SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 1
FORM S-6
File No. 333-84121
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:
D. Name and complete address of agent for service:
Mary Ellyn Minenko, Esq.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
E. Title of securities being registered:
Flexible Premium Variable Life Insurance Policy
F. Approximate date of proposed public offering: not applicable
It is proposed that this filing become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
Prospectus
May 1, 2000
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
Administrative Offices:
829 AXP Financial Center
Minneapolis, MN 55474
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 3
Loads, Fees and Charges 6
Purchasing Your Policy 14
Keeping the Policy in Force 16
The Variable Account 17
The Funds 18
Rates of Return of the Subaccounts 24
The Fixed Account 27
Policy Value 28
Policy Value Credits 30
Proceeds Payable Upon Death 31
Transfers between the Fixed Account and Subaccounts 35
Policy Loans 38
Policy Surrenders 40
Optional Insurance Benefits 42
Payment of Policy Proceeds 42
Federal Taxes 45
American Enterprise Life 48
Management of American Enterprise Life 50
Other Information 51
Policy Illustrations 52
Key Terms 56
<PAGE>
The Policy in Brief
Loads, fees and charges: You pay the following charges, either indirectly (as
deductions from the underlying funds), or directly (such as deductions from your
premium payments or from your policy value). These charges primarily compensate
American Enterprise Life for administering and distributing the policy as well
as paying policy benefits and assuming related risks:
o Fund expenses -- apply only to the underlying funds and consists of
investment management fees, 12b-1 fees, taxes, brokerage commissions and
nonadvisory expenses ranging from 0.65% to 1.56% in total expenses. (p.6)
o Premium expense charge -- 3% 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, administrative expenses and optional
insurance benefits; includes a $7 per month administrative charge.
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. The maximum
surrender charge ranges from $6.84 to $57.75 per thousands of dollars of
the initial specified amount and any increase in the specified amount and
is based on the insured's age, sex and risk classification.
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.
Purchasing your policy: To apply, send a completed application and premium
payment to American Enterprise Life's 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.14)
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 by the 20th day after you receive it. In Hawaii, Illinois,
Virginia, Minnesota, Missouri, North Carolina, South Carolina, Washington and
Wisconsin, you will receive a full refund of all premiums paid. (p.14)
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 Internal Revenue Code of 1986,
as amended (the Code). (p.15)
No lapse guarantee (NLG): 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.16)
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.16)
<PAGE>
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.16)
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.17)
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.27)
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.
(p.30)
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.31)
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.35)
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.38)
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.40)
<PAGE>
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.42)
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 591/2. 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.45)
<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.
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.
<TABLE>
<CAPTION>
Annual operating expenses of the funds (after fee waivers and/or expense
reimbursement, if applicable, as a percentage of average daily net assets)
Management 12b-1 Other
Fees Fees Expenses Total
<S> <C> <C> <C> <C>
AXP(SM) Variable Portfolio -
Blue Chip Advantage Fund .56% .13 .26 .95%(1)
Bond Fund .60% .13 .08 .81%(2)
Capital Resource Fund .60% .13 .06 .79%(2)
Cash Management Fund .51% .13 .05 .69%(2)
Diversified Equity Income Fund .56% .13 .26 .95%(1)
Extra Income Fund .62% .13 .08 .83%(2)
Federal Income Fund .61% .13 .14 .88%(1)
Growth Fund .63% .13 .19 .95%(1)
Managed Fund .59% .13 .04 .76%(2)
New Dimensions Fund(R) .61% .13 .07 .81%(2)
Small Cap Advantage Fund .79% .13 .31 1.23%(1)
AIM V.I.
Capital Appreciation Fund .62% -- .11 .73%(3)
Capital Development Fund --% -- 1.23 1.23%(3,4)
Value Fund .61% -- .15 .76%(3)
Alliance VP
Premier Growth Portfolio (Class B) 1.00% .25 .04 1.29%(5)
Technology Portfolio (Class B) .71% .25 .24 1.20%(5)
U.S. Government/High Grade Securities
Portfolio (Class B) .60% .25 .30 1.15%(5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual operating expenses of the funds (after fee waivers and/or expense
reimbursement, if applicable, as a percentage of average daily net assets)
Management 12b-1 Other
Fees Fees Expenses Total
<S> <C> <C> <C> <C>
Baron Funds
Baron Capital Asset Fund 1.00% .25 .25 1.50%(6)
Fidelity VIP
III Growth & Income Portfolio (Service Class) .48% .10 .12 .70%(7)
III Mid Cap Portfolio (Service Class) .57% .10 .40 1.07%(8)
Overseas Portfolio (Service Class) .73% .10 .18 1.01%(7)
FTVIPT
Franklin Real Estate Fund - Class 2 .56% .25 .02 .83%(9)
Mutual Shares Securities Fund - Class 2 .60% .25 .19 1.04%(10)
Templeton International Smaller Companies Fund -
Class 2 .85% .25 .26 1.36%(11)
Goldman Sachs VIT
Capital Growth Fund .75% -- .25 1.00%(12)
CORE(SM) U.S. Equity Fund .70% -- .20 .90%(12)
Global Income Fund .90% -- .25 1.15%(12)
International Equity Fund 1.00% -- .35 1.35%(12)
J.P. Morgan
U.S. Disciplined Equity Portfolio .35% -- .50 .85%(13)
Lazard Retirement Services
Equity Portfolio .75% .25 .25 1.25%(14)
International Equity Portfolio .75% .25 .25 1.25%(14)
MFS(R)
New Discovery Series .90% -- .17 1.07%(15,16)
Research Series .75% -- .11 .86%(15)
Utilities Series .75% -- .16 .91%(15)
Putnam Variable Trust
Putnam VT Growth and Income Fund - Class IB Shares .46% .15 .04 .65%(3)
Putnam VT International Growth Fund - Class IB Shares .80% .15 .22 1.17%(3)
Putnam VT International New Opportunities Fund -
Class IB Shares 1.08% .15 .33 1.56%(3)
Royce
Micro-Cap Portfolio 1.25% -- .10 1.35%(17)
Premier Portfolio 1.00% -- .35 1.35%(17)
Wanger
International Small Cap 1.25% -- .24 1.49%(18)
U.S. Small Cap .95% -- .07 1.02%(18)
Warburg Pincus Trust -
Emerging Growth Portfolio -- -- 1.40 1.40%(19)
</TABLE>
<PAGE>
1 Based on estimated expenses after fee waivers and expense reimbursements.
Without fee waivers and expense reimbursements "Other Expenses" and "Total"
would be 0.39% and 1.08% for AXP(SM) Variable Portfolio - Blue Chip Advantage
and AXP(SM) Variable Portfolio - Diversified Equity Income Funds, 0.26% and
1.00% for AXP(SM) Variable Portfolio - Federal Income Fund, 0.32% and 1.08% for
AXP(SM) Variable Portfolio - Growth Fund and 0.43% and 1.35% for AXP(SM)
Variable Portfolio - Small Cap Advantage Fund.
2 The fund's expense figures are based on actual expenses for the fiscal year
ended Aug. 31, 1999 restated to include a Rule 12b-1 distribution fee of .125%
that went into effect Sept. 21, 1999.
