<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 (File No. 333-03867) X
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 1 (File No. 811-07623) X
IDS LIFE OF NEW YORK FLEXIBLE PORTFOLIO ANNUITY ACCOUNT
___________________________________________________________________
(Exact Name of Registrant)
IDS Life Insurance Company of New York
___________________________________________________________________
(Name of Depositor)
20 Madison Avenue Extension, Albany, New York 12203
___________________________________________________________________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
___________________________________________________________________
(Name and Address of Agent for Service)
It is proposed that this filing will become effective Sept. 6, 1996
(check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
on (date) pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(i) of Rule 485
on (date) pursuant to paragraph (a)(i) of Rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
DECLARATION REQUIRED BY RULE 24f-2(a)(1)
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Section
24-f of the Investment Company Act of 1940.
<PAGE>
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DECLARATION REQUIRED BY RULE 24f-2(a)(1)
The Registrant hereby amends the Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to
delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission acting pursuant to Section 8(a) may determine.
<PAGE>
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<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus of the information called for by the items enumerated in Part A and B of
Form N-4.
Negative answers omitted from prospectus are so indicated.
PART A PART B
Section Section in Statement of
Item No. in Prospectus Item No. Additional Information
<C> <C> <C> <C>
1 Cover page 15 Cover page
2 Key terms 16 Table of contents
3(a) Expense Summary 17(a) NA
(b) The Flexible Portfolio Annuity in brief (b) NA
(c) About IDS Life of New York*
4(a) NA
(b) Performance information 18(a) NA
(c) NA (b) NA
(c) Independent auditors
5(a) Cover page; About IDS Life of New York (d) NA
(b) The variable account (e) NA
(c) The funds (f) Principal underwriter
(d) Cover page; The funds
(e) Voting rights 19(a) Distribution of the contracts*; About
(f) NA IDS Life of New York*
(g) NA (b) Charges*
6(a) Charges 20(a) Principal underwriter
(b) Charges (b) Principal underwriter
(c) Charges (c) NA
(d) Distribution of the contracts (d) NA
(e) The funds
(f) NA 21(a) Performance information
(b) Performance information
7(a) Buying your annuity; Benefits in case of
death; The annuity payout period 22 Calculating annuity payouts
(b) The variable account; Making the most of
your annuity, Transferring money between 23(a) NA
charge accounts (b) NA
(c) The funds; Charges
(d) Cover page
8(a) The annuity payout period
(b) Buying your annuity
(c) The annuity payout period
(d) The annuity payout period
(e) The annuity payout period
(f) The annuity payout period
9(a) Benefits in case of death
(b) Benefits in case of death
10(a) Buying your annuity; Valuing your
investment
(b) Valuing your investment
(c) Buying your annuity; Valuing your
investment
(d) NA
11(a) Surrendering your contract
(b) TSA - Special surrender provisions
(c) Surrendering your contract
(d) Buying your annuity
(e) The Flexible Portfolio Annuity in brief
12(a) Taxes
(b) Key terms
(c) NA
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13 NA
14 Table of contents of the Statement of
Additional Information
*Designates section in the prospectus, which is hereby incorporated by reference in this statement of Additional Information.
</TABLE>
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IDS Life of New York Flexible Portfolio Annuity
Prospectus
_____, 1996
The Flexible Portfolio Annuity is an individual deferred
fixed/variable annuity contract offered by IDS Life Insurance
Company of New York (IDS Life of New York), a subsidiary of IDS
Life Insurance Company (IDS Life), a subsidiary of American Express
Financial Corporation. Purchase payments may be allocated among
different accounts, providing variable and/or fixed returns and
payouts. The annuity is available for qualified and nonqualified
retirement plans.
IDS Life of New York Flexible Portfolio Annuity Account
Sold by: IDS Life Insurance Company of New York, 20 Madison Ave.
Extension, Albany, NY 12203, Telephone: 518-869-8613.
THIS PROSPECTUS CONTAINS THE INFORMATION ABOUT THE VARIABLE ACCOUNT
THAT YOU SHOULD KNOW BEFORE INVESTING. Refer to "The variable
account" in this prospectus.
THE PROSPECTUS IS ACCOMPANIED OR PRECEDED BY THE FOLLOWING
PROSPECTUSES: THE RETIREMENT ANNUITY MUTUAL FUNDS PROSPECTUS
(DESCRIBING IDS LIFE AGGRESSIVE GROWTH FUND, IDS LIFE INTERNATIONAL
EQUITY FUND, IDS LIFE CAPITAL RESOURCE FUND, IDS LIFE MANAGED FUND,
IDS LIFE SPECIAL INCOME FUND, IDS LIFE MONEYSHARE FUND, IDS LIFE
GROWTH DIMENSIONS FUND, IDS LIFE GLOBAL YIELD FUND AND IDS LIFE
INCOME ADVANTAGE FUND); AIM VARIABLE INSURANCE FUNDS, INC.
PROSPECTUS (DESCRIBING AIM V.I. GROWTH AND INCOME FUND); PUTNAM
CAPITAL MANAGER TRUST (DESCRIBING PCM NEW OPPORTUNITIES FUND); TCI
PORTFOLIOS, INC., (DESCRIBING TCI VALUE); TEMPLETON VARIABLE
PRODUCTS SERIES FUND (DESCRIBING TEMPLETON DEVELOPING MARKETS FUND)
AND WARBURG PINCUS TRUST (DESCRIBING WARBURG PINCUS TRUST/SMALL
COMPANY GROWTH PORTFOLIO). PLEASE KEEP THESE PROSPECTUSES FOR
FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IDS LIFE OF NEW YORK IS NOT A FINANCIAL INSTITUTION, AND THE
SECURITIES IT OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY FINANCIAL INSTITUTION NOR ARE THEY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THIS ANNUITY
INVOLVE INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI) dated _____, 1996
(incorporated by reference into this prospectus) has been filed
with the Securities and Exchange Commission (SEC), and is available
without charge by contacting IDS Life of New York at the telephone
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PAGE 6
number above or by completing and sending the order form on the
last page of this prospectus. The table of contents of the SAI is
on the last page of this prospectus.
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Table of contents
Key terms.......................................................
The Flexible Portfolio Annuity in brief.........................
Expense summary.................................................
Financial statements............................................
Performance information.........................................
The variable account............................................
The funds.......................................................
IDS Life Aggressive Growth Fund............................
IDS Life International Equity Fund.........................
IDS Life Capital Resource Fund.............................
IDS Life Managed Fund......................................
IDS Life Special Income Fund...............................
IDS Life Moneyshare Fund...................................
IDS Life Growth Dimensions Fund............................
IDS Life Global Yield Fund.................................
IDS Life Income Advantage Fund.............................
AIM V.I. Growth and Income Fund............................
PCM New Opportunities Fund.................................
TCI Value..................................................
Templeton Developing Markets Fund..........................
Warburg Pincus Trust/Small Company Growth Portfolio........
The fixed account...............................................
Buying your annuity.............................................
The retirement date........................................
Beneficiary................................................
How to make purchase payments..............................
Charges.........................................................
Contract administrative charge.............................
Mortality and expense risk fee.............................
Surrender charge...........................................
Waiver of surrender charges................................
Valuing your investment.........................................
Number of units............................................
Accumulation unit value....................................
Net investment factor......................................
Factors that affect variable subaccount
accumulation units.........................................
Making the most of your annuity.................................
Automated dollar-cost averaging............................
Transferring money between subaccounts.....................
Transfer policies..........................................
How to request a transfer or a surrender...................
Surrendering your contract......................................
Surrender policies.........................................
Receiving payment when you request a surrender.............
TSA-special surrender provisions................................
Changing ownership..............................................
Benefits in case of death.......................................
The annuity payout period.......................................
Annuity payout plans.......................................
Death after annuity payouts begin..........................
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Taxes...........................................................
Voting rights...................................................
Substitution of investments.....................................
Distribution of the contracts...................................
About IDS Life of New York......................................
Regular and special reports.....................................
Services..................................................
Table of contents of the Statement of
Additional Information...................................
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Key terms
These terms can help you understand details about your annuity.
Annuity - A contract purchased from an insurance company that
offers tax-deferred growth of the investment until earnings are
withdrawn, and that can be tailored to meet the specific needs of
the individual during retirement.
Accumulation unit - A measure of the value of each variable
subaccount before annuity payouts begin.
Annuitant - The person on whose life or life expectancy the annuity
payouts are based.
Annuity payouts - An amount paid at regular intervals under one of
several plans available to the owner and/or any other payee. This
amount may be paid on a variable or fixed basis or a combination of
both.
Annuity unit - A measure of the value of each variable subaccount
used to calculate the annuity payouts you receive.
Beneficiary - The person designated to receive annuity benefits in
case of the owner's or annuitant's death.
Close of business - When the New York Stock Exchange (NYSE) closes,
normally 4 p.m. Eastern time.
Code - Internal Revenue Code of 1986, as amended.
Contract value - The total value of your annuity before any
applicable surrender charge and any contract administrative charge
have been deducted.
Contract year - A period of 12 months, starting on the effective
date of your contract and on each anniversary of the effective
date.
Fixed account - An account to which you may allocate purchase
payments. Amounts allocated to this account earn interest at rates
that are declared periodically by IDS Life of New York.
IDS Life of New York - In this prospectus, "we," "us," "our" and
"IDS Life of New York" refer to IDS Life Insurance Company of New
York.
Mutual funds (funds) - Mutual funds or portfolios, each with a
different investment objective. (See "The funds.") You may
allocate your purchase payments into variable subaccounts investing
in shares of any or all of these funds.
Owner (you, your) - The person who controls the annuity (decides on
investment allocations, transfers, payout options, etc.). Usually,
but not always, the owner is also the annuitant. The owner is
responsible for taxes, regardless of whether he or she receives the
annuity's benefits.<PAGE>
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Purchase payments - Payments made to IDS Life of New York for an
annuity.
Qualified annuity - An annuity purchased for a retirement plan
that is subject to applicable federal law and any rules of the plan
itself. These plans include:
o Individual Retirement Annuities (IRAs)
o Simplified Employee Pension Plans (SEPs)
o Section 401(k) plans
o Custodial and trusteed pension and profit-sharing plans
o Tax-Sheltered Annuities (TSAs)
All other annuities are considered nonqualified annuities.
Retirement date - The date when annuity payouts are scheduled to
begin. This date is first established when you start your
contract. You can change it in the future.
Surrender charge - A deferred sales charge that may be applied if
you surrender your annuity before the retirement date.
Surrender value - The amount you are entitled to receive if you
surrender your annuity. It is the contract value minus any
applicable surrender charge and contract administrative charge.
Valuation date - Any normal business day, Monday through Friday,
that the NYSE is open. The value of each variable subaccount is
calculated at the close of business on each valuation date.
Variable account - An account consisting of separate subaccounts to
which you may allocate purchase payments; each invests in shares of
one mutual fund. (See "The variable account.") The value of your
investment in each variable subaccount changes with the performance
of the particular fund.
The Flexible Portfolio Annuity in brief
Purpose: The Flexible Portfolio Annuity is designed to allow you
to build up funds for retirement. You do this by making one or more
investments (purchase payments) that may earn returns that increase
the value of the annuity. Beginning at a specified future date
(the retirement date), the annuity provides lifetime or other forms
of payouts to you or to anyone you designate.
Ten-day free look: You may return your annuity to your financial
advisor or our Albany office within 10 days after it is delivered
to you and receive a full refund of purchase payments. No charges
will be deducted.
Accounts: You may allocate your purchase payments among any or all
of:
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o variable subaccounts, each of which invests in a mutual fund
with a particular investment objective. The value of each
variable subaccount varies with the performance of the
particular fund. We cannot guarantee that the value at the
retirement date will equal or exceed the total of purchase
payments allocated to the variable subaccounts. (p.)
o one fixed account, which earns interest at rates that are
adjusted periodically by IDS Life of New York. (p.)
Buying your annuity: Your financial advisor will help you complete
and submit an application. Applications are subject to acceptance
at our Albany office. You may buy a nonqualified annuity or a
qualified annuity including an IRA. Payment may be made either in
a lump sum or installments:
o Minimum initial purchase payment - $2,000 ($1,000 for qualified
annuities) unless you pay in installments by means of a bank
authorization or under a group billing arrangement such as a
payroll deduction.
o Minimum additional purchase payment - $50.
o Minimum installment payment - $50 monthly; $23.08 biweekly
(scheduled payment plan billing).
o Maximum first-year payment(s) - $50,000 to $1,000,000 depending
on your age.
o Maximum payment for each subsequent year - $50,000 to $100,000
depending upon your age. (p.)
Transfers: Subject to certain restrictions you may redistribute
your money among accounts without charge at any time until annuity
payouts begin, and once per contract year among the variable
subaccounts thereafter. You may establish automated transfers
among the fixed account and variable subaccount(s). (p.)
Surrenders: You may surrender all or part of your contract value at
any time before the retirement date. You also may establish
automated partial surrenders. Surrenders may be subject to charges
and tax penalties and may have other tax consequences; also,
certain restrictions apply. (p.)
Changing ownership: You may change ownership of a nonqualified
annuity by written instruction, however, such changes of
nonqualified annuities may have federal income tax consequences.
Certain restrictions apply concerning change of ownership of a
qualified annuity. (p.)
Benefits in case of death: If you or the annuitant dies before
annuity payouts begin, we will pay the beneficiary an amount at
least equal to the contract value. (p.)
Annuity payouts: The contract value of your investment can be
applied to an annuity payout plan that begins on the retirement
date. You may choose from a variety of plans to make sure that
payouts continue as long as they are needed. If you purchased a
qualified annuity, the payout schedule must meet the requirements
of the qualified plan. Payouts may be made on a fixed or variable
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PAGE 12
basis, or both. Total monthly payouts may include amounts from
each variable subaccount and the fixed account. During the annuity
payout period, you cannot be invested in more than five variable
subaccounts at any one time unless we agree otherwise. (p.)
Taxes: Generally, your annuity grows tax-deferred until you
surrender it or begin to receive payouts. (Under certain
circumstances, IRS penalty taxes may apply.) Even if you direct
payouts to someone else, you will still be taxed on the income if
you are the owner. (p.)
Charges: Your Flexible Portfolio Annuity is subject to a $30
annual contract administrative charge, a 1.25% mortality and
expense risk charge and a surrender charge.
Expense summary
The purpose of this summary is to help you understand the various
costs and expenses associated with your annuity.
You pay no sales charge when you purchase the annuity. All costs
that you bear directly or indirectly for the variable subaccounts
and underlying mutual funds are shown below. Some expenses may
vary as explained under "Contract charges."
Direct charges. These are deducted directly from the contract
value. They include:
Surrender charge: You may pay surrender charges on any surrender
within the first eight contract years. The surrender charge starts
at 7% of any purchase payments surrendered during the first three
contract years, then declines by 1% per year from 6% in the fourth
year to 2% in the eighth year. No charge applies after 8 contract
years. Contract earnings may be surrendered without charge at any
time.
Annual contract administrative charge: $30, waived when contract
value, or total purchase payments (less any payments surrendered)
equals or exceeds $25,000 on your contract anniversary.
Indirect charges. The variable account pays these expenses out of
its assets. They are reflected in the variable subaccount's daily
accumulation unit value and are not charged directly to your
account. They include:
Mortality and expense risk fee: 1.25% per year, deducted from the
variable account as a percentage of the average daily net assets of
the underlying fund.
Operating expenses of underlying mutual funds: management fees and
other expenses deducted as a percentage of average net assets as
follows: *
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<TABLE>
<CAPTION>
IDS Life IDS Life
Aggres- Inter- IDS Life IDS Life IDS Life IDS Life IDS Life AIM V.I. PCM New
sive national Capital IDS Life Special IDS Life Growth Global Income Growth and Oppor-
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage Income tunities
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
fees .64% .86% .63% .62% .63% .54% .63% .84% .62% .65% .70%
Other
expenses .04 .09 .04 .03 .04 .05 .05 .06 .05 .52 .14
Total .68%** .95%** .67%** .65%** .67%** .59%** .68%# .90%# .67%# 1.17%** .84%**
Warburg Pincus
Templeton Trust/Small
TCI Developing Company
Value Markets Growth Portfolio
Management
fees 1.00% .76% .67%
Other
expenses .00 .94 .58
Total 1.00% 1.70%++ 1.25%+**
* Premium taxes imposed by some state and local governments are not reflected in this table.
** Annualized operating expenses of underlying mutual funds at Dec. 31, 1995.
+ Figures in "Management Fees," "Other expenses" and "Total" reflect waivers and reimbursements of expenses by the investment
advisor of the Portfolio. If there had been no reimbursement of expenses in 1995, actual expenses of the Portfolio, expressed as a
percent of average daily net assets, would have been as follows: "Management Fees," .90%, "Other expenses," .60% and "Total,"
1.50%.
++This is a new fund; operating expenses are based on annualized estimates of such expenses to be incurred in the current fiscal
year. Expenses shown are net of management fees waived. The Fund's Investment Manager has agreed in advance to reduce its fee so
as to limit the total expenses of the Fund to an annual rate of 1.70% of the Fund's average daily net assets until May 1, 1997.
# This is a new fund, operating expenses are based on annualized estimates of such expenses to be incurred in the current fiscal
year.
</TABLE>
<TABLE>
<CAPTION>
IDS Life IDS Life
Aggres- Inter- IDS Life IDS Life IDS Life IDS Life IDS Life AIM V.I. PCM New
sive national Capital IDS Life Special IDS Life Growth Global Income Growth and Oppor-
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage Income tunities
Example:* You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and surrender at the end of each time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 93.42 $ 96.00 $ 93.33 $ 93.14 $ 93.33 $ 92.57 $ 93.42 $ 95.52 $ 93.33 $ 98.09 $ 93.90
3 years 142.30 150.02 142.01 141.44 142.01 139.71 142.30 148.59 142.01 156.28 143.73
5 years 170.98 184.15 170.49 169.50 170.49 166.55 170.98 181.72 170.49 194.78 173.43
10 years 243.98 272.02 242.93 240.82 242.93 234.47 243.98 266.88 242.93 294.32 249.23
Warburg Pincus
Templeton Trust/Small
TCI Developing Company
Value Markets Growth Portfolio
1 year $ 96.47 $103.15 $ 98.86
3 years 151.45 171.25 158.55
5 years 186.57 219.97 198.61
10 years 277.13 346.07 302.30
You would pay the following expenses on the same investment assuming no surrender or the
selection of an annuity payout plan at the end of each time period:
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IDS Life IDS Life
Aggres- Inter- IDS Life IDS Life IDS Life IDS Life IDS Life AIM V.I. PCM New
sive national Capital IDS Life Special IDS Life Growth Global Income Growth and Oppor-
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage Income tunities
1 year $ 21.42 $ 24.19 $ 21.32 $ 21.12 $ 21.32 $ 20.50 $ 21.42 $ 23.68 $ 21.32 $ 26.45 $ 21.94
3 years 66.12 74.46 65.81 65.19 65.81 63.33 66.12 72.92 65.81 81.22 67.67
5 years 113.41 127.36 112.89 111.85 112.89 108.73 113.41 124.79 112.89 138.60 116.01
10 years 243.98 272.02 242.93 240.82 242.93 234.47 243.98 266.88 242.93 294.32 249.23
Warburg Pincus
Templeton Trust/Small
TCI Developing Company
Value Markets Growth Portfolio
1 year $ 24.70 $ 31.88 $ 27.27
3 years 76.00 97.38 83.67
5 years 129.92 165.27 142.67
10 years 277.13 346.07 302.30
</TABLE>
This example should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those
shown.
* In this example, the $30 annual contract administrative charge is
approximated as a .160% charge based on the expected average
contract size. IDS Life of New York has entered into certain
arrangements under which it is compensated for the administrative
services it provides to the funds.
Financial statements
The SAI, dated ________________, 1996, contains:
The audited financial statements of IDS Life Insurance Company of
New York including:
- balance sheets as of Dec. 31, 1995 and Dec. 31, 1994
- related statements of income, and cash flows for each of the
three years in the period ended Dec. 31, 1995
and the unaudited financial statements of IDS Life Insurance
Company of New York including:
- balance sheet as of June 30, 1996 and
- related statements of income, and cash flows for the six
months ended June 30, 1996.
The SAI does not include financial statements of the Variable
Account because this is a new account that does not have any
assets.
Performance information
Performance information for the variable subaccounts may appear
from time to time in advertisements or sales literature. In all
cases, such information reflects the performance of a hypothetical
investment in a particular account during a particular time period.
Calculations are performed as follows:
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PAGE 15
Simple yield - Account GM (investing in Moneyshare Fund): Income
over a given seven-day period (not counting any change in the
capital value of the investment) is annualized (multiplied by 52)
by assuming that the same income is received for 52 weeks. This
annual income is then stated as an annual percentage return on the
investment.
Compound yield - Account GM (investing in Moneyshare Fund):
Calculated like simple yield, except that, when annualized, the
income is assumed to be reinvested. Compounding of reinvested
returns increases the yield as compared to a simple yield.
Yield - For accounts investing in income funds: Net investment
income (income less expenses) per accumulation unit during a given
30-day period is divided by the value of the unit on the last day
of the period. The result is converted to an annual percentage.
Average annual total return: Expressed as an average annual
compounded rate of return of a hypothetical investment over a
period of one, five and 10 years (or up to the life of the account
if it is less than 10 years old). This figure reflects deduction
of all applicable charges, including the contract administrative
charge, mortality and expense risk fee and surrender charge,
assuming a surrender at the end of the illustrated period.
Optional total return quotations may be made that do not reflect a
surrender charge deduction (assuming no surrender).
Aggregate total return: Represents the cumulative change in the
value of an investment over a specified period of time (reflecting
change in a subaccount's accumulation unit value). The calculation
assumes reinvestment of investment earnings and reflects the
deduction of all applicable charges, including the contract
administrative charge, mortality and expense risk fee and surrender
charge, assuming a surrender at the end of the illustrated period.
Optional total return quotations may be made that do not reflect a
surrender charge deduction (assuming no surrender). Aggregate
total return may be shown by means of schedules, charts or graphs.
Performance information should be considered in light of the
investment objectives and policies, characteristics and quality of
the fund in which the subaccount invests, and the market conditions
during the given time period. Such information is not intended to
indicate future performance. Because advertised yields and total
return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance,
subaccount performance should not be compared to that of mutual
funds that sell their shares directly to the public. (See the SAI
for a further description of methods used to determine yield and
total return for the subaccounts.)
If you would like additional information about actual performance,
contact your financial advisor.
<PAGE>
PAGE 16
The variable account
Purchase payments can be allocated to any or all of the subaccounts
of the variable account that invest in shares of the following
funds:
Subaccount
IDS Life Aggressive Growth Fund GA
IDS Life International Equity Fund GI
IDS Life Capital Resource Fund GC
IDS Life Managed Fund GD
IDS Life Special Income Fund GS
IDS Life Moneyshare Fund GM
IDS Life Growth Dimensions Fund GG
IDS Life Global Yield Fund GY
IDS Life Income Advantage Fund GV
AIM V.I. Growth and Income Fund GW
PCM New Opportunities Fund GN
TCI Value GP
Templeton Developing Markets Fund GK
Warburg Pincus Trust/Small Company Growth Portfolio GT
Each variable subaccount meets the definition of a separate account
under federal securities laws. Income, capital gains and capital
losses of each subaccount are credited or charged to that
subaccount alone. No variable subaccount will be charged with
liabilities of any other account or of our general business. All
obligations arising under the contracts are general obligations of
IDS Life of New York.
The variable account was established under New York law on April
17, 1996 and is registered as a unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration
does not involve any supervision of our management or investment
practices and policies by the SEC.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock
of small-and medium-size companies. The fund also may invest in
warrants or debt securities or in large, well-established companies
when the portfolio manager believes such investments offer the best
opportunity for capital appreciation.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock
of foreign issuers and foreign securities convertible into common
stock. The fund also may invest in certain international bonds if
the portfolio manager believes they have a greater potential for
capital appreciation than equities.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common
stocks and other securities convertible into common stock,
diversified over many different companies in a variety of
industries.
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IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in
U.S. common stocks, securities convertible into common stock,
warrants, fixed income securities (primarily high-quality corporate
bonds) and money-market instruments. The fund invests in many
different companies in a variety of industries.
IDS Life Special Income Fund
Objective: to provide a high level of current income while
conserving the value of the investment for the longest time period.
Invests primarily in high-quality, lower-risk corporate bonds
issued by many different companies in a variety of industries, and
in government bonds.
IDS Life Moneyshare Fund
Objective: maximum current income consistent with liquidity and
conservation of capital. Invests in high-quality money market
securities with remaining maturities of 13 months or less. The
fund also will maintain a dollar-weighted average portfolio
maturity not exceeding 90 days. The fund attempts to maintain a
constant net asset value of $1 per share.
IDS Life Growth Dimensions Fund
Objective: long-term growth of capital. Invests primarily in
common stocks of U.S. and foreign companies showing potential for
significant growth.
IDS Life Global Yield Fund
Objective: high total return through income and growth of capital.
Invests primarily in a non-diversified portfolio of debt securities
of U.S. and foreign issuers.
IDS Life Income Advantage Fund
Objective: high current income, with capital growth as a secondary
objective. Invests primarily in long-term, high-yielding, high-
risk debt securities below investment grade issued by U.S. and
foreign corporations.
AIM V.I. Growth and Income Fund
Objective: to seek growth of capital, with current income as a
secondary objective. The fund seeks to achieve its objective by
investing primarily in dividend-paying common stocks which have
prospects for both growth of capital and dividend income.
PCM New Opportunities Fund
Objective: long-term capital appreciation. Invests principally in
common stocks of companies in sectors of the economy that
management believes possess above-average, long-term growth
potential.
TCI Value
Objective: long-term capital growth, with income as a secondary
objective. Invests primarily in securities that management
believes to be undervalued at the time of purchase.
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Templeton Developing Markets Fund
Objective: long-term capital appreciation. Invests primarily in
equity securities of issuers in countries having developing
markets.
Warburg Pincus Trust/Small Company Growth Portfolio
Objective: capital growth. Invests primarily in equity securities
of small-sized domestic companies.
All funds are available to serve as the underlying investment for
variable annuities, and some funds are available to serve as the
underlying investment for variable annuities, variable life
insurance contracts and qualified plans. It is conceivable that in
the future it may be disadvantageous for variable annuity separate
accounts, variable life insurance separate accounts and/or
qualified plans to invest in the available funds simultaneously.
Although IDS Life of New York and the funds do not currently
foresee any such disadvantages, the boards of directors or trustees
of the appropriate funds will monitor events in order to identify
any material conflicts between such contract owners, policy owners
and qualified plans to determine what action, if any, should be
taken in response to a conflict. If a board were to conclude that
separate funds should be established for variable annuity, variable
life insurance and qualified plan separate accounts, the variable
annuity contract holders would not bear any expenses associated
with establishing separate funds.
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h)
of the Code. Each mutual fund intends to comply with these
requirements.
The U.S. Treasury and the IRS have indicated they may provide
additional guidance concerning how many variable subaccounts may be
offered and how many exchanges among variable subaccounts may be
allowed before the owner is considered to have investment control
and thus is currently taxed on income earned within variable
subaccount assets. We do not know at this time what the additional
guidance will be or when action will be taken. We reserve the
right to modify the contract, as necessary, to ensure that the
owner will not be subject to current taxation as the owner of the
variable subaccount assets.
We intend to comply with all federal tax laws to ensure that the
contract continues to qualify as an annuity for federal income tax
purposes. We reserve the right to modify the contract as necessary
to comply with any new tax laws.
The investment managers for the funds are as follows:
o IDS Life Funds - IDS Life, IDS Tower 10, Minneapolis, MN 55440;
American Express Financial Corporation is the investment
advisor.
o AIM V.I. Growth and Income Fund - A I M Advisors, Inc., 11
Greenway Plaza, Suite 1919, Houston, TX 77046-1173;
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PAGE 19
o PCM New Opportunities Fund - Putnam Investment Management, Inc.,
One Post Office Square, Boston, MA 02109;
o TCI Value - Investors Research Corporation, Twentieth Century
Tower, 4500 Main Street, Kansas City, MO 64111;
o Templeton Developing Markets Fund - Templeton Asset Management
Ltd., Hong Kong Branch, Two Exchange Square, Hong Kong;
o Warburg Pincus Trust/Small Company Growth Portfolio - Warburg,
Pincus Counsellors, Inc., 466 Lexington Avenue, New York, NY
10017-3147.
The investment managers cannot guarantee that the funds will meet
their investment objectives. Please read the prospectuses for the
funds for complete information on investment risks, deductions,
expenses and other facts you should know before investing. These
prospectuses are available by contacting IDS Life of New York at
the address or telephone number on the front of this prospectus, or
from your financial advisor.
The fixed account
Purchase payments can also be allocated to the fixed account. The
cash value of the fixed account increases as interest is credited
to the account. Purchase payments and transfers to the fixed
account become part of the general account of IDS Life of New York,
the company's main portfolio of investments. Interest is credited
daily and compounded annually. We may change the interest rates
from time to time.
Because of exemptive and exclusionary provisions, interests in the
fixed account have not been registered under the Securities Act of
1933 (1933 Act), nor is the fixed account registered as an
investment company under the 1940 Act. Accordingly, neither the
fixed account nor any interests in it are generally subject to the
provisions of the 1933 or 1940 Acts, and we have been advised that
the staff of the SEC has not reviewed the disclosures in this
prospectus that relate to the fixed account. Disclosures regarding
the fixed account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to
the accuracy and completeness of statements made in prospectuses.
Buying your annuity
Your financial advisor will help you prepare and submit your
application, and send it along with your initial purchase payment
to our Albany office. As the owner, you have all rights and
may receive all benefits under the contract. The annuity cannot be
owned in joint tenancy, except in spousal situations. You cannot
buy an annuity or be an annuitant if you are 91 or older.
When you apply, you can select:
o the account(s) in which you want to invest;
o how you want to make purchase payments; and
o a beneficiary.
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The contract provides for allocation of purchase payments to the
subaccounts of the variable account and/or to the fixed account in
even 1% increments.
If your application is complete, we will process it and apply your
purchase payment to your account(s) within two days after we
receive it. If your application is accepted, we will send you a
contract. If we cannot accept your application within five days,
we will decline it and return your payment. We will credit
additional purchase payments to your account(s) at the next close
of business.
The retirement date
Upon processing your application we will establish the retirement
date to the maximum age or date as specified below. You can also
select a date within the maximum limits. This date can be aligned
with your actual retirement from a job, or it can be a different
future date, depending on your needs and goals and on certain
restrictions. You can also change the date, provided you send us
written instructions at least 30 days before annuity payouts begin.
For nonqualified annuities, the retirement date must be:
o no earlier than the 60th day after the contract's effective
date; and
o no later than the annuitant's 90th birthday or before the 10th
contract anniversary, if purchased after age 75.
For qualified annuities, to avoid IRS penalty taxes, the retirement
date generally must be:
o on or after the annuitant reaches age 59 1/2; and
o by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2.
If you are taking the minimum IRA or TSA distributions as required
by the Code from another tax-qualified investment, or in the form
of partial surrenders from this annuity, annuity payouts can start
as late as the annuitant's 90th birthday.
Beneficiary
If death benefits become payable before the retirement date, your
named beneficiary will receive all or part of the contract value.
If there is no named beneficiary, then you or your estate will be
the beneficiary. (See "Benefits in case of death" for more about
beneficiaries.)
Minimum purchase payment
If single payment:
Nonqualified: $2,000
Qualified: $1,000
o Minimum additional purchase payment: $50
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If installment payments:
o Minimum installment payment(s): $50 monthly; $23.08 biweekly
(scheduled payment plan billing)
Installments must total at least $600 in the first year.*
*If you make no purchase payments for 36 months, and your previous
payments total $600 or less, we have the right to give you 30 days'
written notice and pay you the total value of your contract in a
lump sum.
Maximum first-year payment(s):
This maximum is based on your age or age of the annuitant (whomever
is older) on the effective date of the contract.
Up to age 75 $1 million
76 to 85 $500,000
86 to 90 $50,000
o Maximum payment for each subsequent year**: $100,000 Up to age 85
$ 50,000 Ages 86-90
**These limits apply in total to all IDS Life of New York annuities
you own. We reserve the right to increase maximum limits. For
qualified annuities the qualified plan's limits on annual
contributions also apply.
How to make purchase payments
1 By letter
Send your check along with your name and account number to:
Regular mail:
IDS Life Insurance Company of New York
Box 5144
Albany, NY 12205
Express mail:
IDS Life Insurance Company of New York
20 Madison Ave. Extension
Albany, NY 12203
2 By scheduled payment plan
Your financial advisor can help you set up:
o an automatic payroll deduction, salary reduction or other group
billing arrangement; or
o a bank authorization.
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Charges
Contract administrative charge
This fee is for establishing and maintaining your records. We
deduct $30 from the contract value on your contract anniversary.
This $30 charge is waived if your contract value, or total purchase
payments less any payments surrendered, equals or exceeds $25,000
on your contract anniversary.
If you surrender your contract, the charge will be deducted at the
time of surrender regardless of the contract value or purchase
payments made. The charge cannot be increased and does not apply
after annuity payouts begin.
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is
applied daily to the variable subaccounts and reflected in the unit
values of the subaccounts. The subaccounts pay this fee at the
time that dividends are distributed from the funds in which they
invest. Annually the fee totals 1.25% of the subaccounts' average
daily net assets. Approximately two-thirds of this amount is for
our assumption of mortality risk, and one-third is for our
assumption of expense risk. This fee does not apply to the fixed
account.
Mortality risk arises because of our guarantee to pay a death
benefit and our guarantee to make annuity payouts according to the
terms of the contract, no matter how long a specific annuitant
lives and no matter how long the entire group of IDS Life of New
York annuitants live. If, as a group, IDS Life of New York
annuitants outlive the life expectancy we have assumed in our
actuarial tables, then we must take money from our general assets
to meet our obligations. If, as a group, IDS Life of New York
annuitants do not live as long as expected, we could profit from
the mortality risk fee. Expense risk arises because the contract
administrative charge cannot be increased and may not cover our
expenses. Any deficit would have to be made up from our general
assets.
We do not plan to profit from the contract administrative charge.
However, we do hope to profit from the mortality and expense risk
fee. We may use any profits realized from this fee for any proper
corporate purpose, including, among others, payment of distribution
(selling) expenses. We do not expect that the surrender charge,
discussed in the following paragraphs, will cover sales and
distribution expenses.
Surrender charge
A surrender charge applies to all purchase payments surrendered in
the first eight contract years. The surrender amount you request
is determined by drawing from your total contract value in the
following order:
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PAGE 23
o First we surrender any contract earnings (contract value minus
all purchase payments received and not previously surrendered).
There is no surrender charge on contract earnings. Note:
Contract earnings are determined by looking at the entire
contract value, not the earnings of any particular variable
subaccount or the fixed account.
o If necessary, we surrender amounts representing purchase
payments not previously surrendered. The surrender charge rate
on these purchase payments is as follows:
Surrender charge as
percent of purchase
payments surrendered Contract year
7 1-3
6 4
5 5
4 6
3 7
2 8
0 After 8 years
The surrender charge is calculated so that the total amount
surrendered, minus any surrender charge, equals the amount you
request.
Waiver of surrender charges
There are no surrender charges for:
o contract earnings;
o minimum required distributions after you reach age 70 1/2; (for
qualified plans)
o contracts settled using an annuity payout plan; and
o death benefits.
Other information on charges: American Express Financial
Corporation makes certain custodial services available to some
custodial and trusteed pension and profit sharing plans and 401(k)
plans funded by IDS Life of New York annuities. Fees for these
services start at $30 per calendar year per participant. A
termination fee for owners under age 59 1/2 will be charged (fee
waived in case of death or disability).
Possible group reductions: In some cases (for example, an employer
making the annuity available to employees), lower sales and
administrative expenses may be incurred due to the size of the
group, the average contribution and the use of group enrollment
procedures. In such cases, we may be able to reduce or eliminate
the contract administrative and surrender charges. However, we
expect this to occur infrequently.
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Valuing your investment
Here is how your accounts are valued:
Fixed account: The amounts allocated to the fixed account are
valued directly in dollars and equal the sum of your purchase
payments, plus interest earned, less any amounts surrendered or
transferred and any contract administrative charge assessed.
Variable subaccounts: Amounts allocated to the variable
subaccounts are converted into accumulation units. Each time you
make a purchase payment or transfer amounts into one of the
variable subaccounts, a certain number of accumulation units are
credited to your contract for that subaccount. Conversely, each
time you take a partial surrender, transfer amounts out of a
variable subaccount, or are assessed a contract administrative
charge, a certain number of accumulation units are subtracted from
your contract.
