laws.

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

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. At December 31, 1997, 1996 and 1995, the
Company excluded investment income due and accrued of $473, $469 and $216,
respectively, with respect to such practices.

The Company uses interest rate swaps as part of its overall interest rate risk
management strategy for certain life insurance and annuity products. The Company
entered into an interest rate swap contract to modify the interest rate
characteristics of the underlying liabilities. The net interest effect of such
swap transactions is reported as an adjustment of interest income from the
hedged items as incurred.

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

AGGREGATE POLICY RESERVES

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

The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality Tables.
The reserves are calculated using interest rates ranging from 2.50 to 6.50
percent and are computed principally on the Net Level Premium Valuation and the
Commissioners' Reserve Valuation Methods. Reserves for universal life policies
are based on account balances adjusted for the Commissioners' Reserve Valuation
Method.

Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with life contingencies are equal to the
present value of future payments assuming interest rates ranging from 3.00 to
8.25 percent and mortality rates, where appropriate, from a variety of tables.

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

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

POLICY AND CONTRACT CLAIM RESERVES

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

SEPARATE ACCOUNTS

Assets held in trust for purchases of separate account contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. Income and gains and losses with respect to these assets
accrue to the benefit of the policyholders and, accordingly, the operations of
the separate accounts are not included in the accompanying financial statements.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation.

2. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 107, DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires additional disclosures about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

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

CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their fair
values.

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

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

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

INTEREST RATE SWAP: Estimated fair value of the interest rate swaps are
based upon the pricing differential for similar swap agreements.

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

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

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

DECEMBER 31
1997 1996
------------------------- ------------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Bonds $3,795,509 $3,880,098 $3,495,667 $3,530,250
Preferred stocks -- -- 125 120
Common stock 144 144 18 18
Mortgage loans on real estate 495,009 504,947 618,633 619,479
Interest rate swap -- 391 -- --

Policy loans 739 739 755 755

Cash and short-term investments 53,508 53,508 25,391 25,391

Separate account assets 5,452,208 5,462,501 4,755,131 4,754,781

LIABILITIES
Investment contract liabilities 4,024,004 3,947,049 3,855,787 3,731,340
Separate account annuities 5,417,036 5,400,010 4,707,568 4,677,289
</TABLE>

3. INVESTMENTS

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

GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
United States Government and agencies $ 93,649 $ 499 $ 252 $ 93,896
State, municipal and other government 55,336 1,413 1,761 54,988
Public utilities 251,071 4,943 892 255,122
Industrial and miscellaneous 2,180,885 57,783 5,344 2,233,324
Mortgage-backed securities 1,214,568 31,185 2,985 1,242,768
---------- ---------- ---------- ----------
$3,795,509 $ 95,823 $ 11,234 $3,880,098
========== ========== ========== ==========
</TABLE>

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>

GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
United States Government and agencies $ 122,355 $ 1,170 $ 1,086 $ 122,439
State, municipal and other government 25,027 519 36 25,510
Public utilities 229,732 2,086 2,977 228,841
Industrial and miscellaneous 2,031,086 33,621 14,895 2,049,812
Mortgage-backed securities 1,087,467 22,579 6,398 1,103,648
---------- ---------- ---------- ----------
3,495,667 59,975 25,392 3,530,250
Preferred stocks 125 5 10 120
---------- ---------- ---------- ----------
$3,495,792 $ 59,980 $ 25,402 $3,530,370
========== ========== ========== ==========
</TABLE>

The carrying value and estimated market value of bonds at December 31, 1997, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

CARRYING ESTIMATED
VALUE FAIR VALUE
---------- ----------
Due in one year or less $ 136,322 $ 136,393
Due after one year through five years 1,371,927 1,398,781
Due after five years through ten years 915,324 938,972
Due after ten years 157,368 163,184
---------- ----------
2,580,941 2,637,330
---------- ----------
Mortgage-backed securities 1,214,568 1,242,768
---------- ----------
$3,795,509 $3,880,098
========== ==========

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

A detail of net investment income is presented below:

DECEMBER 31
1997 1996 1995
-------- -------- --------

Interest on bonds and notes $269,659 $251,923 $231,206
Mortgage loans 57,659 83,511 98,653
Real estate 13,976 7,225 2,400
Dividends on equity investments 9 25 137
Interest on policy loans 39 34 40
Derivative instruments 100 -- --
Other investment gain (loss) 1,340 (5,511) (3,926)
-------- -------- --------
Gross investment income 342,782 337,207 328,510
-------- -------- --------
Investment expenses 17,601 13,379 10,506
-------- -------- --------
Net investment income $325,181 $323,828 $318,004
======== ======== ========

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

DECEMBER 31
1997 1996 1995
-------- ---------- ----------

Proceeds $808,738 $ 703,936 $ 529,363
======== ========== ==========

Gross realized gains $ 16,514 $ 9,527 $ 8,541
Gross realized losses (11,493) (11,595) (15,255)
-------- ---------- ----------
Net realized gains (losses) $ 5,021 $ (2,068) $ (6,714)
======== ========== ==========

At December 31, 1997, investments with an aggregate carrying value of $2,350
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required by
statute.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

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

REALIZED
--------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
-------- -------- --------

Debt securities $ 5,021 $ (2,068) $ (6,714)
Common stock -- 244 --
Preferred stock (7) (44) --
Short-term investments (6) (115) (24)
Mortgage loans on real estate 287 (12,415) (3,650)
Real estate 4,059 -- (628)
Other invested assets 5,035 6,872 11,109
-------- -------- --------
14,389 (7,526) 93

Tax effect -- (87) 247
Transfer to interest maintenance reserve (13,562) (4,484) (3,804)
-------- -------- --------
Total realized gains (losses) $ 827 $(12,097) $ (3,464)
======== ======== ========

CHANGE IN UNREALIZED
-----------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
-------- -------- --------

Debt securities $ 50,011 $(80,600) $265,890
Equity securities 21 (190) 74
-------- -------- --------
Change in unrealized appreciation $ 50,032 $(80,790) $265,964
======== ======== ========

Gross unrealized gains and gross unrealized losses on equity securities at
December 31, 1997, 1996 and 1995 were as follows:

YEAR ENDED DECEMBER 31
1997 1996 1995
----- ----- -----
Unrealized gains $ 38 $ 16 $ 206
Unrealized losses (12) (11) (11)
----- ----- -----
Net unrealized gains $ 26 $ 5 $ 195
===== ===== =====

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

During 1997, the Company issued mortgage loans with interest rates ranging from
8.10% to 8.72%. The maximum percentage of any one loan to the value of the
underlying real estate at origination was 85%. No mortgage loans were non-income
producing for the previous twelve months and, accordingly, no accrued interest
related to these mortgage loans was excluded from investment income. During
1997, the Company refinanced the mortgage loans of one property with an
aggregate carrying value of $24,888 to reduce the interest rates, as a result of
the current interest rate environment. The Company requires all mortgage loans
to carry fire insurance equal to the value of the underlying property.