3 Figures in "Management Fees", "12b-1 Fees", "Other Expenses" and "Total" are
based on actual expenses for the fiscal year ended Dec. 31, 1999.
4 Had there been no fee waiver or expenses reimbursements, expenses would have
been: 0.75%, 0.00%, 2.67% and 3.42%.
5 Figures in "Management Fees", "12b-1 Fees". "Other Expenses" and "Total" are
based on actual expenses for the fiscal period ended Dec. 31, 1999. Absent fee
waivers and expense reimbursements "Management Fees", "12b-1 Fees", "Other
Expenses" and "Total" would be 1.00%, 0.25%, 0.27% and 1.52% for Alliance
Technology Portfolio.
6 The Advisor is contractually obligated to reduce its fee to the extent
required to limit Baron Capital Asset Fund's total operating expenses to 1.50%
for the first $250 million of assets in the Fund, 1.35% for Fund assets over
$250 million and 1.25% for Fund assets over $500 million. Without the expense
limitations, total operating expenses for the Fund for the period Jan. 1, 1999
through Dec. 31, 1999 would have been 1.88%.
7 A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds'
custodian, credits realized as a result of uninvested cash balances were used to
reduce a portion of each applicable funds' expenses. With these reductions,
"Other Expenses" and "Total expenses" presented in the table would have been
0.11% and 0.69% for Growth & Income Portfolio and 0.15% and 0.98% for Overseas
Portfolio.
8 FMR agreed to reimburse a portion Mid Cap Portfolio's expenses during the
period. Without this reimbursement, the Portfolio's management fee, distribution
& service fee (12b-1), other expenses and total expenses would have been 0.57%,
0.10%, 2.74% and 3.41%, respectively.
9 Previously Franklin Real Estate Securities Fund. The fund administration fee
is paid indirectly through the management fee. The fund's Class 2 distribution
plan or "Rule 12b-1 plan" is described in the fund's prospectus.
10 On Feb. 8, 2000, a merger and reorganization was approved that combined the
fund with a similar fund of Templeton Variable Products Series Fund, effective
May 1, 2000. The table shows total expenses based on the fund's as of Dec. 31,
1999, and not the assets of the combined fund. However, if the table reflected
combined assets, the fund's expenses after May 1, 2000 would be estimated as:
Management Fees, 0.60%, 12b-1 Fees 0.25%, Other Expenses 0.19%, and Total 1.04%.
The fund's Class 2 distribution plan or "Rule 12b-1 plan" is described in the
fund's prospectus.
11 The fund's Class 2 distribution plan or "Rule 12b-1 plan" is described in the
fund's prospectus.
12 The fund's expenses are based on estimated expenses for the fiscal year ended
Dec. 31, 2000. Goldman Sachs Asset Management and Goldman Sachs Asset Management
International, the investment advisers, have voluntarily agreed to reduce or
limit certain other expenses (excluding management fees, taxes, interest,
brokerage fees, litigation, indemnification and other extraordinary expenses) to
the extent such expenses exceed the percentage stated in the above table (as
calculated per annum) of each fund's respective average daily net assets.
Without the limitations described above, "Other Expenses" and "Total" of the
funds would be as follows: 0.94% and 1.69% for Capital Growth Fund, 1.78% and
2.68% for Global Income Fund, and 0.77% and 1.77% for International Equity Fund,
0.20% and 0.90% for the CORE(SM) U.S. Equity Fund, CORE(SM) is a service mark of
Goldman Sachs & Co.
13 Fees are stated to reflect an agreement to reimburse the trust to the extent
certain expenses exceed in any fiscal year 0.85% of the average daily net assets
of the J.P. Morgan U.S. Disciplined Equity Portfolio. Without such
reimbursements, total fund annual expenses would have been 0.87% for the
portfolio.
14 Effective May 1, 1999, the investment advisor agreed to waive its fees and/or
reimburse the Funds through Dec. 31, 2000 to the extent that total Fund expenses
exceed 1.25% for Equity and 1.25% for International Equity of the Funds' average
daily net assets. Absent fee waivers and/or reimbursements, "Other Expenses" and
"Total" expenses for the year ended Dec. 31, 1999 would have been 4.63% and
5.63% for Equity, and 11.94% and 12.94% for International Equity.
15 Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. "Other Expenses" do not take into
account these expense reductions, and are therefore higher than the actual
expenses of the series. Had these fee reductions been taken into account, "Net
Expenses" would be lower for certain series and would equal: 1.05% for New
Discovery Series, 0.85% for Research Series, and 0.90% for Utilities Series.
16 MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed the
following percentages of the average daily net assets of the series during the
current fiscal year 0.15% for the New Discovery Series. Without this agreement,
"Other" and Total Expenses" would have been 1.59% and 2.49%. These contractual
fee arrangements will continue until at least May 1, 2001, unless changed with
the consent of the board of trustees which oversees the series.
17 Royce has contractually agreed to waive its fees and reimburse expenses to
the extent necessary to maintain the Funds Net Annual Operating Expense ratio at
or below 1.35% through Dec. 31, 1999 and 1.99% through Dec. 31, 2008. Absent fee
waivers "Other Expenses" and "Total Expenses" would be 0.99% and 2.24% for Royce
Micro-Cap Portfolio and 4.63% and 5.63% for Royce Premier Portfolio.
18 Actual operating expenses of funds at Dec. 31, 1999.
19 Expense ratios are shown after fee waivers and expenses reimbursements by the
investment advisor. The total expense ratios before the waivers and
reimbursements would have been 11.16% for Emerging Growth Portfolio of the
Warburg Pincus Trust.
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.
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" in
the section "Loads, Fees and Charges", 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.
<PAGE>
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" under the section "Keeping
the Policy in Force").
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.
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 or 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.
<PAGE>
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 maximum 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 maximum 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 maximum
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 maximum surrender charge will
decrease annually until it is zero at the beginning of the 16th year following
the increase.
The following example illustrates how we calculate the maximum 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 $1201.00
2 1120.93
3 1040.87
4 960.80
5 880.73
6 800.67
7 720.60
8 640.53
9 560.47
10 480.40
11 400.33
12 320.27
13 240.20
14 160.13
15 80.07
16+ 0
The amounts shown decrease on an annual basis.
<PAGE>
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 per 1,000 of $8.81 multiplied by 50 or
$440.50. 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 per
1,000 of $57.32 multiplied by 5,000 or $286,600.
