<PAGE>
As Filed With The Securities And Exchange Commission On May 1, 2000
Registration No. 333-65149; 811-9062
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 2
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 8
AUSA LIFE INSURANCE COMPANY, INC. SEPARATE ACCOUNT C
(Exact Name of Registrant)
AUSA LIFE INSURANCE COMPANY, INC.
(Name of Depositor)
666 Fifth Avenue
New York, New York 10103
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (212) 246-5234
Gregory E. Miller-Breetz, Esquire
AUSA Life Insurance Company, Inc.
400 West Market Street
Louisville, Kentucky 40202
(Name and Address of Agent for Service)
Copies to:
Michael Berenson, Esquire
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Offering:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[_] On____________, pursuant to paragraph (b) of Rule 485.
[_] 60Days after filing pursuant to paragraph (a)(1) of Rule 485.
[_] On ________________, pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ---------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Definitions GLOSSARY
3. Synopsis Summary; FEE TABLE; Performance Measures
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, Depositor, AUSA Life Insurance Company, Inc. Separate Account C; The
and Portfolio Companies Portfolios; Voting Rights; Expenses; Taxes; FEE TABLE
6. Deductions Expenses; Taxes; FEE TABLE
7. General Description of Variable Annuity Contracts The Annuity Contract
8. Annuity Period Annuity Payments
9. Death Benefit Death Benefit
10. Purchases and Contract Value Contract Application and Purchase Payments; Accumulated Value
11. Redemptions Access to Your Money
12. Taxes Taxes
13. Legal Proceedings Legal Matters
14. Table of Contents of the Statement of Additional Table of Contents of the Advisor's Edge Variable Annuity
Information Statements of Additional Information
</TABLE>
PART B
<TABLE>
<CAPTION>
ITEM OF FORM N-4 STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ---------------- -------------------------------------------
<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History AUSA LIFE INSURANCE COMPANY, INC.
18. Services Part A; Auditors; Part B; SAFEKEEPING OF
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ACCOUNT ASSETS; DISTRIBUTION OF THE
CONTRACTS
19. Purchase of Securities Being Offered DISTRIBUTION OF THE CONTRACTS; Exchanges
20. Underwriters DISTRIBUTION OF THE CONTRACTS
21. Calculation of Performance Data PERFORMANCE INFORMATION
22. Annuity Payments Computations of Annuity Income Payments
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
<PAGE>
THE ADVISOR'S EDGE
VARIABLE ANNUITY
Issued Through
AUSA Life Insurance Company, Inc.
Separate Account C
By
AUSA Life Insurance Company, Inc.
May 1, 2000
The Advisor's Edge Variable Annuity (the "Contract") provides a means of
investing on a tax-deferred basis in 28 investment company portfolios (the
"Portfolios"). The Contract is a group variable annuity contract and is
intended for retirement savings or other long-term investment purposes. You
bear all investment risk (including the possible loss of principal), and
investment results are not guaranteed. The Contract provides a Right to Cancel
period of at least 10 days during which the Contract may be cancelled.
Before investing you should carefully read this prospectus and the
accompanying prospectuses for the Portfolios. These prospectuses give you
important information about the Contract and the Portfolios, including the
objectives, risks, and strategies of the Portfolios. A Statement of Additional
Information for the Contract prospectus has been filed with the Securities and
Exchange Commission, is incorporated by reference, and is available free by
calling our Administrative Offices at 800-866-6007. The Table of Contents of
the Statement of Additional Information is included at the end of this
prospectus.
The Contract is available only in the state of New York.
This prospectus does not constitute an offering in any jurisdiction where it
would be unlawful to make an offering like this. We have not authorized anyone
to give any information or make any representations about this offering other
than those contained in this prospectus. You should not rely on any other
information or representations.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
THE PORTFOLIOS
DFA Investment Dimensions Group, Inc.
Advised by Dimensional Fund Advisors Inc.
DFA Small Value
DFA Large Value
DFA International Value
DFA International Small
DFA Short-Term Fixed
DFA Global Bond
Endeavor Series Trust
Advised by Endeavor Management Co.
Dreyfus Small Cap Value
Endeavor Enhanced Index
T. Rowe Price International Stock
The Federated Insurance Series
Advised by Federated Investment Management Company
Federated American Leaders
Federated High Income Bond
Federated Prime Money
Federated U.S. Government Securities
Federated Utility
The Montgomery Funds III
Advised by Montgomery Asset Management, LLC
Montgomery Growth
Montgomery Emerging Markets
SteinRoe Variable Investment Trust
Advised by Stein Roe & Farnham Incorporated
Stein Roe Small Company Growth
Strong Variable Insurance Funds, Inc.
Advised by Strong Capital Management, Inc.
Strong International Stock
Strong Schafer Value
Wanger Advisors Trust
Advised by Wanger Asset Management, L.P.
Wanger U.S. Small Cap Advisor
Wanger International Small Cap Advisor
Warburg Pincus Trust
Advised by Credit Suisse Asset Management
Warburg Pincus International Equity
Warburg Pincus Small Company Growth
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
WRL Alger Aggressive Growth
WRL J.P. Morgan Real Estate Securities
WRL Janus Global
WRL Janus Growth
<PAGE>
Contents
<TABLE>
<C> <S>
1 Cross Reference to Definitions
2 Summary
6 Fee Table
8 Example
9 The Annuity Contract
10 Annuity Payments
12 Purchase
15 Investment Options
21 Expenses
</TABLE>
<TABLE>
<C> <S>
22 Taxes
26 Access to Your Money
28 Performance
30 Death Benefit
33 Other Information
37 Table of Contents of Statement of Additional Information
A-1 Appendix (Condensed Financial Information)
</TABLE>
CROSS REFERENCE TO DEFINITIONS
We have generally defined the technical terms associated with the Contract
where they are used in the prospectus. The following list shows where certain
of the more technical and more frequently used terms are defined in the
prospectus. In the text you can easily locate the defined word because it will
appear in bold type or its definition will be covered in a space on the page
set aside specifically for discussion of the term.
<TABLE>
<S> <C>
Accumulation Phase....................................................... 9
Annuitant................................................................ 30, 31
Annuity Date............................................................. 10
Annuity Payment Options.................................................. 10
Beneficiary.............................................................. 30, 31
Business Day............................................................. 12
Contract................................................................. 34
Contract Anniversary..................................................... 13
Contract Date............................................................ 13
Contract Owner........................................................... 34
Contract Year............................................................ 13
Income Phase............................................................. 9
Initial Purchase Payment................................................. 12
Joint Annuitant.......................................................... 31
Net Purchase Payment..................................................... 13
Qualified Contract....................................................... 12
Portfolios............................................................... 15
Purchase Payment......................................................... 13
Right to Cancel Period................................................... 34
Tax Deferral............................................................. 23
</TABLE>
1
<PAGE>
SUMMARY
The numbered sections in this Summary provide you with a concise discussion of
the major topics covered in this prospectus. Each section of the Summary is
discussed in greater detail in the main body of the prospectus at
corresponding numbered headings. Please read the full prospectus carefully.
1. THE ANNUITY CONTRACT
The Advisor's Edge Variable Annuity
Advisor's Edge is a flexible-premium multi-funded variable annuity offered by
AUSA Life Insurance Company, Inc. ("AUSA Life"). The Contract provides a means
of investing on a tax-deferred basis in twenty-eight investment company
portfolios.
Who Should Invest
The Contract is intended for long-term investors who want tax-deferred
accumulations of funds, generally for retirement but also for other long-term
purposes.
The Contract provides benefits in two distinct phases: accumulation and
income.
The Accumulation Phase
During the Accumulation Phase, you choose to allocate your investment in the
Contract among the twenty-eight Portfolios available under the Contract. You
can contribute additional amounts to the Contract and you can take withdrawals
from the Contract during the Accumulation Phase. The value of your investment
depends on the investment performance of the Portfolios you choose. Your
earnings are generally not taxed during this phase unless you withdraw them.
The Income Phase
During the Income Phase, you can receive regular annuity payments on a fixed
or variable basis and for various periods of time depending on your need for
income and the choices available under the Contract. See ANNUITY PAYMENTS,
page 10, for more information about Annuity Payment Options.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options. The Contract allows you to receive an income
guaranteed for as long as you live or until the second of two people dies. You
may also choose to receive a guaranteed number of payments over a number of
years. Most Annuity Payment Options are available on either a variable basis
(where the amount of the payment rises or falls depending on the investment
performance of the Portfolios you have chosen) or a fixed basis (where the
payment is guaranteed).
3. PURCHASE
You can buy the Contract with a minimum investment of $5,000 for Non-Qualified
Contracts and $2,000 (or $50 monthly by payroll deduction) for Qualified
Contracts. You can add $500 or more to Non-Qualified Contracts and $50 to
Qualified Contracts at any time during the Accumulation Phase. Your Contract
may not exceed $1,000,000 in total Purchase Payments without our prior
approval.
4. INVESTMENT OPTIONS
You can allocate your Purchase Payments to one or more of the following
Portfolios described in the nine Funds' prospectuses:
DFA Investment Dimensions Group, Inc.
Advised by Dimensional Fund Advisors Inc.
VA Small Value Portfolio ("DFA Small Value Portfolio")
VA Large Value Portfolio ("DFA Large Value Portfolio")
VA International Value Portfolio ("DFA International Value Portfolio")
VA International Small Portfolio ("DFA International Small Portfolio")
2
<PAGE>
VA Short-Term Fixed Portfolio ("DFA Short-Term Fixed Portfolio")
VA Global Bond Portfolio ("DFA Global Bond Portfolio")
Endeavor Series Trust
Advised by Endeavor Management Co.
Dreyfus Small Cap Value Portfolio
Endeavor Enhanced Index Portfolio
T. Rowe Price International Stock Portfolio
The Federated Insurance Series
Advised by Federated Investment Management Company
Federated American Leaders Fund II ("Federated American Leaders
Portfolio")
Federated Fund for U.S. Government Securities II ("Federated U.S.
Government Securities Portfolio")
Federated High Income Bond Fund II ("Federated High Income Bond
Portfolio")
Federated Prime Money Fund II ("Federated Prime Money Portfolio")
Federated Utility Fund II ("Federated Utility Portfolio")
The Montgomery Funds III
Advised by Montgomery Asset Management, LLC
Montgomery Variable Series: Growth Fund ("Montgomery Growth Portfolio")
Montgomery Variable Series: Emerging Markets Fund ("Montgomery Emerging
Markets Portfolio")
SteinRoe Variable Investment Trust
Advised by Stein Roe & Farnham Incorporated
Stein Roe Small Company Growth Fund, Variable Series, formerly Stein Roe
Special Venture Fund ("Stein Roe Small Company Growth Portfolio")
Strong Variable Insurance Funds, Inc.
Advised by Strong Capital Management, Inc.
Strong International Stock Fund II ("Strong International Stock
Portfolio")
Strong Schafer Value Fund II ("Strong Schafer Value Portfolio")
Wanger Advisors Trust
Advised by Wanger Asset Management, L.P.
Wanger U.S. Small Cap Advisor ("Wanger U.S. Small Cap Advisor Portfolio")
Wanger International Small Cap Advisor ("Wanger International Small Cap
Advisor Portfolio")
Warburg Pincus Trust
Advised by Credit Suisse Asset Management
Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
Aggressive Growth Portfolio ("WRL Alger Aggressive Growth Portfolio")
Real Estate Securities Portfolio ("WRL J.P. Morgan Real Estate Securities
Portfolio")
Global Portfolio ("WRL Janus Global Portfolio")
Growth Portfolio ("WRL Janus Growth Portfolio")
Strategic Total Return Portfolio ("WRL LKCM Strategic Total Return
Portfolio")
You can make or lose money in any of these Portfolios depending on their
investment performance.
3
<PAGE>
5. EXPENSES
No sales load is deducted from Purchase Payments.
No surrender charge applies to withdrawals.
AUSA Life will deduct a daily charge corresponding to an annual charge of
0.15% of the net asset value of the Separate Account as an Administrative
Expense Charge and an annual charge of 0.50% for the mortality and expense
risks it assumes. There is also a $30 annual Contract Fee.
You will also pay certain expenses associated with the operation of the
Portfolios.
6. TAXES
In general, you are not taxed on earnings on your investment in the Contract
until you withdraw them or receive Annuity Payments. Earnings are taxed as
ordinary income. During the Accumulation Phase, for tax purposes withdrawals
are taken from earnings first, then from your investment in the Contract. For
Annuity Payments, payments come partially from earnings, partially from your
investment. You are taxed only on the investment portion of each Annuity
Payment. If you receive money from the Contract before age 59 1/2, you may
have to pay a 10% penalty tax on the earnings portion received.
7. ACCESS TO YOUR MONEY
You can take money out of your Contract at any time during the Accumulation
Phase. Each withdrawal you make must be at least $500.
You may have to pay income tax and a tax penalty on any money you take out.
8. PERFORMANCE
The investment performance of the Portfolios you choose directly affects the
value of your Contract. You bear all investment risk (including the possible
loss of principal), and investment results are not guaranteed.
From time to time, AUSA Life may advertise the investment performance of the
Portfolios. In doing so, it will use standardized methods prescribed by the
Securities and Exchange Commission, as well as certain non-standardized
methods.
Past performance does not indicate or predict future performance.
9. DEATH BENEFIT
If the Annuitant dies during the Accumulation Phase, the Beneficiary will
receive the Death Benefit. The Death Benefit is the greater of the then-
current Accumulated Value of the Contract or the Adjusted Death Benefit.
During the first six Contract Years, the Adjusted Death Benefit is the sum of
all Net Purchase Payments minus any partial withdrawals. During each following
six-year period, the Adjusted Death Benefit is the Death Benefit on the last
day of the previous six-year period plus any Net Purchase Payments made during
that six-year period minus any partial withdrawals taken during that six-year
period. After the Annuitant reaches age 75, the Adjusted Death Benefit remains
equal to the Death Benefit on the last day of the six-year period before the
Annuitant reaches age 75 plus any Net Purchase Payments subsequently made
minus any partial withdrawals subsequently taken. The Beneficiary may elect to
receive these amounts as a lump sum or as Annuity Payments.
Federal tax law requires that if a Contract Owner is a natural person and dies
before the Annuity Date, then the entire value of the Contract must be
distributed within five years of the date of death of the Contract Owner.
Special rules may apply to a surviving spouse. If the Contract Owner is not a
natural person, the death of the primary Annuitant triggers the same
distribution requirement.
4
<PAGE>
10. OTHER INFORMATION
Right to Cancel Periods
There are two different Right to Cancel Periods. If the Contract is not a
replacement of an existing annuity contract or life insurance or endowment
policy, the Contract provides for a Right to Cancel Period of 10 days after
the Contract Owner receives the Contract plus 5 days for mailing. If the
Contract is a replacement of an existing annuity contract or life insurance or
endowment policy, a Right to Cancel Period exists for 60 days after the
Contract Owner receives the Contract plus 5 days for mailing.
Reinstatements
If you ask AUSA Life to reinstate a Contract exchanged under Internal Revenue
Code Section 1035 or a Contract whose funds were transferred via a trustee-to-
trustee under the Internal Revenue Code, AUSA Life will require the Contract
Owner to replace the same total amount of money in the applicable Subaccounts
as was taken from them to effect the transfer.
AUSA Life Insurance Company, Inc.
AUSA Life Insurance Company, Inc. is a life insurance company incorporated
under New York law. It is principally engaged in offering life insurance and
annuity contracts. First Providian Life and Health Insurance Company ("First
Providian") merged into AUSA Life in October 1998.
AUSA Life Insurance Company, Inc. Separate Account C
First Providian established the Separate Account under New York law. As part
of First Providian's merger with AUSA Life, the Separate Account was also
merged into AUSA Life and survived the merger intact. The Separate Account is
a unit investment trust registered with the Securities and Exchange
Commission. The Separate Account has twenty-eight Subaccounts dedicated to the
Contract, each of which invests solely in a corresponding Portfolio of the
Funds.
Other topics
Additional information on the topics summarized above and on other topics not
summarized here can be found at OTHER INFORMATION, page 33.
11. INQUIRIES AND CONTRACT AND POLICYHOLDER INFORMATION
For more information about the Advisor's Edge variable annuity, call or write:
AUSA Life Insurance Company, Inc.
Variable Annuity Department
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
800-866-6007
If you have questions about your Contract, please telephone our Administrative
Offices at 800-866-6007 between the hours of 8 a.m. and 5 p.m. Eastern time.
Please have ready the Contract number and the Contract Owner's name when you
call. As Contract Owner, you will receive periodic statements confirming any
transactions that take place as well as quarterly statements and an annual
statement.
5
<PAGE>
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that
may be assessed) that you would incur as a Contract Owner. The purpose of this
table is to assist you in understanding the various costs and expenses that
you would bear directly or indirectly as a purchaser of the Contract. The fee
table reflects all expenses for both the Separate Account and the Funds. For a
complete discussion of Contract costs and expenses, see EXPENSES, page 21.
<TABLE>
<S> <C>
Contractowner Transaction Expenses
Sales Load Imposed on Purchases......................................... None
Contingent Deferred Sales Load (surrender charge)....................... None
Exchange Fees........................................................... None
Annual Contract Maintenance Fee......................................... $30
Separate Account Annual Expenses (as a percentage of assets in the
Separate Account)
Mortality and Expense Risk Charge....................................... 0.50%
Administrative Charge................................................... 0.15%
-----
Total Annual Separate Account Expenses.................................. 0.65%
</TABLE>
Portfolio Annual Expenses
Except as indicated, the figures below are based on expenses for fiscal year
1999 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
Management Total
and Portfolio
Advisory Other Rule 12b-1 Annual
Expenses Expenses Fee Expenses
---------- -------- ---------- ---------
<S> <C> <C> <C> <C>
DFA Small Value Portfolio............ 0.50% 0.17% -- 0.67%
DFA Large Value Portfolio............ 0.25% 0.18% -- 0.43%
DFA International Value Portfolio.... 0.40% 0.25% -- 0.65%
DFA International Small Portfolio.... 0.50% 0.29% -- 0.79%
DFA Short-Term Fixed Portfolio....... 0.25% 0.15% -- 0.40%
DFA Global Bond Portfolio............ 0.25% 0.24% -- 0.49%
Dreyfus Small Cap Value
Portfolio/1....................../.. 0.80% 0.10% 0.32% 1.22%
Endeavor Enhanced Index Portfolio.... 0.75% 0.03% -- 0.78%
Federated American Leaders
Portfolio........................... 0.75% 0.13% -- 0.88%
Federated Utility Portfolio.......... 0.75% 0.19% -- 0.94%
Federated Prime Money Portfolio...... 0.50% 0.23% -- 0.73%
Federated U.S. Government Securities
Portfolio........................... 0.60% 0.24% -- 0.84%
Federated High Income Bond
Portfolio........................... 0.60% 0.19% -- 0.79%
Montgomery Growth Portfolio/2...../.. 0.52% 0.73% -- 1.25%
Montgomery Emerging Markets
Portfolio........................... 1.25% 0.37% -- 1.62%
Stein Roe Small Company Growth
Portfolio........................... 0.65% 0.02% -- 0.67%
Strong International Stock
Portfolio........................... 1.00% 0.16% -- 1.16%
Strong Schafer Value Portfolio....... 1.00% 0.20% -- 1.20%
T. Rowe Price International Stock
Portfolio/3....................../.. 0.90% 0.10% -- 1.00%
Wanger U.S. Small Cap Advisor
Portfolio........................... 0.96% 0.06% -- 1.02%
Wanger International Small Cap
Advisor Portfolio................... 1.25% 0.24% -- 1.49%
Warburg Pincus International Equity
Portfolio/4....................../.. 1.00% 0.32% -- 1.32%
Warburg Pincus Small Company Growth
Portfolio/4....................../.. 0.90% 0.24% -- 1.14%
WRL Alger Aggressive Growth
Portfolio/5....................../.. 0.80% 0.09% -- 0.89%
WRL Janus Growth Portfolio/5....../.. 0.80% 0.05% -- 0.85%
WRL Janus Global/5................/.. 0.80% 0.12% -- 0.92%
WRL LKCM Strategic Total Return
Portfolio/5....................../.. 0.80% 0.07% -- 0.87%
WRL J.P. Morgan Real Estate
Securities Portfolio/5.........../.. 0.80% 0.20% -- 1.00%
</TABLE>
6
<PAGE>
/1/For the Dreyfus Small Cap Portfolio, the Management and Advisory Expenses
were 0.80% and Other Expenses before reimbursements were 0.10%. Therefore,
Total Portfolio Annual Expenses before reimbursements (reduced by custodial
offset arrangements) for the period ended December 31, 1999 were 0.90%. The
Board of Trustees of Endeavor Series Trust has authorized an arrangement
whereby, subject to best price and execution, executing brokers will share
commissions with the Trust's affiliated broker. Under supervision of the
Trustees, the affiliated broker will use the "recaptured commission" to
promote marketing of the Trust's shares. The staff of the Securities and
Exchange Commission believes that, through the use of these recaptured
commissions, the Trust is indirectly paying for distribution expenses and
that such amounts must be shown as 12b-1 fees in the above table. The use
of recaptured commission to promote the sale of the Trust's shares involves
no additional costs to the Trust or any Contract Owner. Endeavor Series
Trust, on the basis of advice of counsel, does not believe that recaptured
brokerage commissions should be treated as 12b-1 fees. For more information
on the Trust's Brokerage Enhancement Plan, see the Trust's prospectus
accompanying this prospectus.
/2/A 1.0% reimbursement was applied to the management fees. Absent the
reimbursement, the Management and Advisory Expenses, Other Expenses, and
Total Portfolio Annual Expenses would have been 1.52%, 0.73%, and 2.25%
respectively.
/3/For the T. Rowe Price International Stock Portfolio, the Management and
Advisory Expenses were 0.90% and Other Expenses were 0.01%. Therefore,
Total Portfolio Annual Expenses (reduced by custodial offset arrangements)
for the period ended December 31, 1999 were 0.91%.
/4/Management and Advisory Expenses, Other Expenses, and Total Portfolio
Annual Expenses are based on actual expenses for the fiscal year ending
December 31, 1999. Management and Advisory Expenses were 1.00% for the
Warburg Pincus International Equity and 0.90% for the Warburg Pincus Small
Company Growth portfolios. Other Expenses equaled 0.33% and 0.25%,
respectively, so that the Total Portfolio Annual Expenses were 1.33% for
the Warburg Pincus International Equity and 1.15% Warburg Pincus Small
Company Growth portfolios. This includes transfer agency offsets that
reduced the fees by 0.01% each.
/5/WRL Investment Management, Inc. ("WRL Management") has voluntarily
undertaken, until at least April 30, 2001, to pay expenses on behalf of the
portfolios advised by WRL Management to the extent that normal operating
expenses (including investment advisory fees but excluding interest, taxes,
brokerage fees, commissions and extraordinary charges) exceed, as a
percentage of each such portfolio's average daily net assets, 1.00%. For
WRL Janus Growth, WRL Management currently waives 0.025% of its advisory
fee for the first $3 billion of the portfolio's average daily net assets
(net fee: 0.775%); and 0.05% for the portfolio's average daily net assets
above $3 billion (net fee: 0.75%). For WRL Janus Global, WRL Management
currently waives 0.025% of its advisory fee on portfolio average daily net
assets over $2 billion (net fee: 0.775%). The waivers for WRL Janus Growth
and WRL Janus Global are voluntary and will be terminated on June 25, 2000.
In 1999, WRL Management reimbursed WRL J. P. Morgan Real Estate Securities
Portfolio in the amount of $51,924. Without such reimbursement, the total
annual expenses during 1999 for this portfolio would have been 2.69%.
7
<PAGE>
EXAMPLE
The following example illustrates the expenses that you would incur on a
$1,000 Purchase Payment over various periods, assuming (1) a 5% annual rate of
return and (2) full surrender at the end of each period. As noted in the Fee
Table, the Contract imposes no surrender or withdrawal charges of any kind.
Your expenses are identical whether you continue the Contract or withdraw the
entire value of your Contract at the end of the applicable period as a lump
sum or under one of the Contract's Annuity Payment Options.
<TABLE>
<CAPTION>
3 10
1 Year Years 5 Years Years
------ ------ ------- -------
<S> <C> <C> <C> <C>
DFA Small Value Portfolio....................... $13.68 $42.55 $ 73.52 $161.28
DFA Large Value Portfolio....................... $11.25 $35.07 $ 60.73 $134.00
DFA International Value Portfolio............... $13.48 $41.93 $ 72.46 $159.03
DFA International Small Portfolio............... $14.90 $46.27 $ 79.86 $174.66
DFA Short-Term Fixed Portfolio.................. $10.95 $34.13 $ 59.12 $130.55
DFA Global Bond Portfolio....................... $11.86 $36.94 $ 63.94 $140.89
Dreyfus Small Cap Value Portfolio............... $19.23 $59.49 $102.26 $221.22
Endeavor Enhanced Index Portfolio............... $14.80 $45.96 $ 79.33 $173.55
Federated American Leaders Portfolio............ $15.81 $49.05 $ 84.59 $184.58
Federated Utility Portfolio..................... $16.41 $50.90 $ 87.73 $191.14
Federated Prime Money Portfolio................. $14.29 $44.41 $ 76.70 $167.99
Federated U.S. Government Securities Portfolio.. $15.40 $47.81 $ 82.49 $180.18
Federated High Income Bond Portfolio............ $14.90 $46.27 $ 79.86 $174.66
Montgomery Growth Portfolio..................... $19.54 $60.41 $103.80 $224.39
Montgomery Emerging Markets Portfolio........... $23.25 $71.64 $122.65 $262.66
Stein Roe Small Company Growth Portfolio........ $13.68 $42.55 $ 73.52 $161.28
Strong International Stock Portfolio............ $18.63 $57.65 $ 99.16 $214.85
Strong Schafer Value Portfolio.................. $19.03 $58.88 $101.22 $219.10
T. Rowe Price International Stock Portfolio..... $17.02 $52.75 $ 90.86 $197.66
Wanger U.S. Small Cap Advisor Portfolio......... $17.22 $53.36 $ 91.90 $199.83
Wanger International Small Cap Advisor
Portfolio...................................... $21.95 $67.70 $116.07 $249.39
Warburg Pincus International Equity Portfolio... $20.24 $62.54 $107.39 $231.75
Warburg Pincus Small Company Growth Portfolio... $18.43 $57.04 $ 98.13 $212.72
WRL Alger Aggressive Growth Portfolio........... $15.91 $49.36 $ 85.11 $185.68
WRL Janus Global Portfolio...................... $16.21 $50.28 $ 86.68 $188.96
WRL Janus Growth Portfolio...................... $15.50 $48.12 $ 83.01 $181.28
WRL LKCM Strategic Total Return Portfolio....... $15.71 $48.74 $ 84.06 $183.48
WRL J.P. Morgan Real Estate Securities
Portfolio...................................... $17.02 $52.75 $ 90.86 $197.66
</TABLE>
The Annual Contract Maintenance Fee is reflected in this example as a
percentage of the total amount of fees collected during a calendar year
divided by the total average net assets of the Portfolios during the same
calendar year. The fee is assumed to remain the same in each year of the above
periods. AUSA Life will deduct the Annual Contract Maintenance Fee on each
Contract Anniversary and upon surrender, on a pro rata basis, from each
Subaccount. AUSA Life may deduct Premium Taxes, if any, as it incurs them.
You should not consider this example to be a representation of past or future
expenses or performance. Actual expenses may be higher than those shown,
subject to the guarantees in the Contract.
CONDENSED FINANCIAL INFORMATION
Please note that the Appendix contains a history of accumulation unit values
in a table labeled "Condensed Financial Information."
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1. THE ANNUITY CONTRACT
The Advisor's Edge variable annuity is a flexible-premium multi-funded
variable annuity offered by AUSA Life Insurance Company, Inc. The Contract
provides a means of investing on a tax-deferred basis in twenty-eight
portfolios (the "Portfolios") offered by a number of investment companies.
Who Should Invest
The Contract is intended for long-term investors who want tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal tax brackets who
have exhausted other avenues of tax deferral, such as pre-tax contributions to
employer-sponsored retirement or savings plans. The tax-deferred feature of
the Contract is unnecessary when the Contract is purchased to fund a qualified
plan.
About the Contract
The Advisor's Edge variable annuity is a contract between you, the Contract
Owner, and AUSA Life, the issuer of the Contract.
The Contract provides benefits in two distinct phases: accumulation and
income.
Accumulation Phase
The Accumulation Phase starts when you purchase your Contract and ends
immediately before the Annuity Date, when the Income Phase starts. During the
Accumulation Phase, you choose to allocate your investment in the Contract
among the twenty-eight available Portfolios. The Contract is a variable
annuity because the value of your investment in the Portfolios can go up or
down depending on the investment performance of the Portfolios you choose. The
Contract is a flexible-premium annuity because you can make additional
investments of at least $500 until the Income Phase begins. During this phase,
you are generally not taxed on earnings from amounts invested unless you
withdraw them.
Other benefits available during the Accumulation Phase include the ability to:
. Make exchanges among your Portfolio choices at no charge and without
current tax consequences. (See Exchanges Among the Portfolios, page 20.)
. Withdraw all or part of your money with no surrender penalty charged by
AUSA Life, although you may incur income taxes and a 10% penalty tax. (See
Full and Partial Withdrawals, page 26.)
Income Phase
During the Income Phase, you receive regular annuity payments. The amount of
these payments is based in part on the amount of money accumulated under your
Contract (its Accumulated Value) and the Annuity Payment Option you select.
The Annuity Payment Options are explained at ANNUITY PAYMENTS, page 10.
At your election, payments can be either variable or fixed. If variable, the
payments rise or fall depending on the investment performance of the
Portfolios you choose. If fixed, the payment amounts are guaranteed.
Annuity payments are available in a wide variety of options, including
payments over a specified period or for life (for either a single life or
joint lives), with or without a guaranteed number of payments.
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The Separate Account
When you purchase a Contract, your money is deposited into AUSA Life's
Separate Account C. The Separate Account contains a number of Subaccounts that
invest exclusively in shares of the corresponding Portfolios. The investment
performance of each Subaccount is linked directly to the investment
performance of one of the Portfolios. Assets in the Separate Account belong to
AUSA Life but are accounted for separately from AUSA Life's other assets and
can be used only to satisfy its obligations to Contract Owners.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options.
Starting the Income Phase
As Contract Owner, you exercise control over when the Income Phase begins by
specifying an Annuity Date on the Contract application when you purchase the
Contract. The Annuity Date is the date on which annuity payments begin and is
always the first day of the month you specify. You may also change the Annuity
Date at any time in writing, as long as the Annuitant or Joint Annuitant is
living and AUSA Life receives the request at least 30 days before the then-
scheduled Annuity Date. Any Annuity Date you request must be at least 30 days
from the day AUSA Life receives written notice of it. The latest possible
Annuity Date AUSA Life will accept without prior approval is the first day of
the month after the Annuitant's 85th birthday.
The Annuity Date for Qualified Contracts may also be controlled by
endorsements, the plan, or applicable law.
Annuity Payment Options
The income you take from the Contract during the Income Phase can take several
different forms, depending on your particular needs. Except for the Designated
Period Annuity Option listed below, the Annuity Payment Options listed below
are available on either a variable basis or a fixed basis.
If available on a variable basis, the Annuity Payment Options provide payments
that, after the initial payment, will go up or down depending on the
investment performance of the Portfolios you choose.
If available on a fixed basis, the Annuity Payment Options provide payments in
an amount that does not change. If you choose a fixed Annuity Payment Option,
AUSA Life will move your investment out of the Portfolios and into the general
account of AUSA Life.
. Life Annuity - Monthly Annuity Payments are paid for the life of an
Annuitant, ending with the last payment before the Annuitant dies.
. Joint and Last Survivor Annuity - Monthly Annuity Payments are paid for as
long as at least one of two named Annuitants is living, ending with the
last payment before the surviving Annuitant dies.
. Life Annuity With Period Certain - Monthly Annuity Payments are paid for as
long as the Annuitant lives, with payments guaranteed to be made for a
period of at least 10 years, 15 years, or 20 years, as elected. If the
Annuitant dies before the period certain ends, AUSA Life will make any
remaining payments to the Beneficiary.
. Installment or Unit Refund Life Annuity - Available as either a fixed
(Installment Refund) or variable (Unit Refund) Annuity Payment Option.
Monthly Annuity Payments are paid for the life of
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an Annuitant, with a period certain determined by dividing the Accumulated
Value by the first Annuity Payment. If the Annuitant dies before the period
certain ends, AUSA Life will make any remaining payments to the
Beneficiary.
. Designated Period Annuity - Available only on a fixed basis. Monthly
Annuity Payments are paid for a specified period, which may be from 10 to
30 years.
Calculating Annuity Payments
Fixed Annuity Payments. Each fixed Annuity Payment is guaranteed to be at
least the amount shown in the Contract's Annuity Tables corresponding to the
Annuity Payment Option selected.
Variable Annuity Payments. To calculate variable Annuity Payments, AUSA Life
determines the amount of the first variable Annuity Payment. The first
variable Annuity Payment will equal the amount shown in the applicable Annuity
Table in the Contract. This amount depends on the Accumulated Value of your
Contract on the Annuity Date, the sex and age of the Annuitant (and Joint
Annuitant where there is one), the Annuity Payment Option selected, and any
applicable Premium Taxes. Subsequent variable Annuity Payments depend on the
investment experience of the Portfolios chosen. If the actual net investment
experience of the Portfolios chosen exactly equals the Assumed Interest Rate
of 4%, then the variable Annuity Payments will not change in amount. If the
actual net investment experience of the Portfolios chosen is greater than the
Assumed Interest Rate of 4%, then the variable Annuity Payments will increase.
On the other hand, they will decrease if the actual experience is lower. The
Statement of Additional Information contains a more detailed description of
the method of calculating variable Annuity Payments.
Impact of Annuitant's Age on Annuity Payments. For either fixed or variable
Annuity Payments involving life income, the actual ages of the Annuitant and
Joint Annuitant will affect the amount of each payment. Since payments based
on the lives of older Annuitants and Joint Annuitants are expected to be fewer
in number, the amount of each Annuity Payment will be greater.
Impact of Annuitant's Sex on Annuity Payments. For either fixed or variable
Annuity Payments involving life income, the sex of the Annuitant and Joint
Annuitant will affect the amount of each payment. Since payments based on the
lives of male Annuitants and Joint Annuitants are expected to be fewer in
number, the amount of each Annuity Payment will be greater than for female
Annuitants and Joint Annuitants.
Impact of Length of Payment Periods on Annuity Payments. The value of all
payments, both fixed and variable, will be greater for shorter guaranteed
periods than for longer guaranteed periods, and greater for single-life
annuities than for joint and survivor annuities, because they are expected to
be made for a shorter period.
A Few Things to Keep in Mind Regarding Annuity Payments
. If an Annuity Payment Option is not selected, AUSA Life will assume
that you chose the Life Annuity With Period Certain option (with 10
years of payments guaranteed) on a variable basis.
. The minimum payment is $100. If on the Annuity Date your Accumulated
Value is below $2,000, AUSA Life reserves the right to pay that amount
to you in a lump sum.
. From time to time, AUSA Life may require proof that the Annuitant,
Joint Annuitant, or Contract Owner is living.
. If someone has assigned ownership of a Contract to you, or if a non-
natural person (e.g., a corporation) owns a Contract, you may not
start the Income Phase of the Contract without AUSA Life's consent.
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. At the time AUSA Life calculates your fixed Annuity Payments, AUSA Life
may offer more favorable rates than those guaranteed in the Annuity
Tables found in the Contract.
. Once Annuity Payments begin, you may not select a different Annuity
Payment Option. Nor may you cancel an Annuity Payment Option after
Annuity Payments have begun.
. If you have selected a variable Annuity Payment Option, you may change
the Portfolios funding the variable Annuity Payments by written request.
. You may select an Annuity Payment Option and allocate a portion of the
value of your Contract to a fixed version of that Annuity Payment Option
and a portion to a variable version of that Annuity Payment Option
(assuming the Annuity Payment Option is available on both a fixed and
variable basis). You may not select more than one Annuity Payment Option.
. If you choose an Annuity Payment Option and the postal or other delivery
service is unable to deliver checks to the Payee's address of record, no
interest will accrue on amounts represented by uncashed Annuity Payment
checks. It is the Payee's responsibility to keep AUSA Life informed of
the Payee's most current address of record.
3. PURCHASE
Contract Application and Issuance of Contracts
To invest in the Advisor's Edge variable annuity, you should send a completed
Contract application and your Initial Purchase Payment to the address
indicated on the Contract application. If you wish to make a personal delivery
by hand or courier to AUSA Life of your completed Contract application and
Initial Purchase Payment (rather than through the mail), do so at our
Administrative Offices, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
AUSA Life will issue a Contract only if the Annuitant and Joint Annuitant are
75 years of age or less.
If the Contract application and any other required documents are received in
good order, AUSA Life will issue the Contract and will credit the Initial
Purchase Payment within two Business Days after receipt. A Business Day is any
day that the New York Stock Exchange is open for trading.
If AUSA Life cannot credit the Initial Purchase Payment because the Contract
application or other required documentation is incomplete, AUSA Life will
contact the applicant in writing, explain the reason for the delay, and refund
the Initial Purchase Payment within five Business Days unless the applicant
consents to AUSA Life's retaining the Initial Purchase Payment and crediting
it as soon as the necessary requirements are fulfilled.
In addition to Non-Qualified Contracts, AUSA Life also offers the Advisor's
Edge as a Qualified Contract. Note that Qualified Contracts contain certain
other restrictive provisions limiting the timing of payments to and
distributions from the Qualified Contract. (See QUALIFIED INDIVIDUAL
RETIREMENT ANNUITIES, page 26.)