During 1997, 1996 and 1995, there were $4,427, $28,929 and $14,264,
respectively, in foreclosed mortgage loans that were transferred to real estate.
At December 31, 1997 and 1996, the Company held a mortgage loan loss reserve in
the asset valuation reserve of $20,191 and $8,368, respectively. The mortgage
loan portfolio is diversified by geographic region and specific collateral
property type as follows:

GEOGRAPHIC DISTRIBUTION PROPERTY TYPE DISTRIBUTION
------------------------------------ ----------------------------
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
---- ---- ---- ----
Pacific 20% 2% Office 30% 42%
South Atlantic 20 37 Apartment 23 10
Mid-Atlantic 16 5 Retail 19 30
E. North Central 16 21 Other 15 17
Mountain 15 15 Industrial 13 1
New England 7 10
W. North Central 2 5
W. South Central 2 5
E. South Central 2 --

At December 31, 1997, the Company had the following investments, excluding U. S.
Government guaranteed or insured issues, which individually represented more
than ten percent of capital and surplus and the asset valuation reserve:

CARRYING
DESCRIPTION OF SECURITY VALUE
- ------------------------- ---------

Bonds:
Chase Manhattan Corp. $37,953
PSEG Capital 27,490

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

The Company utilizes an interest rate swap agreement as part of its efforts to
hedge and manage fluctuations in the market value of its investment portfolio
attributable to changes in general interest rate levels and to manage duration
mismatch of assets and liabilities. The contract or notional amounts of those
instruments reflect the extent of involvement in the various types of financial
instruments.

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract) that
would result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance by
a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.

At December 31, 1997 and 1996, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:

NOTIONAL AMOUNT
1997 1996
------- -----
Derivative securities:
Interest rate swaps:
Receive fixed - pay floating $50,800 $ --

4. REINSURANCE

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

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

1997 1996 1995
---------- ---------- ----------
Direct premiums $1,239,553 $1,135,315 $1,207,720
Reinsurance assumed 6,905 9,962 37,423
Reinsurance ceded (4,546) (27,583) (38,308)
========== ========== ==========
Net premiums earned $1,241,912 $1,117,694 $1,206,835
========== ========== ==========

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

4. REINSURANCE (CONTINUED)

The Company received reinsurance recoveries in the amounts of $1,633, $953 and
$533 during 1997, 1996 and 1995, respectively.

The aggregate reserves for policies and contracts were reduced for reserve
credits for reinsurance ceded at December 31, 1997 and 1996 of $153,178 and
$157,396, respectively.

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

In accordance with the agreement, MONY will receive payments relating to the
performance of the assets and liabilities that exist at the date of closing for
a period of nine years. These payments will be reduced for certain
administrative expenses as defined in the agreement. The Company will recognize
operating gains and losses on renewal premiums received after December 31, 1993
of the business in-force at December 31, 1993, and on all new business written
after that date. At the end of nine years, the Company will purchase from MONY
the remaining transferred business inforce based upon a formula described in the
agreement. At December 31, 1997 and 1996, the Company owed MONY $56,952 and
$67,217, respectively, which represents the amount earned by MONY under the gain
sharing calculation and certain fees for investment management services for the
respective years.

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

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

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

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

5. INCOME TAXES

The Company files a separate federal income tax return.

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

YEAR ENDED DECEMBER 31
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Computed tax expense (benefit) at federal statutory
rate (35%) $ 946 $ (109) $ 1,402
Tax reserve adjustment (144) (211) 755
Deferred acquisition cost - tax basis 2,349 465 636
Carryforward (utilization) of operating loss (1,275) 2,611 3,351
Excess tax depreciation (16) (13) --
Dividend received deduction (1,566) (4) --
Prior year (over)/under accrual 28 114 (67)
IMR amortization (1,029) (666) (676)
Other items - net 735 (882) 187
------- ------- -------
Federal income tax expense $ 28 $ 1,305 $ 5,588
======= ======= =======
</TABLE>

Federal income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to realized gains (losses) due to
the agreement between MONY and the Company, as discussed in Note 4 to the
financial statements. In accordance with this agreement, these gains and losses
are included in the net payments MONY will receive relating to the performance
of the assets that existed at the date of closing. Accordingly, income taxes
relating to gains and losses on such assets are not provided for on the income
tax return filed by the Company.

Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($797 at December 31, 1997). To the extent dividends are paid from the
amount accumulated in the policyholders' surplus account, net earnings would be
reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $279.

At December 31, 1997 the Company had net operating loss carryforwards of
approximately $19,155 which expire through 2011.

An examination by the Internal Revenue Service is underway for years 1993 -
1995.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES

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

DECEMBER 31
1997 1996
----------------------- --------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal
with market value adjustment $ 910,528 9% $ 834,176 10%
Subject to discretionary withdrawal at book
value less surrender charge 1,032,460 11 1,583,989 18
Subject to discretionary withdrawal at market
value 2,772,795 29 2,254,074 26
Subject to discretionary withdrawal at book
value (minimal or no charges or adjustments) 2,565,002 27 1,913,542 22
Not subject to discretionary withdrawal
provision 2,314,542 24 2,136,222 24
---------- --- ---------- ---
9,595,327 100% 8,722,003 100%
========== === ========== ===
Less reinsurance ceded 152,726 157,039

Total policy reserves on annuities and
deposit fund liabilities $9,442,601 $8,564,964
========== ==========
</TABLE>

Separate and variable account assets held by the Company represent contracts
where the benefit is determined by the performance of the investments held in
the separate account. Information regarding the separate accounts of the Company
as of and for the years ended December 31, 1997, 1996 and 1995 is as follows:

GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
----------- -------------- ----------
Premiums, deposits and other
considerations for the year ended
December 31, 1997 $ 147,638 $ 596,581 $ 744,219
=========== =========== ==========

Reserves for separate accounts with
assets as of December 31, 1997 at:
Fair value $ 2,204,931 $ 2,589,401 $ 4,794,332
Amortized cost 622,703 -- 622,703
----------- ----------- -----------
Total $ 2,827,634 $ 2,589,401 $ 5,417,035
=========== =========== ===========