The accumulation units are the true measure of investment value in
each subaccount during the accumulation period. They are related
to, but not the same as, the net asset value of the underlying
fund. The dollar value of each accumulation unit can rise or fall
daily depending on the performance of the underlying mutual fund
and on certain fund expenses. Here is how unit values are
calculated:
Number of units
To calculate the number of accumulation units for a particular
subaccount, we divide your investment, by the current accumulation
unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount
equals the last value times the subaccount's current net investment
factor.
Net investment factor
o Determined each business day by adding the underlying mutual
fund's current net asset value per share, plus per share amount
of any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and
expense risk fee from the result.
Because the net asset value of the underlying mutual fund may
fluctuate, the accumulation unit value may increase or decrease.
You bear this investment risk in a variable subaccount.
Factors that affect variable subaccount accumulation units
Accumulation units may change in two ways; in number and in value.
Here are the factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the variable
subaccount(s);
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PAGE 25
o transfers into or out of the variable subaccount(s);
o partial surrenders;
o surrender charges; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable subaccount(s);
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses; and/or
o mortality and expense risk fees.
Making the most of your annuity
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For
example, you might have a set amount transferred monthly from a
relatively conservative variable subaccount to a more aggressive
one, or to several others.
This systematic approach can help you benefit from fluctuations in
accumulation unit values caused by fluctuations in the market
value(s) of the underlying mutual fund(s). Since you invest the
same amount each period, you automatically acquire more units when
the market value falls, fewer units when it rises. The potential
effect is to lower the average cost per unit. For specific
features contact your financial advisor.
How dollar-cost averaging works
Amount Accumulation Number of units
Month invested unit value purchased
Jan $100 $20 5.00
Feb 100 18 5.56
March 100 17 5.88
April 100 15 6.67
May 100 16 6.25
June 100 18 5.56
July 100 17 5.88
Aug 100 19 5.26
Sept 100 21 4.76
Oct 100 20 5.00
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more units
when the per unit market price is low...
(arrow in table pointing to September) and fewer units when the per
unit market price is high.
You have paid an average price of only $17.91 per unit over the 10
months, while the average market price actually was $18.10.
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PAGE 26
Dollar-cost averaging does not guarantee that any variable
subaccount will gain in value, nor will it protect against a
decline in value if market prices fall. However, if you can
continue to invest regularly throughout changing market conditions,
it can be an effective strategy to help meet your long-term goals.
Transferring money between subaccounts
You may transfer money from any one subaccount, or the fixed
account, to another subaccount before the annuity payouts begin.
If we receive your request before the close of business, we will
process it that day. Requests received after the close of business
will be processed the next business day. There is no charge for
transfers. Before making a transfer, you should consider the risks
involved in switching investments.
Certain restrictions apply to transfers involving the fixed
account. We may suspend or modify transfer privileges at any time.
Excessive trading activity can disrupt mutual fund management
strategy and increase expenses, which are borne by all contract
owners participating in the fund regardless of their transfer
activity. We may apply modifications or restrictions in any manner
reasonably designed to prevent any use of the transfer right we
consider to be to the disadvantage of other contract owners.
Transfer policies
o Before annuity payouts begin, you may transfer contract values
between the variable subaccounts, or from the variable
subaccount(s) to the fixed account at any time. However, if you
have made a transfer from the fixed account to the variable
subaccount(s), you may not make a transfer (including automated
transfers) from any variable subaccount back to the fixed
account until the next contract anniversary.
o You may transfer contract values from the fixed account to the
variable subaccount(s) once a year during a 31-day transfer
period starting on each contract anniversary (except for
automated transfers, which can be set up at any time for
transfer periods of your choosing subject to certain minimums).
o If we receive your transfer request within 30 days before the
contract anniversary date, the transfer from the fixed account
to the variable subaccount(s) will be effective on the
anniversary.
o If we receive your request on or within 30 days after the
contract anniversary date, the transfer from the fixed account
to the variable subaccount(s) will be effective on the day we
receive it.
o We will not accept requests for transfers from the fixed account
at any other time.
o Once annuity payouts begin, no transfers may be made to or from
the fixed account, but transfers may be made once per contract
year among the variable subaccounts. During the annuity payout
period, you cannot be invested in more than five variable
subaccounts at any one time unless we agree otherwise.
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PAGE 27
How to request a transfer or a surrender
1 By letter
Send your name, account number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or
surrender to:
Regular mail:
IDS Life Insurance Company of New York
P.O. Box 5144
Albany, NY 12205
Express mail:
IDS Life Insurance Company of New York
20 Madison Avenue Ext.
Albany, NY 12203
Minimum amount
Mail transfers: $250 or entire account balance
Mail surrenders: $250 or entire account balance
Maximum amount
Mail transfers: None (up to contract value)
Mail surrenders: None (up to contract value)
2 By automated transfers and automated partial surrenders
Your financial advisor can help you set up automated transfers
among your accounts or partial surrenders from the accounts. You
can start or stop this service by written request or other method
acceptable to IDS Life of New York. You must allow 30 days for IDS
Life of New York to change any instructions that are currently in
place.
o Automated transfers from the fixed account to any one of the
variable subaccount(s) may not exceed an amount that, if
continued, would deplete the fixed account within 12 months.
o Automated surrenders may be restricted by applicable law under
some contracts.
o You may not make additional purchase payments if automated
partial surrenders are in effect.
o Automated partial surrenders may result in IRS taxes and
penalties on all or part of the amount surrendered.
Minimum amount
Automated transfers or surrenders: $50
Maximum amount
Automated transfers or surrenders: None (except for automated
transfers from the fixed
account)
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PAGE 28
Surrendering your contract
As owner, you may surrender all or part of your contract at any
time before annuity payouts begin by sending a written request or
calling IDS Life of New York. For total surrenders we will compute
the value of your contract at the close of business after we
receive your request. We may ask you to return the contract. You
may have to pay surrender charges (see "Surrender charge") and IRS
taxes and penalties (see "Taxes"). No surrenders may be made after
annuity payouts begin.
Surrender policies
If you have a balance in more than one account and request a
partial surrender, we will withdraw money from all your accounts in
the same proportion as your value in each account correlates to
your total contract value, unless you request otherwise. The
minimum contract value after partial surrender is $600.
Receiving payment when you request a surrender
By regular or express mail:
o Payable to owner;
o Mailed to address of record;
o Special payee and/or addressee.
By wire:
o Request that payment be wired to your bank;
o Bank account must be in the same ownership as your contract;
o Pre-authorization required. For instructions, contact your
financial advisor.
Payment normally will be sent within seven days after receiving
your request. However, we may postpone the payment if:
-the surrender amount includes a purchase payment check that
has not cleared;
-the NYSE is closed, except for normal holiday and weekend
closings;
-trading on the NYSE is restricted, according to SEC rules;
-an emergency, as defined by SEC rules, makes it impractical
to sell securities or value the net assets of the accounts;
or
-the SEC permits us to delay payment for the protection of
security holders.
TSA-special surrender provisions
Participants in Tax-Sheltered Annuities: The Code imposes certain
restrictions on your right as owner to receive early distributions
from a TSA:
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PAGE 29
o Distributions attributable to salary reduction contributions
made after Dec. 31, 1988, plus the earnings on them, or to
transfers or rollovers of such amounts from other contracts, may
be made from the TSA only if:
-you have attained age 59 1/2;
-you have become disabled as defined in the Code;
-you have separated from the service of the employer who
purchased the annuity; or
-the distribution is made to your beneficiary because of your
death.
o If you encounter a financial hardship (within the meaning of the
Code), you may receive a distribution of all contract values
attributable to salary reduction contributions made after Dec.
31, 1988, but not the earnings on them.
o Even though a distribution may be permitted under the above
rules, it still may be subject to IRS taxes and penalties. (See
"Taxes.")
o The above restrictions on the right to receive a distribution do
not affect the availability of the amount credited to the
contract as of Dec. 31, 1988. The restrictions do not apply to
transfers or exchanges of contract value within the annuity, or
to another registered variable annuity contract or investment
vehicle available through the employer.
o If the contract has a loan provision, the right to receive a
loan from your fixed account is described in detail in your
contract. You may borrow from the contract value allocated to
the fixed account.
o For certain types of contributions under a TSA contract to be
excluded from taxable income, the employer must comply with
certain nondiscrimination requirements. You should consult your
employer to determine whether the nondiscrimination rules apply
to you.
Changing ownership
You may change ownership of your nonqualified annuity at any time
by filing a change of ownership with us at our Albany office. The
change will become binding upon us when we receive and record it.
We will honor any change of ownership request believed to be
authentic and will use reasonable procedures to confirm that it is.
If these procedures are followed, we take no responsibility for the
validity of the change.
If you have a nonqualified annuity, you may lose your tax
advantages by transferring, assigning or pledging any part of it.
(See "Taxes.")
If you have a qualified annuity, you may not sell, assign,
transfer, discount or pledge your contract as collateral for a
loan, or as security for the performance of an obligation or for
any other purpose to any person except IDS Life of New York.
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PAGE 30
However, if the owner is a trust or custodian, or an employer
acting in a similar capacity, ownership of a contract may be
transferred to the annuitant.
Benefits in case of death
If you or the annuitant dies (or, for qualified annuities, if the
annuitant dies) before annuity payouts begin, we will pay the
beneficiary as follows:
If death occurs before the annuitant's 75th birthday, the
beneficiary receives the greatest of:
o the contract value;
o the contract value as of the most recent sixth contract
anniversary, minus any surrenders since that anniversary; or
o purchase payments, minus any surrenders.
If death occurs on or after the annuitant's 75th birthday, the
beneficiary receives the greater of:
o the contract value; or
o the contract value as of the most recent sixth contract
anniversary, minus any surrenders since that anniversary.
If death occurs on or after the annuitant's 75th birthday, the
beneficiary receives the contract value.
If your spouse is sole beneficiary under a nonqualified annuity and
you die before the retirement date, your spouse may keep the
annuity as owner. To do this your spouse must, within 60 days
after we receive proof of death, give us written instructions to
keep the contract in force.
Under a qualified annuity, if the annuitant dies before reaching
age 70 1/2 and before the retirement date, and the spouse is the
only beneficiary, the spouse may keep the annuity in force until
the date on which the annuitant would have reached age 70 1/2 or
any other date permitted by the Code. To do this, the spouse must
give us written instructions within 60 days after we receive proof
of death.
Payments: We will pay the beneficiary in a single sum unless you
have given us other written instructions, or the beneficiary may
receive payouts under any annuity payout plan available under this
contract if:
o the beneficiary asks us in writing within 60 days after we
receive proof of death;
o payouts begin no later than one year after death; and
o the payout period does not extend beyond the beneficiary's life
or life expectancy.
When paying the beneficiary, we will determine the contract's value
at the next close of business after our death claim requirements
are fulfilled. Interest, if any, will be paid from the date of
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PAGE 31
death at a rate no less than required by law. We will mail payment
to the beneficiary within seven days after our death claim
requirements are fulfilled. (See "Taxes.")
The annuity payout period
As owner of the contract, you have the right to decide how and to
whom annuity payouts will be made starting at the retirement date.
You may select one of the annuity payout plans outlined below, or
we will mutually agree on other payout arrangements. The amount
available for payouts under the plan you select is the contract
value on your retirement date. No surrender charges are deducted
under the payout plans listed below.
You also decide whether annuity payouts are to be made on a fixed
or variable basis, or a combination of fixed and variable. Amounts
of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract;
o the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the
investment performance of the subaccount(s) you select. These
payouts will vary from month to month because the performance of
the underlying mutual funds will fluctuate. (In the case of fixed
annuities, payouts remain the same from month to month.)
For information with respect to transfers between accounts after
annuity payouts begin, see "Transfer policies."
Annuity payout plans
You may choose any one of these annuity payout plans by giving us
written instructions at least 30 days before contract values are to
be used to purchase the payout plan.
o Plan A - Life annuity - no refund: Monthly payouts are made
until the annuitant's death. Payouts end with the last payout
before the annuitant's death; no further payouts will be made.
This means that if the annuitant dies after only one monthly payout
has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly
payouts are made for a guaranteed payout period of five, 10 or 15
years that the annuitant elects. This election will determine the
length of the payout period to the beneficiary if the annuitant
should die before the elected period has expired. The guaranteed
payout period is calculated from the retirement date. If the
annuitant outlives the elected guaranteed payout period, payouts
will continue until the annuitant's death.
o Plan C - Life annuity - installment refund: Monthly payouts are
made until the annuitant's death, with our guarantee that payouts
will continue for some period of time. Payouts will be made for at
<PAGE>
PAGE 32
least the number of months determined by dividing the amount
applied under this option by the first monthly payout, whether or
not the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund:
Monthly payouts are made to the annuitant and a joint annuitant
while both are living. If either annuitant dies, monthly payouts
continue at the full amount until the death of the surviving
annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period: Monthly payouts are
made for a specific payout period of 10 to 30 years chosen by the
annuitant. Payouts will be made only for the number of years
specified whether the annuitant is living or not. Depending on the
time period selected, it is foreseeable that an annuitant can
outlive the payout period selected. In addition, a 10% IRS penalty
tax could apply under this payout plan. (See "Taxes.")
Restrictions for some qualified plans: If you purchased a
qualified annuity, you must select a payout plan that provides for
payouts:
o over the life of the annuitant;
o over the joint lives of the annuitant and a designated
beneficiary;
o for a period not exceeding the life expectancy of the
annuitant; or
o for a period not exceeding the joint life expectancies
of the annuitant and a designated beneficiary.
If we do not receive instructions: You must give us written
instructions for the annuity payouts at least 30 days before the
annuitant's retirement date. If you do not, we will make payouts
under Plan B, with 120 monthly payouts guaranteed.
If monthly payouts would be less than $20: We will calculate the
amount of monthly payouts at the time the contract value is used to
purchase a payout plan. If the calculations show that monthly
payouts would be less than $20, we have the right to pay the
contract value to the owner in a lump sum.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any
amount payable to the beneficiary will be provided in the annuity
payout plan in effect.
Taxes
Generally, under current law, any increase in your contract value
is taxable to you only when you receive a payout or surrender.
(See detailed discussion below.) Any portion of the annuity
payouts and any surrenders you request that represent ordinary
income are normally taxable. You will receive a 1099 tax
information form for any year in which a taxable distribution was
made.
<PAGE>
PAGE 33
Annuity payouts under nonqualified annuities: A portion of each
payout will be ordinary income and subject to tax, and a portion of
each payout will be considered a return of part of your investment
and will not be taxed. All amounts received after your investment
in the annuity is fully recovered will be subject to tax.
Tax law requires that all nonqualified deferred annuity contracts
issued by the same company to the same owner during a calendar year
are to be taxed as a single, unified contract when distributions
are taken from any one of such contracts.
Annuity payouts under qualified annuities: Under a qualified
annuity, the entire payout generally will be includable as ordinary
income and subject to tax except to the extent that contributions
were made with after-tax dollars. If you or your employer invested
in your contract with pre-tax dollars as part of a qualified
retirement plan, such amounts are not considered to be part of your
investment in the contract and will be taxed when paid to you.
Surrenders: If you surrender part or all of your contract before
your annuity payouts begin, your surrender payment will be taxed to
the extent that the value of your contract immediately before the
surrender exceeds your investment. You also may have to pay a 10%
IRS penalty for surrenders before reaching age 59 1/2. For
qualified annuities, other penalties may apply if you surrender
your annuity before your plan specifies that you can receive
payouts.
Death benefits to beneficiaries: The death benefit under an
annuity is not tax-exempt. Any amount received by the beneficiary
that represents previously deferred earnings within the contract,
is taxable as ordinary income to the beneficiary in the year(s) he
or she receives the payment(s).
Annuities owned by corporations, partnerships or trusts: Any
annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that
year. This provision is effective for purchase payments made after
Feb. 28, 1986. However, if the trust was set up for the benefit of
a natural person only, the income will continue to be tax-deferred.
Penalties: If you receive amounts from your contract before
reaching age 59 1/2, you may have to pay a 10% IRS penalty on the
amount includable in your ordinary income. However, this penalty
will not apply to any amount received by you or your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal
periodic payments, made at least annually, over your life or
life expectancy (or joint lives or life expectancies of you and
your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except
for qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if
you surrender your annuity before your plan specifies that payouts
can be made.
<PAGE>
PAGE 34
Withholding, generally: If you receive all or part of the contract
value from an annuity, withholding may be imposed against the
taxable income portion of the payout. Any withholding that is done
represents a prepayment of your tax due for the year. You take
credit for such amounts on the annual tax return that you file.
If the payout is part of an annuity payout plan, the amount of
withholding generally is computed using payroll tables. You can
provide us with a statement of how many exemptions to use in
calculating the withholding. As long as you've provided us with a
valid Social Security Number or Taxpayer Identification Number, you
can elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial
or full surrender), withholding is computed using 10% of the
taxable portion. Similar to above, as long as you've provided us
with a valid Social Security Number or Taxpayer Identification
Number, you can elect not to have this withholding occur.
Some states also impose withholding requirements similar to the
federal withholding described above. If this should be the case,
any payment from which federal withholding is deducted may also
have state withholding deducted. The withholding requirements may
differ if payment is being made to a non-U.S. citizen or if the
payment is being delivered outside the United States.
Withholding from qualified annuities: If you receive directly all
or part of the contract value from a qualified annuity (except an
IRA), mandatory 20% income tax withholding generally will be
imposed at the time the payout is made. This mandatory withholding
is in place of the elective withholding discussed above. This
mandatory withholding will not be imposed if:
o instead of receiving the distribution check, you elect to have
the distribution rolled over directly to an IRA or another
eligible plan;
o the payout is one in a series of substantially equal periodic
payouts, made at least annually, over your life or life
expectancy (or the joint lives or life expectancies of you and
your designated beneficiary) or over a specified period of 10
years or more; or
o the payment is a minimum distribution required under the Code.
Payments made to a surviving spouse instead of being directly
rolled over to an IRA may also be subject to mandatory 20% income
tax withholding.
State withholding also may be imposed on taxable distributions.
Transfer of ownership of a nonqualified annuity: If you make such
a transfer without receiving adequate consideration, the transfer
is considered a gift, and also may be considered a surrender for
federal income tax purposes. If the gift is a currently taxable
event, the amount of deferred earnings at the time of the transfer
will be taxed to the original owner, who also may be subject to a
<PAGE>
PAGE 35
10% IRS penalty as discussed earlier. In this case, the new
owner's investment in the annuity will be the value of the annuity
at the time of the transfer.
Collateral assignment of a nonqualified annuity: If you
collaterally assign or pledge your contract, earnings on purchase
payments you made after Aug. 13, 1982 will be taxed to you like a
surrender.
Important: Our discussion of federal tax laws is based upon our
understanding of these laws as they are currently interpreted.
Federal tax laws or current interpretations of them may change.
For this reason and because tax consequences are complex and highly
individual and cannot always be anticipated, you should consult a
tax advisor if you have any questions about taxation of your
contract.
Tax qualification: The contract is intended to qualify as an
annuity for federal income tax purposes. To that end, the
provisions of the contract are to be interpreted to ensure or
maintain such tax qualification, notwithstanding any other
provisions of the contract. We reserve the right to amend the
contract to reflect any clarifications that may be needed or are
appropriate to maintain such qualification or to conform the
contract to any applicable changes in the tax qualification
requirements. We will send you a copy of any such amendments.
Voting rights
As a contract owner with investments in the variable subaccount(s)
you may vote on important mutual fund policies until annuity
payouts begin. Once they begin, the person receiving them has
voting rights. We will vote fund shares according to the
instructions of the person with voting rights.
Before annuity payouts begin, the number of votes is determined by
applying the percentage interest in each variable subaccount to the
total number of votes allowed to the subaccount.
After annuity payouts begin, the number of votes is equal to:
o the reserve held in each subaccount for the contract,
divided by
o the net asset value of one share of the applicable underlying
mutual fund.
As we make annuity payouts, the reserve for the annuity decreases;
therefore, the number of votes also will decrease.
We calculate votes separately for each subaccount not more than 60
days before a shareholders' meeting. Notice of these meetings,
proxy materials and a statement of the number of votes to which the
voter is entitled, will be sent.
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PAGE 36
We will vote shares for which we have not received instructions in
the same proportion as the votes for which we have received
instructions. We also will vote the shares for which we have
voting rights in the same proportion as the votes for which we have
received instructions.
Substitution of investments
If shares of any fund should not be available for purchase by the
appropriate variable subaccount or if, in the judgment of IDS Life
of New York's Management, further investment in such shares is no
longer appropriate in view of the purposes of the subaccount,
investment in the subaccount may be discontinued or another
registered open-end management investment company may be
substituted for fund shares held in the subaccounts if IDS Life of
New York believes it would be in the best interest of persons
having voting rights under the contract. The variable account may
be operated as a management company under the 1940 Act or it may be
deregistered under this Act if the registration is no longer
required. In the event of any such substitution or change, IDS
Life of New York, without the consent or approval of the owners,
may amend the contract and take whatever action is necessary and
appropriate. However, no such substitution or change will be made
without the necessary approval of the SEC and state insurance
departments. IDS Life of New York will notify owners of any
substitution or change.
Distribution of the contracts
American Express Financial Advisors Inc., a registered
broker/dealer and an affiliate of IDS Life of New York, is the sole
distributor of the contract. IDS Life of New York pays total
commissions of up to 7.0% of the total purchase payments received
on the contracts. A portion of this total commission is paid to
district managers and field vice presidents of the selling
representative.
About IDS Life of New York
The Flexible Portfolio Annuity is issued by IDS Life of New York.
IDS Life is a wholly owned subsidiary of IDS Life, which is a
wholly owned subsidiary of American Express Financial Corporation.
American Express Financial Corporation is a wholly owned subsidiary
of the American Express Company, a financial services company
headquartered in New York City.
IDS Life of New York is a stock life insurance company organized in
1972 under the laws of the State of New York and located at 20
Madison Ave. Ext., Albany, NY. IDS Life of New York is licensed in
New York and North Dakota and conducts a conventional life
insurance business in the State of New York.
American Express Financial Advisors Inc. is the principal
underwriter for the Accounts. Its corporate office is IDS Tower
10, Minneapolis, MN 55440-0010. American Express Financial
Advisors Inc. is a wholly owned subsidiary of American Express
Financial Corporation.
<PAGE>
PAGE 37
American Express Financial Advisors Inc. offers mutual funds,
investment certificates and a broad range of financial management
services. IDS Life of New York offers insurance and annuities.
American Express Financial Advisors Inc. serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,800 financial advisors.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, we
provide:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and
its underlying investments.
A personalized annuity progress report detailing the cumulative
return since the contract was purchased and the average annual rate
of return on your investments. This report, which is unique in the
industry, is available upon request from your financial advisor.
<PAGE>
PAGE 38
Table of contents of the Statement of Additional Information
IDS Life of New York Preferred Retirement
Account.......................................
Performance information.......................
Calculating annuity payouts...................
Rating agencies...............................
Principal underwriter.........................
Independent auditors..........................
Mortality and expense risk fee................
Prospectus....................................
Financial statements -
IDS Life Insurance Company of New York
___________________________________________________________________
Please check the appropriate box to receive a copy of the Statement
of Additional Information for:
_____ IDS Life of New York Flexible Portfolio Annuity
_____ IDS Life Retirement Annuity Mutual Funds
_____ AIM Variable Insurance Funds, Inc.
_____ Putnam Capital Manager Trust
_____ TCI Portfolios, Inc.
_____ Templeton Variable Products Series Fund
_____ Warburg Pincus Trust/Small Company Growth Portfolio
Please return this request to:
IDS Life of New York Annuity Service
IDS Life Insurance Company of New York
Box 5144
Albany, NY 12205
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________
<PAGE>
PAGE 39
STATEMENT OF ADDITIONAL INFORMATION
for
IDS LIFE OF NEW YORK FLEXIBLE PORTFOLIO ANNUITY
IDS Life of New York Flexible Portfolio Annuity Account
______ 1996
IDS Life of New York Flexible Portfolio Annuity Account is a
separate account established and maintained by IDS Life Insurance
Company of New York (IDS Life of New York).
This Statement of Additional Information, dated ______ 1996, is not
a prospectus. It should be read together with the Account's
prospectus, dated ______ 1996, which may be obtained from your
financial advisor, or by writing or calling IDS Life of New York at
the address or telephone number below.
IDS Life Insurance Company of New York
20 Madison Avenue Extension
Albany, NY 12203
518-869-8613
<PAGE>
PAGE 40
TABLE OF CONTENTS
IDS Life of New York Preferred Retirement Account.............p.
Performance Information.......................................p.
Calculating Annuity Payouts...................................p.
Rating Agencies...............................................p.
Principal Underwriter.........................................p.
Independent Auditors..........................................p.
Mortality and Expense Risk Fee................................p.
Prospectus....................................................p.
Financial Statements
IDS Life Insurance Company of New York..............p.
<PAGE>
PAGE 41
IDS LIFE OF NEW YORK PREFERRED RETIREMENT ACCOUNT
The Flexible Portfolio Annuity may be used to fund the IDS Life of
New York Preferred Retirement Account (PRA) as a way to build tax-
deferred retirement income. The PRA can be used to supplement, or
as an alternative to, a non-deductible IRA or other retirement
plan.
The advantages of the IDS Life of New York Preferred Retirement
Account over a non-deductible IRA are shown below:
IDS Life of New York Non-deductible IRA
Preferred Retirement
Account
_____________________________________________________________
Maximum $50,000 to $1 million $2,000 per year
amount you initially, then $50,000 (only $250 for
can to $100,000 per year non-working spouse)
contribute depending on your
age. (spouse can have
own plan)
______________________________________________________________
Highest age The later of age 90 70 1/2 years old
you can or the 10th contract
contribute anniversary
______________________________________________________________
Types of Any type: wages, Generally limited
income you investment income, to income from
can gifts, inheritance, employment
contribute etc.
______________________________________________________________
Records None required, but You must keep all
you must IDS Life of New York records yourself
keep furnishes you regular
reports for your files
______________________________________________________________
Reports you None You must report all
must file contributions and
with the withdrawals each
IRS year
______________________________________________________________
Age at which The later of age 90 70 1/2 years old
you must or the 10th contract
begin anniversary
withdrawals
______________________________________________________________
PERFORMANCE INFORMATION
The following performance figures are calculated on the basis of
historical performance of the funds. The performance figures
relating to these funds assume that the contract was in existence
prior to _____, which it was not. Performance figures are
calculated on the basis of historical performance of the funds.
Before the subaccounts began investing in these funds, the figures
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PAGE 42
show what the subaccount performance would have been if these
subaccounts had existed during the illustrated periods. Once these
subaccounts began investing in these funds, actual values are used
for the calculations.
Calculation of yield for Subaccount GM (Investing in IDS Life
Moneyshare Fund)
Subaccount GM, which invests in IDS Life Moneyshare Fund, Inc.,
calculates an annualized simple yield and a compound yield based on
a seven-day period.
The simple yield is calculated by determining the net change in the
value of a hypothetical subaccount having the balance of one
accumulation unit at the beginning of the seven-day period. (The
net change does not include capital change, but does include a pro
rata share of the annual contract charges, including the annual
contract administrative charge and the mortality and expense risk
fee.) The net change in the subaccount value is divided by the
value of the subaccount at the beginning of the period to obtain
the return for the period. That return is then multiplied by 365/7
to obtain an annualized figure. The value of the hypothetical
subaccount includes the amount of any declared dividends, the value
of any shares purchased with any dividend paid during the period
and any dividends declared for such shares. The variable
subaccount's yield does not include any realized or unrealized
gains or losses, nor does it include the effect of any applicable
surrender charge.
The subaccount calculates its compound yield according to the
following formula:
365/7
Compound Yield = [(return for seven-day period +1) ] - 1
Based on the historical performance of the Fund on Dec. 31, 1995,
the subaccount's annualized simple yield would have been 4.04% and
its compound yield would have been 4.13% had the subaccount been in
existence.
The rate of return, or yield, on the subaccount's accumulation unit
may fluctuate daily and does not provide a basis for determining
future yields. Investors must consider, when comparing an
investment in subaccount GM with fixed annuities, that fixed
annuities often provide an agreed-to or guaranteed fixed yield for
a stated period of time, whereas the variable subaccount's yield
fluctuates. In comparing the yield of subaccount GM to a money
market fund, you should consider the different services that the
annuity provides.
Calculation of yield for Subaccounts (Investing in income funds)
Quotations of yield will be based on all investment income earned
during a particular 30-day period, less expenses accrued during the
period (net investment income) and will be computed by dividing net
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PAGE 43
investment income per accumulation unit by the value of an
accumulation unit on the last day of the period, according to the
following formula:
YIELD = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period that were entitled to
receive dividends.
d = the maximum offering price per accumulation unit on
the last day of the period.
Yield on the subaccount is earned from the increase in the net
asset value of shares of the fund in which the subaccount invests
and from dividends declared and paid by the fund, which are
automatically invested in shares of the fund.
Based on the historical performance of the Fund, on Dec. 31, 1995,
the subaccount's annualized yield would have been 8.45% had this
subaccount been in existence.
Calculation of average annual total return
Quotations of average annual total return for a subaccount will be
expressed in terms of the average annual compounded rate of return
of a hypothetical investment in the annuity contract over a period
of one, five and 10 years (or, if less, up to the life of the
account), calculated according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five,
or ten year (or other) period at the end of the
one, five, or ten year (or other) period (or
fractional portion thereof).
The following performance figures are calculated on the basis of
historical performance of the funds. These figures show what the
performance of the subaccounts of the variable account would have
been if these subaccounts had existed during the illustrated
periods.
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PAGE 44
Average Annual Total Return For Period Ended: Dec. 31, 1995
Average Annual Total Return with Surrender
<TABLE><CAPTION>
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C>
IDS Life
Aggressive Growth Fund (1/92) 22.91% --% --% 8.85%
Capital Resource Fund (10/81) 19.07 13.21 12.26 --
International Equity Fund (1/92) 3.01 -- -- 7.11
Managed Fund (4/86) 15.46 10.99 -- 9.99
Moneyshare Fund (10/81) -2.97 1.86 4.41 --
Special Income Fund (10/81) 13.62 9.69 8.78 --
AIM
AIM V.I. Growth and Income Fund (5/94) 25.45 -- -- 10.79
PCM
New Opportunities Fund (5/94) 36.45 -- -- 22.67
Warburg Pincus Trust
Small Company Growth Portfolio (6/95) -- -- -- 47.15
Average Annual Total Return without Surrender
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
IDS Life
Aggressive Growth Fund (1/92) 29.91% --% --% 10.01%
Capital Resource Fund (10/81) 26.07 13.81 12.26 --
International Equity Fund (1/92) 10.01 -- -- 8.32
Managed Fund (4/86) 22.46 11.64 -- 9.99
Moneyshare Fund (10/81) 4.03 2.78 4.41 --
Special Income Fund (10/81) 20.62 10.37 8.78 --
AIM
AIM V.I. Growth and Income Fund (5/94) 32.45 -- -- 17.79
PCM
New Opportunities Fund (5/94) 43.56 -- -- 29.67
Warburg Pincus Trust
Small Company Growth Portfolio (6/95) -- -- -- 54.15
</TABLE>
Aggregate Total Return
Aggregate total return represents the cumulative change in the
value of an investment over a specified period of time (reflecting
change in a subaccount's accumulation unit value) and is computed
by the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five,
or ten year (or other) period at the end of the
one, five, or ten year (or other) period (or
fractional portion thereof).
The Securities and Exchange Commission requires that an assumption
be made that the contract owner surrenders the entire contract at
the end of the one, five and ten year periods (or, if less, up to
the life of the account) for which performance is required to be
calculated. In addition, performance figures may be shown without
the deduction of a surrender charge. Total return figures reflect
the deduction of the contract administrative charge and mortality
and expense risk fee.
<PAGE>
PAGE 45
Performance of the subaccounts may be quoted or compared to
rankings, yields, or returns as published or prepared by
independent rating or statistical services or publishers or
publications such as The Bank Rate Monitor National Index,
Barron's, Business Week, Donoghue's Money Market Fund Report,
Financial Services Week, Financial Times, Financial World, Forbes,
Fortune, Global Investor, Institutional Investor, Investor's Daily,
Kiplinger's Personal Finance, Lipper Analytical Services, Money,
Mutual Fund Forecaster, Newsweek, The New York Times, Personal
Investor, Stanger Report, Sylvia Porter's Personal Finance, USA
Today, U.S. News and World Report, The Wall Street Journal and
Wiesenberger Investment Companies Service.
CALCULATING ANNUITY PAYOUTS
The Variable Account
The following calculations are done separately for each of the
subaccounts of the variable account. The separate monthly payouts,
added together, make up your total variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your annuity as of the valuation
date seven days before the retirement date.
o apply the result to the annuity table contained in the contract
or another table at least as favorable. The annuity table shows
the amount of the first monthly payment for each $1,000 of value
which depends on factors built into the table, as described below.
Annuity Units: The value of your subaccount is then converted to
annuity units. To compute the number credited to you, we divide
the first monthly payment by the annuity unit value (see below) on
the valuation date on (or next day preceding) the seventh calendar
day before the retirement date. The number of units in your
subaccount is fixed. The value of the units fluctuates with the
performance of the underlying mutual fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on or immediately
preceding the seventh calendar day before the payout is due; by
o the fixed number of annuity units credited to you.
Annuity Table: The table shows the amount of the first monthly
payment for each $1,000 of contract value according to the age and,
when applicable, the sex of the annuitant. (Where required by law,
we will use a unisex table of settlement rates.) The table assumes
that the contract value is invested at the beginning of the annuity
payout period and earns a 5% rate of return, which is reinvested
and helps to support future payouts.
Substitution of 3.5% Table: If you ask us at least 30 days before
the retirement date, we will substitute an annuity table based on
an assumed 3.5% investment rate for the 5% table in the contract.
The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or
decrease. Using the 5% table results in a higher initial payment,
<PAGE>
PAGE 46
but later payouts will increase more slowly when annuity unit
values are rising and decrease more rapidly when they are
declining.
Annuity Unit Values: This value was originally set at $1 for each
variable subaccount. To calculate later values we multiply the
last annuity value by the product of:
o the net investment factor; and
o the neutralizing factor. The purpose of the neutralizing factor
is to offset the effect of the assumed investment rate built into
the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor:
o Determined each business day by adding the underlying mutual
fund's current net asset value per share plus per share amount of
any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and
expense risk fee from the result.
Because the net asset value of the underlying mutual fund may
fluctuate, the net investment factor may be greater or less than
one, and the accumulation unit value may increase or decrease. You
bear this investment risk in a variable subaccount.
The Fixed Account
Your fixed annuity payout amounts are guaranteed. Once calculated,
your payout will remain the same and never change. To calculate
your annuity payouts we:
o take the value of your fixed account at the retirement date or
the date you have selected to begin receiving your annuity payouts;
then
o using an annuity table we apply the value according to the
annuity payout plan you select; and
o the annuity payout table we use will be the one in effect at the
time you choose to begin your annuity payouts. The table will be
equal to or greater than the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to IDS Life of New
York by independent rating agencies. These agencies evaluate the
financial soundness and claims-paying ability of insurance
companies based on a number of different factors. This information
does not relate to the management or performance of the variable
subaccounts of the annuity. This information relates only to the
fixed account and reflects IDS Life of New York's ability to make
annuity payouts and to pay death benefits and other distributions
from the annuity.
<PAGE>
PAGE 47
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the variable account is American
Express Financial Advisors Inc., which offers the variable
annuities on a continuous basis.
INDEPENDENT AUDITORS
The financial statements of IDS Life Insurance Company of New York
as of Dec. 31, 1995 and 1994, and for each of the three years in
the period ended Dec. 31, 1995, appearing in this prospectus and
Statement of Additional Information have been audited by Ernst &
Young LLP, independent auditors, as stated in their report
appearing herein.
MORTALITY AND EXPENSE RISK FEE
IDS Life of New York has represented to the SEC that:
IDS Life of New York has reviewed publicly available information
regarding products of other companies. Based upon this review, IDS
Life of New York has concluded that the mortality and expense risk
fee is within the range of charges determined by industry practice.
IDS Life of New York will maintain at its administrative office,
and make available on request of the SEC or its staff, a memorandum
setting forth in detail the variable products analyzed and the
methodology, and results of, its comparative review.
IDS Life of New York has concluded that there is a reasonable
likelihood that the proposed distribution financing arrangements
made with respect to the contracts will benefit the variable
account and investors in the contracts. The basis for such
conclusion is set forth in a memorandum which will be made
available to the SEC or its staff on request.
