<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2 (811-09515)
A. Exact name of trust: American Enterprise Variable Life Account
B. Name of depositor: AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
C. Complete address of depositor's principal executive offices:
IDS Tower 10, Minneapolis, Minnesota 55440-0010
D. Name and complete address of agent for service:
Mary Ellyn Minenko, Esq.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440-0010
E. Title of securities being registered:
Flexible Premium Variable Life Insurance Policy
F. Approximate date of proposed public offering: as soon as practicable
<PAGE>
Prospectus
September 30, 1999
American Express Signature Variable Universal Life, a
flexible premium variable life insurance policy
American Enterprise Variable Life Account
Issued by: American Enterprise Life Insurance Company
80 South Eight Street
P.O. Box 534
Minneapolis, MN 55440-0534
Telephone: 800-333-3437
This prospectus contains information about the life insurance policy that you
should know before investing. You also will receive prospectuses for the
underlying funds that are investment options under your policy. Please read all
prospectuses carefully and keep them for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
An investment in this policy is not a deposit of a bank or financial institution
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. An investment in this policy involves investment
risk including possible loss of principal.
<PAGE>
Table of contents
The policy in brief
Key terms
The variable account
The funds
[New funds to be filed by amendment]
Fund objectives
Relationship between funds and subaccounts
Rates of return of the funds and subaccounts
The fixed account
Purchasing your policy
Application
Right to examine policy
Premiums
Keeping the policy in force
No lapse guarantee
Grace period
Reinstatement
Loads, fees and charges
Premium expense charge
Monthly deduction
Surrender charge
Partial surrender fee
Mortality and expense risk charge
Fund expenses
Policy value
Fixed account value
Subaccount values
Proceeds payable upon death
Change in death benefit option
Changes in specified amount
Misstatement of age or sex
Suicide
Beneficiary
Transfers between the fixed account and subaccounts
Fixed account transfer policies
Minimum transfer amounts
Maximum transfer amounts
Maximum number of transfers per year
Two ways to request a transfer, loan or surrender
Automated transfers
Automated dollar-cost averaging
Policy loans
Policy surrenders
Total surrenders
Partial surrenders
Allocations of partial surrenders
Effects of partial surrenders
Taxes
Exchange right
<PAGE>
Optional insurance benefits
Waiver of monthly deduction
Accidental death benefit
Term insurance rider
Additional insured rider
Children's insurance rider
Payment of policy proceeds
Federal taxes
American Enterprise Life's tax status
Taxation of policy proceeds
Modified endowment contracts
Other tax considerations
American Enterprise Life
Ownership
State regulation
Distribution of the policy
Legal proceedings
Year 2000
Experts
Management of American Enterprise Life
Other information
Substitution of investments
Voting rights
Reports
Policy illustrations
<PAGE>
The policy in brief
Purpose: The purpose of the policy is to provide life insurance protection on
the life of the insured and to build policy value. The policy provides a death
benefit that we pay to the beneficiary upon the insured's death. As in the case
of other life insurance policies, it may not be advantageous to purchase this
policy as a replacement for, or in addition to an existing life insurance
policy.
The policy allows you, as the owner, to allocate your net premiums, or transfer
policy value, to:
The variable account, consisting of subaccounts, each of which invests
in a fund with a particular investment objective. You may direct
premiums to any or all of these subaccounts. Your policy's value may
increase or decrease daily, depending on the investment return. No
minimum amount is guaranteed. (p.)
The fixed account, which earns interest at rates that are adjusted
periodically by American Enterprise Life. This rate will never be lower
than 4.0%. (p.)
Loads, fees and charges: You pay the following charges, either directly (such as
deductions from your premium payments or from your policy value), or indirectly
(as deductions from the underlying funds.) These charges primarily compensate
American Enterprise Life for administering and distributing the policy as well
as paying policy benefits and assuming related risks:
o Premium expense charge -- deducted from each premium payment to cover
some distribution expenses, state and local premium taxes, and federal
taxes.
o Monthly deduction -- charged against the value of your policy each
month (prior to the insured's attained insurance age 100), covering the
cost of insurance, cost of issuing the policy, certain administrative
expenses and optional insurance benefits.
o Surrender charge -- applies if you surrender your policy for its full
cash surrender value, or the policy lapses, during the first 15 years
and for 15 years after requesting an increase in the specified amount.
We base it on the initial specified amount and on any increase in the
specified amount.
o Partial surrender fee -- applies if you surrender part of the value of
your policy; equals $25 or 2% of the amount surrendered, whichever is
less.
o Mortality and expense risk charge -- applies only to the subaccounts;
equals, on an annual basis, 0.9% of the average daily net asset value
of the subaccounts.
o Fund expenses -- apply only to the underlying funds and consists of
investment management fees, taxes, brokerage commissions and
nonadvisory expenses. (p.)
Purchasing your policy: To apply, send a completed application and premium
payment to American Enterprise Life's home office. You will need to provide
medical and other evidence that the person you propose to insure (yourself or
someone else) is insurable according to our underwriting rules before we can
accept your application. (p.)
Right to examine policy: You may return your policy for any reason and receive a
refund of your policy value, less indebtedness, plus any premium expense charges
or monthly deductions taken by mailing us the policy and a written request for
cancellation within a specified period. (p.)
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Premiums: In applying for your policy, you state how much you intend to pay and
whether you will pay quarterly, semiannually or annually. You may also make
additional, unscheduled premium payments subject to certain limits. You cannot
make premium payments on or after the insured's attained insurance age 100. We
may refuse premiums in order to comply with the Code. (p.)
No lapse guarantee: A feature of the policy guaranteeing the policy will remain
in force five policy years. The feature is in effect if you meet certain premium
requirements. (p.)
Grace period: If the cash surrender value of your policy becomes less than the
amount needed to pay the monthly deduction and the no lapse guarantee is not in
effect, you will have 61 days to pay a premium that raises the cash surrender
value to an amount sufficient to pay the monthly deduction. If you don't, the
policy will lapse. (p.)
Reinstatement: If your policy lapses, it can be reinstated within five years.
The reinstatement is subject to certain conditions including evidence of
insurability satisfactory to American Enterprise Life and the payment of a
sufficient premium. (p.)
Proceeds payable upon death: Prior to the insured's attained insurance age 100,
your policy's death benefit can never be less than the specified amount, unless
you change that amount or your policy has outstanding indebtedness. The
relationship between the policy value and the death benefit depends on which of
two options you choose:
o Option 1 level amount: The death benefit is the greater of the
specified amount or a percentage of policy value.
o Option 2 variable amount: The death benefit is the greater of the
specified amount plus the policy value or a percentage of policy value.
You may change the death benefit option or specified amount within certain
limits; doing so generally will affect policy charges.
On or after the insured's attained insurance age 100, the proceeds payable upon
the death of the insured will be the cash surrender value.(p.)
Transfers between the fixed account and subaccounts: You may, at no charge,
transfer policy value from one subaccount to another or between subaccounts and
the fixed account. (Certain restrictions apply to transfers involving the fixed
account.) You also can arrange for automated transfers among the fixed account
and subaccounts. (p.)
Policy loans: You may borrow against your policy's cash surrender value. A
policy loan, even if repaid, can have a permanent effect on the death benefit
and policy value. A loan may have tax consequences if your policy lapses or you
surrender it. (p.)
Policy surrenders: You may cancel this policy while it is in force and receive
its cash surrender value. The cash surrender value is the policy value minus
indebtedness, minus any applicable surrender charges. (p.)
Exchange right: For two years after the policy is issued, you can exchange it
for one that provides benefits that do not vary with the investment return of
the subaccounts. Because the policy itself offers a fixed return option, all you
need do is transfer all of the policy value in the subaccounts to the fixed
account.
Payment of policy proceeds: We will pay policy proceeds when you surrender the
policy or the insured dies. You or the beneficiary may choose whether you want
us to make a lump sum payment or payments under one or more of certain options.
(p.)
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Federal taxes: The death benefit is not considered part of the beneficiary's
income and therefore is not subject to federal income taxes. When the proceeds
are paid after the insured's attained insurance age 100, if the amount received
plus any indebtedness exceeds your investment in the policy, the excess may be
taxable as ordinary income. Part or all of any proceeds you receive through full
or partial surrender, lapse, policy loan or assignment of policy value may be
subject to federal income tax as ordinary income. Proceeds other than death
benefits from certain policies, classified as "modified endowments," are taxed
differently from proceeds of conventional life insurance contracts and also may
be subject to an additional 10% IRS penalty tax if you are younger than 59 1/2.
A policy is considered to be a modified endowment if it was applied for or
materially changed after June 21, 1988, and premiums paid in the early years
exceed certain modified endowment limits. (p.)
Key terms
These terms can help you understand details about your policy.
Accumulation unit: An accounting unit used to calculate the policy value of the
subaccounts prior to the insured's death.
Attained insurance age: The insured's insurance age plus the number of policy
anniversaries since the policy date. Attained insurance age changes only on a
policy anniversary.
Cash surrender value: Proceeds received if you surrender the policy in full, or
the amount payable if the insured's death occurs on or after the insured has
attained insurance age 100. The cash surrender value equals the policy value
minus indebtedness and any applicable surrender charges.
Close of business: Closing time of the New York Stock Exchange, normally 3 p.m.,
Central time.
Code: The Internal Revenue Code of 1986, as amended.
Fixed account: The general investment account of American Enterprise Life. The
fixed account is made up of all of American Enterprise Life's assets other than
those held in any separate account.
Fixed account value: The portion of the policy value that you allocate to the
fixed account, including indebtedness.
Funds: Mutual funds or portfolios, each with a different investment objective.
(See "The funds.") Each of the subaccounts of the variable account invests in a
specific one of these funds.
American Enterprise Life: In this prospectus, "we", "us", "our" and "American
Enterprise Life" refer to American Enterprise Life Insurance Company.
Indebtedness: All existing loans on the policy plus interest that has either
been accrued or added to the policy loan.
Insurance age: The insured's age, based upon his or her last birthday on the
policy date.
Insured: The person whose life is insured by the policy.
Minimum monthly premium: The premium required to keep the NLG in effect. We show
the minimum monthly premium in your policy.
Monthly date: The same day each month as the policy date. If there is no monthly
date in a calendar month, the monthly date is the first day of the next calendar
month.
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Net amount at risk: A portion of the death benefit, equal to the total current
death benefit minus the policy value. This is the amount to which we apply cost
of insurance rates in determining the monthly cost of insurance.
Net premium: The premium paid minus the premium expense charge.
No lapse guarantee (NLG): A feature of the policy guaranteeing that the policy
will not lapse before the five policy years. The guarantee is in effect if you
meet certain premium payment requirements.