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
-------------- ------------- -----------
Premiums, deposits and other
considerations for the year ended
December 31, 1996 $ -- $ 716,524 $ 716,524
=========== =========== ===========

Reserves for separate accounts with
assets as of December 31, 1996 at:
Fair value $ 2,022,843 $ 2,071,160 $ 4,094,003
Amortized cost 613,565 -- 613,565
=========== =========== ===========
Total $ 2,636,408 $ 2,071,160 $ 4,707,568
=========== =========== ===========

Premiums, deposits and other
considerations for the year ended
December 31, 1995 $ -- $ 536,128 $ 536,128
=========== =========== ===========

Reserves for separate accounts with
assets as of December 31, 1995 at:
Fair value $ 2,147,500 $ 1,491,225 $ 3,638,725
Amortized cost 599,254 -- 599,254
-------------- ----------- -----------
Total $ 2,746,754 $ 1,491,225 $ 4,237,979
============== =========== ===========

There may be certain restrictions placed upon the amount of funds that can be
withdrawn without penalty. The amount of separate account liabilities on these
products, by withdrawal characteristics, are summarized as follows:

GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
------------ --------------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1997
Subject to discretionary withdrawal
with market value adjustment $ 358,061 $ -- $ 358,061
Subject to discretionary withdrawal
at book value less surrender charge 264,642 -- 264,642
Subject to discretionary withdrawal
at market value 180,802 2,589,401 2,770,203
Not subject to discretionary withdrawal 2,024,129 -- 2,024,129
=========== =========== ===========
$ 2,827,634 $ 2,589,401 $ 5,417,035
=========== =========== ===========
</TABLE>

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
----------- -------------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1996
Subject to discretionary withdrawal
with market value adjustment $ 269,991 $ -- $ 269,991
Subject to discretionary withdrawal
at book value less surrender charge 279,399 -- 279,399
Subject to discretionary withdrawal
at market value 181,158 2,071,160 2,252,318
Not subject to discretionary withdrawal 1,905,860 -- 1,905,860
=========== ============ ===========
$ 2,636,408 $ 2,071,160 $ 4,707,568
=========== ============ ===========
</TABLE>

A reconciliation of the amounts transferred to and from the separate accounts is
presented below:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Transfers as reported in the summary of
operations of the separate accounts
statement:
Transfers to separate accounts $ 744,188 $ 716,525 $ 536,128
Transfers from separate accounts 760,248 502,244 404,120
--------- --------- ---------
Net transfers to (from) separate accounts (16,060) 214,281 132,008
Reconciling adjustments - HUB level fees not
paid to AUSA general account 13,756 13,520 7,904
========= ======== =========
Transfers as reported in the summary of
operations of the life, accident and health $ (2,304) $ 227,802 $ 139,912
========= ========= =========
</TABLE>

Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1997 and 1996, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

GROSS LOADING NET
------- ------- -------
DECEMBER 31, 1997
Ordinary direct first year business $ 29 $ 21 $ 8
Ordinary direct renewal business 2,976 49 2,927
Group life direct business 125 19 106
Credit life 41 -- 41
Reinsurance ceded (14) -- (14)
------- ------- -------
3,157 89 3,068
Accident and health:
Direct 230 -- 230
Reinsurance ceded (51) -- (51)
------- ------- -------
Total accident and health 179 -- 179
======= ======= =======
$ 3,336 $ 89 $ 3,247
======= ======= =======
DECEMBER 31, 1996
Ordinary direct first year business $ 83 $ (1) $ 84
Ordinary direct renewal business 3,078 25 3,053
Group life direct business 135 22 113
Credit life 5 -- 5
Reinsurance ceded (163) -- (163)
------- ------- -------
3,138 46 3,092
Accident and health:
Direct 165 -- 165
Reinsurance ceded -- -- --
------- ------- -------
Total accident and health 165 -- 165
======= ======= =======
$ 3,303 $ 46 $ 3,257
======= ======= =======

At December 31, 1997 and 1996, the Company had insurance in force aggregating
$597,855 and $615,025, respectively, in which the gross premiums are less than
the net premiums required by the valuation standards established by the
Department of Insurance of the State of New York. The Company established policy
reserves of $1,476 and $1,520 to cover these deficiencies at December 31, 1997
and 1996, respectively.

7. DIVIDEND RESTRICTIONS

Generally, an insurance company's ability to pay dividends is limited to the
amount that their net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital requirements. However,
payment of such amounts as dividends may be subject to approval by regulatory
authorities. The Company is not entitled to pay out any dividends in 1998
without prior approval.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

8. RETIREMENT AND COMPENSATION PLANS

The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The
pension expense is allocated among the participating companies based on the FASB
87 expense as a percent of salaries. The benefits are based on years of service
and the employee's compensation during the highest five consecutive years of
employment. The Company was allocated $0, $13 and $14 of pension expense for the
years ended December 31, 1997, 1996 and 1995, respectively. The plan is subject
to the reporting and disclosure requirements of the Employee Retirement Income
Security Act of 1974.

The Company's employees also participate in a contributory defined contribution
plan sponsored by AEGON which is qualified under Section 401(k) of the Internal
Revenue Service Code. Employees of the Company who customarily work at least
1,000 hours during each calendar year and meet the other eligibility
requirements, are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement Income Security Act of 1974. The Company
was allocated $12, $21 and $8 of expense for the years ended December 31, 1997,
1996 and 1995, respectively.

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

In addition to pension benefits, the Company participates in plans sponsored by
AEGON that provide postretirement medical, dental and life insurance benefits to
employees meeting certain eligibility requirements. Portions of the medical and
dental plans are contributory. The expenses of the postretirement plans
calculated on the pay-as-you-go basis are charged to affiliates in accordance
with an intercompany cost sharing arrangement. The Company expensed $2 and $2
for the years ended December 31, 1996 and 1995, respectively. No expense related
to these plans was recorded for 1997.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

9. RELATED PARTY TRANSACTIONS

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

The Company shares certain officers, employees and general expenses with
affiliated companies.

The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1997, 1996
and 1995, the Company paid $3,630, $3,539 and $3,961, respectively, for these
services, which approximates their costs to the affiliates.

Payable to affiliates and intercompany borrowings bear interest at the
thirty-day commercial paper rate of 5.60% at December 31, 1997. During 1997,
1996 and 1995, the Company paid net interest of $142, $29 and $289,
respectively, to affiliates.