DEFINITION
Qualified Contract
When the term "Qualified Contract" is used in this prospectus we mean a
Contract that qualifies as an individual retirement annuity under either
Section 403(b), 408(b), or 408A of the Internal Revenue Code.
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Purchase Payments
A Purchase Payment is any amount you use to buy or add to the Contract. A
Purchase Payment may be reduced by any applicable Premium Tax. In that case,
the resulting amount is called a Net Purchase Payment.
A Few Things to Keep in Mind Regarding Purchase Payments
. The minimum Initial Purchase Payment for a Non-Qualified Contract is
$5,000.
. The minimum Initial Purchase Payment for a Qualified Contract is $2,000
(or $50 if by payroll deduction).
. You may make additional Purchase Payments at any time during the
Accumulation Phase and while the Annuitant or Joint Annuitant, if
applicable, is living. Additional Purchase Payments must be at least $500
(or $50 if by monthly payroll deduction) for Non-Qualified Contracts.
Additional Purchase Payments must be at least $50 for Qualified
Contracts.
. Additional Purchase Payments received before the close of the New York
Stock Exchange (usually 4:00 p.m. Eastern time) are credited to the
Contract's Accumulated Value as of the close of business that same day.
. The minimum amount that you can allocate to any one Portfolio is $250
(except where Purchase Payments are made by monthly payroll deduction).
. The total of all Purchase Payments may not exceed $1,000,000 without our
prior approval.
. Unless you indicate otherwise, your Initial Net Purchase Payment will be
invested immediately upon our receiving it. From that point forward, you
bear full investment risk for any amounts allocated to the Portfolios
during the Right to Cancel Period.
The date on which the Contract is issued is called the Contract Date. A
Contract Anniversary is any anniversary of the Contract Date. A Contract Year
is a period of twelve months starting with the Contract Date or any Contract
Anniversary.
DEFINITION
Premium Tax
A Premium Tax is a regulatory tax some states assess on the Purchase
Payments made into a Contract. If we should have to pay any Premium Tax, we
will deduct it from each Purchase Payment or from the Accumulated Value as
we incur the tax. Currently, New York does not impose a Premium Tax.
Purchasing by Wire
For wiring instructions, please contact our Administrative Office at 800-866-
6007.
Allocation of Purchase Payments
You specify on the Contract application what portion of your Purchase Payments
you want to be allocated among which Portfolios. You may allocate your
Purchase Payments to one or more Portfolios. All allocations you make must be
in whole-number percentages and must be at least $250 except where Purchase
Payments are made by monthly payroll deduction. Your initial Net Purchase
Payment will be immediately allocated among the Portfolios in the percentages
you specified on your Contract application without waiting for the Right to
Cancel Period to pass.
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Should your investment goals change, you may change the allocation percentages
for additional Net Purchase Payments by sending written notice to AUSA Life.
Requests for Exchanges received before the close of the New York Stock
Exchange (generally 4 p.m. Eastern time) are processed as of that day.
Requests received after the close of the New York Stock Exchange are processed
the next Business Day.
WHAT'S MY CONTRACT WORTH TODAY?
Accumulated Value
The Accumulated Value of your Contract is the value of all amounts accumulated
under the Contract during the Accumulation Phase (similar to the current
market value of a mutual fund account). When the Contract is opened, the
Accumulated Value is equal to your initial Net Purchase Payment. On any
Business Day thereafter, the Accumulated Value equals the Accumulated Value
from the previous Business Day,
plus -
. any additional Net Purchase Payments credited
. any increase in the Accumulated Value due to investment results of the
Portfolio(s) you selected
minus -
. any decrease in the Accumulated Value due to investment results of the
Portfolio(s) you selected
. the daily Mortality and Expense Risk Charge
. the daily Administrative Expense Charge
. the Annual Contract Maintenance Fee, if applicable
. any withdrawals
. any charges for Exchanges made after the first twelve in a Contract Year
.any Premium Taxes that occur during the Valuation Period.
The Valuation Period is any period between two successive Business Days
beginning at the close of business of the first Business Day and ending at
the close of business of the next Business Day.
You should expect the Accumulated Value of your Contract to change from
Valuation Period to Valuation Period, reflecting the investment experience
of the Portfolios you have selected as well as the daily deduction of
charges.
An Accumulation Unit is a measure of your ownership interest in the Contract
during the Accumulation Phase. When you allocate your Net Purchase Payments
to a selected Portfolio, AUSA Life will credit a certain number of
Accumulation Units to your Contract. AUSA Life determines the number of
Accumulation Units it credits by dividing the dollar amount you have
allocated to a Portfolio by the Accumulation Unit Value for that Portfolio
as of the end of the Valuation Period in which the payment is received. Each
Portfolio has its own Accumulation Unit Value (similar to the share price
(net asset value) of a mutual fund). The Accumulation Unit Value varies each
Valuation Period with the net rate of return of the Portfolio. The net rate
of return reflects the performance of the Portfolio for the Valuation Period
and is net of asset charges to the Portfolio. Per Portfolio, the Accumulated
Value equals the number of Accumulation Units multiplied by the Accumulation
Unit Value for that Portfolio.
All dividends and capital gains earned will be reinvested and reflected in
the Accumulation Unit Value. Only in this way can these earnings remain tax-
deferred.
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4. INVESTMENT OPTIONS
The Advisor's Edge variable annuity offers you a means of investing in twenty-
eight portfolios offered by nine different investment companies (each
investment company a "Fund"). A brief description of each Fund and Portfolio
is given below. For detailed information regarding the Funds and the
Portfolios, you should read the prospectuses for the Funds that accompany the
Contract prospectus.
The general public may invest in the Portfolios only through certain insurance
contracts and qualified plans. The investment objectives and policies of the
Portfolios may be similar to those of certain publicly available funds or
portfolios. However, you should not expect that the investment results of any
publicly available funds or portfolios will be comparable to those of the
Portfolios.
The Contract was not designed for professional market timing organizations or
other persons that use programmed, large, or frequent transfers. The use of
such exchanges may be disruptive to an underlying fund portfolio. The Company
reserves the right to reject any premium payment or exchange request from any
person, if, in the Company's judgment, an underlying fund portfolio would be
unable to invest effectively in accordance with its investment objectives and
policies or would otherwise be potentially adversely affected or if an
underlying portfolio would reject the Company's purchase order.
DFA Investment Dimensions Group Inc.
Advised by Dimensional Fund Advisors, Inc.
The Fund is an open-end management investment company organized under Maryland
law in 1981, and is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 (the "1940 Act"). The Fund
consists of 34 series of shares, six of which are available as part of the
Advisor's Edge.
DFA Small Value Portfolio seeks to achieve long-term capital appreciation
by investing in common stocks of U.S. companies that the Portfolio's
investment advisor believes are value stocks, primarily because they have a
high book value in relation to their market value (a "book to market
ratio"), and whose market capitalizations are smaller than that of the
company having the median market capitalization of companies whose shares
are listed on the New York Stock Exchange. A company's shares will be
considered to have a high book to market ratio if the ratio equals or
exceeds the ratios of any of the 30% of companies with the highest positive
book to market ratios whose shares are listed on the New York Stock
Exchange. In measuring value, the Portfolio's investment advisor may
consider additional factors such as cash flow, economic conditions, and
developments in the issuer's industry.
DFA Large Value Portfolio seeks to achieve longer term capital appreciation
by investing in common stocks of U.S. companies that the Portfolio's
investment advisor believes are value stocks, primarily because they have a
high book to market ratio, and whose market capitalizations equal or exceed
that of the company having the median market capitalization of companies
whose shares are listed on the New York Stock Exchange. In measuring value,
the Portfolio's investment advisor may consider additional factors such as
cash flow, economic conditions, and developments in the issuer's industry.
DFA International Value Portfolio seeks to achieve long-term capital
appreciation by investing in stocks of large non-U.S. companies that the
Portfolio's investment advisor believes are value stocks. Securities are
considered value stocks primarily because a company's shares at the time of
purchase have a book to market ratio that equals or exceeds the ratios of
any of the 30% of companies in that country with the highest positive book
to market ratios. In measuring value, the Portfolio's investment advisor
may consider additional factors such as cash flow, economic conditions, and
developments in the issuer's industry. The Portfolio is closed if Portfolio
securities equal in value to at least the majority of its total assets are
principally traded on exchanges that are closed that day. The Portfolio
will not accept purchase and redemption orders for shares on those days.
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DFA International Small Portfolio seeks to achieve long-term capital
appreciation. This Portfolio provides investors with access to securities
portfolios consisting of small Japanese, United Kingdom, Continental, and
Pacific Rim companies. The Portfolio seeks to achieve its investment
objective by investing its assets in a broad and diverse group of
marketable stocks of (1) Japanese small companies that are traded in the
Japanese securities markets; (2) United Kingdom small companies that are
traded principally on the International Stock Exchange of the United
Kingdom and the Republic of Ireland; (3) small companies organized under
the laws of certain European countries; and (4) small companies located in
Australia, New Zealand, and Asian countries whose shares are traded
principally on the securities markets located in those countries.
DFA Short-Term Fixed Portfolio seeks to achieve a stable real return in
excess of the rate of inflation on invested capital with a minimum of risk
by investing in U.S. government obligations, U.S. government agency
obligations, dollar-denominated obligations of foreign issuers issued in
the U.S., bank obligations, including U.S. subsidiaries and branches of
foreign banks, corporate obligations, commercial paper, repurchase
agreements, and obligations of supranational organizations. Generally, this
Portfolio will acquire obligations that mature within one year from the
date of settlement, but substantial investments may be made in obligations
maturing within two years from the date of settlement when greater returns
are available. The Portfolio principally invests in certificates of
deposit, commercial paper, bankers' acceptances, notes, and bonds.
DFA Global Bond Portfolio seeks to provide a market rate of return for a
global fixed income portfolio with low relative volatility of returns. This
Portfolio will invest primarily in obligations issued or guaranteed by the
U.S. and foreign governments and their agencies and instrumentalities,
obligations of other foreign issuers rated AA or better and supranational
organizations, such as the World Bank, the European Investment Bank,
European Economic Community, and European Coal and Steel Community, and
corporate debt obligations. At the present time, the Portfolio's investment
advisor expects that most investments will be made in the obligations of
issuers that are developed countries, such as those countries which are
members of the Organization of Economic Cooperation and Development (OECD).
Endeavor Series Trust
Advised by Endeavor Management Co.
Endeavor Series Trust is a diversified, open-end management investment company
that offers a selection of managed investment portfolios. Each portfolio
constitutes a separate mutual fund with its own investment objectives and
policies. The Fund is organized as a Massachusetts business trust and is
registered with the SEC under the 1940 Act. The Fund currently issues shares
of thirteen portfolios, three of which are available as part of the Advisor's
Edge.
Dreyfus Small Cap Value Portfolio seeks capital growth by investing in
companies with a median capitalization of approximately $750 million, with
at least 75% of the Portfolio's investments in companies with
capitalizations between $150 million and $1.5 billion. The Dreyfus
Corporation serves as the subadviser to the Portfolio.
Endeavor Enhanced Index Portfolio's investment objective is to earn a total
return modestly in excess of the total return performance of the S&P 500
Composite Stock Price Index (including the reinvestment of dividends) ("S&P
500 Index") while maintaining a volatility of return similar to the S&P 500
Index. J.P. Morgan Investment Management Inc. serves as the subadviser to
the Endeavor Enhanced Index Portfolio.
T. Rowe Price International Stock Portfolio's investment objective is to
provide long-term growth of capital through investments primarily in the
common stocks of established non-U.S. companies. Rowe Price-Fleming
International, Inc. serves as the subadviser to the Portfolio.
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The Federated Insurance Series
Advised by Federated Investment Management Company
The Federated Insurance Series is an open-end management investment company
organized as a Massachusetts business trust and registered under the 1940 Act.
The Fund consists of eleven investment portfolios, five of which are available
as part of the Advisor's Edge.
Federated American Leaders Portfolio's primary investment objective is to
achieve long-term growth of capital. The Portfolio's secondary objective is
to provide income. The Portfolio pursues its investment objectives by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue-chip" companies. This Portfolio was formerly known as
the Federated Equity Growth & Income Portfolio.
Federated Utility Portfolio seeks to achieve high current income and
moderate capital appreciation. The Portfolio endeavors to achieve its
objective by investing primarily in a professionally managed and
diversified portfolio of equity and debt securities of utility companies.
Federated Prime Money Portfolio seeks to provide current income consistent
with stability of principal and liquidity. The Portfolio pursues its
investment objective by investing exclusively in a portfolio of money
market instruments maturing in 397 days or less.
Federated U.S. Government Securities Portfolio seeks to provide current
income. Under normal circumstances, the Portfolio pursues its investment
objective by investing at least 65% of the value of its total assets in
securities issued or guaranteed as to payment of principal and interest by
the U.S. government, its agencies, or instrumentalities. This Portfolio was
formerly known as the Federated U.S. Government Bond Portfolio.
Federated High Income Bond Portfolio's investment objective is to seek high
current income by investing primarily in a diversified portfolio of
professionally managed fixed income securities. The fixed income securities
in which the Portfolio intends to invest are lower-rated corporate debt
obligations, which are commonly referred to as "junk bonds." Some of these
fixed income securities may involve equity features. Capital growth will be
considered, but only when consistent with the investment objective of high
current income. This Portfolio was formerly known as the Federated
Corporate Bond Portfolio.
The Montgomery Funds III
Advised by Montgomery Asset Management, LLC
The Montgomery Funds III is an open-end management investment company
organized as a Delaware business trust and registered under the 1940 Act. The
Fund consists of three professionally managed investment portfolios, two of
which are available as part of the Advisor's Edge. Montgomery Asset
Management, LLC ("MAM") was organized as a Delaware limited liability company
in 1997 and serves as the Fund's investment advisor. On July 31, 1997,
Montgomery Management, L.P., formed in 1990, completed the sale of
substantially all of its assets to MAM.
Montgomery Growth Portfolio's investment objective is capital appreciation,
which, under normal conditions, it seeks by investing at least 65% of its
total assets in the equity securities of U.S. companies and by targeting
companies having total market capitalizations of $1 billion or more.
Montgomery Emerging Markets Portfolio, under normal conditions, invests at
least 65% of its total assets in stock of companies based in the world's
developing economies. The Portfolio typically maintains investments in at
least six of these countries at all times, with no more than 25% of its
assets in any single one of them.
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SteinRoe Variable Investment Trust
Advised by Stein Roe & Farnham Incorporated
The SteinRoe Variable Investment Trust is an open-end, diversified management
investment company organized as a Massachusetts business trust and registered
under the 1940 Act. The Fund currently consists of five investment portfolios,
one of which is available as part of the Advisor's Edge.
Stein Roe Small Company Growth Portfolio, under normal market conditions,
invests at least 65% of its assets in common stocks of small-cap companies.
The Portfolio may invests in new issuers during periods when new issues are
being brought to market. The Portfolio may also invests in mid-cap
companies. The Portfolio invests in companies that compete within large and
growing markets and that have the ability to grow their market share. To
find companies with these characteristics, the portfolio manager seeks out
companies that are - or, in the portfolio manager's judgment, have the
potential to be - a market share leader within their respective industry.
He also looks for companies with strong management teams that participate
in the ownership of the companies.
Strong Variable Insurance Funds, Inc.
Advised by Strong Capital Management, Inc.
Strong Variable Insurance Funds, Inc. is an open-end management investment
company organized under Wisconsin law and registered under the 1940 Act. The
two series issued by the Fund are available as part of the Advisor's Edge.
Strong International Stock Portfolio seeks capital growth. It invests
primarily in the equity securities of issuers located outside the United
States. The Portfolio focuses first on country selection, using
quantitative and fundamental analysis to identify those international
markets that offer above average growth potential and those that should be
avoided. The Portfolio attempts to reduce overall portfolio volatility by
actively managing currency risk. In selecting individual stocks, the fund
employs extensive in-house research and in-depth analysis. This is in
addition to the belief that direct meetings with leaders of companies are
an essential element of the analysis process.
Strong Schafer Value Portfolio's primary investment objective is long-term
capital appreciation. Current income is a secondary objective in the
selection of investments. The Portfolio invests in stocks with P/E ratios
that are less than the S&P 500 and with earnings per share growth estimates
that are greater than the S&P 500 over the next three to five years. In
addition, the Portfolio will equally weight the portfolio holdings and
won't invest more than 20% of the Portfolio in one industry group. The
Portfolio remains fully invested in common stocks at all times and does not
try to "time the market."
Wanger Advisors Trust
Advised by Wanger Asset Management, L.P.
Wanger Advisors Trust, an open-end management investment company, was
organized as a Massachusetts business trust in 1994 and is registered under
the 1940 Act. The Fund has made two of its series available as part of the
Advisor's Edge. Wanger Asset Management, L.P. is a limited partnership managed
by its general partner, Wanger Asset Management, Ltd.
Wanger U.S. Small Cap Advisor Portfolio seeks long-term growth of capital.
The Portfolio pursues its investment objective by investing primarily in
stocks of small and medium-sized U.S. companies with capitalization of less
than $2 billion, holding them as they grow, and selling them when they
become large. The Portfolio may also invest in debt securities, including
lower-rated debt securities, that may be regarded as having speculative
characteristics and are commonly referred to as "junk bonds."
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Wanger International Small Cap Advisor Portfolio seeks long-term growth of
capital. The Portfolio pursues its investment objective by investing
primarily in stocks of small and medium-sized foreign companies with
capitalization of less than $2 billion, holding them as they grow, and
selling them when they become large. The Portfolio may also invest in debt
securities, including lower-rated debt securities, that may be regarded as
having speculative characteristics and are commonly referred to as "junk
bonds."
Warburg Pincus Trust
Advised by Credit Suisse Asset Management
Warburg Pincus Trust, an open-end management investment company, was organized
as a Massachusetts business trust in 1995 and is registered under the 1940
Act. The Fund currently offers four investment portfolios, two of which are
available as part of the Advisor's Edge.
Warburg Pincus International Equity Portfolio's investment objective is to
achieve long-term capital appreciation. This Portfolio seeks to achieve its
investment objective by investing primarily in equity securities of
companies, wherever organized, that in the judgment of the Portfolio's
adviser have their principal business activities and interests outside of
the United States. This Portfolio will ordinarily invest substantially all
its assets--but no less than 65% of its total assets--in common stocks,
warrants, and securities convertible into or exchangeable for common
stocks. Generally, this Portfolio will hold no less than 65% of its total
assets in a least three countries other than the United States. Investment
may be made in equity securities of companies of any size, whether traded
on or off a national securities exchange.
Warburg Pincus Small Company Growth Portfolio's investment objective is to
achieve capital growth. This Portfolio seeks to achieve its investment
objective by investing in a portfolio of equity securities of small-sized
domestic companies. This Portfolio will ordinarily invest at least 65% of
its total assets in common stocks or warrants of small companies that
present attractive opportunities for capital growth. The Portfolio
considers a "small" company to be one that has a market capitalization,
measured at the time the Portfolio purchases a security of that company,
within the range of capitalizations of companies represented in the Russell
2000 Index. (As of December 31, 1999, the Russell 2000 Index included
companies with market capitalizations between $10.9 million and $13.5
billion.) It is anticipated that this Portfolio will invest primarily in
companies whose securities are traded on domestic stock exchanges or in the
over-the-counter market. This Portfolio's investments will be made on the
basis of equity characteristics and securities ratings generally will not
be a factor in the selection process.
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
WRL Series Fund, Inc. is a diversified, open-end management investment company
that offers a selection of managed investment portfolios. Each portfolio
constitutes a separate mutual fund with its own investment objectives and
policies. The Fund is registered under the 1940 Act. The Fund currently issues
twenty-six portfolios, five of which are available as part of the Advisor's
Edge.
WRL Alger Aggressive Growth Portfolio's investment objective is to achieve
long-term capital appreciation. The Portfolio invests primarily in equity
securities, such as common stock or preferred stock, or convertible
securities. Fred Alger Management, Inc. serves as subadvisor to the WRL
Alger Aggressive Growth Portfolio.
WRL Janus Global Portfolio seeks long-term growth of capital in a manner
consistent with preservation of capital. The Portfolio invests primarily in
common stocks of foreign and domestic issuers and depositary receipts,
including American Depositary Receipts, Global Depositary Receipts, and
European Depositary Receipts. Janus Capital Corporation serves as
subadvisor to the WRL Janus Global Portfolio.
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WRL Janus Growth Portfolio's investment objective is to seek growth of
capital. The Portfolio invests primarily in common stocks and to a lesser
extent in futures. Janus Capital Corporation serves as subadvisor to the
WRL Janus Growth Portfolio.
WRL LKCM Strategic Total Return Portfolio's investment objective is to
provide current income, long-term growth of income, and capital
appreciation. The Portfolio seeks to achieve its investment objective by
investing primarily in common stock, corporate bonds, convertible preferred
stocks, corporate convertible bonds, and U.S. Treasury Notes. Luther King
Capital Management Corporation serves as subadvisor to the Portfolio.
WRL J.P. Morgan Real Estate Securities 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. The Portfolio seeks to achieve its objective
by investing principally in equity securities of real estate companies,
which include common stocks and convertible securities. J.P. Morgan
Investment Management Inc. serves as subadvisor to the Portfolio.
There is no assurance that a Portfolio will achieve its stated objective.
Additional information regarding the investment objectives and policies of the
Portfolios and the investment advisory services, total expenses, and charges
can be found in the current prospectuses for the corresponding Funds. The
investment advisors to certain of the Funds may compensate AUSA Life for
providing administrative services in connection with certain of the
Portfolios. Such compensation will be paid from the assets of the investment
advisors.
Exchanges Among the Portfolios
Should your investment goals change, you may make unlimited exchanges of money
among the Portfolios at no cost, subject to the following conditions:
. You must make requests for exchanges in writing. AUSA Life will process
requests it receives before the close of the New York Stock Exchange
(generally 4:00 p.m. Eastern time) at the close of business that same day.
Requests received after the close of the New York Stock Exchange are
processed the next Business Day.
. The minimum amount you may exchange from a Portfolio is $250 (unless the
Accumulated Value in a Portfolio is less than $250).
. The $250 minimum balance requirement per Portfolio must be satisfied at all
times unless Purchase Payments are being made by monthly payroll deduction.
If you do not maintain the minimum balance requirement, AUSA Life will
transfer any remaining amount to your other Portfolios on a pro rata basis.
. AUSA Life does not currently charge a fee for exchanges among the
Portfolios, although it reserves the right to charge a $15 fee for
Exchanges in excess of 12 per Contract Year.
Dollar-Cost Averaging Option
If you have at least $5,000 of Accumulated Value in the Federated Prime Money
Portfolio, you can use the Dollar-Cost Averaging Option to move a specified
dollar amount each month from the Federated Prime Money Portfolio to other
Portfolios available under the Contract, subject to the following conditions:
. The minimum amount you may exchange under this option is $250.
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. The maximum amount you may exchange under this option is the Accumulated
Value in the Federated Prime Money Portfolio when elected, divided by 12.
. The transfer date will be the same calendar day each month as the Contract
Date.
. AUSA Life will allocate the dollar amount to the Portfolios in the
proportions you specify on the appropriate AUSA Life form or, if you
specify none, in accordance with your original investment allocation.
. If, on any transfer date, the Accumulated Value in the Federated Prime
Money Portfolio is equal to or less than the amount you have elected to
have transferred, AUSA Life will transfer the entire amount and the option
will end.
. You may change the transfer amount once each Contract Year.
. You may cancel this option by sending the appropriate AUSA Life form to our
Administrative Offices. We must receive the form at least seven days before
the next transfer date.
A CLOSER LOOK AT
Dollar-Cost Averaging
The main objective of Dollar-Cost Averaging is to shield your investment
from short-term price fluctuations. Since the same dollar amount is
transferred to other Portfolios each month, more Accumulation Units are
credited to a Portfolio if the value per Accumulation Unit is low, while
fewer Accumulation Units are credited if the value per Accumulation Unit is
high. Therefore, it is possible to achieve a lower average cost per
Accumulation Unit over the long term if the Accumulation Unit Value declines
over that period. This plan of investing allows investors to take advantage
of market fluctuations but does not assure a profit or protect against a
loss in declining markets.
5. EXPENSES
There are charges and expenses associated with the Contract that reduce the
return on your investment in the policy.
Mortality and Expense Risk Charge
AUSA Life charges a fee as compensation for bearing certain mortality and
expense risks under the Contract. The annual charge is assessed daily based on
the net assets of the Separate Account. The annual Mortality and Expense Risk
Charge is 0.50% of the net asset value of the Separate Account.
We guarantee that this annual charge will not increase. If the charge is more
than sufficient to cover actual costs or assumed risks, any excess will be
added to AUSA Life's surplus. If the charges collected under the Contract are
not enough to cover actual costs or assumed risks, then AUSA Life will bear
the loss.
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A CLOSER LOOK AT
The Mortality and Expense Risk Charge
AUSA Life assumes mortality risk in two ways. First, where Contract Owners
elect an Annuity Payment Option under which AUSA Life guarantees a number of
payments over a life or joint lives, AUSA Life assumes the risk of making
monthly annuity payments regardless of how long all Annuitants may live.
Second, AUSA Life assumes mortality risk in guaranteeing a minimum Death
Benefit in the event the Annuitant dies during the Accumulation Phase.
The expense risk that AUSA Life assumes is that the charges for
administrative expenses, which are guaranteed not to increase beyond the
rates shown for the life of the Contract, may not be great enough to cover
the actual costs of issuing and administering the Contract.
Administrative Expense Charge
AUSA Life assesses each Contract an annual Administrative Expense Charge to
cover the cost of issuing and administering each Contract and of maintaining
the Separate Account. The Administrative Expense Charge is assessed daily at a
rate equal to 0.15% annually of the net asset value of the Separate Account.
Annual Contract Maintenance Fee
AUSA Life charges an Annual Contract Maintenance Fee of $30. The fee is to
reimburse AUSA Life for the costs it expects over the life of the Contract for
maintaining each Contract and the Separate Account. The fee is deducted
proportionately from each of the Portfolios you have selected.
Exchange Fee
Each Contract Year you may make an unlimited number of free Exchanges between
Portfolios, provided that after an Exchange no Portfolio may contain a balance
of less than $250, except in cases where Purchase Payments are made by monthly
payroll deduction. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of twelve per Contract Year.
Portfolio Expenses
The value of the assets in the Separate Account will reflect the fees and
expenses paid by the Portfolios. A complete description of these expenses is
found in the "Fee Table" section of this prospectus and in each Fund's
prospectus and Statement of Additional Information.
6. TAXES
INTRODUCTION
The following discussion of annuity taxation is general in nature and is based
on AUSA Life's understanding of the treatment of annuity contracts under
current federal income tax law, particularly Section 72 of the Internal
Revenue Code and various Treasury Regulations and Internal Revenue Service
interpretations dealing with Section 72. The discussion does not touch upon
state or local taxes. It is not tax advice. You should consult with a
qualified tax adviser about your particular situation to ensure that your
purchase of a Contract results in the tax treatment you desire. Additional
discussion of tax matters is included in the Statement of Additional
Information.
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TAXATION OF ANNUITIES IN GENERAL
Tax Deferral
Special rules in the Internal Revenue Code for annuity taxation exist today.
In general, those rules provide that you are not currently taxed on increases
in value under a Contract until you take some form of withdrawal or
distribution from it. However, it is important to note that, under certain
circumstances, you might not get the advantage of tax deferral, meaning that
the increase in value would be subject to current federal income tax. (See
ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS, page 25, and DIVERSIFICATION
STANDARDS, page 25.)
A CLOSER LOOK AT
Tax Deferral
Tax deferral means no current tax on earnings in your Contract. The amount
you would have paid in income taxes can be left in the Contract and earn
money for you.
One tradeoff of tax deferral is that there are certain restrictions on your
ability to access your money, including penalty taxes for early withdrawals.
This is one reason why a variable annuity is intended as a long-term
investment.
Another tradeoff is that, when funds are withdrawn, they are taxed at
ordinary income rates instead of capital gains rates, which apply to certain
other sorts of investments.
Taxation of Full and Partial Withdrawals
If you make a full or partial withdrawal (including a Systematic Withdrawal)
from a Non-Qualified Contract during the Accumulation Phase, you as Contract
Owner will be taxed at ordinary income rates on earnings you withdraw at that
time. For purposes of this rule, withdrawals are taken first from earnings on
the Contract and then from the money you invested in the Contract. This
"investment in the contract" can generally be described as the cost of the
Contract, and it generally includes all Purchase Payments minus any amounts
you have already received under the Contract that represented the return of
invested money. Also for purposes of this rule, a pledge or assignment of a
Contract is treated as a partial withdrawal from a Contract. (If you are
contemplating using your Contract as collateral for a loan, you may be asked
to pledge or assign it.)
Taxation of Annuity Payments
When you take Annuity Payments in the Income Phase of a Non-Qualified
Contract, for tax purposes each payment is deemed to return to you a portion
of your investment in the Contract. Since with a Non-Qualified Contract you
have already paid taxes on those amounts (the Contract was funded with after-
tax dollars), you will not be taxed again on your investment - only on your
earnings.
For fixed Annuity Payments from a Non-Qualified Contract, in general, AUSA
Life calculates the taxable portion of each payment using a formula known as
the "exclusion ratio." This formula establishes the ratio that the investment
in the Contract bears to the total expected amount of Annuity Payments for the
term of the Contract. AUSA Life then applies that ratio to each payment to
determine the non-taxable portion of the payment. The remaining portion of
each payment is taxable at ordinary income tax rates.
For variable Annuity Payments from a Non-Qualified Contract, in general, AUSA
Life calculates the taxable portion of each payment using a formula that
establishes a specific dollar amount of each
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payment that is not taxed. To find the dollar amount, AUSA Life divides the
investment in the Contract by the total number of expected periodic payments.
The remaining portion of each payment is taxable at ordinary income tax rates.
Once your investment in the Contract has been returned, the balance of the
Annuity Payments represent earnings only and therefore are fully taxable.
Taxation of Withdrawals and Distributions From Qualified Contracts
Generally, the entire amount distributed from a Qualified Contract is taxable
to the Contract Owner. In the case of Qualified Contracts with after-tax
contributions, you may exclude the portion of each withdrawal or Annuity
Payment constituting a return of after-tax contributions. Once all of your
after-tax contributions have been returned to you on a non-taxable basis,
subsequent withdrawals or annuity payments are fully taxable as ordinary
income. Since AUSA Life has no knowledge of the amount of after-tax
contributions you have made, you will need to make this computation in the
preparation of your federal income tax return.
Tax Withholding
Federal tax law requires that AUSA Life withhold federal income taxes on all
distributions unless the recipient elects not to have any amounts withheld and
properly notifies AUSA Life of that election. In certain situations, AUSA Life
will withhold taxes on distributions to non-resident aliens at a flat 30% rate
unless an exemption from withholding applies under an applicable tax treaty.
Penalty Taxes on Certain Early Withdrawals
The Internal Revenue Code provides for a penalty tax in connection with
certain withdrawals or distributions that are includible in income. The
penalty amount is 10% of the amount includible in income that is received
under the deferred annuity. However, there are exceptions to the penalty tax.
For instance, it does not apply to withdrawals: (i) made after the taxpayer
reaches age 59 1/2; (ii) made on or after the death of the Contract Owner or,
where the Contract Owner is not an individual, on or after the death of the
primary Annuitant (who is defined as the individual the events in whose life
are of primary importance in affecting the timing and payment under the
Contracts); (iii) attributable to the disability of the taxpayer which
occurred after the purchase of the Contract (as defined in the Internal
Revenue Code); (iv) that are part of a series of substantially equal periodic
payments made at least annually for the life (or life expectancy) of the
taxpayer, or joint lives (or joint life expectancies) of the taxpayer and his
or her beneficiary; (v) from a Qualified Contract (note, however, that other
penalties may apply); (vi) under an immediate annuity contract (as defined in
the Internal Revenue Code); (vii) that can be traced to an investment in the
Contract prior to August 14, 1982; or (viii) under a Contract that an employer
purchases on termination of certain types of qualified plans and that the
employer holds until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iv) above, and the series of payments is subsequently
modified (for some reason other than death or disability), the tax for the
year in which the modification occurs will be increased by an amount (as
determined under Treasury Regulations) equal to the penalty tax that would
have been imposed but for item (iv) above, plus interest for the deferral
period. The foregoing rule applies if the modification takes place (a) before
the close of the period that is five years from the date of the first payment
and after the taxpayer attains age 59 1/2, or (b) before the taxpayer reaches
age 59 1/2.
For Qualified Contracts, other tax penalties may apply to certain
distributions as well as to certain contributions and other transactions.
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The penalty tax may not apply to distributions from Qualified Contracts issued
under Section 408(b) or 408A of the Internal Revenue Code that you use to pay
qualified higher education expenses, the acquisition costs (up to $10,000)
involved in the purchase of a principal residence by a first-time homebuyer,
or a distribution made on account of an Internal Revenue Service levy.
ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS
Where a non-natural person (for example, a corporation) holds a Contract, that
Contract is generally not treated as an annuity contract for federal income
tax purposes, and the income on that Contract (generally the increase in the
net Accumulated Value less the payments) is considered taxable income each
year. This rule does not apply where the non-natural person is only a nominal
owner such as a trust or other entity acting as an agent for a natural person.
The rule also does not apply where the estate of a decedent acquires a
Contract, where an employer purchases a Contract on behalf of an employee upon
termination of a qualified plan, or to an immediate annuity (as defined in the
Internal Revenue Code).
MULTIPLE-CONTRACTS RULE
All non-qualified annuity contracts issued by the same company (or affiliate)
to the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in
the taxpayer's gross income. Thus, any amount received under any Contract
prior to the Contract's Annuity Date, such as a partial withdrawal, will be
taxable (and possibly subject to the 10% federal penalty tax) to the extent of
the combined income in all such contracts. The Treasury Department has
specific authority to issue regulations that prevent the avoidance of the
multiple-contracts rules through the serial purchase of annuity contracts or
otherwise. In addition, there may be other situations in which the Treasury
Department may conclude that it would be appropriate to aggregate two or more
Contracts purchased by the same Contract Owner. Accordingly, a Contract Owner
should consult a tax adviser before purchasing more than one Contract or other
annuity contracts. (The aggregation rules do not apply to immediate annuities
(as defined in the Internal Revenue Code).)
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract during the Accumulation Phase for
less than full and adequate consideration will generally trigger income tax
(and possibly the 10% federal penalty tax) on the gain in the Contract to the
Contract Owner at the time of such transfer. The transferee's investment in
the Contract will be increased by any amount included in the Contract Owner's
income. This provision, however, does not apply to transfers between spouses
or former spouses incident to a divorce that are governed by Internal Revenue
Code Section 1041(a).
ASSIGNMENTS OF ANNUITY CONTRACTS
A transfer of ownership in a Contract, a collateral assignment, or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant, or
beneficiary that this prospectus does not discuss. A Contract Owner
considering such a transfer or assignment of a Contract should contact a tax
adviser about the potential tax effects of such a transaction.
DIVERSIFICATION STANDARDS
To comply with certain regulations under Internal Revenue Code Section 817(h),
after a start-up period, each Subaccount of the Separate Account will be
required to diversify its investments in accordance with certain
diversification standards. A "look-through" rule applies that suggests that
each
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Subaccount of the Separate Account will be tested for compliance with the
diversification standards by looking through to the assets of the Portfolios
in which each Subaccount invests.
In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance on the extent to which Contract Owners may direct their investments
to particular subaccounts of a separate account. It is possible that
regulations or revenue rulings may be issued in this area at some time in the
future. It is not clear, at this time, what these regulations or rulings would
provide. It is possible that when the regulations or rulings are issued, the
Contract may need to be modified in order to remain in compliance. For these
reasons, AUSA Life reserves the right to modify the Contract, as necessary, to
maintain the tax-deferred status of the Contract.
We intend to comply with the diversification regulations to assure that the
Contract continues to be treated as an annuity contract for federal income tax
purposes.
QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES
Qualified Contracts contain special provisions and are subject to limitations
on contributions and the timing of when distributions can and must be made.
Tax penalties may apply to contributions greater than specified limits, loans,
reassignments, distributions that do not meet specified requirements, or in
other circumstances. Anyone desiring to purchase a Qualified Contract should
consult a personal tax adviser.
403(b) Contracts
AUSA Life will offer Contracts in connection with retirement plans adopted by
public school systems and certain tax-exempt organizations for their employees
under Section 403(b) of the Internal Revenue Code. More detailed information
on 403(b) Contracts may be found in the Statement of Additional Information.
7. ACCESS TO YOUR MONEY
The value of your Contract can be accessed during the Accumulation Phase--
. by making a full or partial withdrawal
. by electing an Annuity Payment Option
. by your Beneficiary in the form of a Death Benefit
Full and Partial Withdrawals
You may withdraw all or part of your money at any time during the Accumulation
Phase of your Contract. All partial withdrawals must be for at least $500.
On the date AUSA Life receives your request for a full withdrawal, the amount
payable is the Surrender Value, which equals the Accumulated Value less any
applicable surrender charge and any applicable Premium Taxes incurred but not
yet deducted.
To make a withdrawal, send your written request on the appropriate AUSA Life
form to our Administrative Offices.
Because you assume the investment risk under the Contract, the total amount
paid upon a full withdrawal of the Contract may be more or less than the
total Purchase Payments made (taking prior withdrawals and Surrender Charges
into account).