Owner: The entity(ies) to which, or individual(s) to whom, we issue the policy
or to whom you subsequently transfer ownership. In the prospectus "you" and
"your" refer to the owner.
Policy anniversary: The same day and month as the policy date each year the
policy remains in force.
Policy date: The date we issue the policy and from which we determine policy
anniversaries, policy years and policy months.
Policy value: The sum of the fixed account value plus the variable account
value.
Proceeds: The amount payable under the policy as follows:
o Upon death of the insured prior to the date the insured has attained
insurance age 100, proceeds will be the death benefit in effect as of
the date of the insured has death, minus any indebtedness.
o Upon the death of the insured on or after the insured has attained
insurance age 100, proceeds will be the cash surrender value.
o On surrender of the policy, the proceeds will be the cash surrender
value.
Pro-rata basis: Allocation to the fixed account and each of the subaccounts. It
is proportionate to the value (minus any indebtedness in the fixed account) that
each bears to the policy value, minus indebtedness.
Risk classification: A group of insureds that American Enterprise Life expects
will have similar mortality experience.
Scheduled premium: A premium you select at the time of application, of a level
amount, at a fixed interval of time.
Specified amount: An amount we use to determine the death benefit and the
proceeds payable upon death of the insured prior to the insured's attained
insurance age 100. We show the initial specified amount in your policy.
Subaccount(s): One or more of the investment divisions of the variable account,
each of which invests in a particular fund.
Surrender charge: A charge we assess against the policy value at the time of
surrender, or if the policy lapses, during the first 15 years of the policy and
for 15 years after an increase in coverage.
Valuation date: A normal business day, Monday through Friday, on which the New
York Stock Exchange is open. We set the value of each subaccount at the close of
business on each valuation date.
Valuation period: The interval commencing at the close of business on each
valuation date and ending at the close of business on the next valuation date.
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Variable account: American Enterprise Variable Life Account consisting of
subaccounts, each of which invests in a particular fund. The policy value in
each subaccount depends on the performance of the particular fund.
Variable account value: The sum of the values that you allocate to the
subaccounts of the variable account.
The variable account
We established the variable account on July 15, 1987 under Indiana law. It is
registered as a single unit investment trust under the Investment Company Act of
1940. The variable account consists of a number of subaccounts, each of which
invests in shares of a particular fund. This registration does not involve any
SEC supervision of the account's management or investment practices or policies.
The variable account meets the definition of a separate account under federal
securities laws. Income, capital gains or capital losses of each subaccount are
credited to or charged against the assets of that subaccount alone. State
insurance law provides that we will not charge a variable subaccount with
liabilities of any other subaccount or of any other business conducted by
American Enterprise Life. At all times, American Enterprise Life will maintain
assets in the subaccounts with total market value at least equal to the reserves
and other liabilities required to cover insurance benefits under all policies
participating in the subaccount.
The U.S. Treasury and the IRS indicated they may provide additional guidance on
investment control. This concerns how many subaccounts an insurance company may
offer and how many exchanges among subaccounts it may allow before the owner
would be currently taxed on income earned within subaccount assets. We do not
know what the additional guidance will be or when action will be taken. We
reserve the right to modify the policy, as necessary, so that the owner will not
be subject to current taxation as the owner of the subaccount assets.
The funds
You can direct your premiums to any or all of the subaccounts of the variable
account that invest in shares of the following funds: [New funds to be filed by
amendment]
[Fund Objectives]
Diversification: The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h) of the Code.
Each fund intends to comply with these requirements.
Relationship between funds and subaccounts
Each subaccount buys shares of the appropriate fund at net asset value without a
sales charge. Dividends and capital gain distributions from a fund are
reinvested at net asset value without a sales charge and held by the subaccount
as an asset. Each subaccount redeems fund shares without a charge to the extent
necessary to make death benefit or other payments under the policy.
Rates of return of the funds and subaccounts
This section presents rates of return first for the funds, and then for the
corresponding subaccounts. Rates of return are different in the two cases
because those of the subaccounts reflect additional charges. All charges and
expenses mentioned in the section are explained fully under "Loads, fees and
charges".
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Rates of return of the funds:
In the following table are average annual rates of return based on the actual
investment performance of the funds after deduction of applicable fund charges
(including the investment management fees and nonadvisory expenses) for the
periods indicated assuming reinvestment of dividends and capital gains. These
rates do not reflect charges that apply to the subaccounts or the policy and
therefore do not illustrate how actual investment performance will affect policy
benefits. If these charges were reflected, the illustrated rates of return would
have been lower. Past performance does not guarantee future results..
<TABLE>
<CAPTION>
Period ending __/__/__
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Fund 1 year 3 years 5 years 10 years or since
commencement
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
[To be filed by amendment]
Rates of return of subaccounts:
Average annual rates of return in the following table reflect all charges
incurred by the funds and charges against the subaccounts (including the
mortality and expense risk charge.) The rates do not reflect the premium expense
charge, surrender charge or monthly deduction. If these charges were reflected,
the illustrated rates of return would have been lower.
We show actual performance from the date the subaccounts began investing in the
funds. We do not provide any performance information for the subaccounts because
they are new and have not had any activity to date. Although we base performance
figures on historical earnings, past performance does not guarantee future
results.
<TABLE>
<CAPTION>
Period ending __/__/__ Since commencement of the subaccounts
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Subaccount Investing in: 1 year 3 years 5 years 10 years or
since
commencement
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
[To be filed by amendment]
The fixed account
You can allocate premiums to the fixed account or transfer policy value from the
subaccounts to the fixed account (with certain restrictions, explained in
"Transfers between the fixed account and subaccounts").
The fixed account is the general investment account of American Enterprise Life.
It includes all assets owned by American Enterprise Life other than those in the
variable account and other separate accounts. Subject to applicable law,
American Enterprise Life has sole discretion to decide how assets of the fixed
account will be invested.
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Placing policy value in the fixed account does not entitle you to share in the
fixed account's investment experience, nor does it expose you to the account's
investment risk. Instead, American Enterprise Life guarantees that the policy
value you place in the fixed account will accrue interest at an effective annual
rate of at least 4.0%, independent of the actual investment experience of the
account. American Enterprise Life bears the full investment risk for amounts
allocated to the fixed account. American Enterprise Life is not obligated to
credit interest at any rate higher than 4.0%, although we may do so at our sole
discretion.
We will not credit interest in excess of 4.0% on any portion of policy value in
the fixed account against which you have a policy loan outstanding.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 and the fixed account
has not been registered as an investment company under the Investment Company
Act of 1940. Accordingly, neither the fixed account nor any interests in it are
subject to the provisions of these Acts and the staff of the SEC has not
reviewed the disclosures in this prospectus relating to the fixed account.
Disclosures regarding the fixed account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
Purchasing your policy
Application
To apply for coverage, complete an application and send it with your premium
payment to American Enterprise Life's home office. In your application, you:
o select a specified amount of insurance;
o select a death benefit option;
o designate a beneficiary; and
o state how premiums are to be allocated among the fixed account and/or
the subaccounts.
Insurability: Before issuing your policy, we require satisfactory evidence of
the insurability of the person whose life you propose to insure (yourself or
someone else). Our underwriting department will review your application and any
medical information or other data required to determine whether the proposed
individual is insurable under our underwriting rules. We may decline your
application if we determine the individual is not insurable and we will return
any premium you have paid.
Age limit: American Enterprise Life generally will not issue a policy where the
proposed insured is over the insurance age of 85. We may, however, do so at our
sole discretion.
Risk classification: The risk classification is based on the insured's health,
occupation or other relevant underwriting standards. This classification will
affect the monthly deduction and may affect the cost of certain optional
insurance benefits. (See "Loads, fees and charges" and "Optional insurance
benefits").
Other conditions: In addition to proving insurability, you and the insured must
also meet certain conditions, stated in the application form, before coverage
will become effective and your policy will be delivered to you.
Incontestability: American Enterprise Life will have two years from the
effective date of your policy to contest the truth of statements or
representations in your application. After the policy has been in force during
the insured's lifetime for two years from the policy date, we cannot contest the
policy.
<PAGE>
Right to examine policy
You may return your policy for any reason and receive a refund of policy value
and policy, less indebtedness, plus any premium expense charges or monthly
deductions taken. To do so, you must mail or deliver the policy to American
Enterprise Life home office or your sales representative with a written request
for cancellation. On the date your request is postmarked or received, the policy
will immediately be considered void from the start by the 10th day after you
receive it.
Premiums
Payment of premiums:
In applying for your policy, you decide how much you intend to pay and how often
you will make payments. During the first several policy years until the policy
value is sufficient to cover the surrender charge, American Enterprise Life
requires that you pay premiums sufficient to keep the NLG in effect in order to
keep the policy in force.
You may schedule payments annually, semiannually or quarterly. (American
Enterprise Life must approve payment at any other interval). We show this
premium schedule in your policy.
The scheduled premium serves only as an indication of your intent as to the
frequency and amount of future premium payments. You may skip scheduled premium
payments at any time if your cash surrender value is sufficient to pay the
monthly deduction or if you have paid sufficient premiums to keep the no lapse
guarantee in effect.
You may also change the amount and frequency of scheduled premium payments by
written request. American Enterprise Life reserves the right to limit the amount
of such changes. Any change in the premium amount is subject to applicable tax
laws and regulations.
Although you have flexibility in paying premiums, the amount and frequency of
your payments will affect the policy value, cash surrender value and length of
time your policy will remain in force, as well as affect whether the NLG remains
in effect.
Premium limitations:
You may make unscheduled premium payments at any time and in any amount of at
least $25. American Enterprise Life reserves the right to limit the number and
amount of unscheduled premium payments. No premium payments, scheduled or
unscheduled, are allowed on or after the insured's attained insurance age 100.
Also, in order to receive favorable tax treatment under the Code, premiums you
pay during the life of the policy must not exceed certain limitations. To comply
with the Code, we can either refuse excess premiums as you pay them or refund
excess premiums with interest no later than 60 days after the end of the policy
year in which they were paid.
Allocation of premiums:
As of the policy date, we will allocate the net premiums to the account(s) you
have selected in your application. At that time, we will begin to assess the
various loads, fees, charges and expenses.
We convert any amount that you allocate to a subaccount into accumulation units
of that subaccount, as explained under "Policy value." Similarly, when you
transfer value between subaccounts, we convert accumulation units in one
subaccount into a cash value, which we then convert into accumulation units of
the second subaccount.
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Keeping the policy in force
No lapse guarantee
The NLG provides that your policy will remain in force for 5 policy years even
if the cash surrender value is insufficient to pay the monthly deduction. The
NLG will stay in effect as long as:
o the sum of premiums paid; minus
o partial surrenders; minus
o outstanding indebtedness; equals or exceeds
o the minimum monthly premiums due since the policy date.