Maximum Surrender Charge
(Rate per Thousand of Initial Specified Amount)
Standard Standard
Age Male Female
0 7.25 6.84
1 7.20 6.81
2 7.27 6.85
3 7.33 6.91
4 7.40 6.96
5 7.48 7.03
6 7.56 7.08
7 7.64 7.15
8 7.75 7.23
9 7.84 7.29
10 7.95 7.37
11 8.07 7.47
12 8.19 7.55
13 8.31 7.64
14 8.44 7.75
15 8.57 7.84
16 8.69 7.95
17 8.83 8.05
18 8.96 8.17
19 9.09 8.29
Standard Nonmoker Standard Nonmoker
Age Male Male Female Female
20 9.96 8.81 8.81 8.25
21 10.13 8.93 8.96 8.39
22 10.32 9.08 9.12 8.51
23 10.52 9.23 9.29 8.64
24 10.73 9.39 9.47 8.79
25 10.96 9.55 9.65 8.95
26 11.21 9.73 9.85 9.11
27 11.48 9.93 10.05 9.27
28 11.76 10.13 10.27 9.45
29 12.07 10.36 10.51 9.64
30 12.39 10.59 10.75 9.84
31 12.73 10.84 11.00 10.05
32 13.11 11.11 11.28 10.27
33 13.49 11.39 11.56 10.51
34 13.92 11.69 11.87 10.76
35 14.36 12.01 12.19 11.01
36 14.83 12.35 12.52 11.29
37 15.32 12.71 12.88 11.59
38 15.84 13.08 13.25 11.89
39 16.40 13.48 13.64 12.21
<PAGE>
Maximum Surrender Charge
(Rate per Thousand of Initial Specified Amount)
Standard Nonsmoker Standard Nonsmoker
Age Male Male Female Female
40 16.99 13.89 14.05 12.56
41 17.60 14.35 14.48 12.92
42 18.25 14.83 14.92 13.29
43 18.95 15.32 15.39 13.69
44 19.67 15.85 15.88 14.11
45 20.44 16.43 16.40 14.55
46 21.25 17.03 16.93 15.01
47 22.11 17.67 17.51 15.51
48 23.01 18.33 18.11 16.03
49 23.99 19.07 18.73 16.59
50 25.00 19.83 19.40 17.17
51 26.09 20.65 20.11 17.80
52 27.25 21.53 20.85 18.45
53 28.47 22.47 21.64 19.16
54 29.76 23.47 22.47 19.91
55 31.13 24.52 23.35 20.69
56 32.57 25.65 24.27 21.53
57 34.11 26.87 25.25 22.44
58 35.72 28.15 26.31 23.40
59 37.44 29.53 27.44 24.43
60 39.28 31.01 28.65 25.55
61 41.24 32.60 29.97 26.75
62 43.33 34.29 31.39 28.04
63 45.55 36.12 32.91 29.44
64 47.89 38.07 34.53 30.93
65 50.37 40.15 36.25 32.53
66 52.99 42.37 38.09 34.25
67 55.75 44.76 40.05 36.09
68 57.75 47.33 42.17 38.08
69 57.69 50.09 44.47 40.25
70 57.63 53.08 46.97 42.63
71 57.58 56.31 49.72 45.21
72 57.55 57.41 52.72 48.04
73 57.53 57.37 55.97 51.12
74 57.53 57.33 57.38 54.47
75 57.53 57.29 57.32 57.23
76 57.53 57.24 57.26 57.14
77 57.52 57.19 57.18 57.05
78 57.48 57.11 57.09 56.94
79 57.43 57.04 56.99 56.83
80 57.39 56.97 56.90 56.73
81 57.36 56.91 56.81 56.63
82 57.36 56.88 56.74 56.56
83 57.39 56.87 56.71 56.51
84 57.42 56.89 56.69 56.46
85 57.44 56.90 56.66 56.42
<PAGE>
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.
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.
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>
Purchasing Your Policy
APPLICATION
To apply for coverage, complete an application and send it with your premium
payment to American Enterprise Life's 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.
RIGHT TO EXAMINE POLICY
You may return your policy for any reason and receive a refund of policy value,
less indebtedness, plus any premium expense charges or monthly deductions taken.
In Hawaii, Illinois, Minnesota, Missouri, North Carolina, South Carolina,
Virginia, Washington and Wisconsin, you will receive a full refund of all
premiums paid. To do so, you must mail or deliver the policy to American
Enterprise Life's office or your sales representative with a written request for
cancellation by the 20th day after you receive it. On the date your request is
postmarked or received, the policy will immediately be considered void from the
start.
<PAGE>
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.
<PAGE>
Keeping the Policy in Force
NO LAPSE GUARANTEE
The NLG provides that your policy will remain in force for five 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 (except in
Tennessee and Virginia) to contest the truth of statements or representations in
the reinstatement application.
<PAGE>
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
Securities and Exchange Commission (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.
<PAGE>
<TABLE>
<CAPTION>
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:
- ---------------------------- ------------------------------ ----------------------------- --------------------------
Subaccount Investing In Investment Objectives and Investment Advisor or
Policies Manager
- ---------------------------- ------------------------------ ----------------------------- --------------------------
<S> <C> <C> <C>
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPBCA AXP(SM) Variable Portfolio - Objective: long-term total IDS Life Insurance
Blue Chip Advantage Fund return exceeding that of Company (IDS Life),
the U.S. stock market. investment manager;
Invests primarily in common American Express
stocks of companies Financial Corporation
included in the unmanaged (AEFC) investment
S&P 500 Index. advisor.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPBND AXP(SM) Variable Portfolio Objective: high level of IDS Life, investment
- Bond Fund current income while manager; AEFC investment
conserving the value of the advisor.
investment and continuing a
high level of income for
the longest time period.
Invests primarily in bonds
and other debt obligations.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPCPR AXP(SM) Variable Portfolio Objective: capital IDS Life, investment
- Capital Resource Fund appreciation. Invests manager; AEFC investment
primarily in U.S. common advisor.
stocks and other securities
convertible into common
stocks.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPCMG AXP(SM) Variable Portfolio - Objective: maximum current IDS Life, investment
Cash Management Fund income consistent with manager; AEFC investment
liquidity and conservation advisor.
of capital. Invests in
money market securities.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPDEI AXP(SM) Variable Portfolio - Objective: a high level of IDS Life, investment
Diversified Equity Income current income and, as a manager; AEFC investment
Fund secondary goal, steady advisor.
growth of capital. Invests
primarily in dividend-
paying common and
preferred stocks.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPEXI AXP(SM) Variable Portfolio Objective: high current IDS Life, investment
- Extra Income Fund income, with capital growth manager; AEFC investment
as a secondary objective. advisor.
Invests primarily in
high-yielding, high-risk
corporate bonds issued by
U.S. and foreign companies
and governments.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPFIF AXP(SM) Variable Portfolio - Objective: a high level of IDS Life, investment
Federal Income Fund current income and safety manager; AEFC investment
of principal consistent advisor.
with an investment in U.S.
government and government
agency securities. Invests
primarily in debt
obligations issued or
guaranteed as to principal
and interest by the U.S.
government, its agencies or
instrumentalities.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPGRO AXP(SM) Variable Portfolio Objective: long-term IDS Life, investment
- Growth Fund capital growth. Invests manager; AEFC investment
primarily in common stocks advisor.
and securities convertible
into common stocks that
appear to offer growth
opportunities.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPMGD AXP(SM) Variable Portfolio - Objective: maximum total IDS Life, investment
Managed Fund investment return through a manager; AEFC investment
combination of capital advisor.
growth and current income.
Invests primarily in a
combination of common and
preferred stocks,
convertible securities,
bonds and other debt
securities.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPNDM AXP(SM) Variable Portfolio - Objective: long-term growth IDS Life, investment
New Dimensions Fund(R) of capital. Invests manager; AEFC investment
primarily in common stocks advisor.
of U.S. and foreign
companies showing potential
for significant growth.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPSCA AXP(SM) Variable Portfolio - Objective: long-term IDS Life, investment
Small Cap Advantage Fund capital growth. Invests manager; AEFC investment
primarily in equity stocks advisor.
of small companies that are
often included in the S&P
SmallCap 600 Index
or the Russell 2000
Index.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VACAP AIM V.I. Capital Objective: growth of A I M Advisors, Inc.