10. COMMITMENTS AND CONTINGENCIES

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

The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. In accordance with the purchase agreement,
assessments related to periods prior to the purchase of the Company will be paid
by Dreyfus. Assessments attributable to business reinsured from MONY for
premiums received prior to the date of the transaction will be paid by MONY. The
Company will be responsible for assessments, if any, attributable to premium
income after the date of purchase. Assessments are charged to operations when
received by the Company except where right of offset against other taxes paid is
allowed by law; amounts available for future offsets are recorded as an asset on
the Company's balance sheet. Potential future obligations for unknown
insolvencies are not determinable by the Company. The future obligation has been
based on the most recent information available from the National Organization of
Life and Health Insurance Guaranty Association. The guaranty fund expense was
$572, $167 and $(207) for the years ended December 31, 1997, 1996 and 1995,
respectively.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

11. YEAR 2000 (UNAUDITED)

AEGON has adopted and has in place a Year 2000 Assessment and Planning Project
(the "Project") to review and analyze its information technology and systems to
determine if they are Year 2000 compatible. The Company has begun to convert or
modify, where necessary, critical data processing systems. It is contemplated
that the plan will be substantially completed by early 1999. The Company does
not expect this project to have a significant effect on operations. However, to
mitigate the effect of outside influences upon the success of the project, the
Company has undertaken communications with its significant customers, suppliers
and other third parties to determine their Year 2000 compatibility and
readiness. Management believes that the issues associated with the Year 2000
will be resolved with no material financial impact on the Company.

Since the Year 2000 computer problem, and its resolution is complex and
multifaceted, the success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems or
equipment addresses Year 2000 date data prior to the Year 2000). Even with
appropriate and diligent pursuit of a well-conceived Project, including testing
procedures, there is no certainty that any company will achieve complete
success. Notwithstanding the efforts or results of the Company, its ability to
function unaffected to and through the Year 2000 may be adversely affected by
actions (or failure to act) of third parties beyond its knowledge or control.

<PAGE>

AUSA Life Insurance Company, Inc.

Summary of Investments - Other Than
Investments in Related Parties
(Dollars in thousands)

December 31, 1997

SCHEDULE I
<TABLE>
<CAPTION>

AMOUNT AT WHICH
MARKET SHOWN IN THE
TYPE OF INVESTMENT COST (1) VALUE BALANCE SHEET
---------- ---------- ---------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds:
United States Government and
government agencies and authorities $ 578,548 $ 591,837 $ 578,548
States, municipalities and political
subdivisions 69,321 71,465 69,321
Foreign governments 42,195 40,618 42,195
Public utilities 251,071 255,123 251,071
All other corporate bonds 2,854,374 2,921,055 2,854,374
---------- ---------- ----------
Total fixed maturities 3,795,509 3,880,098 3,795,509

EQUITY SECURITIES
Common stocks - industrial, miscellaneous
and all other 118 144 144
---------- ---------- ----------
Total equity securities 118 144 144

Mortgage loans on real estate 495,009 495,009
Real estate acquired in satisfaction
of debt 45,695 45,695
Policy loans 739 739
Cash and short-term investments 53,508 53,508
Other long-term investments 22,309 22,309
---------- ----------
Total investments $4,412,887 $4,412,913
========== ==========
<FN>
- -------------------------
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual of discounts.
</FN>
</TABLE>

<PAGE>

AUSA Life Insurance Company, Inc.

Supplementary Insurance Information
(Dollars in thousands)

SCHEDULE III

FUTURE POLICY POLICY AND
BENEFITS AND UNEARNED CONTRACT
EXPENSES PREMIUMS LIABILITIES
------------ -------- -----------
YEAR ENDED DECEMBER 31, 1997
Individual life $ 71,117 $ -- $ 4,187
Individual health 6,607 2,657 9,050
Group life and health 214 -- --
Annuity 843,141 -- --
-------- ------- -------
$921,079 $ 2,657 $13,237
======== ======= =======
YEAR ENDED DECEMBER 31, 1996
Individual life $ 19,493 $ -- $ 3,826
Individual health 7,687 2,493 11,160
Group life and health 223 -- --
Annuity 768,212 -- --
-------- ------- -------
$795,615 $ 2,493 $14,986
======== ======= =======
YEAR ENDED DECEMBER 31, 1995
Individual life $ 17,935 $ -- $ 3,716
Individual health 8,009 2,842 13,515
Group life and health 224 -- --
Annuity 709,122 -- --
-------- ------- -------
$735,290 $ 2,842 $17,231
======== ======= =======

NET BENEFITS, CLAIMS OTHER
PREMIUM INVESTMENT LOSSES AND SETTLEMENT OPERATING PREMIUMS
REVENUE INCOME* EXPENSES EXPENSES* WRITTEN
- ---------- ---------- --------------------- --------- --------
<S> <C> <C> <C> <C>
$ 58,696 $ 3,949 $ 56,689 $ 3,393 --
27,836 1,130 15,615 6,914 $26,560
8,575 265 7,080 1,544 7,977
1,146,805 319,837 1,335,808 155,513 --
- ---------- -------- ---------- --------
$1,241,912 $325,181 $1,415,192 $167,364
========== ======== ========== ========

$ 8,468 $ 2,040 $ 9,087 $ 734 --
40,479 1,734 25,674 12,534 $40,098
8,092 372 6,056 3,044 10,683
1,060,655 319,682 1,016,105 381,285
- ---------- -------- ---------- --------
$1,117,694 $323,828 $1,056,922 $397,597
========== ======== ========== ========

$ 8,388 $ 1,634 $ 8,062 $ 770 --
46,975 1,438 29,657 15,204 $46,558
7,049 306 5,293 970 6,074
1,144,423 314,626 1,181,235 290,402
- ---------- -------- ---------- --------
$1,206,835 $318,004 $1,224,247 $307,346
========== ======== ========== ========

<FN>
- ----------------------
* Allocations of net investment income and other operating expenses are based
on a number of assumptions and estimates, and the results would change if
different methods were applied.
</FN>
</TABLE>

AUSA Life Insurance Company, Inc.