The minimum monthly premium is shown in the policy.
If, on a monthly date, you have not paid enough premiums to keep the NLG in
effect, the no lapse guarantee will terminate. In addition, your policy will
lapse (terminate) if the cash surrender value is less than the amount needed to
pay the monthly deduction.
Grace period
If on a monthly date the cash surrender value of your policy is less than the
amount needed to pay the next monthly deduction and the NLG is not in effect,
you will have 61 days to pay the required premium amount. If you do not pay the
required premium, the policy will lapse.
American Enterprise Life will mail a notice to your last known address,
requesting payment of the premium needed to keep the policy in force. If we
receive this premium before the end of the 61-day grace period, we will use the
payment to cover all monthly deductions and any other charges then due. We will
add any balance to the policy value and allocate it in the same manner as other
premium payments.
If a policy lapses with outstanding indebtedness, any excess of the outstanding
indebtedness over the premium paid generally will be taxable to the owner. (See
"Federal taxes.") If the insured dies during the grace period, we will deduct
any overdue monthly deductions from the death benefit.
Reinstatement
Your policy may be reinstated within five years after it lapses, unless you
surrendered it for cash. To reinstate, American Enterprise Life will require:
o a written request;
o evidence satisfactory to American Enterprise Life that the
insured remains insurable;
o payment of the required reinstatement premium; and
o payment or reinstatement of any indebtedness.
The reinstatement premium is the required premium to reinstate the policy.
The effective date of a reinstated policy will be the monthly date on or next
following the day we accept your application for reinstatement. The suicide
period (see "Proceeds payable upon death") will apply from the effective date of
reinstatement (except in Georgia, Nebraska, Oklahoma, Pennsylvania, South
Carolina, Tennessee, Utah and Virginia.) Surrender charges will also be
reinstated.
We will have two years from the effective date of reinstatement to contest the
truth of statements or representations in the reinstatement application.
<PAGE>
Loads, fees and charges
Policy charges compensate American Enterprise Life for:
o providing the insurance benefits of the policy;
o issuing the policy;
o administering the policy;
o assuming certain risks in connection with the policy; and
o distributing the policy.
We deduct some of these charges from your premium payments. We deduct others
periodically from your policy value in the fixed account and/or subaccounts. We
may also assess a charge if you surrender your policy or the policy lapses.
Premium expense charge
We deduct this charge from each premium payment. We credit the amount remaining
after the deduction, called the net premium, to the account(s) you have
selected. The premium expense charge is 3% of each premium payment. It partially
compensates American Enterprise Life for expenses of distributing the policy,
including agents' commissions, advertising and printing of prospectuses and
sales literature. (The surrender charge, discussed under "Surrender charge",
below also may partially compensate these expenses.) It also compensates
American Enterprise Life for paying taxes imposed by certain states and
governmental subdivisions on premiums received by insurance companies. All
policies in all states are charged the same premium expense charge even though
state premium taxes vary.
Monthly deduction
On each monthly date we deduct from the value of your policy in the fixed
account and/or subaccounts an amount equal to the sum of:
1. the cost of insurance for the policy month;
2. the policy fee shown in your policy; and
3. charges for any optional insurance benefits provided by rider for the
policy month.
We explain each of the three components below.
We will take monthly deductions from the fixed account and the subaccounts on a
pro rata basis.
If the cash surrender value of your policy is not enough to cover the monthly
deduction on a monthly anniversary, the policy may lapse. However, the policy
will not lapse if the no lapse guarantee is in effect. (See "No lapse
guarantee;" also "Grace period" and "Reinstatement.")
Components of the monthly deduction:
1. Cost of insurance: primarily, the cost of providing the death benefit
under your policy. It depends on:
o the amount of the death benefit;
o the policy value; and
o the statistical risk that the insured will die in a given period.
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The cost of insurance for a policy month is calculated as:
[(a + b) x (c - d)]
1000
where:
(a) is the monthly cost of insurance rate based on the insured's attained
insurance age, sex (unless unisex rates are required by law) and risk
classification. Generally, the cost of insurance rate will increase as the
insured's attained insurance age increases.
We set the rates based on our expectations as to future mortality experience. We
may change the rates from time to time; any change will apply to all individuals
of the same rate classification. However, rates will not exceed the Guaranteed
Maximum Monthly Cost of Insurance Rates shown in your policy, which are based on
the 1980 Commissioners Standard Ordinary Smoker and Nonsmoker Mortality Tables,
Age Last Birthday.
(b) is any flat extra insurance charges we assess as a result of special
underwriting considerations.
(c) is the death benefit on the monthly date divided by 1.0032737 (which reduces
American Enterprise Life's net amount at risk, solely for computing the cost of
insurance, by taking into account assumed monthly earnings at an annual rate of
4.0%).
(d) is the policy value on the monthly date. At this point, the policy value has
been reduced by the policy fee, and any charges for optional riders.
2. Administrative charge: $7 per month. This charge reimburses American
Enterprise Life for expenses of issuing the policy, such as processing the
application (primarily underwriting) and setting up computer records; and of
administering the policy, such as processing claims, maintaining records, making
policy changes and communicating with owners.
3. Optional insurance benefit charges: charges for any optional benefits you add
to the policy by rider. (See "Optional insurance benefits.)"
Surrender charge
If you surrender your policy or the policy lapses during the first 15 policy
years and in the 15 years following an increase in specified amount, we will
assess a surrender charge.
The surrender charge reimburses American Enterprise Life for costs of issuing
the policy, such as processing the application (primarily underwriting) and
setting up computer records. It also partially pays for commissions, advertising
and printing the prospectus and sales literature.
The surrender charge for the initial specified amount is shown in your policy.
It is based on the insured's insurance age, sex, risk classification and initial
specified amount. The surrender charge for the initial specified amount will
decrease annually until it is zero at the beginning of the 16th policy year. If
you increase the specified amount, an additional surrender charge will apply.
The additional surrender charge in a revised policy will be based on the
insured's attained insurance age, sex, risk classification and the amount of the
increase. The additional surrender charge will decrease annually until it is
zero at the beginning of the 16th year following the increase.
<PAGE>
The following example illustrates how we calculate the surrender charge for a
male, insurance age 35 qualifying for nonsmoker rates. We assume the specified
amount to be $100,000.
Lapse or surrender
during year Surrender Charge
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16+ 0
The amounts shown decrease on an annual basis.
The maximum surrender charge is the rate from the table below multiplied by the
number of thousands of dollars of initial specified amount. For example, a male
age 20 with a nonsmoker risk classification and an initial specified amount of
$50,000 will have a surrender charge of $___ multiplied by 50 or $____. As
another example, a female age 75 with a smoker risk classification and an
initial specified amount of $5,000,000 will have a surrender charge of $____
multiplied by 5,000 or $____.
<PAGE>
Surrender Charges
Age Male Standard Male Nonsmoker Female Standard Female Nonsmoker
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
<PAGE>
Age Male Standard Male Nonsmoker Female Standard Female Nonsmoker
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
<PAGE>
Age Male Standard Male Nonsmoker Female Standard Female Nonsmoker
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
Partial surrender fee
If you surrender part of the value of your policy, we will charge you $25 (or 2%
of the amount surrendered, if less.) We guarantee that this fee will not
increase for the duration of your policy.
Mortality and expense risk charge
This charge applies only to the subaccounts and not to the fixed account. It is
equal, on an annual basis, to 0.9% of the average daily net asset value of the
subaccounts.
<PAGE>
Computed daily, the charge compensates American Enterprise Life for:
o Mortality risk -- the risk that the cost of insurance charge will be
insufficient to meet actual claims.
o Expense risk -- the risk that the policy fee and the surrender charge
(described above) may be insufficient to cover the cost of
administering the policy.
Any profit from the mortality and expense risk charge would be available to
American Enterprise Life for any proper corporate purpose including, among
others, payment of sales and distribution expenses, which we do not expect to be
covered by the premium expense charge and surrender charges discussed earlier.
American Enterprise Life will make up any further deficit from its general
assets.
Policy Value Credits
Beginning in the 11th policy year and while this policy is in force, we will
periodically apply a policy value credit to your policy value.
On an annual basis, the policy value credit is an amount determined by
multiplying (a) times (b) where:
(a) is the policy value credit percentage at the time the calculation is
made; and
(b) is the policy value less indebtedness at the time the
calculation in made.
We reserve the right to calculate and apply the policy value credit on a
quarterly or monthly basis.
The policy value credit amount shall be applied to the policy value on a
pro-rata basis.
Fund expenses
The investment managers and advisers receive fees for their services to the
funds. The funds also pay taxes, brokerage commissions and nonadvisory expenses,
such as custodian and trustee fees, registration fees for shares, postage,
fidelity and security bond costs, legal fees and other miscellaneous fees and
charges. The table below will help you understand the expenses that the funds
pay.
Annual operating expenses of the funds
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
<S> <C> <C> <C> <C>
Fund Name Management Fees 12b-1 Fees Other Expenses Total
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
- ---------------------------- -------------------------- -------------------------- -------------------------- -----------------
</TABLE>
[New funds to be filed by amendment]
American Enterprise Life has entered into certain arrangements under which it is
compensated by the funds' advisors and/or distributors for the administrative
services it provides to these funds.
Other information on charges
American Enterprise Life may reduce or eliminate various fees and charges when
we incur lower sales costs and/or perform fewer administrative services than
usual.
<PAGE>
Policy value
The value of your policy is the sum of values in the fixed account and each
subaccount of the variable account.
Fixed account value
The value in the fixed account on the policy date (when the policy is issued)
equals:
o the portion of your initial net premium allocated to the fixed account;
minus
o the portion of the monthly deduction for the first policy month
allocated to the fixed account.
On any later date, the value in the fixed account equals:
o the value on the previous monthly date; plus
o net premiums allocated to the fixed account since the last monthly
date; plus
o any transfers to the fixed account from the subaccounts, including
loan transfers, since the last monthly date; plus
o accrued interest on all of the above; plus
o any policy value credit allocated to the fixed account; minus
o any transfers from the fixed account to the subaccounts, including
loan repayment transfers, since the last monthly date; minus
o any partial surrenders or partial surrender fees allocated to the
fixed account since the last monthly date; minus
o interest on any transfers or partial surrenders, from the date of the
transfer or surrender to the date of calculation; minus
o any portion of the monthly deduction for the coming month allocated to
the fixed account if the date of calculation is a monthly date.
Subaccount values
The value in each subaccount changes daily, depending on the investment
performance of the funds in which that subaccount invests and on other factors
detailed below. There is no guaranteed minimum subaccount value. You as owner
bear the entire investment risk.