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Systematic Withdrawal Option
You may elect to have a specified dollar amount provided to you from your
Contract's Accumulated Value on a monthly, quarterly, semiannual, or annual
basis. The minimum amount for each Systematic Withdrawal is $100.
You may elect this option by completing a Systematic Withdrawal Request Form.
AUSA Life must receive your Form at least 30 days before the date you want
Systematic Withdrawals to begin. AUSA Life will process each Systematic
Withdrawal on the date and at the frequency you specified in your Systematic
Withdrawal Program Application Form. The start date for Systematic Withdrawals
must be between the first and the twenty-eighth day of the month. You may
discontinue the Systematic Withdrawal Option at any time by notifying us in
writing at least 30 days prior to your next scheduled withdrawal date.
We reserve the right to discontinue offering this option upon 30 days' notice,
and we also reserve the right to charge a fee for this option.
Minimum Balance Requirements
The minimum required balance in any Portfolio is $250, except where Purchase
Payments are made by monthly payroll deduction. If an exchange or withdrawal
would reduce the balance in a Portfolio to less than $250, AUSA Life will
transfer the remaining balance to the other Portfolios under the Contract on a
pro rata basis. If the entire value of the Contract falls below $1,000, and if
you have not made a Purchase Payment within three years, AUSA Life may notify
you that the Accumulated Value of your Contract is below the minimum balance
requirement. In that case, you will be given 60 days to make an Additional
Purchase Payment before your Contract is liquidated. AUSA Life would then
promptly pay proceeds to the Contract Owner. The proceeds would be taxed as a
withdrawal from the Contract. Full withdrawal will result in an automatic
termination of the Contract. We will not exercise this right to cancel your
Contract if it is a Qualified Contract.
Payment of Full or Partial Withdrawal Proceeds
AUSA Life will pay cash withdrawals within seven days after receipt of your
written request for withdrawal except in one of the following situations, in
which AUSA Life may delay the payment beyond seven days:
. the New York Stock Exchange is closed on a day that is not a weekend or a
holiday, or trading on the New York Stock Exchange is otherwise restricted
. an emergency exists as defined by the Securities and Exchange Commission
(the "SEC"), or the SEC requires that trading be restricted
. the SEC permits a delay for your protection as a Contract Owner
. the payment is derived from premiums paid by check, in which case AUSA Life
may delay payment until the check has cleared your bank
Taxation of Withdrawals
For important information on the tax consequences of withdrawals, see
Taxation of Full and Partial Withdrawals, page 23, and Penalty Taxes on
Certain Early Withdrawals, page 24.
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Tax Withholding on Withdrawals
If you do not provide AUSA Life with a written request not to have federal
income taxes withheld when you request a full or partial withdrawal, federal
tax law requires AUSA Life to withhold federal income taxes from the taxable
portion of any withdrawal and send that amount to the federal government.
8. PERFORMANCE
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Federated Prime Money Subaccount, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Contract Owners.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio's performance.
Standardized Average Annual Total Return
When advertising performance of the Subaccounts, AUSA Life will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the SEC, is the effective annual compounded rate of return
that would have produced the cash redemption value over the stated period had
the performance remained constant throughout. The Standardized Average Annual
Total Return assumes a single $1,000 payment made at the beginning of the
period and full redemption at the end of the period. It reflects the deduction
of all applicable sales loads (including the contingent deferred sales load),
the Annual Contract Fee and all other Portfolio, Separate Account and Contract
level charges except Premium Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
Non-Standardized Cumulative Total Return and Non-Standardized Average Annual
Total Return
AUSA Life may show Non-Standardized Cumulative Total Return (i.e., the
percentage change in the value of an Accumulation Unit) for one or more
Subaccounts with respect to one or more periods. AUSA Life may also show Non-
Standardized Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Values) with respect to one or more periods. For one year,
the Non-Standardized Cumulative Total Return and the Non-Standardized Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized Average Annual Total
Return is the effective annual compounded rate of return for the periods
stated. Because the value of an Accumulation Unit reflects the Separate
Account and Portfolio expenses (see "Fee Table"), the Non-Standardized
Cumulative Total Return and Non-Standardized Average Annual Total Return also
reflect these expenses. These returns do not reflect the Annual Contract Fee,
any sales loads or Premium Taxes (if any), which, if included, would reduce
the percentages reported.
Non-Standardized Total Return Year-To-Date
AUSA Life may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect to one or more non-standardized base periods commencing at the
beginning of a calendar year. Total Return YTD figures reflect the percentage
change in actual Accumulation Unit Values during the relevant period. These
returns reflect a deduction for the Separate Account and Portfolio expenses,
but do not include the Annual Contract
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Fee, any sales loads or Premium Taxes (if any), which, if included, would
reduce the percentages reported by AUSA Life.
Non-Standardized One Year Return
AUSA Life may show Non-Standardized One Year Return for one or more
Subaccounts with respect to one or more non-standardized base periods
commencing at the beginning of a calendar year (or date of Portfolio
inception, if during the relevant year) and ending at the end of such calendar
year. One Year Return figures reflect the historical performance of the
Portfolios as if the Contract were in existence before its inception date
(which it was not). After the Contract's inception date, the figures reflect
the percentage change in actual Accumulation Unit Values during the relevant
period. These returns reflect a deduction for the Separate Account and
Portfolio expenses, but do not include the Annual Contract Fee, any sales
loads or Premium Taxes (if any), which, if included, would reduce the
percentage reported by AUSA Life.
Non-Standardized Adjusted Historical Cumulative Return and Non-Standardized
Adjusted Historical Average Annual Total Return
AUSA Life may show Non-Standardized Adjusted Historical Cumulative Return and
Non-Standardized Adjusted Historical Average Annual Total Return, calculated
on the basis of the historical performance of the Portfolios, and may assume
the Contract was in existence prior to its inception date (which it was not).
After the Contract's inception date, the calculations will reflect actual
Accumulation Unit Values. These returns are based on specified premium
patterns which produce the resulting Accumulated Values. These returns reflect
a deduction for the Separate Account expenses and Portfolio expenses. These
returns do not include the Annual Contract Fee, any sales loads or Premium
Taxes (if any) which, if included, would reduce the percentages reported.
The Non-Standardized Adjusted Historical Cumulative Return for a Subaccount is
the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Adjusted Historical Average Annual Total Return for a
Subaccount is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the
performance remained constant throughout.
YIELD AND EFFECTIVE YIELD
AUSA Life may also show yield and effective yield figures for the Subaccount
investing in shares of the Federated Prime Money Portfolio. "Yield" refers to
the income generated by an investment in Federated Prime Money over a seven-
day period, which is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in Federated Prime Money is assumed to be reinvested.
Therefore, the effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. These figures do not
reflect the Annual Contract Fee, any sales loads or Premium Taxes (if any)
which, if included, would reduce the yields reported.
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than Federated Prime
Money for which AUSA Life advertises yield, AUSA Life shall furnish a yield
quotation referring to the Portfolio computed in the following manner: the net
29
<PAGE>
investment income per Accumulation Unit earned during a recent one month
period divided by the Accumulation Unit Value on the last day of the period.
Please refer to the Statement of Additional Information for a description of
the method used to calculate a Portfolio's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Portfolio's
performance.
The performance measures discussed above reflect results of the Portfolios and
are not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service that ranks mutual funds and other investment companies by
overall performance, investment objectives, and assets. Performance may also
be tracked by other ratings services, companies, publications, or persons who
rank separate accounts or other investment products on overall performance or
other criteria. Performance figures will be calculated in accordance with
standardized methods established by each reporting service.
9. DEATH BENEFIT
In General
If the Annuitant dies during the Accumulation Phase, the Beneficiary will
receive the Death Benefit. The Death Benefit is the greater of the then-
current Accumulated Value of the Contract or the Adjusted Death Benefit.
During the first six Contract Years, the Adjusted Death Benefit is the sum of
all Net Purchase Payments minus any partial withdrawals. During each following
six-year period, the Adjusted Death Benefit is the Death Benefit on the last
day of the previous six- year period plus any Net Purchase Payments made
during that six-year period minus any partial withdrawals taken during that
six-year period. After the Annuitant reaches age 75, the Adjusted Death
Benefit remains equal to the Death Benefit on the last day of the six-year
period before the Annuitant reaches age 75 plus any Net Purchase Payments
subsequently made minus any partial withdrawals subsequently taken. The
Beneficiary may elect to receive these amounts as a lump sum or as Annuity
Payments.
Federal tax law requires that if a Contract Owner is a natural person and dies
before the Annuity Date, then the entire value of the Contract must be
distributed within five years of the date of death of the Contract Owner. If
the Contract Owner is not a natural person, the death of the primary Annuitant
triggers the same distribution requirement. Special rules may apply to a
surviving spouse.
Death of the Annuitant During the Accumulation Phase
If the Annuitant dies during the Accumulation Phase, the Beneficiary will be
entitled to the Death Benefit. When it receives Due Proof of Death of the
Annuitant, AUSA Life will calculate the Death Benefit. The Beneficiary can
choose to receive the amount payable in a lump-sum cash benefit or under one
of the Annuity Payment Options. The Contract Owner can choose an Annuity
Payment Option for the Beneficiary before the Annuitant's death. However, if
the Contract Owner does not make such a choice and AUSA Life has not already
paid a cash benefit, the Beneficiary may choose a payment option after the
Annuitant's death.
Paid as a lump sum, the Death Benefit is the greater of:
(1) the Accumulated Value on the date we receive Due Proof of Death; or
(2) the Adjusted Death Benefit.
30
<PAGE>
Paid under one of the Annuity Payment Options, the Death Benefit will be based
on the greater of:
(1) the Accumulated Value on the Annuity Date elected by the Beneficiary
and approved by AUSA Life; or
(2) the Adjusted Death Benefit.
The amount of the Adjusted Death Benefit is calculated as follows. During the
first six Contract Years, the Adjusted Death Benefit is the sum of all Net
Purchase Payments minus any partial withdrawals. During each following six-
year period, the Adjusted Death Benefit is the Death Benefit on the last day
of the previous six-year period plus any Net Purchase Payments made during
that six-year period minus any partial withdrawals taken during that six-year
period. After the Annuitant reaches age 75, the Adjusted Death Benefit remains
equal to the Death Benefit on the last day of the six-year period before the
Annuitant reaches age 75 plus any Net Purchase Payments subsequently made
minus any partial withdrawals subsequently taken.
DEFINITION
Due Proof of Death
When the term "Due Proof of Death" is used in this prospectus we mean any of
the following:
. a certified death certificate
. a certified decree of a court of competent jurisdiction as to the finding
of death
. a written statement by a medical doctor who attended the deceased
. any other proof satisfactory to AUSA Life
Death of the Annuitant During the Income Phase
The Death Benefit, if any, payable if the Annuitant dies during the Income
Phase depends on the Annuity Payment Option selected. Upon the Annuitant's
death, AUSA Life will pay the Death Benefit, if any, to the Beneficiary under
the Annuity Payment Option in effect. For instance, if the Life Annuity With
Period Certain option has been elected, and if the Annuitant dies during the
Income Phase, then any unpaid payments certain will be paid to the
Beneficiary.
A Word About Joint Annuitants
The Contract permits you as Contract Owner to name a Joint Annuitant. This
can have different effects depending on whether the Contract is in the
Accumulation Phase or the Income Phase.
During the Accumulation Phase, the Death Benefit is payable only after the
death of both the Annuitant and the Joint Annuitant.
During the Income Phase, it will not matter that you have named a Joint
Annuitant unless you have chosen an Annuity Payment Option, such as the
Joint and Last Survivor Annuity option, that pays over the life of more than
one person. Therefore, if you have chosen an Annuity Payment Option that
provides income over the life of someone other than the person named as
Joint Annuitant, the Joint Annuitant's death during the Income Phase will
have no effect on the benefits due under the Contract.
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Designation of a Beneficiary
The Contract Owner may select one or more Beneficiaries and name them in the
Contract application. Thereafter, while the Annuitant or Joint Annuitant is
living, the Contract Owner may change the Beneficiary by written notice. The
change will take effect as of the date the Contract Owner signs the notice,
but it will not affect any payment made or any other action taken before AUSA
Life acknowledges the notice. The Contract Owner may also make the designation
of Beneficiary irrevocable by sending written notice to AUSA Life and
obtaining approval from AUSA Life. Changes in the Beneficiary may then be made
only with the consent of the designated irrevocable Beneficiary.
If the Annuitant dies during the Accumulation Period, the following will apply
unless the Contract Owner has made other provisions:
. If there is more than one Beneficiary, each will share in the Death Benefit
equally.
. If one or two or more Beneficiaries have already died, AUSA Life will pay
that share of the Death Benefit equally to the survivor(s).
. If no Beneficiary is living, AUSA Life will pay the proceeds to the
Contract Owner.
. If a Beneficiary dies at the same time as the Annuitant, AUSA Life will pay
the proceeds as though the Beneficiary had died first. If a Beneficiary
dies within 15 days after the Annuitant's death and before AUSA Life
receives due proof of the Annuitant's death, AUSA Life will pay proceeds as
though the Beneficiary had died first.
If a Beneficiary who is receiving Annuity Payments dies, AUSA Life will pay
any remaining Payments Certain to that Beneficiary's named Beneficiary(ies)
when due. If no Beneficiary survives the Annuitant, the right to any amount
payable will pass to the Contract Owner. If the Contract Owner is not living
at this time, this right will pass to his or her estate.
Death of the Contract Owner
Death of the Contract Owner During the Accumulation Phase. With two
exceptions, federal tax law requires that when either the Contract Owner or
the Joint Owner (if any) dies during the Accumulation Phase, AUSA Life must
pay out the entire value of the Contract within five years of the date of
death. First exception: If the entire value is to be distributed to the
Owner's Designated Beneficiary, he or she may elect to have it paid under an
Annuity Payment Option over his or her life or over a period certain no longer
than his or her life expectancy as long as the payments begin within one year
of the Contract Owner's death. Second exception: If the Owner's Designated
Beneficiary is the spouse of the Contract Owner (or Joint Owner), the spouse
may elect to continue the Contract in his or her name as Contract Owner
indefinitely and to continue deferring tax on the accrued and future income
under the Contract. ("Owner's Designated Beneficiary" means the natural person
whom the Contract Owner names as a beneficiary and who becomes the Contract
Owner upon the Contract Owner's death.) If the Contract Owner and the
Annuitant are the same person, then upon that person's death the Beneficiary
is entitled to the Death Benefit. In this regard, see Death of the Annuitant
During the Accumulation Phase, page 30.
Death of the Contract Owner During the Income Phase. Federal tax law requires
that when either the Contract Owner or the Joint Owner (if any) dies during
the Income Phase, AUSA Life must pay the remaining portions of the value of
the Contract at least as rapidly as under the method of distribution being
used on the date of death.
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Non-Natural Person as Contract Owner. Where the Contract Owner is not a
natural person (for example, is a corporation), the death of the "primary
Annuitant" is treated as the death of the Contract Owner for purposes of
federal tax law. (The Internal Revenue Code defines a "primary Annuitant" as
the individual who is of primary importance in affecting the timing or the
amount of payout under the Contract.) In addition, where the Contract Owner is
not a natural person, a change in the identity of the "primary Annuitant" is
also treated as the death of the Contract Owner for purposes of federal tax
law.
Payment of Lump-Sum Death Benefits
AUSA Life will pay lump-sum Death Benefits within seven days after the
election to take a lump sum becomes effective except in one of the following
situations, in which AUSA Life may delay the payment beyond seven days:
. the New York Stock Exchange is closed on a day that is not a weekend or a
holiday, or trading on the New York Stock Exchange is otherwise restricted
. an emergency exists as defined by the SEC, or the SEC requires that trading
be restricted
. the SEC permits a delay for your protection as a Contract Owner
. the payment is derived from premiums paid by check, in which case AUSA Life
may delay payment until the check has cleared your bank.
10. OTHER INFORMATION
AUSA Life Insurance Company, Inc. ("AUSA Life," "We," "Us," "Our")
AUSA Life Insurance Company, Inc. is a stock life insurance company
incorporated under the laws of the state of New York on October 3, 1947, with
offices at 666 Fifth Avenue, New York, New York 10103. It is principally
engaged in offering life insurance and annuity contracts, and is licensed in
the District of Columbia and all states except Hawaii.
As of December 31, 1999, AUSA Life had statutory-basis assets of approximately
$11.6 billion. It is a wholly owned indirect subsidiary of AEGON USA, Inc.,
which conducts substantially all of its operations through subsidiary
companies engaged in the insurance business or in providing non-insurance
financial services. AEGON N.V. of The Netherlands indirectly owns all of the
stock of AEGON USA, Inc. AEGON N.V., a holding company, conducts its business
through subsidiary companies engaged primarily in the insurance business.
AUSA Life is a member of the Insurance Marketplace Standards Association
(IMSA). IMSA is an independent voluntary organization of life insurance
companies. It promotes high ethical standards in the sales and advertising of
individual life insurance and annuity products. Companies must undergo a
rigorous self- and independent assessment of their practices to become a
member of IMSA. The IMSA logo in our sales literature shows our ongoing
commitment to these standards.
The First Providian Merger. On October 1, 1998, First Providian Life and
Health Insurance Company ("First Providian") merged with and into AUSA Life.
First Providian was a stock life insurance company incorporated under the laws
of the state of New York on March 23, 1970. Upon the merger, First Providian's
existence ceased and AUSA Life became the surviving company under the name
AUSA Life Insurance Company, Inc. As a result of the merger, the Separate
Account became a separate account of AUSA Life. All of the Contracts issued by
First Providian before the merger were, at the time of the merger, assumed by
AUSA Life. The merger did not affect any provisions of, or rights or
obligations under, those Contracts. In approving the merger on May 26, 1998,
and May 29, 1998,
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<PAGE>
respectively, the boards of directors of AUSA Life and First Providian
determined that the merger of two financially strong stock life insurance
companies would result in an overall enhanced capital position and reduced
expenses, which, together, would be in the long-term interests of the Contract
Owners. On May 26, 1998, 100% of the stockholders of AUSA Life voted to
approve the merger, and on May 29, 1998, 100% of the stockholders of First
Providian voted to approve the merger. In addition, the New York Insurance
Department has approved the merger.
AUSA Life Insurance Company, Inc. Separate Account C
The Separate Account was established by First Providian, a former affiliate of
AUSA Life, as a separate account under the laws of the state of New York on
November 4, 1994. On October 1, 1998, First Providian, together with the
Separate Account, was merged into AUSA Life. The Separate Account survived the
merger intact.
The Separate Account is a unit investment trust registered with the SEC under
the 1940 Act. Such registration does not signify that the SEC supervises the
management or the investment practices or policies of the Separate Account.
AUSA Life owns the assets of the Separate Account, and the obligations under
the Contract are obligations of AUSA Life. These assets are held separately
from the other assets of AUSA Life and are not chargeable with liabilities
incurred in any other business operation of AUSA Life (except to the extent
that assets in the Separate Account exceed the reserves and other liabilities
of the Separate Account). AUSA Life will always keep assets in the Separate
Account with a value at least equal to the total Accumulated Value under the
Contracts. Income, gains, and losses incurred on the assets in the Separate
Account, whether or not realized, are credited to or charged against the
Separate Account without regard to other income, gains, or losses of AUSA
Life. Therefore, the investment performance of the Separate Account is
entirely independent of the investment performance of AUSA Life's general
account assets or any other separate account AUSA Life maintains.
The Separate Account has twenty-eight Subaccounts dedicated to the Contract,
each of which invests solely in a corresponding Portfolio of the Funds.
Additional Subaccounts may be established at AUSA Life's discretion. The
Separate Account meets the definition of a "separate account" under Rule
O-1(e)(1) of the 1940 Act.
Group Contract
The Contract described here is a group contract, participation in which will
be evidenced by a certificate that AUSA Life will issue to the Contract Owner.
When the word "Contract" appears in this prospectus, it means the certificate
issued to a Contract Owner.
Contract Owner ("You," "Your")
The Contract Owner is the person or persons designated as the Contract Owner
in the Contract application to participate in the Contract. The term shall
also include any person named as Joint Owner. A Joint Owner shares ownership
in all respects with the Owner. The Owner has the right to assign ownership to
a person or party other than himself.
Payee
The Payee is the Contract Owner, Annuitant, Beneficiary, or any other person,
estate, or legal entity to whom benefits are to be paid.
Right to Cancel Periods
There are two different Right to Cancel Periods depending on whether the
Contract is a replacement or not.
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<PAGE>
Right to Cancel Period for Non-Replacement Contracts
If the Contract is not a replacement of an existing annuity contract or life
insurance or endowment policy, the Contract provides for a Right to Cancel
Period of 10 days after the Contract Owner receives the Contract plus 5 days
for mailing. The Contract Owner may cancel the Contract during the Right to
Period by returning it to our Administrative Office, 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499 or to the agent from whom the Contract Owner
purchased the Contract or by mailing it to us at P.O. Box 3183, Cedar Rapids,
Iowa 52046-3183. Upon cancellation, the Contract is treated as void from the
Contract Date and the Contract Owner will receive the Accumulated Value of the
Contract as of the day the Contract is received by AUSA Life plus any loads,
fees, and Premium Taxes that may have been subtracted to date.
Right to Cancel Period for Replacement Contracts
If the Contract is a replacement of an existing annuity contract or life
insurance or endowment policy, a Right to Cancel Period exists for 60 days
after the Contract Owner receives the Contract plus 5 days for mailing. Upon
cancellation of a replacement Contract, the Contract is treated as void from
the Contract Date and the Contract Owner will receive the Accumulated Value of
the Contract as of the day the Contract is received by AUSA Life plus any
loads, fees, and Premium Taxes that may have been subtracted to date.
Reinstatements
AUSA Life occasionally receives requests to reinstate a Contract whose funds
had been transferred to another company via an exchange under Internal Revenue
Code Section 1035 or a trustee-to-trustee transfer under the Internal Revenue
Code. In this situation, AUSA Life will require the Contract Owner to replace
the same total amount of money in the applicable Subaccounts as was taken from
them to effect the transfer. The total dollar amount of funds reapplied to the
Separate Account will be used to purchase a number of Accumulation Units
available for each Subaccount based on the Accumulation Unit Values at the
date of Reinstatement (within two days of the date the funds were received by
AUSA Life). It should be noted that the number of Accumulation Units available
on the Reinstatement date may be more or less than the number surrendered for
the transfer. Contract Owners should consult a qualified tax adviser
concerning the tax consequences of any Internal Revenue Code Section 1035
exchanges or reinstatements.
Voting Rights
The Funds do not hold regular meetings of shareholders. The directors/trustees
of the Funds may call special meetings of shareholders as the 1940 Act or
other applicable law may require. To the extent required by law, AUSA Life
will vote the Portfolio shares held in the Separate Account at shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Portfolio. AUSA Life will vote
Fund shares as to which no timely instructions are received and those shares
held by AUSA Life as to which Contract Owners have no beneficial interest in
proportion to the voting instructions that are received with respect to all
Contracts participating in that Portfolio. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Prior to the Annuity Date, the Contract Owner holds a voting interest in each
Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Date, the person receiving
Annuity Payments under any variable Annuity Payment Option has the voting
interest. The number of votes after the Annuity
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Date will be determined by dividing the reserve for such Contract allocated to
the Portfolio by the net asset value per share of the corresponding Portfolio.
After the Annuity Date, the votes attributable to a Contract decrease as the
reserves allocated to the Portfolio decrease. In determining the number of
votes, fractional shares will be recognized.
The number of votes of the Portfolio that are available will be determined as
of 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 communication prior to such meeting in accordance with
procedures established by the Fund.
Additions, deletions, or substitutions of investments
AUSA Life retains the right, subject to any applicable law, to make certain
changes. AUSA Life reserves the right to eliminate the shares of any of the
Portfolios and to substitute shares of another Portfolio of the Funds or of
another registered open-end management investment company, if the shares of
the Portfolios are no longer available for investment or if, in AUSA Life's
judgment, investment in any Portfolio would be inappropriate in view of the
purposes of the Separate Account. To the extent the 1940 Act requires,
substitutions of shares attributable to a Contract Owner's interest in a
Portfolio will not be made until SEC approval has been obtained and the
Contract Owner has been notified of the change.
AUSA Life may establish new Portfolios when marketing, tax, investment, or
other conditions so warrant. AUSA Life will make any new Portfolios available
to existing Contract Owners on a basis AUSA Life will determine. AUSA Life may
also eliminate one or more Portfolios if marketing, tax, investment, or other
conditions so warrant.
In the event of any such substitution or change, AUSA Life may, by appropriate
endorsement, make whatever changes in the Contracts may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to
be in the best interests of persons having voting rights under the Contracts,
AUSA Life may operate the Separate Account as a management company under the
1940 Act or any other form permitted by law, may deregister the Separate
Account under the 1940 Act in the event such registration is no longer
required, or may combine the Separate Account with one or more other separate
accounts.
Financial Statements
The audited statutory-basis financial statements of AUSA Life and the audited
financial statements of certain Subaccounts of the Separate Account which are
available for investment by Advisor's Edge Contract Owners (as well as the
Independent Auditors' Reports on them) are contained in the Statement of
Additional Information.
Auditors
Ernst & Young LLP serves as independent auditors for AUSA Life and certain
Subaccounts of the Separate Account which are available for investment by
Advisor's Edge Contract Owners and audits their financial statements annually.
Legal Matters
The law firm of Jorden Burt Boros Cicchetti Berenson & Johnson LLP, of
Washington, D.C., has provided legal advice concerning the issue and sale of
the Contract under the applicable federal securities laws. On behalf of AUSA
Life, Gregory E. Miller-Breetz, Esquire, has passed upon all matters of New
York law pertaining to the validity of the Contract and AUSA Life's right to
issue the Contract.
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TABLE OF CONTENTS FOR THE ADVISOR'S EDGE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE CONTRACT.............................................................. 1
Computation of Variable Annuity Income Payments......................... 1
Exchanges............................................................... 1
Exceptions to Charges and to Transactions or Balance Requirements....... 2
403(b) Contracts........................................................ 2
GENERAL MATTERS........................................................... 4
Non-Participating....................................................... 4
Misstatement of Age or Sex.............................................. 4
Assignment.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 5
Incontestability........................................................ 5
Ownership............................................................... 5
PERFORMANCE INFORMATION................................................... 5
Money Market Subaccount Yields.......................................... 6
30-Day Yield for Non-Money Market Subaccounts........................... 6
Standardized Average Annual Total Return for Subaccounts................ 6
ADDITIONAL PERFORMANCE MEASURES........................................... 8
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 8
Non-Standardized Total Return Year-to-Date.............................. 9
Non-Standardized One Year Return........................................ 10
Non-Standardized Adjusted Historical Cumulative Return and Non-
Standardized Adjusted Historical Average Annual Total Return........... 11
Individualized Computer Generated Illustrations......................... 22
PERFORMANCE COMPARISONS................................................... 22
SAFEKEEPING OF ACCOUNT ASSETS............................................. 24
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS........................ 24
AUSA LIFE................................................................. 25
TAXES..................................................................... 25
STATE REGULATION OF AUSA LIFE............................................. 26
RECORDS AND REPORTS....................................................... 26
DISTRIBUTION OF THE CONTRACTS............................................. 26
LEGAL PROCEEDINGS......................................................... 26
OTHER INFORMATION......................................................... 26
FINANCIAL STATEMENTS...................................................... 27
</TABLE>
37
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APPENDIX
CONDENSED FINANCIAL INFORMATION
(For the period January 1, 1997 through December 31, 1999)
<TABLE>
<CAPTION>
DFA DFA
DFA Small DFA Large International International DFA Short- DFA Global Dreyfus Small
Value Value Value Small Term Fixed Bond Cap Value
------------ ------------- ------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*........... 9.992 9.948 10.000 9.949 10.000 9.990 10.255
12/31/97.............. 12.645 12.242 9.995 7.661 10.426 10.640 N/A
12/31/98.............. 11.733 13.471 11.096 8.006 10.926 11.443 9.024
12/31/99.............. 12.806 14.022 13.452 9.427 11.320 11.828 11.600
Number of units Outstanding as of
12/31/97.............. 7,359 12,353 12,955 11,690 30,884 7,312 N/A
12/31/98.............. 4,742 7,122 7,565 7,212 2,584 32,339 2,299
12/31/99.............. 3,205 6,616 13,773 4,456 2,037 34,082 3,785
<CAPTION>
Endeavor Federated Federated
Enhanced TRP American Federated High Federated U.S. Gov't Federated
Index International Leaders Income Bond Prime Money Securities Utility
------------ ------------- ------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*........... 11.674 10.413 9.987 10.020 10.001 10.030 10.008
12/31/97.............. N/A N/A 12.304 11.156 10.404 10.751 12.476
12/31/98.............. 13.057 10.541 14.379 11.383 10.831 11.500 14.124
12/31/99.............. 15.328 13.862 15.239 11.570 11.261 11.357 14.271
Number of units outstanding as of
12/31/97.............. N/A N/A 6,261 45,383 291 22,835 6,250
12/31/98.............. 2,043 2,246 21,099 35,115 10,251 21,492 10,988
12/31/99.............. 8,684 10,470 23,782 20,008 17,049 8,203 5,408
<CAPTION>
Montgomery Stein Roe Wanger Wanger Int'l
Montgomery Emerging Small Co. Strong Int'l Strong U.S. Small Small Cap
Growth Markets Growth Stock Schafer Value Cap Advisor Advisor
------------ ------------- ------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*........... 10.039 9.941 9.030 9.892 9.445 10.031 10.045
12/31/97.............. 12.389 8.827 11.571 8.384 N/A 13.396 9.569
12/31/98.............. 12.669 5.478 9.507 7.931 N/A 14.465 11.060
12/31/99.............. 15.205 8.971 13.988 14.752 9.863 17.974 24.879
Number of units outstanding as of
12/31/97.............. 3,049 6,210 2,782 3,581 N/A 4,703 2,280
12/31/98.............. 7,015 11,154 276 343 0 8,428 14,103
12/31/99.............. 11,342 5,304 812 1,545 106 6,995 7,980
<CAPTION>
WRL J.P.
Warburg Warburg WRL Alger Morgan Real WRL LKCM
Pincus Int'l Pincus Small Aggressive Estate WRL Janus WRL Janus Strategic
Equity Co. Growth Growth Securities Global Growth Total Return
------------ ------------- ------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*........... 10.960 11.162 10.199 9.408 10.512 9.999 9.707
12/31/97.............. 9.601 13.183 N/A N/A N/A N/A N/A
12/31/98.............. 10.049 12.724 N/A N/A N/A N/A N/A
12/31/99.............. 15.319 21.375 14.961 8.998 15.620 13.662 10.592
Number of units outstanding as of
12/31/97.............. 1,294 1,348 N/A N/A N/A N/A N/A
12/31/98.............. 906 125 N/A N/A N/A N/A N/A
12/31/99.............. 861 2,899 98 106 906 1,118 103
</TABLE>
* Date of commencement of operations for the Subaccounts was as follows:
1/23/97 for DFA Small Value, DFA Large Value, DFA International Value, DFA
International Small, DFA Short-Term Fixed; and DFA Global Bond; 1/22/97 for
Federated Prime Money; 2/26/97 for Montgomery Emerging Markets; 3/7/97 for
Federated U.S. Government Securities; 9/26/97 for Strong International
Stock;
A-1
<PAGE>
5/29/97 for Warburg Pincus International Equity and Warburg Pincus Small
Company Growth; 5/1/97 for Federated American Leaders, Federated Utility,
Federated High Income Bond, Montgomery Growth; 9/26/97 for Stein Roe Small
Company Growth; 5/1/97 for Wanger U.S. Small Cap Advisor, and Wanger
International Small Cap Advisor; 5/19/98 for T. Rowe Price International
Stock, Dreyfus Small Cap Value and Endeavor Enhanced Index; 9/21/99 for
Strong Schafer Value, and 9/1/99 for WRL Alger Aggressive Growth; WRL J.P.
Morgan Real Estate Securities; WRL Janus Global; WRL Janus Growth; and WRL
LKCM Strategic Total Return. The information presented above reflects
operations of the Subaccounts as offered through First Providian Life and
Health Insurance Company Separate Account C, which was acquired intact by
AUSA Life Insurance Company, Inc. on October 1, 1998.
A-2
<PAGE>
AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
for the
ADVISOR'S EDGE VARIABLE ANNUITY
Offered by
AUSA Life Insurance Company, Inc.
(A New York Stock Company)
Administrative Offices
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Advisor's Edge variable annuity contract (the
"Contract") offered by AUSA Life Insurance Company, Inc. ("the Company" or "AUSA
Life"). You may obtain a copy of the Prospectus dated May 1, 2000, by calling
800-866-6007 or by writing to our Administrative Offices at 4333 Edgewood Road,
N.E., Cedar Rapids, Iowa 52499. Terms used in the current Prospectus for the
Contract are incorporated in this Statement of Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
May 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE CONTRACT......................................................................................... 1
Computation of Variable Annuity Income Payments................................................. 1
Exchanges....................................................................................... 1
Exceptions to Charges and to Transactions or Balance Requirements............................... 2
403(b) Contracts................................................................................ 2
GENERAL MATTERS...................................................................................... 4
Non-Participating............................................................................... 4
Misstatement of Age or Sex...................................................................... 4
Assignment...................................................................................... 4
Annuity Data.................................................................................... 4
Annual Statement................................................................................ 5
Incontestability................................................................................ 5
Ownership....................................................................................... 5
PERFORMANCE INFORMATION.............................................................................. 5
Money Market Subaccount Yields.................................................................. 6
30-Day Yield for Non-Money Market Subaccounts................................................... 6
Standardized Average Annual Total Return for Subaccounts........................................ 6
ADDITIONAL PERFORMANCE MEASURES...................................................................... 8
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.......................................................................... 8
Non-Standardized Total Return Year-to-Date...................................................... 9
Non-Standardized One Year Return................................................................ 10
Non-Standardized Adjusted Historical Cumulative Return and Non-Standardized
Adjusted Historical Average Annual Total Return.............................................. 11
Individualized Computer Generated Illustrations................................................. 22
PERFORMANCE COMPARISONS.............................................................................. 22
SAFEKEEPING OF ACCOUNT ASSETS........................................................................ 24
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS................................................... 24
AUSA LIFE............................................................................................ 25
TAXES................................................................................................ 25
STATE REGULATION OF AUSA LIFE........................................................................ 26
RECORDS AND REPORTS.................................................................................. 26
DISTRIBUTION OF THE CONTRACTS........................................................................ 26
LEGAL PROCEEDINGS.................................................................................... 26
OTHER INFORMATION.................................................................................... 26
FINANCIAL STATEMENTS................................................................................. 27
</TABLE>
<PAGE>
THE CONTRACT
In order to supplement the description in the Prospectus, the following provides
additional information about the Contract which may be of interest to Contract
Owners.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
The amounts shown in the Annuity Tables contained in your Contract represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
Variable annuity income payments are computed as follows. First, the Accumulated
Value (or the portion of the Accumulated Value used to provide variable
payments) is applied under the Annuity Tables contained in your Contract
corresponding to the Annuity Payment Option elected by the Contract Owner and
based on an assumed interest rate of 4%. This will produce a dollar amount which
is the first monthly payment.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit Value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit Value
for any subsequent Business Day is equal to (a) times (b) times (c), where
(a) = the Annuity Unit Value for the immediately preceding Business
Day;
(b) = the Net Investment Factor for the day;
(c) = the investment result adjustment factor (.99989255 per day),
which recognizes an assumed interest rate of 4% per year used
in determining the Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) = any increase or decrease in the value of the Subaccount due to
investment results;
(b) = a daily charge assessed at an annual rate of 1.25% for the
mortality and expense risks assumed by AUSA Life;
(c) = a daily charge for the cost of administering the Contract
corresponding to an annual charge of .15% of the value of the
Subaccount plus the Annual Contract Fee.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year.
EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. An Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
"Exchange Date"). Each year you may make an unlimited number of free Exchanges
between Subaccounts. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of twelve per Contract Year.
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<PAGE>
Exchanges will be made using the Annuity Unit Value for the Subaccounts on the
date the written request for Exchange is received. On the Exchange Date, AUSA
Life will establish a value for the current Subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing Subaccounts
and compute the number of Annuity Units for the new Subaccounts by dividing the
Annuity Unit Value of the new Subaccounts into the value previously calculated
for the existing Subaccounts.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
AUSA Life may impose reduced sales loads, administrative charges or other
deductions from Purchase Payments in certain situations where AUSA Life expects
to realize significant economies of scale or other economic benefits with
respect to the sales of Contracts. This is possible because sales costs do not
increase in proportion to the dollar amount of the Contracts sold. For example,
the per-dollar transaction cost for a sale of a Contract equal to $5,000 is
generally much higher than the per-dollar cost for a sale of a Contract equal to
$1,000,000. As a result, any applicable sales charge declines as a percentage of
the dollar amount of Contracts sold as the dollar amount increases.
AUSA Life may also impose reduced sales loads and reduced administrative charges
and fees on sales to directors, officers and bona fide full-time employees (and
their spouses and minor children) of AUSA Life, its ultimate parent company, and
certain of their affiliates and certain sales representatives for the Contract.
AUSA Life may also grant waivers or modifications of certain minimum or maximum
purchase and transaction amounts or balance requirements in these circumstances.
Notwithstanding the above, any variations in the sales loads, administrative
charges or other deductions from Purchase Payments or in the minimum or maximum
transaction or balance requirements shall reflect differences in costs or
services and shall not be unfairly discriminatory against any person.
403(b) CONTRACTS
Contracts will be offered in connection with retirement plans adopted by public
school systems and certain tax-exempt organizations (Code Section 501(c)(3)
organizations) for their employees under Section 403(b) of the Code. Except, as
discussed below and subject to any conditions in an employer's plan, a Contract
used in connection with a Section 403(b) Plan offers the same benefits and is
subject to the same charges described in the Prospectus.