Reinsurance
(Dollars in thousands)

SCHEDULE IV

ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED TO
AMOUNT COMPANIES COMPANIES AMOUNT NET
---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Life insurance in force $1,559,108 $37,433 $ 216,838 $1,738,513 12%
========== ======= ========== ========== ========
Premiums:
Individual life $ 57,604 $ 266 $ 1,358 $ 58,696 2%
Individual health 27,044 4 796 27,836 3
Group life and health 9,103 537 9 8,575 --
Annuity 1,145,802 3,739 4,742 1,146,805 --
---------- ------- ---------- ---------- --------
$1,239,553 $ 4,546 $ 6,905 $1,241,912 1%
========== ======= ========== ========== ========
YEAR ENDED DECEMBER 31, 1996
Life insurance in force $1,238,554 $68,804 $ 241,117 $1,410,867 17%
========== ======= ========== ========== ========
Premiums:
Individual life $ 7,652 $ 560 $ 1,376 $ 8,468 16%
Individual health 39,593 4 890 40,479 2
Group life and health 8,085 -- 7 8,092 --
Annuity 1,079,985 27,019 7,689 1,060,655 1
---------- ------- ---------- ---------- --------
$1,135,315 $27,583 $ 9,962 $1,117,694 1%
========== ======= ========== ========== ========
YEAR ENDED DECEMBER 31, 1995
Life insurance in force $1,497,961 $34,206 $ 266,127 $1,729,882 15%
========== ======= ========== ========== ========
Premiums:
Individual life $ 7,348 $ 359 $ 1,399 $ 8,388 17%
Individual health 46,609 5 371 46,975 1
Group life and health 7,043 -- 6 7,049 --
Annuity 1,146,720 37,944 35,647 1,144,423 3
---------- ------- ---------- ---------- --------
$1,207,720 $38,308 $ 37,423 $1,206,835 3%
========== ======= ========== ========== ========
</TABLE>

<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 Code 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 in connection with the defense or settlement of such action, or
in connection with an appeal therein, if such

II-1

<PAGE>

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 81 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 (1)
(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. (3)
(b) (i) Form of Master Service and Distribution Compliance Agreement(1)
(ii) Form of Broker/Dealer Supervisory and Service Agreement (1)
(c) See Exhibit 1.A.(3)(b)(ii)
(4) Not Applicable
(5)(a) Specimen Flexible Premium Variable Life Insurance Policy (2)
(b) Children's Insurance Rider (2)
(c) Disability Waiver Rider (2)
(d) Accidental Death Benefit Rider (2)
(e) Primary Insured Rider (2)
(f) Other Insured Rider (2)
(g) Terminal Illness Accelerated Death Benefit Rider (2)
(h) Endorsement - Asset Rebalancing (2)
(i) Endorsement - Dollar Cost Averaging (2)
(6)(a) Certificate of Incorporation of AUSA Life (1)
(b) Amended and Restated By-Laws of AUSA Life (1)
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10) Application for Flexible Premium Variable Life Insurance Policy (1)
(11) Memorandum describing issuance, transfer and redemption procedures

2. See Exhibit 1.A.

3. Opinion of Counsel as to the legality of the securities being registered (2)

4. No financial statement will be omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I

II-3

<PAGE>

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.

8. Consent of Sutherland, Asbill & Brennan LLP

9. Consent of Ernst & Young LLP

10. Powers of Attorney (1)

- ----------------------------------------
(1)Incorporated by reference to the like-numbered Exhibit to Pre-Effective
Amendment No. 2 to the Form S-6 Registration Statement of the AUSA Series
Life Account, File No. 33-86696 (October 20, 1997).
(2)This exhibit was previously filed on the Initial Registration Statement to
Form S-6 dated October 21, 1997 (File No. 333-38343) and is incorporated
herein by reference.
(3)Incorporated by reference to the like numbered Exhibit to Pre-Effective
Amendment No. 3 to the Form S-6 Registration Statement of the AUSA Series
Life Account, File No. 33-86696 (June 23, 1998).

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. 1 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 22nd day of June, 1998.

(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. 1 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 June 22, 1998
- -------------------------------
Larry G. Brown, Chairman of the
Board

/s/ WILLIAM BROWN, JR. June 22, 1998
- -----------------------------
William Brown, Jr., Director*

/s/ PATRICK S. BAIRD June 22, 1998
- --------------------------------
Patrick S. Baird, Vice President
and Chief Financial Officer*

/s/ WILLIAM L. BUSLER June 22, 1998
- ----------------------------
William L. Busler, Director*

<PAGE>

/s/ JACK R. DYKHOUSE June 22, 1998
- ---------------------------
Jack R. Dykhouse, Director*

/s/ STEVEN E. FRUSHTICK June 22, 1998
- ------------------------------
Steven E. Frushtick, Director*

/s/ CARL T. HANSON June 22, 1998
- -------------------------
Carl T. Hanson, Director*

/s/ B. LARRY JENKINS June 22, 1998
- ---------------------------
B. Larry Jenkins, Director*

/s/ PETER P. POST June 22, 1998
- ------------------------
Peter P. Post, Director*

/s/ COR H. VERHAGEN June 22, 1998
- --------------------------
Cor H. Verhagen, Director*

/s/ E. KIRBY WARREN June 22, 1998
- --------------------------
E. Kirby Warren, Director*

/s/ TOM A. SCHLOSSBERG June 22, 1998
- --------------------------------
Tom A. Schlossberg, Director
and President*

/s/ COLETTE F. VARGAS June 22, 1998
- ----------------------------
Colette F. Vargas, Director
and Chief Actuary*

/s/ VERA F. MIHAIC June 22, 1998
- -----------------------------
Vera F. Mihaic, Director
and Vice President*

/s/ BRENDA CLANCY June 22, 1998
- -------------------------
Brenda Clancy, Treasurer*

/s/ PATRICK E. FALCONIO June 22, 1998
- ------------------------------
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
- ------- -----------

1A(11) Memorandum describing issuance, transfer and redemption
procedures

6. Opinion and Consent of Alan Yaeger as to actuarial
matters pertaining to the securities being registered

7. Consent of Robert F. Colby, Esq.

8. Consent of Sutherland, Asbill & Brennan LLP

9. Consent of Ernst & Young LLP

Exhibit 1A(11)

Memorandum describing issuance, transfer and redemption procedures

<PAGE>

INDIVIDUAL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
AUSA LIFE INSURANCE COMPANY, INC.
ISSUANCE, REDEMPTION AND TRANSFER PROCEDURES

This document sets forth, as required by Rule 6e-3(T)(b)(12)(ii), the
administrative procedures that will be followed by AUSA Life Insurance Company
("AUSA Life") in connection with the issuance of the Individual Flexible Premium
Variable Life Insurance Policy ("Policy") described in this Registration
Statement, the transfer of assets held thereunder, and the redemption by
Policyowners of their interest in the Policies.
----------------------------------------

1. "Public Offering Price":

PURCHASE AND RELATED TRANSACTIONS

Set out below is a summary of the principal Policy provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, a "purchase" transaction. The summary shows that, because of the
insurance nature of the Policies, the procedures involved necessarily differ in
certain significant respects from the purchase procedures for mutual funds and
contractual plans.