Calculation of subaccount value: The value of each subaccount on the policy date
equals:
o the portion of your initial net premium allocated to the subaccount;
minus
o the portion of the monthly deduction for the first policy month
allocated to that subaccount.
The value on each subaccount on each valuation date equals:
o the value of the subaccount on the preceding valuation date, multiplied
by the net investment factor for the current valuation period
(explained below); plus
o net premiums received and allocated to the subaccount during the
current valuation period; plus
o any transfers to the subaccount (from the fixed account or other
subaccounts, including loan repayment transfers) during the period;
plus
o any policy value credit allocated to the subaccounts; minus
o any transfers from the subaccount including loan transfers during
the current valuation period; minus
o any partial surrenders and partial surrender fees allocated to the
subaccount during the period; minus
o any portion of the monthly deduction allocated to the subaccount
during the period.
<PAGE>
The net investment factor measures the investment performance of a subaccount
from one valuation period to the next. Because performance may fluctuate, the
value of a subaccount may increase or decrease from day to day.
Accumulation units: We convert the policy value allocated to each subaccount
into accumulation units. Each time you direct a premium payment or transfer
policy value into one of the subaccounts, we credit a certain number of
accumulation units to your policy for that subaccount. Conversely, each time you
take a partial surrender or transfer value out of a subaccount, we subtract a
certain number of accumulation units.
Accumulation units are the true measure of investment value in each subaccount.
For subaccounts investing in the funds, they are related to, but not the same
as, the net asset value of the corresponding fund. The dollar value of each
accumulation unit can rise or fall daily, depending on the investment
performance of the underlying funds, and on certain charges. Here is how unit
values are calculated:
Number of units: To calculate the number of units for a particular subaccount,
we divide your investment (net premium or transfer amount) by the current
accumulation unit value.
Accumulation unit value: The current accumulation unit value for each subaccount
equals the last accumulation unit value times the current net investment factor.
Net investment factor: We determine the net investment factor at the end of each
valuation period. This factor equals
(a divided by b) - c,
where:
(a) equals:
o net asset value per share of the fund; plus
o per-share amount of any dividend or capital gain distribution made by
the relevant fund to the subaccount; plus
o any credit or minus any charge for reserves to cover any tax
liability resulting from the investment operations of the
subaccount.
(b) equals:
o net asset value per share of the fund at the end of the preceding
valuation period; plus
o any credit or minus any charge for reserves to cover any tax liability
in the preceding valuation period.
(c) is a percentage factor representing the mortality and expense risk charge,
as described in "Loads, fees and charges" above.
Factors that affect subaccount accumulation units:
Accumulation units of each subaccount may change in two ways; in number and in
value. Here are the factors that influence those changes:
<PAGE>
The number of accumulation units you own may fluctuate due to:
o additional premiums allocated to the subaccount;
o transfers into or out of the subaccount;
o partial surrenders and partial surrender fees;
o surrender charges;
o pro rata portions of the monthly deductions; and/or
o policy value credits.
Accumulation unit values will fluctuate due to:
o changes in underlying fund's net asset value;
o dividends distributed to the subaccount;
o capital gains or losses of underlying fund;
o fund operating expenses; and/or
o mortality and expense risk fees.
Proceeds payable upon death
We will pay a benefit to the beneficiary of the policy when the insured dies.
If that death is prior to the insured's attained insurance age 100, the amount
payable is based on the specified amount and death benefit option (described
below) that you have selected, less any indebtedness.
If the insured's death is on or after the attained insurance age 100, the amount
payable is the cash surrender value.
Option 1 (level amount): Under this option, the policy's value is part of the
specified amount. The Option 1 death benefit is the greater of:
o the specified amount on the date of the insured's death; or
o the applicable percentage of the policy value on the date of the
insured's death, if that death occurs on a valuation date, or on the
next valuation date following the date of death. (See table below.)
<PAGE>
<TABLE>
<CAPTION>
Applicable percentage table
<S> <C> <C> <C>
Insured's attained Applicable Insured's attained Applicable
insurance age percentage of insurance age percentage of
policy value policy value
40 or younger 250% 61 128%
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
<PAGE>
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75-95 105
55 150 96 104
56 146 97 103
57 142 98 102
58 138 99 101
59 134 100 100
60 130
</TABLE>
The percentage is designed to ensure that the policy meets the provisions of
federal tax law which require a minimum death benefit in relation to policy
value for your policy to qualify as life insurance.
Option 2 (variable amount): Under this option, the policy value is added to the
specified amount. The Option 2 death benefit is the greater of:
o the policy value plus the specified amount; or
o the applicable percentage of policy value (from the preceding table) on
the date of the insureds death, if that death occurs on a valuation
date, or on the next valuation date following the date of death.
Examples: Option 1 Option 2
- --------- -------- --------
specified amount $100,000 $100,000
policy value $ 5,000 $ 5,000
death benefit $100,000 $105,000
policy value increases to $ 8,000 $ 8,000
death benefit $100,000 $108,000
policy value decreases to $ 3,000 $ 3,000
death benefit $100,000 $103,000
If you want to have premium payments and favorable investment performance
reflected partly in the form of an increasing death benefit, you should consider
Option 2. If you are satisfied with the specified amount of insurance protection
and prefer to have premium payments and favorable investment performance
reflected to the maximum extent in the policy value, you should consider Option
1. Under Option 1, the cost of insurance is lower because American Enterprise
Life's net amount at risk is generally lower; for this reason the monthly
deduction is less and a larger portion of your premiums and investment returns
is retained in the policy value.
Change in death benefit option
You may make a written request to change the death benefit option once per
policy year. A change in the death benefit option also will change the specified
amount. You do not need to provide additional evidence of insurability.
If you change from Option 1 to Option 2: The specified amount will decrease by
an amount equal to the policy value on the effective date of the change.
If you change from Option 2 to Option 1: The specified amount will increase by
an amount equal to the policy value on the effective date of the change.
An increase or decrease in specified amount resulting from a change in the death
benefit option will affect the following policy costs:
o Monthly deduction because the cost of insurance depends upon the
specified amount.
o Charges for certain optional insurance benefits.
The surrender charge will not be affected.
Changes in specified amount
Subject to certain limitations, you may make a written request to increase or
decrease the specified amount at any time. Changes in specified amount may have
tax implications, discussed in the section "Modified endowment contracts" under
"Federal taxes."
Increases: If you increase the specified amount, we may require additional
evidence of insurability that is satisfactory to us. The effective date of the
increase will be the monthly anniversary on or next following our approval of
the increase. The increase may not be less than $25,000, and we will not permit
an increase after the insured's attained insurance age 85.
An increase in the specified amount will have the following effect on policy
costs:
o Your monthly deduction will increase because the cost of insurance
charge depends upon the specified amount.
o Charges for certain optional insurance benefits may increase.
o The minimum monthly premium will increase if the NLG is in effect.
o The surrender charge will increase.
At the time of the increase in specified amount, the cash surrender value of
your policy must be sufficient to pay the monthly deduction on the next monthly
anniversary. The increased surrender charge will reduce the cash surrender
value. If the remaining cash surrender value is not sufficient to cover the
monthly deduction, we will require you to pay additional premiums within the
61-day grace period. If you do not, the policy will lapse unless the NLG is in
effect. Because the minimum monthly premium will increase, you may also have to
pay additional premiums to keep the NLG in effect.
<PAGE>
Decreases: Any decrease in specified amount will take effect on the monthly
anniversary on or next following our receipt of your written request. The
specified amount remaining after the decrease may not be less than the minimum
amount shown in the policy. If, following a decrease in specified amount, the
policy would no longer qualify as life insurance under federal tax law, the
decrease may be limited to the extent necessary to meet these requirements.
A decrease in specified amount will affect your costs as follows:
o Your monthly deduction will decrease because the cost of insurance
charge depends upon the specified amount.
o Charges for certain optional insurance benefits may decrease.
o The minimum monthly premium will decrease if the NLG is in effect.
o The surrender charge will not change.
No surrender charge is imposed when you request a decrease in the specified
amount.
We will deduct decreases in the specified amount from the current specified
amount in this order:
o First from the portion due to the most recent increase;
o Next from portions due to the next most recent increases successively;
and
o Then from the initial specified amount when the policy was issued.
This procedure may affect the cost of insurance if we have applied different
risk classifications to the current specified amount. We will eliminate the risk
classification applicable to the most recent increase in the specified amount
first, then the risk classification applicable to the next most recent increase,
and so on.
Misstatement of age or sex
If the insured's age or sex has been misstated, the proceeds payable upon death
will be:
o the policy value on the date of death; plus
o the amount of insurance that would have been purchased by the cost of
insurance deducted for the policy month during which death occurred, if
that cost had been calculated using rates for the correct age and sex;
minus
o the amount of any outstanding indebtedness on the date of death.
Suicide
Suicide by the insured, whether sane or insane, within two years from the policy
date is not covered by the policy. If suicide occurs, the only amount payable to
the beneficiary will be the premiums paid, minus the amount of any outstanding
indebtedness.
In Colorado and North Dakota, the suicide period is shortened to one year. In
Missouri, American Enterprise Life must prove that the insured intended to
commit suicide at the time he or she applied for coverage.
Beneficiary
Initially, the beneficiary will be the person you designate in your application
for the policy. You may change the beneficiary by giving written notice to
American Enterprise Life, subject to requirements and restrictions stated in the
policy. If you do not designate a beneficiary, or if the designated beneficiary
dies before the insured, the beneficiary will be you or your estate.
<PAGE>
Transfers between the fixed account and subaccounts
You may transfer policy values from one subaccount to another or between
subaccounts and the fixed account. For most transfers, we will process your
transfer request at the end of the valuation period during which we receive your
request. There is no charge for transfers. Before transferring policy value, you
should consider the risks involved in switching investments.
We may suspend or modify the transfer privilege at any time with the necessary
approval of the SEC. Transfers involving the fixed account are subject to the
restrictions below.
Fixed account transfer policies
o You must make transfers from the fixed account during a 30-day period
starting on a policy 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 request to transfer amounts from the fixed account
within 30 days before the policy anniversary, the transfer will become
effective on the anniversary.
o If we receive your request on or within 30 days after the policy
anniversary, the transfer 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 If you made a transfer from the fixed account to one or more
subaccounts, you may not make a transfer from any subaccount back to
the fixed account until the next policy anniversary. We will waive this
limitation once during the first two policy years if you exercise the
policy's right to exchange provision. (See "Exchange right").
Minimum transfer amounts
From a subaccount to another subaccount or the fixed account:
o For mail and phone transfers--$250 or the entire subaccount balance,
whichever is less.
o For automated transfers--$50.