Appreciation Fund capital. Invests primarily
in common stocks, with
emphasis on medium- and
small-sized growth
companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VACDV AIM V.I. Capital Development Objective: long-term growth A I M Advisors, Inc.
Fund of capital. Invests
primarily in securities
(including common stocks,
convertible securities and
bonds) of small- and
medium-sized companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VAVAL AIM V.I. Value Fund Objective: long-term growth A I M Advisors, Inc.
of capital with income as a
secondary objective.
Invests primarily in equity
securities judged to be
undervalued relative to the
investment advisor's
appraisal of the current or
projected earnings of the
companies issuing the
securities, or relative to
current market values of
assets owned by the
companies issuing the
securities, or relative to
the equity market generally.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VAPGR Alliance Premier Growth Objective: growth of Alliance Capital
Portfolio (Class B) capital by pursuing Management, L.P.
aggressive investment
policies. Invests primarily
in equity securities of a
limited number of large,
carefully selected,
high-quality U.S. companies
that are judged likely to
achieve superior earnings
growth. As a matter of
fundamental policy, the
Portfolio normally invests
in at least 85% of its
total assets in the equity
securities of U.S.
companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VATEC Alliance Technology Objective: growth of Alliance Capital
Portfolio (Class B) capital. Current income is Management, L.P.
incidental to the
Portfolio's objective.
Invests primarily in
securities of
companies expected
to benefit from
technological advances
and improvements. The
Portfolio's policy
is to invest in any
company and industry
and in any type of
security with potential for
capital appreciation.
It invests in well-
known and established
companies and new
and unseasoned
companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VAUGH Alliance U.S. Government/ Objective: high level of Alliance Capital
High Grade Securities current income consistent Management, L.P.
Portfolio (Class B) with preservation of
capital. Invests primarily
in (1) U.S. Government
securities and (2) other
high-grade debt securities
rated AAA, AA, A by S&P,
Duff & Phelps or Fitch,
Aaa, Aa or A, by
Moody's, or, if
unrated, of
equivalent quality.
As a matter of
fundamental policy,
the Portfolio
invests at least 65%
of its total assets
in these types of
securities. The
Portfolio may invest
up to 35% of its
total assets in
investment grade or
corporate debt
securities and CMOs.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VBCAS Baron Capital Asset Fund Objective: capital BAMCO, Inc.
appreciation. Invests
primarily in securities of
small and medium sized
companies with undervalued
assets or favorable growth
prospects.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VFGRI Fidelity VIP III Growth & Objective: high total Fidelity Management &
Income Portfolio (Service return through a Research Company (FMR),
Class) combination of current investment manager; FMR
income and capital U.K. and FMR Far East,
appreciation. Invests sub-investment advisors.
primarily in common stocks
with a focus on those that
pay current dividends and
show potential for capital
appreciation.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VFMDC Fidelity VIP III Mid Cap Objective: long-term growth FMR, investment manager;
Portfolio (Service Class) of capital. Invests FMR U.K. and FMR Far
primarily in medium market East, sub-investment
capitalization common advisors.
stocks.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VFOVS Fidelity VIP Overseas Objective: long-term growth FMR, investment manager;
Portfolio (Service Class) of capital. Invests FMR U.K., FMR Far East,
primarily in common stocks Fidelity International
of foreign securities. Investment Advisors
(FIIA) and FIIA U.K.,
sub-investment advisors.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VFRES FTVIPT Franklin Real Estate Objective: capital Franklin Advisers, Inc.
Fund - Class 2 (Previously appreciation with a
Franklin Real Estate secondary goal to earn
Securities Fund) current income. Invests
primarily in securities of
companies operating
in the real estate
industry, primarily
equity real estate
investment trusts
(REITS).
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VFMSS FTVIPT Mutual Shares Objective: capital Franklin
Securities Fund - Class 2 appreciation with income Mutual
as a secondary goal. Advisers,
Invests primarily in LLC
equity securities of
companies that the
manager believes are
available at market
prices less than their
actual value based on
certain recognized or
objective criteria
(intrinsic value).
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VFISC FTVIPT Templeton Objective: long-term Templeton Investment
International Smaller capital appreciation. Counsel, Inc.
Companies Fund - Class 2 Invests primarily in equity
securities of smaller
companies located outside
the U.S., including in
emerging markets.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VGCPG Goldman Sachs VIT Capital Objective: long-term growth Goldman Sachs Asset
Growth Fund of capital. Invests Management
primarily in equity
securities considered
by the Investment Advisor
to have long-term
capital appreciation
potential.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VGCUS Goldman Sachs VIT CORE U.S. Objective: long-term growth Goldman Sachs Asset
Equity Fund of capital and dividend Management
income. Invests primarily
in a broadly diversified
portfolio of large-cap and
blue chip equity securities
representing all major
sectors of the U.S. economy.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VGGLI Goldman Sachs VIT Global Objective: high total Goldman Sachs Asset
Income Fund return, emphasizing current Management International
income, and, to a lesser
extent, providing
opportunities for capital
appreciation. Invests
primarily in a portfolio of
high quality fixed-income
securities of U.S. and
foreign issuers and enters
into transactions in
foreign currencies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VGINE Goldman Sachs VIT Objective: long-term Goldman Sachs Asset
International Equity Fund capital appreciation. Management International
Invests primarily in equity
securities of companies
that are organized
outside the U.S., or
whose securities are
principally traded
outside the U.S.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VJUDE J.P. Morgan U.S. Disciplined Objective: provide high J.P. Morgan
Equity Portfolio total return from a
portfolio of selected
equity securities through a
disciplined management
approach. Invests primarily
in large- and medium-
capitalization U.S.
companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VLREQ Lazard Retirement Series Objective: long-term Lazard Asset Management
Equity Portfolio capital appreciation.
Invests primarily in
equity securities,
principally common
stocks of relatively
large U.S. companies
(those whose total
market value is more
than $1 billion)
that the Investment
Manager believes are
undervalued based on
their earnings, cash
flow or asset
values.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VLRIE Lazard Retirement Series Objective: long-term Lazard Asset Management
International Equity capital appreciation.
Portfolio Invests primarily in equity
securities, principally
common stocks of relatively
large non-U.S. companies
(those whose total market
value is more than
$1 billion) that the
Investment Manager
believes are
undervalued based on
their earnings, cash
flow or asset
values.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VMNDS MFS(R) New Discovery Series Objective: capital MFS Investment
appreciation. Invests Management(R)
primarily in equity
securities of emerging
growth companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VMRES MFS(R) Research Series Objective: long-term growth MFS Investment
of capital and future Management(R)
income. Invests primarily
in common stocks and
related securities that
have favorable prospects
for long-term growth,
attractive valuations based
on current and expected
earnings or cash flow,
dominant or growing market
share, and superior
management.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VMUTS MFS(R)Utilities Series Objective: capital growth MFS Investment
and current income. Invests Management(R)
primarily in equity and
debt securities of domestic
and foreign companies in
the utilities industry.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPGRI Putnam VT Growth and Income Objective: capital growth Putnam Investment
Fund - Class IB Shares and current income. Invests Management, Inc.
primarily in common stocks
that offer potential for
capital growth, current
income or both.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPIGR Putnam VT International Objective: capital Putnam Investment
Growth Fund - Class IB Shares appreciation. Invests Management, Inc.
primarily in equity
securities of companies
located in countries other
than the United States.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VPINO Putnam VT International New Objective: long-term Putnam Investment
Opportunities Fund - Class capital appreciation. Management, Inc.