(a) PREMIUM SCHEDULES AND UNDERWRITING STANDARDS

Premiums for the Policies will not be the same for all Policyowners. AUSA
Life will require the Policyowner to pay an initial premium that is at least
equal to a minimum monthly first year premium set forth in the Policy.
Policyowners will determine a planned periodic premium payment schedule that
provides for a level premium payable at a fixed interval for a specified period
of time. Payment of premiums in accordance with this schedule is not, however,
mandatory, and failure to make a planned periodic premium payment will not of
itself cause the Policy to lapse. Instead, Policyowners may make premium
payments in any amount at any frequency, subject only to the minimum premium
amount(1), and the maximum premium limitation. If at any time a premium is paid
which would result in total premiums exceeding the current maximum premium
limitation set forth in the Policy, AUSA Life will accept only that portion of
the premium which will make total premiums equal that amount. Any portion of the
premium in excess of that amount will

- ------------------
1 The minimum amount is currently $50.00.

<PAGE>

be returned to the Policyowner and no further premiums will be accepted until
allowed by the current maximum premium limitations set forth in the Policy. The
Policy will remain in force so long as net surrender value is sufficient to pay
certain monthly charges imposed in connection with the Policy. Thus, the amount
of a premium, if any, that must be paid to keep the Policy in force depends upon
the net surrender value of the Policy, which in turn depends on such factors as
the investment experience and the cost of insurance charge. However, until the
No Lapse Date shown on the Policy Schedule Page, the Policy will remain in force
and no grace period will begin provided (1) the total of the premiums received
(minus any withdrawals, minus any outstanding loans and any pro rata Decrease
Charge deducted from the Cash Value) equals or exceeds the minimum monthly
guarantee premium shown in the Policy times the number of months since the
Policy Date, including the current month.

The cost of insurance rate utilized in computing the cost of insurance
charge will not be the same for each insured. The chief reason is that the
principle of pooling and distribution of mortality risks is based upon the
assumption that the insured incurs an insurance rate commensurate with the
mortality risk which is actuarially determined based upon factors such as
attained age, sex, rate class and length of time a Policy is in force.
Accordingly, while not all insureds will be subject to the same cost of
insurance rate, there will be a single "rate" for all insureds in a given
actuarial category.

The Policies will be offered and sold pursuant to established underwriting
standards and in accordance with state insurance laws. State insurance laws
prohibit unfair discrimination among insureds, but recognize that premiums must
be based upon factors such as age, sex, health and occupation.

(b) APPLICATION AND INITIAL PREMIUM PROCESSING

Upon receipt of a completed application, AUSA Life will follow certain
insurance underwriting (I.E., evaluation of risks) procedures designed to
determine whether the proposed insureds are insurable. This process may involve
such verification procedures as medical examinations and may require that
further information be provided by the proposed insured before

<PAGE>

a determination can be made. A Policy will not be issued until this underwriting
procedure has been completed.

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 and AUSA Life will
allocate net premiums to the sub-accounts of the Series Account on the first
valuation date on or following the record date in accordance with the directions
on the application.

If AUSA Life determines to its satisfaction that on the date the
application is signed and submitted with an initial payment the proposed insured
was insurable and acceptable under AUSA Life's underwriting rules and standards
for insurance for the amount, plan and risk classification applied for in the
application, then the insurance protection applied for, subject to the limits of
liability and in accordance with the terms set forth in the Policy and in the
conditional receipt, will by reason of such payment take effect on the later of
the date of the application, or the completion of all medical tests and
examinations, if required.

Under AUSA Life's current rules, the minimum specified amount at issue for
Issue Ages 0-45 is $50,000 declining to $25,000 for Issue Ages 46 to 80. AUSA
Life reserves the right to revise its rules from time to time to specify a
different minimum specified amount at issue.

In the application for a Policy, the Policyowner can allocate net premiums
(total premiums less any premium expense charges) among the sub-accounts of the
Series Account and the Fixed Account. Notwithstanding the allocation in the
application, if a premium payment of $1,000 or more is paid upon submission of
the application, the net premium will initially be allocated on the Policy Date
to the sub-account of the Series Account that invests exclusively in shares of
the Money Market Portfolio and will be re-allocated on the first valuation date
(2) on or following the Record Date in accordance with the directions in the
application. Net premiums paid after the record date will be allocated in
accordance with the Policyowner's instructions in the application. The minimum
percentage of each premium that may be allocated to any account is currently 1%;

- --------------
2 A valuation period is the period between two successive valuation dates,
commencing at the close of business of the next succeeding valuation. The net
asset value per share of a portfolio of the Fund will be determined, once
daily, as of the close of the regular session of business on the New York Stock
Exchange (currently 4:00 p.m., New York City time) Monday through Friday,
except on customary national holidays on which the New York Exchange is closed.

<PAGE>

percentages must be in whole numbers. The allocation for future net premiums may
be changed at any time by providing AUSA Life with written notification.
However, AUSA Life reserves the right to limit the number of changes of the
allocation of net premiums to one per year.

(d) REINSTATEMENT

A lapsed Policy may be reinstated any time within 5 years after the date
of lapse and before the maturity date by submitting the following items to AUSA
Life:

1. A written application for reinstatement from the Policyowner;
2. Evidence of insurability 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 set forth in the Policy) as of the date of
reinstatement.

Any indebtedness on the date of lapse will not be reinstated. The Cash Value of
the Policy loan on the date of reinstatement will also not be reinstated. The
amount of Cash Value on the date of reinstatement will be equal to the amount of
the cash value on the date of lapse (exclusive of any Policy loan on that date)
increased by the net premiums paid at reinstatement, less the amounts paid in
accordance with (a) 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 of approval of the application of reinstatement.

(e) REPAYMENT OF INDEBTEDNESS

A loan under the Policy will be subject to an interest rate of 5.2%
payable annually in advance (equivalent to an effective annual rate of 5.5%).
Outstanding indebtedness may be repaid at 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.
Under AUSA Life's current procedures, at each Policy anniversary, AUSA Life will
compare the amount of the

<PAGE>

outstanding loan (including interest in advance until the next Policy
Anniversary, if not paid) to the amount in the loan reserve. AUSA Life will also
make this comparison any time the Policyowner repays all or part of the loan. 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 the same manner as premiums are allocated. AUSA Life will
allocate the repayment of indebtedness at the end of the valuation period during
which the repayment is received.

(f) CORRECTION OF MISSTATEMENT OF AGE OR SEX

If AUSA Life discovers that the age or sex of any insured has been
misstated, AUSA Life will adjust the death benefits based on what the cost of
insurance charge for the most recent monthly deduction would have purchased
based on the correct age or sex.