PROSPECTUS
The prospectus dated ______ 1996, is hereby incorporated in this
Statement of Additional Information by reference.
<PAGE>
PAGE 48
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company of New York
We have audited the accompanying balance sheets of IDS Life
Insurance Company of New York (a wholly owned subsidiary of IDS
Life Insurance Company) as of December 31, 1995 and 1994, and the
related statements of income and cash flows for each of the three
years in the period ended December 31, 1995. 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 conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS
Life Insurance Company of New York at December 31, 1995 and 1994,
and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company
changed its method of accounting for certain investments in debt
and equity securities in 1994.
Ernst & Young LLP
February 2, 1996
Minneapolis, Minnesota
<PAGE>
PAGE 49
IDS Life of New York Financial Information
The financial statements shown below are those of the insurance
company and not those of any other entity. They are included in
the prospectus for the purpose of informing investors as to the
financial condition of the insurance company and its ability to
carry out its obligations under its variable contracts.
<TABLE>
<CAPTION>
IDS Life Insurance Company of New York
Balance Sheets Dec. 31, 1995 Dec. 31, 1994
Assets (thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost
(Fair value: 1995, $683,147; 1994, $653,080) $ 642,580 $ 686,483
Available for sale, at fair value
(Amortized cost: 1995, $577,068;
1994, $474,599) 601,298 455,103
1,243,878 1,141,586
Mortgage loans on real estate
(Fair value: 1995, $168,194; 1994, $157,085) 158,730 164,916
Policy loans 18,035 14,899
Other investments 1,915 1,524
Total investments 1,422,558 1,322,925
Cash and cash equivalents -- 5,262
Accrued investment income 22,572 21,517
Deferred policy acquisition costs 109,800 100,078
Other assets 2,108 1,584
Separate account assets 724,212 506,208
Total assets $2,281,250 $1,957,574
Liabilities and Stockholder's Equity
Liabilities:
Fixed annuities - future policy benefits $1,109,167 $1,087,367
Universal life-type insurance - future
policy benefits 136,475 127,871
Traditional life, disability income and
long-term care insurance - future policy
benefits 42,477 40,546
Policy claims and other policyholders' funds 3,644 3,217
Deferred income taxes 15,663 2,044
Amounts due to brokers 10,000 --
Other liabilities 21,029 18,600
Separate account liabilities 724,212 506,208
Total liabilities 2,062,667 1,785,853
Stockholder's equity:
Capital stock, $10 par value per share; 200,000
shares authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 49,000 49,000
Net unrealized gain (loss) on investments 15,341 (12,369)
Retained earnings 152,242 133,090
Total stockholder's equity 218,583 171,721
Total liabilities and stockholder's equity $2,281,250 $1,957,574
Commitments and contingencies (Note 7)
See accompanying notes.
</TABLE>
<PAGE>
PAGE 50
<TABLE>
<CAPTION>
____________________________________________________________________________
Statements of Income Years ended Dec. 31,
1995 1994 1993
(thousands)
____________________________________________________________________________
<S> <C> <C> <C>
Revenues:
Traditional life, disability income and
long-term care insurance premiums $ 9,280 $ 7,846 $ 7,110
Policyholder and contractholder charges 13,216 11,607 9,634
Mortality and expense risk fees 6,213 4,562 2,904
Net investment income 110,924 108,143 110,147
Net realized gain on investments 1,548 957 1,334
Total revenues 141,181 133,115 131,129
Benefits and expenses:
Death and other benefits - traditional
life, disability income and long-term
care insurance 3,354 6,016 5,715
Death and other benefits - universal
life-type insurance and investment contracts 4,548 3,773 2,465
Increase (decrease) in liabilities for future
policy benefits for traditional life,
disability income and long-term care insurance 1,958 506 (1,343)
Interest credited on universal life-type
insurance and investment contracts 68,630 65,018 68,987
Amortization of deferred policy
acquisition costs 13,085 12,994 10,434
Other insurance and operating expenses 7,474 8,359 7,652
Total benefits and expenses 99,049 96,666 93,910
Income before income taxes 42,132 36,449 37,219
Income taxes 14,745 12,794 13,335
Net income $ 27,387 $ 23,655 $ 23,884
See accompanying notes.
<PAGE>
PAGE 51
__________________________________________________________________________
Statements of Cash Flows Years ended Dec. 31,
1995 1994 1993
(thousands)
Cash flows from operating activities:
Net income $ 27,387 $ 23,655 $ 23,884
Adjustments to reconcile net income to net
cash provided by operating activities:
Issuance - policy loans, excluding
universal life-type insurance (2,093) (1,365) (1,044)
Repayment - policy loans, excluding
universal life-type insurance 881 849 455
Change in accrued investment income (1,055) (175) (1,476)
Change in deferred policy acquisition
costs, net (11,017) (11,522) (10,622)
Change in liabilities for future policy
benefits for traditional life, disability
income and long-term care insurance 1,931 501 (939)
Change in policy claims and other
policyholders' funds 427 870 282
Change in deferred income taxes (1,301) (4,321) (449)
Change in other liabilities 2,429 (1,711) 4,348
Amortization of premium (accretion
of discount), net (480) 2,464 (1,598)
Net realized gain on investments (1,548) (957) (1,334)
Premiums related to universal life-type
insurance 21,694 19,522 15,141
Surrenders and death benefits related to
universal life-type insurance (13,164) (13,208) (9,785)
Interest credited to account balances related
to universal life-type insurance 7,036 6,640 6,892
Policyholder and contractholder
charges, non-cash (6,962) (6,000) (5,663)
Other, net (508) 689 (780)
Net cash provided by operating activities $ 23,657 $ 15,931 $ 17,312
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $(37,540) $(36,560) $ --
Maturities, sinking fund payments and calls 34,216 78,757 --
Sales 28,905 2,649 --
Fixed maturities available for sale:
Purchases (133,503) (117,965) --
Maturities, sinking fund payments and calls 44,234 70,316 --
Sales 8,839 14,533 --
Investment securities:
Purchases -- -- (331,900)
Maturities, sinking fund payments and calls -- -- 265,059
Sales -- -- 28,519
Other investments, excluding policy loans:
Purchases (1,939) (47,353) (65,202)
Sales 5,993 2,975 2,568
Change in amounts due to brokers 10,000 (4,952) (10,448)
Net cash used in investing activities (40,795) (37,600) (111,404)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 137,737 168,947 149,269
Surrenders and death benefits (177,531) (198,963) (119,158)
Interest credited to account balances 61,594 58,378 62,250
Issuance - policy loans, universal life-type
insurance (4,870) (3,907) (3,403)
Repayment - policy loans, universal life-type
insurance 2,946 2,476 1,886
Cash dividend to parent (8,000) -- --
Net cash provided by financing activities 11,876 26,931 90,844
Net (decrease) increase in cash and cash
equivalents (5,262) 5,262 (3,248)
Cash and cash equivalents at beginning
of year 5,262 - 3,248
Cash and cash equivalents at end of year $ -- $ 5,262 $ --
See accompanying notes.
</TABLE>
<PAGE>
PAGE 52
IDS Life Insurance Company of New York
Notes to Financial Statements ($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company of New York (the Company) is engaged in
the insurance and annuity business in the state of New York. The
Company's principal products are deferred annuities and universal
life insurance which are issued primarily to individuals. It
offers single premium and annual premium deferred annuities on both
a fixed and variable dollar basis. Immediate annuities are offered
as well. The Company's insurance products include universal life
(fixed and variable), whole life, single premium life and term
products (including waiver of premium and accidental death
benefits). The Company also markets disability income and long-
term care insurance.
The Company's principal annuity product in terms of amount in force
is the fixed deferred annuity. The annuity contract guarantees a
minimum interest rate during the accumulation period (the time
before annuity payments begin), although the Company normally pays
a higher rate reflective of current market rates. The fixed
annuity provides for a surrender charge during the first seven to
ten years after a purchase payment is made. The Company has also
adopted a practice whereby the higher current rate is guaranteed
for a specified period. The Company also offers a variable annuity
product under the name Flexible Annuity. This is a fixed/variable
annuity offering the purchasers a choice among mutual funds with
portfolios of equities, bonds, managed assets and/or short-term
securities, and the Company's general account, as the underlying
investment vehicles. With respect to funds applied to the variable
portion of the annuity, the purchaser, rather than the Company,
assumes the investment risks and receives the rewards inherent in
the ownership of the underlying investment. The Flexible Annuity
provides for a surrender charge during the first six years after a
purchase payment is made.
The Company's principal insurance product is the flexible-premium,
adjustable-benefit universal life insurance policy. In this type
of insurance policy, each premium payment accumulates interest in a
cash value account. The policyholder has access to the cash
surrender value in whole or in part after the first year. The size
of the cash value of the fund can also be controlled by the
policyholder by increasing or decreasing premiums, subject only to
maintaining a required minimum to keep the policy in force.
Monthly deductions from the cash value of the policy are made for
the cost of insurance, expense charges and any policy riders.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Life Insurance
Company (IDS Life), which is a wholly owned subsidiary of American
Express Financial Corporation, which is a wholly owned subsidiary
of American Express Company. The accompanying financial
statements have been prepared in conformity with generally accepted<PAGE>
PAGE 53
1. Summary of significant accounting policies (continued)
accounting principles which vary in certain respects from reporting
practices prescribed or permitted by the New York Department of
Insurance as reconciled in Note 11.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Investments
Fixed maturities that the Company has both the positive intent and
the ability to hold to maturity are classified as held to maturity
and carried at amortized cost. All other fixed maturities and all
marketable equity securities are classified as available for sale
and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are carried as a
separate component of stockholder's equity.
Management determines the appropriate classification of fixed
maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
Mortgage loans on real estate are carried principally at the unpaid
principal balances of the related loans. Policy loans are carried
at the aggregate of the unpaid loan balances which do not exceed
the cash surrender values of the related policies. Other
investments include interest rate caps and equity securities. When
evidence indicates a decline in the underlying value or earning
power of individual investments which is other than temporary such
investments are written down to fair value by a charge to income.
Equity securities are carried at market value and the related net
unrealized appreciation or depreciation is reported as a credit or
charge to stockholder's equity.
Realized investment gain or loss is determined on an identified
cost basis.
Prepayments are anticipated on certain investments in mortgage-
backed securities in determining the constant effective yield used
to recognize interest income. Prepayment estimates are based on
information received from brokers who deal in mortgage-backed
securities.
Statements of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates fair value.
<PAGE>
PAGE 54
1. Summary of significant accounting policies (continued)
Supplementary information to the statements of cash flows for the
years ended Dec. 31 is summarized as follows:
1995 1994 1993
Cash paid during the year for:
Income taxes $15,026 $17,386 $14,138
Interest on borrowings 742 147 235
Recognition of profits on fixed annuity contracts and insurance
policies
The Company issues single premium deferred annuity contracts that
provide for a service fee (surrender charge) at annually decreasing
rates upon withdrawal of the annuity accumulation value by the
contract owner. No sales fee is deducted from the contract
considerations received on these contracts ("no load" annuities).
All of the Company's single premium deferred annuity contracts
provide for crediting the contract owners' accumulations at
specified rates of interest. Such rates are revised by the Company
from time to time based on changes in the market investment yield
rates for fixed-income securities.
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
The retrospective deposit method is used in accounting for
universal life-type insurance. This method recognizes profits over
the lives of the policies in proportion to the estimated gross
profits expected to be realized.
Premiums on traditional life, disability income and long-term care
insurance policies are recognized as revenue when collected or due,
and related benefits and expenses are associated with premium
revenue in a manner that results in recognition of profits over the
lives of the insurance policies. This association is accomplished
by means of the provision for future policy benefits and the
deferral and subsequent amortization of policy acquisition costs.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, underwriting and certain sales
expenses, have been deferred on insurance and annuity contracts.
The deferred acquisition costs for single premium deferred
annuities and installment annuities are amortized based upon
surrender charge revenue and a portion of the excess of investment
income earned from investment of the contract considerations over
the interest credited to contract owners. The costs for universal
life-type insurance are amortized over the lives of the policies as
a percentage of the estimated gross profits expected to be realized<PAGE>
PAGE 55
1. Summary of significant accounting policies (continued)
on the policies. For traditional life, disability income and long-
term care insurance policies, the costs are amortized over an
appropriate period in proportion to premium revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance, single premium
deferred annuities and installment annuities are accumulation
values.
Liabilities for fixed annuities in a benefit status are based on
the Progressive Annuity Table with interest at 5 percent, the 1971
Individual Annuity Table with interest at 7 percent or 8.25
percent, or the 1983a Table with various interest rates ranging
from 5.5 percent to 9.5 percent, depending on year of issue.
Liabilities for future benefits on traditional life insurance have
been computed principally by the net level premium method, based on
anticipated rates of mortality (approximating the 1965-1970 Select
and Ultimate Basic Table for policies issued after 1980 and the
1955-1960 Select and Ultimate Basic Table for policies issued prior
to 1981 and the 1975-1980 Select and Ultimate Basic Table for term
insurance policies issued after 1986), policy persistency derived
from IDS Life's experience data (first-year rates ranging from
approximately 70 percent to 90 percent and increasing rates
thereafter), and estimated future investment yields of 4 percent
for policies issued before 1974 and 5.25 percent for policies
issued from 1974 to 1980. Cash value plans issued in 1980 and
later assume future investment rates that grade from 9.5 percent to
5 percent over 20 years. Term insurance issued from 1981 to 1984
assumes an 8 percent level investment rate, and term insurance
issued from 1985 to 1994 assumes investment rates that grade from
10 percent to 6 percent over 20 years, and term insurance issued
after 1994 assumes investment rates that grade from 8 percent to
6.5 percent over 7 years.
Liabilities for future disability income policy benefits have been
computed principally by the net level premium method, based on the
1964 Commissioners Disability Table with the 1958 Commissioners
Standard Ordinary Mortality Table at 3 percent interest for persons
disabled in 1980 and prior, 8 percent interest for persons disabled
from 1981 to 1991, 7 percent interest for persons disabled in 1992
and 6 percent interest for persons disabled after 1992.
Liabilities for future benefits on long-term care insurance have
been computed principally by the net level premium method, using
morbidity rates based on the 1985 National Nursing Home Survey and
mortality rates based on the 1983a Table. The interest rate basis
is 9.5 percent grading to 7 percent over ten years for policies
issued from 1989 to 1992, 7.75 percent grading to 7 percent over
four years for policies issued after 1992, 8 percent for claims
incurred in 1989 to 1991, 7 percent for claims incurred in 1992 and
6 percent for claims incurred after 1992.
<PAGE>
PAGE 56
1. Summary of significant accounting policies (continued)
Reinsurance
The maximum amount of life insurance risk retained by the Company
on any one life is $750 of life and waiver of premium benefits plus
$50 of accidental death benefits. The maximum amount of disability
income risk retained by the Company on any one life is $6 of
monthly benefit for benefit periods longer than three years. The
excesses are reinsured with other life insurance companies on a
yearly renewable term basis.
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that,
under an agreement between American Express Financial Corporation
and American Express Company, tax benefit is recognized for losses
to the extent they can be used on the consolidated tax return. It
is the policy of American Express Financial Corporation to
reimburse a subsidiary for any tax benefit.
Included in other liabilities at Dec. 31, 1995 and 1994 are $3,971
and $3,161, respectively, payable to IDS Life for federal income
taxes.
Separate account business
The separate account assets and liabilities represent funds held
for the exclusive benefit of the variable annuity and variable life
insurance contract owners. The Company receives a monthly cost of
insurance charge and receives a minimum death benefit guarantee fee
from variable life insurance separate accounts and a mortality and
expense assurance fee from the variable annuity and variable life
insurance separate accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the separate
accounts will not be affected by future variations in the actual
life expectancy experience of the annuitants and the beneficiaries
from the mortality assumptions implicit in the annuity contracts.
The Company makes periodic fund transfers to, or withdrawals from,
the separate accounts for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company
guarantees, for the variable life insurance policyholders, the
contractual insurance rate and that the death benefit will never be
less than the death benefit at the date of issuance.
Accounting changes
The Financial Accounting Standards Board's (FASB) SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," is effective Jan. 1, 1996. The
new rule is not expected to have a material impact on the Company's
results of operations or financial condition.<PAGE>
PAGE 57
1. Summary of significant accounting policies (continued)
The Company's adoption of SFAS No. 114 as of Jan. 1, 1995 is
discussed in Note 2.
The Company adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The effect of adopting
the new rule was to increase stockholder's equity by approximately
$12 million, net of tax, as of Jan. 1, 1994, but the adoption had
no impact on the Company's net income.
Reclassification
Certain 1994 and 1993 amounts have been reclassified to conform to
the 1995 presentation.
2. Investments
Fair values of investments in fixed maturities represent quoted
market prices and estimated values when quoted prices are not
available. Estimated values are determined by established
procedures involving, among other things, review of market indices,
price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial
files.
Changes in net unrealized appreciation (depreciation) of
investments for the years ended Dec. 31 are summarized as follows:
1995 1994 1993
Fixed maturities:
Held to maturity $73,970 $(84,244) $ --
Available for sale 43,726 (38,226) --
Investment securities -- -- 25,350
Net realized gain (loss) on investments for the years ended Dec. 31
is summarized as follows:
1995 1994 1993
Fixed maturities $1,997 $948 $1,316
Other investments (449) 9 18
$1,548 $957 $1,334
<PAGE>
PAGE 58
2. Investments (continued)
The amortized cost, gross unrealized gains and losses and fair
value of investments in fixed maturities and equity securities at
Dec. 31, 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 5,003 $ 199 $ -- $ 5,202
State and municipal
obligations 150 -- 2 148
Corporate bonds and
obligations 578,253 41,939 2,027 618,165
Mortgage-backed securities 59,174 846 388 59,632
$642,580 $42,984 $2,417 $683,147
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
State and municipal
obligations $ 105 $ 10 $ -- $ 115
Corporate bonds and
obligations 248,973 17,470 497 265,946
Mortgage-backed securities 327,990 9,157 1,910 335,237
Total fixed maturities 577,068 26,637 2,407 601,298
Equity securities 10 -- -- 10
$577,078 $26,637 $2,407 $601,308
</TABLE>
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $27,710 in 1995.
The amortized cost, gross unrealized gains and losses and fair
value of investments in fixed maturities and equity securities at
Dec. 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 398 $ 2 $ 18 $ 382
Corporate bonds and
obligations 622,422 6,564 33,976 595,010
Mortgage-backed securities 63,663 580 6,555 57,688
$686,483 $7,146 $40,549 $653,080
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government agency
obligations $ 10,000 $ -- $ 135 $ 9,865
State and municipal
obligations 104 1 -- 105
Corporate bonds and
obligations 142,447 2,632 2,447 142,632
Mortgage-backed securities 322,048 381 19,928 302,501
Total fixed maturities 474,599 3,014 22,510 455,103
Equity securities 332 -- 197 135
$474,931 $3,014 $22,707 $455,238
/TABLE
<PAGE>
PAGE 59
2. Investments (continued)
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $(12,393) in 1994.
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1995 by contractual maturity are shown
below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 18,748 $ 19,136
Due from one to five years 99,486 105,747
Due from five to ten years 367,875 392,671
Due in more than ten years 97,297 105,961
Mortgage-backed securities 59,174 59,632
$642,580 $683,147
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 15,296 $ 15,473
Due from one to five years 80,249 85,561
Due from five to ten years 108,127 114,937
Due in more than ten years 45,406 50,090
Mortgage-backed securities 327,990 335,237
$577,068 $601,298
During the year ended Dec. 31, 1995, fixed maturities classified as
held to maturity were sold with proceeds of $28,905 and gross
realized gains and losses on such sales were $1,055 and $121,
respectively. The sale of these fixed maturities was due to
significant deterioration in the issuers' creditworthiness. As a
result of adopting the FASB Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities," the Company
reclassified securities with a book value of $15,607 and net
unrealized gains of $144 from held to maturity to available for
sale in December 1995.
In addition, fixed maturities available for sale were sold during
1995 with proceeds of $8,839 and gross realized gains and losses on
such sales were $nil and $74, respectively.
During the year ended Dec. 31, 1994, fixed maturities classified as
held to maturity were sold with proceeds of $2,649 and gross
realized gains and losses on such sales were $nil and $86,
respectively. The sale of these fixed maturities was due to
significant deterioration in the issuers' creditworthiness.
In addition, fixed maturities available for sale were sold during
1994 with proceeds of $14,533 and gross realized gains and losses
on such sales were $181 and $308, respectively.
<PAGE>
PAGE 60
2. Investments (continued)
At Dec. 31, 1995, bonds carried at $262 were on deposit with the
state of New York as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
1995 1994 1993
Interest on fixed maturities $ 97,092 $ 93,800 $100,940
Interest on mortgage loans 13,888 13,226 8,424
Other investment income 1,291 1,219 1,220
Interest on cash equivalents 186 363 63
112,457 108,608 110,647
Less investment expenses 1,533 465 500
$110,924 $108,143 $110,147
At Dec. 31, 1995, investments in fixed maturities comprised 87
percent of the Company's total invested assets. Securities are
rated by Moody's and Standard & Poor's (S&P), except for securities
carried at approximately $144 million which are rated by American
Express Financial Corporation internal analysts using criteria
similar to Moody's and S&P. A summary of investments in fixed
maturities, at amortized cost, by rating on Dec. 31 is as follows:
Rating 1995 1994
Aaa/AAA $ 391,321 $ 393,736
Aa/AA 17,572 18,857
Aa/A 9,950 9,710
A/A 209,483 191,694
A/BBB 61,912 57,206
Baa/BBB 357,445 340,271
Baa/BB 46,029 48,552
Below investment grade 125,936 101,056
$1,219,648 $1,161,082
At Dec. 31, 1995, 90 percent of the securities rated Aaa/AAA are
GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of
any other issuer are greater than 1 percent of the Company's total
investments in fixed maturities.
<PAGE>
PAGE 61
2. Investments (continued)
At Dec. 31, 1995, approximately 11.2 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region and by type of real estate are as follows:
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 31, 1994
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
West North Central $ 23,705 $ -- $ 26,660 $--
East North Central 34,207 -- 35,018 --
South Atlantic 38,802 2,033 39,516 18
Middle Atlantic 23,502 -- 24,061 --
Pacific 13,150 -- 13,297 --
Mountain 14,937 5,084 15,218 --
New England 8,982 -- 9,674 --
East South Central 1,613 7,407 1,629 --
West South Central 277 -- 288 --
159,175 14,524 165,361 18
Less allowance for losses 445 -- 445 --
$158,730 $14,524 $164,916 $18
Dec. 31, 1995 Dec. 31, 1994
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $ 64,136 $ 7,988 $ 65,389 $18
Department/retail stores 55,308 -- 57,608 --
Office buildings 12,367 6,536 13,107 --
Industrial buildings 13,255 -- 13,583 --
Medical buildings 5,255 -- 6,704 --
Nursing/retirement 6,565 -- 6,644 --
Other 2,012 -- 2,038 --
Hotels/motels 277 -- 288 --
159,175 14,524 165,361 18
Less allowance for losses 445 -- 445 --
$158,730 $14,524 $164,916 $18
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authority to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds
the mortgage document, which gives the right to take possession of
the property if the borrower fails to perform according to the
terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage
interest rates currently offered for mortgages of similar
maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage
commitments is $nil.
As of Jan. 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" (SFAS No. 114), as amended by Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures".
The adoption of the new rules did not have a material impact on the
Company's results of operations or financial condition.
<PAGE>
PAGE 62
2. Investments (continued)
SFAS No. 114 applies to all loans except for smaller-balance
homogeneous loans, that are collectively evaluated for impairment.
Impairment is measured as the excess of the loan's recorded
investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate,
or the fair value of collateral. The amount of the impairment is
recorded as a reserve for investment losses.
Based on management's judgment as to the ultimate collectibility of
principal, interest payments received are either recognized as
income or applied to the recorded investment in the loan until it
has been recovered. Once the recorded investment has been
recovered, any additional payments are recognized as interest
income.
The reserve for investment losses is maintained at a level that
management believes is adequate to absorb estimated credit losses
in the portfolio. The level of the reserve account is determined
based on several factors, including historical experience, expected
future principal and interest payments, estimated collateral
values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the
reserve for investment losses.
At Dec. 31, 1995, the Company's recorded investment in impaired
loans was $2,052 with a reserve of $445. During the year, the
average recorded investment in impaired loans was $3,003. There
was no change in the reserve for investment losses from the prior
year.
The Company recognized $204 of interest income related to impaired
loans for the year ended Dec. 31, 1995.
3. Income taxes
The Company qualifies as a life insurance company for federal
income tax purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance
companies.
Income tax expense consists of the following:
1995 1994 1993
Federal income taxes:
Current $15,146 $16,419 $13,164
Deferred (1,301) (4,320) (449)
13,845 12,099 12,715
State income taxes-current 900 695 620
Income tax expense $14,745 $22,794 $13,335
<PAGE>
PAGE 63
3. Income taxes (continued)
Increases (decreases) to the federal tax provision applicable to
pretax income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1995 1994 1993
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $14,746 35.0% $12,757 35.0% $13,026 35.0%
Increases (decreases) are
attributable to:
Tax-excluded interest
and dividend income (464) (1.1) (554) (1.5) (557) (1.5)
Other, net (437) (1.0) (104) (0.3) 246 0.7
Federal income taxes $13,845 32.9% $12,099 33.2% $12,715 34.2%
</TABLE>
A portion of life insurance company income earned prior to 1984 was
not subject to current taxation but was accumulated, for tax
purposes, in a "policyholders' surplus account." At Dec. 31, 1995,
the Company had a policyholders' surplus account balance of $798.
The policyholders' surplus account is only taxable if dividends to
the stockholder exceed the stockholder's surplus account or if the
Company is liquidated. Deferred income taxes of $279 have not been
established because no distributions of such amounts are
contemplated.
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
1995 1994
Deferred tax assets:
Policy reserves $ 26,237 $21,567
Investments -- 3,331
Other 2,791 2,991
Total deferred tax assets 29,028 27,889
Deferred tax liabilities:
Deferred policy acquisition costs 33,001 29,933
Investments 11,690 --
Total deferred tax liabilities 44,691 29,933
Net deferred tax liabilities $(15,663) $(2,044)
The Company is required to establish a "valuation allowance" for
any portion of the deferred tax assets that management believes
will not be realized. In the opinion of management, it is more
likely than not that the Company will realize the benefit of the
deferred tax assets, and, therefore, no such valuation allowance
has been established.
<PAGE>
PAGE 64
4. Stockholder's equity
Retained earnings available for distribution as dividends to the
parent are limited to the Company's surplus as determined in
accordance with accounting practices prescribed by the New York
Department of Insurance. Statutory unassigned surplus aggregated
$85,964 as of Dec. 31, 1995 and $70,974 as of Dec. 31, 1994 (see
Note 3 with respect to the income tax effect of certain
distributions).
Dividends paid to parent were $8,000 in 1995, $nil in 1994 and $nil
in 1993.
During 1995, the Company incurred a loss of $235 on the sale of an
interest rate cap to IDS Life. This loss has been reflected as a
direct charge to stockholder's equity in the accompanying financial
statements.
5. Retirement plan and services
Until July 1, 1995, the Company participated in the IDS Retirement
Plan of American Express Financial Corporation which covered all
permanent employees age 21 and over who had met certain employment
requirements. Effective July 1, 1995, the IDS Retirement Plan was
merged with American Express Company's American Express Retirement
Plan, which simultaneously was amended to include a cash balance
formula and a lump sum distribution option. Employer contributions
to the plan are based on participants' age, years of service and
total compensation for the year. Funding of retirement costs for
this plan complies with the applicable minimum funding requirements
specified by ERISA. The Company's share of the total net periodic
pension cost was $nil in 1995, 1994 and 1993.
The Company has a "Sales Benefit Plan" which is an unfunded,
noncontributory retirement plan for all eligible financial
advisors. Total plan costs for 1995, 1994 and 1993, which are
calculated on the basis of commission earnings of the individual
financial advisors, were $1,392, $1,372 and $1,042, respectively.
Such costs are included in deferred policy acquisition costs.
The Company also participates in defined contribution pension plans
of American Express Company which cover all employees who have met
certain employment requirements. Company contributions to the
plans are a percent of either each employee's eligible compensation
or basic contributions. Costs of these plans charged to operations
in 1995, 1994 and 1993 were $231, $251 and $201, respectively.
The Company participates in defined benefit health care plans of
American Express Financial Corporation that provide health care and
life insurance benefits to retired employees and retired financial
advisors. The plans include participant contributions and service-
related eligibility requirements. Upon retirement, such employees
are considered to have been employees of American Express Financial
<PAGE>
PAGE 65
5. Retirement plan and services (continued)
Corporation. American Express Financial Corporation expenses these
benefits and allocates the expenses to its subsidiaries.
Accordingly, costs of such benefits to the Company are included in
employee compensation and benefits and cannot be identified on a
separate company basis. At Dec. 31, 1995, the total accumulated
post retirement benefit obligation, has been recorded as a
liability by American Express Financial Corporation.
6. Incentive plan and operating expenses
The Company maintains a "Persistency Payment Plan." Under the
terms of this plan, financial advisors earn additional compensation
based on the volume and persistency of insurance sales. The total
costs for the plan for 1995, 1994 and 1993 were $1,720, $1,287 and
$1,387, respectively. Such costs are included in deferred policy
acquisition costs.
Charges by IDS Life and American Express Financial Corporation for
the use of joint facilities, marketing services and other services
aggregated $12,122, $9,314 and $7,421 for 1995, 1994 and 1993,
respectively. Certain of the costs assessed to the Company are
included in deferred policy acquisition costs.
7. Commitments and contingencies
At Dec. 31, 1995 and 1994, traditional life insurance and universal
life-type insurance in force aggregated $3,502,851 and $3,155,571,
respectively, of which $163,462 and $162,956 were reinsured at the
respective year ends.
In addition, the Company has a stop loss reinsurance agreement with
IDS Life covering ordinary life benefits. IDS Life agrees to pay
all death benefits incurred each year which exceed 125 percent of
normal claims, where normal claims are defined in the agreement as
.095 percent of the mean retained life insurance in force.
Premiums ceded to IDS Life amounted to $85, $76 and $67 for the
years ended Dec. 31, 1995, 1994 and 1993, respectively. Claim
recoveries under the terms of this reinsurance agreement were $nil
in 1995, 1994 and 1993.
Premiums ceded to reinsurers other than IDS Life amounted to $269,
$721 and $741 for the years ended Dec. 31, 1995, 1994 and 1993,
respectively. Reinsurance recovered from reinsurers other than IDS
Life amounted to $576, $14 and $379 for the years ended Dec. 31,
1995, 1994 and 1993.
Reinsurance contracts do not relieve the Company from its primary
obligations to policyholders.
The Company has an agreement to assume a block of extended term
life insurance business. The amount of insurance in force related
to this agreement was $392,106 and $447,317 at Dec. 31, 1995 and
1994, respectively. The accompanying statement of income includes <PAGE>
PAGE 66
7. Commitments and contingencies (continued)
premiums of $nil for the years ended Dec. 31, 1995, 1994 and 1993,
and decrease in liabilities for future policy benefits of $2,039,
2,538 and $3,032 related to this agreement for the years ended Dec.
31, 1995, 1994 and 1993, respectively.
8. Lines of credit
The Company has available lines of credit with two banks
aggregating $30,000 at 40 to 80 basis points over each bank's cost
of funds. Outstanding borrowings under these agreements were $nil
at Dec. 31, 1995 and 1994.
9. Derivative financial instruments
The Company enters into transactions involving derivative
financial instruments to manage its exposure to interest rate risk,
including hedging specific transactions. The Company manages risks
associated with these instruments as described below. The Company
does not hold derivative instruments for trading purposes.
Market risk is the possibility that the value of the derivative
financial instruments will change due to fluctuations in a factor
from which the instrument derives its value, primarily an interest
rate. The Company is not impacted by market risk related to
derivatives held for non-trading purposes beyond that inherent in
cash market transactions. Derivatives held for purposes other than
trading are largely used to manage risk and, therefore, the cash
flow and income effects of the derivatives are inverse to the
effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not
fulfill the terms of the contract. The Company monitors credit
exposure related to derivative financial instruments through
established approval procedures, including setting concentration
limits by counterparty and industry, and requiring collateral,
where appropriate. A vast majority of the Company's counterparties
are rated A or better by Moody's and Standard & Poor's.
The notional or contract amount of a derivative financial
instrument is generally used to calculate the cash flows that are
received or paid over the life of the agreement. Notional amounts
are not recorded on the balance sheet. Notional amounts far exceed
the related credit exposure.
Credit exposure related to interest rate caps is measured by
replacement cost of the contracts. The replacement cost represents
the fair value of the instruments.
<TABLE>
<CAPTION>
Notional Carrying Fair Total Credit
Dec. 31, 1995 Amount Value Value Exposure
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $300,000 $1,905 $745 $745
Dec. 31, 1994
Assets:
Interest rate caps $200,000 $1,389 $828 $828
</TABLE>
<PAGE>
PAGE 67
9. Derivative financial instruments (continued)
The fair values of derivative financial instruments are based on
market values, dealer quotes or pricing models. The interest rate
caps expire on various dates from 1997 to 2000.
Interest rate caps are used to manage the Company's exposure to
rising interest rates. These instruments are used primarily to
protect the margin between interest rates earned on investments and
the interest rates credited to related annuity contract holders.
The cost of interest rate caps is amortized to interest expense
over the life of the contracts and payments received as a result
of these agreements are recorded as a reduction of interest expense
when realized. The amortized cost of interest rate cap contracts
is included in other investments.
10. Fair values of financial instruments
The Company discloses fair value information for most on- and off-
balance sheet financial instruments for which it is practical to
estimate that value. Fair values of life insurance obligations,
receivables and all non-financial instruments, such as deferred
acquisition costs are excluded. Off-balance sheet intangible
assets, such as the value the field force, are also excluded.
Management believes the value of excluded assets is significant.
The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<TABLE>
<CAPTION>
1995 1994
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $ 642,580 $ 683,147 $ 686,483 $ 653,080
Available for sale 601,298 601,298 455,103 455,103
Mortgage loans on real
estate (Note 2) 158,730 168,194 164,916 157,085
Other:
Equity securities (Note 2) 10 10 135 135
Derivative financial
instruments (Note 9) 1,905 745 1,389 828
Cash and cash equivalents
(Note 1) -- -- 5,262 5,262
Separate accounts assets
(Note 1) 724,212 724,212 506,208 506,208
Financial Liabilities
Future policy benefits for
fixed annuities 1,038,431 1,005,004 1,025,881 991,358
Separate account liabilitie 678,263 645,389 474,958 448,665
</TABLE>
At Dec. 31, 1995 and 1994, the carrying amount and fair value of
future policy benefits for fixed annuities exclude life insurance-
related contracts carried at $67,843 and $59,803, respectively,
and policy loans of $2,893 and $1,683, respectively. The fair
value of these benefits is based on the status of the annuities at
Dec. 31, 1995 and 1994. The fair value of deferred annuities is <PAGE>
PAGE 68
10. Fair values of financial instruments (continued)
estimated as the carrying amount less any surrender charges and
related loans. The fair value for annuities in non-life contingent
payout status is estimated as the present value of projected
benefit payments at rates appropriate for contracts issued in 1995
and 1994.
At Dec. 31, 1995 and 1994, the fair value of liabilities related to
separate accounts is estimated as the carrying amount less
applicable surrender charges and less variable insurance contracts
carried at $45,949 and $31,250, respectively.
11. Statutory insurance accounting practices
Reconciliations of net income for 1995, 1994 and 1993 and
stockholder's equity at Dec. 31, 1995 and 1994, as shown in the
accompanying financial statements, to that determined using
statutory accounting practices are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net income, per accompanying
financial statements $ 27,387 $23,655 $23,884
Deferred policy acquisition costs (9,722) (12,187) (10,622)
Adjustments of future policy
benefit liabilities (10,655) 13,741 13,597
Deferred federal income taxes (1,301) (4,321) (462)
Provision for losses on investments -- (1,652) 438
Separate account gains 20,769 142 2,708
Other, net (1,678) 755 (1,182)
Net income, on basis of
statutory accounting practices
$24,800 $20,133 $28,361
1995 1994
Stockholder's equity, per
accompanying financial
statements $218,583 $171,721
Deferred policy acquisition costs (109,800) (100,078)
Adjustments of future policy
benefit liabilities 23,172 33,827
Deferred federal income taxes 15,663 2,044
Securities valuation reserve (18,029) (15,939)
Adjustments of separate account
liabilitiess 34,326 13,557
Net unrealized loss on
investments (24,231) 19,497
Premiums due 925 851
Deferred revenue liability 794 834
Allowance for losses 445 445
Non-admitted assets (578) (503)
Interest maintenance reserve (2,442) (2,110)
Other, net 347 249
Stockholder's equity, on basis
of statutory accounting
practices $139,175 $124,395
</TABLE>
<PAGE>
PAGE 69
IDS Life of New York Financial Information
The financial statements shown below are those of the insurance
company and not those of any other entity. They are included in
the prospectus for the purpose of informing investors as to the
financial condition of the insurance company and its ability to
carry out its obligations under its variable contracts.