From the fixed account to a subaccount:
o $250 or the entire fixed account balance, minus any outstanding
indebtedness, whichever is less.
o For automated transfers--$50.
Maximum transfer amounts
From a subaccount to another subaccount or the fixed account:
o Entire subaccount balance.
From the fixed account to a subaccount:
o Entire fixed account balance, minus any outstanding indebtedness.
<PAGE>
Maximum number of transfers per year
We reserve the right to limit mail and telephone transfers to 12 per policy
year. Twelve automated transfers per policy are allowed.
Two ways to request a transfer, loan or surrender
Provide your name, policy number, Social Security Number or Taxpayer
Identification Number when you request a transfer.
1 By letter
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Ave.
Minneapolis, MN 55402
2 By phone
[Call between 7 a.m. and 6 p.m. Central Time:
1-800-333-3437 (toll free) or
(612) 671-7700 (Minneapolis area)
TTY service for the hearing impaired:
1-800-285-8846 (toll free)]
o We answer phone requests promptly, but you may experience delays when
call volume is unusually high. If you are unable to get through, use
mail procedure as an alternative.
o We will honor any telephone transfer or surrender request we believe is
authentic and we will use reasonable procedures to confirm that it is.
These procedures include asking identifying questions and tape
recording calls. As long as we follow these procedures, American
Enterprise Life and its affiliates will not be liable for any loss
resulting from fraudulent requests.
o We make telephone transfers available automatically. If you do not want
telephone transfers to be made from your account, please write to
American Enterprise Life and tell us.
Automated transfers
In addition to written and telephone requests, you can arrange to have policy
value transferred from one account to another automatically. Your financial
advisor can help you set up an automated transfer.
<PAGE>
Automated transfer policies:
o Minimum automated transfer amount: $50
o Only one automated transfer arrangement can be in effect at any time.
You can transfer policy values to one or more subaccounts and the fixed
account, but you can transfer from only one account.
o You can start or stop this service by written request. You must allow
seven days for us to change any instructions that currently are in
place.
o You cannot make automated transfers from the fixed account in an amount
that, if continued, would deplete the fixed account within 12 months.
o If you made a transfer from the fixed account to one or more
subaccounts, you may not make a transfer from any subaccount back to
the fixed account until the next policy anniversary.
o If you submit your automated transfer request with an application for a
policy, automated transfers will not take effect until the policy is
issued.
o If the value of the account from which you are transferring policy
value is less than the $50 minimum, we will stop the transfer
arrangement automatically.
o Automated transfers are subject to all other policy provisions and
terms including provisions relating to the transfer of money between
the fixed account and the subaccounts.
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 subaccount to a more
aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit value, caused by fluctuations in the market value of the underlying fund.
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 your average cost per unit. There is no charge for
dollar-cost averaging.
<PAGE>
How dollar-cost averaging works
Month Amount Accumulation Number of units
invested unit value purchased
Jan $100 $20 5.00
Feb 100 16 6.25
Mar 100 9 11.11
Apr 100 5 20.00
May 100 7 14.29
June 100 10 10.00
July 100 15 6.67
Aug 100 20 5.00
Sept 100 17 5.88
Oct 100 12 8.33
(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 August) and fewer units when the per unit market
price is high.
You have paid an average price of only $10.81 per unit over the 10 months, while
the average market price actually was $13.10.
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.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon your willingness to continue to invest
regularly through periods of low price levels. Dollar-cost averaging can be an
effective way to help meet your long-term goals.
Policy loans
You may borrow against your policy by written or telephone request. (See chart
under "Transfers between the fixed account and subaccounts" for address and
telephone numbers for your requests.) We will process your loan request at the
end of the valuation period during which we receive your request. (Loans by
telephone are limited to $50,000.)
Interest rate: The interest rate for policy loans is 6% per year. After the 10th
anniversary we expect to reduce the loan interest to 4% per year. Interest is
charged daily and due at the end of the policy year.
Minimum loan:
o $500 ($200 for Connecticut residents).
<PAGE>
Maximum loan:
o In Texas, 100% of the policy value in the fixed account, minus a pro rata
portion of surrender charges.
o In Alabama, 100% of the policy value minus surrender charges.
o In all other states, 90% of the policy value minus surrender charges.
We will compute the maximum loan value as of the end of the valuation period
during which we receive your loan request. The amount available at any time for
a new loan is the maximum loan value less any existing indebtedness. When we
compute the amount available, we reserve the right to deduct from the loan value
interest for the period until the next policy anniversary and monthly deductions
that we will take until the next policy anniversary.
Payment of loaned funds: Generally, we will pay loans within seven days after we
receive your request (with certain exceptions - see "Deferral of payments,"
under "Payment of policy proceeds.")
Allocation of loans to accounts: If you do not specify whether the loan is to
come from the fixed account or the subaccounts, we will take it from the
subaccounts and the fixed account on a pro-rata basis minus indebtedness. When
we make a loan from a subaccount, we redeem accumulation units and transfer the
proceeds into the fixed account. We will credit the loaned amount with 4.0%
annual interest.
Repayments: We will allocate loan repayments to subaccounts and/or the fixed
account using the premium allocation percentages in effect unless you tell us
otherwise. Repayments must be in amounts of at least $25.
Overdue interest: If you do not pay accrued interest when it is due, we will
increase the amount of indebtedness in the fixed account to cover the amount
due. Interest added to a policy loan will be charged the same interest rate as
the loan itself. We will take the interest from the fixed account and
subaccounts on a pro-rata basis.
Effects of policy loans: If you do not repay your loan, it will reduce the death
benefit and cash surrender value. Even if you do repay it, your loan can have a
permanent effect on death benefits and policy values, because money you borrow
against the subaccounts will not share in the investment results of the relevant
fund(s).
A loan may terminate the no lapse guarantee. We deduct the loan amount from the
total premiums you pay, which may reduce the total below the level required to
keep the NLG in effect.
Taxes: If your policy lapses or you surrender it with an outstanding
indebtedness, and the amount of outstanding indebtedness plus the cash surrender
value is more than the sum of premiums you paid, you generally will be liable
for taxes on the excess. (See "Federal taxes.")
Policy surrenders
You may surrender your policy in full or in part by written or telephone
request. (See chart under "Transfers between the fixed account and
subaccounts.") We will process your surrender request at the end of the
valuation period during which we receive your request. We may require you to
return your policy.
We normally will process your payment within seven days; however, we reserve the
right to defer payment. (See "Deferral of payments," under "Payment of policy
proceeds.")
<PAGE>
Total surrenders
If you totally surrender your policy, you receive its cash surrender value--the
policy value minus outstanding indebtedness and applicable surrender charges.
(See "Loads, fees and charges.") We will compute the value of each subaccount as
of the end of the valuation period during which we receive your request.
Partial surrenders
After the first policy year, you may surrender any amount from $500 up to 90% of
the policy's cash surrender value. (Partial surrenders by telephone are limited
to $50,000.) We will charge you a partial surrender fee, described under "Loads,
fees and charges."
Allocation of partial surrenders
Unless you specify otherwise, American Enterprise Life will make partial
surrenders from the fixed account and subaccounts on a pro-rata basis at the end
of the valuation period during which we receive your request. In determining
these proportions, we first subtract the amount of any outstanding indebtedness
from the fixed account value.
Effect of partial surrenders
o A partial surrender will reduce the policy value by the amount of
the partial surrender and fee.
o A partial surrender will reduce the death benefit by the amount of the
partial surrender and fee, or, if the death benefit is based on the
applicable percentage of policy value, by an amount equal to the
applicable percentage times the amount of the partial surrender.
o A partial surrender may terminate the no lapse guarantee. We deduct the
surrender amount from total premiums you paid, which may reduce the
total below the level required to keep the no lapse guarantee in
effect.
o If Option 1 is in effect, a partial surrender will reduce the specified
amount by the amount of the partial surrender and fee. American
Enterprise Life will deduct this decrease from the current specified
amount in this order:
o If Option 2 is in effect, a partial surrender does not affect
the specified amount.
Taxes
Upon surrender, you generally will be liable for taxes on any excess of the cash
surrender value plus outstanding indebtedness over the premium paid. (See
"Federal taxes.")
Exchange right
For two years after we issue the policy, you can exchange it for one that
provides benefits that do not vary with the investment return of the
subaccounts. Because the policy itself offers a fixed return option, all you
need to do is transfer all of the policy value in the subaccounts to the fixed
account. We automatically will credit all future premium payments to the fixed
account unless you request a different allocation.
A transfer for this purpose will not count against the 12-transfers-per-year
limit. Also, we will waive any restrictions on transfers into the fixed account
for this type of transfer.
There is no effect on the policy's death benefit, specified amount, net amount
at risk, risk classification or issue age. Only the method of funding the policy
value will be affected.
<PAGE>
In Connecticut, during the first 18 months after the policy is issued, you have
the right to exchange the policy for a policy of permanent fixed benefit life
insurance we are then offering.
We will not require evidence of insurability. We will require that:
1. this policy is in force; and
2. your request is in writing; and
3. you repay any existing indebtedness.
The new policy will have the same initial death benefit, policy date and issue
age as this policy. The premium for the new policy will be based on our rates in
effect on its policy date for the same class of risk as under this policy.
We will inform you of the premium for the new policy and any extra sum required
or allowance to be made for a cash surrender value adjustment that takes
appropriate account of the values under both this policy exceeds the cash
surrender value of the new policy, the excess will be sent to you. If the cash
surrender value of this policy is less than the cash surrender value of the new
policy, you will be required to send us the shortage amount for this exchange to
be completed.
Optional insurance benefits
You may choose to add the following benefits to your policy at an additional
cost, in the form of riders (if you meet certain requirements). More detailed
information on these benefits is in your policy.
Waiver of monthly deduction (WMD): Under WMD, we will waive the monthly
deduction if the insured becomes totally disabled.
Accidental death benefit (ADB): ADB provides an additional death benefit if the
insured's death is caused by accidental injury.
Term insured rider (TIR): TIR provides an additional level, adjustable death
benefit on the base insured.
Additional insured rider (AIR): AIR provides a level, adjustable death benefit
on the life of each additional insured covered.
Children's insurance rider (CIR): CIR provides level term coverage on each
eligible child.
Payment of policy proceeds
We will pay policy proceeds when:
o you surrender the policy; or
o the insured dies
We will pay all proceeds by check. We will compute the amount of the death
proceeds and pay it in a single sum unless you select one of the payment options
below. We will pay interest at a rate of at least 4% per year (8% in Arkansas,
11% in Florida) on single sum death proceeds, from the date of the insured's
death to the settlement date (the date on which we pay the proceeds in a lump
sum or first place them under a payment option).