IB Shares Invests primarily in growth
stocks issued by companies
outside the U.S.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VRMCC Royce Micro-Cap Portfolio Objective: long-term growth Royce & Associates, Inc.
of capital. Invests
primarily in a broadly
diversified portfolio of
equity securities issued by
micro-cap companies
(companies with stock
market capitalizations
below $300 million).
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VRPRM Royce Premier Portfolio Objective: long-term growth Royce & Associates, Inc.
of capital with current
income as a
secondary objective.
Invests primarily in
a limited number of
equity securities
issued by small
companies with stock
market capitalization
between $300 million
and $1.5 billion.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VWISC Wanger International Small Objective: long-term growth Wanger Asset Management,
Cap of capital. Invests L.P.
primarily in stocks of
small- and medium-sized
non-U.S. companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VWUSC Wanger U.S. Small Cap Objective: long-term growth Wanger Asset Management,
of capital. Invests L.P.
primarily in stocks of
small- and medium-sized
U.S. companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
- ---------------------------- ------------------------------ ----------------------------- --------------------------
VWTEG Warburg Pincus Trust Objective: maximum capital Credit Suisse Asset
Emerging Growth Portfolio appreciation. Invests Management, LLC.
primarily in equity
securities of small- to
medium-sized U.S.
emerging-growth companies.
- ---------------------------- ------------------------------ ----------------------------- --------------------------
</TABLE>
<PAGE>
Fund Objectives
The investment objectives and policies of some of the funds maybe similar to the
investment objectives and policies of other mutual funds that the investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results, and those
may differ significantly from other funds with similar investment objectives and
policies.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds prospectuses for facts you
should know before investing. These prospectuses are available by contacting us
at the address or telephone number on the first page of this prospectus.
All funds are available to serve as the underlying investments for variable life
insurance policies. Some funds also are available to serve as investment options
for variable annuities and tax-deferred retirement plans. It is possible that in
the future, it may be disadvantageous for variable annuity accounts and variable
life insurance accounts and/or tax-deferred retirement plans to invest in the
available funds simultaneously.
Although the insurance company and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between annuity
owners, life insurance policy owners and tax-deferred retirement plans and to
determine what action, if any, should be taken in response to a conflict. If a
board were to conclude that it should establish separate funds for the variable
annuity, variable life insurance and tax-deferred retirement plan accounts, you
would not bear any expenses associated with establishing separate funds. Please
refer to the fund prospectuses for risk disclosure regarding simultaneous
investments by variable annuity, variable life insurance and tax-deferred
retirement plan accounts.
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 Subaccounts
Average annual rates of return in the following table reflect all charges
incurred by the fund, charges against the subaccounts (including the mortality
and expense risk charge) and the 3% premium expense charge. The rates do not
reflect the surrender charge or monthly deduction. If these charges were
reflected, the illustrated rates of return would have been lower.
Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. We show performance from the commencement date of the funds as if the
contract existed at that time which, it did not. Although we base performance
figures on historical earnings, past performance does not guarantee future
results.
<PAGE>
<TABLE>
<CAPTION>
Period ending 12/31/99 Subaccount performance since commencement of the Fund
10 years or
Subaccount Investing in 1 year 5 years since
commencement
<S> <C> <C> <C>
VPBCA AXP(SM) Variable Portfolio - Blue Chip Advantage Fund (9/99)1,4 --% --% 7.36%
VPBND AXP(SM) Variable Portfolio - Bond Fund (10/81)1 (2.23) 6.14 6.75
VPCPR AXP(SM) Variable Portfolio - Capital Resource Fund (10/81)1 7.27 17.04 12.95
VPCMG AXP(SM) Variable Portfolio - Cash Management Fund (10/81)1,2 0.69 3.37 3.57
AXP(SM) Variable Portfolio - Cash Management Fund's seven-day yield was 4.36%
and its compunded yield was 4.51%.
VPDEI AXP(SM) Variable Portfolio - Diversified Equity Income Fund (9/99)1,4 __ __ (1.11)
VPEXI AXP(SM) Variable Portfolio - Extra Income Fund (5/96)1 2.12 -- 3.71
VPFIF AXP(SM) Variable Portfolio - Federal Income Fund (9/99)1,4 -- -- (2.59)
VPGRO AXP(SM) Variable Portfolio - Growth Fund (9/99)1,4 -- -- 13.11
VPMGD AXP(SM) Variable Portfolio - Managed Fund (4/86)1 5.52 15.26 11.62
VPNDM AXP(SM) Variable Portfolio - New Dimensions Fund(R)(5/96)1 25.83 -- 23.90
VPSCA AXP(SM) Variable Portfolio - Small Cap Advantage Fund (9/99)1,4 -- -- 7.64
VACAP AIM V.I. Capital Appreciation Fund (5/93)1 35.87 23.14 20.26
VACDV AIM V.I. Capital Development Fund (5/98) 24.08 -- 8.19
VAVAL AIM V.I. Value Fund (5/93)1 23.05 24.95 21.13
VAPGR Alliance Premier Growth Portfolio (Class B) (7/99)3,4 -- -- 7.95
VATEC Alliance Technology Portfolio (Class B) (9/99)3,4 -- -- 43.55
VAUGH Alliance U.S. Government/High Grade Securities Portfolio
(Class B) (6/99)3,4 -- -- (3.57)
VBCAS Baron Capital Asset Fund (10/98)1 30.60 -- 56.29
VFGRI Fidelity VIP III Growth & Income Portfolio (Service Class) (12/96)1 3.66 -- 19.24
VFMDC Fidelity VIP III Mid Cap Portfolio (Service Class) (12/98)1 42.13 -- 46.07
VFOVS Fidelity VIP Overseas Portfolio (Service Class) (12/87)1 33.49 11.70 8.17
VFRES FTVIPT Franklin Real Estate Fund - Class 2 (1/89)1,6 (9.99) 6.36 7.69
VFMSS FTVIPT Mutual Shares Securities Fund - Class 2 (11/96)1,6 9.20 -- 8.80
VFISC FTVIPT Templeton International Smaller Companies Fund -
Class 2 (5/96)1,6 19.13 -- 3.42
VGCPG Goldman Sachs VIT Capital Growth Fund (4/98)1 22.22 -- 21.13
VGCUS Goldman Sachs VIT CORE U.S. Equity Fund (2/98)1 19.49 -- 17.72
VGGLI Goldman Sachs VIT Global Income Fund (1/98)1 (4.84) -- 1.09
VGINE Goldman Sachs VIT International Equity Fund (1/98)1 26.76 -- 23.26
VJUDE J.P. Morgan U.S. Disciplined Equity Portfolio (12/94)1 6.82 21.08 21.06
VLREQ Lazard Retirement Series Equity Portfolio (3/98)1 3.81 -- 7.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Period ending 12/31/99 Subaccount performance since commencement of the Fund
10 years or
Subaccount Investing in 1 year 5 years since
commencement
<S> <C> <C> <C> <C>
VLRIE Lazard Retirement Series International Equity Portfolio (9/98)1 16.73% --% 22.28%
VMNDS MFS(R)New Discovery Series (5/98)1 66.65 -- 36.95
VMRES MFS(R)Research Series (7/95)1 19.25 -- 21.00
VMUTS MFS(R)Utilities Series (1/95)1 32.83 -- 25.94
VPGRI Putnam VT Growth and Income Fund - Class IB Shares (2/88)1,5 (2.35) 18.14 12.88
VPIGR Putnam VT International Growth Fund - Class IB Shares (1/97)1,5 54.07 -- 27.70
VPINO Putnam VT International New Opportunities Fund -
Class IB Shares (1/97)1,5 94.96 -- 30.21
VRMCC Royce Micro-Cap Portfolio (12/96)1 23.19 -- 15.11
VRPRM Royce Premier Portfolio (12/96)1 4.04 -- 9.20
VWISC Wanger International Small Cap (5/95)1 117.18 -- 36.63
VWUSC Wanger U.S. Small Cap (5/95)1 20.08 -- 24.50
VWTEG Warburg Pincus Trust Emerging Growth Portfolio (9/99)1,4 -- -- 27.69
</TABLE>
1 (Commencement date of the fund).