IDS Life Insurance Company of New York
Balance Sheet (Unaudited) June 30, 1996
Assets (thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost
(Fair value: 1996, $619,894) $ 611,118
Available for sale, at fair value
(Amortized cost: 1996, $570,211) 572,286
Mortgage loans on real estate
(Fair value: 1996, $169,197) 169,489
Policy loans 18,903
Other investments 1,576
Total investments 1,373,372
Cash and cash equivalents --
Accrued investment income 22,120
Deferred policy acquisition costs 114,975
Other assets 2,360
Separate account assets 829,743
Total assets $2,342,570
Liabilities and Stockholder's Equity
Liabilities:
Fixed annuities - future policy benefits $1,081,700
Universal life-type insurance - future
policy benefits 140,556
Traditional life, disability income and
long-term care insurance - future policy
benefits 43,771
Policy claims and other policyholders' funds (401)
Deferred income taxes 7,462
Amounts due to brokers 6,004
Other liabilities 24,464
Separate account liabilities 829,743
Total liabilities 2,133,299
Stockholder's equity:
Capital stock, $10 par value per share; 200,000
shares authorized, issued and outstanding 2,000
Additional paid-in capital 49,000
Net unrealized gain (loss) on investments 1,314
Retained earnings 156,957
Total stockholder's equity 209,271
Total liabilities and stockholder's equity $2,342,570
Commitments and contingencies
See accompanying notes.
<PAGE>
PAGE 70
___________________________________________________________________
Statement of Income (Unaudited) Six month period ended
June 30, 1996
(thousands)
___________________________________________________________________
Revenues:
Traditional life, disability income and
long-term care insurance premiums $ 5,316
Policyholder and contractholder charges 7,705
Mortality and expense risk fees 3,957
Net investment income 55,111
Net realized gain (loss) on investments (985)
Total revenues 71,104
Benefits and expenses:
Death and other benefits - traditional
life, disability income and long-term
care insurance 2,106
Death and other benefits - universal
life-type insurance and investment contracts 2,730
Increase (decrease) in liabilities for future
policy benefits for traditional life,
disability income and long-term care insurance 1,041
Interest credited on universal life-type
insurance and investment contracts 33,156
Amortization of deferred policy
acquisition costs 7,504
Other insurance and operating expenses 4,790
Total benefits and expenses 51,327
Income before income taxes 19,777
Income taxes 7,061
Net income $ 12,716
See accompanying notes.
<PAGE>
PAGE 71
___________________________________________________________________
Statement of Cash Flows (Unaudited) Six month period ended
June 30,1996
(thousands)
Cash flows from operating activities:
Net income $ 12,716
Adjustments to reconcile net income to net
cash provided by operating activities:
Issuance - policy loans, excluding
universal life-type insurance (946)
Repayment - policy loans, excluding
universal life-type insurance 704
Change in accrued investment income 452
Change in deferred policy acquisition
costs, net (4,598)
Change in liabilities for future policy
benefits for traditional life, disability
income and long-term care insurance 1,294
Change in policy claims and other
policyholders' funds (4,045)
Change in deferred income taxes 629
Change in other liabilities 3,435
Amortization of premium (accretion
of discount), net (202)
Net realized gain on investments 985
Premiums related to universal life-type
insurance 13,872
Surrenders and death benefits related to
universal life-type insurance (9,721)
Interest credited to account balances related
to universal life-type insurance 3,665
Policyholder and contractholder
charges, non-cash (3,735)
Other, net (1,579)
Net cash provided by operating activities 12,926
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases --
Maturities, sinking fund payments and calls 21,830
Sales 9,035
Fixed maturities available for sale:
Purchases (39,264)
Maturities, sinking fund payments and calls 33,786
Sales 12,866
Other investments, excluding policy loans:
Purchases (14,418)
Sales 3,328
Change in amounts due to brokers (3,996)
Net cash provided by investing activities $ 23,167
<PAGE>
PAGE 72
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received $ 46,952
Surrenders and death benefits (103,909)
Interest credited to account balances 29,490
Issuance - policy loans, universal life-type
insurance (2,247)
Repayment - policy loans, universal life-type
insurance 1,621
Cash dividend to parent (8,000)
Net cash used in financing activities (36,093)
Net increase (decrease) in cash and cash
equivalents --
Cash and cash equivalents at beginning
of period --
Cash and cash equivalents at end of period $ --
See accompanying notes.
<PAGE>
PAGE 73
IDS Life Insurance Company of New York
Notes to Financial Statements
June 30, 1996 ($ Thousands) (Unaudited)
1. General
In the opinion of the management of IDS Life Insurance Company of
New York (the Company), the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly its balance sheet as of
June 30, 1996, and the related statement of income and statement of
cash flows for the six months ended June 30, 1996.
The Company is a wholly owned subsidiary of IDS Life Insurance
Company which is a wholly owned subsidiary of American Express
Financial Corporation which is a wholly owned subsidiary of
American Express Company.
2. Nature of business
The Company is engaged in the life insurance and annuity business
in the state of New York. The Company's principal products are
deferred annuities and universal life insurance which are issued
primarily to individuals. It sells various forms of fixed and
variable individual life insurance, disability income insurance,
long-term care insurance, and single and installment
premium fixed and variable annuities.
3. Statements of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates market value.
Cash paid for interest on borrowings totaled $211 for the six
months ended June 30, 1996. Cash paid for income taxes totaled
$8,319 for the six months ended June 30, 1996.
4. Commitments and contingencies
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in a material
liability.
<PAGE>
PAGE 74
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial statements included in part B of this Registration
Statement:
IDS Life Insurance Company of New York:
Report of Independent Auditors dated February 2, 1996.
Balance Sheets at Dec. 31, 1995 and 1994.
Statements of Income for the years ended Dec. 31, 1995, 1994
and 1993.
Statements of Cash Flows for the years ended 1995, 1994 and
1993.
Notes to Financial Statements.
Balance Sheet (unaudited) at June 30, 1996.
Statement of Income (unaudited) for the six months ended June
30, 1996.
Statement of Cash Flows (unaudited) for the six months ended
June 30, 1996.
Notes to Financial Statements (unaudited) dated June 30,
1996.
(b) Exhibits:
1. Consent in writing in Lieu of Meeting of IDS Life of New York
establishing the IDS Life of New York Flexible Portfolio
Annuity Account dated on April 17, 1996, filed electronically
as Exhibit 1 to Initial Registration Statement is
incorporated herein by reference.
2. Not applicable.
3. Not applicable.
4.1 Copy of Qualified Deferred Annuity Contract Form No. 31037-NY
(10/95) filed electronically as Exhibit 4.1 to Initial
Registration Statement is incorporated herein by reference.
4.2 Copy of Non-Qualified Deferred Annuity Contract, Form No.
31036-NY (10/95), filed electronically as Exhibit 4.2 to
Initial Registration Statement is incorporated herein by
reference.
4.3 Copy of Deferred Annuity Contract (IRA), Form No. 31038-NY
(10/95), filed electronically as Exhibit 4.3 to Initial
Registration Statement is incorporated herein by reference.
4.4 Copy of Deferred Annuity Contract (SEP), Form No. 31039-NY
(10/95), filed electronically as Exhibit 4.4 to Initial
Registration Statement is incorporated herein by reference.
5. Form of Application to be filed by amendment.
<PAGE>
PAGE 75
6.1 Copy of the revised charter of IDS Life of New York dated
April 1992, filed electronically as Exhibit 6.1 to Initial
Registration Statement is incorporated herein by reference.
6.2 Copy of Amended By-Laws of IDS Life of New York dated May
1992, filed electronically as Exhibit 6.2 to Initial
Registration Statement is incorporated herein by reference.
7. Not applicable.
8.1 Form of Participation Agreement between IDS Life Insurance
Company of New York and Putnam Capital Manager Trust and
Putnam Mutual Funds Corp., is filed electronically herewith.
8.2 Form of Participation Agreement between IDS Life Insurance
Company of New York and Templeton Variable Products Series
Fund and Franklin Templeton Distributors, Inc., is filed
electronically herewith.
8.3 Form of Participation Agreement between IDS Life Insurance
Company of New York and Warburg Pincus Trust and Warburg
Pincus Counsellors, Inc. and Counsellors Securities, Inc., is
filed electronically herewith.
8.4 Form of Participation Agreement between IDS Life Insurance
Company of New York and AIM Variable Insurance Funds, Inc.
and AIM Distributors, Inc., is filed electronically herewith.
8.5 Form of Participation Agreement between IDS Life Insurance
Company of New York and TCI Portfolios, Inc. and Investors
Research Corporation, is filed electronically herewith.
9. Opinion of counsel, dated August 13, 1996, is filed
electronically herewith.
10. Consent of Independent Auditors, is filed electronically
herewith.
11. Financial Statement Schedules and Report of Independent
Auditors, is filed electronically herewith.
Financial Statement Schedules:
Schedule I - Summary of Investments Other Than
Investments In Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
Schedule V - Valuation and Qualifying Accounts
Report of Independent Auditors dated February 2, 1996
All other schedules to the Financial Statements required by
Article 7 of Regulation S-X are not required under the
related instructions or are inapplicable and, therefore, have
been omitted.
12. Not applicable.
<PAGE>
PAGE 76
13. Copy of schedule for computation of each performance
quotation provided in the Registration Statement in response
to Item 21, filed electronically as Exhibit 13 to Initial
Registration Statement is incorporated herein by reference.
14. Financial Data Schedule is filed electronically herewith.
15. Power of Attorney to sign this Registration Statement dated
April 16, 1996, filed electronically as Exhibit 15 to Initial
Registration Statement is incorporated herein by reference.
Item 25. Directors and Officers of the Depositor (IDS Life
Insurance Company of New York)
<TABLE>
<CAPTION>
Positions and
Name Principal Business Address Offices with Depositor
<S> <C> <C>
Mario Alaia 20 Madison Avenue Extension Claims Officer and
Albany, NY Assistant Secretary
Tracy A. Anderson IDS Tower 10 Treasurer and Chief Actuary
Minneapolis, MN 55440
Darrell C. Beckstrom IDS Tower 10 Underwriting Officer
Minneapolis, MN 55440
John C. Boeder 20 Madison Avenue Extension Director
Albany, NY
Roger C. Corea 20 Madison Avenue Extension Director
Albany, NY
Charles A. Cuccinello 20 Madison Avenue Extension Director
Albany, NY
Milton R. Fenster 20 Madison Avenue Extension Director
Albany, NY
Donna M. Gaglione 20 Madison Avenue Extension Secretary
Albany, NY
Margaret M. Grogan, M.D. Bethlehem Terrace Apts. Medical Director
Slingerland, NY
Lorraine R. Hart IDS Tower 10 Investment Officer
Minneapolis, MN 55440
Robert A. Hatton IDS Tower 10 Director, Vice
Minneapolis, MN 55440 President and Chief
Operating Officer
Richard W. Kling IDS Tower 10 Director, Chairman of
Minneapolis, MN 55440 the Board and President
Edward Landes IDS Tower 10 Director
Minneapolis, MN 55440
Janis E. Miller IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
Michael P. Monaco World Financial Center Director
New York, NY
Stephen P. Norman World Financial Center Director
New York, NY
<PAGE>
PAGE 77
Kevin E. Palmer IDS Tower 10 Reinsurance Actuary
Minneapolis, MN 55440
Louise M. Parent World Financial Center Director
New York, NY
Carl N. Platou IDS Tower 10 Director
Minneapolis, MN 55440
Gordon H. Ritz 404 WCCO Radio Bldg. Director
Minneapolis, MN
F. Dale Simmons IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant Treasurer
William A. Stoltzmann IDS Tower 10 Counsel and Assistant
Minneapolis, MN 55440 Secretary
Michael R. Woodward 20 Madison Avenue Extension Director
Albany, NY
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
IDS Life Insurance Company of New York is a wholly owned
subsidiary of IDS Life Insurance Company which is a
wholly owned subsidiary of American Express Financial
Corporation. American Express Financial Corporation is a
wholly owned subsidiary of American Express Company
(American Express).
The following list includes the names of major
subsidiaries of American Express.
Jurisdiction
Name of Subsidiary of Incorporation
I. Travel Related Services
American Express Travel Related
Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Investors Diversified Financial Services
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Nevada Inc. Nevada
American Express Minnesota Foundation Minnesota
American Express Service Corporation Delaware
American Express Tax and Business Services Inc. Minnesota
American Express Trust Company Minnesota
<PAGE>
PAGE 78
American Partners Life Insurance Company Arizona
AMEX Assurance Company Illinois
IDS Advisory Group Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Deposit Corp. Utah
IDS Fund Management Limited U.K.
IDS Futures Corporation Minnesota
IDS Futures III Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS International, Inc. Delaware
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant (Continued)
Jurisdiction
Name of Subsidiary of Incorporation
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
Item 27. Number of Contractowners
None.
Item 28. Indemnification
The By-Laws of the depositor provide that it shall
indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that
he is or was a director, officer, employee or agent of
this Corporation, or is or was serving at the direction
of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, to any threatened, pending or
completed action, suit or proceeding, wherever brought,
to the fullest extent permitted by the laws of the State
<PAGE>
PAGE 79
of Minnesota, as now existing or hereafter amended,
provided that this Article shall not indemnify or protect
any such director, officer, employee or agent against any
liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the
performance of his duties or by reason of his reckless
disregard of his obligations and duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to director, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt
Fund, Inc.; IDS International Fund, Inc.; IDS Investment
Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New
Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy
Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money
Fund, Inc.; IDS Utilities Income Fund, Inc. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
<PAGE>
PAGE 80
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- None
IDS Tower 10 Investments
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Retirement
Services
Alvan D. Arthur Group Vice President- None
Suite 105 Central California/
2710 S. Gateway Oaks Dr. Western Nevada
Sacramento, CA 95833
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Technology and Development
Minneapolis, MN 55440
<PAGE>
PAGE 81
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Brent L. Bisson Group Vice President- None
Ste 900 E. Westside Twr Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- Director
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President- None
Suite 200 New Jersey
3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
<PAGE>
PAGE 82
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- Director
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Colleen Curran Vice President and None
IDS Tower 10 Assistant General Counsel
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive None
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
<PAGE>
PAGE 83
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger S. Edgar Senior Vice President None
IDS Tower 10 and Technology Advisor
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
<PAGE>
PAGE 84
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 150 North Texas
801 E. Campbell Road
Richardson, TX 75081
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
<PAGE>
PAGE 85
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations and
Chief Compliance Officer
David R. Hubers Chairman, Chief None
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- Chairman of
IDS Tower 10 Risk Management Products the Board and
Minneapolis, MN 55440 President
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
<PAGE>
PAGE 86
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Jr. Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
<PAGE>
PAGE 87
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President- None
Suite 200 At Large
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Mary Owens Neal Vice President- None
IDS Tower 10 Mature Market Segment
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Technology Services
Minneapolis, MN 55440
<PAGE>
PAGE 88
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
<PAGE>
PAGE 89
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Retirement
Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President- None
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
<PAGE>
PAGE 90
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Group Vice President- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
466 Westdale Mall Eastern Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Bren Road North Dakota/Western
Minnetonka, MN 55343 Wisconsin
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
<PAGE>
PAGE 91
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
John R. Thomas Senior Vice President- None
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Tax Research and Audit
Minneapolis, MN 55440
James M. Weiss Vice President-Senior
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
Thomas L. White Group Vice President- None
Suite 200 Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
<PAGE>
PAGE 92
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- Director
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
Item 30. Location of Accounts and Records
IDS Life Insurance Company of New York
20 Madison Avenue Extension
Albany, NY 12203
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective
amendment to this registration statement as
frequently as is necessary to ensure that the
audited financial statements in the
registration statement are never more than 16
months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as
part of any application to purchase a contract
offered by the prospectus, a space that an
applicant can check to request a Statement of
Additional Information, or (2) a post card or
similar written communication affixed to or
included in the prospectus that the applicant
can remove to send for 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.
<PAGE>
PAGE 93
(d) Registrant represents that it is relying upon
the no-action assurance given to the American
Council of Life Insurance (pub. avail. Nov. 28,
1988). Further, Registrant represents that it
has complied with the provisions of paragraphs
(1)-(4) of that no-action letter.
<PAGE>
PAGE 94
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, IDS Life Insurance Company of New York, on
behalf of the Registrant certifies that it meets requirements of
Securities Act Rule 485 for all effectiveness to this Registration
Statement and has duly caused this Registration Statement to be
signed on its behalf in the City of Minneapolis, and State of
Minnesota, on the 22nd day of August, 1996.
IDS LIFE OF NEW YORK FLEXIBLE PORTFOLIO ANNUITY ACCOUNT
(Registrant)
By IDS Life Insurance Company of New York
(Sponsor)
By /s/ Richard W. Kling
Richard W. Kling
President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities indicated on the 22nd day of August, 1996.
Signature Title
/s/ Richard W. Kling* Director, Chairman of the
Richard W. Kling Board and President
/s/ John C. Boeder* Director
John C. Boeder
/s/ Roger C. Corea* Director
Roger C. Corea
/s/ Charles A. Cuccinello* Director
Charles A. Cuccinello
/s/ Milton R. Fenster* Director
Milton R. Fenster
/s/ Robert Hatton* Director, Vice President
Robert Hatton and Chief Operating Officer
/s/ Edward Landes* Director
Edward Landes
/s/ Michael P. Monaco* Director
Michael P. Monaco
/s/ Stephen P. Norman* Director
Steven P. Norman
/s/ Louise M. Parent* Director
Louise M. Parent
<PAGE>
PAGE 95
Signature Title
/s/ Carl Platou* Director
Carl Platou
/s/ Gordon H. Ritz* Director
Gordon H. Ritz
/s/ Michael R. Woodward* Director
Michael R. Woodward
*Signed pursuant to Power of Attorney dated April 16, 1996, filed
electronically as Exhibit 15 to the Initial Registration Statement
as incorporated herein by reference:
___________________________
Mary Ellyn Minenko
<PAGE>
PAGE 96
CONTENTS OF PRE-EFFECTIVE AMENDMENT NO. 1
This Registration Statement is comprised of the following papers
and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
PAGE 1
IDS LIFE OF NEW YORK FLEXIBLE PORTFOLIO ANNUITY ACCOUNT
Registration Number 333-03867/811-07623
EXHIBIT INDEX
8.1 Form of Participation Agreement between IDS Life Insurance
Company of New York and Putnam Capital Manager Trust and
Putnam Mutual Funds Corp.
8.2 Form of Participation Agreement between IDS Life Insurance
Company of New York and Templeton Variable Products Series
Fund and Franklin Templeton Distributors, Inc.
8.3 Form of Participation Agreement between IDS Life Insurance
Company of New York and Warburg Pincus Trust and Warburg
Pincus Counsellors, Inc. and Counsellors Securities, Inc.
8.4 Form of Participation Agreement between IDS Life Insurance
Company of New York and AIM Variable Insurance Funds, Inc. and
AIM Distributors, Inc.
8.5 Form of Participation Agreement between IDS Life Insurance
Company of New York and TCI Portfolios, Inc. and Investors
Research Corporation, is filed electronically herewith.
9. Opinion of counsel, dated August 13, 1996.
10. Consent of Independent Auditors.
11. Financial Statement Schedules and Report of Independent
Auditors.
Financial Statement Schedules:
Schedule I - Summary of Investments Other Than
Investments In Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
Schedule V - Valuation and Qualifying Accounts
Report of Independent Auditors dated February 2, 1996
14. Financial Data Schedule.
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
PUTNAM CAPITAL MANAGER TRUST
And
PUTNAM MUTUAL FUNDS CORP.
THIS AGREEMENT, made and entered into this ____ day of __________,
1996 by and among IDS Life Insurance Company of New York organized
under the laws of the State of New York (the "Company"), on its own
behalf and on behalf of each separate account of the Company named
in Schedule 1 to this Agreement, as may be amended from time to
time (each account referred to as the "Account"), Putnam Capital
Manager Trust, an open-end management investment company and
business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund") and Putnam Mutual Funds Corp., a
Massachusetts corporation (the "Distributor").
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to
be offered by insurance companies that have entered into
participation agreements with the Fund and the Distributor (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has received an order from the Securities &
Exchange Commission (the "SEC") granting Participating Insurance
Companies and variable annuity separate accounts and variable life
insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of
1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity separate
accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and
qualified pension and retirement plans outside of the separate
account context (the "Mixed and Shared Funding Exemptive Order").
The parties to this Agreement agree that the conditions or
undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund and/or the
Distributor by virtue of the receipt of such order by the SEC will
be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent
applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (the "1933 Act"); and
<PAGE>
PAGE 2
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company under the insurance laws of the State of
New York, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the
Portfolios named in Schedule 2, as such schedule may be amended
from time to time (the "Designated Portfolios") on behalf of the
Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Distributor agree as follows:
ARTICLE 1. Sale of Fund Shares
1.1. The Fund agrees, subject to the terms of this Agreement, to
sell to the Company those shares of the Designated Portfolios
that each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the order for the
shares of the Fund. For purposes of this Section 1.1, the
Company will be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund
receives notice of such order by 9:00 a.m. Central Time on
the next following business day. "Business Day" will mean
any day on which the New York Stock Exchange is open for
trading and on which the Fund calculates its net asset value
pursuant to the rules of the SEC.
1.2. The Company will pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance
with Section 1.1 above. Payment will be in federal funds
transmitted by wire. The Company will only purchase Fund
shares to fund Contracts sold by the Company or by
broker-dealers affiliated with the Company.
1.3. The Fund agrees to make shares of the Designated Portfolios
available indefinitely, subject to Article X, for purchase at
the applicable net asset value per share by Participating
Insurance Companies and their separate accounts on those days
on which the Fund calculates its Designated Portfolio net
asset value pursuant to rules of the SEC; provided, however,
that the Trustees of the Fund (the "Trustees") may refuse to
sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such
<PAGE>
PAGE 3
action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees,
acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, necessary or in
the best interests of the shareholders of such Portfolio.
1.4. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable provisions of
the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the
sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be
sold to the general public.
1.5. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by
the Company, executing such requests on a daily basis at the
net asset value next computed after receipt and acceptance by
the Fund or its agent of the request for redemption. For
purposes of this Section 1.5, the Company will be the
designee of the Fund for receipt of requests for redemption
from each Account and receipt by such designee will
constitute receipt by the Fund; provided the Fund receives
notice of request for redemption by 9:00 a.m. Central Time on
the next following Business Day. Payment will be in federal
funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on
such next Business Day as the Fund receives notice of the
redemption order from the Company. If notification of
redemption is received after 9:00 a.m. Central Time on a
Business Day, payment for redeemed shares will be made on the
next following Business Day. The Fund reserves the right to
delay payment of redemption proceeds, but in no event may
such payment be delayed longer than the period permitted
under Section 22(e) of the 1940 Act. The Fund will not bear
any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be
responsible for such action.
1.6. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus
of the Fund in accordance with the provisions of such
prospectus. The Company will provide the Fund with such
information about the sales and redemptions of shares as the
Fund may reasonably request.
1.7. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders for
Fund shares will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund will furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares.
<PAGE>
PAGE 4
The Company hereby elects to receive all such dividends and
distributions as are payable on the Designated Portfolio
shares in the form of additional shares of that Designated
Portfolio. The Company reserves the right to revoke this
election and to receive all such dividends and distributions
in cash. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and
distributions.
1.9. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best efforts
to make such net asset value per share available by 5:30
p.m., Central Time, but other than with respect to events
outside the control of the Fund, in no event later than 6:00
p.m., Central Time, each business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts
will be issued and sold in compliance with all applicable
federal and state laws, including state insurance suitability
requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and
validly established each Account as a separate account under
applicable state law and has registered the Account as a unit
investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company will
amend the registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act
for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will
register and qualify the Contracts for sale in accordance
with the securities laws of any state only if and to the
extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts
under applicable provisions of the Internal Revenue Code, and
that it will make every effort to maintain such treatment and
that it will notify the Fund and the Distributor immediately
upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
<PAGE>
PAGE 5
2.4. The Company agrees that it will notify the Fund and the
Distributor if the Company adds an aggressive growth fund
with similar objectives to the Fund as an investment option
under the Contracts sixty (60) days prior to the effective
date of such addition.
2.5. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund
is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are sold. The
Fund will amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its
shares. The Fund will register and qualify the shares of the
Designated Portfolios for sale in accordance with the laws of
any state only if and to the extent deemed advisable by the
Fund based solely on the sale of Fund shares to the Company.
2.6. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort to
maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.7. The Fund represents that its investment objectives, policies
and restrictions comply with applicable state securities laws
as they may apply to the Fund. The Fund makes no
representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies
with the insurance laws and regulations of any state. The
Fund and the Distributor agree that they will furnish the
information required by state insurance laws so that the
Company can obtain the authority needed to issue the
Contracts in any applicable state.
2.8. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act or otherwise, although it reserves the right to
make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have the Trustees, a majority
of whom are not "interested" persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.9. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts
and that it does and will comply in all material respects
with applicable provisions of the 1940 Act.
<PAGE>
PAGE 6
2.10. The Distributor represents and warrants that it is and will
remain duly registered under all applicable federal and state
securities laws and that it will perform its obligations for
the Fund in accordance in all material respects with any
applicable state and federal securities laws.
2.11. The Fund represents and warrants that all of its Trustees,
officers, employees investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding
company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund will provide such documentation, including a final
copy of a current prospectus set in type or a computer
diskette at the Fund's expense, and other assistance as is
reasonably necessary in order for the Company at least
annually (or more frequently if the Fund prospectus is
amended more frequently) to have the Fund's prospectus and
the prospectuses of other funds in which assets attributable
to the Contracts may be invested printed together in one
document. The Company will bear the expense of printing and
distributing prospectuses. The Fund will provide such
documentation to the Company in a timely manner so that the
Company can print and distribute the prospectuses within the
time required by applicable law.
3.2. The Fund's prospectus will state that the statement of
additional information for the Fund is available from the
Company. The Fund will provide the Company, at the Fund's
expense, with as many copies of the statement of additional
information as the Company may reasonably request for
distribution, at the Company's expense, to prospective
contractowners and applicants. The Fund will provide, at the
Fund's expense, as many copies of said statement of
additional information as necessary for distribution, at the
Fund's expense, to any existing contractowner who requests
such statement or whenever state or federal law otherwise
requires that such statement be provided. The Fund will
provide the copies of said statement of additional
information to the Company or to its mailing agent in a
timely manner so that the Company can distribute the
statement of additional information within the time required
by applicable law. The Company will distribute the statement
of additional information as requested or required and will
bill the Fund for the reasonable cost of such distribution.
3.3. The Fund, at its expense, will provide the Company or its
mailing agent with copies of its proxy material if any,
reports to shareholders and other communications to
shareholders in such quantity as the Company will reasonably
<PAGE>
PAGE 7
require and in a timely manner so that the Company can
distribute these documents within the time required by
applicable law. The Company will distribute this proxy
material, reports and other communications to existing
contractowners, such distribution to be at the Company's
expense.
3.4. If and to the extent required by law and the Mixed & Shared
Funding Exemptive Order, the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held
in the Account in accordance with instructions
received from contractowners; and
(c) vote shares of the Designated Portfolios held in
the Account for which no timely instructions have
been received, in the same proportion as shares of
such Designated Portfolio for which instructions
have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to
interpret the 1940 Act and the Mixed & Shared Funding
Exemptive Order to require pass-through voting privileges for
variable contractowners. The Company reserves the right to
vote Fund shares held in any segregated asset account in its
own right, to the extent permitted by law and the Mixed &
Shared Funding Exemptive Order. The Company will be
responsible for assuring that each Account participating in
the Fund calculates voting privileges in a manner consistent
with all legal requirements, including the Mixed and Shared
Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund
either will provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or, as the Fund currently intends, to
comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance
with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of Trustees and with
whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company will furnish, or will cause to be furnished, to
the Distributor, each piece of sales literature or other
promotional material in which the Fund, its investment
adviser or the Distributor is named, at least ten (10)
business days prior to its use. No such material will be
used if the Fund or the Distributor reasonably objects to
such use within five (5) business days after receipt of such
material.
<PAGE>
PAGE 8
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the
Contracts other than the information or representations
contained in the registration statement, prospectus or
statement of additional information for Fund shares, as such
registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund,
or in published reports for the Fund which are in the public
domain or approved by the Fund or the Distributor for
distribution, or in sales literature or other material
provided by the Fund or by the Distributor, except with
permission of the Fund or the Distributor. The Fund and the
Distributor agree to respond to any request for approval on a
prompt and timely basis. Nothing in this Section 4.2 will be
construed as preventing the Company or its employees or
agents from giving advice on investment in the Fund.
4.3. The Fund or the Distributor will furnish, or will cause to be
furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the
Company or its Account is named, at least ten (10) business
days prior to its use. No such material will be used if the
Company reasonably objects to such use within five (5)
business days after receipt of such material.
4.4. The Fund and the Distributor will not give any information or
make any representations or statements on behalf of the
Company or concerning the Company, each Account, or the
Contracts other than the information or representations
contained in a registration statement, prospectus or
statement of additional information for the Contracts, as
such registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the
Company for distribution to contractowners, or in sales
literature or other material provided by the Company, except
with permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely
basis.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales
literature and other promotional materials naming the Company
or the Account, and all amendments to any of the above, that
relate to the Fund or its shares, promptly following the
filing of such document with the SEC or the NASD.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, solicitations for voting
instructions, sales literature and other promotional
materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, promptly following
the filing of such document with the SEC or the NASD.<PAGE>
PAGE 9
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other
public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any
written communication distributed or made generally available
to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.8. The Fund and the Distributor hereby consent to the Company's
use of the names "Putnam", "Putnam Capital Manager Trust",
and "PCM", in connection with marketing the Contracts,
subject to the terms of Sections 4.1 and 4.2 of this
Agreement. Such consent will terminate with the termination
of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Distributor will pay no fee or other
compensation to the Company under this Agreement, except: (a)
if the Fund or any Designated Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then, subject to obtaining any
required exemptive orders or other regulatory approvals, the
Distributor may make payments to the Company if and in such
amounts agreed to by the Distributor in writing; and (b) the
Fund may pay fees to the Company for services provided to
contractowners that are not primarily intended to result in
the sale of shares of the Designated Portfolio or of lying
contracts.
5.2. All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by
law. All shares of the Designated Portfolios will be duly
authorized for issuance and registered in accordance with
applicable federal law and, to the extent deemed advisable by
the Fund, in accordance with applicable state law, prior to
sale. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of
additional information and registration statement, proxy
materials and reports; setting the Fund's prospectus in type;
setting in type and printing proxy materials and reports to
contractowners the preparation of all statements and notices
required by any federal or state law; all taxes on the
<PAGE>
PAGE 10
issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a
plan, if any, under Rule 12b-1 under the 1940 Act; and all
other expenses set forth in Article III of this Agreement.
5.3. The Company will bear all expenses incident to the
performance of its obligations under this Agreement. The
Company will bear those expenses of:
(a) printing and distributing the Fund's prospectus to
existing and prospective contractowners;
(b) distributing reports to contractowners; and
(c) distributing the Fund's proxy materials to contractowners
as set forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1. The Fund will comply with Section 817(h) of the Internal
Revenue Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment,
or life insurance contracts. In the event of a breach of
this Article VI by the Fund, it will take all reasonable
steps: (a) to notify the Company of such breach; and (b) to
adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the
contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by
variable annuity and variable life insurance contractowners;
or (f) a decision by an insurer to disregard the voting
instructions contractowners. The Trustees will promptly
inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Trustees. The Company agrees to
assist the Trustees in carrying out their responsibilities,
as delineated in the Mixed and Shared Funding Exemptive
Order, by providing the Trustees with all information
reasonably necessary for them to consider any issues raised.
This includes, but is not limited to, an obligation by the
Company to inform the Trustees whenever contractowner voting
<PAGE>
PAGE 11
instructions are to be disregarded. The Trustees will record
in their minutes, or other appropriate records, all reports
received by them and all action with regard to a conflict.
7.3. If it is determined by a majority of the Trustees, or a
majority of the disinterested Trustees, that an
irreconcilable material conflict exists, the Company and
other Participating Insurance Companies will, at their
expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees), take
whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e.,
variable annuity contractowners or variable life insurance
contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making
such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and such disregard of voting instructions could
conflict with the majority of contractowner voting
instructions, and the Company's judgement represents a
minority position that would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw
the affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a
majority of the disinterested Trustees. No charge or penalty
will be imposed a result of such withdrawal. Any such
withdrawal and termination must take place within six (6)
months after the Fund gives written notice to the Company
that this provision is being implemented. Until the end of
such six-month period the Distributor and Fund will, to the
extent permitted by law and any exemptive relief previously
granted to the Fund, continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because of a
particular state insurance regulator's decision applicable to
the Company to disregard contractowner voting instructions,
and that decision represents a minority position that would
preclude a majority vote, then the Company may be required,
at the Fund's direction, to withdraw the affected subaccount
of the Account's investment in the Fund and terminate this
Agreement with respect to such subaccount; provided, however,
<PAGE>
PAGE 12
that such withdrawal and termination will be limited to the
extent required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested
Trustees. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written
notice to the Company that this provision is being
implemented. Until the end of such six-month period the
Distributor and Fund will, to the extent permitted by law and
any exemptive relief previously granted to the Fund, continue
to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested Trustees will determine whether
any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund be required
to establish a new funding medium for the Contracts. The
Company will not be required to establish a new funding
medium for the Contracts if an offer to do so has been
declined by vote of a majority of contractowners affected by
the irreconcilable material conflict.
7.7. The Company will at least annually submit to the Trustees
such reports, materials or data as the Trustees may
reasonably request so that they may fully carry out the
duties imposed upon them as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials
and data will be submitted more frequently if deemed
appropriate by the Trustees.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order,
then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Distributor, and each person, if any, who
controls or is associated with the Fund or the
Distributor within the meaning of such terms under the
federal securities laws and any director, trustee,
<PAGE>
PAGE 13
officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid
in settlement with the written consent of the Company
which consent may not be unreasonably withheld) or
litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof)
or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the registration
statement, prospectus or statement of additional
information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required
to be stated or necessary to make such statements
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Distributor or the
Fund for use in the registration statement,
prospectus or statement of additional information
for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained
in the Fund registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the
Fund (or any amendment or supplement) not supplied
by the Company or persons under control of the
Company), or wrongful conduct of the Company or
persons under its control, with respect to the sale
or distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
<PAGE>
PAGE 14
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund or the
Distributor by or on behalf of the Company or
persons under its control; or
(4) arise out of any material breach of any
representation and/or warranty made by the Company
in this Agreement or arise out of or result from
any other material breach by the Company of this
Agreement; except to the extent provided in
Sections 8.1(b) and 8.4 hereof. This
indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.1(a) if the loss, claim, damage, liability or
litigation for which indemnification is sought is due to
the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this
Agreement by such party.
(c) An Indemnified Party promptly will notify the Company of
the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
him, her or it in connection with the issuance or sale
of the Fund shares or the Contracts or the operation of
the Fund.
8.2. Indemnification By The Distributor
(a) The Distributor agrees to indemnify and hold harmless
the Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Distributor which consent may not be
unreasonably withheld) or litigation (including
reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the sales literature or
other promotional material of the Fund (or any
amendment or supplement to any of the foregoing),
<PAGE>
PAGE 15
or arise out of or are based upon the omission or
the alleged omission to state therein a material
fact required to be stated or necessary to make
such statements not misleading in light of the
circumstances in which they were made; provided
that this agreement to indemnify will not apply as
to any Indemnified Party if such statement or
omission or such alleged statement or omission was
made in reliance upon and in conformity with
information furnished to the Distributor or Fund by
or on behalf of the Company for use in the sales
literature of the Fund (or any amendment or
supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in
the Contract or Fund registration statements,
prospectuses or statements of additional
information or sales literature or other
promotional material for the Contracts or the Fund
(or any amendment or supplement) not supplied by
the Distributor or the Fund or persons under the
control of the Distributor or the Fund
respectively) or wrongful conduct of the
Distributor or persons under the control of the
Distributor, with respect to the sale or
distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission
or alleged omission to state therein a material
fact required to be stated or necessary to make
such statement or statements not misleading in
light of the circumstances in which they were made,
if such statement or omission was made in reliance
upon and in conformity with information furnished
to the Company by or on behalf of the Distributor
or persons under the control of the Distributor; or
(4) arise out of or result from any material breach of
any representation and/or warranty made by the
Distributor in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Distributor (including a failure,
whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements and procedures related thereto
specified in Article VI of this Agreement); or
<PAGE>
PAGE 16
(5) arise out of or result from any failure to supply
timely and accurate net asset value information
related to the Fund, as contemplated by Article I,
which failure is the result of gross negligence or
willful misconduct of the Distributor or its
affiliates (it being agreed that neither the
Distributor or such affiliates assume
responsibility for the timing or accuracy of prices
supplied by independent third parties, such as
pricing services and market makers); except to the
extent provided in Sections 8.2(b) and 8.4 hereof.