<PAGE>
Payment options:
During the insured's lifetime, you may request in writing that we pay policy
proceeds under one or more of the three payment options below. (The beneficiary
also may select a payment option, unless you say that he or she cannot). You
decide how much of the proceeds to place under each option (minimum: $5,000). We
will transfer any such amount to American Enterprise Life's general account.
Unless we agree otherwise, we must make payments under all options to a natural
person.
You also may make a written request to us to change a prior choice of payment
option or, if we agree, to elect a payment option other than the three below.
If you elect a payment option for pre-death proceeds, payments under this option
may be subject to federal income tax as ordinary income. If you elect Option A,
the full pre-death proceeds will be taxed as a full surrender or maturity as
described in "Taxation of policy proceeds" and also may be subject to an
additional 10% penalty tax if the policy is a modified endowment. The interest
paid under Option A will be ordinary income subject to income tax in the year
earned. The interest payments will not be subject to the 10% penalty tax.
If you elect Option B or Option C for payment of pre-death proceeds, any
indebtedness at the time of election will be taxed as a partial surrender as
described in "Taxation of policy proceeds" and also may be subject to an
additional 10% penalty tax if the policy is a modified endowment. We will use
the remainder of the proceeds to make payments under the option elected. A
portion of each payment will be taxed as ordinary income and a portion of each
payment will be considered a return of the investment in the policy and will not
be taxed. We describe an owner's investment in the policy in "Taxation of policy
proceeds." All payments we make after the investment in the policy is fully
recovered will be subject to tax. Amounts we pay under Option B or Option C that
are subject to tax also may be subject to an additional 10% penalty tax. (See
"Penalty tax" under "Federal Taxes").
Death benefit proceeds applied to any payment option are not considered part of
the beneficiary's income and therefore are not subject to federal income tax.
Payments of interest under Option A will be ordinary income subject to tax.
Under Option B or Option C, a portion of each payment will be ordinary income
subject to tax and a portion of each payment will be considered a return of the
beneficiary's investment in the policy which is not subject to tax. The
beneficiary's investment in the policy is the death benefit proceeds we apply to
the payment option. All payments we make after the investment in the policy is
fully recovered will be subject to tax.
Option A -- Interest payments: We will pay interest on any proceeds placed under
this option at a rate of 4% per year compounded annually, at regular intervals
and for a period that is agreeable to both you and us. At the end of any payment
interval, you may withdraw proceeds in amounts of at least $100. At any time,
you may withdraw all of the proceeds that remain or you may place them under a
different payment option approved by us.
Option B -- Payments for a specified period: We will make fixed monthly payments
for any number of years you specify. Here are examples of monthly payments for
each $1,000 placed under this option:
Payment period Monthly payment per $1,000
(years) placed under Option B
10 $ 9.61
15 6.87
20 5.51
25 4.71
30 4.18
We will furnish monthly amounts for other payment periods at your request,
without charge.
<PAGE>
Option C -- Lifetime income: We will make monthly payments for the life of the
person (payee) who is to receive the income. We will guarantee payment for 5, 10
or 15 years.
We will base the amount of each monthly payment per $1,000 placed under this
option on the table of settlement rates in effect at the time of the first
payment. The amount depends on the sex and age of the payee on that date.
The amount of each monthly payment per $1,000 placed under this option will be
at least the amounts shown in the following table.
We will furnish monthly amounts for any adjusted age not shown at your request,
without charge.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Life Income per $1,000 with Payments Guaranteed for 10 Years
- -------------------------------------------------------------------------------------------------------------
- --------------- ------------- ------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Age Payee Settlement 5 Years 10 Years 15 Years
- --------- ----------- ------- -------- --------
Beginning
---------
in Year Male Female Male Female Male Female
------- ----------- ----------- -----------
- --------------- ------------- ------------------------- -------------------------- --------------------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
65 2005 5.26 4.66 5.15 4.62 4.95 4.53
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2010 5.17 4.60 5.07 4.55 4.89 4.48
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2015 5.09 4.53 4.99 4.49 4.83 4.42
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2020 5.01 4.47 4.92 4.44 4.77 4.38
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2025 4.94 4.42 4.86 4.39 4.72 4.33
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2030 4.87 4.37 4.79 4.34 4.67 4.29
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
70 2005 6.12 5.35 5.87 5.24 5.48 5.05
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2010 6.01 5.26 5.77 5.16 5.41 4.99
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2015 5.89 5.17 5.68 5.08 5.35 4.93
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2020 5.79 5.09 5.59 5.01 5.29 4.87
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2025 5.69 5.01 5.51 4.94 5.23 4.82
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2030 5.59 4.94 5.43 4.88 5.17 4.76
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
75 2005 7.27 6.33 6.72 6.07 6.00 5.65
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2010 7.11 6.20 6.61 5.97 5.94 5.59
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2015 6.96 6.08 6.50 5.87 5.88 5.52
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2020 6.82 5.97 6.40 5.78 5.83 5.46
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2025 6.68 5.86 6.30 5.69 5.77 5.40
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
2030 6.55 5.76 6.21 5.60 5.72 5.34
- --------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------
</TABLE>
Deferral of payments:
We reserve the right to defer payments of cash surrender value, policy loans or
variable death benefits in excess of the specified amount if:
o the payments derive from a premium payment made by a check that has not
cleared the banking system (we have not collected good payment);
o the NYSE is closed (other than customary weekend and holiday closings);
o in accordance with SEC rules, trading on the NYSE is restricted or,
because of an emergency, it is not practical to dispose of securities
held in the subaccount or determine the value of the subaccount's net
assets.
<PAGE>
We may delay the payment of any loans or surrenders from the fixed account up to
six months from the date we receive the request. If we postpone the payment of
surrender proceeds more than 30 days, we will pay you interest on the amount
surrendered at an annual rate of 3% for the period of postponement.
Federal taxes
The following is a general discussion of the policy's federal income tax
implications. It is not intended as tax advice. Because the effect of taxes on
the value and benefits of your policy depends on your individual situation as
well as American Enterprise Life's tax status, YOU SHOULD CONSULT A TAX ADVISOR
TO FIND OUT HOW THESE GENERAL CONSIDERATIONS APPLY TO YOU. The discussion is
based on our understanding of federal income tax laws as the Internal Revenue
Service (IRS) currently interprets them; both the laws and their interpretation
may change.
We intend the policy to qualify as a life insurance policy for federal income
tax purposes. To that end, the provisions of the policy are to be interpreted to
ensure or maintain this tax qualification. American Enterprise Life reserves the
right to change the policy in order to ensure that it will continue to qualify
as life insurance for tax purposes. We will send you a copy of any changes.
American Enterprise Life's tax status
The IRS taxes American Enterprise Life as a life insurance company under the
Code. For federal income tax purposes, we consider the subaccounts to be a part
of American Enterprise Life, although we treat their operations separately in
accounting and financial statements. We reinvest the investment income from the
subaccounts and it becomes part of the subaccounts' value. The IRS does not tax
American Enterprise Life on this investment income, including realized capital
gains. Therefore, American Enterprise Life does not charge the subaccounts for
our federal income taxes. American Enterprise Life reserves the right to make
such a charge in the future if there is a change in the tax treatment of
subaccounts or variable life insurance contracts or in American Enterprise
Life's tax status as we currently understand it.
Taxation of policy proceeds
The IRS does not consider the death benefit to be part of the beneficiary's
income and therefore it is not subject to federal income taxes. When we pay the
proceeds after the insured's attained insurance age 100 and the amount received
plus any indebtedness exceeds your investment in the policy, the IRS may tax the
excess as ordinary income.
The IRS may tax part or all of any pre-death proceeds that you receive through
full surrender or maturity, lapse, partial surrender, policy loan or assignment
of policy value or payment options as ordinary income. (See the following
table.) In some cases, the tax liability depends on whether the policy is a
modified endowment (explained following the table). The taxable amount also may
be subject to an additional 10% penalty tax if the policy is a modified
endowment.
<PAGE>
Source of proceeds Taxable portion of pre-death proceeds
Full surrender: Amount you receive plus any indebtedness,
minus your investment in the policy.*
Lapse: Any outstanding indebtedness minus your
investment in the policy.*
Partial surrenders Lesser of:
(modified endowments): the amount you receive or policy value minus
your investment in the policy.*
Policy loans and assignments Lesser of:
(modified endowments) the amount of the loan/assignment or policy
value minus your investment in the policy.*
Partial surrenders Generally, if the amount you receive is
(other policies): greater than your investment in the policy,*
the amount in excess of your investment is
taxable. However, during the first 15 policy
years, a different amount may be taxable if
the partial surrender results in or is caused
by a reduction in benefits.
Policy loans and assignments None
(other policies):
Payment options: If we pay the proceeds of the policy
under one of the payment options, see the
"Payment option" under "Payment of Policy
proceeds" section for tax information.
* The owner's investment is equal to premiums paid, minus the nontaxable portion
of any previous partial surrenders, plus the taxable portion of any previous
policy loans.
Modified endowment contracts
In 1988, Congress created a new class of life insurance policies called
"Modified Endowment Contracts." The IRS taxes these policies differently from
conventional life insurance contracts.
Your policy is a modified endowment contract if:
o you apply for it or materially change it on or after June 21, 1988 and
o the premiums you pay in the first seven years of the policy, or the
first seven years following a material change, exceed certain limits.
Also, any life insurance policy you receive in exchange for a modified endowment
is itself a modified endowment.
We have procedures for monitoring whether your policy may become a modified
endowment contract. We calculate modified endowment limits when we issue the
policy. We base these limits on the benefits we provide under the policy and on
the risk classification of the insured. We recalculate these limits later if
certain increases or reductions in benefits occur.
<PAGE>
Increases in benefits: We recalculate limits when an increase is a "material
change." Almost any increase you request, such as an increase in specified
amount, the addition of a rider benefit or an increase in an existing rider
benefit, is a material change. An automatic increase under the terms of your
policy, such as an increase in death benefit due to operation of the applicable
percentage table described in the "Proceeds payable upon death" section or an
increase in policy value growth under Option 2, generally is not a material
change. A policy becomes a modified endowment if premiums you pay in the early
years following a material change exceed the recalculated limits.
Reductions in benefits: When you reduce benefits within seven years after we
issue the policy or after the most recent material change, we recalculate the
limits as if the reduced level of benefits had always been in effect. In most
cases, this recalculation will further restrict the amount of premiums that you
can pay without exceeding modified endowment limits. If the premiums you have
already paid exceed the recalculated limits, the policy becomes a modified
endowment even if you do not pay any further premiums.