2 The 7-day yield, shown here in parentheses, more closely reflects the current
earnings of the fund than the total return quotation.
3 (Commencement of distribution of Class B shares).
4 These numbers are YTD as of Dec. 31, 1999, not annualized.
5 Performance information for Class IB shares for the period prior to April 6,
1998 for Putnam VT Growth and Income Fund and prior to April 30, 1998 for Putnam
VT International Growth Fund and Putnam VT International New Opportunities Fund
are based on the performance of the fund's Class IA Shares (not offered as an
investment option) adjusted to reflect the fees paid by Class IB Shares,
including a Rule 12b-1 fee of 0.15%.
6 Because Class 2 shares were issued on Jan. 6, 1999, for the periods prior to
that date, Class 2 performance represents the historical performance of Class 1
shares. Performance of Class 2 shares for periods after Jan. 6, 1999 reflects
Class 2's additional 12b-1 fee expense which also affects all future
performance.
<PAGE>
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.
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. Rates higher than 4.0% may change from time to time, at the
discretion of American Enterprise Life, and will be based on various factors
including, but not limited to, the interest rate environment, returns earned on
investments backing these policies, the rates currently in effect for new and
existing American EnterpriseLife policies, product design, competition and
American Enterprise Life's revenues and expenses.
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.
<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
<PAGE>
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.
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.
<PAGE>
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:
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.
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 is 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.
<PAGE>
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.)
Applicable percentage table
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
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
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.
<PAGE>
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.
<PAGE>
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.
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. We
reserve the right to limit any specified amount decrease, in any policy year, to
no more than 25% of the specified amount in effect as of the date of your
request.
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.
<PAGE>
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 and partial surrenders.
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" under "Policy Surrenders").
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.
Maximum Number of Transfer Per Year
We reserve the right to limit mail and telephone transfers to 12 per policy
year. Twelve automated transfers per policy are allowed.
<PAGE>
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
P.O. Box 290679
Wethersfield, CT 06129-0679
Express mail:
American Enterprise Life Insurance Company
Attention: AEL Service Center
1290 Silas Deane Highway
Suite 102
Wethersfield, CT 06109
2 By phone
Call between 8 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.
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.
<PAGE>
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.
<TABLE>
<CAPTION>
How dollar-cost averaging works
Month Amount Accumulation Number of units
invested unit value purchased
<S> <C> <C> <C> <C>
By investing an Jan $100 $20 5.00
equal number of Feb 100 16 6.25
dollars each month... Mar 100 9 11.11
Apr 100 5 20.00
you automatically May 100 7 14.29
buy more units Jun 100 10 10.00
when the per unit Jul 100 15 6.67
market price is low... Aug 100 20 5.00
Sep 100 17 5.88
and fewer units when Oct 100 12 8.33
the per unit market
price is high.
</TABLE>
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.
<PAGE>
ASSET REBALANCING
You can ask us in writing to automatically rebalance the subaccount portion of
your policy value either quarterly, semi-annually or annually. The period you
select will start to run on the date we record your request. On the first
valuation date of each of these periods, we automatically will rebalance your
policy value so that the value in each subaccount matches your current
subaccount percentage allocations. These percentage allocations must be in whole
numbers. Asset rebalancing does not apply to the fixed account. There is no
charge for asset rebalancing.
You can change your percentage allocations or your rebalancing period at any
time by contacting us in writing. We will restart the rebalancing period you
selected as of the date we record your change. You also can ask us in writing to
stop rebalancing your policy value. You must allow 30 days for us to change any
instructions that currently are in place. For more information on asset
rebalancing, contact your sales representative.
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 the10th
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).
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.
<PAGE>
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.")
<PAGE>
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.")
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 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:
-- First from the portion due to the most recent increase;
-- Next from portions due to the next most recent increases successively; and
-- Then from the initial specified amount when the policy was issued.
(See "Decreases" under "Proceeds Payable Upon Death.")
o If Option 2 is in effect, a partial surrender does not affect the specified
amount.
<PAGE>
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.
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.
<PAGE>
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).
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.
<PAGE>
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. (See "Taxation of
policy proceeds" under "Federal Taxes"). 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 3% 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.
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.
<PAGE>
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 5, 10 and 15 Years
Age Payee Settlement 5 Years 10 Years 15 Years
Beginning
in Year Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C>
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 New York Stock Exchange (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.
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.
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
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 (modified endowments): Lesser of: The amount you receive or policy value
minus your investment in the policy.*
Policy loans and assignments (modified endowments) Lesser of: The amount of the loan/assignment or
policy value minus your investment in the policy.*
Partial surrenders (other policies): Generally, if the amount you receive is
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 (other policies): None
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.
</TABLE>
*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.
<PAGE>
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.
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.
<PAGE>
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 591/2;
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.
Tax-deferred retirement plans: The policy may be used in conjunction with
certain retirement plans that are already tax-deferred under the Code. The
policy will not provide any necessary or additional tax deferral if it is used
to fund a retirement plan that is tax-deferred. Since the rules governing such
use are complex, a purchaser should consult a competent pension consultant.
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.
<PAGE>
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
829 AXP Financial Center, Minneapolis, MN 55474. 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 as of the
most recent fiscal year were more than $262 billion.
STATE REGULATION
American Enterprise Life is subject to the laws of Indiana governing insurance
companies and to regulation by the Indiana Department of Insurance. 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 Insurance 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 Insurance 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
American Express Financial Advisors Inc. (AEFA), a registered broker/dealer,
serves as the principal underwriter for the life insurance policy. AEFA is a
wholly owned subsidiary of AEFC, which is a wholly owned subsidiary of American
Express Company.
Broker-dealers who have entered into distribution agreements with AEFA and
American Enterprise Life will distribute the life insurance policies.