(b) No party will be entitled to indemnification under
Section 8.2(a) if the loss, claim, damage, liability or
litigation for which indemnification is sought is due to
the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this
Agreement by such party.
(c) The Indemnified Parties will promptly notify the
Distributor and the Fund of the commencement of any
litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with
the issuance or sale of the Contracts or the operation
of the Account.
8.3. Indemnification By the Fund
(a) The Fund agrees to indemnify and hold harmless the
Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Fund which consent may not be
unreasonably withheld) or litigation (including
reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(1) arise out of or based upon any untrue statement or
alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
<PAGE>
PAGE 17
misleading in light of the circumstances in which
they were made, provided that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Distributor or Fund by or on behalf of the Company
for use in the registration statement, prospectus,
or statement of additional information for the Fund
(or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or
Fund shares; or
(2) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Fund; except to the extent provided in Sections
8.3(b) and 8.4 hereof.
(b) No party will be entitled to indemnification under
Section 8.3(a) if the loss, claim, damage, liability or
litigation for which indemnification is sought is due to
the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations and duties under this
Agreement by such party.
(c) The Indemnified Parties will promptly notify the Fund of
the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the
Contracts or the operation of the Account.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("Indemnifying Party" for the purpose of this
Section 8.4) will not be liable under the indemnification
provisions of this Article VIII with respect to any claim
made against a party entitled to indemnification under this
Article VIII ("Indemnified Party" for the purpose of this
Section 8.4) unless such Indemnified Party will have notified
the Indemnifying Party in writing within a reasonable time
after the summons or other first legal process giving
information of the nature of the claim will have been served
upon such Indemnified Party (or after such party will have
received notice of such service on any designated agent), but
failure to notify the Indemnifying Party of any such claim
will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of the
indemnification provision of this Article VIII, except to the
extent that the failure to notify results in the failure of
actual notice to the Indemnifying Party and such Indemnifying
Party is damaged solely as a result of failure to give such
<PAGE>
PAGE 18
notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the
defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Indemnifying Party to
the Indemnified Party of the Indemnifying Party's election to
assume the defense thereof, the Indemnified Party will bear
the fees and expenses of any additional counsel retained by
it, and the Indemnifying Party will not be liable to such
party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in
connection with the defense thereof other than reasonable
costs of investigation, unless: (a) the Indemnifying Party
and the Indemnified Party will have mutually agreed to the
retention of such counsel; or (b) the named parties to any
such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The Indemnifying Party will not be liable for
any settlement of any proceeding effected without its written
consent (such consent may not be unreasonably withheld) but
if settled with such consent or if there is a final judgment
for the plaintiff, the Indemnifying Party agrees to indemnify
the Indemnified Party from and against any loss or liability
by reason of such settlement or judgment. A successor by law
of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article
VIII. The indemnification provisions contained in this
Article VIII will survive any termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the
State of New York.
9.2. This Agreement will be subject to the provisions of the 1933
Act, the 1934 Act and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions
from those statutes, rules and regulations as the SEC may
grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios,
upon six (6) month's advance written notice to the other
parties or, if later, upon receipt of any required
exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among
the parties; or
<PAGE>
PAGE 19
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares of the
Designated Portfolio are not reasonably available to
meet the requirements of the Contracts as determined in
good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment media of the
Contracts issued or to be issued by Company; or
(d) at the option of the Fund or the Distributor, upon
receipt of the Fund's or the Distributor's written
notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC,
the insurance commission of any state or any other
regulatory body, provided that the Fund or the
Distributor determines in its sole judgment, exercised
in good faith, that any such proceeding would have a
material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by other parties, upon
institution of formal proceedings against the Fund or
the Distributor by the NASD, the SEC, or any state
securities or insurance department or any other
regulatory body, provided that the Company determines in
its sole judgment, exercised in good faith, that any
such proceeding would have a material adverse effect on
the Fund's or the Distributor's ability to perform its
obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the
Fund ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the
Company reasonably and in good faith believes that the
Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails to
meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in
good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another
party's material breach of any provision of this
Agreement; or
<PAGE>
PAGE 20
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that
either the Fund or the Distributor has suffered a
material adverse change in its business, operations or
financial condition since the date of this Agreement or
is the subject of material adverse publicity which is
likely to have a material adverse impact upon the
business and operations of the Company, such termination
to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to
terminate; or
(j) at the option of the Fund or the Distributor, if the
Fund or Distributor respectively, determines in its sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations or financial condition since the date of this
Agreement or is the subject of material adverse
publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or
the Distributor, such termination to be effective sixty
(60) days' after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of
the contractowners having an interest in the Account (or
any subaccount) to substitute the shares of another
investment company for the corresponding Designated
Portfolio shares of the Fund in accordance with the
terms of the Contracts for which those Designated
Portfolio shares had been selected to serve as the
underlying investment media. The Company will give
sixty (60) days' prior written notice to the Fund of the
date of any proposed vote or other action taken to
replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Trustees, or a
majority of the disinterested members, that an
irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of
this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will
be effective immediately upon such occurrence without
notice; or
(n) with respect to any Designated Portfolio, upon sixty
(60) days' advance written notice from the Distributor
to the Company, upon a decision by the Distributor or
the Fund to cease offering shares of the Designated
Portfolio for sale; or
<PAGE>
PAGE 21
(o) at the option of the Distributor or the Fund, upon sixty
(60) days' prior written notice to the Company, if the
Company delivers the notice contemplated by Section 2.4.
10.2. Notice Requirement
(a) No termination of this Agreement will be effective
unless and until the party terminating this Agreement
gives prior written notice to all other parties of its
intent to terminate, which notice will set forth the
basis for the termination.
(b) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior
written notice will be given in advance of the effective
date of termination as required by such provisions.
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, the Fund
and the Distributor will, at the option of the Company,
continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing
Contracts."). Specifically, without limitation, the owners
of the Existing Contracts will be permitted to reallocate
investments in the Portfolios (as in effect on such date),
redeem investments in the Portfolios and/or invest in the
Portfolios upon the making of additional purchase payments
under the Existing Contracts to the same extent as if this
Agreement had not terminated. The parties agree that this
Section 10.3 will not apply to any terminations under
Article VII and the effect of such Article VII terminations
will be governed by Article VII of this Agreement.
10.4. Surviving Provisions
Not withstanding any termination of this Agreement, each
party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination
of this Agreement. In addition, with respect to Existing
Contracts, all provisions of this Agreement also will
survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
11.1. Any notice will be deemed duly given when sent by registered
or certified mail to the other party at the address of such
party set forth below or at such other address as such party
may from time to time specify in writing to the other
parties.
<PAGE>
PAGE 22
If to the Company:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Mr. Wendell Halvorson
American Express Financial Advisors Inc.
With a simultaneous copy to:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Ms. Mary Ellyn Minenko
Counsel
If to the Fund:
One Post Office Square
Boston, MA 02109
Attention: Mr. John R. Verani
If to the Distributor:
One Post Office Square
Boston, MA 02109
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of the Commonwealth
of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Fund
as Trustees and not individually and that the obligations of
or arising out of this instrument, including without
limitations Article VII are not binding upon any of the
Trustees or shareholders individually but binding only upon
the assets and property of the Fund.
12.2. The Fund and the Distributor acknowledge that the identities
of the customers of the Company or any of its affiliates
(collectively the "Protected Parties" for purposes of this
Section 12.2), information maintained regarding those
customers, and all computer programs and procedures or other
information developed or used by the Protected Parties or
any of their employees or agents with respect to such
customers are the valuable property of the Protected
Parties. The Fund and the Distributor agree that if they
come into possession of any list or compilation of the
identities of or other information about the Protected
Parties' customers, or any other confidential information or
property of the Protected Parties, other than such
information as may be independently developed or compiled by
the Fund or the Distributor from information supplied to
them by the Protected Parties' customers who also maintain
accounts directly with the Fund or the Distributor, the Fund
<PAGE>
PAGE 23
and the Distributor will hold such information or property
in confidence and refrain from using, disclosing or
distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b)
as required by law or judicial process. The Fund and the
Distributor acknowledge that any breach of the agreements in
this Section 12.2 would result in immediate and irreparable
harm to the Protected Parties for which there would be no
adequate remedy at law and agree that in the event of such a
breach, the Protected Parties will be entitled to equitable
relief by way of temporary and permanent injunctions, as
well as such other relief as any court of competent
jurisdiction deems appropriate.
12.3. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction
or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute
one and the same instrument.
12.5. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities
(including without limitation the SEC, the NASD and state
insurance regulators) and will permit each other and such
authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby. The
Fund agrees that the Company will have the right to inspect,
audit and copy all records pertaining to the performance of
services under this Agreement pursuant to the requirements
of the New York State insurance department.
12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will
be the valid and binding obligation of such party
enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to
this Agreement from time to time to reflect changes in or
relating to the Contracts, the Accounts or the Designated
Portfolios of the Fund or other applicable terms of this
Agreement.
<PAGE>
PAGE 24
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
IDS LIFE INSURANCE COMPANY OF NEW YORK
SEAL
Title: Vice President
ATTEST:
Title: Assistant Secretary
PUTNAM CAPITAL MANAGER TRUST
SEAL
John R. Verani
Title: Vice President
PUTNAM MUTUAL FUNDS CORP.
SEAL
Jeff Miller
Title: Senior Vice President
<PAGE>
PAGE 25
Schedule 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
PUTNAM CAPITAL MANAGER TRUST
And
PUTNAM MUTUAL FUNDS CORP.
The following separate accounts of IDS Life Insurance Company of
New York are permitted in accordance with the provisions of this
Agreement to invest in Designated Portfolios of the Fund shown in
Schedule 2:
IDS Life of New York Flexible Portfolio Annuity Account,
established April 17, 1996.
__________________, 1996
<PAGE>
PAGE 26
Schedule 2
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
PUTNAM CAPITAL MANAGER TRUST
And
PUTNAM MUTUAL FUNDS CORP.
The Separate Account(s) shown on Schedule 1 may invest in the
following Designated Portfolios of the Putnam Capital Manager
Trust:
PCM New Opportunities Fund
__________________, 1996
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
THIS AGREEMENT, made and entered into this ____ day of ___________,
1996 by and among IDS Life Insurance Company of New York organized
under the laws of the State of New York (the "Company"), on its own
behalf and on behalf of each separate account of the Company named
in Schedule 1 to this Agreement, as may be amended from to time
(each account referred to as the "Account"), Templeton Variable
Products Series Fund an open-end management investment company and
business trust organized under the laws of the State of
Massachusetts (the "Fund") and Franklin Templeton Distributors,
Inc. a corporation organized under the laws of the State of
California (the "Underwriter"), the Fund's principal underwriter.
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to
be offered by insurance companies that have entered into
participation agreements substantially identical to this Agreement
(the "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has received an order from the Securities &
Exchange Commission (the "SEC") granting Participating Insurance
Companies and their variable annuity separate accounts and variable
life insurance separate accounts relief from the provisions of
Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares
of the Fund to be sold to and held by variable annuity separate
accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and
certain qualified pension and retirement plans outside of the
separate account context (the "Mixed and Shared Funding Exemptive
Order"). The parties to this Agreement agree that the conditions or
undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund and/or the
Underwriter by virtue of the receipt of such order by the SEC will
be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent
applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (the "1933 Act"); and
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PAGE 2
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company under the insurance laws of the State of
New York, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the
Portfolios named in Schedule 2, as such schedule may be amended
from time to time (the "Designated Portfolios") on behalf of the
Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale and Redemption of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account orders, executing
such orders on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund or its
designee of the order for the shares of the Fund, as
established in accordance with the provisions of the
then-current prospectus of the Fund describing purchase
procedures on those days on which the Fund calculates its net
asset value pursuant to rules of the SEC, and the Fund shall
use reasonable efforts to calculate such net asset value on
each day on which the New York Stock Exchange is open for
trading. For purposes of this Section 1.1, the Company will
be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee will constitute
receipt by the Fund; provided that the Fund receives notice
of such order by 10:00 a.m. Eastern Time on the next
following business day. "Business Day" will mean any day on
which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Company will pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance
with Section 1.1 above. Payment will be in federal funds
transmitted by wire to the Fund.
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PAGE 3
1.3. The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per
share by Participating Insurance Companies and their separate
accounts on those days on which the Fund calculates its
Designated Portfolio net asset value pursuant to rules of the
SEC; provided, however, that the Board of Trustees of the
Fund (the "Fund Board") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering
of shares of any Portfolio if such action is required by law
or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Fund Board, acting in good faith
and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.4. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable provisions of
the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the
sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be
sold to the general public. The Company agrees that it will
use Fund shares only for the purpose of funding the Contracts
through the Accounts listed on Schedule 1, as amended from
time to time.
1.5. The Fund will not sell Fund shares to any insurance company
or separate account unless an agreement containing provisions
substantially the same as Articles I, III, and VII of this
Agreement are in effect to govern such sales. The Fund will
make available upon written request from the Company a list
of all other Participating Insurance Companies.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by
the Company, executing such requests on a daily basis at the
net asset value next computed after receipt and acceptance by
the Fund or its agent of the request for redemption. For
purposes of this Section 1.6, the Company will be the
designee of the Fund for receipt of requests for redemption
from each Account and receipt by such designee will
constitute receipt by the Fund; provided the Fund receives
notice of request for redemption by 10:00 a.m. Eastern Time
on the next following Business Day. Payment will be in
federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on
the same Business Day the Fund receives notice of the
redemption order from the Company; provided the Fund receives
notice of redemption by 10:00 a.m. Eastern Time. If the Fund
receives notice of the redemption after 10:00 a.m. Eastern
Time, payment for the redeemed shares will be made on the
next following Business Day. The Fund reserves the right to
delay payment of redemption proceeds, but in no event may
such payment be delayed longer than the period permitted
under Section 22(e) of the 1940 Act. The Fund will not bear
<PAGE>
PAGE 4
any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be
responsible for such action.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus
of the Fund in accordance with the provisions of such
prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders for
Fund shares will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund will furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares.
The Company hereby elects to receive all such dividends and
distributions as are payable on the Designated Portfolio
shares in the form of additional shares of that Designated
Portfolio. The Company reserves the right to revoke this
election and to receive all such dividends and distributions
in cash. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and
distributions.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best efforts
to make such net asset value per share available by 6:00 p.m.
Eastern Time each business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts
will be issued and sold in compliance with all applicable
federal and state laws, including state insurance suitability
requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and
validly established each Account as a separate account under
New York law and has registered the Account as a unit
investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company will amend
the registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act
for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will
register and qualify the Contracts for sale in accordance
with the securities laws of any state only if and to the
extent deemed necessary by the Company.
<PAGE>
PAGE 5
2.2. The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts
under applicable provisions of the Internal Revenue Code, and
that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately
upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund
is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are sold. The
Fund will amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its
shares. The Fund will register and qualify the shares of the
Designated Portfolios for sale in accordance with the laws of
any state only if and to the extent deemed advisable by the
Fund.
2.5. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort to
maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.6. The Fund represents that its investment objectives, policies
and restrictions comply with applicable state investment laws
as they may apply to the Fund. The Fund makes no
representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies
with the insurance laws and regulations of any state. The
Fund and the Underwriter agree that they will furnish the
information required by state insurance laws so that the
Company can obtain the authority needed to issue the
Contracts in any applicable state.
2.7. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act or otherwise, although it reserves the right to
make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have its Fund Board, a majority
of whom are not "interested" persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution
expenses.
<PAGE>
PAGE 6
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Massachusetts and
that it does and will comply in all material respects with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that it will
distribute the Fund shares of the Designated Portfolios in
accordance with all applicable federal and state securities
laws including, without limitation, the 1933 Act, the 1934
Act and the 1940 Act.
2.10. The Underwriter represents and warrants that the adviser for
the Fund is and will remain duly registered under all
applicable federal and state securities laws and that it will
perform its obligations for the Fund in accordance in all
material respects with any applicable state and federal
securities laws.
2.11. The Fund represents and warrants that all of its trustees,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding
company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or the Underwriter will provide the Company, at the
Company's expense, with as many copies of the current Fund
prospectus for the Designated Portfolios, annual report,
semi-annual report and other shareholder communications,
including any amendments and supplements to any of the
foregoing, as the Company may reasonably request for
distribution, at the Company's expense, to prospective
contractowners and applicants. The Fund or the Underwriter
will provide the Company, at the Fund's expense, with as many
copies of said documents as necessary for distribution, at
the Company's expense, to existing contractowners. The Fund
will provide the copies of said documents to the Company or
to its mailing agent. The Company will distribute such
documents to existing contractowners. If requested by the
Company in lieu thereof, the Fund will provide such
documentation, including a final copy of such documents set
in type or a computer diskette at the Fund's expense, and
other assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund
prospectus is amended more frequently) to have the Fund's
prospectus and the prospectuses of other mutual funds printed
together, in which case the Fund will pay its share of
reasonable expenses directly related to the required
disclosure of information concerning the Fund.
<PAGE>
PAGE 7
3.2. The Fund's prospectus will state that the statement of
additional information for the Fund is available from the
Company. The Fund will provide the Company, at the Company's
expense, with as many copies of the statement of additional
information as the Company may reasonably request for
distribution, at the Company's expense, to prospective
contractowners and applicants. The Fund will provide, at the
Fund's expense, as many copies of said statement of
additional information as necessary for distribution, at the
Fund's expense, to any existing contractowner who requests
such statement or whenever state or federal law otherwise
requires that such statement be provided. The Fund will
provide the copies of said statement of additional
information to the Company or to its mailing agent. The
Company will distribute the statement of additional
information as requested or required and will bill the Fund
for the reasonable cost of such distribution.
3.3. The Fund, at its expense, will provide the Company or its
mailing agent with copies of its proxy material in such
quantity as the Company will reasonably require for
distribution to contractowners. The Company will distribute
this proxy material to contractowners at its expense.
3.4. The Company assumes responsibility for ensuring that current
prospectuses, annual and semi-annual reports, shareholder
communications and proxy material are delivered to
contractowners in accordance with applicable securities laws
provided the Company receives the required information and/or
documentation from the Fund within a reasonable time to allow
for compliance with such laws.
3.5. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios
held in the Account in accordance with
instructions received from contractowners;
(c) vote shares of the Designated Portfolios held in
the Account for which no timely instructions
have been received, in the same proportion as
shares of such Designated Portfolio for which
instructions have been received from the
Company's contractowners;
so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contractowners. The Company reserves
the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law.
Participating Insurance Companies will be responsible for
assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner
consistent with all legal requirements, including the Mixed
and Shared Funding Exemptive Order.
<PAGE>
PAGE 8
3.6. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund
either will provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or, as the Fund currently intends, to
comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further the Fund will act in accordance
with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and
with whatever rules the SEC may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company will furnish, or will cause to be furnished, to
the Fund or the Underwriter, each piece of sales literature
or other promotional material in which the Fund, the
Underwriter or the adviser of the Fund is named, at least ten
(10) business days prior to its use. No such material will be
used if the Fund or the Underwriter reasonably objects to
such use within five (5) business days after receipt of such
material.
4.2. The Company and its agents will not give any information or
make any representations or statements on behalf of the Fund
or concerning the Fund, the Underwriter or the adviser for
the Fund, in connection with the sale of the Contracts other
than the information or representations contained in and
accurately derived from the registration statement,
prospectus or statement of additional information for Fund
shares, as such registration statement, prospectus and
statement of additional information may be amended or
supplemented from time to time, or in reports or proxy
statements for the Fund, or in published reports for the Fund
which are in the public domain or approved by the Fund or the
Underwriter for distribution, or in sales literature or other
material provided by the Fund or by the Underwriter, except
with permission of the Fund or the Underwriter. The Fund and
the Underwriter agree to respond to any request for approval
on a prompt and timely basis. Nothing in this Section 4.2
will be construed as preventing the Company or its employees
or agents from giving advice on investment in the Fund,
subject to compliance with applicable state and federal law.
4.3. The Fund or the Underwriter will furnish, or will cause to be
furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the
Company or its Account is named, at least ten (10) business
days prior to its use. No such material will be used if the
Company reasonably objects to such use within five (5)
business days after receipt of such material.
4.4. The Fund and the Underwriter will not give any information or
make any representations or statements on behalf of the
Company or concerning the Company, each Account, or the
<PAGE>
PAGE 9
Contracts other than the information or representations
contained in and accurately derived from a registration
statement, prospectus or statement of additional information
for the Contracts, as such registration statement, prospectus
and statement of additional information may be amended or
supplemented from time to time, or in published reports for
each Account or the Contracts which are in the public domain
or approved by the Company for distribution to
contractowners, or in sales literature or other material
provided by the Company, except with permission of the
Company. The Company agrees to respond to any request for
approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such
document with the SEC or the NASD.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, solicitations for voting
instructions, sales literature and other promotional
materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously
with the filing of such document with the SEC or the NASD.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other
public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any
written communication distributed or made generally available
to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.8. The Company agrees and acknowledges that the Underwriter (or
its affiliates) is the sole owner of the name and mark
"Franklin Templeton" and that all use of any designation
comprised in whole or part of such name or mark under this
Agreement shall inure to the benefit of the Underwriter.
<PAGE>
PAGE 10
Except as provided in Section 4.1, the Company shall not use
any such name or mark on its own behalf or on behalf of the
Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written
consent of the Underwriter. Upon termination of this
Agreement for any reason, the Company shall cease all use of
any such name or mark as soon as reasonably practicable.
ARTICLE V. Fees and Expenses
5.1. The Fund will pay no fee or other compensation to the Company
under this Agreement; except: (a) if the Fund or any
Designated Portfolio adopts and implements a plan pursuant to
Rule 12b-1 under the 1940 Act to finance distribution
expenses, then, subject to obtaining any required exemptive
orders or other regulatory approvals, the Fund may make
payments to the Company if and in such amounts agreed to by
the Fund in writing; and (b) the Fund may pay fees to the
Company for services provided to contractowners that are not
primarily intended to result in the sale of shares of the
Designated Portfolio or of underlying contracts.
5.2. All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by
law. All shares of the Designated Portfolios will be duly
authorized for issuance and registered in accordance with
applicable federal law and, to the extent deemed advisable by
the Fund, in accordance with applicable state law, prior to
sale. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of
additional information and registration statement, proxy
materials and reports; setting in type and printing the
Fund's prospectus; setting in type and printing proxy
materials and reports to contractowners (including the costs
of printing a Fund prospectus that constitutes an annual
report); the preparation of all statements and notices
required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a
plan, if any, under Rule 12b-1 under the 1940 Act; and all
other typesetting, printing and distribution expenses set
forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated
as variable annuity contracts under the Internal Revenue Code
and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation
1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment,
or life insurance contracts and any amendments or other
modifications to such Section or Regulation. In the event of
<PAGE>
PAGE 11
a breach of this Article VI by the Fund, it will take all
reasonable steps: (a) to notify the Company of such breach;
and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Treasury
Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the
contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no
-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by
variable annuity and variable life insurance contractowners;
or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund Board will promptly
inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Fund Board. The Company agrees to
assist the Fund Board in carrying out its responsibilities,
as delineated in the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any
issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever
contractowner voting instructions are to be disregarded. The
Fund Board will record in its minutes, or other appropriate
records, all reports received by it and all action with
regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested directors, that an
irreconcilable material conflict exists, the Company and
other Participating Insurance Companies will, at their
expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors),
take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e.,
variable annuity contractowners or variable life insurance
<PAGE>
PAGE 12
contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making
such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and such disregard of voting instructions could
conflict with the majority of contractowner voting
instructions, and the Company's judgment represents a
minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw
the affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a
majority of the disinterested directors of the Fund Board. No
charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal and termination must take
place within six (6) months after the Fund gives written
notice to the Company that this provision is being
implemented. Until the end of such six-month period the
Underwriter and Fund will, to the extent permitted by law and
any exemptive relief previously granted to the Fund, continue
to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state
insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund
and terminate this Agreement with respect to such subaccount;
provided, however, that such withdrawal and termination will
be limited to the extent required by the foregoing
irreconcilable material conflict as determined by a majority
of the disinterested directors of the Fund Board. No charge
or penalty will be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within
six (6) months after the Fund gives written notice to the
Company that this provision is being implemented. Until the
end of such six-month period the Advisor and Fund will, to
the extent permitted by law and any exemptive relief
previously granted to the Fund, continue to accept and
implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board will
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the
Fund be required to establish a new funding medium for the
Contracts. The Company will not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer
<PAGE>
PAGE 13
to do so has been declined by vote of a majority of
contractowners affected by the irreconcilable material
conflict.
7.7. The Company will at least annually submit to the Fund Board
such reports, materials or data as the Fund Board may
reasonably request so that the Fund Board may fully carry out
the duties imposed upon it as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials
and data will be submitted more frequently if deemed
appropriate by the Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order,
then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Underwriter, and each person, if any, who
controls or is associated with the Fund or the
Underwriter within the meaning of such terms under the
federal securities laws and any director, trustee,
officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid
in settlement with the written consent of the Company)
or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof)
or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the registration
statement, prospectus or statement of additional
information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
<PAGE>
PAGE 14
supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required
to be stated or necessary to make such statements
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Underwriter or the
Fund for use in the registration statement,
prospectus or statement of additional information
for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained
in the Fund registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the
Fund (or any amendment or supplement) not supplied
by the Company or persons under its control) or
wrongful conduct of the Company or persons under
its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on behalf
of the Company or persons under its control; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials
under the terms of this Agreement; or
(5) arise out of any material breach of any
representation and/or warranty made by the Company
in this Agreement or arise out of or result from
any other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
<PAGE>
PAGE 15
(b) No party will be entitled to indemnification under
Section 8.1(a) if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith,
or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such
party's reckless disregard of its obligations or duties
under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund.
8.2. Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless
the Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including
reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material
of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact required to be stated or
necessary to make such statements not misleading in
light of the circumstances in which they were made;
provided that this agreement to indemnify will not
apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission
was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by
or on behalf of the Company for use in the
registration statement, prospectus or statement of
additional information for the Fund or in sales
literature of the Fund (or any amendment or
supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
<PAGE>
PAGE 16
(2) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in
the Contract or Fund registration statements,
prospectuses or statements of additional
information or sales literature or other
promotional material for the Contracts or of the
Fund (or any amendment or supplement) not supplied
by the Underwriter or the Fund or persons under the
control of the Underwriter or the Fund
respectively) or wrongful conduct of the
Underwriter or the Fund or persons under the
control of the Underwriter or the Fund
respectively, with respect to the sale or
distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission
or alleged omission to state therein a material
fact required to be stated or necessary to make
such statement or statements not misleading in
light of the circumstances in which they were made,
if such statement or omission was made in reliance
upon and in conformity with information furnished
to the Company by or on behalf of the Underwriter
or the Fund or persons under the control of the
Underwriter or the Fund; or
(4) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement);
or
(5) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter or the Fund in this Agreement, or arise
out of or result from any other material breach of
this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under
Section 8.2(a) if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith,
or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such
party's reckless disregard of its obligations or duties
under this Agreement by the party seeking
indemnification.
<PAGE>
PAGE 17
(c) The Indemnified Parties will promptly notify the
Underwriter and the Fund of the commencement of any
litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with
the issuance or sale of the Contracts or the operation
of the Account.
8.3. Indemnification By the Fund
(a) The Fund agrees to indemnify and hold harmless the
Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Fund) or litigation (including reasonable
legal and other expenses) to which the Indemnified
Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related
to the operations of the Fund and:
(1) arise as a result of any failure by the Fund to
provide the services and furnish the materials
under the terms of this Agreement (including a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification and
other qualification requirements specified in
Article VI); or
(2) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Fund; or
(3) arise out of or result from the incorrect or
untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate;
except to the extent provided in Sections 8.3(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under
Section 8.3(a) if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith,
or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such
party's reckless disregard of its obligations and duties
under this Agreement by the party seeking
indemnification.
<PAGE>
PAGE 18
(c) The Indemnified Parties will promptly notify the Fund of
the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the
Contracts or the operation of the Account.
(d) It is understood and expressly stipulated that neither
the holders of shares of the Fund nor any Fund Board
member, officer, agent or employee of the Fund shall be
personally liable hereunder, nor shall any resort be had
to other private property for the satisfaction of any
claim or obligation hereunder, but the Fund only shall
be liable.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("Indemnifying Party" for the purpose of this
Section 8.4) will not be liable under the indemnification
provisions of this Article VIII with respect to any claim
made against a party entitled to indemnification under this
Article VIII ("Indemnified Party" for the purpose of this
Section 8.4) unless such Indemnified Party will have notified
the Indemnifying Party in writing within a reasonable time
after the summons or other first legal process giving
information of the nature of the claim will have been served
upon such Indemnified Party (or after such party will have
received notice of such service on any designated agent), but
failure to notify the Indemnifying Party of any such claim
will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of the
indemnification provision of this Article VIII, except to the
extent that the failure to notify results in the failure of
actual notice to the Indemnifying Party and such Indemnifying
Party is damaged solely as a result of failure to give such
notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the
defense thereof with counsel satisfactory to the party named
in the action. After notice from the Indemnifying Party to
the Indemnified Party of the Indemnifying Party's election to
assume the defense thereof, the Indemnified Party will bear
the fees and expenses of any additional counsel retained by
it, and the Indemnifying Party will not be liable to such
party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in
connection with the defense thereof other than reasonable
costs of investigation, unless: (a) the Indemnifying Party
and the Indemnified Party will have mutually agreed to the
retention of such counsel; or (b) the named parties to any
such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The Indemnifying Party will not be liable for
<PAGE>
PAGE 19
any settlement of any proceeding effected without its written
consent but if settled with such consent or if there is a
final judgment for the plaintiff, the Indemnifying Party
agrees to indemnify the Indemnified Party from and against
any loss or liability by reason of such settlement or
judgment. A successor by law of the parties to this Agreement
will be entitled to the benefits of the indemnification
contained in this Article VIII. The indemnification
provisions contained in this Article VIII will survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the
State of New York.
9.2. This Agreement will be subject to the provisions of the 1933
Act, the 1934 Act and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions
from those statutes, rules and regulations as the SEC may
grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause,
with respect to some or all of the Designated
Portfolios, upon sixty (60) days advance written notice
to the other parties or, if later, upon receipt of any
required exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among
the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares of the
Designated Portfolio are not reasonably available to
meet the requirements of the Contracts as determined in
good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment media of the
Contracts issued or to be issued by company; or
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of
formal proceedings against the Company by the NASD, the
SEC, the insurance commission of any state or any other
<PAGE>
PAGE 20
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts,
the administration of the Contracts, the operation of
the Account, or the purchase of the Fund shares,
provided that the Fund determines in its sole judgment,
exercised in good faith, that any such proceeding would
have a material adverse effect on the Company's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon
institution of formal proceedings against the Fund or
the Underwriter by the NASD, the SEC, or any state
securities or insurance department or any other
regulatory body, regarding the Fund's or the
Underwriter's duties under this Agreement or related to
the sale of Fund shares or the administration of the
Fund, provided that the Company determines in its sole
judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the
Fund's or the Underwriter's ability to perform its
obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the
Fund ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the
Company reasonably and in good faith believes that the
Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails to
meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in
good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another
party's material breach of any provision of this
Agreement; or
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that
either the Fund or the Underwriter has suffered a
material adverse change in its business, operations or
financial condition since the date of this Agreement or
is the subject of material adverse publicity which is
likely to have a material adverse impact upon the
business and operations of the Company, such termination
to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to
terminate; or
<PAGE>
PAGE 21
(j) at the option of the Fund or the Underwriter, if the
Fund or Underwriter respectively, determines in its sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations or financial condition since the date of this
Agreement or is the subject of material adverse
publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or
the Underwriter, such termination to be effective sixty
(60) days' after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of
the contractowners having an interest in the Account (or
any subaccount) to substitute the shares of another
investment company for the corresponding Designated
Portfolio shares of the Fund in accordance with the
terms of the Contracts for which those Designated
Portfolio shares had been selected to serve as the
underlying investment media. The Company will give sixty
(60) days' prior written notice to the Fund of the date
of any proposed vote or other action taken to replace
the Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members, that
an irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of
this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will be
effective immediately upon such occurrence without
notice.
10.2. Notice Requirement
(a) No termination of this Agreement will be effective
unless and until the party terminating this Agreement
gives prior written notice to all other parties of its
intent to terminate, which notice will set forth the
basis for the termination.
(b) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior
written notice will be given in advance of the effective
date of termination as required by such provisions.
<PAGE>
PAGE 22
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, the Fund
and the Underwriter will, at the option of the Company,
continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners
of the Existing Contracts will be permitted to reallocate
investments in the Portfolios (as in effect on such date),
redeem investments in the Portfolios and/or invest in the
Portfolios upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this
Section 10 3 will not apply to any terminations under Article
VII and the effect of such Article VII terminations will be
governed by Article VII of this Agreement.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each
party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination
of this Agreement. In addition, with respect to Existing
Contracts, all provisions of this Agreement also will survive
and not be affected by any termination of this Agreement.
ARTICLE XI. Notices
11.1 Any notice will be deemed duly given when sent by registered
or certified mail to the other party at the address of such
party set forth below or at such other address as such party
may from time to time specify in writing to the other
parties.
If to the Company:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Wendell Halvorson
American Express Financial Advisors Inc.
With a simultaneous copy to:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Mary Ellyn Minenko
Counsel
If to the Fund or the Underwriter:
Templeton Variable Products Series Fund
or Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, FL 33701
Attn: Thomas M. Mistele
Secretary
<PAGE>
PAGE 23
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims
against the Fund as neither the directors, trustees,
officers, partners, employees, agents or shareholders assume
any personal liability for obligations entered into on behalf
of the Fund.
12.2. The Fund and the Underwriter acknowledge that the identities
of the customers of the Company or any of its affiliates
(collectively the "Protected Parties" for purposes of this
Section 12.2), information maintained regarding those
customers, and all computer programs and procedures or other
information developed or used by the Protected Parties or any
of their employees or agents in connection with the Company's
performance of its duties under this Agreement are the
valuable property of the Protected Parties. The Fund and the
Underwriter agree that if they come into possession of any
list or compilation of the identities of or other information
about the Protected Parties' customers, or any other
information or property of the Protected Parties, other than
such information as may be independently developed or
compiled by the Fund or the Underwriter from information
supplied to them by the Protected Parties' customers who also
maintain accounts directly with the Fund or the Underwriter,
the Fund and the Underwriter will hold such information or
property in confidence and refrain from using, disclosing or
distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b)
as required by law or judicial process. The Fund and the
Underwriter acknowledge that any breach of the agreements in
this Section 12.2 would result in immediate and irreparable
harm to the Protected Parties for which there would be no
adequate remedy at law and agree that in the event of such a
breach, the Protected Parties will be entitled to equitable
relief by way of temporary and permanent injunctions, as well
as such other relief as any court of competent jurisdiction
deems appropriate.
12.3. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction
or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute
one and the same instrument.
12.5. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
<PAGE>
PAGE 24
12.7. Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities (including
without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and such authorities
reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby. The Fund agrees that
the Company will have the right to inspect, audit and copy
all records pertaining to the performance of services under
this Agreement pursuant to the requirements of any state
insurance department.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will
be the valid and binding obligation of such party enforceable
in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating
to the Contracts, the Accounts or the Designated Portfolios
of the Fund or other applicable terms of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
IDS LIFE INSURANCE COMPANY OF NEW YORK
SEAL By:
Name:
Title: Vice President
ATTEST
By:
Name:
Title: Assistant Secretary
TEMPLETON VARIABLE PRODUCTS SERIES FUND
SEAL By:
Name:
Title: Secretary
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
SEAL By:
Name:
Title: Vice President
<PAGE>
PAGE 25
Schedule 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
The following separate accounts of IDS Life Insurance Company of
New York are permitted in accordance with the provisions of this
Agreement to invest in Designated Portfolios of the Fund shown in
Schedule 2:
IDS Life of New York Flexible Portfolio Annuity Account,
established April 17, 1996.