2. "REDEMPTION PROCEDURES":
SURRENDER AND RELATED TRANSACTIONS

This section outlines those procedures which might be deemed to constitute
redemptions under the Policy. These procedures differ in certain significant
respects from the redemption procedures for mutual funds and contractual plans.

(a) CASH VALUES

At any time before the earlier of the death of the insured or the maturity
date, the Policyowner may totally surrender or, after the first Policy year,
make a cash withdrawal from 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 office. 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; minus
(3) any outstanding Policy loan; plus
(4) any unearned interest.

<PAGE>

A surrender charge as described in appendix A will be deducted if the
Policy is surrendered during the first 15 Policy years. 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(3).

If 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.

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 are allowed only once each Policy year.

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.

- ---------------
3 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 week-end and holiday closings, or trading on the New York Stock
Exchange is restricted as determined by 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 in 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. AUSA Life further
reserves the right to defer payment of transfer, cash withdrawals or
surrenders from the Fixed Account for up to six months. Payments under the
Policy of any amount paid by check may be postponed until such time as the
check has cleared the Policyowner's bank.

<PAGE>

(b) BENEFIT CLAIMS

As long as the Policy remains in force, AUSA Life will generally pay a
death benefit to the named beneficiary in accordance with the designated death
benefit option within seven days after AUSA Life receives due proof of death of
the insured, and AUSA Life receives proof that the insured died while the Policy
was in force, and verifies the validity of the claim. Payment of death benefits
may, however, be postponed under certain circumstances(4). In particular, during
the first two Policy years, and during the first two years after a Policy is
reinstated, and in other circumstances in which AUSA Life may have a basis for
contesting the claim, there can be a delay beyond the seven day period. The
amount of the death benefit is determined at the end of the valuation period
during which the insured dies. The death benefit proceeds payable under the
designated death benefit option will be reduced by any outstanding indebtedness
and any due and unpaid charges. The proceeds will be increased by any additional
insurance provided by rider and any unearned loan interest.

The amount of the death benefit is guaranteed not to be less than the
specified amount of the Policy. These proceeds may be reduced by any outstanding
indebtedness and any due and unpaid charges. The death benefit may, however,
exceed the specified amount of the Policy. The amount by which the death benefit
exceeds the specified amount depends upon the death benefit option in effect and
the cash value of the Policy. Under Death Benefit Option A, the death benefit
will only vary when the limitation percentage of cash value set forth in the
Policy exceeds the specified amount of the Policy. Under Death Benefit Option B,
the death benefit will always vary with the cash value because the death benefit
will at least equal the specified amount plus the cash value. Under Death
Benefit Option C, the death benefit will vary as the Cash Value and the
Insured's Attained Age varies.

The amount of the benefit payable at maturity is the net surrender value
of the Policy on the maturity date. These proceeds will be reduced by any
outstanding indebtedness. This benefit will only be paid if the insured is
living on the Policy's maturity date. The Policy will mature on the anniversary
nearest the insured's 95th birthday, if the insured is living and the Policy is
in force.
- ----------------
4 SEE note 3, SUPRA.

<PAGE>

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. The maximum amount that may be borrowed is an amount
which, together with any loans already outstanding and any surrender charge, is
90% of the cash value. Indebtedness equals the total of all Policy loans less
any unearned loan interest on the loans. The loan value will be determined at
the end of the valuation period during which the loan request is received. Loans
have priority over the claims of any assignee or other person. The loan may be
repaid all or in part at any time before that maturity date 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. The interest rate charged on Policy loans
accrues daily. Interest payments are 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.

A Policyowner may allocate a Policy loan among the accounts. If no such
allocation is made, AUSA Life will allocate the loan in accordance with the
Policyowner's current allocation instructions. The loan amount will normally be
paid within seven days after receipt of a written request. Postponement of loans
may take place under certain circumstances(5).

Cash Value equal to the portion of the Policy loan plus interest in
advance until the next Policy anniversary allocated to each account will be
transferred from the account to the loan reserve, reducing the Policy's Cash
Value in that account. The loan reserve is a portion of the Fixed Account to
which amounts are transferred as collateral for Policy loans. As noted above,
under AUSA Life's current procedures, at each Policy anniversary, AUSA Life will
compare the amount of the outstanding loan (including interest in advance until
the next Policy anniversary, if not paid) to the amount in the loan reserve.
AUSA Life will also make this comparison any time the Policyowner repays all or
part of the loan. 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
- ----------------
5 SEE note 3, SUPRA

<PAGE>

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 the same manner as premiums are allocated. Cash Value in
the loan reserve will be credited with guaranteed interest at 4% per year.
Additional interest may be credited to this Cash Value.

(d) POLICY LAPSE

Lapse will only occur where net surrender value is insufficient to cover
the monthly deduction, and a grace period expires without a sufficient payment.
If net surrender value on any Monthly Anniversary is insufficient to cover the
monthly deduction on such day, the Policyowner must, except as noted below, pay
during the grace period a payment at least sufficient to provide a net premium
to cover the sum of the monthly deductions due within the grace period. However,
until the No Lapse Date shown on the Policy Schedule Page, the Policy will
remain in force and no grace period will begin provided (1) the total premiums
received (minus any withdrawals and minus any outstanding loans and any pro rata
Decrease Charge deducted from the Cash Value) equals or exceeds the minimum
monthly guarantee premium shown in the Policy times the number of months since
the Policy date, including the current month, and (2) no riders have been added
since the Policy Date, including the current month. Should the Policyowner
request the addition of any rider after the Policy Date but prior to the No
Lapse Date, the Policyowner will be notified as to the effect on grace period
processing prior to the date the rider is effective.

If 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 sent to the
Policyowner, to make sufficient payment. 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 in accordance with the
Policyowner's then current instructions. If the insured dies during the grace
period, the death benefit proceeds will equal the amount of death benefit
proceeds

<PAGE>
immediately prior to the commencement of the grace period, reduced by any due
and unpaid charges. SEE Reinstatement, p. 4.