Under 403(b) Contracts, the Contract Owner and the Annuitant must be the same
person. The Code imposes a maximum limit on annual Purchase Payments which may
be excluded from your gross income. Such limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Purchase Payments
will be excluded from your gross income only if the 403(b) Plan meets certain
Code non-discrimination requirements.
Under your 403(b) Contract, you may borrow against your Contract's Surrender
Value after the first Contract Year. No additional loans will be extended until
prior loan balances are paid in full. The loan amount must be at least $1,000
and your Contract must have a minimum vested Accumulated Value of $2,000. The
loan amount may not exceed the lesser of (a) or (b), where (a) is 50% of the
Contract's vested Accumulated Value on the date on which the loan is made, and
(b) is $50,000 reduced by the excess, if any, of the highest outstanding balance
of loans during the one-year period ending on the day before the current loan is
made over the outstanding balance of loans on the date of the current loan. If
you are married, your spouse must consent in writing to a loan request. This
consent must be given within the 90-day period before the loan is to be made.
The loan interest rate is variable, is determined monthly, is based on the
Moody's Corporate Bond Yield Averages-Monthly Average Corporates (the
"Average"), which is published by Moody's Investors Services, Inc. We will
notify you of the initial loan interest rate at the time the loan is made. The
initial interest rate may be increased or reduced by us during the life of the
loan based on changes of the Average. If a change in the Average would cause the
initial loan interest rate (or a subsequent rate that has been previously
increased or reduced by us) to be reduced by 0.50% per annum or more, we must
reduce the loan interest rate. If a change in the Average would cause the
initial loan interest rate (or a subsequent rate that has been previously
increased or reduced by us) to be increased by 0.50% per annum, we may increase
the loan interest rate at our discretion. In no event will the loan interest
rate be greater than the maximum allowed by the insurance regulations of the
State of New York.
2
<PAGE>
On the first Business Day of each calendar month, AUSA Life will determine a
loan interest rate. The loan interest rate for the calendar month in which the
loan is effective will apply for one year from the loan effective date. Annually
on the anniversary of the loan effective date, the rate will be adjusted to
equal the loan interest rate determined for the month in which the loan
anniversary occurs.
Principal and interest on loans must be repaid in substantially level payments,
not less frequently than quarterly, over a five year term except for certain
loans for the purchase of a principal residence. If the loan interest rate is
adjusted, future payments will be adjusted so that the outstanding loan balance
is amortized in equal quarterly installments over the remaining term. A $40
processing fee is charged for each loan. The remainder of each repayment will be
credited to the individual account.
If you miss a loan payment and are not eligible for a distribution, the
remaining balance of the loan becomes taxable as a deemed distribution. Interest
continues to accrue on the unpaid loan balance until a qualifying distribution
event occurs. The loan payment may be taxable to the borrower, and may be
subject to the early withdrawal tax penalty. When a loan is made, unless
instructed to the contrary by the Annuitant, the number of Accumulation Units
equal to the loan amount will be withdrawn from the individual account and
placed in the Collateral Fixed Account. Accumulation Units taken from the
individual account to provide a loan do not participate in the investment
experience of the related Portfolios or the guarantees of the General Account
Guaranteed Options. The loan amount will be withdrawn on a pro rata basis first
from the Portfolios to which Accumulated Value has been allocated, and if that
amount is insufficient, collateral will then be transferred from the General
Account Guaranteed Options - except the Guaranteed Equity Option. As with any
withdrawal, Market Value Adjustments or other deductions applicable to amounts
allocated to General Account Guaranteed Options may be applied and no amounts
may be withdrawn from the Guaranteed Equity Option. Until the loan is repaid in
full, that portion of the Collateral Fixed Account shall be credited with
interest at a rate of 2% less than the loan interest rate applicable to the loan
- - however, the interest rate credited will never been less than the General
Account Guaranteed Option's guaranteed rate of 3%.
A bill in the amount of the quarterly principal and interest will be mailed
directly to you in advance of the payment due date. The initial quarterly
repayment will be due three months from the loan date. The loan date will be the
date that AUSA Life receives the loan request form in good order. Payment is due
within 30 calendar days after the due date. Subsequent quarterly installments
are based on the first due date.
When repayment of principal is made, Accumulation Units will be reallocated on a
current value basis among the same investment Portfolios and/or General Account
Guaranteed Options and in the same proportion as when the loan was initially
made, unless the Annuitant specifies otherwise. If a repayment in excess of a
billed amount is received, the excess will be applied towards the principal
portion of the outstanding loan. Payments received which are less than the
billed amount will not be accepted and will be returned to you.
Prepayment of the entire loan is allowed. At the time of prepayment, AUSA Life
will bill you for any accrued interest. AUSA Life will consider the loan paid
when the loan balance and accrued interest are paid.
If the individual account is surrendered or if the Contract Owner dies with an
outstanding loan balance, the outstanding loan balance and accrued interest will
be deducted from the Surrender Value or the Death Benefit, respectively. If an
Annuity Payment Option is elected while there is an outstanding loan balance,
the outstanding loan balance and accrued interest will be deducted from the
Accumulated Value.
AUSA Life may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.
3
<PAGE>
The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since AUSA Life has no
information concerning the outstanding loans that you may have with other
companies, it will only use the information available under the Contracts issued
by AUSA Life.
The Code imposes restrictions on full or partial surrenders from 403(b)
individual accounts attributable to Purchase Payments under a salary reduction
agreement and to any earnings on the entire 403(b) individual account credited
on and after January 1, 1989. Surrenders of these amounts are allowed only if
the Contract Owner (a) has died, (b) has become disabled, as defined in the
Code, (c) has attained age 59 1/2, or (d) has separated from service. Surrenders
are allowed if the Contract Owner can show "hardship" as defined by the Internal
Revenue Service, but the surrender is limited to the lesser of Purchase Payments
made on or after January 1, 1989 or the amount necessary to relieve the
hardship. Even if a surrender is permitted under these provisions, a 10% federal
tax penalty may be assessed on the withdrawn amount if it does not otherwise
meet the exceptions to the penalty tax provisions.
Under the Code, you may request a full or partial surrender of an amount equal
to the individual account cash value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although the
Code surrender restrictions do not apply to this amount, a 10% federal penalty
tax may be assessed on the withdrawn amount if it does not otherwise meet the
exceptions to the penalty tax provisions.
AUSA Life believes that the Code surrender restrictions do not apply to tax-free
transfers pursuant to Revenue Ruling 90-24. AUSA Life further believes that the
surrender restrictions will not apply to any "grandfathered" amount transferred
pursuant to Revenue Ruling 90-24 into another 403(b) Contract.
GENERAL MATTERS
NON-PARTICIPATING
The Contracts are non-participating. No dividends are payable and the Contracts
will not share in the profits or surplus earnings of AUSA Life.
MISSTATEMENT OF AGE OR SEX
AUSA Life may require proof of age and sex before making Annuity Payments. If
the Annuitant's stated age, sex or both in the Contract are incorrect, AUSA Life
will change the annuity benefits payable to those benefits which the Purchase
Payments would have purchased for the correct age and sex. In the case of
correction of the stated age and/or sex after payments have commenced, AUSA Life
will: (1) in the case of underpayment, pay the full amount due with the next
payment; and (2) in the case of overpayment, deduct the amount due from one or
more future payments.
ASSIGNMENT
Any Non-Qualified Contract may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. AUSA Life is not responsible for the validity
of any assignment. No assignment will be recognized until AUSA Life receives the
appropriate AUSA Life form notifying AUSA Life of such assignment. The interest
of any beneficiary which the assignor has the right to change shall be
subordinate to the interest of an assignee. Any amount paid to the assignee
shall be paid in one sum notwithstanding any settlement agreement in effect at
the time assignment was executed. AUSA Life shall not be liable as to any
payment or other settlement made by AUSA Life before receipt of the appropriate
AUSA Life form.
ANNUITY DATA
AUSA Life will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to AUSA Life.
4
<PAGE>
ANNUAL STATEMENT
Once each Contract Year, AUSA Life will send you an annual statement of the
current Accumulated Value allocated to each Subaccount and any Purchase
Payments, charges, Exchanges or withdrawals during the year. This report will
also give you any other information required by law or regulation. You may ask
for an annual statement like this at any time. We will also send you quarterly
statements. However, we reserve the right to discontinue quarterly statements at
any time.
INCONTESTABILITY
This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" provision.
OWNERSHIP
The Contract Owner on the Contract Date is the Annuitant, unless otherwise
specified in the application. The Contract Owner may specify a new Contract
Owner by sending us the appropriate AUSA Life form at any time thereafter. The
term Contract Owner also includes any person named as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. During the
Annuitant's lifetime, all rights and privileges under this Contract may be
exercised solely by the Contract Owner. Upon the death of the Contract Owner,
ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Contract Owner. If no
Owner's Designated Beneficiary has been selected or if no Owner's Designated
Beneficiary is living, then the Owner's Designated Beneficiary is the Contract
Owner's estate. From time to time AUSA Life may require proof that the Contract
Owner is still living.
PERFORMANCE INFORMATION
Performance information for the Subaccounts including the yield and effective
yield of the Federated Prime Money Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts, may appear in reports or
promotional literature to current or prospective Contract Owners.
Where applicable in calculating performance information, the Annual Contract Fee
is reflected as a percentage equal to the estimated total amount of fees
collected during a calendar year divided by the estimated total average net
assets of the Portfolios during the same calendar year. The fee is assumed to
remain the same in each year of the applicable period. (With respect to partial
year periods, if any, the Annual Contract Fee is pro-rated to reflect only the
applicable portion of the partial year period.)
Until October 1995, the DFA Large Value Portfolio (formerly DFA Global Value
Portfolio) invested its assets in both U.S. and international securities.
Depending on the period presented, total return and performance information
presented for the DFA Large Value Portfolio may reflect the performance of the
Portfolio when it invested in the stocks of both U.S. and international
companies. Total return and performance information for the DFA Large Value
Portfolio which includes the period prior to October 1995 should not be
considered indicative of the Portfolio's future performance.
Where applicable, the following Subaccount inception dates are used in the
calculation of performance figures:
1/23/97 for DFA Global Bond Portfolio; 1/23/97 for DFA International Small
Portfolio; 1/23/97 for DFA International Value Portfolio; 1/23/97 for DFA Large
Value Portfolio; 1/23/97 for DFA Short-Term Fixed Portfolio; 1/23/97 for DFA
Small Value Portfolio; 1/22/97 for Federated Prime Money Portfolio; 5/1/97 for
Federated American Leaders Portfolio; 5/1/97 for Federated Utility Portfolio;
3/7/97 for Federated U.S. Government Securities Portfolio; 5/1/97 for Federated
High Income Bond Portfolio; 5/1/97 for Montgomery Growth Portfolio; 2/26/97 for
Montgomery Emerging Markets Portfolio; 5/1/97 for Wanger U.S. Small Cap Advisor
Portfolio; 5/1/97 for Wanger International Small Cap Advisor Portfolio; 5/19/98
for Dreyfus Small Cap Value Portfolio; 5/19/98 for Endeavor Enhanced Index
Portfolio; 5/19/98 for T. Rowe Price International Portfolio; 9/26/97 for Stein
Roe Small Company Growth Portfolio; 9/26/97 for Strong International Stock
Portfolio; 9/21/99 for Strong Schafer Value Portfolio; 5/29/97 for Warburg
Pincus International Equity Portfolio; 5/29/97 for Warburg Pincus Small Company
Growth Portfolio; and 9/1/99 for the WRL Alger Aggressive Growth, WRL
5
<PAGE>
J.P. Morgan Real Estate Securities, WRL Janus Global, WRL Janus Growth, and WRL
LKCM Strategic Total Return Subaccounts.
Where applicable, the following Fund inception dates are used in the calculation
of performance figures: 9/29/95 for the DFA Small Value and International Small
Value Portfolios; 1/12/95 for the DFA Large Value and DFA Global Bond
Portfolios; 9/29/95 for the DFA International; 9/29/95 for DFA Short-Term Fixed
Portfolios; 11/18/94 for Federated Prime Money Portfolio; 2/10/94 for Federated
American Leaders Portfolio; 2/10/94 for Federated Utility Portfolio; 3/28/94 for
Federated U.S. Government Securities Portfolio; 3/1/94 for Federated High Income
Bond Portfolio; 2/9/96 for Montgomery Growth Portfolio; 2/2/96 for Montgomery
Emerging Markets Portfolio; 5/3/95 for Wanger U.S. Small Cap Advisor Portfolio;
5/3/95 for Wanger International Small Cap Advisor Portfolio; 10/20/95 for Strong
International Stock Portfolio; 6/30/95 for Warburg Pincus International Equity
Portfolio; 6/30/95 for Warburg Pincus Small Company Growth Portfolio; 10/10/97
for Strong Schafer Value Portfolio; 4/8/91 for T. Rowe Price International Stock
Portfolio; 5/4/93 for Dreyfus Small Cap Value Portfolio; 5/1/97 for Endeavor
Enhanced Index Portfolio; 3/1/94 for WRL Alger Aggressive Growth Portfolio;
5/1/98 for WRL J.P. Morgan Real Estate Securities Portfolio; 12/3/92 for WRL
Janus Global Portfolio; 10/2/86 for WRL Janus Growth Portfolio; and 3/1/93 for
WRL LKCM Strategic Total Return Portfolio.
FEDERATED PRIME MONEY PORTFOLIO SUBACCOUNT YIELDS
Current yield for the Federated Prime Money Subaccount will be based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular 7-day period, less a pro-rata share of Subaccount expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Yield = [((Base Period Return)+1)365/7]-1
30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS
Quotations of yield for the remaining Subaccounts will be based on all
investment income per Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of a Unit on the last
day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6-1]
---
cd
Where:
[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a Subaccount;
6
<PAGE>
[b] equals the expenses accrued for the period (net of reimbursement);
[c] equals the average daily number of Units outstanding during the
period; and
[d] equals the maximum offering price per Accumulation Unit on the last
day of the period.
Yield on a Subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the Subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the Subaccounts, AUSA Life will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of all applicable sales loads (including the
contingent deferred sales load), the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes, if
any.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, five and ten years (or, if less,
up to the life of the Subaccount), calculated pursuant to the formula:
P(1+T)n=ERV
Where:
(1) [P] equals a hypothetical initial Purchase Payment of $1,000;
(2) [T] equals an average annual total return;
(3) [n] equals the number of years; and
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
Purchase Payment made at the beginning of the period (or
fractional portion thereof).
The following table show the Standardized Average Annual Total Return for the
Subaccounts for the period beginning at the inception of each Subaccount and
ending on December 31, 1999.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount One Year Inception
- ---------- -------- ----------
<S> <C> <C>
DFA Small Value................................................................. 9.14% 8.82%
DFA Large Value................................................................. 4.09% 12.40%
DFA International Value......................................................... 21.23% 10.62%
DFA International Small......................................................... 17.76% -1.82%
DFA Short-Term Fixed............................................................ 3.60% 4.31%
DFA Global Bond................................................................. 3.36% 5.92%
</TABLE>
7
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<TABLE>
<S> <C> <C>
Federated Prime Money........................................................... 3.97% 4.12%
Federated American Leaders...................................................... 5.98% 17.16%
Federated US Gov't Securities................................................... -1.24% 4.51%
Federated Utility............................................................... 1.04% 14.22%
Federated High Income Bond...................................................... 1.64% 5.54%
Wanger Int'l Small Cap.......................................................... 124.96% 40.48%
Wanger US Small Cap............................................................. 24.26% 24.43%
Montgomery Emerg Mkt............................................................ 63.75% -3.55%
Montgomery Growth............................................................... 20.01% 16.83%
Stein Roe Small Company Growth.................................................. 47.14% 16.35%
Strong Int'l Stock.............................................................. 85.99% 19.31%
Warburg Pincus Int'l Equity..................................................... 52.44% 13.79%
Warburg Pincus Small Co Growth.................................................. 67.99% 28.49%
Dreyfus Small Cap Value......................................................... 28.55% 7.91%
Endeavor Enhanced Index......................................................... 17.40% 18.31%
Strong Schafer Value............................................................ N/A 4.43%
T. Rowe Price Int'l............................................................. 31.50% 19.33%
WRL Alger Agg Growth............................................................ N/A 46.70%
WRL JP Morgan Real Est.......................................................... N/A -4.36%
WRL Janus Global................................................................ N/A 48.60%
WRL Janus Growth................................................................ N/A 36.64%
WRL LKCM Strategic Tot Rtn...................................................... N/A 9.11%
</TABLE>
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN
AUSA Life may show Non-Standardized Cumulative Total Return (i.e., the
percentage change in the value of an Accumulation Unit) for one or more
Subaccounts with respect to one or more periods. AUSA Life may also show
Non-Standardized Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year, the
Non-Standardized Cumulative Total Return and the Non-Standardized Average Annual
Total Return are effective annual rates of return and are equal. For periods
greater than one year, the Non-Standardized Average Annual Total Return is the
effective annual compounded rate of return for the periods stated. Because the
value of an Accumulation Unit reflects the Separate Account and Portfolio
expenses (see Fee Table in the Prospectus), the Non-Standardized Cumulative
Total Return and Non-Standardized Average Annual Total Return also reflect these
expenses. However, these percentages do not reflect the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which, if included, would reduce the
percentages reported by AUSA Life.
NON-STANDARDIZED CUMULATIVE TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount One Year Inception
- ---------- -------- ----------
<S> <C> <C>
DFA Small Value................................................................. 9.14% 28.17%
DFA Large Value................................................................. 4.09% 40.96%
DFA International Value......................................................... 21.23% 34.52%
DFA International Small......................................................... 17.76% -5.25%
DFA Short-Term Fixed............................................................ 3.60% 13.20%
DFA Global Bond................................................................. 3.36% 18.39%
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
Federated Prime Money........................................................... 3.97% 12.59%
Federated American Leaders...................................................... 5.98% 52.58%
Federated US Gov't Securities................................................... -1.24% 13.23%
Federated Utility............................................................... 1.04% 42.59%
Federated High Income Bond...................................................... 1.64% 15.48%
Wanger Int'l Small Cap.......................................................... 124.96% 147.68%
Wanger US Small Cap............................................................. 24.26% 79.18%
Montgomery Emerg Mkt............................................................ 63.75% -9.76%
Montgomery Growth............................................................... 20.01% 51.45%
Stein Roe Small Company Growth.................................................. 47.14% 40.87%
Strong Int'l Stock.............................................................. 85.99% 49.13%
Warburg Pincus Int'l Equity..................................................... 52.44% 39.77%
Warburg Pincus Small Co Growth.................................................. 67.99% 91.50%
Dreyfus Small Cap Value......................................................... 28.55% 13.12%
Endeavor Enhanced Index......................................................... 17.40% 31.30%
Strong Schafer Value............................................................ N/A 4.43%
T. Rowe Price Int'l............................................................. 31.50% 33.13%
WRL Alger Agg Growth............................................................ N/A 46.70%
WRL JP Morgan Real Est.......................................................... N/A -4.36%
WRL Janus Global................................................................ N/A 48.60%
WRL Janus Growth................................................................ N/A 36.64%
WRL LKCM Strategic Tot Rtn...................................................... N/A 9.11%
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount One Year Inception
- ---------- -------- ----------
<S> <C> <C>
DFA Small Value................................................................. 9.14% 8.82%
DFA Large Value................................................................. 4.09% 12.40%
DFA International Value......................................................... 21.23% 10.62%
DFA International Small......................................................... 17.76% -1.82%
DFA Short-Term Fixed............................................................ 3.60% 4.31%
DFA Global Bond................................................................. 3.36% 5.92%
Federated Prime Money........................................................... 3.97% 4.12%
Federated American Leaders...................................................... 5.98% 17.16%
Federated US Gov't Securities................................................... -1.24% 4.51%
Federated Utility............................................................... 1.04% 14.22%
Federated High Income Bond...................................................... 1.64% 5.54%
Wanger Int'l Small Cap.......................................................... 124.96% 40.48%
Wanger US Small Cap............................................................. 24.26% 24.43%
Montgomery Emerg Mkt............................................................ 63.75% -3.55%
Montgomery Growth............................................................... 20.01% 16.83%
Stein Roe Small Company Growth.................................................. 47.14% 16.35%
Strong Int'l Stock.............................................................. 85.99% 19.31%
Warburg Pincus Int'l Equity..................................................... 52.44% 13.79%
Warburg Pincus Small Co Growth.................................................. 67.99% 28.49%
Dreyfus Small Cap Value......................................................... 28.55% 7.91%
Endeavor Enhanced Index......................................................... 17.40% 18.31%
Strong Schafer Value............................................................ N/A 4.43%
T. Rowe Price Int'l............................................................. 31.50% 19.33%
WRL Alger Agg Growth............................................................ N/A 46.70%
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C>
WRL JP Morgan Real Est.......................................................... N/A -4.36%
WRL Janus Global................................................................ N/A 48.60%
WRL Janus Growth................................................................ N/A 36.64%
WRL LKCM Strategic Tot Rtn...................................................... N/A 9.11%
</TABLE>
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
AUSA Life may show Non-Standardized Total Return Year-to-Date as of a particular
date, or simply Total Return YTD, for one or more Subaccounts with respect to
one or more non-standardized base periods commencing at the beginning of a
calendar year. Total Return YTD figures reflect the percentage change in actual
Accumulation Unit Values during the relevant period. These percentages reflect a
deduction for the Separate Account and Portfolio expenses, but do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any), which, if
included, would reduce the percentages reported by AUSA Life.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
<TABLE>
<CAPTION>
Total Return
YTD as of
Subaccount 12/31/99
- ---------- --------
<S> <C>
DFA Small Value................................................................. 9.14%
DFA Large Value................................................................. 4.09%
DFA International Value......................................................... 21.23%
DFA International Small......................................................... 17.76%
DFA Short-Term Fixed............................................................ 3.60%
DFA Global Bond................................................................. 3.36%
Federated Prime Money........................................................... 3.97%
Federated American Leaders...................................................... 5.98%
Federated US Gov't Securities................................................... -1.24%
Federated Utility............................................................... 1.04%
Federated High Income Bond...................................................... 1.64%
Wanger Int'l Small Cap.......................................................... 124.96%
Wanger US Small Cap............................................................. 24.26%
Montgomery Emerg Mkt............................................................ 63.75%
Montgomery Growth............................................................... 20.01%
Stein Roe Small Company Growth.................................................. 47.14%
Strong Int'l Stock.............................................................. 85.99%
Warburg Pincus Int'l Equity..................................................... 52.44%
Warburg Pincus Small Co Growth.................................................. 67.99%
Dreyfus Small Cap Value......................................................... 28.55%
Endeavor Enhanced Index......................................................... 17.40%
Strong Schafer Value............................................................ N/A
T. Rowe Price Int'l............................................................. 31.50%
WRL Alger Agg Growth............................................................ N/A
WRL JP Morgan Real Est.......................................................... N/A
WRL Janus Global................................................................ N/A
WRL Janus Growth................................................................ N/A
WRL LKCM Strategic Tot Rtn...................................................... N/A
</TABLE>
NON-STANDARDIZED ONE YEAR RETURN
AUSA Life may show Non-Standardized One Year Return, for one or more Subaccounts
with respect to one or more non-standardized base periods commencing at the
beginning of a calendar year (or date of Portfolio inception, if during
10
<PAGE>
the relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the historical performance of the Portfolios as if the Contract
were in existence before its inception date (which it was not). After the
Contract's inception date, the figures reflect the percentage change in actual
Accumulation Unit Values during the relevant period. These percentages reflect a
deduction for the Separate Account and Portfolio expenses, but do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any), which, if
included, would reduce the percentages reported by AUSA Life.
11
<PAGE>
NON-STANDARDIZED ONE YEAR RETURN
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
DFA Small Value.................................. 9.14% -7.21% 29.60% 21.26% N/A
DFA Large Value.................................. 4.90% 10.04% 28.39% 17.72% N/A
DFA International Value.......................... 21.23% 11.01% -2.86% 6.41% N/A
DFA International Small.......................... 17.76% 7.07% -25.56% -0.39% N/A
DFA Short-Term Fixed............................. 3.60% 4.80% 5.00% 4.51% N/A
DFA Global Bond.................................. 3.36% 7.54% 7.09% 8.27% N/A
Federated Prime Money............................ 3.97% 4.13% 4.26% 4.08% 4.46%
Federated American Leaders....................... 5.98% 16.86% 31.48% 20.78% 34.02%
Federated US Gov't Securities.................... -1.24% 6.96% 7.88% 3.52% 7.53%
Federated Utility................................ 1.04% 13.21% 25.81% 10.84% 23.88%
Federated High Income Bond....................... 1.64% 2.03% 13.09% 13.57% 17.95%
Wanger Int'l Small Cap........................... 124.96% 15.58% -2.10% 31.15% N/A
Wanger US Small Cap.............................. 24.26% 7.98% 28.57% 45.63% N/A
Montgomery Emerg Mkt............................. 63.75% -37.93% -1.22% N/A N/A
Montgomery Growth................................ 20.01% 2.26% 27.74% N/A N/A
Stein Roe Small Company Growth................... 47.14% -17.84% N/A N/A N/A
Strong Int'l Stock............................... 85.99% -5.39% -14.08% 9.67% N/A
Warburg Pincus Int'l Equity...................... 52.44% 4.67% -2.89% 9.32% N/A
Warburg Pincus Small Co Growth................... 67.99% -3.48% 14.89% 13.18% N/A
Dreyfus Small Cap Value.......................... 28.55% -2.81% 24.76% 24.83% 13.32%
Endeavor Enhanced Index.......................... 17.40% 30.54% N/A N/A N/A
Strong Schafer Value............................. -3.49% 1.50% N/A N/A N/A
T. Rowe Price Int'l.............................. 31.50% 14.69% 1.95% 14.49% 9.66%
WRL Alger Agg Growth............................. 49.61% 47.75% 23.12% 9.73% 37.15%
WRL JP Morgan Real Est........................... -10.02% N/A N/A N/A N/A
WRL Janus Global................................. 56.20% 29.19% 17.99% 26.92% 22.28%
WRL Janus Growth................................. 36.62% 63.45% 16.79% 17.21% 46.20%
WRL LKCM Strategic Tot Rtn....................... 5.92% 8.93% 21.08% 14.26% 23.86%
</TABLE>
NON-STANDARDIZED ADJUSTED HISTORICAL CUMULATIVE RETURN AND NON-STANDARDIZED
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURN
AUSA Life may show Non-Standardized Adjusted Historical Cumulative Return and
Non-Standardized Adjusted Historical Average Annual Total Return, calculated on
the basis of the historical performance of the Portfolios (calculated beginning
from the end of the year of inception for each Portfolio) and may assume the
Contract was in existence prior to its inception date (which it was not). After
the Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which produce
the resulting Accumulated Values. They reflect a deduction for the Separate
Account expenses and Portfolio expenses. However, they do not include the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which, if included,
would reduce the percentages reported.
The Non-Standardized Adjusted Historical Cumulative Return for a Subaccount is
the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Adjusted Historical Average Annual Total Return for a
Subaccount is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the performance
remained constant throughout.
12
<PAGE>
ADJUSTED HISTORICAL CUMULATIVE RETURNS FOR PERIODS ENDING 12/31/98
(BASED ON SINGLE INITIAL PURCHASE)
<TABLE>
<CAPTION>
Total
Since Fund
1 Year 3 Year Inception Year-End
------ ------ ------------------
<S> <C> <C> <C>
DFA Small Value................................ 9.14% 31.25% 56.40%
DFA Large Value................................ 4.09% 47.06% 108.08%
DFA International Value........................ 21.23% 30.72% 46.58%
DFA International Small........................ 17.76% -6.15% -5.83%
DFA Short-Term Fixed........................... 3.60% 14.00% 20.51%
DFA Global Bond................................ 3.36% 19.04% 45.44%
Federated Prime Money.......................... 3.94% 12.86% 23.15%
Federated American Leaders..................... 5.98% 62.84% 160.25%
Federated US Gov't Securities.................. -1.24% 13.95% 29.40%
Federated Utility.............................. 1.04% 43.92% 89.89%
Federated High Income Bond..................... 1.64% 17.29% 50.62%
Wanger Int'l Small Cap......................... 124.96% 154.54% 355.02%
Wanger US Small Cap............................ 24.26% 72.51% 190.94%
Montgomery Emerg Mkt........................... 63.75% 0.39% 5.50%
Montgomery Growth.............................. 20.01% 56.77% 98.48%
Strong Int'l Stock............................. 85.99% 51.19% 69.93%
Warburg Pincus Int'l Equity.................... 52.44% 54.94% 81.21%
Warburg Pincus Small Co Growth................. 67.99% 86.29% 162.92%
Dreyfus Small Cap Value........................ 28.55% 55.88% 139.51%
Endeavor Enhanced Index........................ 17.40% N/A 87.54%
Strong Schafer Value........................... -3.49% N/A -1.37%
T. Rowe Price Int'l............................ 31.50% 53.77% 113.55%
WRL Alger Agg Growth........................... 67.94% 205.50% 351.51%
WRL JP Morgan Real Est......................... -4.44% N/A -19.03%
WRL Janus Global............................... 70.01% 159.14% 446.03%
WRL Janus Growth............................... 58.65% 202.85% 1402.24%
WRL LKCM Strategic Tot Rtn..................... 11.35% 46.72% 131.64%
</TABLE>
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/98
(BASED ON SINGLE INITIAL PURCHASE)
<TABLE>
<CAPTION>
Total
Since Fund
1 Year 3 Year Inception Year-End
------ ------ ------------------
<S> <C> <C> <C>
DFA Small Value................................ 9.14% 9.49% 11.08%
DFA Large Value................................ 4.09% 13.72% 15.89%
DFA International Value........................ 21.23% 9.34% 9.40%
DFA International Small........................ 17.76% -2.09% -1.40%
DFA Short-Term Fixed........................... 3.60% 4.47% 4.48%
DFA Global Bond................................ 3.36% 5.98% 7.83%
Federated Prime Money.......................... 3.94% 4.11% 4.15%
Federated American Leaders..................... 5.98% 17.65% 17.63%
Federated US Gov't Securities.................. -1.24% 4.45% 4.57%
Federated Utility.............................. 1.04% 12.90% 11.50%
Federated High Income Bond..................... 1.64% 5.46% 7.27%
Wanger Int'l Small Cap......................... 124.96% 36.54% 38.37%
Wanger US Small Cap............................ 24.26% 19.93% 25.72%
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C>
Montgomery Emerg Mkt........................... 63.75% 0.13% 1.38%
Montgomery Growth.............................. 20.01% 16.17% 19.25%
Strong Int'l Stock............................. 85.99% 14.77% 13.46%
Warburg Pincus Int'l Equity.................... 52.44% 15.72% 14.10%
Warburg Pincus Small Co Growth................. 67.99% 23.04% 23.92%
Dreyfus Small Cap Value........................ 28.55% 15.95% 14.01%
Endeavor Enhanced Index........................ 17.40% N/A 26.57%
Strong Schafer Value........................... -3.49% N/A -0.62%
T. Rowe Price Int'l............................ 31.50% 15.42% 9.07%
WRL Alger Agg Growth........................... 67.94% 45.10% 29.46%
WRL JP Morgan Real Est......................... -4.44% N/A -11.88%
WRL Janus Global............................... 70.01% 37.36% 27.10%
WRL Janus Growth............................... 58.65% 44.68% 22.68%
WRL LKCM Strategic Tot Rtn..................... 11.35% 13.63% 13.07%
</TABLE>
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Portfolios based on monthly reinvestment of dividends over a specific period of
time.
HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
DFA Small Value
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 60,630 21.26% 21.26% 21.26% 12/31/1996 $ 4,000 $ 4,425 21.26% 21.26%
12/31/1997 $ 50,000 $ 78,578 29.60% 25.36% 57.16% 12/31/1997 $ 6,000 $ 7,735 29.60% 26.57%
12/31/1998 $ 50,000 $ 72,910 -7.21% 13.40% 45.82% 12/31/1998 $ 8,000 $ 9,177 -7.21% 9.23%
</TABLE>
<TABLE>
<CAPTION>
DFA Large Value
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 58,858 17.72% 17.72% 17.72% 12/31/1996 $ 4,000 $ 4,354 17.72% 17.72%
12/31/1997 $ 50,000 $ 75,568 28.39% 22.94% 51.14% 12/31/1997 $ 6,000 $ 7,591 28.39% 24.51%
12/31/1998 $ 50,000 $ 83,153 10.04% 18.48% 66.31% 12/31/1998 $ 8,000 $ 10,352 10.04% 17.48%
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
DFA International Value
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 53,206 6.41% 6.41% 6.41% 12/31/1996 $ 4,000 $ 4,128 6.41% 6.41%
12/31/1997 $ 50,000 $ 51,681 -2.86% 1.67% 3.36% 12/31/1997 $ 6,000 $ 6,010 -2.86% 0.17%
12/31/1998 $ 50,000 $ 57,372 11.01% 4.69% 14.74% 12/31/1998 $ 8,000 $ 8,672 11.01% 5.40%
</TABLE>
<TABLE>
<CAPTION>
DFA International Small
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 49,804 -0.39% -0.39% -0.39% 12/31/1996 $ 4,000 $ 3,992 -0.39% -0.39%
12/31/1997 $ 50,000 $ 37,073 -25.56% -13.89% -25.85% 12/31/1997 $ 6,000 $ 4,972 -25.56% -18.25%
12/31/1998 $ 50,000 $ 39,693 7.07% -7.41% -20.61% 12/31/1998 $ 8,000 $ 7,323 7.07% -5.87%
</TABLE>
<TABLE>
<CAPTION>
DFA Short-Term Fixed
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 12/31/1995 $ 2,000 $ 2,000
12/31/1996 $ 50,000 $ 52,256 4.51% 4.51% 4.51% 12/31/1996 $ 4,000 $ 4,090 4.51% 4.51%
12/31/1997 $ 50,000 $ 54,871 5.00% 4.76% 9.74% 12/31/1997 $ 6,000 $ 6,295 5.00% 4.84%
12/31/1998 $ 50,000 $ 57,503 4.80% 4.77% 15.01% 12/31/1998 $ 8,000 $ 8,597 4.80% 4.82%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
DFA Global Bond
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,135 8.27% 8.27% 8.27% 12/31/1996 $ 4,000 $ 4,165 8.27% 8.27%
12/31/1997 $ 50,000 $ 57,974 7.09% 7.68% 15.95% 12/31/1997 $ 6,000 $ 6,461 7.09% 7.49%
12/31/1998 $ 50,000 $ 62,346 7.54% 7.63% 24.69% 12/31/1998 $ 8,000 $ 8,948 7.54% 7.52%
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Small Cap Value
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1993 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1993 $ 2,000 $ 2,000 N/A N/A
12/31/1994 $ 50,000 $ 48,787 -2.43% -2.43% -2.43% 12/31/1994 $ 4,000 $ 3,951 -2.43% -2.43%
12/31/1995 $ 50,000 $ 55,284 13.32% 5.15% 10.57% 12/31/1995 $ 6,000 $ 6,478 13.32% 7.76%
12/31/1996 $ 50,000 $ 69,010 24.83% 11.34% 38.02% 12/31/1996 $ 8,000 $ 10,086 24.83% 15.68%
12/31/1997 $ 50,000 $ 86,098 24.76% 14.55% 72.20% 12/31/1997 $ 10,000 $ 14,583 24.76% 18.97%
12/31/1998 $ 50,000 $ 83,679 -2.81% 10.85% 67.36% 12/31/1998 $ 12,000 $ 16,174 -2.81% 11.86%
</TABLE>
<TABLE>
<CAPTION>
Endeavor Enhanced Index
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1997 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1997 $ 2,000 $ 2,000 N/A N/A
12/31/1998 $ 50,000 $ 65,269 30.54% 30.54% 30.54% 12/31/1998 $ 4,000 $ 4,611 30.54% 30.54%
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price International
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1991 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1991 $ 2,000 $ 2,000 N/A N/A
12/31/1992 $ 50,000 $ 47,882 -4.24% -4.24% -4.24% 12/31/1992 $ 4,000 $ 3,915 -4.24% -4.24%
12/31/1993 $ 50,000 $ 56,367 17.72% 6.18% 12.73% 12/31/1993 $ 6,000 $ 6,609 17.72% 9.83%
12/31/1994 $ 50,000 $ 52,825 -6.29% 1.85% 5.65% 12/31/1994 $ 8,000 $ 8,194 -6.29% 1.60%
12/31/1995 $ 50,000 $ 57,925 9.66% 3.75% 15.85% 12/31/1995 $ 10,000 $ 10,985 9.66% 4.70%
12/31/1996 $ 50,000 $ 66,320 14.49% 5.81% 32.64% 12/31/1996 $ 12,000 $ 14,577 14.49% 7.74%
12/31/1997 $ 50,000 $ 67,614 1.95% 5.16% 35.23% 12/31/1997 $ 14,000 $ 16,861 1.95% 6.14%
12/31/1998 $ 50,000 $ 77,550 14.69% 6.47% 55.10% 12/31/1998 $ 16,000 $ 21,339 14.69% 8.09%
</TABLE>
<TABLE>
<CAPTION>
Federated American Leaders Portfolio
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 67,009 34.02% 34.02% 34.02% 12/31/1995 $ 4,000 $ 4,680 34.02% 34.02%
12/31/1996 $ 50,000 $ 80,936 20.78% 27.23% 61.87% 12/31/1996 $ 6,000 $ 7,653 20.78% 25.40%
12/31/1997 $ 50,000 $ 106,414 31.48% 28.63% 112.83% 12/31/1997 $ 8,000 $ 12,062 31.48% 28.18%
12/31/1998 $ 50,000 $ 124,356 16.86% 25.58% 148.71% 12/31/1998 $ 10,000 $ 16,096 16.86% 24.00%
</TABLE>
<TABLE>
<CAPTION>
Federated High Income Bond Portfolio
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 58,975 17.95% 17.95% 17.95% 12/31/1995 $ 4,000 $ 4,359 17.95% 17.95%
12/31/1996 $ 50,000 $ 66,977 13.57% 15.74% 33.95% 12/31/1996 $ 6,000 $ 6,950 13.57% 15.08%
12/31/1997 $ 50,000 $ 75,747 13.09% 14.85% 51.49% 12/31/1997 $ 8,000 $ 9,861 13.09% 14.13%
12/31/1998 $ 50,000 $ 77,288 2.03% 11.50% 54.58% 12/31/1998 $ 10,000 $ 12,061 2.03% 9.38%
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Federated Prime Money Portfolio
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 52,232 4.46% 4.46% 4.46% 12/31/1995 $ 4,000 $ 4,089 4.46% 4.46%
12/31/1996 $ 50,000 $ 54,361 4.08% 4.27% 8.72% 12/31/1996 $ 6,000 $ 6,256 4.08% 4.21%
12/31/1997 $ 50,000 $ 56,679 4.26% 4.27% 13.36% 12/31/1997 $ 8,000 $ 8,523 4.26% 4.24%
12/31/1998 $ 50,000 $ 59,022 4.13% 4.23% 18.04% 12/31/1998 $ 10,000 $ 10,875 4.13% 4.20%
</TABLE>
<TABLE>
<CAPTION>
Federated U.S. Government Securities
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 53,766 7.53% 7.53% 7.53% 12/31/1995 $ 4,000 $ 4,151 7.53% 7.53%
12/31/1996 $ 50,000 $ 55,660 3.52% 5.51% 11.32% 12/31/1996 $ 6,000 $ 6,297 3.52% 4.87%
12/31/1997 $ 50,000 $ 60,044 7.88% 6.29% 20.09% 12/31/1997 $ 8,000 $ 8,793 7.88% 6.33%
12/31/1998 $ 50,000 $ 64,224 6.96% 6.46% 28.45% 12/31/1998 $ 10,000 $ 11,405 6.96% 6.58%
</TABLE>
<TABLE>
<CAPTION>
Federated Utility Portfolio
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 61,942 23.88% 23.88% 23.88% 12/31/1995 $ 4,000 $ 4,478 23.88% 23.88%
12/31/1996 $ 50,000 $ 68,654 10.84% 17.18% 37.31% 12/31/1996 $ 6,000 $ 6,963 10.84% 15.27%
12/31/1997 $ 50,000 $ 86,377 25.81% 19.99% 72.75% 12/31/1997 $ 8,000 $ 10,760 25.81% 20.16%
12/31/1998 $ 50,000 $ 97,789 13.21% 18.26% 95.58% 12/31/1998 $ 10,000 $ 14,182 13.21% 17.55%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Montgomery Growth
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1996 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1996 $ 2,000 $ 2,000 N/A N/A
12/31/1997 $ 50,000 $ 63,869 27.74% 27.74% 27.74% 12/31/1997 $ 4,000 $ 4,555 27.74% 27.74%
12/31/1998 $ 50,000 $ 65,314 2.26% 14.29% 30.63% 12/31/1998 $ 6,000 $ 6,658 2.26% 10.59%
</TABLE>
<TABLE>
<CAPTION>
Montgomery Emerging Markets
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1996 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1996 $ 2,000 $ 2,000 N/A N/A
12/31/1997 $ 50,000 $ 49,388 -1.22% -1.22% -1.22% 12/31/1997 $ 4,000 $ 3,976 -1.22% -1.22%
12/31/1998 $ 50,000 $ 30,653 -37.93% -21.70% -38.69% 12/31/1998 $ 6,000 $ 4,467 -37.93% -28.19%
</TABLE>
<TABLE>
<CAPTION>
Strong International Stock
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,835 9.67% 9.67% 9.67% 12/31/1996 $ 4,000 $ 4,193 9.67% 9.67%
12/31/1997 $ 50,000 $ 47,115 -14.08% -2.93% -5.77% 12/31/1997 $ 6,000 $ 5,603 -14.08% -6.77%
12/31/1998 $ 50,000 $ 44,574 -5.39% -3.76% -10.85% 12/31/1998 $ 8,000 $ 7,301 -5.39% -6.07%
</TABLE>
<TABLE>
<CAPTION>
Strong Schafer Value
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1997 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1997 $ 2,000 $ 2,000 N/A N/A
12/31/1998 $ 50,000 $ 50,751 1.50% 1.50% 1.50% 12/31/1998 $ 4,000 $ 4,030 1.50% 1.50%
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Wanger U.S. Small Cap Advisor
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 72,815 45.63% 45.63% 45.63% 12/31/1996 $ 4,000 $ 4,913 45.63% 45.63%
12/31/1997 $ 50,000 $ 93,621 28.57% 36.84% 87.24% 12/31/1997 $ 6,000 $ 8,316 28.57% 34.61%
12/31/1998 $ 50,000 $ 101,093 7.98% 26.45% 102.19% 12/31/1998 $ 8,000 $ 10,980 7.98% 21.57%
</TABLE>
<TABLE>
<CAPTION>
Wanger International Small Cap Advisor
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 65,573 31.15% 31.15% 31.15% 12/31/1996 $ 4,000 $ 4,623 31.15% 31.15%
12/31/1997 $ 50,000 $ 64,197 -2.10% 13.31% 28.39% 12/31/1997 $ 6,000 $ 6,526 -2.10% 8.52%
12/31/1998 $ 50,000 $ 74,195 15.58% 14.06% 48.39% 12/31/1998 $ 8,000 $ 9,542 15.58% 11.88%
</TABLE>
<TABLE>
<CAPTION>
Warburg Pincus International Equity
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,661 9.32% 9.32% 9.32% 12/31/1996 $ 4,000 $ 4,186 9.32% 9.32%
12/31/1997 $ 50,000 $ 53,081 -2.89% 3.04% 6.16% 12/31/1997 $ 6,000 $ 6,065 -2.89% 1.09%
12/31/1998 $ 50,000 $ 55,558 4.67% 3.58% 11.12% 12/31/1998 $ 8,000 $ 8,348 4.67% 2.85%
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Warburg Pincus Small Company Growth
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 56,588 13.18% 13.18% 13.18% 12/31/1996 $ 4,000 $ 4,264 13.18% 13.18%
12/31/1997 $ 50,000 $ 65,015 14.89% 14.03% 30.03% 12/31/1997 $ 6,000 $ 6,898 14.89% 14.29%
12/31/1998 $ 50,000 $ 62,752 -3.48% 7.87% 25.50% 12/31/1998 $ 8,000 $ 8,658 -3.48% 5.30%
</TABLE>
<TABLE>
<CAPTION>
WRL Alger Aggressive Growth
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 68,574 37.15% 37.15% 37.15% 12/31/1995 $ 4,000 $ 4,743 37.15% 37.15%
12/31/1996 $ 50,000 $ 75,249 9.73% 22.68% 50.50% 12/31/1996 $ 6,000 $ 7,205 9.73% 18.89%
12/31/1997 $ 50,000 $ 92,647 23.12% 22.83% 85.29% 12/31/1997 $ 8,000 $ 10,870 23.12% 20.87%
12/31/1998 $ 50,000 $ 136,885 47.75% 28.63% 173.77% 12/31/1998 $ 10,000 $ 18,061 47.75% 29.93%
</TABLE>
<TABLE>
<CAPTION>
WRL J.P. Morgan Real Estate Securities
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1998 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1998 $ 2,000 $ 2,000 N/A N/A
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
WRL Janus Global
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1992 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1992 $ 2,000 $ 2,000 N/A N/A
12/31/1993 $ 50,000 $ 67,100 34.20% 34.20% 34.20% 12/31/1993 $ 4,000 $ 4,684 34.20% 34.20%
12/31/1994 $ 50,000 $ 66,835 -0.40% 15.62% 33.67% 12/31/1994 $ 6,000 $ 6,665 -0.40% 10.71%
12/31/1995 $ 50,000 $ 81,724 22.28% 17.79% 63.45% 12/31/1995 $ 8,000 $ 10,150 22.28% 16.12%
12/31/1996 $ 50,000 $ 103,726 26.92% 20.01% 107.45% 12/31/1996 $ 10,000 $ 14,883 26.92% 20.00%
12/31/1997 $ 50,000 $ 122,389 17.99% 19.61% 144.78% 12/31/1997 $ 12,000 $ 19,561 17.99% 19.40%
12/31/1998 $ 50,000 $ 158,110 29.19% 21.15% 216.22% 12/31/1998 $ 14,000 $ 27,270 29.19% 21.75%
</TABLE>
<TABLE>
<CAPTION>
WRL Janus Growth
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1986 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1986 $ 2,000 $ 2,000 N/A N/A
12/31/1987 $ 50,000 $ 55,090 10.18% 10.18% 10.18% 12/31/1987 $ 4,000 $ 4,204 10.18% 10.18%
12/31/1988 $ 50,000 $ 64,931 17.86% 13.96% 29.86% 12/31/1988 $ 6,000 $ 6,954 17.86% 15.14%
12/31/1989 $ 50,000 $ 94,873 46.11% 23.80% 89.75% 12/31/1989 $ 8,000 $ 12,161 46.11% 28.77%
12/31/1990 $ 50,000 $ 94,050 -0.87% 17.11% 88.10% 12/31/1990 $ 10,000 $ 14,056 -0.87% 17.10%
12/31/1991 $ 50,000 $ 149,350 58.80% 24.46% 198.70% 12/31/1991 $ 12,000 $ 24,321 58.80% 28.08%
12/31/1992 $ 50,000 $ 151,857 1.68% 20.34% 203.71% 12/31/1992 $ 14,000 $ 26,729 1.68% 21.10%
12/31/1993 $ 50,000 $ 156,890 3.31% 17.75% 213.78% 12/31/1993 $ 16,000 $ 29,615 3.31% 17.06%
12/31/1994 $ 50,000 $ 142,916 -8.91% 14.03% 185.83% 12/31/1994 $ 18,000 $ 28,977 -8.91% 11.54%
12/31/1995 $ 50,000 $ 208,939 46.20% 17.22% 317.88% 12/31/1995 $ 20,000 $ 44,364 46.20% 16.81%
12/31/1996 $ 50,000 $ 244,887 17.21% 17.22% 389.77% 12/31/1996 $ 22,000 $ 53,996 17.21% 16.87%
12/31/1997 $ 50,000 $ 286,009 16.79% 17.18% 472.02% 12/31/1997 $ 24,000 $ 65,063 16.79% 16.86%
12/31/1998 $ 50,000 $ 467,470 63.45% 20.48% 834.94% 12/31/1998 $ 26,000 $108,344 63.45% 21.59%
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
WRL LKCM Strategic Total Return
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1993 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1993 $ 2,000 $ 2,000 N/A N/A
12/31/1994 $ 50,000 $ 49,411 -1.18% -1.18% -1.18% 12/31/1994 $ 4,000 $ 3,976 -1.18% -1.18%
12/31/1995 $ 50,000 $ 61,203 23.86% 10.64% 22.41% 12/31/1995 $ 6,000 $ 6,925 23.86% 14.70%
12/31/1996 $ 50,000 $ 69,930 14.26% 11.83% 39.86% 12/31/1996 $ 8,000 $ 9,913 14.26% 14.49%
12/31/1997 $ 50,000 $ 84,668 21.08% 14.07% 69.34% 12/31/1997 $ 10,000 $ 14,002 21.08% 16.90%
12/31/1998 $ 50,000 $ 92,231 8.93% 13.03% 84.46% 12/31/1998 $ 12,000 $ 17,253 8.93% 14.42%
</TABLE>
Individualized Computer Generated Illustrations
AUSA Life may from time to time use computer-based software available through
Morningstar, CDA/Wiesnberger and/or other firms to provide registered
representatives and existing and/or potential owners of Contracts with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolio; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
PERFORMANCE COMPARISONS
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Accumulation Value is allocated to a
Subaccount during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Portfolio in which
the Subaccount invests, and the market conditions during the given period, and
should not be considered as a representation of what may be achieved in the
future.
Reports and marketing materials may, from time to time, include information
concerning the rating of AUSA Life Insurance Company, Inc. as determined by one
or more of the ratings services listed below, or other recognized rating
services. Reports and promotional literature may also contain other information
including (i) the ranking of any Subaccount derived from rankings of variable
annuity separate accounts or other investment products tracked by Lipper
Analytical Services or by other rating services, companies, publications, or
other person who rank separate accounts or other investment products on overall
performance or other criteria, and (ii) the effect of tax-deferred compounding
on a Subaccount's investment returns, or returns in general, which may be
illustrated by graphs, charts, or otherwise, and which may include a comparison,
at various points in time, of the return from an investment in a Contract (or
returns in general) on a tax-deferred basis (assuming one or more tax rates)
with the return on a taxable basis.
23
<PAGE>
Each Subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the Subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
. Dow Jones Industrial Average ("DJIA"), an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
. Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, which can be used to compare
to the total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the Standard & Poor's index assumes
reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated into the Standard & Poor's figures.
. Lipper Analytical Services, Inc., a reporting service that ranks funds
in various fund categories by making comparative calculations using
total return. Total return assumes the reinvestment of all income
dividends and capital gains distributions, if any. From time to time,
we may quote the Portfolios' Lipper rankings in various fund
categories in advertising and sales literature.
. Bank Rate Monitor National Index, Miami Beach, Florida, a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of
the largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution, and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
. Shearson Lehman Government/Corporate (Total) Index, an index comprised
of approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed-rate, non-convertible
domestic bonds of companies in industry, public utilities and finance.
The average maturity of these bonds approximates nine years. Tracked
by Shearson Lehman, Inc., the index calculates total returns for one
month, three month, twelve month, and ten year periods and
year-to-date.
. Shearson Lehman Government/Corporate (Long-Term) Index, an index
composed of the same types of issues as defined above. However, the
average maturity of the bonds included in this index approximates 22
years.
24
<PAGE>
. Shearson Lehman Government Index, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government,
or any agency thereof, or any quasi-federal corporation and of
corporate debt guaranteed by the U.S. government. Only notes and bonds
with a minimum outstanding principal of $1 million and a minimum
maturity of one year are included.
. Morningstar, Inc., an independent rating service that publishes the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
. Money, a monthly magazine that regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money
ranking in advertising and sales literature.
. Standard & Poor's Utility Index, an unmanaged index of common stocks
from forty different utilities. This index indicates daily changes in
the price of the stocks. The index also provides figures for changes
in price from the beginning of the year to date, and for a twelve
month period.
. Dow Jones Utility Index, an unmanaged index comprised of fifteen
utility stocks that tracks changes in price daily and over a six month
period. The index also provides the highs and lows for each of the
past five years.
. The Consumer Price Index, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by AUSA Life. The assets are
kept physically segregated and held separate and apart from AUSA Life's General
Account assets. The General Account contains all of the assets of AUSA Life.
Records are maintained of all purchases and redemptions of eligible Portfolio
shares held by each of the Subaccounts and the General Account.
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS
The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of AUSA Life or other insurance
companies. Although AUSA Life believes it is unlikely, a material conflict could
arise between the interests of the Separate Account and one or more of the other
participating separate accounts. In the event a material conflict does exist,
the affected insurance companies agree to take any necessary steps, including
removing their separate accounts from the Fund if required by law, to resolve
the matter. See the Fund's prospectus for more information.
25
<PAGE>
AUSA LIFE
On October 1, 1998, First Providian Life & Health Insurance Company ("First
Providian") merged with and into the Company. First Providian was a stock life
insurance company incorporated under the laws of the State of New York on March
23, 1970. Upon the merger, First Providian's existence ceased and the Company
became the surviving company under the name AUSA Life Insurance Company, Inc. As
a result of the merger, the Separate Account became a separate account of the
Company. All of the Contracts issued by First Providian before the merger were,
at the time of the merger, assumed by the Company. The merger did not affect any
provisions of, or rights or obligations under, those Contracts. In approving the
merger on May 26, 1998, and May 29, 1998, respectively, the boards of directors
of the Company and First Providian determined that the merger of two financially
strong stock life insurance companies would result in an overall enhanced
capital position and reduced expenses, which, together, would be in the
long-term interests of the Contract Owners. On May 26, 1998, 100% of the
stockholders of the Company voted to approve the merger, and on May 29, 1998,
100% of the stockholders of First Providian voted to approve the merger. In
addition, the New York Insurance Department has approved the merger.
The Company is a direct subsidiary of First AUSA Life Insurance Company and
Veterans Life Insurance Company, which, respectively, have 82.33% and 17.67%
interests in the Company. Veterans Life Insurance Company is a wholly owned
subsidiary of Peoples Benefit Life Insurance Company ("Peoples Benefit"), which
in turn is a direct subsidiary of Monumental Life Insurance Company, Capital
Liberty, L.P., and Commonwealth General Corporation, which, respectively, have
76.3%, 20%, and 3.7% interests in Peoples Benefit. Monumental Life Insurance
Company is a direct subsidiary of Capital General Development Corporation and
First AUSA Life Insurance Company, which, respectively, have 73.23% and 26.77%
interests in Monumental Life Insurance Company. Monumental Life Insurance
Company and Commonwealth General Corporation have, respectively, 99% and 1%
interests in Capital Liberty, L.P. Commonwealth General Corporation is a wholly
owned subsidiary of Transamerica Holding Company. Capital General Development
Corporation is a wholly owned subsidiary of Commonwealth General Corporation.
First AUSA Life Insurance Company is a wholly owned subsidiary of Transamerica
Holding Company. Transamerica Holding Company is a wholly owned subsidiary of
AEGON USA, Inc.
The Company is a wholly-owned indirect subsidiary of AEGON USA, Inc., which in
turn is wholly owned by AEGON U.S. Holding Corporation, a wholly owned
subsidiary of AEGON International N.V. AEGON International N.V. is a wholly
owned subsidiary of AEGON N.V. Vereniging AEGON (a Netherlands membership
association) has a 53.16% interest in AEGON N.V.
TAXES
AUSA Life is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. Since the Separate Account is not a separate entity
from AUSA Life and its operations form a part of AUSA Life, the Separate Account
will not be taxed separately as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. Investment income and realized
capital gains on the assets of the Separate Account are reinvested and taken
into account in determining the Accumulated Value. Under existing federal income
tax law, the Separate Account's investment income, including realized net
capital gains, is not taxed to AUSA Life. AUSA Life reserves the right to make a
deduction for taxes should they be imposed with respect to such items in the
future.
Under present laws, AUSA Life will not incur New York state or local taxes. If
there is a change in state or local tax laws, AUSA Life may make charges for
such taxes. AUSA Life does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Contracts. Based upon these expectations, no charge is
currently being made to the Separate Account for corporate federal income taxes
that may be attributable to the Separate Account.
AUSA Life will periodically review the question of a charge to the Separate
Account for corporate federal income taxes related to the Separate Account. Such
a charge may be made in future years for any federal income taxes AUSA Life
incurs. This might become necessary if AUSA Life ultimately determines that its
tax treatment is not what it currently believes it to be, if there are changes
in the federal income tax treatment of annuities at the corporate level, or if
there is a change in AUSA Life's tax status. If AUSA Life should incur federal
income taxes attributable
26
<PAGE>
to investment income or capital gains retained as part of the reserves under the
Contracts, the Accumulated Value of the Contract would be correspondingly
adjusted by any provision or charge for such taxes.
STATE REGULATION OF AUSA LIFE
AUSA Life is subject to the laws of New York governing insurance companies and
to regulation by the New York Department of Insurance. An annual statement in a
prescribed form is filed with the Department of Insurance each year covering the
operation of AUSA Life for the preceding year and its financial condition as of
the end of such year. Regulation by the Department of Insurance includes
periodic examination to determine AUSA Life's contract liabilities and reserves
so that the Department may determine if the items are correct. AUSA Life's books
and accounts are subject to review by the Department of Insurance at all times.
In addition, AUSA Life is subject to regulation under the insurance laws of
other jurisdictions in which it may operate.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
AUSA Life. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, AUSA Life will mail to all Contract Owners
at their last known address of record, at least semi-annually, reports
containing such information as may be required under that Act or by any other
applicable law or regulation. Contract Owners will also receive confirmation of
each financial transaction and any other reports required by law or regulation.
DISTRIBUTION OF THE CONTRACTS
AFSG Securities Corporation ("AFSG"), formerly Providian Securities Corporation,
the principal underwriter of the Contract, is ultimately a wholly-owned
subsidiary of AEGON N.V. AFSG is registered with the SEC under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
The Contract is offered to the public through brokers licensed under the federal
securities laws and New York State insurance laws that have entered into
agreements with AFSG. The offering of the Contract is continuous and AFSG does
not anticipate discontinuing the offering of the Contract. However, AFSG does
reserve the right to discontinue the offering of the Contract.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. AUSA Life is not involved
in any litigation that is of material importance in relation to its total assets
or that relates to the Separate Account.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contract discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contract and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
27
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements of certain subaccounts of the Separate Account
which are available for investment by Advisor's Edge Contract Owners as of
December 31, 1999, including the Report of Independent Auditors thereon, are
included in this Statement of Additional Information.
The audited statutory-basis financial statements of AUSA Life as of December 31,
1999, and 1998, and for each of the three years in the period ended December 31,
1999, including the Reports of Independent Auditors thereon, are included in
this Statement of Additional Information. They should be distinguished from the
financial statements of the subaccounts of the Separate Account which are
available for investment by Advisor's Edge Contract Owners and should be
considered only as bearing on the ability of AUSA Life to meet its obligations
under the Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account.
28
<PAGE>
Financial Statements
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's
Edge Variable Annuity
Year ended December 31, 1999
with Report of Independent Auditors
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Financial Statements
Year ended December 31, 1999
Contents
Report of Independent Auditors.................................................1
Financial Statements
Balance Sheets.................................................................2
Statements of Operations......................................................14
Statements of Changes in Contract Owners' Equity..............................22
Notes to Financial Statements.................................................31
<PAGE>
Report of Independent Auditors
The Board of Directors and Contract Owners
of the Advisor's Edge Variable Annuity,
AUSA Life Insurance Company, Inc.
We have audited the accompanying balance sheets of certain subaccounts of AUSA
Life Insurance Company, Inc. Separate Account C (comprised of the DFA Small
Value, DFA Large Value, DFA International Value, DFA International Small, DFA
Short-Term Fixed, DFA Global Bond, Federated American Leaders Fund II, Federated
Utility Fund II, Federated Prime Money Fund II, Federated High Income Bond Fund
II, Federated Fund for U.S. Government Securities II, Wanger U.S. Small Cap
Advisor, Wanger International Small Cap Advisor, Montgomery Growth, Montgomery
Emerging Markets, Strong International Stock Fund II, Strong Schafer Value Fund
II, Stein Roe Venture Fund Variable Series, Warburg Pincus International Equity,
Warburg Pincus Small Company Growth, T. Rowe Price International Stock, Dreyfus
SmallCap Value, Endeavor Enhanced Index, WRL Alger Aggressive Growth, WRL Janus
Global, WRL Janus Growth, WRL LKCM Strategic Total Return, and the WRL J. P.
Morgan Real Estate Securities subaccounts), which are available for investment
by contract owners of the Advisor's Edge Variable Annuity, as of December 31,
1999, and the related statements of operations for the period then ended as
indicated thereon and changes in contract owners' equity for the periods
indicated thereon. These financial statements are the responsibility of the
Separate Account's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of mutual fund shares owned as of December 31,
1999, by correspondence with the mutual funds' transfer agents. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts of AUSA Life Insurance Company, Inc. Separate Account C which are
available for investment by contract owners of the Advisor's Edge Variable
Annuity at December 31, 1999, and the results of their operations for the period
then ended as indicated thereon and changes in their contract owners' equity for
the periods indicated thereon in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 28, 2000
1
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Balance Sheets
December 31, 1999
<TABLE>
<CAPTION>
DFA Small DFA Large
Value Value
Subaccount Subaccount
---------------------------------
<S> <C> <C>
Assets
Cash $ - $ 4
Investments in mutual funds, at current market value:
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio 41,049 -
DFA Large Value Portfolio - 92,767
DFA International Value Portfolio - -
DFA International Small Portfolio - -
DFA Short-Term Fixed Portfolio - -
DFA Global Bond Portfolio - -
The Federated Insurance Series:
Federated American Leaders Fund II - -
Federated Utility Fund II - -
Federated Prime Money Fund II - -
Federated High Income Bond Fund II - -
Federated Fund for U. S. Government Securities II - -
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - -
Wanger International Small Cap Advisor - -
The Montgomery Funds III:
Montgomery Growth Portfolio - -
Montgomery Emerging Markets Portfolio - -
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II - -
Strong Schafer Value Fund II - -
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series - -
Warburg Pincus Trust:
Warburg Pincus International Equity Portfolio - -
Warburg Pincus Small Company Growth Portfolio - -
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio - -
Dreyfus SmallCap Value Portfolio - -
Endeavor Enhanced Index Portfolio - -
WRL Series Fund, Inc.:
WRL Alger Aggressive Growth Portfolio - -
WRL Janus Global Portfolio - -
WRL Janus Growth Portfolio - -
WRL LKCM Strategic Total Return Portfolio - -
WRL J. P. Morgan Real Estate Securities Portfolio - -
-------------------------------
Total investments in mutual funds 41,049 92,767
-------------------------------
Total assets $41,049 $92,771
===============================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Federated
DFA DFA American Federated Federated
DFA International Short-Term DFA Global Leaders Utility Prime Money
International Small Fixed Bond Fund II Fund II Fund II
Value Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- ------------------ ---------------- -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ 3 $ - $ 5 $ 6
- - - - - - -
- - - - - - -
185,278 - - - - - -
- 42,004 - - - - -
- - 23,057 - - - -
- - - 403,104 - - -
- - - - 362,415 - -
- - - - 77,168 -
- - - - - - 191,975
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- ----------------------------------------------------------------------------------------------------------------
185,278 42,004 23,057 403,104 362,415 77,168 191,975
- ----------------------------------------------------------------------------------------------------------------
$185,278 $ 42,004 $ 23,057 $403,107 $362,415 $ 77,173 $191,981
================================================================================================================
</TABLE>
3
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
DFA Small DFA Large
Value Value
Subaccount Subaccount
---------------------------------
<S> <C> <C>
Liabilities and contract owners' equity
Liabilities:
Contract terminations payable $ 1 $ -
---------------------------------
Total liabilities 1 -
Contract owners' equity:
Deferred annuity contracts terminable by owners 41,048 92,771
---------------------------------
Total liabilities and contract owners' equity $41,049 $92,771
=================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
Federated
DFA DFA American Federated Federated
DFA International Short-Term DFA Global Leaders Utility Prime Money
International Small Fixed Bond Fund II Fund II Fund II
Value Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1 $ 1 $ - $ - $ 2 $ - $ -
- --------------------------------------------------------------------------------------------------------------------------
1 1 - - 2 - -
185,277 42,003 23,057 403,107 362,413 77,173 191,981
- --------------------------------------------------------------------------------------------------------------------------
$185,278 $ 42,004 $ 23,057 $403,107 $362,415 $ 77,173 $191,981
==========================================================================================================================
</TABLE>
5
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
Federated Fund
for U. S.
Federated High Government
Income Bond Fund Securities II
II Subaccount Subaccount
------------------ -----------------
<S> <C> <C>
Assets
Cash $ 7 $ 5
Investments in mutual funds, at current market value:
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio - -
DFA Large Value Portfolio - -
DFA International Value Portfolio - -
DFA International Small Portfolio - -
DFA Short-Term Fixed Portfolio - -
DFA Global Bond Portfolio - -
The Federated Insurance Series:
Federated American Leaders Fund II - -
Federated Utility Fund II - -
Federated Prime Money Fund II - -
Federated High Income Bond Fund II 231,494 -
Federated Fund for U. S. Government Securities II - 93,156
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - -
Wanger International Small Cap Advisor - -
The Montgomery Funds III:
Montgomery Growth Portfolio - -
Montgomery Emerging Markets Portfolio - -
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II - -
Strong Schafer Value Fund II - -
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series - -
Warburg Pincus Trust:
Warburg Pincus International Equity Portfolio - -
Warburg Pincus Small Company Growth Portfolio - -
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio - -
Dreyfus SmallCap Value Portfolio - -
Endeavor Enhanced Index Portfolio - -
WRL Series Fund, Inc.:
WRL Alger Aggressive Growth Portfolio - -
WRL Janus Global Portfolio - -
WRL Janus Growth Portfolio - -
WRL LKCM Strategic Total Return Portfolio - -
WRL J. P. Morgan Real Estate Securities Portfolio - -
-----------------------------------
Total investments in mutual funds 231,494 93,156
-----------------------------------
Total assets $231,501 $ 93,161
===================================
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Stein Roe
Wanger Strong Special
Wanger U. S. International Montgomery International Strong Venture Fund
Small Cap Small Cap Montgomery Emerging Stock Schafer Variable
Advisor Advisor Growth Markets Fund II Value Series
Subaccount Subaccount Subaccount Subaccount Subaccount Fund II Subaccount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ - $ - $ -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
125,738 - - - - - -
- 198,534 - - - - -
- - 172,455 - - - -
- - - 47,584 - - -
- - - - 22,789 - -
- - - - - 1,044 -
- - - - - - 11,364
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- --------------------------------------------------------------------------------------------------------------------------
125,738 198,534 172,455 47,584 22,789 1,044 11,364
- --------------------------------------------------------------------------------------------------------------------------
$125,738 $198,534 $172,455 $ 47,584 $ 22,789 $ 1,044 $ 11,364
==========================================================================================================================
</TABLE>
7
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
Federated Fund
Federated High for U. S.
Income Bond Government
Fund II Securities II
Subaccount Subaccount
-----------------------------------
<S> <C> <C>
Liabilities and contract owners' equity Liabilities:
Contract terminations payable $ - $ -
-----------------------------------
Total liabilities - -
Contract owners' equity:
Deferred annuity contracts terminable by owners 231,501 93,161
-----------------------------------
Total liabilities and contract owners' equity $231,501 $ 93,161
===================================
</TABLE>
See accompanying notes.
8
<PAGE>
<TABLE>
<CAPTION>
Stein Roe
Wanger Strong Strong Special
Wanger U. S. International Montgomery International Schafer Venture Fund
Small Cap Small Cap Montgomery Emerging Stock Value Variable
Advisor Advisor Growth Markets Fund II Fund II Series
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 8 $ 2 $ 3 $ 2 $ - $ - $ 1
- --------------------------------------------------------------------------------------------------------------------------
8 2 3 2 - - 1
125,730 198,532 172,452 47,582 22,789 1,044 11,363
- --------------------------------------------------------------------------------------------------------------------------
$125,738 $198,534 $172,455 $ 47,584 $ 22,789 $ 1,044 $ 11,364
==========================================================================================================================
</TABLE>
9
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
International Small Company
Equity Growth
Subaccount Subaccount
------------------ -----------------
<S> <C> <C>
Assets
Cash $ - $ 3
Investments in mutual funds, at current market value:
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio - -
DFA Large Value Portfolio - -
DFA International Value Portfolio - -
DFA International Small Portfolio - -
DFA Short-Term Fixed Portfolio - -
DFA Global Bond Portfolio - -
The Federated Insurance Series:
Federated American Leaders Fund II - -
Federated Utility Fund II - -
Federated Prime Money Fund II - -
Federated High Income Bond Fund II - -
Federated Fund for U. S. Government Securities II - -
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - -
Wanger International Small Cap Advisor - -
The Montgomery Funds III:
Montgomery Growth Portfolio - -
Montgomery Emerging Markets Portfolio - -
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II - -
Strong Schafer Value Fund II
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series - -
Warburg Pincus Trust:
Warburg Pincus International Equity Portfolio 13,186 -
Warburg Pincus Small Company Growth Portfolio - 61,954
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio - -
Dreyfus SmallCap Value Portfolio - -
Endeavor Enhanced Index Portfolio - -
WRL Series Fund, Inc.:
WRL Alger Aggressive Growth Portfolio - -
WRL Janus Global Portfolio - -
WRL Janus Growth Portfolio - -
WRL LKCM Strategic Total Return Portfolio - -
WRL J. P. Morgan Real Estate Securities Portfolio - -
------------------ -----------------
Total investments in mutual funds 13,186 61,954
------------------ -----------------
Total assets $13,186 $61,957
================== =================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
WRL
LKCM WRL J. P.
T. Rowe Price Dreyfus Endeavor WRL Alger Strategic Morgan Real
International SmallCap Enhanced Aggressive WRL Janus WRL Janus Return Estate
Stock Value Index Growth Global Growth Total Securities
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ - $ - $ - $ -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
145,141 - - - - - - -
- 43,907 - - - - - -
- - 133,115 - - - - -
- - - 1,467 - - - -
- - - - 14,146 - - -
- - - - - 15,270 - -
- - - - - - 1,091 -
- - - - - - - 956
- --------------------------------------------------------------------------------------------------------------------------
145,141 43,907 133,115 1,467 14,146 15,270 1,091 956
- --------------------------------------------------------------------------------------------------------------------------
$145,141 $ 43,907 $133,115 $ 1,467 $ 14,146 $ 15,270 $ 1,091 $ 956
==========================================================================================================================
</TABLE>
11
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
International Small Company
Equity Growth
Subaccount Subaccount
----------------------------------
<S> <C> <C>
Liabilities and contract owners' equity Liabilities:
Contract terminations payable $ 2 $ -
----------------------------------
Total liabilities 2 -
Contract owners' equity:
Deferred annuity contracts terminable by owners 13,184 61,957
---------------------------------
Total liabilities and contract owners' equity $13,186 $61,957
=================================
</TABLE>
See accompanying notes.
12
<PAGE>
<TABLE>
<CAPTION>
WRL
T. Rowe LKCM WRL J. P.
Price Dreyfus Endeavor WRL Alger Strategic Morgan Real
International SmallCap Enhanced Aggressive WRL Janus WRL Janus Total Estate
Stock Value Index Growth Global Growth Return Securities
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 8 $ 2 $ 2 $ - $ - $ - $ - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
8 2 2 - - - - -
145,133 43,905 133,113 1,467 14,146 15,270 1,091 956
- ------------------------------------------------------------------------------------------------------------------------------------
$145,141 $ 43,907 $133,115 $ 1,467 $ 14,146 $ 15,270 $ 1,091 $ 956
====================================================================================================================================
</TABLE>
13
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Operations
Year ended December 31, 1999, except as noted
<TABLE>
<CAPTION>
DFA Small Value DFA Large Value
Subaccount Subaccount
------------------------------------
<S> <C> <C>
Net investment income (loss)
Income:
Dividends $ 7,499 $ 17,713
Expenses:
Administrative, mortality and expense risk charges 302 622
------------------------------------
Net investment income (loss) 7,197 17,091
Net realized and unrealized capital gain (loss) from
investments
Net realized
capital gain (loss) from sales of
investments:
Proceeds from sales 38,146 37,237
Cost of investments sold 38,346 31,907
------------------------------------
Net realized capital gain (loss) from sales of investments (200) 5,330
Net change in unrealized appreciation/depreciation of
investments:
Beginning of the year (2,731) 7,245
End of the year (4,219) (9,147)
------------------------------------
Net change in unrealized appreciation/depreciation of
investments
(1,488) (16,392)
------------------------------------
Net realized and unrealized capital gain (loss) from
investments
(1,688) (11,062)
------------------------------------
Increase (decrease) from operations $ 5,509 $ 6,029
====================================
</TABLE>
(1) Commencement of operations, September 21, 1999.
(2) Commencement of operations, September 1, 1999.
See accompanying notes.
14
<PAGE>
<TABLE>
<CAPTION>
Federated
DFA DFA American
International International DFA Short- DFA Global Leaders
Value Small Term Fixed Bond Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,193 $ 1,404 $ 1,032 $ 22,736 $ 33,412
761 369 248 2,635 2,504
- ------------------------------------------------------------------------------------------------------------
14,432 1,035 784 20,101 30,908
57,091 37,285 34,174 5,507 279,825
50,722 40,420 33,426 5,197 258,113
- ------------------------------------------------------------------------------------------------------------
6,369 (3,135) 748 310 21,712
75 (15,028) (88) 12,009 22,038
(341) (1,929) (372) 4,388 (13,848)
- ------------------------------------------------------------------------------------------------------------
(416) 13,099 (284) (7,621) (35,886)
- ------------------------------------------------------------------------------------------------------------
5,953 9,964 464 (7,311) (14,174)
- ------------------------------------------------------------------------------------------------------------
$ 20,385 $ 10,999 $ 1,248 $ 12,790 $ 16,734
============================================================================================================
</TABLE>
15
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Operations (continued)
<TABLE>
<CAPTION>
Federated Federated
Utility Prime Money
Fund II Fund II
Subaccount Subaccount
--------------------------------------
<S> <C> <C>
Net investment income (loss)
Income:
Dividends $ 9,538 $ 6,848
Expenses:
Administrative, mortality and expense risk charges 752 851
--------------------------------------
Net investment income (loss) 8,786 5,997
Net realized and unrealized capital gain (loss) from
investments
Net realized capital gain (loss) from sales of
investments:
Proceeds from sales 126,228 605,135
Cost of investments sold 125,733 605,135
--------------------------------------
Net realized capital gain (loss) from sales of investments 495 -
Net change in unrealized appreciation/depreciation of investments:
Beginning of the year 8,792 -
End of the year 331 -
--------------------------------------
Net change in unrealized appreciation/depreciation of investments
(8,461) -
--------------------------------------
Net realized and unrealized capital gain (loss) from investments
(7,966) -
--------------------------------------
Increase (decrease) from operations $ 820 $ 5,997
======================================
</TABLE>
(1) Commencement of operations, September 21, 1999.