______________, 1996
<PAGE>
PAGE 26
Schedule 2
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
The Separate Account(s) shown on Schedule 1 may invest in the
following Designated Portfolios of the Templeton Variable Products
Series Fund:
Templeton Developing Markets Fund
_________________, 1996
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
THIS AGREEMENT, made and entered into this ____ day of _________,
1996 by and among IDS Life Insurance Company of New York, organized
under the laws of the State of New York (the "Company"), on its own
behalf and on behalf of each separate account of the Company named
in Schedule 1 to this Agreement, as may be amended from time to
time (each account referred to as the "Account"), Warburg Pincus
Trust, an open-end management investment company and business trust
organized under the laws of the Commonwealth of Massachusetts (the
"Fund"); Warburg, Pincus Counsellors, Inc. a corporation organized
under the laws of the State of Delaware (the "Adviser"); and
Counsellors Securities Inc., a corporation organized under the laws
of the State of New York ("CSI").
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to
be offered by insurance companies that have entered into
participation agreements similar to this Agreement (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has received an order from the Securities &
Exchange Commission (the "SEC") granting Participating Insurance
Companies and variable annuity separate accounts and variable life
insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of
1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity separate
accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and
qualified pension and retirement plans outside of the separate
account context (the "Mixed and Shared Funding Exemptive Order").
The parties to this Agreement agree that the conditions or
undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund, the Adviser
and/or CSI by virtue of the receipt of such order by the SEC will
be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent
applicable to each such party; and
<PAGE>
PAGE 2
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company under the insurance laws of the State of
New York, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, CSI, the Fund's distributor, is registered as a broker-
dealer with the SEC under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the
Portfolios named in Schedule 2, as such schedule may be amended
from time to time (the "Designated Portfolios") on behalf of the
Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, the Adviser and CSI agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account orders, executing
such orders on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund or its
designee of the order for the shares of the Fund. For
purposes of this Section 1.1, the Company will be the
designee of the Fund for receipt of such orders from each
Account and receipt by such designee will constitute receipt
by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following
business day ("T+l"). "Business Day" will mean any day on
which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2 The Company will pay for Fund shares on T+1 that an order to
purchase Fund shares is made in accordance with Section 1.1
above. Payment will be in federal funds transmitted by wire.
This wire transfer will be initiated by 12:00 p.m. Eastern
Time.
<PAGE>
PAGE 3
1.3 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per
share by Participating Insurance Companies and their separate
accounts on those days on which the Fund calculates its
Designated Portfolio net asset value pursuant to rules of the
SEC; provided, however, that the Board of Trustees of the
Fund (the "Fund Board") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering
of shares of any Portfolio if such action is required by law
or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Fund Board, acting in good faith
and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.4 On each Business Day on which the Fund calculates its net
asset value, the Company will aggregate and calculate the net
purchase or redemption orders for each Account maintained by
the Fund in which contractowner assets are invested. Net
orders will only reflect orders that the Company has received
prior to the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,Eastern
Time) on that Business Day. Orders that the Company has
received after the close of regular trading on the NYSE will
be treated as though received on the next Business Day. Each
communication of orders by the Company will constitute a
representation that such orders were received by it prior to
the close of regular trading on the NYSE on the Business Day
on which the purchase or redemption order is priced in
accordance with Rule 22c-1 under the 1940 Act. Other
procedures relating to the handling of orders will be in
accordance with the prospectus and statement of additional
information of the relevant Designated Portfolio or with oral
or written instructions that CSI or the Fund will forward to
the Company from time to time.
1.5 The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable provisions of
the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the
sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be
sold to the general public except as set forth in this
Section 1.5.
1.6 The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by
the Company, executing such requests on a daily basis at the
net asset value next computed after receipt and acceptance by
the Fund or its agent of the request for redemption. For
purposes of this Section 1.6, the Company will be the
designee of the Fund for receipt of requests for redemption
from each Account and receipt by such designee will
constitute receipt by the Fund, provided the Fund receives
notice of request for redemption by 10:00 a.m. Eastern Time
on the next following Business Day. Payment will be in
<PAGE>
PAGE 4
federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on
the same Business Day the Fund receives notice of the
redemption order from the Company. The Fund reserves the
right to delay payment of redemption proceeds, but in no
event may such payment be delayed longer than the period
permitted by the 1940 Act. The Fund will not bear any
responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be
responsible for such action. If notification of redemption is
received after 10:00 a.m. Eastern Time, payment for redeemed
shares will be made on the next following Business Day.
1.7 The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus
of the Fund in accordance with the provisions of such
prospectus.
1.8 Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders for
Fund shares will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund will furnish same day notice (by telecopier,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares.
The Company hereby elects to receive all such dividends and
distributions as are payable on the Designated Portfolio
shares in the form of additional shares of that Designated
Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and
distributions. The Company reserves the right to revoke this
election upon reasonable prior notice to the Fund and to
receive all such dividends and distributions in cash.
1.10 The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best efforts
to make such net asset value per share available by 6:00
p.m., Eastern Time, but in no event later than 7:00 p.m.,
Eastern Time, each business day.
1.11 In the event adjustments are required to correct any error in
the computation of the net asset value of the Fund's shares,
the Fund or CSI will notify the Company as soon as
practicable after discovering the need for those adjustments
that result in an aggregate reimbursement of $150 or more to
any one Account maintained by a Designated Portfolio (or, if
greater, result in an adjustment of $10 or more to each
contractowner's account). Any such notice will state for each
day for which an error occurred the incorrect price, the
correct price and, to the extent communicated to the Fund's
shareholders, the reason for the price change. The Company
may send this notice or a derivation thereof (so long as such
derivation is approved in advance by CSI or the Adviser) to
<PAGE>
PAGE 5
contractowners whose accounts are affected by the price
change. The parties will negotiate in good faith to develop a
reasonable method for effecting such adjustments.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts
will be issued and sold in compliance with all applicable
federal and state laws, including state insurance suitability
requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and
validly established each Account as a separate account under
applicable state law and has registered the Account as a unit
investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company will amend
the registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act
for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will
register and qualify the Contracts for sale in accordance
with the securities laws of any state only if and to the
extent deemed necessary by the Company.
2.2 The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts
under applicable provisions of the Internal Revenue Code, and
that it will make every effort to maintain such treatment and
that it will notify the Fund and the Adviser immediately upon
having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so
treated in the future.
2.3 The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.4 The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund
is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are sold. The
Fund will amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its
shares. The Fund will register and qualify the shares of the
Designated Portfolios for sale in accordance with the laws of
any state only if and to the extent deemed advisable by the
Fund.
<PAGE>
PAGE 6
2.5 The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort to
maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.6 The Fund represents and warrants that in performing the
services described in this Agreement, the Fund will comply
with all applicable laws, rules and regulations. The Fund
makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses
and investment policies, objectives and restrictions)
complies with the insurance laws and regulations of any
state. The Fund and CSI agree that upon request they will use
their best efforts to furnish the information required by
state insurance laws so that the Company can obtain the
authority needed to issue the Contracts in any applicable
state.
2.7 The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act, although it reserves the right to make such
payments in the future. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the
Fund undertakes to have its Fund Board, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses in
accordance with the 1940 Act.
2.8 CSI represents and warrants that it will distribute the Fund
shares of the Designated Portfolios in accordance with all
applicable federal and state securities laws including,
without limitation, the 1933 Act, the 1934 Act and the 1940
Act.
2.9 The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts
and that it does and will comply in all material respects
with applicable provisions of the 1940 Act.
2.10 CSI represents and warrants that it is and will remain duly
registered under all applicable federal and state securities
laws and that it will perform its obligations for the Fund in
accordance in all material respects with any applicable state
and federal securities laws.
2.11 The Fund and CSI represent and warrant that all of their
trustees, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding
company.<PAGE>
PAGE 7
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 The Fund or CSI will provide the Company, at the Fund's or
its affiliate's expense, with as many copies of the current
Fund prospectus for the Designated Portfolios as the Company
may reasonably request for distribution, at the Company's
expense, to prospective contractowners and applicants. The
Fund or CSI will provide, at the Fund's or its affiliate's
expense, as many copies of said prospectus as necessary for
distribution, at the Company s expense, to existing
contractowners. The Fund or CSI will provide the copies of
said prospectus to the Company or to its mailing agent. If
requested by the Company in lieu thereof, the Fund or CSI
will provide such documentation, including a computer
diskette or a final copy of a current prospectus set in type
at the Fund's or its affiliate's expense, and such other
assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund
prospectus is amended more frequently) to have the Fund's
prospectus and the prospectuses of other mutual funds in
which assets attributable to the Contracts may be invested
printed together in one document, in which case the Fund or
its affiliate will bear its reasonable share of expenses as
described above, allocated based on the proportionate number
of pages of the Fund's and other funds' respective portions
of the document.
3.2 The Fund or CSI will provide the Company, at the Fund's or
its affiliate's expense, with as many copies of the statement
of additional information as the Company may reasonably
request for distribution, at the Company's expense, to
prospective contractowners and applicants. The Fund or CSI
will provide at the Fund's or its affiliate's expense, as
many copies of said statement of additional information as
necessary for distribution, at the Company's expense, to any
existing contractowner who requests such statement or
whenever state or federal law otherwise requires that such
statement be provided. The Fund or CSI will provide the
copies of said statement of additional information to the
Company or to its mailing agent.
3.3 The Fund or CSI, at the Fund's or its affiliate's expense,
will provide the Company or its mailing agent with copies of
its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity as the
Company will reasonably require. The Company will distribute
this proxy material, reports and other communications to
existing contractowners and tabulate the votes.
3.4 If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from
contractowners; and
<PAGE>
PAGE 8
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been
received, as well as shares it owns, in the same
proportion as shares of such Designated Portfolio for
which instructions have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contractowners. Except as set forth
above, the Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the
extent permitted by law. The Company will be responsible for
assuring that each of its separate accounts participating in
the Fund calculates voting privileges in a manner consistent
with all legal requirements, including the Mixed and Shared
Funding Exemptive Order.
3.5 The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund
either will provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or, as the Fund currently intends, to
comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance
with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of trustees and with
whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 CSI will provide the Company on a timely basis with
investment performance information for each Designated
Portfolio in which the Company maintains an Account,
including total return for the preceding calendar month and
calendar quarter, the calendar year to date, and the prior
one-year, five-year, and ten-year (or life of the Fund)
periods. The Company may, based on the SEC-mandated
information supplied by CSI, prepare communications for
contractowners ("Contractowner Materials"). The Company will
provide copies of all Contractowner Materials concurrently
with their first use for CSI's internal recordkeeping
purposes. It is understood that neither CSI nor any
Designated Portfolio will be responsible for errors or
omissions in, or the content of, Contractowner Materials
except to the extent that the error or omission resulted from
information provided by or on behalf of CSI or the Designated
Portfolio. Any printed information that is furnished to the
Company other than each Designated Portfolio's prospectus or
statement of additional information (or information
supplemental thereto), periodic reports and proxy
solicitation materials is CSI's sole responsibility and not
the responsibility of any Designated Portfolio or the Fund.
The Company agrees that the Portfolios, the shareholders of
<PAGE>
PAGE 9
the Portfolios and the officers and governing Board of the
Fund will have no liability or responsibility to the Company
in these respects.
4.2 The Company will not give any information or make any
representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the
Contracts other than the information or representations
contained in the registration statement, prospectus or
statement of additional information for Fund shares, as such
registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund,
or in published reports for the Fund which are in the public
domain or approved by the Fund or CSI for distribution, or in
sales literature or other material provided by the Fund or by
CSI, except with permission of the Fund or CSI. The Fund and
CSI agree to respond to any request for approval on a prompt
and timely basis. Nothing in this Section 4.2 will be
construed as preventing the Company or its employees or
agents from giving advice on investment in the Fund.
4.3 The Fund, the Adviser or CSI will furnish, or will cause to
be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the
Company or its Account is named, at least ten (10) business
days prior to its use. No such material will be used if the
Company reasonably objects to such use within five (5)
business days after receipt of such material.
4.4 The Fund, the Adviser and CSI will not give any information
or make any representations or statements on behalf of the
Company or concerning the Company, each Account, or the
Contracts other than the information or representations
contained in a registration statement, prospectus or
statement of additional information for the Contracts, as
such registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the
Company for distribution to contractowners, or in sales
literature or other material provided by the Company, except
with permission of the Company. The Company agrees to respond
to any request for approval on a prompt and timely basis.
4.5 The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such
document with the SEC, the NASD or other regulatory
authority.
<PAGE>
PAGE 10
4.6 The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, solicitations for voting
instructions, sales literature and other promotional
materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously
with the filing of such document with the SEC, the NASD or
other regulatory authority.
4.7 For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other
public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any
written communication distributed or made generally available
to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.8 The Fund and CSI hereby consent to the Company's use of the
names Warburg Pincus Trust - Small Company Growth Portfolio
and Warburg, Pincus Counsellors, Inc. in connection with the
marketing of the Contracts, subject to the terms of Sections
4.1 and 4.2 of this Agreement. Such consent will terminate
with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1 The Fund, the Adviser and CSI will pay no fee or other
compensation to the Company under this Agreement except if
the Fund or any Designated Portfolio adopts and implements a
plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then, subject to obtaining any
required exemptive orders or other regulatory approvals, the
Fund may make payments to the Company if and in such amounts
agreed to by the Fund in writing.
5.2 All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by
law. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of
additional information and registration statement, proxy
materials and reports; setting in type and printing the
Fund's prospectus; setting in type and printing proxy
<PAGE>
PAGE 11
materials and reports by it to contractowners (including the
costs of printing a Fund prospectus that constitutes an
annual report); the preparation of all statements and notices
required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a
plan, if any, under Rule 12b-1 under the 1940 Act; and all
other expenses set forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1 The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated
as variable annuity contracts under the Internal Revenue Code
and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation
1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment,
or life insurance contracts and any amendments or other
modifications to such Section or Regulation. In the event of
a breach of this Article VI by the Fund, it will take all
reasonable steps: (a) to notify the Company of such breach;
and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Treasury
Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1 The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the
contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-
action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by
variable annuity and variable life insurance contractowners;
or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund Board will promptly
inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts
of which it is aware to the Fund Board. The Company agrees to
assist the Fund Board in carrying out its responsibilities,
as delineated in the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any
issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever
<PAGE>
PAGE 12
contractowner voting instructions are to be disregarded. The
Company's responsibilities hereunder will be carried out with
a view only to the interest of contractowners.
7.3 If it is determined by a majority of the Fund Board, or a
majority of its disinterested directors, that an
irreconcilable material conflict exists, the Company will, at
its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors),
take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e.,
variable annuity contractowners or variable life insurance
contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making
such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and the Company's judgment represents a
minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw
the affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a
majority of the disinterested directors of the Fund Board. No
charge or penalty will be imposed as a result of such
withdrawal.
7.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state
insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund
and terminate this Agreement with respect to such subaccount;
provided, however, that such withdrawal and termination will
be limited to the extent required by the foregoing
irreconcilable material conflict as determined by a majority
of the disinterested directors of the Fund Board. No charge
or penalty will be imposed as a result of such withdrawal.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board will
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the
Fund or the Adviser (or any other investment adviser to the
Fund) be required to establish a new funding medium for the
<PAGE>
PAGE 13
Contracts. The Company will not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer
to do so has been declined by vote of a majority of
contractowners materially affected by the irreconcilable
material conflict.
7.7 The Company will at least annually submit to the Fund Board
such reports, materials or data as the Fund Board may
reasonably request so that the Fund Board may fully carry out
the duties imposed upon it as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials
and data will be submitted more frequently if deemed
appropriate by the Fund Board.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order,
then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE XIII. Indemnification
8.1 Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, CSI, and each person, if any, who
controls or is associated with the Fund, the Adviser or
CSI within the meaning of such terms under the federal
securities laws and any director, trustee, officer,
partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or
litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof)
or settlements:
(1) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Contracts or contained in the Contracts or sales
<PAGE>
PAGE 14
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with written
information furnished to the Company by the Fund, the
Adviser or CSI for use in the registration statement,
prospectus or statement of additional information for
the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company or
wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of
the Company or persons under its control; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(5) arise out of any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any
other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.1(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
<PAGE>
PAGE 15
performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund.
8.2 Indemnification By The Adviser, the Fund and CSI
(a) The Adviser, the Fund and CSI, in each case solely to the
extent relating to such party's responsibilities
hereunder, agree to indemnify and hold harmless the
Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any director,
trustee, officer, partner, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 8.2) against any and all losses,
claims, expenses, damages, liabilities (including amounts
paid in settlement with the written consent of the
Adviser) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may
become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Adviser, CSI or the Fund by or on
behalf of the Company for use in the registration
statement, prospectus or statement of additional
information for the Fund or in sales literature of
the Fund (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
<PAGE>
PAGE 16
(2) arise out of or as a result of statements or
representations or wrongful conduct of the Adviser,
the Fund or CSI or persons under the control of the
Adviser, the Fund or CSI respectively, with respect
to the sale of the Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact
required to be stated or necessary to make such
statement or statements not misleading in light of
the circumstances in which they were made, if such
statement or omission was made in reliance upon and
in conformity with written information furnished to
the Company by the Adviser, the Fund or CSI or
persons under the control of the Adviser, the Fund or
CSI; or
(4) arise as a result of any failure by the Fund, the
Adviser or CSI to provide the services and furnish
the materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement);
or
(5) arise out of or result from any material breach of
any representation and/or warranty made by the
Adviser, the Fund or CSI in this Agreement, or arise
out of or result from any other material breach of
this Agreement by the Adviser, the Fund or CSI;
except to the extent provided in Sections 8.2(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under
Section 8.2(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser,
the Fund and CSI of the commencement of any litigation,
proceedings, complaints or actions by regulatory
authorities against them in connection with the issuance
or sale of the Contracts or the operation of the Account.
<PAGE>
PAGE 17
8.4 Indemnification Procedure
Any person obligated to provide indemnification under this Article
VIII ("Indemnifying Party" for the purpose of this Section 8.4)
will not be liable under the indemnification provisions of this
Article VIII with respect to any claim made against a party
entitled to indemnification under this Article VIII ("Indemnified
Party" for the purpose of this Section 8.4) unless such Indemnified
Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim will have been served
upon such Indemnified Party (or after such party will have received
notice of such service on any designated agent), but failure to
notify the Indemnifying Party of any such claim will not relieve
the Indemnifying Party from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise
than on account of the indemnification provision of this Article
VIII, except to the extent that the failure to notify results in
the failure of actual notice to the Indemnifying Party and such
Indemnifying Party is damaged solely as a result of failure to give
such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the Indemnifying Party to the Indemnified
Party of the Indemnifying Party's election to assume the defense
thereof, the Indemnified Party will bear the fees and expenses of
any additional counsel retained by it, and the Indemnifying Party
will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs
of investigation, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of
such counsel; or (b) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party and representation of both parties
by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party
will not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there is a final judgment for the plaintiff, the Indemnifying Party
agrees to indemnify the Indemnified Party from and against any loss
or liability by reason of such settlement or judgment. A successor
by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will
survive any termination of this Agreement.
ARTICLE IX. Applicable Law
9.1 This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the
State of New York.
9.2 This Agreement will be subject to the provisions of the 1933
Act, the 1934 Act and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions
from those statutes, rules and regulations as the SEC may<PAGE>
PAGE 18
grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon
ninety (90) days' advance written notice to the other
parties or, if later, upon receipt of any required
exemptive relief or orders from the SEC, unless otherwise
agreed in a separate written agreement among the parties;
or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares of the
Designated Portfolio are not reasonably available to meet
the requirements of the Contracts as determined in good
faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares
as the underlying investment media of the Contracts
issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of
formal proceedings against the Company by the NASD, the
SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the
administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares, provided
that the Fund determines in its sole judgment, exercised
in good faith, that any such proceeding would have a
material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon
institution of formal proceedings against the Fund or CSI
by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body,
provided that the Company determines in its sole
judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the
Fund's or CSI's ability to perform its obligations under
this Agreement; or
<PAGE>
PAGE 19
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the
Fund ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or under
any successor or similar provision, or if the Company
reasonably and in good faith believes that the Fund may
fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails to
meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in
good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another party's
material breach of any provision of this Agreement; or
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either
the Fund, the Adviser or CSI has suffered a material
adverse change in its business, operations or financial
condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other
parties of written notice of the election to terminate;
or
(j) at the option of the Fund or CSI, if the Fund or CSI
respectively, determines in its sole judgment exercised
in good faith, that the Company has suffered a material
adverse change in its business, operations or financial
condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Fund or the Adviser, such termination
to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to
terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another
investment company for the corresponding Designated
Portfolio shares of the Fund in accordance with the terms
of the Contracts for which those Designated Portfolio
shares had been selected to serve as the underlying
investment media. The Company will give sixty (60) days'
prior written notice to the Fund of the date of any
proposed vote or other action taken to replace the Fund's
shares; or
<PAGE>
PAGE 20
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members, that an
irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of this
Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will be
effective immediately upon such occurrence without
notice.
10.2 Notice Requirement
No termination of this Agreement will be effective unless and
until the party terminating this Agreement gives prior written
notice to all other parties of its intent to terminate, which
notice will set forth the basis for the termination.
10.3 Effect of Termination
Notwithstanding any termination of this Agreement, the Fund
and CSI will, at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect
on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts.").
Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the
Portfolios (as in effect on such date), redeem investments in
the Portfolios and/or invest in the Portfolios upon the making
of additional purchase payments under the Existing Contracts.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each
party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination of
this Agreement. In addition, each party's obligations under
Section 12.7 will survive and not be affected by any
termination of this Agreement. Finally, with respect to
Existing Contracts, all provisions of this Agreement also will
survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
11.1 Any notice will be deemed duly given when sent by registered
or certified mail to the other party at the address of such
party set forth below or at such other address as such party
may from time to time specify in writing to the other
parties.
<PAGE>
PAGE 21
If to the Company:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Wendell Halvorson
With a simultaneous copy to:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Mary Ellyn Minenko
Counsel
If to the Fund, the Adviser and/or CSI:
466 Lexington Avenue
New York, NY 10017
Attn: Eugene P. Grace
Senior Vice President
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims
against the Fund as neither the directors, trustees,
officers, partners, employees, agents or shareholders assume
any personal liability for obligations entered into on behalf
of the Fund. No Portfolio or series of the Fund will be
liable for the obligations or liabilities of any other
Portfolio or series.
12.2 The Fund, the Adviser and CSI acknowledge that the identities
of the customers of the Company or any of its affiliates
(collectively the "Company Protected Parties" for purposes of
this Section 12.2), information maintained regarding those
customers, and all computer programs and procedures or other
information developed or used by the Company Protected
Parties or any of their employees or agents in connection
with the Company's performance of its duties under this
Agreement are the valuable property of the Company Protected
Parties. The Fund, the Adviser and CSI agree that if they
come into possession of any list or compilation of the
identities of or other information about the Company
Protected Parties' customers, or any other information or
property of the Company Protected Parties, other than such
information as is publicly available or as may be
independently developed or compiled by the Fund, the Adviser
or CSI from information supplied to them by the Company
Protected Parties customers who also maintain Accounts
directly with the Fund, the Adviser or CSI, the Fund, the
Adviser and CSI will hold such information or property in
confidence and refrain from using, disclosing or distributing
any of such information or other property except: (a) with
the Company's prior written consent; or (b) as required by
law or judicial process. The Company acknowledges that the
identities of the customers of the Fund, the Adviser, CSI or
any of their affiliates (collectively the "Adviser Protected
Parties" for purposes of this Section 12.2), information
<PAGE>
PAGE 22
maintained regarding those customers, and all computer
programs and procedures or other information developed or
used by the Adviser Protected Parties or any of their
employees or agents in connection with the Funds', the
Adviser's or CSI's performance of their respective duties
under this Agreement are the valuable property of the Adviser
Protected Parties. The Company agrees that if it comes into
possession of any list or compilation of the identities of or
other information about the Adviser Protected Parties'
customers, or any other information or property of the
Adviser Protected Parties, other than such information as is
publicly available or as may be independently developed or
compiled by the Company from information supplied to them by
the Adviser Protected Parties' customers who also maintain
accounts directly with the Company, the Company will hold
such information or property in confidence and refrain from
using, disclosing or distributing any of such information or
other property except: (a) with the Fund's, the Adviser's or
CSI's prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach of
the agreements in this Section 12.2 would result in immediate
and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the
event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of
competent jurisdiction deems appropriate.
12.3 The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction
or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute
one and the same instrument.
12.5 If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement will not be affected thereby.
12.6 This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7 Each party to this Agreement will maintain all records
required by law, including records detailing the services it
provides. Such records will be preserved, maintained and made
available to the extent required by law and in accordance
with the 1940 Act and the rules thereunder. Each party to
this Agreement will cooperate with each other party and all
appropriate governmental authorities (including without
limitation the SEC, the NASD and state insurance regulators)
and will permit each other and such authorities reasonable
access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Upon request by the Fund or
CSI, the Company agrees to promptly make copies or, if
<PAGE>
PAGE 23
required, originals of all records pertaining to the
performance of services under this Agreement available to the
Fund or CSI, as the case may be. The Fund agrees that the
Company will have the right to inspect, audit and copy all
records pertaining to the performance of services under this
Agreement pursuant to the requirements of any state insurance
department. Each party also agrees to promptly notify the
other parties if it experiences any difficulty in maintaining
the records in an accurate and complete manner. This
provision will survive termination of this Agreement.
12.8 Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will
be the valid and binding obligation of such party enforceable
in accordance with its terms.
12.9 The parties to this Agreement acknowledge and agree that all
liabilities of the Fund arising, directly or indirectly,
under this agreement, will be satisfied solely out of the
assets of the Fund and that no trustee, officer, agent or
holder of shares of beneficial interest of the Fund will be
personally liable for any such liabilities.
12.10 The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating
to the Contracts, the Accounts or the Designated Portfolios
of the Fund or other applicable terms of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
IDS LIFE INSURANCE COMPANY OF NEW YORK
By:
SEAL Name:
Title:
ATTEST:
By:
Name:
Title:
WARBURG PINCUS TRUST
SEAL By:
Name: Eugene P. Grace
Title: Vice President & Secretary
<PAGE>
PAGE 24
WARBURG, PINCUS COUNSELLORS, INC.
SEAL By:
Name: Eugene P. Grace
Title: Senior Vice President &
Asst. Secretary
COUNSELLORS SECURITIES INC.
SEAL By:
Name:
Title: Vice President
<PAGE>
PAGE 25
Schedule 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The following separate accounts of IDS Life Insurance Company of
New York are permitted in accordance with the provisions of this
Agreement to invest in Designated Portfolios of the Fund shown in
Schedule 2:
IDS Life of New York Flexible Portfolio Annuity Account,
established April 17, 1996.
_______________, 1996
<PAGE>
PAGE 26
Schedule 2
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY OF NEW YORK
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The Separate Account(s) shown on Schedule 1 may invest in the
following Designated Portfolios of the Warburg Pincus Trust:
Small Company Growth Portfolio
____________________, 1996
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
AIM DISTRIBUTORS, INC.
IDS LIFE INSURANCE COMPANY OF NEW YORK
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
<PAGE>
PAGE 2
TABLE OF CONTENTS
Description Page
Section 1. Available Funds.......................................5
1.1 Availability.........................................5
1.2 Addition, Deletion or Modification of Funds..........5
1.3 No Sales to the General Public.......................5
Section 2. Processing Transactions...............................5
2.1 Timely Pricing and Orders............................5
2.2 Timely Payments......................................6
2.3 Applicable Price.....................................6
2.4 Dividends and Distributions..........................6
2.5 Book Entry...........................................7
Section 3. Costs and Expenses....................................7
3.1 General..............................................7
3.2 Registration.........................................7
3.3 Other (Non-Sales-Related)............................7
3.4 Other (Sales-Related)................................8
3.5 Parties To Cooperate.................................8
Section 4. Legal Compliance......................................8
4.1 Tax Laws.............................................8
4.2 Insurance and Certain Other Laws....................11
4.3 Securities Laws.....................................11
4.4 Notice of Certain Proceedings
and Other Circumstances.............................12
4.5 IDS Life of New York To Provide Documents;
Information About AVIF..............................13
4.6 AVIF To Provide Documents;
Information About IDS Life of New York..............14
Section 5. Mixed and Shared Funding.............................16
5.1 General.............................................16
5.2 Disinterested Directors.............................16
5.3 Monitoring for Material Irreconcilable Conflicts....16
5.4 Conflict Remedies...................................17
5.5 Notice to IDS Life of New York......................18
5.6 Information Requested by Board of Directors.........18
5.7 Compliance with SEC Rules...........................19
5.8 Other Requirements..................................19
Section 6. Termination..........................................19
6.1 Events of Termination...............................19
6.2 Notice Requirement for Termination..................20
6.3 Funds To Remain Available...........................21
6.4 Survival of Warranties and Indemnifications.........21
6.5 Continuance of Agreement for Certain Purposes.......21
Section 7. Parties To Cooperate Respecting Termination..........21
Section 8. Assignment...........................................22
Section 9. Notices..............................................22
<PAGE>
PAGE 3
Description Page
Section 10. Voting Procedures...................................22
Section 11. Foreign Tax Credits.................................23
Section 12. Indemnification.....................................23
12.1 Of AVIF and AIM by IDS Life of New York............23
12.2 Of IDS Life of New York by AVIF and AIM............25
12.3 Effect of Notice...................................28
12.4 Successors.........................................28
Section 13. Applicable Law......................................28
Section 14. Execution in Counterparts...........................29
Section 15. Severability........................................29
Section 16. Rights Cumulative...................................29
Section 17. Headings............................................29
Section 18. Confidentiality.....................................29
Section 19. Trademarks and Fund Names...........................30
Section 20. Parties to Cooperate................................31
<PAGE>
PAGE 4
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of
_____________, 1996 ("Agreement"), by and among AIM Variable
Insurance Funds, Inc., a Maryland corporation ("AVIF"); AIM
Distributors, Inc., a Delaware corporation ("AIM"); IDS Life
Insurance Company of New York, a New York life insurance company
and American Express Financial Advisors Inc. ("AEFA"), an affiliate
of IDS Life of New York, the principal underwriter of the Contracts
referred to below ("IDS Life of New York"), on behalf of itself and
each of its segregated asset accounts listed in Schedule A hereto,
as the parties hereto may amend from time to time (each, an
"Account," and collectively, the "Accounts") (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, AVIF currently consists of nine separate series
("Series"), shares ("Shares") of each of which are registered under
the Securities Act of 1933, as amended (the "1933 Act") and are
currently sold to one or more separate accounts of life insurance
companies to fund benefits under variable annuity contracts; and
WHEREAS, AVIF will make Shares of each Series listed on
Schedule A hereto as the Parties hereto may amend from time to time
(each a "Fund"; reference herein to "AVIF" includes reference to
each Fund, to the extent the context requires) available for
purchase by the Accounts; and
WHEREAS, IDS Life of New York will be the issuer of certain
variable annuity contracts ("Contracts") as set forth on Schedule A
hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required
by applicable law, will be registered under the 1933 Act; and
WHEREAS, IDS Life of New York will fund the Contracts through
the Accounts, each of which may be divided into two or more
subaccounts ("Subaccounts": reference herein to an "Account"
includes reference to each Subaccount thereof to the extent the
context requires); and
WHEREAS, IDS Life of New York will serve as the depositor of
the Accounts, each of which is registered as a unit investment
trust investment company under the 1940 Act (or exempt therefrom),
and the security interests deemed to be issued by the Accounts
under the Contracts will be registered as securities under the 1933
Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, IDS Life of New York intends to purchase Shares in
one or more of the Funds on behalf of the Accounts to fund the
Contracts; and<PAGE>
PAGE 5
WHEREAS, AEFA is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in
good standing of the National Association of Securities Dealers,
Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and
promises contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
AVIF will make Shares of each Fund available to IDS Life of
New York for purchase and redemption at net asset value and with no
sales charges, subject to the terms and conditions of this
Agreement. The Board of Directors of AVIF may refuse to sell
Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or
by regulatory authorities having jurisdiction or if, in the sole
discretion of the Directors acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws,
such action is deemed in the best interests of the shareholders of
such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other
Funds to provide additional funding media for the Contracts, or to
delete, combine, or modify existing Funds, by amending Schedule A
hereto. Upon such amendment to Schedule A, any applicable
reference to a Fund, AVIF, or its Shares herein shall include a
reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part
hereof.
1.3 No Sales to the General Public.
AVIF represents and warrants that no Shares of any Fund have
been or will be sold to the general public.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to
provide IDS Life of New York with the net asset value per Share for
each Fund by 5:30 p.m. Central Time on each Business Day. As used
herein, "Business Day" shall mean any day on which (i) the New York
Stock Exchange is open for regular trading, (ii) AVIF calculates
the Fund's net asset value, and (iii) IDS Life of New York is open
for business.
(b) IDS Life of New York will use the data provided by AVIF
each Business Day pursuant to paragraph (a) immediately above to
calculate Account unit values and to process transactions that
receive that same Business Day's Account unit values. IDS Life of
New York will perform such Account processing the same Business
<PAGE>
PAGE 6
Day, and will place corresponding orders to purchase or redeem
Shares with AVIF by 9:00 a.m. Central Time the following Business
Day; provided, however, that AVIF shall provide additional time to
IDS Life of New York in the event that AVIF is unable to meet the
5:30 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF
takes to make the net asset values available to IDS Life of New
York.
(c) With respect to payment of the purchase price by IDS Life
of New York and of redemption proceeds by AVIF, IDS Life of New
York and AVIF shall net purchase and redemption orders with respect
to each Fund and shall transmit one net payment per Fund in
accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset
value information (as determined under SEC guidelines), IDS Life of
New York shall be entitled to an adjustment to the number of Shares
purchased or redeemed to reflect the correct net asset value per
Share. Any material error in the calculation or reporting of net
asset value per Share, dividend or capital gain information shall
be reported promptly upon discovery to IDS Life of New York.
2.2 Timely Payments.
IDS Life of New York will wire payment for net purchases to a
custodial account designated by AVIF by 1:00 p.m. Central Time on
the same day as the order for Shares is placed, to the extent
practicable. AVIF will wire payment for net redemptions to an
account designated by IDS Life of New York by 1:00 p.m. Central
Time on the same day as the Order is placed, to the extent
practicable, but in any event within five (5) calendar days after
the date the order is placed in order to enable IDS Life of New
York to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may
be required by law.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result
from purchase payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that IDS Life
of New York receives prior to the close of regular trading on the
New York Stock Exchange on a Business Day will be executed at the
net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), IDS Life of New York shall be the
designated agent of AVIF for receipt of orders relating to Contract
transactions on each Business Day and receipt by such designated
agent shall constitute receipt by AVIF; provided that AVIF receives
notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance
with Section 2.1 (b) hereof.
<PAGE>
PAGE 7
(b) All other Share purchases and redemptions by IDS Life of
New York will be effected at the net asset values of the
appropriate Funds next computed after receipt by AVIF or its
designated agent of the order therefor, and such orders will be
irrevocable.
2.4 Dividends and Distributions.
AVIF will furnish notice by wire or telephone (followed by
written confirmation) on or prior to the payment date to IDS Life
of New York of any income dividends or capital gain distributions
payable on the Shares of any Fund. IDS Life of New York hereby
elects to reinvest all dividends and capital gains distributions in
additional Shares of the corresponding Fund at the ex-dividend date
net asset values until IDS Life of New York otherwise notifies AVIF
in writing, it being agreed by the Parties that the ex-dividend
date and the payment date with respect to any dividend or
distribution will be the same Business Day. IDS Life of New York
reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry
only. Stock certificates will not be issued to IDS Life of New
York. Shares ordered from AVIF will be recorded in an appropriate
title for IDS Life of New York, on behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party
will bear all expenses incident to its performance under this
Agreement.
3.2 Registration.
(a) AVIF will bear the cost of its registering as a
management investment company under the 1940 Act and registering
its Shares under the 1933 Act, and keeping such registrations
current and effective; including, without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule 24f-
2 Notices with respect to AVIF and its Shares and payment of all
applicable registration or filing fees with respect to any of the
foregoing.