American Enterprise Life will pay commissions for sales of policies to insurance
agencies or broker-dealers that are also insurance agencies. These commissions
will be up to 95% of the initial target premium (annualized), plus up to 2% of
all premiums in excess of the target premium. In addition, American Enterprise
Life may pay certain sellers additional compensation for selling and
distribution activities under certain circumstances. From time to time, American
Enterprise Life will pay or permit other promotional incentives, in cash or
credit or other compensation.
<PAGE>
LEGAL PROCEEDINGS
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which American Enterprise Life and its affiliates do business
involving insurers' sales practices, alleged agent misconduct, failure to
properly supervise agents, and other matters. IDS Life is a defendant in three
class action lawsuits of this nature. American Enterprise Life is a named
defendant in one of these suits. Richard W. and Elizabeth Thoresen vs. AEFC,
American Centurion Life Assurance Company, American Enterprise Life Insurance
Company, American Partners Life Insurance Company, IDS Life Insurance Company
and IDS Life Insurance Company of New York which was commenced in Minnesota
State Court in October 1998. The action was brought by individuals who purchased
an annuity in a qualified plan. The plaintiffs 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 is included as a party to a preliminary settlement of
all three class action lawsuits. We believe this approach will put these cases
behind us and provide a fair outcome for our clients. Our decision to settle
does not include any admission of wrongdoing. We do not anticipate that this
proposed settlement, or any other lawsuits in which American Enterprise Life is
a defendant, 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. All of the major systems used by American Enterprise
Life and the Variable Account are utilized by multiple subsidiaries 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,
including those specific to American Enterprise Life and the Variable Account,
was conducted to identify the major systems that could be affected by the Year
2000 issue. Steps were taken to resolve potential problems including
modification to existing software and the purchase of new software. As of Dec.
31, 1999, AEFC had completed its program of corrective measures on its internal
systems and applications, including Year 2000 compliance testing. AEFC had also
completed an evaluation of the Year 2000 readiness of other third parties whose
system failures could have an impact on American Enterprise Life's and the
Variable Account's operations.
AEFC's Year 2000 project also included 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. As of Dec. 31, 1999, these plans had been amended to include
specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the result of actual production since
Jan. 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on American Enterprise Life's and
the Variable Account's business, results of operations, or financial condition
as a result of the Year 2000 issue.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the financial statements
of American Enterprise Life Insurance Company at Dec. 31, 1999 and 1998, and for
each of the three years in the period ended Dec. 31, 1999. We've included our
financial statements in the prospectus in reliance of Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
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.
<PAGE>
Management of American Enterprise Life
Directors
James E. Choat
Director, president 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.
Paula R. Meyer
Director and executive vice president, Assured Assets since 1998; vice
president, AEFC since 1998; Piper Capital Management (PCM) President from
October 1997 to May 1998; PCM Director of Marketing from June 1995 to October
1997; PCM Director of Retail from December 1993 to June 1995.
William A. Stoltzmann
Director since September 1989; vice president, general counsel and secretary
since 1985.
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 May 1994 to July 1997; director of finance and
analyses, Corporate Treasury, AEFC, from June 1990 to May 1994.
Philip C. Wentzel
Vice president and controller since1998. Vice president - Finance, Risk
Management Products, AEFC since 1997; and director of financial reporting and
analyses from 1992 to 1997.
The address for all of the directors and principal officers is: 200 AXP
Financial Center, Minneapolis, MN 55474 (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.
<PAGE>
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:
o the existing funds become unavailable, or
o 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.
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.
<PAGE>
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.)
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 0.73% 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;
<PAGE>
o the daily mortality and expense risk charge, equivalent to 0.9% of the
daily net asset value of the subaccounts annually.
o the 12b-1 fee, assumed to be equivalent to an annual rate of 0.1% of the
fund's average daily net assets.
o a nonadvisory expense charge (assumed to be equivalent to an annual rate of
0.21% of each fund's average daily net assets for direct expenses incurred
by the fund. 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:
Gross annual investment rate Net annual rate of return for
of return Guaranteed and Current illustrations
0% (1.92)%
6 3.96%
12 9.85%
<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
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 $100,000 $100,000 $100,000 $609 $652 $696 $-- $-- $--
2 $1,537 $100,000 $100,000 $100,000 $1,207 $1,331 $1,461 $86 $210 $340
3 $2,979 $100,000 $100,000 $100,000 $1,782 $2,026 $2,291 $742 $986 $1,250
4 $4,073 $100,000 $100,000 $100,000 $2,337 $2,739 $3,192 $1,376 $1,778 $2,232
5 $5,222 $100,000 $100,000 $100,000 $2,876 $3,475 $4,178 $1,995 $2,594 $3,297
6 $6,428 $100,000 $100,000 $100,000 $3,397 $4,232 $5,254 $2,596 $3,432 $4,454
7 $7,694 $100,000 $100,000 $100,000 $3,903 $5,016 $6,433 $3,182 $4,296 $5,712
8 $9,024 $100,000 $100,000 $100,000 $4,389 $5,821 $7,719 $3,749 $5,181 $7,078
9 $10,420 $100,000 $100,000 $100,000 $4,859 $6,651 $9,126 $4,299 $6,091 $8,565
10 $11,886 $100,000 $100,000 $100,000 $5,301 $7,497 $10,655 $4,821 $7,016 $10,175
11 $13,425 $100,000 $100,000 $100,000 $5,751 $8,404 $12,384 $5,350 $8,004 $11,983
12 $15,042 $100,000 $100,000 $100,000 $6,169 $9,330 $14,272 $5,849 $9,010 $13,951
13 $16,739 $100,000 $100,000 $100,000 $6,556 $10,271 $16,334 $6,315 $10,031 $16,094
14 $18,521 $100,000 $100,000 $100,000 $6,924 $11,244 $18,605 $6,763 $11,084 $18,445
15 $20,392 $100,000 $100,000 $100,000 $7,249 $12,226 $21,083 $7,169 $12,146 $21,003
16 $22,356 $100,000 $100,000 $100,000 $7,540 $13,225 $23,801 $7,540 $13,225 $23,801
17 $24,419 $100,000 $100,000 $100,000 $7,790 $14,237 $26,780 $7,790 $14,237 $26,780
18 $26,585 $100,000 $100,000 $100,000 $7,996 $15,259 $30,049 $7,996 $15,259 $30,049
19 $28,859 $100,000 $100,000 $100,000 $8,163 $16,295 $33,643 $8,163 $16,295 $33,643
20 $31,247 $100,000 $100,000 $100,000 $8,276 $17,335 $37,592 $8,276 $17,335 $37,592