(2) Commencement of operations, September 1, 1999.
See accompanying notes.
16
<PAGE>
<TABLE>
<CAPTION>
Federated Wanger
Federated Fund for U. S. Wanger U. S. International
High Income Government Small Cap Small Cap Montgomery
Bond Fund II Securities II Advisor Advisor Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 32,361 $ 11,777 $ 15,436 $ 2,928 $ 1,722
2,217 1,247 1,066 1,221 1,071
- -------------------------------------------------------------------------------------------------------
30,144 10,530 14,370 1,707 651
262,599 200,756 169,367 190,566 136,925
271,840 200,299 161,927 143,270 120,003
- -------------------------------------------------------------------------------------------------------
(9,241) 457 7,440 47,296 16,922
7,083 13,940 8,306 (113) 545
(6,575) (1,751) 20,751 96,733 12,809
- -------------------------------------------------------------------------------------------------------
(13,658) (15,691) 12,445 96,846 12,264
- -------------------------------------------------------------------------------------------------------
(22,899) (15,234) 19,885 144,142 29,186
- -------------------------------------------------------------------------------------------------------
$ 7,245 $ (4,704) $ 34,255 $ 145,849 $ 29,837
=======================================================================================================
</TABLE>
17
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Operations (continued)
<TABLE>
<CAPTION>
Montgomery Strong
Emerging International
Markets Stock Fund II
Subaccount Subaccount
------------------------------------
<S> <C> <C>
Net investment income (loss)
Income:
Dividends $ 5 $ 11
Expenses:
Administrative, mortality and expense risk charge 288 45
------------------------------------
Net investment income (loss) (283) (34)
Net realized and unrealized capital gain (loss) from
investments
Net realized capital gain (loss) from sales of
investments:
Proceeds from sales 75,726 75
Cost of investments sold 95,260 70
------------------------------------
Net realized capital gain (loss) from sales of investments (19,534) 5
Net change in unrealized appreciation/depreciation of
investments:
Beginning of the year (27,691) (567)
End of the year 13,040 7,689
------------------------------------
Net change in unrealized appreciation/depreciation of
investments 40,731 8,256
------------------------------------
Net realized and unrealized capital gain (loss) from
investments 21,197 8,261
------------------------------------
Increase (decrease) from operations $ 20,914 $ 8,227
====================================
</TABLE>
(1) Commencement of operations, September 21, 1999.
(2) Commencement of operations, September 1, 1999.
See accompanying notes.
18
<PAGE>
<TABLE>
<CAPTION>
Stein Roe
Special Venture Warburg Warburg T. Rowe
Strong Schafer Fund Variable Pincus Pincus Price
Value Fund II Series International Small Company International
Subaccount (1) Subaccount Equity Subaccount Growth Subaccount Stock Subaccount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 41 $ - $ 115 $ 1,748 $ 619
2 32 67 102 368
- ----------------------------------------------------------------------------------------------------------------
39 (32) 48 1,646 251
2 32 4,615 1,446 24,870
2 39 4,913 1,284 22,642
- ----------------------------------------------------------------------------------------------------------------
- (7) (298) 162 2,228
- (908) (860) 45 1,931
5 2,420 3,715 19,466 27,714
- ----------------------------------------------------------------------------------------------------------------
5 3,328 4,575 19,421 25,783
- ----------------------------------------------------------------------------------------------------------------
5 3,321 4,277 19,583 28,011
- ----------------------------------------------------------------------------------------------------------------
$ 44 $ 3,289 $ 4,325 $21,229 $28,262
================================================================================================================
</TABLE>
19
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Operations (continued)
<TABLE>
<CAPTION>
Dreyfus Endeavor
SmallCap Enhanced
Value Index
Subaccount Subaccount
---------------------------------------
<S> <C> <C>
Net investment income (loss) Income:
Dividends $ 2,326 $ 1,335
Expenses:
Administrative, mortality and expense risk charge 167 364
---------------------------------------
Net investment income (loss) 2,159 971
Net realized and unrealized capital gain (loss) from
investments
Net realized capital gain (loss) from sales of
investments:
Proceeds from sales 25,442 31,009
Cost of investments sold 20,872 25,707
---------------------------------------
Net realized capital gain (loss) from sales of investments 4,570 5,302
Net change in unrealized appreciation/depreciation of investments:
Beginning of the year 2,286 3,672
End of the year 2,558 10,283
---------------------------------------
Net change in unrealized appreciation/depreciation of investments
272 6,611
---------------------------------------
Net realized and unrealized capital gain (loss) from investments
4,842 11,913
---------------------------------------
Increase (decrease) from operations $ 7,001 $12,884
=======================================
</TABLE>
(1) Commencement of operations, September 21, 1999.
(2) Commencement of operations, September 1, 1999.
See accompanying notes.
20
<PAGE>
<TABLE>
<CAPTION>
WRL J. P.
WRL Alger WRL LKCM Morgan Real
Aggressive WRL Janus WRL Janus Strategic Total Estate
Growth Global Growth Return Securities
Subaccount (2) Subaccount (2) Subaccount Subaccount (2) Subaccount (2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 126 $ 462 $1,457 $ 58 $ -
3 8 9 2 2
- ----------------------------------------------------------------------------------------------------------
123 454 1,448 56 (2)
3 8 9 2 2
3 6 8 2 2
- ----------------------------------------------------------------------------------------------------------
- 2 1 - -
- - - - -
343 1,544 123 35 (41)
- ----------------------------------------------------------------------------------------------------------
343 1,544 123 35 (41)
- ----------------------------------------------------------------------------------------------------------
343 1,546 124 35 (41)
- ----------------------------------------------------------------------------------------------------------
$ 466 $2,000 $1,572 $ 91 $ (43)
==========================================================================================================
</TABLE>
21
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity
Years ended December 31, 1999 and 1998, except as noted
<TABLE>
<CAPTION>
DFA Small Value DFA Large
Subaccount Value Subaccount
----------------------------------- -----------------------------------
1999 1998 1999 1998
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 7,197 $ 4,218 $ 17,091 $ 7,237
Net realized capital gain (loss) (200) (2,816) 5,330 2,801
Net change in unrealized appreciation/
depreciation of investments (1,488) (11,534) (16,392) (2,821)
----------------------------------- -----------------------------------
Increase (decrease) from operations 5,509 (10,132) 6,029 7,217
Contract transactions:
Net contract purchase payments 6,950 2,125 21,981 5,001
Transfer payments from (to) other
subaccounts or general account (7,596) 5,377 1,255 (6,905)
Contract terminations, withdrawals and other
deductions (19,458) (34,785) (32,430) (60,604)
----------------------------------- -----------------------------------
Increase (decrease) from contract transactions (20,104) (27,283) (9,194) (62,508)
----------------------------------- -----------------------------------
Net increase (decrease) in contract owners'
equity (14,595) (37,415) (3,165) (55,291)
Contract owners' equity:
Beginning of the period 55,643 93,058 95,936 151,227
----------------------------------- -----------------------------------
End of the period $ 41,048 $ 55,643 $ 92,771 $ 95,936
=================================== ===================================
</TABLE>
(1) Commencement of operations, May 19, 1998.
(2) Commencement of operations, September 21, 1999.
(3) Commencement of operations, September 1, 1999.
See accompanying notes.
22
<PAGE>
<TABLE>
<CAPTION>
DFA International DFA International DFA Short-Term DFA Global
Value Subaccount Small Subaccount Fixed Subaccount Bond Subaccount
- ------------------------------ ---------------------------- -------------------------- ----------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ---------------- ------------- -------------- ------------- ------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14,432 $ 4,724 $ 1,035 $ 4,054 $ 784 $ 3,452 $ 20,101 $ 4,817
6,369 (4,092) (3,135) (14,241) 748 72 310 (115)
(416) 5,567 13,099 9,895 (284) 1,248 (7,621) 16,081
- ------------------------------ ---------------------------- -------------------------- ----------------------------
20,385 6,199 10,999 (292) 1,248 4,772 12,790 20,783
10,012 3,998 2,250 3,000 1 - 11,783 6,000
103,368 (2,232) (3,034) 8,710 13,037 (265,085) 8,514 265,458
(32,430) (53,510) (25,944) (43,245) (19,458) (33,465) (25) -
- ------------------------------ ---------------------------- -------------------------- ----------------------------
80,950 (51,744) (26,728) (31,535) (6,420) (298,550) 20,272 271,458
- ------------------------------ ---------------------------- -------------------------- ----------------------------
101,335 (45,545) (15,729) (31,827) (5,172) (293,778) 33,062 292,241
83,942 129,487 57,732 89,559 28,229 322,007 370,045 77,804
- ------------------------------ ---------------------------- -------------------------- ----------------------------
$ 185,277 $ 83,942 $ 42,003 $ 57,732 $ 23,057 $ 28,229 $ 403,107 $ 370,045
============================== ============================ ========================== ============================
</TABLE>
23
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Federated American
Leaders Fund II Federated Utility
Subaccount Fund II Subaccount
-------------------------------- --------------------------------
1999 1998 1999 1998
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 30,908 $ 5,945 $ 8,786 $ 4,575
Net realized capital gain (loss) 21,712 (16,518) 495 8,513
Net change in unrealized appreciation/
depreciation of investments (35,886) 20,112 (8,461) (330)
-------------------------------- --------------------------------
Increase (decrease) from operations 16,734 9,539 820 12,758
Contract transactions:
Net contract purchase payments 57,550 218,619 11,236 54,813
Transfer payments from (to) other
subaccounts or general account 30,866 26,651 (29,465) 37,162
Contract terminations, withdrawals and other
deductions (46,111) (28,471) (60,613) (27,593)
-------------------------------- --------------------------------
Increase (decrease) from contract transactions 42,305 216,799 (78,842) 64,382
-------------------------------- --------------------------------
Net increase (decrease) in contract owners'
equity 59,039 226,338 (78,022) 77,140
Contract owners' equity:
Beginning of the period 303,374 77,036 155,195 78,055
-------------------------------- --------------------------------
End of the period $ 362,413 $ 303,374 $ 77,173 $ 155,195
================================ ================================
</TABLE>
(1) Commencement of operations, May 19, 1998.
(2) Commencement of operations, September 21, 1999.
(3) Commencement of operations, September 1, 1999.
See accompanying notes.
24
<PAGE>
<TABLE>
<CAPTION>
Federated High Federated Fund for
Federated Prime Income Bond Fund II U. S. Government Wanger U. S. Small
Money Fund II Subaccount Subaccount Securities II Subaccount Cap Advisor Subaccount
- ------------------------------ ---------------------------- -------------------------- -------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ---------------- ------------- -------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,997 $ 2,543 $ 30,144 $ 12,153 $ 10,530 $ 2,662 $ 14,370 $ 3,325
- - (9,241) (8,107) 457 6,941 7,440 (15,261)
- - (13,658) (2,499) (15,691) 8,171 12,445 8,325
- ---------------- ------------- -------------- ------------- ------------- ------------ ------------ ------------
5,997 2,543 7,245 1,547 (4,704) 17,774 34,255 (3,611)
376,119 211,103 33,708 221,045 24,616 87,352 24,388 74,083
(81,062) (104,814) (54,277) (1,228) (20,051) (11,965) (18,304) 16,635
(220,107) (826) (154,890) (327,953) (153,851) (91,509) (36,518) (28,198)
- ---------------- ------------- -------------- ------------- ------------- ------------ ------------ ------------
74,950 105,463 (175,459) (108,136) (149,286) (16,122) (30,434) 62,520
- ---------------- ------------- -------------- ------------- ------------- ------------ ------------ ------------
80,947 108,006 (168,214) (106,589) (153,990) 1,652 3,821 58,909
111,034 3,028 399,715 506,304 247,151 245,499 121,909 63,000
- ---------------- ------------- -------------- ------------- ------------- ------------ ------------ ------------
$191,981 $111,034 $231,501 $399,715 $ 93,161 $247,151 $125,730 $121,909
================ ============= ============== ============= ============= ============ ============ ============
</TABLE>
25
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Wanger International Small Montgomery Growth
Cap Advisor Subaccount Subaccount
-------------------------------- --------------------------------
1999 1998 1999 1998
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 1,707 $ (277) $ 651 $ 416
Net realized capital gain (loss) 47,296 (4,313) 16,922 (4,060)
Net change in unrealized appreciation/
depreciation of investments 96,846 1,389 12,264 3,611
-------------------------------- --------------------------------
Increase (decrease) from operations 145,849 (3,201) 29,837 (33)
Contract transactions:
Net contract purchase payments 19,892 98,197 54,941 73,389
Transfer payments from (to) other
subaccounts or general account (88,036) 67,312 9,627 (15,092)
Contract terminations, withdrawals and other
deductions (35,145) (28,154) (10,833) (7,155)
-------------------------------- --------------------------------
Increase (decrease) from contract transactions (103,289) 137,355 53,735 51,142
-------------------------------- --------------------------------
Net increase (decrease) in contract owners'
equity 42,560 134,154 83,572 51,109
Contract owners' equity:
Beginning of the period 155,972 21,818 88,880 37,771
-------------------------------- --------------------------------
End of the period $ 198,532 $ 155,972 $ 172,452 $ 88,880
================================ ================================
</TABLE>
(1) Commencement of operations, May 19, 1998.
(2) Commencement of operations, September 21, 1999.
(3) Commencement of operations, September 1, 1999.
See accompanying notes.
26
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Special
Montgomery Venture Fund
Emerging Markets Strong International Stock Strong Schafer Value Variable Series
Subaccount Fund II Subaccount Fund II Subaccount Subaccount
- ---------------------------------- ---------------------------------- -------------------- ---------------------------------
1999 1998 1999 1998 1999 (2) 1999 1998
- ---------------------------------- ---------------------------------- -------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (283) $ (282) $ (34) $ 177 $ 39 $ (32) $ 2,693
(19,534) (16,707) 5 (6,090) - (7) (8,501)
40,731 (20,010) 8,256 4,136 5 3,328 1,202
- ---------------------------------- ---------------------------------- -------------- ---------------------------------
20,914 (36,999) 8,227 (1,777) 44 3,289 (4,606)
15,223 70,247 11,840 3,150 1,000 5,450 3,151
(48,120) (17,554) (1) (28,676) - (1) (28,106)
(1,541) (9,399) - - - - -
- ---------------------------------- ---------------------------------- -------------- ---------------------------------
(34,438) 43,294 11,839 (25,526) 1,000 5,449 (24,955)
- ---------------------------------- ---------------------------------- -------------- ---------------------------------
(13,524) 6,295 20,066 (27,303) 1,044 8,738 (29,561)
61,106 54,811 2,723 30,026 - 2,625 32,186
- ---------------------------------- ---------------------------------- -------------- ---------------------------------
$ 47,582 $ 61,106 $ 22,789 $ 2,723 $ 1,044 $ 11,363 $ 2,625
================================== ================================== ============== =================================
</TABLE>
27
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Small
International Equity Company Growth
Subaccount Subaccount
---------------------------------- ----------------------------------
1999 1998 1999 1998
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 48 $ (29) $ 1,646 $ (53)
Net realized capital gain (loss) (298) (263) 162 960
Net change in unrealized appreciation/
depreciation of investments 4,575 1,703 19,421 287
---------------------------------- ----------------------------------
Increase (decrease) from operations 4,325 1,411 21,229 1,194
Contract transactions:
Net contract purchase payments 4,300 12,805 5,931 2,670
Transfer payments from (to) other
subaccounts or general account (2,208) (17,534) 34,051 (20,045)
Contract terminations, withdrawals and other
deductions (2,342) - (841) -
---------------------------------- ----------------------------------
Increase (decrease) from contract transactions (250) (4,729) 39,141 (17,375)
---------------------------------- ----------------------------------
Net increase (decrease) in contract owners'
equity 4,075 (3,318) 60,370 (16,181)
Contract owners' equity:
Beginning of the period 9,109 12,427 1,587 17,768
---------------------------------- ----------------------------------
End of the period $ 13,184 $ 9,109 $ 61,957 $ 1,587
================================== ==================================
</TABLE>
(1) Commencement of operations, May 19, 1998.
(2) Commencement of operations, September 21, 1999.
(3) Commencement of operations, September 1, 1999.
See accompanying notes.
28
<PAGE>
<TABLE>
<CAPTION>
WRL Alger
T. Rowe Price Aggressive
International Stock Dreyfus SmallCap Endeavor Enhanced Growth
Subaccount Value Subaccount Index Subaccount Subaccount
--------------------------------- --------------------------------- --------------------------------- ---------------
1999 1998 (1) 1999 1998 (1) 1999 1998 (1) 1999 (3)
--------------------------------- --------------------------------- --------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 251 $ 159 $ 2,159 $ 2,029 $ 971 $ (20) $ 123
2,228 (629) 4,570 (3,345) 5,302 1,011 -
25,783 1,931 272 2,286 6,611 3,672 343
--------------------------------- --------------------------------- --------------------------------- ---------------
28,262 1,461 7,001 970 12,884 4,663 466
3,512 - 599 - 35,579 1 1,001
114,184 34,333 40,838 30,568 88,534 35,888 -
(24,502) (12,117) (25,274) (10,797) (30,553) (13,883) -
--------------------------------- --------------------------------- --------------------------------- ---------------
93,194 22,216 16,163 19,771 93,560 22,005 1,001
--------------------------------- --------------------------------- --------------------------------- ---------------
121,456 23,677 23,164 20,741 106,444 26,669 1,467
23,677 - 20,741 - 26,669 - -
--------------------------------- --------------------------------- --------------------------------- ---------------
$ 145,133 $ 23,677 $ 43,905 $ 20,741 $ 133,113 $ 26,669 $ 1,467
================================= ================================= ================================= ===============
</TABLE>
29
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
WRL J. P.
WRL LKCM Morgan Real
WRL Janus WRL Janus Strategic Estate
Global Growth Total Return Securities
Subaccount Subaccount Subaccount Subaccount
-------------- -------------- -------------- --------------
1999 (3) 1999 (3) 1999 (3) 1999 (3)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 454 $ 1,448 $ 56 $ (2)
Net realized capital gain (loss) 2 1 - -
Net change in unrealized appreciation/
depreciation of investments 1,544 123 35 (41)
-------------- -------------- -------------- --------------
Increase (decrease) from operations 2,000 1,572 91 (43)
Contract transactions:
Net contract purchase payments 6,234 7,805 1,000 999
Transfer payments from (to) other
subaccounts or general account 6,000 6,000 - -
Contract terminations, withdrawals and
other deductions (88) (107) - -
-------------- -------------- -------------- --------------
Increase (decrease) from contract
transactions 12,146 13,698 1,000 999
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity 14,146 15,270 1,091 956
Contract owners' equity:
Beginning of the period - - - -
-------------- -------------- -------------- --------------
End of the period $ 14,146 $ 15,270 $ 1,091 $ 956
============== ============== ============== ==============
</TABLE>
(1) Commencement of operations, May 19, 1998.
(2) Commencement of operations, September 21, 1999.
(3) Commencement of operations, September 1, 1999.
See accompanying notes.
30
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements
December 31, 1999
1. Accounting Policies
Organization of the Account
AUSA Life Insurance Company, Inc. Separate Account C (the "Mutual Fund Account")
is a segregated investment account of AUSA Life Insurance Company, Inc.
("AUSA"), an indirect wholly-owned subsidiary of AEGON N.V., a holding company
organized under the laws of The Netherlands.
The Mutual Fund Account is registered with the Securities and Exchange
Commission as a Unit Investment Trust pursuant to provisions of the Investment
Company Act of 1940. The Mutual Fund Account consists of forty-six investment
subaccounts, six of which are invested in specified portfolios of the DFA
Investment Dimensions Group, Inc., five of which are invested in specified
portfolios of the Federated Insurance Series, two of which are invested in
specified portfolios of the Wanger Advisors Trust, two of which are invested in
specified portfolios of the Montgomery Funds III, two of which are invested in
specified portfolios of the Strong Variable Insurance Funds, Inc., one of which
is invested in the Stein Roe Special Venture Fund of the Stein Roe Variable
Investment Trust, two of which are invested in specified portfolios of the
Warburg Pincus Trust, three of which are invested in specified portfolios of the
Endeavor Series Trust, and five of which are invested in specified portfolios of
the WRL Series Fund, Inc. (each a "Series Fund" and collectively "the Series
Funds"). Activity in these twenty-eight subaccounts is available to contract
owners of the Advisor's Edge Variable Annuity. Activity in the portfolios of the
DFA Investment Dimensions Group, Inc. and the Federated Prime Money Fund II
portfolios of the Federated Insurance Series are also available to contract
owners of the Dimensional Variable Annuity, also offered by AUSA. The amounts
reported herein represent the activity related to contract owners of the
Advisor's Edge Variable Annuity only. The remaining eighteen subaccounts (not
included herein), are available to contract owners of the Prism Variable
Annuity, Dimensional Variable Annuity, and Marquee Variable Annuity, also issued
by AUSA.
For the period March 1997 through April 1999, the portfolios of the DFA
Investment Dimensions Group, Inc. were not available to new contract owners
within the Mutual Fund Account. Existing contract owners could continue to
allocate purchase payments to, or transfers into, these subaccounts. Effective
May 1, 1999, the portfolios of the DFA Investment Dimensions Group, Inc. were
again made available for investment to all contract owners of the Advisor's Edge
Variable Annuity.
31
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
1. Accounting Policies (continued)
Investments
Net purchase payments received by the Mutual Fund Account for the Advisor's Edge
Variable Annuity are invested in the portfolios of the Series Funds as selected
by the contract owner. Investments are stated at the closing net asset values
per share on December 31, 1999.
Prior to July 17, 1998, realized capital gains and losses from the sale of
shares in the Series Funds were determined on the basis of average cost.
Subsequent to this date, such gains or losses are determined on the first-in,
first-out basis. This change was implemented by establishing the average cost of
the portfolio as of July 17, 1998 as the opening cost for purposes of the
first-in, first-out basis. This change had no effect on "net realized and
unrealized capital gain (loss) from investments" and "increase (decrease) from
operations" as reported in the Statements of Operations.
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed) and dividend income is recorded on the ex-dividend
date. Unrealized gains or losses from investments in the Series Funds are
credited or charged to contract owners' equity.
Dividend Income
Dividends received from the Series Funds investments are reinvested to purchase
additional fund shares.
2. Investments
A summary of the mutual fund investments at December 31, 1999 follows:
<TABLE>
<CAPTION>
Net Asset
Number of Value Per Market
Shares Held Share Value Cost
----------------------------------------------------------
<S> <C> <C> <C> <C>
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio 3,793.818 $ 10.82 $ 41,049 $ 45,268
DFA Large Value Portfolio 7,108.563 13.05 92,767 101,914
DFA International Value Portfolio 15,063.252 12.30 185,278 185,619
DFA International Small Portfolio 5,153.884 8.15 42,004 43,933
DFA Short-Term Fixed Portfolio 2,307.976 9.99 23,057 23,429
DFA Global Bond Portfolio 39,793.111 10.13 403,104 398,716
</TABLE>
32
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
A summary of the mutual fund investments at December 31, 1999 follows:
<TABLE>
<CAPTION>
Net Asset
Number of Value Per Market
Shares Held Share Value Cost
------------------------------------------------------------
<S> <C> <C> <C> <C>
The Federated Insurance Series:
Federated American Leaders Fund II 17,407.053 $ 20.82 $362,415 $376,263
Federated Utility Fund II 5,377.585 14.35 77,168 76,837
Federated Prime Money Fund II 191,974.880 1.00 191,975 191,975
Federated High Income Bond Fund II 22,606.844 10.24 231,494 238,069
Federated Fund for U. S. Government
Securities II 8,821.621 10.56 93,156 94,907
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor 5,053.793 24.88 125,738 104,987
Wanger International Small Cap Advisor 4,546.239 43.67 198,534 101,801
The Montgomery Funds III:
Montgomery Growth Portfolio 9,377.661 18.39 172,455 159,646
Montgomery Emerging Markets Portfolio 4,381.602 10.86 47,584 34,544
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II 1,392.142 16.37 22,789 15,100
Strong Schafer Value Fund II 114.497 9.12 1,044 1,039
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable
Series 563.416 20.17 11,364 8,944
Warburg Pincus Trust:
Warburg Pincus International Equity
Portfolio 789.608 16.70 13,186 9,471
Warburg Pincus Small Company Growth
Portfolio 2,364.643 26.20 61,954 42,488
Endeavor Series Trust:
T. Rowe Price International Stock 6,951.190 20.88 145,141 117,427
Portfolio
Dreyfus SmallCap Value Portfolio 2,659.415 16.51 43,907 41,349
Endeavor Enhanced Index Portfolio 7,330.133 18.16 133,115 122,832
WRL Series Fund, Inc.:
WRL Alger Aggressive Growth Portfolio 44.087 33.275 1,467 1,124
WRL Janus Global Portfolio 377.624 37.461 14,146 12,602
WRL Janus Growth Portfolio 195.776 77.996 15,270 15,147
WRL LKCM Strategic Total Return Portfolio 64.762 16.847 1,091 1,056
WRL J. P. Morgan Real Estate Securities
Portfolio 118.690 8.056 956 997
</TABLE>
33
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998
------------------------------- -------------------------------
Purchases Sales Purchases Sales
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio $ 25,239 $ 38,146 $ 14,884 $ 37,948
DFA Large Value Portfolio 45,129 37,237 18,004 73,274
DFA International Value Portfolio 152,474 57,091 14,269 61,289
DFA International Small Portfolio 11,593 37,285 19,151 46,644
DFA Short-Term Fixed Portfolio 28,538 34,174 10,909 306,007
DFA Global Bond Portfolio 45,878 5,507 281,202 4,928
The Federated Insurance Series:
Federated American Leaders Fund II 353,039 279,825 430,873 208,128
Federated Utility Fund II 56,167 126,228 128,589 59,632
Federated Prime Money Fund II 686,047 605,135 353,028 244,994
Federated High Income Bond Fund II 117,276 262,599 264,480 360,462
Federated Fund for U. S. Government
Securities II 61,995 200,756 95,884 109,344
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor 153,310 169,367 157,080 91,234
Wanger International Small Cap Advisor 88,985 190,566 165,753 28,674
The Montgomery Funds III:
Montgomery Growth Portfolio 191,313 136,925 92,278 40,719
Montgomery Emerging Markets Portfolio 41,007 75,726 84,022 41,010
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II 11,881 75 3,335 28,685
Strong Schafer Value Fund II 1,041 2 - -
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund,
Variable Series 5,450 32 5,746 28,008
</TABLE>
34
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998
------------------------------- -------------------------------
Purchases Sales Purchases Sales
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Warburg Pincus Trust:
Warburg Pincus International Equity
Portfolio $ 4,415 $ 4,615 $ 13,245 $ 18,003
Warburg Pincus Small Company Growth
Portfolio 42,230 1,446 2,815 20,243
Endeavor Series Trust:
T. Rowe Price International Stock
Portfolio 118,322 24,870 34,478 12,102
Dreyfus SmallCap Value Portfolio 43,766 25,442 32,582 10,782
Endeavor Enhanced Index Portfolio 125,542 31,009 35,854 13,868
WRL Series Fund, Inc.:
WRL Alger Aggressive Growth Portfolio 1,127 3 - -
WRL Janus Global Portfolio 12,608 8 - -
WRL Janus Growth Portfolio 15,155 9 - -
WRL LKCM Strategic Total Return
Portfolio 1,058 2 - -
WRL J. P. Morgan Real Estate
Securities Portfolio 999 2 - -
</TABLE>
3. Contract Owner's Equity
Contract owners' equity for certain of the Subaccounts includes amounts which
represent the current market value of AUSA's capital contribution to the
Subaccounts. A summary of these amounts follows:
Market
Subaccount Value
----------------------------------------------------------------------------
Strong Schafer Value Fund II $1,044
WRL Alger Aggressive Growth 1,467
WRL Janus Global 1,486
WRL Janus Growth 1,366
WRL LKCM Strategic Total Return 1,091
WRL J. P. Morgan Real Estate Securities 956
35
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owner's Equity (continued)
A summary of deferred annuity contracts terminable by owners at December 31,
1999 follows:
<TABLE>
<CAPTION>
Accumulation Accumulation Total Contract
Subaccount Units Owned Unit Value Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DFA Small Value 3,205.334 $12.806099 $ 41,048
DFA Large Value 6,616.089 14.021966 92,771
DFA International Value 13,773.291 13.451899 185,277
DFA International Small 4,455.577 9.427010 42,003
DFA Short-Term Fixed 2,036.813 11.320157 23,057
DFA Global Bond 34,082.045 11.827554 403,107
Federated American Leaders Fund II 23,782.113 15.238874 362,413
Federated Utility Fund II 5,407.721 14.270905 77,173
Federated Prime Money Fund II 17,049.011 11.260547 191,981
Federated High Income Bond Fund II 20,008.060 11.570388 231,501
Federated Fund for U. S. Government Securities II 8,202.978 11.357026 93,161
Wanger U. S. Small Cap Advisor 6,994.979 17.974303 125,730
Wanger International Small Cap Advisor 7,979.789 24.879356 198,532
Montgomery Growth 11,342.188 15.204512 172,452
Montgomery Emerging Markets 5,304.135 8.970828 47,582
Strong International Stock Fund II 1,544.789 14.751926 22,789
Strong Schafer Value Fund II 105.881 9.862967 1,044
Stein Roe Special Venture Fund,
Variable Series 812.338 13.988443 11,363
Warburg Pincus International Equity 860.647 15.319078 13,184
Warburg Pincus Small Company Growth 2,898.566 21.375064 61,957
T. Rowe Price International Stock 10,469.751 13.862122 145,133
Dreyfus SmallCap Value 3,784.916 11.599986 43,905
Endeavor Enhanced Index 8,684.292 15.328057 133,113
WRL Alger Aggressive Growth 98.053 14.960783 1,467
WRL Janus Global 905.609 15.620310 14,146
WRL Janus Growth 1,117.653 13.662117 15,270
WRL LKCM Strategic Total Return 103.016 10.591918 1,091
WRL J. P. Morgan Real Estate Securities 106.288 8.998235 956
</TABLE>
36
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owner's Equity (continued)
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
DFA DFA DFA DFA DFA
Small Large International International Short-Term
Value Value Value Small Fixed
Sub-account Sub-account Subaccount Subaccount Subaccount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1, 1998
7,359 12,353 12,955 11,690 30,884
Units purchased 338 396 800 1,685 474
Units redeemed and transferred (2,955) (5,627) (6,190) (6,163) (28,774)
-------------------------------------------------------------------------------
Units outstanding at December 31, 1998
4,742 7,122 7,565 7,212 2,584
Units purchased 608 1,643 810 269 -
Units redeemed and transferred (2,145) (2,149) 5,398 (3,025) (547)
-------------------------------------------------------------------------------
Units outstanding at December 31, 1999
3,205 6,616 13,773 4,456 2,037
===============================================================================
<CAPTION>
Federated Federated
American Federated Federated High Income
DFA Global Leaders Utility Prime Money Bond
Bond Fund II Fund II Fund II Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1, 1998
7,312 6,261 6,256 291 45,383
Units purchased 25,303 22,428 4,043 19,893 20,364
Units redeemed and transferred (276) (7,590) 689 (9,932) (30,632)
-------------------------------------------------------------------------------
Units outstanding at December 31, 1998
32,339 21,099 10,988 10,252 35,115
Units purchased 1,007 3,784 781 43,804 2,876
Units redeemed and transferred 736 (1,101) (6,361) (37,007) (17,983)
-------------------------------------------------------------------------------
Units outstanding at December 31, 1999
34,082 23,782 5,408 17,049 20,008
===============================================================================
</TABLE>
37
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owner's Equity (continued)
<TABLE>
<CAPTION>
Federated Fund Wanger
for U. S. Wanger International Montgomery
Government U. S. Small Small Cap Montgomery Emerging
Securities II Cap Advisor Advisor Growth Markets
Subaccount Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1, 1998 22,834 4,703 2,280 3,049 6,210
Units purchased 7,913 7,593 12,018 7,272 11,582
Units redeemed and transferred (9,255) (3,868) (195) (3,306) (6,638)
-----------------------------------------------------------------------------------------
Units outstanding at December 31, 1998 21,492 8,428 14,103 7,015 11,154
Units purchased 2,148 1,724 1,680 3,983 2,537
Units redeemed and transferred (15,437) (3,157) (7,803) 344 (8,387)
-----------------------------------------------------------------------------------------
Units outstanding at December 31, 1999 8,203 6,995 7,980 11,342 5,304
=========================================================================================
<CAPTION>
Stein Roe
Strong Special Warburg
International Strong Venture Fund Warburg Pincus Pincus Small
Stock Schafer Value Variable International Company
Fund II Fund II Series Equity Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1, 1998 3,581 - 2,782 1,294 1,348
Units purchased 343 - 276 1,208 211
Units redeemed and transferred (3,581) - (2,782) (1,596) (1,434)
-----------------------------------------------------------------------------------------
Units outstanding at December 31, 1998 343 - 276 906 125
Units purchased 1,203 107 537 382 412
Units redeemed and transferred (1) (1) (1) (427) 2,362
-----------------------------------------------------------------------------------------
Units outstanding at December 31, 1999 1,545 106 812 861 2,899
=========================================================================================
</TABLE>
38
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owner's Equity (continued)
<TABLE>
<CAPTION>
T. Rowe Price Dreyfus Endeavor WRL Alger
International SmallCap Enhanced Aggressive WRL Janus
Stock Value Index Growth Global
Subaccount Subaccount Subaccount Subaccount Subaccount
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1, 1998 - - - - -
Units purchased 1,729 1,770 1,573 - -
Units redeemed and transferred 517 529 470 - -
-------------------------------------------------------------------------------------
Units outstanding at December 31, 1998 2,246 2,299 2,043 - -
Units purchased 288 56 2,540 99 524
Units redeemed and transferred 7,936 1,430 4,101 (1) 382
-------------------------------------------------------------------------------------
Units outstanding at December 31, 1999 10,470 3,785 8,684 98 906
=====================================================================================
<CAPTION>
WRL J. P.
WRL LKCM Morgan Real
WRL Janus Strategic Total Estate
Growth Return Securities
Subaccount Subaccount Subaccount
-------------------------------------------------
<S> <C> <C> <C>
Units outstanding at January 1, 1998 - - -
Units purchased - - -
Units redeemed and transferred - - -
-------------------------------------------------
Units outstanding at December 31, 1998 - - -
Units purchased 689 104 107
Units redeemed and transferred 429 (1) (1)
-------------------------------------------------
Units outstanding at December 31, 1999 1,118 103 106
=================================================
</TABLE>
4. Administrative, Mortality and Expense Risk Charges
An annual charge is deducted from the unit values of the subaccounts of the
Mutual Fund Account for AUSA's assumption of certain mortality and expense risks
incurred in connection with the contract. It is assessed daily based on the net
asset value of the Mutual Fund Account. The effective annual rate for this
charge is .50%.
39
<PAGE>
AUSA Life Insurance Company, Inc.
Separate Account C - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
4. Administrative, Mortality and Expense Risk Charges (continued)
An administrative charge of .15% annually is deducted from the unit values of
the subaccounts of the Mutual Fund Account. This charge is assessed daily by
AUSA. AUSA also deducts an annual policy fee of $30 per contract. The annual
policy fee is deducted proportionately from the subaccounts accumulated value.
These deductions represent reimbursement for the costs expected to be incurred
over the life of the contract for issuing and maintaining each contract and the
Mutual Fund Account.
5. Taxes
Operations of the Mutual Fund Account form a part of AUSA, which is taxed as a
life insurance company under Subchapter L of the Internal Revenue Code of 1986,
as amended (the "Code"). The operations of the Mutual Fund Account are accounted
for separately from other operations of AUSA for purposes of federal income
taxation. The Mutual Fund Account is not separately taxable as a regulated
investment company under Subchapter M of the Code and is not otherwise taxable
as an entity separate from AUSA. Under existing federal income tax laws, the
income of the Mutual Fund Account, to the extent applied to increase reserves
under the variable annuity contracts, is not taxable to AUSA.
40
<PAGE>
Financial Statements - Statutory Basis
AUSA Life Insurance Company, Inc.
Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors
<PAGE>
AUSA Life Insurance Company, Inc.
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
Contents
<TABLE>
<S> <C>
Report of Independent Auditors.................................. 1
Audited Financial Statements
Balance Sheets - Statutory Basis................................ 3
Statements of Operations - Statutory Basis...................... 5
Statements of Changes in Capital and Surplus - Statutory Basis.. 6
Statements of Cash Flow - Statutory Basis....................... 7
Notes to Financial Statements - Statutory Basis................. 8
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
AUSA Life Insurance Company, Inc.
We have audited the accompanying statutory-basis balance sheets of AUSA Life
Insurance Company, Inc., an indirect wholly-owned subsidiary of AEGON N.V., as
of December 31, 1999 and 1998 and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flow for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
"Separate Account Assets" and "Separate Account Liabilities" in the statutory-
basis balance sheets of the Company. The Separate Account financial statements
were audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the data included for the Separate Accounts,
is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Department of Insurance of the State of New York, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of AUSA Life Insurance Company, Inc. at December 31, 1999 and 1998, or the
results of its operations or its cash flows for each of the three years in the
period ended December 31, 1999.