(b) IDS Life of New York will bear the cost of registering,
to the extent required, each Account as a unit investment trust
under the 1940 Act and registering units of interest under the
Contracts under the 1933 Act and keeping such registrations current
and effective; including, without limitation, the preparation and
filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment of
all applicable registration or filing fees with respect to any of
the foregoing.
<PAGE>
PAGE 8
3.3 Other (Non-Sales-Related).
(a) AVIF will bear, or arrange for others to bear, the costs
of preparing, filing with the SEC and setting for printing AVIF's
prospectus, statement of additional information and any amendments
or supplements thereto (collectively, the "AVIF Prospectus"),
periodic reports to shareholders, AVIF proxy material and other
shareholder communications.
(b) IDS Life of New York will bear the costs of preparing,
filing with the SEC and setting for printing each Account's
prospectus, statement of additional information and any amendments
or supplements thereto (collectively, the "Account Prospectus"),
any periodic reports to Contract owners, annuitants or participants
under the Contracts (collectively, "Participants"), voting
instruction solicitation material, and other Participant
communications.
(c) IDS Life of New York will print in quantity and deliver
to existing Participants the documents described in Section 3.3(b)
above and the prospectus provided by AVIF in camera ready or
computer diskette form. AVIF will print the AVIF statement of
additional information, proxy materials relating to AVIF and
periodic reports of AVIF.
3.4 Other (Sales-Related).
IDS Life of New York will bear the expenses of distribution.
These expenses would include by way of illustration, but are not
limited to, the costs of distributing to Participants the following
documents, whether they relate to the Account or AVIF:
prospectuses, statements of additional information, proxy materials
and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and
advertising relating to the Funds, as well as filing such materials
with, and obtaining approval from, the SEC, NASD, any state
insurance regulatory authority, and any other appropriate
regulatory authority, to the extent required.
3.5 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable,
in arranging to print, mail and/or deliver, in a timely manner,
combined or coordinated prospectuses or other materials of AVIF and
the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and represents that it will use its best efforts to
qualify and to maintain qualification of each Fund as a RIC. AVIF
will notify IDS Life of New York immediately upon having a
reasonable basis for believing that a Fund has ceased to so qualify
or that it might not so qualify in the future.<PAGE>
PAGE 9
(b) AVIF represents that it will use its best efforts to
comply and to maintain each Fund's compliance with the
diversification requirements set forth in Section 817(h) of the
Code and Section 1.817-5(b) of the regulations under the Code.
AVIF will notify IDS Life of New York immediately upon having a
reasonable basis for believing that a Fund has ceased to so comply
or that a Fund might not so comply in the future. In the event of
a breach of this Section 4.1(b) by AVIF, it will take all
reasonable steps to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Section 1.817-5 of
the regulations under the Code.
(c) IDS Life of New York agrees that if the Internal Revenue
Service ("IRS") asserts in writing in connection with any
governmental audit or review of IDS Life of New York or, to IDS
Life of New York's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section
817(h) of the Code or IDS Life of New York otherwise becomes aware
of any facts that could give rise to any claim against AVIF or its
affiliates as a result of such a failure or alleged failure:
(i) IDS Life of New York shall promptly notify AVIF of
such assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) IDS Life of New York shall consult with AVIF as to
how to minimize any liability that may arise as a
result of such failure or alleged failure;
(iii) IDS Life of New York shall use its best efforts to
minimize any liability of AVIF or its affiliates
resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was
inadvertent;
(iv) IDS Life of New York shall permit AVIF, its
affiliates and their legal and accounting advisors
to participate in any conferences, settlement
discussions or other administrative or judicial
proceeding or contests (including judicial appeals
thereof) with the IRS, any Participant or any other
claimant regarding any claims that could give rise
to liability to AVIF or its affiliates as a result
of such a failure or alleged failure; provided,
however, that IDS Life of New York will retain
control of the conduct of such conferences
discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by IDS Life of
New York to the IRS, any Participant or any other
claimant in connection with any of the foregoing
proceedings or contests (including, without
limitation, any such materials to be submitted to
the IRS pursuant to Treasury Regulations Section
1.817-5(a)(2)), (a) shall be provided by IDS Life of
<PAGE>
PAGE 10
New York to AVIF (together with any supporting
information or analysis); subject to the
confidentiality provisions of Section 18, at least
ten (10) business days or such shorter period to
which the Parties hereto agree prior to the day on
which such proposed materials are to be submitted,
and (b) shall not be submitted by IDS Life of New
York to any such person without the express written
consent of AVIF which shall not be unreasonably
withheld;
(vi) IDS Life of New York shall provide AVIF or its
affiliates and their accounting and legal advisors
with such cooperation as AVIF shall reasonably
request (including, without limitation, by
permitting AVIF and its accounting and legal
advisors to review the relevant books and records of
IDS Life of New York) in order to facilitate review
by AVIF or its advisors of any written submissions
provided to it pursuant to the preceding clause or
its assessment of the validity or amount of any
claim against its arising from such a failure or
alleged failure;
(vii) IDS Life of New York shall not with respect to any
claim of the IRS or any Participant that would give
rise to a claim against AVIF or its affiliates (a)
compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the
express written consent of AVIF or its affiliates,
which shall not be unreasonably withheld, provided
that IDS Life of New York shall not be required,
after exhausting all administrative penalties, to
appeal any adverse judicial decision unless AVIF or
its affiliates shall have provided an opinion of
independent counsel to the effect that a reasonable
basis exists for taking such appeal; and provided
further that the costs of any such appeal shall be
borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a
result of such failure or alleged failure if IDS
Life of New York fails to comply with any of the
foregoing clauses (i) through (vii), and such
failure could be shown to have materially
contributed to the liability.
Should AVIF or any of its affiliates refuse to give its
written consent to any compromise or settlement of any claim or
liability hereunder, IDS Life of New York may, in its discretion,
authorize AVIF or its affiliates to act in the name of IDS Life of
New York in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all
administrative or judicial appeals thereof, and in that event AVIF
or its affiliates shall bear the fees and expenses associated with
the conduct of the proceedings that it is so authorized to control;
provided, that in no event shall IDS Life of New York have any
<PAGE>
PAGE 11
liability resulting from AVIF's refusal to accept the proposed
settlement or compromise with respect to any failure caused by
AVIF. As used in this Agreement, the term "affiliates" shall have
the same meaning as "affiliated person" as defined in Section
2(a)(3) of the 1940 Act.
(d) IDS Life of New York represents and warrants that the
Contracts currently are and will be treated as annuity contracts
under applicable provisions of the Code and that it will use its
best efforts to maintain such treatment; IDS Life of New York will
notify AVIF immediately upon having a reasonable basis for
believing that any of the Contracts have ceased to be so treated or
that they might not be so treated in the future.
(e) IDS Life of New York represents and warrants that each
Account is a "segregated asset account" and that interests in each
Account are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms under
Section 817 of the Code and the regulations thereunder. IDS Life
of New York will use its best efforts to continue to meet such
definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have
ceased to be met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
(a) AVIF will use its best efforts to comply with any
applicable state insurance laws or regulations, to the extent
specifically requested in writing by IDS Life of New York,
including, the furnishing of information not otherwise available to
IDS Life of New York which is required by state insurance law to
enable IDS Life of New York to obtain the authority needed to issue
the Contracts in any applicable state.
(b) IDS Life of New York represents and warrants that (i) it
is an insurance company duly organized, validly existing and in
good standing under the laws of the State of New York and has full
corporate power, authority and legal right to execute, deliver and
perform its duties and comply with its obligations under this
Agreement, (ii) it has legally and validly established and
maintains each Account as a segregated asset account under 4240 of
the New York Insurance Law and New York Insurance Regulation 47
thereunder, and (iii) the Contracts comply in all material respects
with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation
duly organized, validly existing, and in good standing under the
laws of the State of Maryland and has full power, authority, and
legal right to execute, deliver, and perform its duties and comply
with its obligations under this Agreement.
4.3 Securities Laws.
(a) IDS Life of New York represents and warrants that (i)
interests in each Account pursuant to the Contracts will be
registered under the 1933 Act to the extent required by the 1933
Act, (ii) the Contracts will be duly authorized for issuance and
<PAGE>
PAGE 12
sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940
Act and Minnesota law, (iii) each Account is and will remain
registered under the 1940 Act, to the extent required by the 1940
Act, (iv) each Account does and will comply in all material
respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any
amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and the rules
thereunder, (vi) IDS Life of New York will amend the registration
statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect
the continuous offering of its Contracts or as may otherwise be
required by applicable law, and (vii) each Account Prospectus will
at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold
pursuant to this Agreement will be registered under the 1933 Act to
the extent required by the 1933 Act and duly authorized for
issuance and sold in compliance with Maryland law, (ii) AVIF is and
will remain registered under the 1940 Act to the extent required by
the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering
of its Shares, (iv) AVIF does and will comply in all material
respects with the requirements of the 1940 Act and the rules
thereunder, (v) AVIF's 1933 Act registration statement, together
with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the
rules thereunder.
(c) AVIF will at its expense register and qualify its Shares
for sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed advisable by
AVIF.
(d) AVIF currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or otherwise, although it reserves the right to make such
payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b- 1, AVIF undertakes to
have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities
of the Fund are and continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond includes
coverage for larceny and embezzlement and is issued by a reputable
bonding company.<PAGE>
PAGE 13
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF will immediately notify IDS Life of New York of (i)
the issuance by any court or regulatory body of any stop order,
cease and desist order, or other similar order with respect to
AVIF's registration statement under the 1933 Act or AVIF
Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the
offering of Shares of AVIF, (iii) the initiation of any proceedings
for that purpose or for any other purpose relating to the
registration or offering of AVIF's Shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without
limitation, any circumstances in which (a) such Shares are not
registered and, in all material respects, issued and sold in
accordance with applicable state and federal law, or (b) such law
precludes the use of such Shares as an underlying investment medium
of the Contracts issued or to be issued by IDS Life of New York.
AVIF will make every reasonable effort to prevent the issuance,
with respect to any Fund, of any such stop order, cease and desist
order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) IDS Life of New York will immediately notify AVIF of (i)
the issuance by any court or regulatory body of any stop order,
cease and desist order, or other similar order with respect to each
Account's registration statement under the 1933 Act relating to the
Contracts or each Account Prospectus, (ii) any request by the SEC
for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii)
the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's
interests pursuant to the Contracts, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of said
interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. IDS Life of New
York will make every reasonable effort to prevent the issuance of
any such stop order, cease and desist order or similar order and,
if any such order is issued, to obtain the lifting thereof at the
earliest possible time.
4.5 IDS Life of New York To Provide Documents; Information
About AVIF.
(a) IDS Life of New York will provide to AVIF or its
designated agent at least one (1) complete copy of all SEC
registration statements, Account Prospectuses, reports, any
preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to each Account or
the Contracts, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
<PAGE>
PAGE 14
(b) IDS Life of New York will provide to AVIF or its
designated agent at least one (1) complete copy of each piece of
sales literature or other promotional material in which AVIF or any
of its affiliates is named, at least five (5) Business Days prior
to its use or such shorter period as the Parties hereto may, from
time to time, agree upon. No such material shall be used if AVIF
or its designated agent objects to such use within five (5)
Business Days after receipt of such material or such shorter period
as the Parties hereto may, from time to time, agree upon. AVIF
hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated
agent by giving notice to IDS Life of New York in the manner
required by Section 9 hereof.
(c) Neither IDS Life of New York nor any of its affiliates,
will give any information or make any representations or statements
on behalf of or concerning AVIF or its affiliates in connection
with the sale of the Contracts other than (i) the information or
representations contained in the registration statement, including
the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time
to time; or (ii) in reports or proxy materials for AVIF; or (iii)
in published reports for AVIF that are in the public domain and
approved by AVIF for distribution; or (iv) in sales literature or
other promotional material approved by AVIF, except with the
express written permission of AVIF.
(d) IDS Life of New York shall adopt and implement procedures
reasonably designed to ensure that information concerning AVIF and
its affiliates that is intended for use only by brokers or agents
selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used,
and neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages),
sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
<PAGE>
PAGE 15
4.6 AVIF To Provide Documents; Information About IDS Life of
New York.
(a) AVIF will provide to IDS Life of New York at least one
(1) complete copy of all SEC registration statements, AVIF
Prospectuses, reports, any preliminary and final proxy material,
applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
(b) AVIF will provide to IDS Life of New York camera ready or
computer diskette copies of all AVIF prospectuses and printed
copies, in an amount specified by IDS Life of New York, of AVIF
statements of additional information, proxy materials, periodic
reports to shareholders and other materials required by law to be
sent to Participants who have allocated any Contract value to a
Fund. AVIF will provide such copies to IDS Life of New York in a
timely manner so as to enable IDS Life of New York, as the case may
be, to print and distribute such materials within the time required
by law to be furnished to Participants.
(c) AVIF will provide to IDS Life of New York or its
designated agent at least one (1) complete copy of each piece of
sales literature or other promotional material in which IDS Life of
New York, or any of its respective affiliates is named, or that
refers to the Contracts, at least five (5) Business Days prior to
its use or such shorter period as the Parties hereto may, from time
to time, agree upon. No such material shall be used if IDS Life of
New York or its designated agent objects to such use within five
(5) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon.
IDS Life of New York shall receive all such sales literature until
such time as it appoints a designated agent by giving notice to
AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any
information or make any representations or statements on behalf of
or concerning IDS Life of New York, each Account, or the Contracts
other than (i) the information or representations contained in the
registration statement, including each Account Prospectus contained
therein, relating to the Contracts, as such registration statement
and Account Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in the
public domain and approved by IDS Life of New York for
distribution; or (iii) in sales literature or other promotional
material approved by IDS Life of New York or its affiliates, except
with the express written permission of IDS Life of New York.
(e) AVIF shall cause its principal underwriter to adopt and
implement procedures reasonably designed to ensure that information
concerning IDS Life of New York, and its respective affiliates that
is intended for use only by brokers or agents selling the Contracts
(i.e., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither IDS
<PAGE>
PAGE 16
Life of New York, nor any of its respective affiliates shall be
liable for any losses, damages or expenses relating to the improper
use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or designed
for use in, a newspaper, magazine. or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages),
sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be
available for investment by certain other entities, including,
without limitation, separate accounts funding variable life
insurance contracts, separate accounts of insurance companies
unaffiliated with IDS Life of New York, and trustees of qualified
pension and retirement plans (collectively, "Mixed and Shared
Funding"). The Parties recognize that the SEC has imposed terms
and conditions for such orders that are substantially identical to
many of the provisions of this Section 5. Sections 5.2 through 5.8
below shall apply pursuant to such an exemptive order granted to
AVIF. AVIF hereby notifies IDS Life of New York that, in the event
that AVIF implements Mixed and Shared Funding, it may be
appropriate to include in the prospectus pursuant to which a
Contract is offered disclosure regarding the potential risks of
Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times
consist of directors a majority of whom (the "Disinterested
Directors") are not interested persons of AVIF within the meaning
of Section 2(a)(19) of the 1940 Act and the Rules thereunder and as
modified by any applicable orders of the SEC, except that if this
condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this
condition shall be suspended (a) for a period of forty-five (45)
days if the vacancy or vacancies may be filled by the Board; (b)
for a period of sixty (60) days if a vote of shareholders is
required to fill the vacancy or vacancies; or (c) for such longer
period as the SEC may prescribe by order upon application.<PAGE>
PAGE 17
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the
existence of any material irreconcilable conflict between the
interests of the Participants in all separate accounts of life
insurance companies utilizing AVIF ("Participating Insurance
Companies"), including each Account, and participants in all
qualified retirement and pension plans investing in AVIF
("Participating Plans"). IDS Life of New York agrees to inform the
Board of Directors of AVIF of the existence of or any potential for
any such material irreconcilable conflict of which it is aware.
The concept of a "material irreconcilable conflict" is not defined
by the 1940 Act or the rules thereunder, but the Parties recognize
that such a conflict may arise for a variety of reasons, including,
without limitation:
(a) an action by any state insurance or other regulatory
authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action
by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Fund are being
managed;
(e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract Participants
or by Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to
disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the
voting instructions of Plan participants.
Consistent with the SEC's requirements in connection with
exemptive orders of the type referred to in Section 5.1 hereof, IDS
Life of New York will assist the Board of Directors in carrying out
its responsibilities by providing the Board of Directors with all
information reasonably necessary for the Board of Directors to
consider any issue raised, including information as to a decision
by IDS Life of New York to disregard voting instructions of
Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of
the members of the Board of Directors or a majority of the
Disinterested Directors that a material irreconcilable conflict
exists, IDS Life of New York will, if it is a Participating
Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably
<PAGE>
PAGE 18
practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps may
include, but are not limited to:
(i) withdrawing the assets allocable to some or all of
the Accounts from AVIF or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of AVIF, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (e.g., annuity Participants, life
insurance Participants or all Participants) that
votes in favor of such segregation, or offering to
the affected Participants the option of making such
a change; and
(ii) establishing a new registered investment company of
the type defined as a "management company" in
Section 4(3) of the 1940 Act or a new separate
account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of
IDS Life of New York's decision to disregard Participant voting
instructions and that decision represents a minority position or
would preclude a majority vote, IDS Life of New York may be
required, at AVIF's election, to withdraw each Account's investment
in AVIF or any Fund. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal must take place
within six (6) months after AVIF gives notice to IDS Life of New
York that this provision is being implemented, and until such
withdrawal AVIF shall continue to accept and implement orders by
IDS Life of New York for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to IDS
Life of New York conflicts with the majority of other state
regulators, then IDS Life of New York will withdraw each Account's
investment in AVIF within six (6) months after AVIF's Board of
Directors informs IDS Life of New York that it has determined that
such decision has created a material irreconcilable conflict, and
until such withdrawal AVIF shall continue to accept and implement
orders by IDS Life of New York for the purchase and redemption of
Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) IDS Life of New York agrees that any remedial action
taken by it in resolving any material irreconcilable conflict will
be carried out at its expense and with a view only to the interests
of Participants.
(e) For purposes hereof, a majority of the Disinterested
Directors will determine whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no
event, however, will AVIF or any of its affiliates be required to
establish a new funding medium for any Contracts. IDS Life of New
<PAGE>
PAGE 19
York will not be required by the terms hereof to establish a new
funding medium for any Contracts if an offer to do so has been
declined by vote of a majority of Participants materially adversely
affected by the material irreconcilable conflict.
5.5 Notice to IDS Life of New York.
AVIF will promptly make known in writing to IDS Life of New
York the Board of Directors' determination of the existence of a
material irreconcilable conflict, a description of the facts that
give rise to such conflict and the implications of such conflict.
5.6 Information Requested by Board of Directors.
IDS Life of New York and AVIF (or its investment adviser) will
at least annually submit to the Board of Directors of AVIF such
reports, materials or data as the Board of Directors may reasonably
request so that the Board of Directors may fully carry out the
obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at
any reasonable time deemed appropriate by the Board of Directors.
All reports received by the Board of Directors of potential or
existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and
determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of
Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment
medium for variable life insurance Contracts, 1940 Act Rules 6e-
3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to
provide exemptive relief with respect to Mixed and Shared Funding,
AVIF agrees that it will comply with the terms and conditions
thereof and that the terms of this Section 5 shall be deemed
modified if and only to the extent required in order also to comply
with the terms and conditions of such exemptive relief that is
afforded by any of said rules that are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company
and Participating Plan enter into an agreement with AVIF that
contains in substance the same provisions as are set forth in
Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this
Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as
to a Fund:
<PAGE>
PAGE 20
(a) at the option of any party, with or without cause with
respect to the Fund, upon six (6) months advance written notice to
the other parties, or, if later, upon receipt of any required
exemptive relief from the SEC, unless otherwise agreed to in
writing by the parties; or
(b) at the option of AVIF upon institution of formal
proceedings against IDS Life of New York or its affiliates by the
NASD, the SEC, any state insurance regulator or any other
regulatory body regarding IDS Life of New York's obligations under
this Agreement or related to the sale of the Contracts, the
operation of each Account, or the purchase of Shares, if, in each
case, AVIF reasonably determines that such proceedings, or the
facts on which such proceedings would be based, have a material
likelihood of imposing material adverse consequences on the Fund
with respect to which the Agreement is to be terminated; or
(c) at the option of IDS Life of New York upon institution of
formal proceedings against AVIF, its principal underwriter, or its
investment adviser by the NASD, the SEC, or any state insurance
regulator or any other regulatory body regarding AVIF's obligations
under this Agreement or related to the operation or management of
AVIF or the purchase of AVIF Shares, if, in each case, IDS Life of
New York reasonably determines that such proceedings, or the facts
on which such proceedings would be based, have a material
likelihood of imposing material adverse consequences on IDS Life of
New York, or the Subaccount corresponding to the Fund with respect
to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the
Fund's Shares are not registered and, in all material respects,
issued and sold in accordance with any applicable federal or state
law, or (ii) such law precludes the use of such Shares as an
underlying investment medium of the Contracts issued or to be
issued by IDS Life of New York; or
(e) upon termination of the corresponding Subaccount's
investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of IDS Life of New York if the Fund ceases
to qualify as a RIC under Subchapter M of the Code or under
successor or similar provisions, or if IDS Life of New York
reasonably believes that the Fund may fail to so qualify; or
(g) at the option of IDS Life of New York if the Fund fails
to comply with Section 817(h) of the Code or with successor or
similar provisions, or if IDS Life of New York reasonably believes
that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by IDS Life
of New York cease to qualify as annuity contracts under the Code
(other than by reason of the Fund's noncompliance with Section
817(h) or Subchapter M of the Code) or if interests in an Account
under the Contracts are not registered, where required, and, in all
material respects, are not issued or sold in accordance with any
applicable federal or state law; or
<PAGE>
PAGE 21
(i) upon another Party's material breach of any provision of
this Agreement.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and
until the Party terminating this Agreement gives prior written
notice to the other Party to this Agreement of its intent to
terminate, and such notice shall set forth the basis for such
termination. Furthermore:
(a) in the event that any termination is based upon the
provisions of Section 6.1(a) or Section 6.1(e) hereof, such prior
written notice shall be given at least six (6) months in advance of
the effective date of termination unless a shorter time is agreed
to by the Parties hereto;
(b) in the event that any termination is based upon the
provisions of Section 6.1(b) or Section 6.1(c) hereof, such prior
written notice shall be given at least ninety (90) days in advance
of the effective date of termination unless a shorter time is
agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the
provisions of Section 6.1(d), Section 6.1(f), Section 6.1(g),
Section 6.1(h) or Section 6.1(i) hereof, such prior written notice
shall be given as soon as possible within twenty-four (24) hours
after the terminating Party learns of the event causing termination
to be required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, AVIF will,
at the option of IDS Life of New York, continue to make available
additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as
"Existing Contracts."). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate
investments in the Fund (as in effect on such date), redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts. The
parties agree that this Section 6.3 will not apply to any
terminations under Section 5 and the effect of such terminations
will be governed by Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the
termination of this Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any
Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g),
6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue
in effect as to any Shares of that Fund that are outstanding as of
the date of such termination (the "Initial Termination Date"). <PAGE>
PAGE 22
This continuation shall extend to the earlier of the date as of
which an Account owns no Shares of the affected Fund or a date (the
"Final Termination Date") six (6) months following the Initial
Termination Date, except that IDS Life of New York may, by written
notice shorten said six (6) month period in the case of a
termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable
assistance to one another in taking all necessary and appropriate
steps for the purpose of ensuring that an Account owns no Shares of
a Fund after the Final Termination Date with respect thereto, or,
in the case of a termination pursuant to Section 6.1(a), the
termination date specified in the notice of termination. Such
steps may include combining the affected Account with another
Account, substituting other mutual fund shares for those of the
affected Fund, or otherwise terminating participation by the
Contracts in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with
the written consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 9
hereof will be given by means mutually acceptable to the Parties
concerned. Each other notice or communication required or
permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other
persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Facsimile: 612-671-2269
Attn: Mr. Wendell Halvorson
American Express Financial Advisors Inc.
cc: IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, MN 55440-0010
Facsimile: 612-671-3767
Attn: Mary Ellyn Minenko, Esq.
Counsel
American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Facsimile: 612-671-3767
Attn: William Stoltzmann
Vice President
<PAGE>
PAGE 23
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Nancy L. Martin, Esq.
AIM Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Mr. Gary Littlepage
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section
3 hereof, IDS Life of New York will distribute all proxy material
furnished by AVIF to Participants to whom pass-through voting
privileges are required to be extended and will solicit voting
instructions from Participants. IDS Life of New York will vote
Shares in accordance with timely instructions received from
Participants. IDS Life of New York will vote Shares that are (a)
not attributable to Participants to whom pass-through voting
privileges are extended, or (b) attributable to Participants, but
for which no timely instructions have been received, in the same
proportion as Shares for which said instructions have been received
from Participants, so long as and to the extent that the SEC
continues to interpret the 1940 Act to require pass through voting
privileges for Participants. Neither IDS Life of New York nor any
of its affiliates will in any way recommend action in connection
with or oppose or interfere with the solicitation of proxies for
the Shares held for such Participants. IDS Life of New York
reserves the right to vote shares held in any Account in its own
right, to the extent permitted by law. IDS Life of New York shall
be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with
that of other Participating Insurance Companies or in the manner
required by the Mixed and Shared Funding exemptive order obtained
by AVIF. AVIF will notify IDS Life of New York of any changes of
interpretations or amendments to Mixed and Shared Funding exemptive
order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF
either will provide for annual meetings (except insofar as the SEC
may interpret Section 16 of the 1940 Act not to require such
meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c)
of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, AVIF will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with
respect to periodic elections of directors and with whatever rules
the SEC may promulgate with respect thereto.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with IDS Life of New York
concerning any decision to elect or not to elect pursuant to
Section 853 of the Code to pass through the benefit of any foreign
tax credits to its shareholders.
<PAGE>
PAGE 24
Section 12. Indemnification
12.1 Of AVIF and AIM by IDS Life of New York.
(a) Except to the extent provided in Sections 12.1(b) and
12.1(c), below, IDS Life of New York agrees to indemnify and hold
harmless AVIF, AIM, their affiliates, and each person, if any, who
controls AVIF, AIM, or their affiliates within the meaning of
Section 15 of the 1933 Act and any of their directors and officers,
(collectively, the "Indemnified Parties" for purposes of this
Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of IDS Life of New York) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages,
liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to IDS Life
of New York by or on behalf of AVIF for use in any
Account's 1933 Act registration statement, any
Account Prospectus, the Contracts, or sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, not supplied
for use therein by or on behalf of IDS Life of New
York and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent
conduct of IDS Life of New York or its affiliates or
persons under their control (including, without
limitation, their employees and "Associated
Persons," as that term is defined in paragraph (m)
of Article I of the NASD's By-Laws), in connection
with the sale or distribution of the Contracts or
Shares; or<PAGE>
PAGE 25
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading if such a statement or omission was
made in reliance upon and in conformity with
information furnished to AVIF by or on behalf of IDS
Life of New York or its affiliates for use in AVIF's
1933 Act registration statement, AVIF Prospectus,
sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by IDS Life of New
York to perform the obligations, provide the
services and furnish the materials required of them
under the terms of this Agreement, or any material
breach of any representation and/or warranty made by
IDS Life of New York in this Agreement or arise out
of or result from any other material breach of this
Agreement by IDS Life of New York; or
(v) arise as a result of failure by the Contracts issued
by IDS Life of New York to qualify as annuity
contracts under the Code, otherwise than by reason
of any Fund's failure to comply with Subchapter M or
Section 817(h) of the Code.
(b) IDS Life of New York shall not be liable under this
Section 12.1 with respect to any losses, claims, damages,
liabilities or actions to which an Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance by that Indemnified Party of
its duties or by reason of that Indemnified Party's reckless
disregard of obligations or duties (i) under this Agreement, or
(ii) to AVIF.
(c) IDS Life of New York shall not be liable under this
Section 12.1 with respect to any action against an Indemnified
Party unless AVIF or AIM shall have notified IDS Life of New York
in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify IDS Life of New York of
any such action shall not relieve IDS Life of New York from any
liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section
12.1. Except as otherwise provided herein, in case any such action
is brought against an Indemnified Party, IDS Life of New York shall
be entitled to participate, at its own expense, in the defense of
such action and also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in
the action, which approval shall not be unreasonably withheld.
After notice from IDS Life of New York to such Indemnified Party of
<PAGE>
PAGE 26
its election to assume the defense thereof, the Indemnified Party
will cooperate fully with IDS Life of New York and shall bear the
fees and expenses of any additional counsel retained by it, and IDS
Life of New York will not be liable to such Indemnified Party under
this Agreement for any legal or other expenses subsequently
incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12.2 Of IDS Life of New York by AVIF and AIM.
(a) Except to the extent provided in Sections 12.2(c),
12.2(d) and 12.2(e), below, AVIF and AIM agree to indemnify and
hold harmless IDS Life of New York its affiliates, and each person,
if any, who controls IDS Life of New York, or its affiliates within
the meaning of Section 15 of the 1933 Act and any of its directors
and officers, (collectively, the "Indemnified Parties" for purposes
of this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of AVIF and AIM) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute,
regulation, at common law, or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages,
liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus or sales literature or advertising
of AVIF (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to AVIF or
its affiliates by or on behalf of IDS Life of New
York or its affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, or in sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus,
sales literature or advertising for the Contracts,
or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on
behalf of AVIF, AIM or their affiliates and on which
such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of AVIF,
<PAGE>
PAGE 27
AIM, their affiliates or persons under their control
(including, without limitation, their employees and
"Associated Persons" as that Term is defined in
Section (n) of Article 1 of the NASD By-Laws), in
connection with the sale or distribution of AVIF
Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made
in reliance upon and in conformity with information
furnished to IDS Life of New York or its affiliates
by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF or AIM to
perform the obligations, provide the services and
furnish the materials required of them under the
terms of this Agreement, or any material breach of
any representation and/or warranty made by AVIF or
AIM in this Agreement or arise out of or result
from any other material breach of this Agreement by
AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(c),
12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and
hold harmless the Indemnified Parties from and against any and all
losses, claims, damages, liabilities (including amounts paid in
settlement thereof with, the written consent of AVIF or AIM) or
actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may
become subject directly or indirectly under any statute, at common
law or otherwise, insofar as such losses, claims, damages,
liabilities or actions directly or indirectly result from or arise
out of the failure of any Fund to operate as a regulated investment
company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income
taxes and related penalties, rescission charges, liability under
state law to Participants asserting liability against IDS Life of
New York pursuant to the Contracts, the costs of any ruling and
closing agreement or other settlement with the IRS, and the cost of
any substitution by IDS Life of New York of Shares of another
investment company or portfolio for those of any adversely affected
Fund as a funding medium for each Account that IDS Life of New York
reasonably deems necessary or appropriate as a result of the
noncompliance.
<PAGE>
PAGE 28
(c) Neither AVIF nor AIM shall be liable under this Section
12.2 with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in
the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to IDS
Life of New York, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section
12.2 with respect to any action against an Indemnified Party unless
the Indemnified Party shall have notified AVIF and AIM in writing
within a reasonable time after the summons or other first legal
process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify AVIF and AIM of any such action shall
not relieve AVIF and AIM from any liability which they may have to
the Indemnified Party against whom such action is brought otherwise
than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified
Party, AVIF and AIM will be entitled to participate, at their own
expense, in the defense of such action and also shall be entitled
to assume the defense thereof (which shall include, without
limitation, the conduct of any ruling request and closing agreement
or other settlement proceeding with the IRS), with counsel approved
by the Indemnified Party named in the action, which approval shall
not be unreasonably withheld. After notice from AVIF or AIM to
such Indemnified Party of AVIF's or AIM's election to assume the
defense thereof, the Indemnified Party will cooperate fully with
AVIF and AIM and shall bear the fees and expenses of any additional
counsel retained by it, and neither AVIF nor AIM will be liable to
such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than
reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any
individual or entity, including, without limitation, IDS Life of
New York, or any other Participating Insurance Company or any
Participant, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a
breach of any representation, warranty, and/or covenant made by IDS
Life of New York hereunder or by any Participating Insurance
Company under an agreement containing substantially similar
representations, warranties and covenants; (ii) the failure by IDS
Life of New York or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Fund) as a
legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust
under the provisions of the 1940 Act (unless exempt therefrom); or
(iii) the failure by IDS Life of New York or any Participating
Insurance Company to maintain its variable annuity insurance
contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts under applicable provisions
of the Code.
<PAGE>
PAGE 29
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified
Party referred to in Section 12.1(c) or 12.2(d) above of
participation in or control of any action by the indemnifying Party
will in no event be deemed to be an admission by the indemnifying
Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with
respect to the claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the
benefits of the indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof
interpreted under and in accordance with Maryland law without
regard for that state's principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and
the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, that the Parties are
entitled to under federal and state laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are
for purposes of reference only and shall not limit or define the
meaning of the provisions of this Agreement.
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of IDS
Life of New York or any of its affiliates (collectively, the "IDS
Life of New York Protected Parties" for purposes of this Section
18), information maintained regarding those customers, and all
computer programs and procedures or other information developed by
the IDS Life of New York Protected Parties or any of their
employees or agents in connection with IDS Life of New York's
performance of its duties under this Agreement are the valuable
property of the IDS Life of New York Protected Parties. AVIF
<PAGE>
PAGE 30
agrees that if it comes into possession of any list or compilation
of the identities of or other information about the IDS Life of New
York Protected Parties' customers, or any other information or
property of the IDS Life of New York Protected Parties, other than
such information as may be independently developed or compiled by
AVIF from information supplied to it by the IDS Life of New York
Protected Parties' customers who also maintain accounts directly
with AVIF. AVIF will hold such information or property in
confidence and refrain from using, disclosing or distributing any
of such information or other property except: (a) with IDS Life of
New York's prior written consent; or (b) as required by law or
judicial process. IDS Life of New York acknowledges that the
identities of the customers of AVIF or any of its affiliates
(collectively the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and
all computer programs and procedures or other information developed
by the AVIF Protected Parties or any of their employees or agents
in connection with AVIF's performance of its duties under this
Agreement are the valuable property of the AVIF Protected Parties.
IDS Life of New York agrees that if it comes into possession of any
list or compilation of the identities of or other information about
the AVIF Protected Parties' customers or any other information or
property of the AVIF Protected Parties, other than such information
as may be independently developed or compiled by IDS Life of New
York from information supplied to it by the AVIF Protected Parties'
customers who also maintain accounts directly with IDS Life of New
York, IDS Life of New York will hold such information or property
in confidence and refrain from using, disclosing or distributing
any of such information or other property except: (a) with AVIF's
prior written consent; or (b) as required by law or judicial
process. Each party acknowledges that any breach of the agreements
in this Section 18 would result in immediate and irreparable harm
to the other parties for which there would be no adequate remedy at
law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of
competent jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
(a) AIM, or its affiliates, owns all right, title and
interest in and to the name, trademark and service mark "AIM" and
such other tradenames, trademarks and service marks as may be set
forth on Schedule B, as amended from time to time by written notice
from AIM to IDS Life of New York (the "AIM licensed marks" or the
"licensor's licensed marks") and is authorized to use and to
license other persons to use such marks. AIM hereby grants to IDS
Life of New York and its affiliates a non-exclusive license to use
the AIM licensed marks in connection with IDS Life of New York's
performance of the services contemplated under this Agreement,
subject to the terms and conditions set forth in this Section 19.
(b) The grant of license by AIM (a "licensor") to IDS Life of
New York and its affiliates (the "licensee") shall terminate
automatically upon termination of this Agreement. Upon automatic
termination, the licensee shall cease to use the licensor's
licensed marks, except that IDS Life of New York shall have the
<PAGE>
PAGE 31
right to continue to service any outstanding Contracts bearing any
of the AIM licensed marks. Upon AIM's elective termination of this
license, IDS Life of New York and its affiliates shall immediately
cease to issue any new annuity contracts bearing any of the AIM
licensed marks and shall likewise cease any activity which suggests
that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that IDS Life of New York
shall have the right to continue to service outstanding Contracts
bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of
the licensor for the public release by such licensee of any
materials bearing the licensor's licensed marks. The licensor's
approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may
request that a licensee submit samples of any materials bearing any
of the licensor's licensed marks which were previously approved by
the licensor but, due to changed circumstances, the licensor may
wish to reconsider. If, on reconsideration, or on initial review,
respectively, any such samples fail to meet with the written
approval of the licensor, then the licensee shall immediately cease
distributing such disapproved materials. The licensor's approval
shall not be unreasonably withheld, and the licensor, when
requesting reconsideration of a prior approval, shall assume the
reasonable expenses of withdrawing and replacing such disapproved
materials. The licensee shall obtain the prior written approval of
the licensor for the use of any new materials developed to replace
the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates
that, to the best of the knowledge of the licensee, the licensor's
licensed marks are valid and enforceable trademarks and/or service
marks and that such licensee does not own the licensor's licensed
marks and claims no rights therein other than as a licensee under
this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and
agrees that the use of the licensor's licensed marks pursuant to
this grant of license shall inure to the benefit of the licensor.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities (including,
without limitation, the SEC, the NASD and state insurance
regulators) and will permit each other and such authorities
reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
<PAGE>
PAGE 32
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed in their names and on their behalf by and through their
duly authorized signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
By:
Robert H. Graham
Title: President
AIM DISTRIBUTORS, INC.