Distributions affected: Modified endowment rules apply to distributions in the
year the policy becomes a modified endowment and in all subsequent years. In
addition, the rules apply to distributions taken two years before the policy
becomes a modified endowment because the IRS presumes that you took a
distribution in anticipation of that event.
Serial purchase of modified endowments: The IRS treats all modified endowments
issued by the same insurer (or affiliated companies of the insurer) to the same
owner during any calendar year as one policy for purposes of determining the
amount of any loan or distribution that is taxable.
Penalty tax: If a policy is a modified endowment, the taxable portion of
pre-death proceeds from a full surrender, maturity, lapse, partial surrender,
policy loan or assignment of policy value or certain payment options may be
subject to a 10% penalty tax unless:
o the distribution occurs after the owner attains age 59-1/2;
o the distribution is attributable to the owner becoming disabled
(within the meaning of Code Section 72(m)(7); or
o the distribution is part of a series of substantially equal periodic
payments made at least once a year over the life (or life expectancy)
of the owner or over the joint lives (or life expectancies) of
the owner and the owner's beneficiary.
Other tax considerations
Interest paid on policy loans: If you use a policy loan for personal purposes,
interest paid on the loan is not tax-deductible. Other rules apply if you use
the loan for trade or business or investment purposes or if a business or
corporation owns the policy from which the loan is taken.
Policy changes: Changing ownership, exchanging or assigning the policy may have
tax consequences, depending on the circumstances.
Other taxes: Federal estate tax, state and local estate tax, inheritance tax,
gift tax and other tax consequences of ownership or receipt of policy proceeds
also will depend on the circumstances.
Qualified retirement plans: The policy may be used in conjunction with certain
qualified plans. Since the rules governing such use are complex, a purchaser
should consult a competent pension consultant.
<PAGE>
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v. Norris
that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Since the policy's cost of
insurance rates and purchase rates for certain settlement options distinguish
between men and women, employers and employee organizations should consult with
legal counsel before purchasing the policy for any employment-related insurance
or benefit program.
American Enterprise Life
American Enterprise Life is a stock life insurance company organized under the
laws of the State of Indiana in 1981. Its administrative offices are located at
80 South Eighth Street, Minneapolis, MN 55402. Its statutory address is 100
Capitol Center South, 201 North Illinois Street, Indianapolis, IN 46204.
American Enterprise Life conducts a conventional life insurance business.
American Enterprise Life issues the life insurance policies.
Ownership
American Enterprise Life is a wholly owned subsidiary of IDS Life Insurance
Company (IDS Life), which is a wholly-owned subsidiary of American Express
Financial Corporation (AEFC). AEFC, a Delaware corporation, is a wholly owned
subsidiary of American Express Company.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services.
Besides managing investments for all funds in the American Express(R) Funds,
AEFC also manages investments for itself and its subsidiaries, IDS Certificate
Company and IDS Life Insurance Company. Total assets under management on Mar.
31, 1999 were more than $219 billion.
State regulation
American Enterprise Life is subject to the laws of Indiana governing insurance
companies and to regulation by the Indiana Department of Commerce. In
addition, American Enterprise Life is subject to regulation under the insurance
laws of other jurisdictions in which it operates. American Enterprise Life files
an annual statement in a prescribed form with Indiana's Department of Commerce
and in each state in which American Enterprise Life does business. American
Enterprise Life's books and accounts are subject to review by the Indiana
Department of Commerce at all times and a full examination of its operations is
conducted periodically. Such regulation does not, however, involve any
supervision of management or investment practices or policies.
[Distribution of the policy - To be filed by amendment]
Legal proceedings
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which American Enterprise Life and AEFC do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents, and other matters. American Enterprise Life and AEFC, like
other life and health insurers, from time to time are involved in such
litigation. On October 13, 1998 an action entitled Richard Thoresen and
Elizabeth Thoresen vs. AEFC, American Partners Life Insurance Company, American
Enterprise Life Insurance Company, American Centurion Life Assurance Company,
IDS Life Insurance Company and IDS Life Insurance Company of New York was
commenced in Minnesota State
<PAGE>
Court. The action was brought by individuals who purchased an annuity in a
qualified plan. They allege that the sale of annuities in tax-deferred
contributory retirement investment plans (e.g. IRAs) is never appropriate. The
plaintiffs purport to represent a class consisting of all persons who made
similar purchases. The plaintiffs seek damages in an unspecified amount.
American Enterprise Life also is a defendant in various other lawsuits. In
American Enterprise Life's opinion, none of these lawsuits will have a material
adverse effect on our financial condition.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of American Enterprise Life
and the variable account. American Enterprise Life and the variable account are
utilized by multiple subsidiaries maintained by AEFC and affiliates of AEFC.
American Enterprise Life's and the variable accounts businesses are heavily
dependent upon AEFC's computer systems and have significant interactions with
systems of third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve potential problems including
modification to existing software and the purchase of new software. AEFC's
target date for substantially completing corrective measures on internal
business critical systems was Dec. 31, 1998. As of June 30, 1999, AEFC completed
its program of corrective measures on its internal systems and applications,
including Year 2000 compliance testing. The Year 2000 readiness of unaffiliated
investment managers and other third parties whose system failures could have an
impact on American Enterprise Life's and the variable account's operations
continues to be evaluated.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business unit. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered. This disclosure
will be updated as necessary and filed by amendment.
[Experts - To be filed by amendment]
Actuarial matters included in the prospectus have been examined by Mark Gorham,
F.S.A., M.A.A.A., Actuarial Director, Insurance Product Development, as stated
in his opinion filed as an exhibit to the Registration Statement.
Management of American Enterprise Life
Directors
James E. Choat
Director and chief executive officer since 1996; senior vice president-
Institutional Products Group, AEFA, 1994 to 1997.
Richard W. Kling
Director and chairman of the board since March 1994.
Paul S. Mannweiler*
Director since 1986. Partner at Locke Reynolds Boyd & Weisell since 1980.
<PAGE>
Paula R. Meyer
Director and executive vice president, Assured Assets since
Officers other than directors
Jeffrey S. Horton
Vice president and treasurer since December 1997; vice president and corporate
treasurer, AEFC, since December 1997; controller, American Express
Technologies-Financial Services, AEFC, from July 1997 to December 1997;
controller, Risk Management Products, AEFC, from June 1990 to May 1994.
William A. Stoltzmann
Director since September 1989; vice president, general counsel and secretary
since 1985.
The address for all of the directors and principal officers is: IDS Tower 10,
Minneapolis, MN 55440-0010 (except for Paul S. Mannweiler). *Mr. Mannweiler is
an independent director whose address is: 201 No. Illinois Street, Indianapolis,
IN 46204.
The officers, employees and sales force of IDS Life are bonded, in the amount of
$100 million, by virtue of a blanket fidelity bond issued to American Express
Company by Saint Paul Fire and Marine, the lead underwriter.
Other information
The variable account has filed a registration statement with the SEC. For
further information concerning the policy, the variable account and American
Enterprise Life, please refer to the registration statement. You can find the
registration statement on the SEC's web site at http://www.sec.gov.
Substitution of investments
We may change the funds from which the subaccounts buy shares if: the existing
funds become unavailable, or in the judgment of American Enterprise Life, the
funds are no longer suitable for the subaccounts. If these situations occur, we
have the right to substitute the funds held in the subaccounts for other
registered, open-end management investment companies as long as we believe it
would be in the best interest of persons having voting rights under the
policies.
In the event of any such substitution or change, American Enterprise Life may,
without the consent or approval of owners, amend the policy and take whatever
action is necessary and appropriate. However, we will not make any substitution
or change without any necessary approval of the SEC or state insurance
departments. American Enterprise Life will notify owners within five days of any
substitution or change.
Voting rights
As a policy owner with investments in any subaccount, you may vote on important
fund matters. Each share of a fund has one vote.
American Enterprise Life is the owner of all fund shares and therefore holds all
voting rights. However, American Enterprise Life will vote the shares of each
fund according to instructions we receive from owners. If we do not receive
timely instructions from you, we will vote your shares in the same proportion as
the shares for which we do receive instructions. American Enterprise Life also
will vote fund shares that are not otherwise attributable to owners in the same
proportion as those shares in that subaccount for which we receive instructions.
<PAGE>
We determine the number of fund shares in each subaccount for which you may give
instructions by applying your percentage interest in the subaccount to the total
number of votes attributable to the subaccount. We will determine that number as
of a date we choose that is 60 days or less before the meeting of the fund. We
will send you notice of each shareholder meeting, together with any proxy
solicitation materials and a statement of the number of votes for which you are
entitled to give instructions.
Under certain conditions, American Enterprise Life may disregard voting
instructions that would change the goals of one or more of the funds or would
result in approval or disapproval of an investment advisory contract. If
American Enterprise Life does disregard voting instructions, we will advise you
of that action and the reasons for it in our next report to owners.
Reports
At least once a year American Enterprise Life will mail to you, at your last
known address of record, a report containing all information required by law or
regulation, including a statement showing the current policy value.
Policy illustrations
The following tables illustrate how policy values, cash surrender values and
death benefits may change with the investment experience of the subaccount. The
tables show how these amounts might vary, for a 35-year-old male nonsmoker,
under Death Benefit Option 1, if:
o the annual rate of return of the fund is 0%, 6% or 12%.
o the cost of insurance rates and policy fees are current rates or
guaranteed rates and fees.
This type of illustration involves a number of detailed assumptions. (See chart,
"Understanding the illustrations.") To the extent that your own circumstances
differ from those assumed in the illustrations, your expected results also would
differ.
Upon request, we will furnish you with comparable tables illustrating death
benefits, policy values and cash surrender values based on the actual age of the
person you propose to insure and on an initial specified amount and premium
payment schedule. In addition, after you have purchased a policy, you may
request illustrations based on policy values at the time of request.
Understanding the illustrations:
Rates of return: assumes uniform, gross, after-tax, annual rates of 0%, 6% or
12% for the fund. Results would differ depending on allocations among the
subaccounts, if returns averaged 0%, 6% and 12% for the fund as a whole but
differed across portfolios.
Insured: assumes a male insurance age 35, in a standard risk classification,
qualifying for the nonsmoker rate. Results would be lower if the insured were in
a substandard risk classification or did not qualify for the non-smoker rate.
Premiums: assumes a $900 premium is paid in full at the beginning of each policy
year. Results would differ if premiums were paid on a different schedule.
Policy loans and partial withdrawals: assumes that none have been made. (Since
we assume indebtedness is zero, the cash surrender value in all cases equals the
policy value minus the surrender charge.)