1
<PAGE>
However, in our opinion, based on our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of AUSA Life Insurance Company, Inc. at
December 31, 1999 and 1998, and the results of its operations and its cash flow
for each of the three years in the period ended December 31, 1999, in conformity
with accounting practices prescribed or permitted by the Department of Insurance
of the State of New York.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 18, 2000
2
<PAGE>
AUSA Life Insurance Company, Inc.
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------
<S> <C> <C>
Admitted assets
Cash and invested assets:
Bonds $ 3,864,509 $ 4,151,780
Stocks:
Preferred 6,789 2,582
Common, at market (cost: $14 in 1999 and 1998) 2 2
Mortgage loans on real estate 449,603 413,107
Real estate acquired in satisfaction of debt, at cost
less accumulated depreciation ($1,239 in 1999 and
$2,474 in 1998) 16,865 33,986
Policy loans 3,276 3,181
Cash and short-term investments 81,390 61,065
Other invested assets 62,759 30,795
Short-term notes receivable from affiliates 136,300 10,400
--------------------------------
Total cash and invested assets 4,621,493 4,706,898
Receivable from affiliates 17,851 14,731
Premiums deferred and uncollected 6,572 6,408
Accrued investment income 58,103 64,859
Federal income taxes recoverable - 527
Other assets 14,901 12,567
Separate account assets 6,881,195 6,517,152
--------------------------------
Total admitted assets $11,600,115 $11,323,142
================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------
<S> <C> <C>
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 138,147 $ 109,132
Annuity 796,401 868,294
Accident and health 16,432 16,416
Policy and contract claim reserves:
Life 5,004 4,927
Accident and health 8,190 10,302
Other policyholders' funds 3,145,632 3,267,417
Remittances and items not allocated 44,643 58,724
Asset valuation reserve 82,997 84,077
Interest maintenance reserve 27,244 37,253
Deferred interest on assets purchased 733 5,230
Payable under assumption reinsurance agreement 39,118 52,837
Other liabilities 23,566 7,422
Federal income taxes payable 4,507 -
Separate account liabilities 6,874,006 6,497,865
--------------------------------
Total liabilities 11,206,620 11,019,896
Commitments and contingencies (Note 10)
Capital and surplus:
Common stock, $125 par value, 20,000 shares authorized,
issued and outstanding 2,500 2,500
Paid-in surplus 319,180 319,180
Special surplus funds 2,017 1,827
Unassigned surplus (deficit) 69,798 (20,261)
--------------------------------
Total capital and surplus 393,495 303,246
--------------------------------
Total liabilities and capital and surplus $11,600,115 $11,323,142
================================
</TABLE>
See accompanying notes.
4
<PAGE>
AUSA Life Insurance Company, Inc.
Statements of Operations - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Revenue:
Premiums and other considerations, net of
reinsurance:
Life $ 48,276 $ 22,664 $ 71,899
Annuity 1,475,991 1,132,120 1,199,470
Accident and health 29,748 32,869 39,999
Net investment income 325,049 345,660 341,540
Amortization of interest maintenance reserve 4,078 6,116 3,392
Commissions and expense allowances on
reinsurance ceded 424 302 374
Separate account fee income 51,872 43,525 -
Other income 5,531 - 17,240
-----------------------------------------------------
1,940,969 1,583,256 1,673,914
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits 32,871 32,464 39,045
Surrender benefits 1,937,450 1,117,653 1,175,051
Other benefits 21,747 20,886 14,316
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 29,016 5,762 52,500
Annuity (71,893) (42,781) 65,982
Accident and health 16 (131) (1,357)
Other 778 (67) 580
Increase (decrease) in liability for premium
and other deposit type funds (122,644) 85,461 92,280
-----------------------------------------------------
1,827,341 1,219,247 1,438,397
Insurance expenses:
Commissions 50,265 69,009 79,099
General insurance expenses 58,034 95,169 92,613
Taxes, licenses and fees 1,836 1,466 3,717
Net transfers to (from) separate accounts (79,470) 174,435 42,490
Other (16) 978 181
-----------------------------------------------------
30,649 341,057 218,100
-----------------------------------------------------
1,857,990 1,560,304 1,656,497
-----------------------------------------------------
Gain from operations before federal income tax
expense and net realized capital gains on
investments 82,979 22,952 17,417
Federal income tax expense 7,976 4,021 5,247
-----------------------------------------------------
Gain from operations before net realized
capital gains on investments 75,003 18,931 12,170
Net realized capital gains on investments (net
of related federal income taxes and amounts
transferred to interest maintenance reserve) 11,471 3,770 831
-----------------------------------------------------
Net income $ 86,474 $ 22,701 $ 13,001
=====================================================
</TABLE>
See accompanying notes.
5
<PAGE>
AUSA Life Insurance Company, Inc.
Statements of Changes in Capital and
Surplus - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Special Unassigned Total
Common Paid-in Surplus Surplus Capital
Stock Surplus Funds (Deficit) and Surplus
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $2,500 $319,180 $1,473 $ (4,246) $318,907
Net income - - 134 12,867 13,001
Change in net unrealized capital gains
(losses) - - - (2,710) (2,710)
Change in non-admitted assets - - - (8,483) (8,483)
Change in liability for reinsurance in
unauthorized companies - - - 29 29
Change in asset valuation reserve - - - (20,446) (20,446)
Net change in separate account surplus - - - (49) (49)
Prior year federal income tax adjustment - - - 59 59
---------------------------------------------------------------------------
Balance at December 31, 1997 2,500 319,180 1,607 (22,979) 300,308
Net income - - 220 22,481 22,701
Change in net unrealized capital gains
(losses) - - - 4,439 4,439
Change in non-admitted assets - - - (291) (291)
Change in liability for reinsurance in
unauthorized companies - - - 18 18
Change in asset valuation reserve - - - (16,753) (16,753)
Net change in separate account surplus - - - 824 824
Dividend to stockholder - - - (8,000) (8,000)
---------------------------------------------------------------------------
Balance at December 31, 1998 2,500 319,180 1,827 (20,261) 303,246
Net income - - 190 86,284 86,474
Change in net unrealized capital gains
(losses) - - - (2,666) (2,666)
Change in non-admitted assets - - - 8,957 8,957
Change in liability for reinsurance in
unauthorized companies - - - (394) (394)
Change in asset valuation reserve - - - 1,080 1,080
Net change in separate account surplus - - - (3,202) (3,202)
---------------------------------------------------------------------------
Balance at December 31, 1999 $2,500 $319,180 $2,017 $ 69,798 $393,495
===========================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
AUSA Life Insurance Company, Inc.
Statement of Cash Flow - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Premiums and other considerations, net of reinsurance $ 1,569,443 $ 1,191,035 $ 1,340,757
Net investment income 343,327 353,054 340,150
Life and accident and health claims (34,919) (33,979) (40,151)
Surrender benefits and other fund withdrawals (1,937,450) (1,117,653) (1,175,051)
Other benefits to policyholders (21,733) (20,876) (14,290)
Commissions, other expenses and other taxes (125,507) (169,784) (184,457)
Net transfers (to) from separate account 131,083 (130,976) (43,309)
Federal income taxes paid (2,942) (5,558) (4,704)
Other, net (26,319) (3,806) (3,744)
--------------------------------------------------------
Net cash provided by (used in) operating activities (105,017) 61,457 215,201
Investing activities
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 1,843,152 1,381,784 968,184
Common stocks 55,050 164 -
Mortgage loans on real estate 144,620 138,723 179,810
Real estate 46,449 22,067 25,104
Policy loans - - 16
Other 3,847 (21) -
--------------------------------------------------------
2,093,118 1,542,717 1,173,114
Cost of investments acquired:
Bonds and preferred stocks (1,588,268) (1,554,838) (1,260,122)
Common stocks (55,050) - (103)
Mortgage loans on real estate (178,473) (51,862) (60,722)
Real estate (27,721) (561) -
Policy loans (95) (135) (146)
Other 7,731 5,756 (17,805)
--------------------------------------------------------
(1,841,876) (1,601,640) (1,338,898)
--------------------------------------------------------
Net cash provided by (used in) investing activities 251,242 (58,923) (165,784)
Financing activities
Issuance of intercompany notes, net (125,900) (1,600) (9,400)
Dividends to stockholders - (8,000) -
--------------------------------------------------------
Net cash used in financing activities (125,900) (9,600) (9,400)
--------------------------------------------------------
Increase (decrease) in cash and short-term investments 20,325 (7,066) 40,017
Cash and short-term investments at beginning of year 61,065 68,131 28,114
--------------------------------------------------------
Cash and short-term investments at end of year $ 81,390 $ 61,065 $ 68,131
========================================================
</TABLE>
See accompanying notes.
7
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis
(Dollars in thousands)
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization
AUSA Life Insurance Company, Inc. ("the Company") is a stock life insurance
company and is 82 percent owned by First AUSA Life Insurance Company ("First
AUSA"), a wholly-owned subsidiary of AEGON USA, Inc. ("AEGON"), and 18 percent
owned by Veterans Life Insurance Company, an indirect wholly-owned subsidiary of
AEGON. AEGON is a wholly-owned subsidiary of AEGON N.V., a holding company
organized under the laws of The Netherlands. Effective September 24, 1993, First
AUSA purchased from The Dreyfus Corporation ("Dreyfus"), its entire interest in
Dreyfus Life Insurance Company and subsequently changed the name to AUSA Life
Insurance Company, Inc. On December 31, 1993, the Company entered into an
assumption reinsurance agreement with Mutual of New York ("MONY") to transfer
certain group pension business of MONY to the Company.
On October 1, 1998, the Company completed a merger with First Providian Life and
Health Insurance Company ("FPLH"), an indirect wholly-owned subsidiary of
Commonwealth General Corporation which, in turn, is an indirect wholly-owned
subsidiary of AEGON, whereby FPLH was merged directly into the Company. The
accompanying financial statements give retroactive effect as if the merger had
occurred on January 1, 1997 in conformity with the practices of the National
Association of Insurance Commissioners (NAIC) and accounting practices
prescribed or permitted by the Department of Insurance of the State of New York.
This merger was accounted for as a statutory merger, which is similar to the
pooling of interests method of accounting and, accordingly, the historical book
values carried over from the separate companies to the Company.
Nature of Business
The Company primarily sells group fixed and variable annuities and group life
coverages. The Company is licensed in 49 states and the District of Columbia and
is in the process of becoming licensed in New Jersey. Sales of the Company's
products are primarily through brokers.
Basis of Presentation
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
8
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract reserves, guarantee fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and assumptions
utilized which could have a material impact on the financial statements.
The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Department of Insurance of
the State of New York ("Insurance Department"), which practices differ in some
respects from generally accepted accounting principles. The more significant of
these differences are as follows: (a) bonds are generally reported at amortized
cost rather than segregating the portfolio into held-to-maturity (reported at
amortized cost), available-for-sale (reported at fair value), and trading
(reported at fair value) classifications; (b) acquisition costs of acquiring new
business are charged to current operations as incurred rather than deferred and
amortized over the life of the policies; (c) certain separate accounts provide
policyholders with a guaranteed return; these separate accounts are included in
the general account assets and liabilities for GAAP purposes due to the nature
of the guaranteed return, (d) policy reserves on traditional life products are
based on statutory mortality rates and interest which may differ from reserves
based on reasonable assumptions of expected mortality, interest, and withdrawals
which include a provision for possible unfavorable deviation from such
assumptions; (e) policy reserves on certain investment products use discounting
methodologies utilizing statutory interest rates rather than full account
values; (f) reinsurance amounts are netted against the corresponding asset or
liability rather than shown as gross amounts on the balance sheet; (g) deferred
income taxes are not provided for the difference between the financial statement
and income tax bases of assets and liabilities; (h) net realized gains or losses
attributed to changes in the level of interest rates in the market are deferred
and amortized over the remaining life of the bond or mortgage loan, rather than
recognized as gains or losses in the statement of operations when the sale is
completed; (i) declines in the estimated realizable value of investments are
provided for through the establishment of a formula-determined statutory
investment reserve (reported as a liability), changes to which are charged
directly to surplus, rather than through recognition in the statement of
operations for declines in value, when such declines are judged to be other than
temporary; (j) certain assets designated as "non-admitted assets" have been
charged to surplus rather than being reported as assets; (k) revenues for
universal life and investment products consist of premiums received rather than
policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed; (l)
pension expense is recorded as amounts are paid; (m) stock options settled in
cash are recorded as an expense of the Company's indirect parent rather than
charged to current operations; (n) adjustments to federal income taxes of prior
years are charged or
9
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
credited directly to unassigned surplus, rather than reported as a component of
expense in the statement of operations; and (o) gains or losses on dispositions
of business are charged or credited directly to unassigned surplus rather than
being reported in the statement of operations. The effects of these variances
have not been determined by the Company, but are presumed to be material.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification"), effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the State of New York must adopt Codification
as the prescribed basis of accounting on which domestic insurers must report
their statutory-basis results to the Insurance Department. At this time, it is
unclear whether the State of New York will adopt Codification. However, based on
current guidance, management believes that the impact of Codification will not
be material to the Company's statutory-basis financial statements.
Cash and Short-Term Investments
For purposes of the statements of cash flow, the Company considers all highly
liquid investments with remaining maturity of one year or less when purchased to
be short-term investments.
Investments
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortized costs for bonds and mortgage loans on real
estate that were acquired through the reinsurance agreement described earlier
were initially recorded at market value, consistent with the aforementioned
agreement and as prescribed by the Department of Insurance of the State of New
York. Amortization is computed using methods which result in a level yield over
the expected life of the security. The Company reviews its prepayment
assumptions on mortgage and other asset-backed securities at regular intervals
and adjusts amortization rates retrospectively when such assumptions are changed
due to experience and/or expected future patterns. Investments in preferred
stocks in good standing are reported at cost. Investments in preferred stocks
not in good standing are reported at the lower of cost or market. Common stocks
are carried at
10
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
market. Real estate is reported at cost less allowances for depreciation.
Depreciation is computed principally by the straight-line method. Policy loans
are reported at unpaid principal. Other invested assets consist principally of
investments in various joint ventures and are recorded at equity in underlying
net assets. Other "admitted assets" are valued, principally at cost, as required
or permitted by New York Insurance Laws.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. During 1999, 1998 and 1997, the Company
excluded investment income due and accrued of $261, $216 and $473, respectively,
with respect to such practices.
The Company uses interest rate swaps as part of its overall interest rate risk
management strategy for certain life insurance and annuity products. The net
interest effect of such swap transactions is reported as an adjustment of
interest income from the hedged items as incurred.
Deferred income for unrealized gains and losses on the securities valued at
market at the time of the assumption reinsurance agreement (described in Note 4)
are returned to MONY at the time of realization pursuant to the agreement.
Aggregate Policy Reserves
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using statutorily
specified interest rates and valuation methods that will provide, in the
aggregate, reserves that are greater than or equal to the minimum required by
law.
11
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality Tables.
The reserves are calculated using interest rates ranging from 2.50 to 6.50
percent and are computed principally on the Net Level Premium Valuation and the
Commissioners' Reserve Valuation Method. Reserves for universal life policies
are based on account balances adjusted for the Commissioners' Reserve Valuation
Method.
Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with life contingencies are equal to the
present value of future payments assuming interest rates ranging from 3.00 to
8.50 percent and mortality rates, where appropriate, from a variety of tables.
Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.
Separate Accounts
Assets held in trust for purchases of separate account contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. Income and gains and losses with respect to these assets
accrue to the benefit of the contract owners and, accordingly, the operations of
the separate accounts are not included in the accompanying financial statements.
Certain separate account assets and liabilities reported in the accompanying
financial statements contain contractual guarantees. Guaranteed separate
accounts represent funds invested by the Company for the benefit of individual
contract holders who are guaranteed certain returns as specified in the
contracts. Separate account asset performance different than guaranteed
requirements is either transferred to or received
12
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
from the general account and reported in the statements of operations.
Guaranteed separate account assets and liabilities are reported at estimated
fair value except for certain government and fixed-rate separate accounts, which
are carried at amortized cost. The assets and liabilities of the nonguaranteed
separate accounts are carried at estimated fair value.
Stock Option Plan
AEGON N.V. sponsors a stock option plan for eligible employees of the Company.
Under this plan, certain employees have indicated a preference to immediately
sell shares received as a result of their exercise of the stock options; in
these situations, AEGON N.V. has settled such options in cash rather than
issuing stock to these employees. These cash settlements are paid by the
Company, and AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any expense
related to this plan, as the expense is recognized by AEGON N.V. However, the
Company is allowed to record a deduction in the consolidated tax return filed by
the Company and certain affiliates.
Reclassifications
Certain reclassifications have been made to the 1999 financial statements to
conform to the 1998 and 1997 presentation.
2. Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures About Derivative Financial Instruments and Fair
Value of Financial Instruments, requires additional disclosures about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
13
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their fair
values.
Investment securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments. The fair values for equity securities are based on
quoted market prices.
Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal its carrying amount.
Short-term notes receivable from affiliates: The fair values for short-term
notes receivable from affiliates are assumed to equal their carrying value.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash flow
calculations, based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
Interest rate swaps: Estimated fair value of interest rate swaps are based upon
the pricing differential for similar swap agreements.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
14
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
The following sets forth a comparison of the fair values and carrying amounts of
the Company's financial instruments subject to the provisions of SFAS No. 107
and No. 119:
<TABLE>
<CAPTION>
December 31
1999 1998
---------------------------------- ----------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Admitted assets
Cash and short-term investments $ 81,390 $ 81,390 $ 61,065 $ 61,065
Bonds 3,864,509 3,767,465 4,151,780 4,246,901
Preferred stock 6,789 6,579 2,582 2,529
Common stock 2 2 2 2
Mortgage loans on real estate 449,603 439,799 413,107 429,716
Interest rate swap - (174) - -
Policy loans 3,276 3,276 3,181 3,181
Short-term notes receivable from
affiliates 136,000 136,300 10,400 10,400
Separate account assets 6,881,195 6,866,675 6,517,152 6,527,180
Liabilities
Investment contract liabilities 3,940,657 3,841,080 4,134,507 4,057,004
Separate account annuities 6,798,987 6,753,227 6,408,436 6,387,445
</TABLE>
3. Investments
The carrying amounts and estimated fair values of investments in debt securities
were as follows:
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated Fair
Amount Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1999
Bonds:
United States Government and agencies $ 59,439 $ 85 $ 2,589 $ 56,935
State, municipal and other government 74,897 454 1,410 73,941
Public utilities 281,024 693 9,538 272,179
Industrial and miscellaneous 2,190,297 10,886 69,634 2,131,549
Mortgage-backed and asset-backed securities
1,258,852 4,816 30,807 1,232,861
----------------------------------------------------------------
3,864,509 16,934 113,978 3,767,465
Preferred stocks 6,789 8 218 6,579
----------------------------------------------------------------
$3,871,298 $16,942 $114,196 $3,774,044
================================================================
</TABLE>
15
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated Fair
Amount Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1998
Bonds:
United States Government and agencies $ 99,834 $ 1,776 $ 285 $ 101,325
State, municipal and other government 38,387 1,427 1,625 38,189
Public utilities 355,719 10,239 825 365,133
Industrial and miscellaneous 2,398,132 88,051 25,538 2,460,645
Mortgage-backed and asset-backed securities 1,259,708 27,387 5,486 1,281,609
----------------------------------------------------------------
4,151,780 128,880 33,759 4,246,901
Preferred stocks 2,582 - 53 2,529
----------------------------------------------------------------
$4,154,362 $128,880 $33,812 $4,249,430
================================================================
</TABLE>
The carrying amounts and estimated fair values of bonds at December 31, 1999, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
--------------------------------
<S> <C> <C>
Due in one year or less $ 182,460 $ 182,521
Due after one year through five years 1,643,466 1,601,064
Due after five years through ten years 592,008 574,987
Due after ten years 187,723 176,032
--------------------------------
2,605,657 2,534,604
Mortgage-backed and asset-backed securities 1,258,852 1,232,861
--------------------------------
$3,864,509 $3,767,465
================================
</TABLE>
16
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
A detail of net investment income is presented below:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Interest on bonds and notes $290,534 $290,967 $285,730
Mortgage loans 34,863 46,027 57,659
Real estate 7,176 12,741 13,976
Dividends on equity investments - 254 223
Interest on policy loans 49 317 168
Derivative instruments (2,600) (3,265) 100
Other investment income 9,139 9,568 1,543
--------------------------------------------------
Gross investment income 339,161 356,609 359,399
Less investment expenses 14,112 10,949 17,859
--------------------------------------------------
Net investment income $325,049 $345,660 $341,540
==================================================
</TABLE>
Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Proceeds $1,843,152 $1,381,784 $968,184
==================================================
Gross realized gains $ 11,207 $ 19,871 $ 19,165
Gross realized losses (22,545) (5,974) (11,997)
--------------------------------------------------
Net realized gains (losses) $ (11,338) $ 13,897 $ 7,168
==================================================
</TABLE>
At December 31, 1999, investments with an aggregate carrying amount of $2,853
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required by
statute.
17
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
Realized investment gains (losses) for investments are summarized below:
<TABLE>
<CAPTION>
Realized
----------------------------------------------------
Year ended December 31
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Debt securities $(11,338) $ 13,897 $ 7,168
Common stock - 60 -
Preferred stock - 170 (7)
Short-term investments 373 (41) (6)
Mortgage loans on real estate 1,161 325 287
Real estate 2,463 3,967 4,059
Other invested assets 9,407 2,859 5,035
----------------------------------------------------
2,066 21,237 16,536
Federal income tax effect 3,474 20 (747)
Transfer (to) from interest maintenance
reserve 5,931 (17,487) (14,958)
----------------------------------------------------
Total realized gains $ 11,471 $ 3,770 $ 831
====================================================
</TABLE>
During 1999, the Company issued mortgage loans with interest rates ranging from
6.77% to 8.49%. The maximum percentage of any one loan to the value of the
underlying real estate at origination was 95%. No mortgage loans were non-income
producing for the previous twelve months and, accordingly, no accrued interest
related to these mortgage loans was excluded from investment income. The Company
requires all mortgage loans to carry fire insurance equal to the value of the
underlying property.
During 1999, 1998 and 1997, there were $17,959, $2,796 and $4,427, respectively,
in foreclosed mortgage loans that were transferred to real estate. At December
31, 1999 and 1998, the Company held a mortgage loan loss reserve in the asset
valuation reserve of $36,273 and $34,083, respectively. The mortgage loan
portfolio is diversified by geographic region and specific collateral property
type as follows:
18
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
<TABLE>
<CAPTION>
Geographic Distribution Property Type Distribution
- -------------------------------------------------- ---------------------------------------------
December 31 December 31
1999 1998 1999 1998
--------------------- ---------------------
<S> <C> <C> <C> <C> <C>
South Atlantic 26% 22% Office 37% 37%
E. North Central 15 20 Retail 23 24
Mountain 14 20 Industrial 20 29
Mid-Atlantic 13 9 Apartment 6 4
W. South Central 12 9 Agricultural 8 2
Pacific 10 8 Other 6 4
New England 4 7
W. North Central 4 3
E. South Central 2 2
</TABLE>
At December 31, 1999, the Company had no investments, excluding U. S. Government
guaranteed or insured issues, which individually represented more than ten
percent of capital and surplus and the asset valuation reserve.
The Company utilizes interest rate swap agreements as part of its efforts to
hedge and manage fluctuations in the market value of its investment portfolio
attributable to changes in general interest rate levels and to manage duration
mismatch of assets and liabilities. The contract or notional amounts of those
instruments reflect the extent of involvement in the various types of financial
instruments.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract) that
would result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance by
a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.
At December 31, 1999 and 1998, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:
<TABLE>
<CAPTION>
Notional Amount
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Derivative securities:
Interest rate swaps:
Receive fixed - pay floating $103,700 $74,588
Receive floating- pay fixed 10,000 -
</TABLE>
19
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
4. Reinsurance
The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to meet
its obligation under the reinsurance treaty.
Premiums earned reflect the following reinsurance assumed and ceded amounts for
the year ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,548,392 $1,183,777 $1,309,731
Reinsurance assumed 8,301 6,415 6,905
Reinsurance ceded (2,678) (2,539) (5,268)
--------------------------------------------------
Net premiums earned $1,554,015 $1,187,653 $1,311,368
==================================================
</TABLE>
The Company received reinsurance recoveries in the amounts of $2,983, $2,493 and
$1,992 during 1999, 1998 and 1997, respectively.
The aggregate reserves for policies and contracts were reduced for reserve
credits for reinsurance ceded at December 31, 1999 and 1998 of $118,070 and
$143,819, respectively.
On December 31, 1993, the Company and MONY entered into an assumption
reinsurance agreement whereby all of the general account liabilities were
novated to the Company from MONY as state approvals were received. In accordance
with the agreement, MONY will receive payments relating to the performance of
the assets and liabilities that existed at the date of closing for a period of
nine years. These payments will be reduced for certain administrative expenses
as defined in the agreement. The Company will recognize operating gains and
losses on renewal premiums received after December 31, 1993 of the business in-
force at December 31, 1993, and on all new business written after that date. At
the end of nine years from the date of closing, the Company will purchase from
MONY the remaining transferred business inforce based upon a formula described
in the agreement. At December 31, 1999 and 1998, the Company owed MONY $39,118
and $52,837, respectively, which represents the amount earned by MONY under the
gain sharing calculation and certain fees for investment management services for
the respective years. In connection with the transaction, MONY purchased
$150,000 and $50,000 in Series A and Series B notes, respectively, of AEGON. The
proceeds were used to enhance the surplus of the Company. Both the Series A and
Series B notes bear a market rate of interest and mature in nine years from the
date of closing.
20
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
4. Reinsurance (continued)
AEGON provides general and administrative services for the transferred business
under a related agreement with MONY. The agreement specifies prescribed rates
for expenses to administer the business up to certain levels. In addition, AEGON
also provides investment management services on the assets underlying the new
business written by the Company while MONY continues to provide investment
management services for assets supporting the remaining policy liabilities which
were transferred at December 31, 1993.
5. Income Taxes
For federal income tax purposes, the Company joins in a consolidated income tax
return filing with certain affiliated companies. Under the terms of a tax-
sharing agreement between the Company and its affiliates, the Company computes
federal income tax expense as if it were filing a separate income tax return,
except that tax credits and net operating loss carryforwards are determined on
the basis of the consolidated group. Additionally, the alternative minimum tax
is computed for the consolidated group and the resulting tax, if any, is
allocated back to the separate companies on the basis of the separate companies'
alternative minimum taxable income.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before federal income
tax expense and net realized capital gains (losses) on investments primarily due
to differences in the statutory and tax treatment of certain investments,
deferred policy acquisition costs, stock options exercised, dividends received
deduction, carryforward (utilization) of net operating loss, IMR amortization,
and certain adjustments related to the agreement between MONY and the Company.
These adjustments caused the Company to calculate federal income tax expense
using alternative minimum tax requirements in 1998.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to net realized capital gains (losses) on
investments due to the agreement between MONY and the Company, as discussed in
Note 4 to the financial statements. In accordance with this agreement, these
gains and losses are included in the net payments MONY will receive relating to
the performance of the assets that existed at the date of closing. Accordingly,
income taxes relating to gains and losses on such assets are not provided for on
the income tax return filed by the Company.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($2,427 at December 31, 1999). To the extent dividends are paid from the
amount accumulated in the policyholders' surplus
21
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
5. Income Taxes (continued)
account, net earnings would be reduced by the amount of tax required to be paid.
Should the entire amount in the policyholders' surplus account become taxable,
the tax thereon computed at current rates would amount to approximately $849.
The Company expects to utilize a net operating loss carryforward of $32,539 in
the 1999 consolidated tax return.
In 1998, the Company reached a final settlement with the Internal Revenue
Service for years 1993 through 1995 resulting in no tax due or refunded. An
examination of 1996 and 1997 is currently in process.
6. Policy and Contract Attributes
A portion of the Company's policy reserves and other policyholders' funds relate
to liabilities established on a variety of the Company's products that are not
subject to significant mortality or morbidity risk; however, there may be
certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics, are summarized as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------- -----------------------------
Percent of Percent of
Amount Total Amount Total
--------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment $ 924,075 8% $ 912,692 9%
Subject to discretionary withdrawal at book
value less surrender charge 998,443 9 1,013,495 10
Subject to discretionary withdrawal at
market value 4,418,345 41 3,678,649 34
Subject to discretionary withdrawal at book
value (minimal or no charges or adjustments) 2,395,732 22 2,666,670 25
Not subject to discretionary withdrawal 2,121,526 20 2,416,602 22
---------------------------- -------------------------
10,858,121 100% 10,688,108 100%
=========== ========
Less reinsurance ceded 117,178 143,475
------------- -------------
Total policy reserves on annuities and
deposit fund liabilities $10,740,943 $10,544,633
============= =============
</TABLE>
22
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
Separate account assets held by the Company represent contracts where the
benefit is determined by the performance of the investments held in the separate
account. Information regarding the separate accounts of the Company as of and
for the years ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Guaranteed Non-guaranteed
Separate Separate
Account Account Total
----------------------------------------------------
<S> <C> <C> <C>
Premiums, deposits and other
considerations for the year ended
December 31, 1999 $ 205,834 $1,002,770 $1,208,604
====================================================
Reserves for separate accounts with
assets at:
Fair value $1,925,973 $4,310,332 $6,236,305
Amortized cost 562,682 - 562,682
----------------------------------------------------
Total $2,488,655 $4,310,332 $6,798,987
====================================================
Premiums, deposits and other
considerations for the year ended
December 31, 1998 $ 84,150 $ 767,676 $ 851,826
====================================================
Reserves for separate accounts with
assets at:
Fair value $2,350,983 $3,461,715 $5,812,698
Amortized cost 595,738 - 595,738
----------------------------------------------------
Total $2,946,721 $3,461,715 $6,408,436
====================================================
Premiums, deposits and other
considerations for the year ended
December 31, 1997 $ 147,638 $ 648,056 $ 795,694
====================================================
Reserves for separate accounts with
assets at:
Fair value $2,204,931 $2,767,245 $4,972,176
Amortized cost 622,703 - 622,703
----------------------------------------------------
Total $2,827,634 $2,767,245 $5,594,879
====================================================
</TABLE>
23
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
There may be certain restrictions placed upon the amount of funds that can be
withdrawn without penalty. The amount of separate account liabilities on these
products, by withdrawal characteristics, is summarized as follows:
<TABLE>
<CAPTION>
Guaranteed Non-guaranteed
Separate Separate
Account Account Total
----------------------------------------------------
<S> <C> <C> <C>
December 31, 1999
Subject to discretionary withdrawal
with market value adjustment $ 335,351 $ - $ 335,351
Subject to discretionary withdrawal at
book value less surrender charge 227,331 - 227,331
Subject to discretionary withdrawal at
market value 108,013 4,310,332 4,418,345
Not subject to discretionary withdrawal 1,817,960 - 1,817,960
----------------------------------------------------
$2,488,655 $4,310,332 $6,798,987
====================================================
December 31, 1998
Subject to discretionary withdrawal
with market value adjustment $ 345,379 $ - $ 345,379
Subject to discretionary withdrawal at
book value less surrender charge 250,359 - 250,359
Subject to discretionary withdrawal at
market value 216,935 3,461,715 3,678,650
Not subject to discretionary withdrawal 2,134,048 - 2,134,048
----------------------------------------------------
$2,946,721 $3,461,715 $6,408,436
====================================================
</TABLE>
A reconciliation of the amounts transferred to and from the separate accounts is
presented below:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
Transfers as reported in the summary of operations of
the separate accounts annual statement:
Transfers to separate accounts $ 1,207,636 $ 851,826 $ 795,663
Transfers from separate accounts (1,290,346) (679,796) (767,049)
--------------------------------------------------------
Net transfers to (from) separate accounts (82,710) 172,030 28,614
Reconciling adjustments - HUB level fees not paid to
AUSA general account 3,240 1,317 13,756
Fees paid to external fund manager - - 120
Assumption of liabilities via merger of FPLH - 1,088 -
--------------------------------------------------------
Net adjustments 3,240 2,405 13,876
--------------------------------------------------------
Net transfers as reported in the summary of operations
of the life, accident and health annual statement $ (79,470) $ 174,435 $ 42,490
========================================================
</TABLE>
24
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1999 and 1998, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:
<TABLE>
<CAPTION>
Gross Loading Net
--------------------------------------
<S> <C> <C> <C>
December 31, 1999
Life and annuity:
Ordinary direct first year business $ 400 $ 276 $ 124
Ordinary direct renewal business 6,454 1,080 5,374
Group life direct business 1,030 427 603
Credit life 42 - 42
Reinsurance ceded (15) - (15)
--------------------------------------
7,911 1,783 6,128
Accident and health:
Direct 484 - 484
Reinsurance ceded (40) - (40)
--------------------------------------
Total accident and health 444 - 444
--------------------------------------
$8,355 $1,783 $6,572
======================================
December 31, 1998
Life and annuity:
Ordinary direct first year business $ 351 $ 339 $ 12
Ordinary direct renewal business 6,760 1,087 5,673
Group life direct business 851 482 369
Credit life 37 - 37
Reinsurance ceded (6) - (6)
--------------------------------------
7,993 1,908 6,085
Accident and health:
Direct 363 - 363
Reinsurance ceded (40) - (40)
---------------------------------------
Total accident and health 323 - 323
--------------------------------------
$8,316 $1,908 $6,408
======================================
</TABLE>
At December 31, 1999 and 1998, the Company had insurance in force aggregating
$425,151 and $474,471, respectively, in which the gross premiums are less than
the net premiums required by the valuation standards established by the
Department of Insurance of the State of New York. The Company established policy
reserves of $1,250 and $1,348 to cover these deficiencies at December 31, 1999
and 1998, respectively.
25
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
7. Dividend Restrictions
The Company is subject to certain limitations relative to statutory surplus,
imposed by the State of New York, on the payment of dividends to its parent
company.
The Company paid dividends to its parent of $8,000 in 1998. The Company is not
entitled to pay out any dividends in 1999 without prior approval.
8. Retirement and Compensation Plans
The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The
pension expense is allocated among the participating companies based on the SFAS
87 expense as a percent of salaries. The benefits are based on years of service
and the employee's compensation during the highest five consecutive years of
employment. The Company's allocation of pension expense for each of the years
ended December 31, 1999, 1998 and 1997 was negligible. The plan is subject to
the reporting and disclosure requirements of the Employee Retirement Income
Security Act of 1974.
The Company's employees also participate in a contributory defined contribution
plan sponsored by AEGON which is qualified under Section 401(k) of the Internal
Revenue Service Code. Employees of the Company who customarily work at least
1,000 hours during each calendar year and meet the other eligibility
requirements are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement Income Security Act of 1974. The Company
was allocated $10, $9 and $12 of expense for the years ended December 31, 1999,
1998 and 1997, respectively.
In addition to pension benefits, the Company participates in plans sponsored by
AEGON that provide postretirement medical, dental and life insurance benefits to
employees meeting certain eligibility requirements. Portions of the medical and
dental plans are contributory. The expenses of the postretirement plans
calculated on the pay-as-you-go basis are charged to affiliates in accordance
with an intercompany cost sharing arrangement. The Company's allocation of
postretirement expenses was negligible for each of the years ended December 31,
1999, 1998 and 1997.
26
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
9. Related Party Transactions
In accordance with an agreement between AEGON and the Company, AEGON will ensure
the maintenance of certain minimum tangible net worth, operating leverage and
liquidity levels of the Company, as defined in the agreement, through the
contribution of additional capital by the Company's parent as needed.
The Company shares certain officers, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1999, 1998
and 1997, the Company paid $6,940, $5,650 and $7,330, respectively, for these
services, which approximates their costs to the affiliates.
Payable to affiliates and intercompany borrowings bear interest at the thirty-
day commercial paper rate of 5.7% at December 31, 1999. During 1999, 1998 and
1997, the Company paid net interest of $485, $232 and $142, respectively, to
affiliates.
10. Commitments and Contingencies
The Company has issued Trust (synthetic) GIC contracts to plan sponsors totaling
$186,478 and $153,146 at December 31, 1999 and 1998, respectively, pursuant to
terms under which the plan sponsor retains ownership of the assets related to
these contracts. The Company guarantees benefit responsiveness in the event that
plan benefit requests and other contractual commitments exceed plan cash flows.
The plan sponsor agrees to reimburse the Company for such benefit payments with
interest, either at a fixed or floating rate, from future plan and asset cash
flows. In return for this guarantee, the Company receives a premium which varies
based on such elements as benefit responsive exposure and contract size. The
Company underwrites the plans for the possibility of having to make benefit
payments and also must agree to the investment guidelines to ensure appropriate
credit quality and cash flow matching. Funding requirements to date have been
minimal and management does not anticipate any future material funding
requirements that would have a material effect on reported financial results.
The assets relating to such contracts are not recognized in the Company's
statutory-basis financial statements.
The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages, in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.
27
<PAGE>
AUSA Life Insurance Company, Inc.
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
10. Commitments and Contingencies (continued)
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. In accordance with the purchase agreement,
assessments related to periods prior to the purchase of the Company will be paid
by Dreyfus and assessments attributable to business reinsured from MONY for
premiums received prior to the date of the transaction will be paid by MONY (see
Note 1). The Company will be responsible for assessments, if any, attributable
to premium income after the date of purchase. Assessments are charged to
operations when received by the Company except where right of offset against
other taxes paid is allowed by law; amounts available for future offsets are
recorded as an asset on the Company's balance sheet. Potential future
obligations for unknown insolvencies are not determinable by the Company. The
future obligation has been based on the most recent information available from
the National Organization of Life and Health Insurance Guaranty Associations.
The guaranty fund expense was $46, $126 and $586 for the years ended December
31, 1999, 1998 and 1997, respectively.