By:
W. Gary Littlepage
Title: Senior Vice President
IDS LIFE OF NEW YORK, on behalf of
itself and its separate accounts
By:
Title:
Attest:
Title:
AMERICAN EXPRESS FINANCIAL
ADVISORS INC.
By:
Title:
<PAGE>
PAGE 33
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
o IDS Life of New York Flexible Portfolio Annuity Account
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o Flexible Premium Deferred Variable Annuity Contract Form Nos.
31037, 31036 and 31038-IRA and 31039-SEP
<PAGE>
PAGE 34
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
o AIM and Design
(logo)
<PAGE>
PAGE 1
FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT is made and entered into as
of _________________, 1996 by and among IDS LIFE INSURANCE COMPANY
OF NEW YORK (the "Company"), TCI PORTFOLIOS, INC. (the "Issuer")
and the investment adviser of the Issuer, INVESTORS RESEARCH
CORPORATION ("lnvestors Research").
WHEREAS, the Company offers to the public certain qualified
and nonqualified variable annuity contracts (collectively, the
"Contracts"), which the Company has registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company wishes to offer as investment options
under the Contracts, TCI Value (the "Fund"), a series of mutual
fund shares to be registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and issued by the Issuer; and
WHEREAS, on the terms and conditions hereinafter set forth,
Investors Research and the Issuer desire to make shares of the
Funds available as investment options under the Contracts;
NOW, THEREFORE, the Company, the Issuer and Investors Research
agree as follows:
1. Transactions in the Funds. Subject to the terms and
conditions of this Agreement, the Issuer will make shares of the
Funds available to be purchased, exchanged, or redeemed, by the
Company on behalf of the Account (defined in Section 6(a) below)
through a single account per Fund at the net asset value applicable
to each order. The Funds' shares shall be purchased and redeemed
on a net basis in such quantity and at such time as determined by
the Company to satisfy the requirements of the Contracts for which
the Funds serve as underlying investment media. Dividends and
capital gains distributions will be automatically reinvested in
full and fractional shares of the Funds.
2. Administrative Services. The Company shall be solely
responsible for providing all administrative services for the
Contracts owners. The Company agrees that it will maintain and
preserve all records as required by law to be maintained and
preserved, and will otherwise comply with all laws, rules and
regulations applicable to the marketing of the Contracts and the
provision of administrative services to the Contract owners.
3. Processing and Timing of Transactions.
(a) The Issuer hereby appoints the Company as its agent for
the limited purpose of accepting purchase and redemption orders for
Fund shares from the Contract owners. On each day the New York
Stock Exchange (the "Exchange") is open for business (each, a
"Business Day"), the Company may receive instructions from the
Contract owners for the purchase or redemption of shares of the
Funds ("Orders"). Orders received and accepted by the Company
prior to the close of regular trading on the Exchange (the "Close
of Trading") on any given Business Day (currently, 3:00 p.m.
<PAGE>
PAGE 2
Central time) and transmitted to the Issuer by 9:00 a.m. Central
time on the next following Business Day will be executed by the
Issuer at the net asset value determined as of the Close of Trading
on the previous Business Day ("Day 1"). Any Orders received by the
Company after the Close of Trading, and all Orders that are
transmitted to the Issuer after 9:00 a.m. Central time on the next
following Business Day, will be executed by the Issuer at the net
asset value determined following receipt by the Issuer of such
Order. The day as of which an Order is executed by the Issuer
pursuant to the provisions set forth above is referred to herein as
the "Effective Trade Date".
(b) By 5:30 p.m. Central time on each Business Day, Investors
Research will provide to the Company via facsimile or other
electronic transmission acceptable to the Company the Funds' net
asset value, dividend and capital gain information and, in the case
of income funds, the daily accrual for interest rate factor (mil
rate), determined at the Close of Trading.
(c) By 9:00 a.m. Central time on each Business Day, the
Company will provide to Investors Research via facsimile or other
electronic transmission acceptable to Investors Research a report
(referred to in subsection (a) above) stating whether the Orders
received by the Company from Contract owners by the Close of
Trading on the preceding Business Day resulted in the Account being
a net purchaser or net seller of shares of the Funds. As used in
this Agreement, the phrase "other electronic transmission
acceptable to Investors Research" includes the use of remote
computer terminals located at the premises of the Company, its
agents or affiliates, which terminals may be linked electronically
to the computer system of Investors Research, its agents or
affiliates (hereinafter, "Remote Computer Terminals").
(d) Upon the timely receipt from the Company of the report
described in subsection (c) above, Investors Research will execute
the purchase or redemption transactions (as the case may be) at the
net asset value computed as of the Close of Trading on Day 1.
Payment for net purchase transactions shall be made by wire
transfer by the Company to the custodial account designated by the
Fund on the Business Day next following the Effective Trade Date.
Such wire transfers shall be initiated by the Company's bank prior
to 3:00 p.m. Central time and received by the Funds prior to 5:00
p.m. Central time on the Business Day next following the Effective
Trade Date. If payment for a purchase Order is not timely
received, such Order will be executed at the net asset value next
computed following receipt of payment. Payments for net redemption
transactions shall be made by wire transfer by the Issuer to the
account designated by the Company within the time period set forth
in the applicable Fund's then-current prospectus; provided,
however, Investors Research will use all reasonable efforts to
settle all redemptions on the Business Day next following the
Effective Trade Date. On any Business Day when the Federal Reserve
Wire Transfer System is closed, all communication and processing
rules will be suspended for the settlement of Orders. Orders will
be settled on the next Business Day on which the Federal Reserve
Wire Transfer System is open and the Effective Trade Date will
apply.
<PAGE>
PAGE 3
4. Prospectus and Proxy Materials.
(a) Investors Research shall provide to the shareholder of
record copies of the Issuer's proxy materials, periodic reports to
shareholders and other materials that are required by law to be
sent to the Issuer's shareholders. In addition, Investors Research
shall provide the Company copies of the Fund's prospectuses and
periodic reports to shareholders in sufficient quantity to
distribute to each Contract owner, together with such additional
copies of the Fund's prospectuses as may be reasonably requested by
Company. If the Company provides for pass-through voting by the
Contract owners, Investors Research will provide the Company with a
sufficient quantity of proxy materials for each Contract owner.
(b) The cost of preparing, typesetting, printing and shipping
to the Company the Fund's separate prospectuses, proxy materials,
periodic reports to shareholders and other materials shall be paid
by Investors Research or its agents or affiliates.
(c) The cost of mailing prospectuses, proxy materials,
periodic fund reports and other materials of the Issuer to the
Contract owners and prospective Contract owners shall be paid by
the Company and shall not be the responsibility of Investors
Research or the Issuer.
5. Compensation and Expenses.
(a) Investors Research will pay no fee or other compensation
to the Company under this Agreement.
(b) All expenses incident to performance by the Issuer of its
duties under this Agreement, including, but not limited to, the
cost of registration and qualification of the Fund's shares, will
be paid by Investors Research to the extent permitted by law. All
expenses incident to performance by the Company of its duties under
this Agreement, including, but not limited to, the cost of
providing the administrative services to Contract owners, shall be
paid by the Company.
6. Representations and Warranties.
(a) The Company represents and warrants that: (i) this
Agreement has been duly authorized by all necessary corporate
action and, when executed and delivered, shall constitute the
legal, valid and binding obligation of the Company, enforceable in
accordance with its terms; (ii) it has established IDS Life of New
York Flexible Portfolio Annuity Account (the "Account"), which is a
separate account under New York Insurance law, and has registered
each Account as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act") to serve as an investment
vehicle for the Contracts; (iii) each Contract provides for the
allocation of net amounts received by the Company to an Account for
investment in the shares of one of more specified investment
companies selected among those companies available through the
Account to act as underlying investment media; (iv) selection of a
particular investment company is made by the Contract owner under a
particular Contract, who may change such selection from time to
time in accordance with the terms of the applicable Contract; and
<PAGE>
PAGE 4
(v) the activities of the Company contemplated by this Agreement
comply in all material respects with all provisions of federal and
state insurance, securities, and tax laws applicable to such
activities.
(b) Investors Research represents that: (i) this Agreement
has been duly authorized by all necessary corporate action and,
when executed and delivered, shall constitute the legal, valid and
binding obligation of Investors Research and Issuer, enforceable in
accordance with its terms; and (ii) the investments of the Funds
will at all times be adequately diversified within the meaning of
Section 817(h) of the Internal Revenue Service Code of 1986, as
amended (the "Code"), and the regulations thereunder, and that at
all times while this Agreement is in effect, all beneficial
interests in each of the Funds will be owned by one or more
insurance companies or by any other party permitted under Section
1.817-5(f)(3) of the Regulations promulgated under the Code. In
the event of a breach, Investors Research will take reasonable
steps to notify the Company of such breach and to adequately
diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
(c) Investors Research represents that the Fund's investment
objectives, policies and restrictions comply in all material
respects with applicable state investment laws as they may apply to
the Fund. Neither the Issuer nor Investors Research makes any
representation as to whether any aspect of the Fund's operations
(including, but not limited to, fees and expenses and investment
policies, objectives and restrictions) complies with the insurance
laws and regulations of any state. Investors Research agrees that
it will use reasonable effort to furnish such information regarding
the Funds as may be reasonably required by state insurance laws so
that the Company may obtain the authority needed to issue the
Contracts in any applicable state.
7. Additional Covenants and Agreements.
(a) Each party shall comply with all provisions of federal
and state laws applicable to its respective activities under this
Agreement.
(b) Each party shall promptly notify the other parties in the
event that it is, for any reason, unable to perform any of its
obligations under this Agreement.
(c) The Company covenants and agrees that all Orders accepted
and transmitted by it hereunder with respect to each Account on any
Business Day will be based upon instructions that it received from
the Contract owners in proper form prior to the Close of Trading of
the Exchange on the previous Business Day.
(d) The Company covenants and agrees that all Orders
transmitted to the Issuer, whether by telephone, telecopy, or other
electronic transmission acceptable to Investors Research, shall be
sent by or under the authority and direction of a person designated
by the Company as being duly authorized to act on behalf of the
owner of the Account. Absent actual knowledge to the contrary,
Investors Research shall be entitled to rely on the existence of
<PAGE>
PAGE 5
such authority and to assume that any person transmitting Orders
for the purchase, redemption or transfer of Fund shares on behalf
of the Company is "an appropriate person" as used in Sections 8-308
and 8-404 of the Uniform Commercial Code with respect to the
transmission of instructions regarding Fund shares on behalf of the
owner of such Fund shares. The Company shall maintain the
confidentiality of all passwords and security procedures issued,
installed or otherwise put in place with respect to the use of
Remote Computer Terminals and assumes full responsibility for the
security therefor. The Company further agrees to be solely
responsible for the accuracy, propriety and consequences of all
data transmitted to Investors Research by the Company by telephone,
telecopy or other electronic transmission acceptable to Investors
Research.
(e) The Company agrees to make every reasonable effort to
market its Contracts. It will use its best efforts to give equal
emphasis and promotion to shares of the Funds as is given to other
underlying investments of the Account.
(f) The Company or its employees or agents will not give any
information or advice, or make any representations or statements on
behalf of or concerning the Issuer or the Fund, in connection with
the sale of the Contracts unless based upon information or
representations contained in the registration statement for the
Fund's shares, as such registration statement may be amended or
supplemented from time to time, or in reports or proxy statements
of the Fund, or in published reports for the Fund that are
published in reputable financial publications or approved by
Investors Research for distribution, or in sales literature or
other material provided by Investors Research. Investors Research
agrees to use reasonable efforts to respond to any request for
approval on a prompt and timely basis.
(g) Notwithstanding anything in Section 7(f) above, the
Company will furnish, or will cause to be furnished, to the Issuer
or Investors Research, each piece of sales literature or other
promotional material in which the Fund or the Issuer or Investors
Research is named, at least ten (10) business days prior to its
use. No such material will be used if Investors Research
reasonably objects to such use. Investors Research agrees to use
reasonable efforts to respond to any request for approval on a
prompt and timely basis.
(h) Investors Research will furnish or will cause to be
furnished to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or
its Account is named, at least ten (10) business days prior to its
use. No such material will be used if the Company reasonably
objects to such use. The Company agrees to use reasonable efforts
to respond to any request for approval on a prompt and timely
basis.
(i) Investors Research will not give any information or make
any representations or statements on behalf of the Company or
concerning the Company, the Account, or the Contracts unless based
upon information or representations contained in the registration
statement for the Contracts, as such registration statement may be<PAGE>
PAGE 6
amended or supplemented from time to time, or in reports for the
Contracts, or in published reports for the Account or the Contracts
that are published in reputable financial publications or are
approved by the Company for distribution, or in sales literature or
other material provided by the Company. The Company agrees to use
reasonable efforts to respond to any request for approval on a
prompt and timely basis.
(j) The Company will provide to Investors Research at least
one complete copy of all registration statements, annual and semi-
annual reports, proxy statements, and all amendments or supplements
to any of the above that include a description of or information
regarding the Funds promptly after the filing of such document with
the SEC or other regulatory authority.
(k) For purposes of this Section 7, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media (e.g., online
networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made
generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising
under the NASD rules, the 1933 Act or the 1940 Act.
8. Use of Names. Except as otherwise expressly provided for
in this Agreement, neither Investors Research nor the Funds shall
use any trademark, trade name, service mark or logo of the Company,
or any variation of any such trademark, trade name, service mark or
logo, without the Company's prior written consent, the granting of
which shall be at the Company's sole option. Except as otherwise
expressly provided for in this Agreement, the Company shall not use
any trademark, trade name, service mark or logo of the Issuer or
Investors Research, or any variation of any such trademarks, trade
names, service marks, or logos, without the prior written consent
of either the Issuer or Investors Research, as appropriate, the
granting of which shall be at the sole option of Investors Research
and/or the Issuer.
9. Proxy Voting.
(a) The Company shall provide pass-through voting privileges
to all Contract owners so long as the SEC continues to interpret
the 1940 Act as requiring such privileges. It shall be the
responsibility of the Company to assure that it and the separate
accounts of the other Participating Companies (as defined in
Section 11(a) below) participating in any Fund calculate voting
privileges in a consistent manner.
<PAGE>
PAGE 7
(b) The Company will distribute to Contract owners all proxy
material furnished by Investors Research and will vote shares in
accordance with instructions received from such Contract owners.
The Company shall vote Fund shares for which no instructions have
been received in the same proportion as shares for which such
instructions have been received. The Company and its agents shall
not oppose or interfere with the solicitation of proxies for Fund
shares held for such Contract owners.
10. Indemnity.
(a) Investors Research agrees to indemnify and hold harmless
the Company and each person, if any, who controls the Company
within the meaning of the Securities Act of 1933, and any officers,
directors, employees, agents, and affiliates of the foregoing
(collectively, the "Indemnified Parties" for purposes of this
Section 10(a)) against any losses, claims, expenses, damages or
liabilities (including amounts paid in settlement thereof) or
litigation expenses (including reasonable legal and other expenses)
(collectively, "Losses"), to which the Indemnified Parties may
become subject, insofar as such Losses (i) result from a breach by
Investors Research of a material provision of this Agreement,
including the incorrect calculation or reporting of the daily net
asset value per share or dividend or capital gain distribution
rate, or (ii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any
registration statement or any prospectus of the Fund or arise out
of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading. Investors Research
will reimburse any legal or other expenses reasonably incurred by
the Indemnified Parties in connection with investigating or
defending any such Losses. Investors Research shall not be liable
for indemnification hereunder if such Losses are attributable to
the negligence or misconduct of the Company performing its
obligations under this Agreement or as a result of a breach of
Section 21.
(b) The Company agrees to indemnify and hold harmless
Investors Research and the Issuer and each person, if any, who
controls the Issuer or Investors Research within the meaning of the
Securities Act of 1933, and their respective officers, directors,
employees, agents, and affiliates of the foregoing (collectively,
the "Indemnified Parties" for purposes of this Section 10(b))
against any Losses to which the Indemnified Parties may become
subject, insofar as such Losses (i) result from a breach by the
Company of a material provision of this Agreement, or (ii) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the sales literature of
the Company or in a registration statement or any prospectus of the
Company regarding the Contracts or the Account, if any, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or arise out of or
as a result of conduct, statements or representations of the
Company or its agents (other than statements or representations
contained in the prospectuses or sales literature of the Fund),
<PAGE>
PAGE 8
with respect to the sale and distribution of Contracts for which
the Fund's shares serve as the underlying investment, or (iii)
result from the use by any person of a Remote Computer Terminal.
The Company will reimburse any legal or other expenses reasonably
incurred by the Indemnified Parties in connection with
investigating or defending any such Losses. The Company shall not
be liable for indemnification hereunder if such Losses are
attributable to the negligence or misconduct of Investors Research
or the Issuer in performing their obligations under this Agreement.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of action, such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party of the
commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section
10. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish to, assume the defense
thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party
of its election to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
(d) If the indemnifying party assumes the defense of any such
action, the indemnifying party shall not, without the prior written
consent of the indemnified parties in such action, settle or
compromise the liability of the indemnified parties in such action,
or permit a default or consent to the entry of any judgment in
respect thereof, unless in connection with such settlement,
compromise or consent, each indemnified party receives from such
claimant an unconditional release from all liability in respect of
such claim.
11. Potential Conflicts.
(a) The Company has received a copy of an application for
exemptive relief, as amended, filed by Investors Research on
December 21, 1987, with the SEC and the order issued by the SEC in
response thereto (the "Shared Funding Exemptive Order"). The
Company has reviewed the conditions to the requested relief set
forth in such application for exemptive relief. As set forth in
such application, the Board of Directors of the Issuer (the
"Board") will monitor the Issuer for the existence of any material
irreconcilable conflict between the interests of the contract
owners of all separate accounts ("Participating Companies")
investing in funds of the Issuer. An irreconcilable material
conflict may arise for a variety of reasons, including: (i) an
action by any state insurance regulatory authority; (ii) a change
in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-
action or interpretative letter, or any similar actions by
<PAGE>
PAGE 9
insurance, tax or securities regulatory authorities; (iii) an
administrative or judicial decision in any relevant proceeding;
(iv) the manner in which the investments of any portfolio are being
managed; (v) a difference in voting instructions given by variable
annuity contract owners and variable life insurance contract
owners; or (vi) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform
the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
(b) The Company will report any potential or existing
conflicts of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the
Shared Funding Exemptive Order by providing the Board with all
information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
(c) If a majority of the Board, or a majority of its
disinterested Board members, determines that a material
irreconcilable conflict exists with regard to contract owner
investments in a Fund, the Board shall give prompt notice to all
Participating Companies. If the Board determines that the Company
is responsible for causing or creating said conflict, the Company
shall at its sole cost and expense, and to the extent reasonably
practicable (as determined by a majority of the disinterested Board
members), take such action as is necessary to remedy or eliminate
the irreconcilable material conflict. Such necessary action may
include but shall not be limited to:
(i) withdrawing the assets allocable to the Account from
the Fund and reinvesting such assets in a different
investment medium or submitting the question of
whether such segregation should be implemented to a
vote of all affected contract owners and as
appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract
owners of one or more Participating Companies) that
votes in favor of such segregation, or offering to
the affected contract owners the option of making
such a change; and/or
(ii) establishing a new registered management investment
company or managed separate account.
(d) If a material irreconcilable conflict arises as a result
of a decision by the Company to disregard its contract owner voting
instructions and said decision represents a minority position or
would preclude a majority vote by all of its contract owners having
an interest in the Issuer, the Company at its sole cost, may be
required, at the Board's election, to withdraw an Account's
investment in the Issuer and terminate this Agreement; provided,
however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members
of the Board.
<PAGE>
PAGE 10
(e) For the purpose of this Section 11, a majority of the
disinterested Board members shall determine whether or not any
proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Issuer be required to establish
a new funding medium for any Contract. The Company shall not be
required by this Section 11 to establish a new funding medium for
any Contract if an offer to do so has been declined by vote of a
majority of the Contract owners materially adversely affected by
the irreconcilable material conflict.
12. Term and Termination. The term of this Agreement shall
commence only upon the granting of effectiveness of the Issuer's
registration statement with respect to the Fund. Investors
Research shall notify the Company upon the effectiveness of the
Fund's registration statement. This Agreement shall terminate as
to the sale and issuance of new Contracts:
(a) at the option of either the Company, Investors Research
or the Issuer upon six months' advance written notice, except that
if exemptive relief or an exemptive order from the SEC is required
in connection with such termination, at such later date as may be
necessary to obtain such exemptive relief;
(b) at the option of the Company if the Funds' shares are not
available for any reason to meet the requirement of Contracts as
determined by the Company. Reasonable advance notice of election
to terminate shall be furnished by Company;
(c) at the option of either the Company, Investors Research
or the Issuer, upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the
Account, the Company, or the Issuer by the National Association of
Securities Dealers, Inc. (the "NASD"), the SEC or any other
regulatory body;
(d) upon termination of the Management Agreement between the
Issuer and Investors Research. Notice of such termination shall be
promptly furnished to the Company. This Section 12(d) shall not be
deemed to apply if contemporaneously with such termination a new
contract of substantially similar terms is entered into between the
Issuer and Investors Research;
(e) upon the requisite vote of Contract owners having an
interest in the Issuer to substitute for the Issuer's shares the
shares of another investment company in accordance with the terms
of Contracts for which the Issuer's shares had been selected to
serve as the underlying investment medium. The Company will give
60 days' written notice to the Issuer and Investors Research of any
proposed vote to replace the Funds' shares;
(f) upon assignment of this Agreement unless made with the
written consent of all other parties hereto;
(g) if the Issuer's shares are not registered, issued or sold
in conformance with Federal law or such law precludes the use of
Fund shares as an underlying investment medium of Contracts issued
or to be issued by the Company. Prompt notice shall be given by
either party should such situation occur;<PAGE>
PAGE 11
(h) at the option of the Issuer, if the Issuer reasonably
determines in good faith that the Company is not offering shares of
the Fund in conformity with the terms of this Agreement or
applicable law;
(i) at the option of any party hereto upon a determination
that continuing to perform under this Agreement would, in the
reasonable opinion of the terminating party's counsel, violate any
applicable federal or state law, rule, regulation or judicial
order;
(j) at the option of the Company, if the Company determines,
in its sole judgment exercised in good faith, that Investors
Research has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement
or is the subject of material adverse publicity that is likely to
have a material adverse impact upon the business and operations of
the Company, such termination to be effective sixty (60) days'
after receipt by Investors Research of written notice of the
Company's election to terminate this Agreement; or
(k) at the option of Investors Research, if Investors
Research determines, in its sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its
business, operations or financial condition since the date of this
Agreement or is the subject of material adverse publicity that is
likely to have a material adverse impact upon the business and
operations of the Fund or Investors Research, such termination to
be effective sixty (60) days' after receipt by the Company of
written notice of Investors Research's election to terminate this
Agreement.
13. Continuation of Agreement. Termination as the result of
any cause listed in Section 12 shall not affect the Issuer's
obligation to furnish, under the terms of this Agreement, its
shares to Contracts then in force for which its shares serve or may
serve as the underlying medium (unless such further sale of Fund
shares is proscribed by law or the SEC or other regulatory body).
14. Non-Exclusivity. Each of the parties acknowledges and
agrees that this Agreement and the arrangement described herein are
intended to be non-exclusive and that each of the parties is free
to enter into similar agreements and arrangements with other
entities.
15. Survival. The provisions of Section 8 (use of names) and
Section 10 (indemnity) of this Agreement shall survive termination
of this Agreement.
16. Amendment. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally,
but only by an instrument in writing signed by all of the parties
hereto.
17. Notices. All notices and other communications hereunder
shall be given or made in writing and shall be delivered
personally, or sent by telex, telecopier, express delivery or
<PAGE>
PAGE 12
registered or certified mail, postage prepaid, return receipt
requested, to the party or parties to whom they are directed at the
following addresses, or at such other addresses as may be
designated by notice from such party to all other parties.
To the Company:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, Minnesota 55440-0010
Attention: Wendell Halvorson
(612) 671-3095 (office number)
(612) 671-2269 (telecopy number)
With a simultaneous copy to:
IDS Life Insurance Company of New York
IDS Tower 10
Minneapolis, Minnesota 55440
Attention: Mary Ellyn Minenko, Counsel
(612) 671-3678 (office number)
(612) 671-3767 (telecopy number)
To the Issuer or Investors Research:
Twentieth Century Mutual Funds
4500 Main Street
Kansas City, Missouri 64111
Attention: Charles A. Etherington, Esq.
(816) 340-4051 (office number)
(816) 340-4964 (telecopy number)
Any notice, demand or other communication given in a manner
prescribed in this Section 17 shall be deemed to have been
delivered on receipt.
18. Successors and Assigns. This Agreement may not be
assigned without the written consent of all parties to the
Agreement at the time of such assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective permitted successors and assigns.
19. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one agreement, and any party hereto may execute this
Agreement by signing any such counterpart.
20. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
<PAGE>
PAGE 13
21. Confidentiality.
(a) Investors Research acknowledges that the identities of
the customers of the Company or any of its affiliates
(collectively, the "Protected Parties" for purposes of this Section
21), information maintained regarding those customers, and all
computer programs and procedures or other confidential information
developed or used by the Protected Parties or any of their
employees or agents in connection with the Company's performance of
its duties under this Agreement are the valuable property of the
Protected Parties. Investors Research agrees that if in connection
with the performance of its duties under this Agreement it comes
into possession of any list or compilation of the identities of or
other confidential information about the Protected Parties'
customers, or any other confidential information or property of the
Protected Parties, other than such information as may be
independently developed, compiled or obtained by Investors
Research, whether from information supplied by the Protected
Parties' customers who also maintain accounts directly with the
Issuer or another affiliate of Investors Research or otherwise,
Investors Research will hold such information or property in
confidence and refrain from using, disclosing or distributing any
of such information or other property except: (a) with the
Company's prior written consent; or (b) as required by law or
judicial process. Investors Research acknowledges that any breach
of this Section 21(a) would result in immediate and irreparable
harm to the Protected Parties for which there would be no adequate
or quantifiable remedy at law. As a result, the parties agree that
in the event of a breach, as their sole remedy, the Protected
Parties will be entitled to equitable relief by way of temporary
and permanent injunctions, as well as such other equitable relief
as a court of competent jurisdiction deems appropriate.
(b) The parties acknowledge that it is not contemplated that
any confidential information of the Protected Parties is necessary
for the performance by Investors Research or the Issuer of their
respective duties under this Agreement. If the parties determine
that the communication of such confidential information is
necessary or desirable, the parties agree to cooperate in the
establishment of procedures to identify such information as
confidential in order to ensure its protection.
22. Access to Books and Records. Each party to this
Agreement agrees to cooperate with each other party and all
appropriate government authorities (including without limitation
the SEC, the NASD and state insurance regulators) and will permit
each other and such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby. Each party
agrees to permit the other party or the appropriate governmental
authority to make copies of portions of its books and records that
relate to the party's performance of its duties under this
Agreement and which are the subject matter of the investigation or
inquiry.
<PAGE>
PAGE 14
23. Entire Agreement. This Agreement, including the
Attachments hereto, constitutes the entire agreement between the
parties with respect to the matters dealt with herein, and
supersedes all previous agreements, written or oral, with respect
to such matters.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date set forth above.
INVESTORS RESEARCH CORPORATION IDS LIFE INSURANCE COMPANY OF
NEW YORK
By: By:
William M. Lyons Name:
Executive Vice President Title:
TCI PORTFOLIOS, INC. Attest:
By: By:
William M. Lyons Name:
Executive Vice President Title:
<PAGE>
PAGE 1
August 13, 1996
Board of Directors
IDS Insurance Company of New York
IDS Tower 10
80 S. 8th Street
Minneapolis, MN 55440
Gentlemen:
As Counsel of IDS Life Insurance Company of New York (the Company),
I am familiar with its legal affairs and with the IDS Life of New
York Flexible Portfolio Annuity Account (the Account), which is a
separate account of the Company established by the Company's Board
of Directors pursuant to Section 4240 of the New York Insurance
Law. I am familiar with the Registration Statement on Form N-4 and
Pre-effective Amendment No. 1 thereto (File No. 333-03867/811-
07623)(the Registration Statement), filed by the Company on behalf
of the Account with the Securities and Exchange Commission with
respect to Deferred Annuity Contracts (the Contracts).
I have made such examination of law and examined such documents and
records as in my judgment are necessary and appropriate to enable
me to express the following opinions. I am of the opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the State of New York, and is duly
licensed or qualified to do business in New York wherein the
business transacted by it requires such licensing or
qualification. The Company has all corporate power required
to carry on its buisness as now conducted and to issue the
Contracts.
2. The Account is a separate account of the Company, duly
established and validly existing pursuant to New York law.
3. The Contracts, when issued, offered and sold in accordance
with the prospectus contained in the aforesaid Registration
Statement and, upon reliance of local law, will be legal and
binding obligations of the Company in accordance with their
terms.
4. There is no limitation as to the interests in the Account that
may be issued.
<PAGE>
PAGE 2
August 13, 1996
5. There is no pending or threatened litigation, claims or
assessments (including any unasserted claims or assessments)
against the Company.
Please be advised you are correct in your understanding that I will
advise and consult with you concerning questions of disclosure and
the applicable requirements of Statements of Financial Accounting
Standards No. 5 if, and when, in the course of performing legal
services for the Company or the Accounts with respect to a matter
recognized by me to involve an unasserted claim or assessment that
may require financial statement disclosure or consider disclosure
of any such possible claim or assessment in your financial
statements. You may furnish a copy of this letter to your
independent accountants.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Sincerely,
William A. Stoltzmann
Counsel and Assistant Secretary
WAS/TM/rdh
<PAGE>
PAGE 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Independent Auditors" and to the use of our reports dated February
2, 1996 on the financial statements and schedules of IDS Life
Insurance Company of New York in Pre-Effective Amendment No. 1 to
the Registration Statement (Form N-4 No. 333-03867) for the
registration of the Flexible Portfolio Annuity to be offered by IDS
Life Insurance Company of New York.
Ernst & Young LLP
Minneapolis, Minnesota
April 22, 1996
<PAGE>
PAGE 1
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE I - SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1995
Column A Column B Column C Column D
Amount at which
Type of Investment Cost Value shown in the
balance sheet
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 19,863 $ 19,914 $ 19,863
States, municipalities and
political subdivisions 150 148 150
All other corporate bonds 622,567 663,085 622,567
Total held to maturity 642,580 683,147 642,580
Available for sale:
United States Government and
government agencies and
authorities (b) 145,261 148,087 148,087
States, municipalities and
political subdivisions 105 115 115
All other corporate bonds 431,703 453,096 453,096
Total available for sale 577,069 $ 601,298 601,298
Mortgage loans on real estate 158,730 XXXXXXXXXX 158,730
Policy loans 18,035 XXXXXXXXXX 18,035
Other investments 1,915 1,915
Total investments $ 1,398,329 XXXXXXXXXX $ 1,422,558
(a) - Includes mortgage-backed securities with a cost and market value of $14,860 and $14,712,
respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $145,261 and $148,087,
respectively.
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1995
Column A Column B Column C Column D Column E Column F
Segment Deferred Future Unearned Other policy Premium
policy policy premiums claims and revenue
acquisition benefits, benefits
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C>
Annuities $ 65,283 $1,109,167 $ - $ 2,222 $ -
Life, DI and
Long--term Care
Insurance 44,517 178,952 - 1,422 9,280
Total $ 109,800 $1,288,119 $ - $ 3,644 $9,280
Column A Column G Column H Column I Column J Column K
Segment Net Benefits, Amortization Other Premiums
investment claims, of deferred operating written
income losses and policy expenses
settlement acquisition
expenses costs
Annuities $ 95,323 $ 171 $ 9,138 $ 6,908 N/A
Life, DI and
Long--term Care
Insurance 15,601 9,689 3,947 566 N/A
Total $ 110,924 $ 9,860 $ 13,085 $ 7,474 N/A
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1994
Column A Column B Column C Column D Column E Column F
Segment Deferred Future Unearned Other policy Premium
policy policy premiums claims and revenue
acquisition benefits, benefits
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C>
Annuities $ 61,442 $1,087,367 $ - $ 1,348 $ -
Life, DI and
Long-term Care
Insurance 38,636 168,417 - 1,869 7,846
Total $ 100,078 $1,255,784 $ - $ 3,217 $7,846
Column A Column G Column H Column I Column J Column K
Segment Net Benefits, Amortization Other Premiums
investment claims, of deferred operating written
income losses and policy expenses
settlement acquisition
expenses costs
Annuities $ 92,583 $ 81 $ 9,392 $ 4,765 N/A
Life, DI and
Long-term Care
Insurance 15,560 10,214 3,602 3,594 N/A
Total $ 108,143 $ 10,295 $ 12,994 $ 8,359 N/A
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F
Segment Deferred Future Unearned Other policy Premium
policy policy premiums claims and revenue
acquisition benefits, benefits
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C>
Annuities $ 53,300 $1,059,005 $ - $ 1,707 $ -
Life, DI and
Long-term Care
Insurance 34,591 160,962 - 640 7,110
Total $ 87,891 $1,219,967 $ - $ 2,347 $7,110
Column A Column G Column H Column I Column J Column K
Segment Net Benefits, Amortization Other Premiums
investment claims, of deferred operating written
income losses and policy expenses
settlement acquisition
expenses costs
Annuities $ 93,943 $ 103 $ 7,707 $ 4,459 N/A
Life, DI and
Long-term Care
Insurance 16,204 6,733 2,727 3,193 N/A
Total $ 110,147 $ 6,836 $ 10,434 $ 7,652 N/A
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995
Life insurance
in force $ 3,110,745 $ 163,462 $ 392,106 $ 3,339,389 11.74%
Premiums:
Life insurance
& annuities $ 2,327 $ 185 $ -- $ 2,142 0.00%
DI & long-term care
insurance 7,221 83 -- 7,138 0.00%
Total premiums $ 9,548 $ 268 $ 0 $ 9,280 0.00%
For the year ended
December 31, 1994
Life insurance
in force $ 3,602,888 $ 162,956 $ 447,317 $ 3,887,249 11.51%
Premiums:
Life insurance
& annuities $ 2,219 $ 209 $ -- $ 2,010 0.00%
DI & long--term care
insurance 5,919 83 -- 5,836 0.00%
Total premiums $ 8,138 $ 292 $ 0 $ 7,846 0.00%
For the year ended
December 31, 1993
Life insurance
in force $ 2,933,830 $ 172,973 $ 512,555 $ 3,273,412 15.66%
Premiums:
Life insurance
& annuities $ 2,250 $ 187 $ -- $ 2,063 0.00%
DI & long--term care
insurance 5,140 93 -- 5,047 0.00%
Total premiums $ 7,390 $ 280 $ 0 $ 7,110 0.00%
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Column A Column B Column C Column D Column E
Additions
--------------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe Describe of Period
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995
- ------------------------------
Reserve for
Mortgage Loans $ 445 $ 0 $0 $0 $ 445
Reserve for
Fixed Maturities $ 0 $ 26 $0 $0 $ 26
For the year ended
December 31, 1994
- ------------------------------
Reserve for
Mortgage Loans $ 445 $ 0 $0 $0 $ 445
Reserve for
Fixed Maturities $1,652 $(1,652) $0 $0 $ 0
For the year ended
December 31, 1993
- ------------------------------
Reserve for
Mortgage Loans $ 500 $ (55) $0 $0 $ 445
Reserve for
Fixed Maturities $1,159 $ 493 $0 $0 $1,652
</TABLE>
<PAGE>
PAGE 7
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company of New York
We have audited the financial statements of IDS Life Insurance
Company of New York (a wholly owned subsidiary of IDS Life
Insurance Company) as of December 31, 1995 and 1994, and for each
of the three years in the period ended December 31, 1995, and have
issued our report thereon dated February 2, 1996 (included
elsewhere in this Registration Statement).
Our audits also included the financial statement schedules listed
in Item 11 of this Registration Statement. These schedules are the
responsibility of the Company's management. Our responsibility is
to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 2, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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