3. TRANSFERS

The Series Account currently has sixteen sub-accounts. Each sub-account
invests exclusively in the shares of a corresponding portfolio of WRL Series
Fund, Inc., an open-end diversified management company registered with the
Commission. Policyowners may transfer Cash Value among the sub-accounts of the
Series Account or from the sub-accounts to the Fixed Account, which is part of
AUSA Life's general account. 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 administrative office within thirty days
after a Policy anniversary. Under the Policy, the 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. 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 requirements for a signature guarantee. 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. Policyowners may make
transfer requests in writing or by telephone. Written requests must be in a form
acceptable to AUSA Life. Telephonic requests are permissible if the Policyowner
has previously authorized telephone transfers in writing. AUSA Life may, at any
time, revoke or modify the transfer privilege. Cash value transferred from one
sub-account into more than one sub-account counts as one transfer. AUSA Life
will effectuate transfers and determine all values in connection with transfers
at the end of the valuation period during which the transfer request is
received. Postponement of transfers may take place under certain
circumstances(6). AUSA Life reserves the right to impose a $25 transfer charge
for each
- ----------------
6 SEE note 3, SUPRA.

<PAGE>

transfer in excess of one per Policy Month or twelve per Policy year and will be
deducted from each sub-account from which a transfer is being made in an equal
amount. Transfers resulting from policy loans, the exercise of conversion
rights, and the reallocation of cash value immediately after the record date,
will not be subject to a transfer charge. No transfer charge will apply to
transfers from the Fixed Account to a sub-account.

4. CONVERSION PROCEDURE

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.

<PAGE>

APPENDIX A
SURRENDER CHARGE

During the first fifteen Policy years, a Surrender Charge will be
incurred upon surrender of the Policy. The Surrender Charge consists of the
Surrender Charge Per Thousand multiplied by the applicable Surrender Charge
Factor.
(a) Surrender Charge Per Thousand. The surrender Charge Per Thousand
Dollars of initial Specified Amount varies with the Insured's Issue Age, gender
and classification. See the table below indicating the charges per thousand
dollars of initial Specified Amount.
(b) Surrender Charge Factor. As stated above, the factor is applied
to the charge per thousand dollars of initial Specified Amount due upon any
Surrender of a Policy during the first fifteen Policy years. In Policy years 1 -
5 this factor is 1.00 for Insureds at Issue Ages 0 - 39 and then declines at a
rate of 0.10 per year until reaching zero at the end of the fifteenth (15th)
Policy year as shown below. For Insureds at Issue Ages older than 39, this
factor is less than 1.00 at the end of the first (1st) Policy year and declines
to zero at the end of the fifteenth (15th) Policy year. Therefore, application
of the factor to the Surrender Charge Per Thousand in the event of any surrender
during the second through fifteenth Policy years will result in the same or
reduced surrender charges. If a surrender occurs after the fifteenth (15th)
Policy year, there is no Surrender Charge Per Thousand due. See the example
below. Factors for the Builder Plus Program are different than those shown
below.

SURRENDER CHARGE FACTORS
ISSUE AGES 0 - 39

SURRENDER CHARGE FACTOR
END OF POLICY YEAR* FACTOR
----------------------- ------

At Issue.................................... 1.00
1-5......................................... 1.00
6........................................... .90
7........................................... .80
8........................................... .70
9........................................... .60
10.......................................... .50
11.......................................... .40
12.......................................... .30

<PAGE>

13.......................................... .20
14.......................................... .10
15.......................................... 0
16+......................................... 0
* THE FACTOR ON ANY DATE OTHER THAN ANNIVERSARY
WILL BE INTERPOLATED BETWEEN THE TWO END OF
YEAR FACTORS.

(C) Example: Assume a male tobacco user purchases the Policy at
Issue Age 35. The Surrender Charge Per Thousand is $16.48. This is multiplied by
the Surrender Charge Factor resulting in the following Table of Surrender
Charges:

TABLE OF SURRENDER CHARGES PER $1,000 OF
SPECIFIED AMOUNT AS OF THE POLICY DATE

SURRENDER SURRENDER
CHARGE CHARGE
PER $1,000 PER $1,000
OF SPECIFIED OF SPECIFIED
END OF AMOUNT ON END OF AMOUNT ON
POLICY POLICY POLICY POLICY
YEAR PAGE 3A YEAR PAGE 3A
------ ------- ------ -------

At Issue $16.48 9 $ 9.89
1 16.48 10 8.24
2 16.48 11 6.59
3 16.48 12 4.94
4 16.48 13 3.30
5 16.48 14 1.65
6 14.83 15 0.00
7 13.18 16+ 0.00
8 11.54

* THE SURRENDER CHARGE ON ANY DATE OTHER THAN AN ANNIVERSARY WILL BE
INTERPOLATED BETWEEN THE TWO END OF YEAR CHARGES.

Exhibit 6

Opinion and Consent of Alan Yaeger as to actuarial matters
pertaining to the securities being registered

<PAGE>

WRL Letterhead

June 22, 1998

AUSA Life Insurance Company, Inc.
4 Manhattanville Road
Purchase, New York 10577

RE: REGISTRATION NO. 333-38343

Gentlemen:

This opinion is furnished in connection with the Pre-Effective Amendment
No. 1 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) 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 YAEGER
- ---------------
Alan Yaeger
Actuary

EXHIBIT 7

Consent of Robert F. Colby, Esq.

<PAGE>

AUSA LIFE LETTERHEAD

June 22, 1998

AUSA Life Insurance Company, Inc.
4 Manhattanville Road
Purchase, New York 10577

Gentlemen:

I hereby consent to reference to my name under the caption "Legal Matters" in
the Prospectus incorporated by reference in Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 333-38343) for the AUSA Series Life
Account filed by AUSA Life Insurance Company, Inc. with the Securities and
Exchange Commission.

/s/ ROBERT F. COLBY
- --------------------
Robert F. Colby
Vice President, Assistant
Secretary and Counsel

EXHIBIT 8

Consent of Sutherland, Asbill & Brennan LLP

<PAGE>

S.A.B. LETTERHEAD

June 22, 1998

Board of Directors
AUSA Life Insurance Company, Inc.
AUSA Series Life Account
4 Manhattanville Road
Purchase, New York 10577

RE: AUSA Series Life Account
File No. 333-38343

Gentlemen:

We hereby consent to the use of our name under the caption "Legal Matters"
in the Prospectus for the AUSA Financial Freedom Builder contained in
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6 (File
No. 333-38343) of the AUSA Series Life Account filed by AUSA Life Insurance
Company, Inc. with the Securities and Exchange Commission. In giving this
consent, we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.

Very truly yours,

SUTHERLAND, ASBILL & BRENNAN

By: /s/ STEPHEN E. ROTH
--------------------
Stephen E. Roth

EXHIBIT 9

Consent of Ernst & Young LLP

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 27, 1998, with respect to the statutory-basis
financial statements and schedules of AUSA Life Insurance Company, Inc. included
in Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6 No.
333-38343) and related Prospectus of AUSA Series Life Account.

ERNST & YOUNG

Des Moines, Iowa
June 23, 1998