28
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Part A. None
Part B. Financial Statements of Subaccounts of AUSA Life Insurance
Company, Inc. Separate Account C (formerly First Providian Life and Health
Insurance Company Separate Account C) which are available for investment by
Advisor's Edge Contract Owners as of December 31, 1999 and for each of the
two years in the period ended December 31, 1999.
Statutory-basis financial statements of AUSA Life Insurance Company, Inc.
as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 with Report of Independent Auditors.
Part C. None
(b) Exhibits.
(1) Resolution of the Board of Directors of First Providian Life and
Health Insurance Company ("First Providian ") authorizing
establishment of the Separate Account./2/
(2) Not Applicable.
(3) Distribution Agreement.
(a) Form of Selling Agreement./2/
(4) (a) Form of variable annuity contract./2/
(5) (a) Form of Application./2/
(6) (a) Articles of Incorporation of AUSA Life Insurance Company, Inc./4/
(b) By-Laws of AUSA Life Insurance Company, Inc./4/
(7) Not Applicable.
(8) (a) Participation Agreement by and between Wanger Advisors Trust and
First Providian dated November 15, 1996./3/
(b) Amendment No. 1 dated December 16, 1996 to Participation
Agreement by and between Wanger Advisors Trust and First
Providian dated November 15, 1996./3/
(c) Participation Agreement among Federated Insurance Series,
Federated Advisers, Federated Securities Corp. and First
Providian dated November 15, 1996./3/
(d) Participation Agreement among DFA Investment Dimensions Group,
Inc., Dimensional Fund Advisors Inc., DFA Securities, Inc. and
First Providian dated November 15, 1996./3/
(e) Marketing Agreement between DFA Securities, Inc. and First
Providian dated November 15, 1996./3/
(f) Amendment dated February 10, 1997 to the Marketing Agreement
between DFA Securities, Inc. and First Providian dated
November 15, 1996./3/
(g) Amendment dated March 4, 1997 to the Participation Agreement
among DFA Investment Dimensions Group, Inc., Dimensional Fund
Advisors, Inc., DFA Securities, Inc. and First Providian and
Marketing Agreement between DFA Securities, Inc. and First
Providian dated November 15, 1996./3/
(h) Amendment dated April 15, 1997 to the Participation Agreement
among DFA Investment Dimensions Group Inc., Dimensional Fund
Advisors Inc., DFA Securities, Inc., and First Providian dated
November 15, 1996./3/
(i) Participation Agreement among Montgomery Funds III, Montgomery
Asset Management, L.P. and First Providian dated November 15,
1996./3/
(j) Participation Agreement among First Providian Life and Health
Insurance Company, Warburg Pincus Trust, Warburg Pincus Asset
Management, Inc. and Counsellors Securities, Inc. dated
August 11, 1998./5/
(9) (a) Opinion and Consent of Counsel./1/
(b) Consent of Counsel./1/
(10) Consent of Independent Auditors./1/
(11) No Financial Statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Computation./12/
(14) Not Applicable.
- -------------------------
/1/ Filed herewith.
/2/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of First Providian Life and Health Insurance
Company, File No. 33-94204 (as filed July 16, 1996).
/3/ Incorporated by reference from Post-Effective Amendment No. 2 to the
Registration Statement of First Providian Life and Health Insurance
Company, File No. 33-94204 (as filed July 29, 1997).
/4/ Incorporated by reference from Initial Registration Statement on Form N-4
of AUSA Life Insurance Company, Inc. - AUSA Endeavor Variable Annuity
Account, File No. 33-83560 (as filed on September 1, 1994).
/5/ Incorporated by reference from Initial Registration Statement on Form N-4
of AUSA Life Insurance Company, Inc. Separate Account C, File No. 333-65149
(as filed October 1, 1998)
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
OFFICERS:
<TABLE>
<S> <C>
Director, President and Chairman of the Board... Tom A. Schlossberg
4 Manhattanville Road
Purchase, NY 10577
Director........................................ Wiliam Brown Jr.
Brownstone Managements
14 Windward Ave.
White Plains, NY 10605
Director and Vice President..................... William L. Busler
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Vice President and Chief Financial Officer...... Patrick S. Baird
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Secretary....................................... Craig D. Vermie
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Director and Chief Actuary...................... Colette B. Vargas
4 Manhattanville Road
Purchase, NY 10577
Treasurer....................................... Brenda K. Clancy
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Director........................................ Jack R. Dykhouse
Brown Trail, Suite 302
Bedford, TX 76021
Director........................................ Steven E. Frushtick
500 Fifth Avenue
New York, NY 10110
Director........................................ Carl Thor Hanson
900 Birdseye Road
P.O. Box 112
Orient, NY 11957-0112
Director and Vice President..................... Robert S. Rubinstein
4 Manhattanville Rd.
Purchase, NY 10577
Director........................................ Peter P. Post
415 Madison Avenue
New York, NY 10017
Director........................................ Cor H. Verhagen
51 JFK Parkway
Short Hills, NJ 07078
Director........................................ E. Kirby Warren
725 Uris Hall
116th Street & Broadway
New York, NY 10027
Director and Vice President..................... Eric B. Goodman
400 West Market Street
Louisville, KY 40202
</TABLE>
C-2
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The Depositor, AUSA Life Insurance Company, Inc. ("AUSA Life"), is indirectly
wholly owned by AEGON USA, Inc. The Registrant is a segregated asset account
of AUSA Life.
The following chart indicates the persons controlled by or under common con-
trol with AUSA Life.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
AEGON N.V. Netherlands 53.16% of Vereniging Holding company
AEGON Netherlands
Membership Association
Groninger Financieringen B.V. Netherlands 100% AEGON N.V. Holding company
AEGON Netherland N.V. Netherlands 100% AEGON N.V. Holding company
AEGON Nevak Holding B.V. Netherlands 100% AEGON N.V. Holding company
AEGON International N.V. Netherlands 100% AEGON N.V. Holding company
Voting Trust Trustees: Delaware Voting Trust
K.J. Storm
Donald J. Shepard H.B.
Van Wijk Dennis Hersch
AEGON U.S. Holding Corporation Delaware 100% Voting Trust Holding company
Short Hills Management Company New Jersey 100% AEGON U.S. Holding company
Holding Corporation
CORPA Reinsurance Company New York 100% AEGON U.S. Holding company
Holding Corporation
AEGON Management Company Indiana 100% AEGON U.S. Holding company
Holding Corporation
RCC North America Inc. Delaware 100% AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
Transamerica Holding Company Delaware 100% AEGON USA, Inc. Holding Company
AEGON Funding Corp. Delaware 100% Transamerica Issue debt securities-net
Holding Company proceeds used to make
loans to affiliates
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Company
AUSA Life Insurance New York 82.33% First AUSA Life Insurance
Company, Inc. Insurance Company
17.67% Veterans Life
Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Life Investors Alliance, LLC Delaware 100% LIICA Purchase, own, and hold the
equity interest of other
entities
Great American Insurance Iowa 100% LIICA Marketing
Agency, Inc.
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.
AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
of Kentucky Services Group, Inc. settlements
AEGON Assignment Corporation Illinois 100% AEGON Financial Administrator of structured
Services Group, Inc. settlements
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Western Reserve Life Assurance Ohio 100% First AUSA Life Ins. Co. Insurance
Co. of Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund
WRL Investment Florida 100% Western Reserve Life Registered investment advisor
Management, Inc. Assurance Co. of Ohio
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
And Subsidiaries Assurance Co. of Ohio
ISI Insurance Agency Alabama 100% ISI Insurance Agency, Inc. Insurance Agency
of Alabama, Inc.
ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
of Massachusetts, Inc.
ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
ISI Insurance Agency Hawaii 100% ISI Insurance Insurance agency
of Hawaii, Inc. Agency, Inc.
ISI Insurance Agency New Mexico 100% ISI Insurance Insurance agency
New Mexico, Inc. Agency, Inc.
AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance Agency
Assurance Co. of Ohio
Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance
United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency
Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance
The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Monumental General Life Puerto Rico 51% First AUSA Life Insurance
Insurance Company of Insurance Company
Puerto Rico 49% Baldrich & Associates
of Puerto Rico
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. insurance
Monumental General Maryland 100% Monumental General Provides management srvcs.
Administrators, Inc. Insurance Group, Inc. to unaffiliated third party
administrator
Executive Management and Maryland 100% Monumental General Provides actuarial consulting
Consultant Services, Inc. Administrators, Inc. services
Monumental General Mass Maryland 100% Monumental General Marketing arm for sale of
Marketing, Inc. Insurance Group, Inc. mass marketed insurance
coverages
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Transamerica Capital, Inc. California 100% AUSA Holding Co. Broker/Dealer
Endeavor Management Company California 100% AUSA Holding Co. Investment Management
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies
ADB Corporation Delaware 100% Money Services, Inc. Special purpose limited
Liability company
ORBA Insurance Services, Inc. California 10.56% Money Services, Inc. Insurance agency
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
Zahorik Texas, Inc. Texas 100% Zahorik Company, Inc. Insurance agency
Long, Miller & Associates, L.L.C. California 33-1/3% AUSA Holding Co. Insurance agency
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment advisor
Services, Inc.
InterSecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
Associated Mariner Financial Michigan 100% InterSecurities, Inc. Holding co./management
Group, Inc. services
Associated Mariner Ins. Agency Massachusetts 100% Associated Mariner Insurance agency
of Massachusetts, Inc. Agency, Inc.
Associated Mariner Agency Ohio 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.
Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.
Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services
Idex Management, Inc. Delaware 100% AUSA Holding Co. Investment advisor
IDEX Mutual Funds Massachusetts Various Mutual fund
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.
Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advisors, Inc.
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
George Beram & Company, Inc. Massachusetts 100% Diversified Investment Employee benefit and
Advisors, Inc. actuarial consulting
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer (De-registered)
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.
Weiner Agency, Inc. Maryland 100% Creditor Resources, Inc. Insurance agency
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment services
AEGON USA Real Estate Delaware 100% AEGON USA Realty Real estate and mortgage
Services, Inc. Advisors, Inc. holding company
QSC Holding, Inc. Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales
LRA, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Realty Associates, Inc. Texas 100% Landauer Associates, Inc. Real estate counseling
Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management
USP Real Estate Investment Trust Iowa 12.89% First AUSA Life Ins. Co. Real estate investment trust
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner.
Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")
AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life
Insurance Company
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Capital 200 Block Corporation Delaware 100% CGC Real estate holdings
Capital Real Estate Delaware 100% CGC Furniture and equipment
Development Corporation lessor
Commonwealth General. Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements
Diversified Financial Products Inc. Delaware 100% CGC Provider of investment,
marketing and admin. services
to ins. cos.
Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. to ins. cos.
PB Investment Advisors, Inc. Delaware 100% CGC Registered investment advisor
(de-registered)
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands
Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management
(EIN 23-1720755) support services
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
National Home Life Corporation Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment lessor
Agency, Inc.
Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administrator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Academy Insurance Group, Inc. Delaware 100% CGC Holding company
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Life Insurance company
Company of America Insurance Company
FED Financial, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
(EIN 23-2364438) Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Unicom Administrative Germany 100% Unicom Administrative Provider of admin. services
Services, GmbH Services, Inc.
Capital General Development Delaware 100% CGC Holding company
Corporation
Monumental Life Maryland 73.23% Capital General Insurance company
Insurance Company Development Company
26.77% First AUSA Life
Insurance Company
AEGON Special Markets Maryland 100% Monumental Life Marketing company
Group, Inc. Insurance Company
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20.0% Capital Liberty, L.P.
76.3% Monumental Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
Coverna Direct Insurance Maryland 100% Peoples Benefit Insurance agency
Insurance Services, Inc. Life Insurance Company
Ammest Realty Corporation Texas 100% Monumental Life Special purpose subsidiary
Insurance Company
JMH Operating Company, Inc. Mississippi 100% Monumental Life Real estate holdings
Insurance Company
Capital Liberty, L.P. Delaware 99.0% Monumental Life Holding Company
Insurance Company
1.0% CGC
Transamerica Corporation Delaware 100% AEGON NV Major interest in insurance
and finance
Transamerica Pacific Insurance Hawaii 100% Transamerica Corp. Life insurance
Company, Ltd.
TREIC Enterprises, Inc. Delaware 100% Transamerica Corp. Investments
ARC Reinsurance Corporation Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Transamerica Management, Inc. Delaware 100% ARC Reinsurance Corp. Asset management
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Inter-America Corporation California 100% Transamerica Corp. Insurance Broker
Pyramid Insurance Company, Ltd. Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Pacific Cable Ltd. Bmda. 100% Pyramid Ins. Co., Ltd. Sold 25% of TC Cable, Inc.
stock in 1998
Transamerica Business Tech Corp. Delaware 100% Transamerica Corp. Telecommunications and
data processing
Transamerica CBO I, Inc. Delaware 100% Transamerica Corp. Owns and manages a pool of
high-yield bonds
Transamerica Corporation (Oregon) Oregon 100% Transamerica Corp. Name holding only-Inactive
Transamerica Finance Corp. Delaware 100% Transamerica Corp. Commercial & Consumer
Lending & equip. leasing
TA Leasing Holding Co., Inc. Delaware 100% Transamerica Fin. Corp. Holding company
Trans Ocean Ltd. Delaware 100% TA Leasing Hldg Co. Inc. Holding company
Trans Ocean Container Corp. Delaware 100% Trans Ocean Ltd. Intermodal Leasing
("TOCC")
SpaceWise Inc. Delaware 100% TOCC Intermodal leasing
Trans Ocean Container
Finance Corp. Delaware 100% TOCC Intermodal leasing
Trans Ocean Leasing
Deutschland GmbH Germany 100% TOCC Intermodal leasing
Trans Ocean Leasing PTY Ltd. Austria 100% TOCC Intermodal leasing
Trans Ocean Management S.A. Switzerland 100% TOCC Intermodal leasing
Trans Ocean Regional
Corporate Holdings California 100% TOCC Holding company
Trans Ocean Tank Services Corp. Delaware 100% TOCC Intermodal leasing
Transamerica Leasing Inc. Delaware 100% TA Leasing Holding Co. Leases & Services intermodal
equipment
Transamerica Leasing Holdings Delaware 100% Transamerica Leasing Inc. Holding Company
Inc. ("TLHI")
Greybox Logistics Services Inc. Delaware 100% TLHI Intermodal Leasing
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Greybox L.L.C. Delaware 100% TLHI Intermodal freight container
interchange facilitation service
Transamerica Trailer France 100% Greybox L.L.C. Leasing
Leasing S.N.C.
Greybox Services Limited U.K. 100% TLHI Intermodal Leasing
Intermodal Equipment, Inc. Delaware 100% TLHI Intermodal leasing
Transamerica Leasing N.V. Belg. 100% Intermodal Equipment Inc.
Transamerica Leasing SRL Italy 100% Intermodal Equipment Inc.
Transamerica Distribution Delaware 100% TLHI Provided door-to-door services
Services, Inc. for the domestic
transportation of temperature-
sensitive products
Transamerica Leasing Belg. 100% TLHI Leasing
Coordination Center
Transamerica Leasing do Braz. 100% TLHI Container Leasing
Brasil Ltda.
Transamerica Leasing GmbH Germany 100% TLHI Leasing
Transamerica Leasing Limited U.K. 100% TLHI Leasing
ICS Terminals (UK) Limited U.K. 100% Transamerica. Leasing
Leasing Limited
Transamerica Leasing Pty. Ltd. Australia 100% TLHI Leasing
Transamerica Leasing (Canada) Inc. Canada 100% TLHI Leasing
Transamerica Leasing (HK) Ltd. H.K. 100% TLHI Leasing
Transamerica Leasing S. Africa 100% TLHI Intermodal leasing
(Proprietary) Limited
Transamerica Tank Container Australia 100% TLHI The Australian (domestic)
Leasing Pty. Limited leasing of tank containers
Transamerica Trailer Holdings I Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Holdings II, Inc. Delaware 100% TLHI Holding company
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Transamerica Trailer Holdings III, Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Leasing AB Swed. 100% TLHI Leasing
Transamerica Trailer Leasing AG Switzerland 100% TLHI Leasing
Transamerica Trailer Leasing A/S Denmark 100% TLHI Leasing
Transamerica Trailer Leasing GmbH Germany 100% TLHI Leasing
Transamerica Trailer Leasing Belgium 100% TLHI Leasing
(Belgium) N.V.
Transamerica Trailer Leasing Netherlands 100% TLHI Leasing
(Netherlands) B.V.
Transamerica Trailer Spain S.A. Spain 100% TLHI Leasing
Transamerica Transport Inc. New Jersey 100% TLHI Dormant
Transamerica Commercial Delaware 100% Transamerica Fin. Corp. Holding company for
Finance Corporation, I ("TCFCI") Commercial/consumer finance
subsidiaries
Transamerica Equipment Financial Delaware 100% TCFCI
Services Corporation
BWAC Credit Corporation Delaware 100% TCFCI
BWAC International Corporation Delaware 100% TCFCI
BWAC Twelve, Inc. Delaware 100% TCFCI Holding company for premium
finance subsidiaries
TIFCO Lending Corporation Illinois 100% BWAC Twelve, Inc. General financing & other
services in the US &
elsewhere
Transamerica Insurance Finance Maryland 100% BWAC Twelve, Inc. Provides insurance premium
Corporation ("TIFC") financing in the US with the
exception of CA and HI
Transamerica Insurance Finance Maryland 100% TIFC Provides Insurance premium
Company (Europe) financing in California
Transamerica Insurance Finance California 100% TIFC Disability ins. & holding co.
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Corporation, California for various insurance
subsidiaries of Transamerica
Corporation
Transamerica Insurance Finance ON 100% TIFC Provides ins. premium
Corporation, Canada financing in Canada
Transamerica Business Credit Delaware 100% TCFCI Provides asset based lending
Corporation ("TBCC") leasing & equip. financing
Transamerica Mezzanine Delaware 100% TBCC Holds investments in several
Financing, Inc. joint ventures/partnerships
Transamerica Business Advisory Grp. Delaware 100% TBCC
Bay Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Coast Funding Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Transamerica Small Business Delaware 100% TBCC
Capital, Inc. ("TSBC")
Emergent Business Capital Delaware 100% TSBC
Holdings, Inc.
Gulf Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Direct Capital Equity Investment, Inc. Delaware 100% TBCC Small business loans
TA Air East, Corp Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air I, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air II, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air III, Corp. Delaware 100% TBCC special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
TA Air IV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air V, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air VIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air IX, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air X, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
TA Marine I Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TA Marine II Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TBC I, Inc. Delaware 100% TBCC Special purpose corp.
TBC II, Inc. Delaware 100% TBCC Special purpose corp.
TBC III, Inc. Delaware 100% TBCC Special purpose corp.
TBC IV, Inc. Delaware 100% TBCC Special purpose corp.
TBC V, Inc. Delaware 100% TBCC Special purpose corp.
TBC VI, Inc. Delaware 100% TBCC Special purpose corp.
TBC Tax I, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax II, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax III, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IV, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax V, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VI, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VIII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IX, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
The Plain Company Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft.
Transamerica Distribution Delaware 100% TCFCI Holding corp. for inventory,
Finance Corporation ("TDFC") comm. Leasing, retail finance
comm. Recovery service and
accounts
Transamerica Accounts Holding Corp. Delaware 100% TDFC
Transamerica Commercial Delaware 100% TDFC Wholesale floor plan for
Finance Corporation ("TCFC") appliances, electronics,
computers, office equip. and
marine equipment.
Transamerica Acquisition Canada 100% TCFC Holding company
Corporation, Canada
Transamerica Distribution Finance Delaware 100% TCFC
Corporation - Overseas, Inc.
("TDFCO")
TDF Mauritius Limited Mauritius 100% TDFCO Mauritius holding company
of our Indian Joint Venture
Inventory Funding Trust Delaware 100% TCFC
Inventory Funding Company, LLC Delaware 100% Inventory Funding Trust
TCF Asset Management Corporation Colorado 100% TCFC A depository for foreclosed
real and personal property
Transamerica Joint Ventures, Inc. Delaware 100% TCFC To enter into general partner-
ships for the ownership of
comm. & finance business
Transamerica Inventory Delaware 100% TDFC Holding co. for inventory
Finance Corporation ("TIFC") finance subsidiaries
Transamerica GmbH, Inc. Delaware 100% TIFC Commercial lending in
Germany
Transamerica Fincieringsmaatschappij
B.V. Netherlands 100% Trans. GmbH, Inc. Commercial lending in
Europe
</TABLE>
C-17
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
BWAC Seventeen, Inc. Delaware 100% TIFC Holding co. for principal
Canadian operation, Trans-
America Comm. Finance
Corp, Canada
Transamerica Commercial ON 100% BWAC Seventeen, Inc. Shell corp.- Dormant
Finance Canada, Limited
Transamerica Commercial Canada 100% BWAC Seventeen, Inc. Commercial finance
Finance Corporation, Canada
BWAC Twenty-One, Inc. Delaware 100% TIFC Holding co. for United
Kingdom operation, Trans-
America Comm. Finance
Limited
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Commercial lending in the
Finance Limited ("TCFL") United Kingdom.
Whirlpool Financial Corporation 100% TCFL Inactive commercial finance
Polska Spzoo Company in Poland
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Holding Company
Holdings Limited
Transamerica Commercial Finance U.K. 100% Trans. Commercial
Limited Holdings Limited
Transamerica Commercial Finance France 100% BWAC Twenty-One Inc. Carries out factoring trans-
France S.A. actions in France & abroad
Transamerica GmbH Inc. Delaware 100% BWAC Twenty-One Inc. Holding co. for Transamerica
Financieringsmaatschappij
B.V.
Transamerica Retail Financial Delaware 100% TIFC Provides retail financing
Services Corporation ("TRFSC")
Transamerica Bank, NA Delaware 100% TRFSC Bank (Credit Cards)
Transamerica Consumer Finance Delaware 100% TRFSC Consumer finance holding
Holding Company ("TCFHC") company
Transamerica Mortgage Company Delaware 100% TCFHC Consumer mortgages
Transamerica Consumer Mortgage Delaware 100% TCFHC Securitization company
Receivables Company
Metropolitan Mortgage Company Florida 100% TCFHC Consumer mortgages
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Easy Yes Mortgage, Inc. Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Easy Yes Mortgage, Inc. Georgia 100% Metropolitan Mtg. Co. No active business/Name
holding only
First Florida Appraisal Services, Inc. Georgia 100% Metropolitan Mtg. Co. Appraisal and inspection
services
First Georgia Appraisal Services, Inc. Georgia 100% First FL App. Srvc, Inc. Appraisal services
Freedom Tax Services, Inc. Florida 100% Metropolitan Mtg. Co. Property tax information
services
J.J. & W. Advertising, Inc. Florida 100% Metropolitan Mtg. Co. Advertising and marketing
services
J.J. & W. Realty Corporation Florida 100% Metropolitan Mtg. Co. To hold problem REO
properties
Liberty Mortgage Company of Florida 100% Metropolitan Mtg. Co. No active business/Name
Ft. Myers, Inc. holding only
Metropolis Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Perfect Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Transamerica Vendor Financial Srvc. Delaware 100% TDFC Provides commercial lease
Transamerica Distribution Finance 100% TCFCI
Corporation de Mexico ("TDFCM")
TDF de Mexico Mexico 100% TDFCM
Transamerica Corporate Services 100% TDFCM
De Mexico
Transamerica Home Loan California 100% TFC Consumer mortgages
Transamerica Lending Company Delaware 100% TFC Consumer lending
Transamerica Financial Products, Inc. California 100% Transamerica Corp. Service investments
Transamerica Insurance Corporation California 100% Transamerica Corp. Provides insurance premium
of California ("TICC") financing in California
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Arbor Life Insurance Company Arizona 100% TICC Life insurance, disability
insurance
Plaza Insurance Sales Inc. California 100% TICC Casualty insurance placement
Transamerica Advisors, Inc. California 100% TICC Retail sale of investment
advisory services
Transamerica Annuity Services Corp. New Mexico 100% TICC Performs services required for
structured settlements
Transamerica Financial Resources, Inc. Delaware 100% TICC Retail sale of securities
products
Financial Resources Insurance Texas 100% Transamerica Fin. Res. Retail sale of securities
Agency of Texas products
TBK Insurance Agency of Ohio, Inc. Ohio 100% Transamerica Fin. Res. Variable insurance contract
sales in state of Ohio
Transamerica Financial Resources Alabama 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Alabama, Inc.
Transamerica Financial Resources Ins. Massachusetts 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Massachusetts, Inc.
Transamerica International Insurance Delaware 100% TICC Holding & administering
Services, Inc. ("TIIS") foreign operations
Home Loans and Finance Ltd. U.K. 100% TIIS Inactive
Transamerica Occidental Life California 100% TICC Licensed in all forms of life
Insurance Company ("TOLIC") insurance, accident and
sickness insurance
NEF Investment Company California 100% TOLIC Real estate development
Transamerica Life Insurance and N. Carolina 100%TOLIC Writes life and pension ins.
Annuity Company ("TLIAC") originally incorporated in CA
April 14, 1966
Transamerica Assurance Company Missouri 100% TLIAC Life and disability insurance
Gemini Investments, Inc. Delaware 100% TLIAC Investment subsidiary
Transamerica Life Insurance Company Canada 100% TOLIC Sells individual life insurance
of Canada & investment products in all
provinces and territories of
Canada
</TABLE>
C-20
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Transamerica Life Insurance Company New York 100% TOLIC Licensed in NY to market life
of New York insurance, annuities and health
insurance
Transamerica South Park Delaware 100% TOLIC Provide market analysis of
Resources, Inc. certain undeveloped land
holdings held by TOLIC
Transamerica Variable Insurance Maryland 100% TOLIC Mutual Fund
Fund, Inc.
USA Administration Services, Inc. Kansas 100% TOLIC Third party administrator
Transamerica Products. Inc. California 100% TICC Parent co. of various
subsidiary corp. which are
formed to be co-general
partners of proprietary limited
Transamerica Securities Sales Corp. Maryland 100% Transamerica Prod. Inc. Retail sale of the variable life
ins. and variable annuity
products of the Transamerica
life companies
Transamerica Service Company Delaware 100% Transamerica Prod. Inc. Passive loss tax service for
Lloyd's U.S. names
Transamerica Intellitech, Inc. Delaware 100% TICC Real estate information and
technology services
Transamerica International Delaware 100% TICC Investments
Holdings, Inc.
Transamerica Investment Services, Inc. Delaware 100% TICC Investment adviser
Transamerica Income Shares, Inc. Maryland 100% Trans. Invest. Srvc. Inc. Transamerica investment
services
Transamerica LP Holdings Corp. Delaware 100% TICC Limited partnership
Investment
(initial limited partner of
Transamerica Delaware, L.P.)
Transamerica Real Estate Tax Service N/A 100% TICC Real estate tax reporting and
(A Division of Transamerica Corp) processing services
Transamerica Realty Services, Inc. Delaware 100% TICC Responsible for real estate
investments for Transamerica
</TABLE>
C-21
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Bankers Mortgage Company of CA California 100% Transamerica Realty Srv. Holds bank account and owns
certain residual investments in
certain French real estate
projects which are managed
special purpose company for
the purchase of real estate tax
liens.
Pyramid Investment Corporation Delaware 100% Transamerica Realty Srv. Owns office buildings in San
Francisco and other properties
The Gilwell Company California 100% Transamerica Realty Srv. Ground lessee of 517
Washington Street,
San Francisco
Transamerica Affordable Housing, Inc. California 100% Transamerica Realty Srv. Owns general partnership
interests in low-income
housing tax credit
partnerships
Transamerica Minerals Company California 100% Transamerica Realty Srv. Owner and lessor of oil and
gas properties
Transamerica Oakmont Corporation California 100% Transamerica Realty Srv. General partner in
Transamerica/Oakmont
Retirement Associates
Transamerica Senior Properties, Inc. Delaware 100% TICC Owns congregate care and
assisted living retirement
Properties
Transamerica Senior Living, Inc. Delaware 100% Trans. Sr. Prop. Inc. Manages congregate care and
assisted living retirement
properties.
</TABLE>
C-22
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 25, 2000, there were 50 Contract Owners of the Advisor's Edge
Variable Annuity.
ITEM 28. INDEMNIFICATION
The New York Code (Section 721 et seq.) provides for permissive indemnification
in certain situations, mandatory indemnification in other situations, and
prohibits indemnification in certain situations. The Code also specifies
procedures for determining when indemnification payments can be made.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to directors, officers, and
controlling persons of the Depositor pursuant to the foregoing provisions, or
otherwise, the Depositor has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act, and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment by
the Depositor of expenses incurred or paid by a director, officer, or
controlling person in connection with the securities being registered), the
Depositor will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) AFSG Securities Corporation ("AFSG"), which serves as the principal
underwriter for the variable annuity contracts funded by Separate
Account C, also serves as the principal underwriter for variable life
insurance policies funded by Separate Account I and Variable Annuity
contracts funded by Separate Account II and Separate Account V of
Peoples Benefit Life Insurance Company. In addition, AFSG serves as
principal underwriter for variable annuity and variable life contracts
funded by PFL Life Variable Annuity Account A, PFL Life Variable
Annuity Account C, PFL Life Variable Annuity Account D, PFL Endeavor
VA Separate Account, PFL Retirement Builder Variable Annuity Account
and Legacy Builder Variable Life Separate Account of PFL Life
Insurance Company; Life Investors Variable Life Account A of Life
Investors Insurance Company of America; WRL Series Life Corporate
Account of Western Reserve Life Assurance Co. of Ohio; and AUSA
Endeavor Variable Annuity Account of AUSA Life Insurance Company, Inc.
(b) Directors and Officers:
Larry N. Norman President, Director
Anne M. Spaes Vice President, Director
Lisa A. Wachendorf Vice President, Chief Compliance Officer,
Director
Thomas R. Moriarty Vice President
Frank A. Camp Secretary
Linda Gilmer Controller and Treasurer
Priscilla I. Hechler Assistant Vice President, Assistant Secretary
Thomas E. Pierpan Assistant Vice President, Assistant Secretary
Darin D. Smith Assistant Vice President, Assistant Secretary
Robert W. Warner Assistant Compliance Officer
Emily Bates Assistant Treasurer
Clifton W. Flenniken Assistant Treasurer
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the Administrative Offices of AUSA Life Insurance Company, Inc. in Cedar
Rapids, Iowa.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS.
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that
the audited financial statements in the registration statement are
never more than 16 months old for so long as Premiums under the Policy
may be accepted.
(b) Registrant undertakes that it will include either (I) a postcard or
similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional
Information or (ii) a space in the Policy application that an
applicant can check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request of AUSA Life
Insurance Company, Inc., at the address or phone number listed in the
Prospectus.
(d) AUSA Life Insurance Company, Inc. hereby represents that the fees and
charges deducted under the policies described in this registration
statement, in the aggregate, are reasonable in relation to the
<PAGE>
services rendered, the expenses expected to be incurred, and the risks
assumed by AUSA Life Insurance Company, Inc.
Section 403(b) Representations
- ------------------------------
AUSA Life represents that it is relying on a non-action letter dated
November 28, 1998, to the American Counsel of Life Insurance (Ref. No. IP-6-88),
regarding Sections 22(e), 27(c)(i), and 27(d) of the Investment Company Act of
1940, as amended, in connection with redeemability restrictions on Section
403(b) Policies, and that paragraphs numbered (1) through (4) of that letter
will be complied with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant hereby certifies that this Amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b)
of Rule 485 and has caused this Registration Statement to be signed on its
behalf, in the City of Louisville and Commonwealth of Kentucky, on this 28th day
of April, 2000.
AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
Registrant
AUSA LIFE INSURANCE COMPANY, INC.
Depositor
Tom A. Schlossberg
-------------------------
Tom A. Schlossberg
President
By: /s/ Gregory E. Miller-Breetz
--------------------------------
Gregory E. Miller-Breetz
Attorney-In-Fact
<PAGE>
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
William Brown, Jr. Director April 28, 1999
- -----------------------------------
William Brown, Jr.
William L. Busler Director April 28, 1999
- -----------------------------------
William L. Busler
Jack R. Dykhouse Director April 28, 1999
- -----------------------------------
Jack R. Dykhouse
Steven E. Frushtick Director April 28, 1999
- -----------------------------------
Steven E. Frushtick
Carl T. Hanson Director April 28, 1999
- -----------------------------------
Carl T. Hanson
Colette Vargas Director April 28, 1999
- -----------------------------------
Colette Vargas
Peter P. Post Director April 28, 1999
- -----------------------------------
Peter P. Post
Tom A. Schlossberg Director (Principal April 28, 1999
- ----------------------------------- Executive Officer)
Tom A. Schlossberg
Cor H. Verhagen Director April 28, 1999
- -----------------------------------
Cor H. Verhagen
E. Kirby Warren Director April 28, 1999
- -----------------------------------
E. Kirby Warren
Brenda K. Clancy Treasurer (Chief April 28, 1999
- ----------------------------------- Accounting Officer
Brenda K. Clancy
</TABLE>
By: /s/ Gregory E. Miller-Breetz
- -----------------------------------
Gregory E. Miller-Breetz
Attorney-In-Fact
<PAGE>
INDEX TO EXHIBITS
EXHIBIT 9(a) Opinion and Consent of Counsel
EXHIBIT 9(b) Consent of Counsel
EXHIBIT 10 Consent of Independent Auditors
<PAGE>
EXHIBIT 9(a)
April 28, 2000
AUSA Life Insurance Company, Inc.
Administrative Office
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
RE: AUSA Life Insurance Company, Inc. Separate Account C (Advisor's Edge
Variable Annuity) - Opinion and Consent
To Whom It May Concern:
This opinion and consent is furnished in connection with the filing of Post-
Effective Amendment No. 2 (the "Amendment") to the Registration Statement on
Form N-4, File No. 333-65149 (the "Registration Statement") under the Securities
Act of 1933, as amended (the "Act"), of AUSA Life Insurance Company, Inc.
Separate Account C ("Separate Account C"). Separate Account C receives and
invests premiums allocated to it under a group flexible premium multi-funded
annuity contract (the "Annuity Contract"). The Annuity Contract is offered in
the manner described in the prospectus contained in the Registration Statement
(the "Prospectus").
In my capacity as legal adviser to AUSA Life Insurance Company, Inc., I hereby
confirm the establishment of Separate Account C pursuant to the provisions of
Section 4240 of the New York Insurance Statutes. In addition, I have made such
examination of the law in addition to consultation with outside counsel and have
examined such corporate records and such other documents as I consider
appropriate as a basis for the opinion hereinafter expressed. On the basis of
such examination, it is my professional opinion that:
1. AUSA Life Insurance Company, Inc. is a corporation duly organized and
validly existing under the laws of the State of New York.
2. Separate Account C is an account established and maintained by AUSA Life
Insurance Company, Inc. pursuant to the laws of the State of New York, under
which income, capital gains and capital losses incurred on the assets of
Separate Account C are credited to or charged against the assets of Separate
Account C, without regard to the income, capital gains or capital losses
arising out of any other business with AUSA Life Insurance Company, Inc. may
conduct.
<PAGE>
3. Assets allocated to Separate Account C will be owned by AUSA Life Insurance
Company, Inc.. The assets in Separate Account C attributable to the Annuity
Contract generally are not chargeable with liabilities arising out of any
other business which AUSA Life Insurance Company, Inc. may conduct. The
assets of Separate Account C are available to cover the general liabilities
of AUSA Life Insurance Company, Inc. only to the extent that the assets of
Separate Account C exceed the liabilities arising under the Annuity
Contracts.
4. The Annuity Contracts have been duly authorized by AUSA Life Insurance
Company, Inc. and, when sold in jurisdictions authorizing such sales, in
accordance with the Registration Statement, will constitute validly issued
and binding obligations of AUSA Life Insurance Company, Inc. in accordance
with their terms.
5. Owners of the Annuity Contracts as such, will not be subject to any
deductions, charges or assessments imposed by AUSA Life Insurance Company,
Inc. other than those provided in the Annuity Contract.
I hereby consent to the use of this opinion as an exhibit to the Amendment and
to the reference to my name under the heading "Legal Matters" in the
Prospectuses.
Very truly yours,
/s/ Gregory E. Miller-Breetz
Gregory E. Miller-Breetz
Attorney
<PAGE>
EXHIBIT 9(b)
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400-EAST
WASHINGTON, D.C. 20007-0805
(202) 965-8100
TELECOPIER (202) 965-8104
April 28, 2000
AUSA Life Insurance Company, Inc.
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
Ladies and Gentlemen:
We hereby consent to the reference to our name under the capital "Legal Matters"
in the Prospectuses contained in Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (File No. 333-65149) filed by AUSA Life
Insurance Company, Inc. and AUSA Life Insurance Company, Inc. Separate Account C
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Boros Cicchetti Berenson &
Johnson LLP
Jorden Burt Boros Cicchetti Berenson &
Johnson LLP
<PAGE>
EXHIBIT 10
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Statements" in the Prospectus and Statement of Additional Information, and
"Auditors" in the Prospectus, and to the use of our reports (1) dated
January 28, 2000 with respect to the financial statements of certain subaccounts
of AUSA Life Insurance Company, Inc. Separate Account C, which are available for
investment by the contract owners of the Advisor's Edge Variable Annuity, and
(2) dated February 18, 2000 with respect to the statutory-basis financial
statements of AUSA Life Insurance Company, Inc. included in Post-Effective
Amendment No. 2 to the Registration Statement (Form N-4 No. 333-65149) and
related Prospectus of the Advisor's Edge Variable Annuity.
/s/ Ernst & Young LLP
Des Moines, Iowa
April 24, 2000