<PAGE>
Effect of expenses, charges, and credits
The death benefit, policy value and cash surrender value reflect the following
charges:
o Premium expense charge: 3% of each premium payment.
o Cost of insurance charge for the sex, age and rate classification for
the assumed insured.
o Administrative charge: $7 per month
o Policy value credit: 0.45% for years 11+ on the end of the year asset
value.
o The expenses paid by the fund and charges made against the
subaccounts as described below:
The net investment return of the subaccounts, shown in the tables, is lower than
the gross, after-tax return of the fund or trust because we deducted the
expenses paid by the fund and charges made against the subaccounts. These
include:
o the daily investment management fee paid by the fund, assumed to be
equivalent to an annual rate of __% of the fund's average daily net assets;
the assumed investment management fee is approximately equal to a simple
average of the investment management fees, based on assets of the
subaccounts, of the funds available under the policy. The actual charges
you incur will depend on how you choose to allocate policy value. See Fund
expenses in the Loads, fees and charges section of this prospectus for
additional information;
o the daily mortality and expense risk charge, equivalent to 0.9% of the
daily net asset value of the subaccounts annually.
o a nonadvisory expense charge of 0.1% of each fund's average daily net
assets for direct expenses incurred by the fund; currently, this is the
maximum direct expenses the funds will incur after American Enterprise Life
limits the direct expenses of some funds. The actual charges you incur will
depend on how you choose to allocate policy value. See Fund expenses in the
Loads, fees, and charges, section of this prospectus for additional
information.
After deduction of the expenses and charges described above, the illustrated
gross annual investment rates of return correspond to the following approximate
net annual rates of return:
Net annual rate of
Gross annual investment return for "Guaranteed
rate of return costs assumed" illustration
0%
6
12
<PAGE>
Taxes: Results shown in the tables reflect the fact that American Enterprise
Life does not currently charge the subaccounts for federal income tax. If we
take such a charge in the future, the portfolios will have to earn more than
they do now in order to produce the death benefits and policy values
illustrated.
<TABLE>
<CAPTION>
Illustration
- -----------------------------------------------------------------------------------------------------------------------------
Initial specified amount $100,000 Male age 35 Current costs assumed
Death benefit Option 1 nonsmoker Annual premium $900
- -----------------------------------------------------------------------------------------------------------------------------
End of Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
policy accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
year with annual annual investment return of annual investment return of annual investment return of
interest
at 5%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $100,000 $100,000
2 $100,000 $100,000 $100,000
3 $100,000 $100,000 $100,000
4 $100,000 $100,000 $100,000
5 $100,000 $100,000 $100,000
6 $100,000 $100,000 $100,000
7 $100,000 $100,000 $100,000
8 $100,000 $100,000 $100,000
9 $100,000 $100,000 $100,000
10 $100,000 $100,000 $100,000
11 $100,000 $100,000 $100,000
12 $100,000 $100,000 $100,000
13 $100,000 $100,000 $100,000
14 $100,000 $100,000 $100,000
15 $100,000 $100,000 $100,000
16 $100,000 $100,000 $100,000
17 $100,000 $100,000 $100,000
18 $100,000 $100,000 $100,000
19 $100,000 $100,000 $100,000
20 $100,000 $100,000 $100,000
age 60 $100,000 $100,000 $100,000
age 65 $100,000 $100,000
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We cannot represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration
- ----------------------------------------------------------------------------------------------------------------------------
Initial specified amount $100,000 Male age 35 Current costs assumed
Death benefit Option 1 nonsmoker Annual premium $900
- ----------------------------------------------------------------------------------------------------------------------------
End of Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
policy accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
year with annual annual investment return of annual investment return of annual investment return of
interest
at 5%
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------------------------------------------------------------------------------------------------------------------------
1 $100,000 $100,000 $100,000
2 $100,000 $100,000 $100,000
3 $100,000 $100,000 $100,000
4 $100,000 $100,000 $100,000
5 $100,000 $100,000 $100,000
6 $100,000 $100,000 $100,000
7 $100,000 $100,000 $100,000
8 $100,000 $100,000 $100,000
9 $100,000 $100,000 $100,000
10 $100,000 $100,000 $100,000
11 $100,000 $100,000 $100,000
12 $100,000 $100,000 $100,000
13 $100,000 $100,000 $100,000
14 $100,000 $100,000 $100,000
15 $100,000 $100,000 $100,000
16 $100,000 $100,000 $100,000
17 $100,000 $100,000 $100,000
18 $100,000 $100,000 $100,000
19 $100,000 $100,000 $100,000
20 $100,000 $100,000 $100,000
age 60 $100,000 $100,000 $100,000
age 65 $100,000 $100,000
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We cannot represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission hereto or hereafter duly adopted pursuant to authority conferred in
that section.
RULE 484 UNDERTAKING
The By-Laws of IDS Life Insurance Company provide that:
The Corporation 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 Manager
of Variable Annuity Funds A and B, director, officer, employee or agent of this
Corporation, or is or was serving at the direction of the Corporation as a
Manager of Variable Annuity Funds A and B, 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 of Minnesota,
as now existing or hereafter amended, provided that this Article shall not
indemnify or protect any such Manager of Variable Annuity Funds A and B,
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 directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
The sponsoring insurance company represents that the fees and charges deducted
under the contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
insurance company.
<PAGE>
CONTENTS OF THE REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 43 pages.
The undertakings to file reports.
The signatures.
The following exhibits:
1. A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2 to the Registration Statement.
(1) (a) Resolution of the Executive Committee of the Board
of Directors of American Enterprise Life Insurance
Company establishing the Trust, dated July 15, 1987,
filed electronically as Exhibit 1 to the Initial
Registration Statement No. 33-54471, filed on or
about July 5, 1994, is incorporated herein by
reference.
(2) Not applicable.
(3) (a) Not applicable.
(b) (1) Form of Sales Representative Agreements to be
filed by amendment.
<PAGE>
(c) Schedules of Sales Commissions to be filed by
amendment.
(4) Not applicable.
(5) (a) Flexible Premium Variable Life Insurance
Policy (SIG-VUL) to be filed by amendment.
(6) (a) Amendment and Restatement of Articles of
Incorporation of American Enterprise Life dated July
29, 1986, filed electronically as Exhibit 6.1 to the
Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by
reference.
(b) Amended By-Laws of American Enterprise Life filed
electronically as Exhibit 6.2 to the Initial
Registration Statement No. 33-54471, filed on or
about July 5, 1994, is incorporated herein by
reference.
(7) Not applicable.
(8) (a) Form of Participation Agreements to be filed by
amendment.
(9) None.
(10) Application form for the Flexible Premium Variable Life
Insurance Policy to be filed by amendment.
(11) IDS Life Insurance Company's Description of Transfer
and Redemption Procedures and Method of Conversion to
Fixed Benefit Policies to be filed by amendment.
B. (1) Not applicable.
(2) Not applicable.
<PAGE>
C. Not applicable.
2. Opinion of counsel to be filed by amendment.
3. Financial Statement Schedules to be filed by amendment.
4. Not applicable.
5. Financial Data Schedules to be filed by amendment.
6. Actuarial opinion of Mark Gorham to be filed by amendment.
7. (a) Written actuarial consent of Mark Gorham to be filed by
amendment.
(b) Written auditor consent of Ernst & Young LLP to be filed by
amendment.
(c) Power of Attorney to sign amendments to this Registration
Statement dated July 29, 1999 is filed electronically herewith
as Exhibit 7(c) to this Initial Registration Statement on Form
S-6.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 American Enterprise Life Insurance Company, on behalf of the
Registrant, has duly caused this Registration Statement to be signed on behalf
of the Registrant by the undersigned, thereunto duly authorized, in the City of
Minneapolis, and State of Minnesota on the 30th day of July, 1999.
American Enterprise Variable Life Separate Account
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated on the 30th day of July, 1999.
Signature Title
/s/ James F. Choat* Director, President
James F. Choat and Chief Executive Officer
/s/ Jeffrey S. Horton* Vice President and Treasurer
Jeffrey S. Horton
/s/ Richard W. Kling* Director, President
Richard W. Kling and Chief Executive Officer
__________________ Director
Paul S. Mannweiler
/s/ Paula R. Meyer* Director and Executive Vice
Paula R. Meyer President, Assured Assets
/s/ William A. Stoltzmann* Director, Vice President,
William A. Stoltzmann General Counsel and Secretary.
/s/ Philip C. Wentzel* Vice President and Controller
Philip C. Wentzel
<PAGE>
*Signed pursuant to Power of Attorney dated July 29, 1999 filed electronically
herewith as an Exhibit.
By:
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Vice President, Group Counsel and Assistant Secretary
American Enterprise Variable Life Account
File No. 811-09515
EXHIBIT INDEX
Exhibit 7(c): Power of Attorney to Registration Statement dated
July 29, 1999
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as a director and/or officer of American Enterprise
Life Insurance Company (AEL), on behalf of the below listed registrants
previously have filed registration statements and amendments thereto pursuant to
requirements of the Securities Act of 1933 and the Investment Company Act of
1940 with the Securities and Exchange Commission:
<TABLE>
<CAPTION>
<S> <C> <C>
1933 Act 1940 Act
Reg. Number Reg. Number
----------------- ----------------
American Enterprise Variable Annuity Account 333-74865 811-7195
American Express Signature Variable AnnuitySM (SIG-VA)
- ------------------------------------------------------------------
American Enterprise Variable Life Account
American Express Signature Variable Universal Life (SIG-VUL)
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko,
Christopher R. Long, Eileen J. Newhouse, Eric L. Marhoun and Timothy S. Meehan
or any one of them, as his/her attorney-in-fact and agent, to sign for him/her
in his/her name, place and stead any and all filings, applications (including
applications for exemptive relief), periodic reports, registration statements
for existing or future products (with all exhibits and other documents required
or desirable in connection therewith), other documents, and amendments thereto
and to file such filings, applications, periodic reports, registration
statements, other documents, and amendments thereto with the Securities and
Exchange Commission, and any necessary states, and grants to any or all of them
the full power and authority to do and perform each and every act required or
necessary in connection therewith.
Dated the 29th day of July, 1999.
<PAGE>
/s/ James F. Choat
James F. Choat
President and Chief Executive Officer
Director
/s/ Jeffrey S. Horton
Jeffrey S. Horton
Vice President and Treasurer
/s/ Richard W. Kling
Richard W. Kling
Chairman of the Board
Director
_____________________
Paul S. Mannweiler
Director
_____________________
Paula R. Meyer
Executive Vice President, Assured Assets
Director
/s/ William A. Stoltzmann
William A. Stoltzmann
Vice President, General Counsel and Secretary
Director
/s/ Philip C. Wentzel
Philip C. Wentzel
Vice President and Controller