Age 60 $45,102 $100,000 $100,000 $100,000 $7,953 $22,541 $64,342 $7,953 $22,541 $64,342
Age 65 $62,785 $100,000 $100,000 $132,571 $5,521 $27,309 $108,664 $5,521 $27,309 $108,664
</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 Guaranteed costs assumed
Death benefit Option 1 nonsmoker Annual premium $900
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $945 $100,000 $100,000 $100,000 $606 $649 $693 $-- $-- $--
2 $1,937 $100,000 $100,000 $100,000 $1,192 $1,316 $1,445 $71 $195 $324
3 $2,979 $100,000 $100,000 $100,000 $1,756 $1,999 $2,261 $716 $958 $1,221
4 $4,073 $100,000 $100,000 $100,000 $2,297 $2,695 $3,144 $1,336 $1,734 $2,184
5 $5,222 $100,000 $100,000 $100,000 $2,816 $3,408 $4,104 $1,935 $2,528 $3,223
6 $6,428 $100,000 $100,000 $100,000 $3,310 $4,134 $5,143 $2,509 $3,333 $4,342
7 $7,694 $100,000 $100,000 $100,000 $3,778 $4,873 $6,269 $3,057 $4,152 $5,548
8 $9,024 $100,000 $100,000 $100,000 $4,221 $5,626 $7,491 $3,580 $4,985 $6,851
9 $10,420 $100,000 $100,000 $100,000 $4,637 $6,391 $8,818 $4,077 $5,830 $8,257
10 $11,886 $100,000 $100,000 $100,000 $5,024 $7,166 $10,256 $4,544 $6,685 $9,776
11 $13,425 $100,000 $100,000 $100,000 $5,380 $7,948 $11,817 $4,979 $7,548 $11,416
12 $15,042 $100,000 $100,000 $100,000 $5,705 $8,740 $13,512 $5,384 $8,420 $13,192
13 $16,739 $100,000 $100,000 $100,000 $5,997 $9,538 $15,354 $5,756 $9,298 $15,114
14 $18,521 $100,000 $100,000 $100,000 $6,254 $10,341 $17,357 $6,094 $10,181 $17,197
15 $20,392 $100,000 $100,000 $100,000 $6,474 $11,147 $19,536 $6,394 $11,067 $19,456
16 $22,356 $100,000 $100,000 $100,000 $6,652 $11,951 $21,906 $6,652 $11,951 $21,906
17 $24,419 $100,000 $100,000 $100,000 $6,784 $12,749 $24,484 $6,784 $12,749 $24,484
18 $26,585 $100,000 $100,000 $100,000 $6,865 $13,536 $27,291 $6,865 $13,536 $27,291
19 $28,859 $100,000 $100,000 $100,000 $6,886 $14,303 $30,346 $6,886 $14,303 $30,346
20 $31,247 $100,000 $100,000 $100,000 $6,845 $15,047 $33,675 $6,845 $15,047 $33,675
Age 60 $45,102 $100,000 $100,000 $100,000 $5,455 $18,162 $55,635 $5,455 $18,162 $55,635
Age 65 $62,785 $100,000 $100,000 $111,378 $1,075 $19,208 $91,293 $1,075 $19,208 $91,293
</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>
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.
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.
<PAGE>
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.
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.
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY FINANCIAL INFORMATION
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
American Enterprise Life Insurance Company
We have audited the accompanying balance sheets of American Enterprise Life
Insurance Company (a wholly owned subsidiary of IDS Life Insurance Company) as
of December 31, 1999 and 1998, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Enterprise Life
Insurance Company at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Ernst & Young LLP
February 3, 2000
Minneapolis, Minnesota
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
($ thousands, except share amounts)
<TABLE>
<S> <C> <C>
ASSETS 1999 1998
- ------ ----------- -----------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value:
1999, $984,103; 1998, $1,126,732) $1,006,349 $1,081,193
Available for sale, at fair value (amortized cost:
1999, $2,411,799; 1998, $2,526,712) 2,304,487 2,594,858
----------- -----------
3,310,836 3,676,051
Mortgage loans on real estate 785,253 815,806
Other investments 11,470 12,103
----------- -----------
Total investments 4,107,559 4,503,960
Accounts receivable 316 214
Accrued investment income 56,676 61,740
Deferred policy acquisition costs 180,288 196,479
Deferred income taxes 37,501 --
Other assets 9 43
Separate account assets 220,994 123,185
----------- -----------
Total assets $4,603,343 $4,885,621
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $3,921,513 $4,166,852
Policy claims and other policyholders' funds 12,097 7,389
Deferred income taxes -- 23,199
Amounts due to brokers 25,215 54,347
Other liabilities 17,436 24,500
Separate account liabilities 220,994 123,185
----------- -----------
Total liabilities 4,197,255 4,399,472
Stockholder's equity:
Capital stock, $100 par value per share;
100,000 shares authorized,
20,000 shares issued and outstanding 2,000 2,000
Additional paid-in capital 282,872 282,872
Accumulated other comprehensive (loss) income:
Net unrealized securities (losses) gains (69,753) 44,295
Retained earnings 190,969 156,982
----------- -----------
Total stockholder's equity 406,088 486,149
----------- -----------
Total liabilities and stockholder's equity $4,603,343 $4,885,621
========== ==========
</TABLE>
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
($ thousands)
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
--------- --------- ---------
Revenues:
Net investment income $322,746 $340,219 $332,268
Contractholder charges 6,069 6,387 5,688
Mortality and expense risk fees 2,269 1,275 641
Net realized gain (loss) on investments 6,565 (4,788) (509)
--------- --------- ---------
Total revenues 337,649 343,093 338,088
--------- --------- ---------
Benefits and expenses:
Interest credited on investment contracts 208,583 228,533 231,437
Amortization of deferred policy acquisition costs 43,257 53,663 36,803
Other operating expenses 35,147 24,476 24,890
--------- --------- ---------
Total benefits and expenses 286,987 306,672 293,130
--------- --------- ---------
Income before income taxes 50,662 36,421 44,958
Income taxes 16,675 14,395 16,645
--------- --------- ---------
Net income $ 33,987 $ 22,026 $ 28,313
========= ========= =========
</TABLE>
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1999
($ thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Total Additional Comprehensive
Stockholder's Capital Paid-In (Loss) Income, Retained
Equity Stock Capital Net of Tax Earnings
------------- -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $363,858 $2,000 $242,872 $ 12,343 $106,643
Comprehensive income:
Net income 28,313 -- -- -- 28,313
Unrealized holding gains arising
during the year, net of taxes of
($19,891) 36,940 -- -- 36,940 --
Reclassification adjustment for losses
included in net income, net of tax
of ($126) 233 -- -- 233 --
------------- ------------
Other comprehensive income 37,173 -- -- 37,173 --
-------------
Comprehensive income 65,486
Capital contribution from IDS Life 40,000 -- 40,000 -- --
------------- -------- ------------ ------------ -------------
Balance, December 31, 1997 469,344 2,000 282,872 49,516 134,956
Comprehensive income:
Net income 22,026 -- -- -- 22,026
Unrealized holding losses arising
during the year, net of taxes of $3,400 (6,314) -- -- (6,314) --
Reclassification adjustment for losses
included in net income, net of tax
of ($588) 1,093 -- -- 1,093 --
------------- ------------
Other comprehensive loss (5,221) -- -- (5,221) --
-------------
Comprehensive income 16,805
------------- -------- ------------ ------------ -------------
Balance, December 31, 1998 486,149 2,000 282,872 44,295 156,982
Comprehensive loss:
Net income 33,987 -- -- -- 33,987
Unrealized holding losses arising
during the year, net of taxes of $(59,231) (110,001) -- -- (110,001) --
Reclassification adjustment for gains
included in net income, net of tax (4,047) (4,047) --
of $(2,179) ------------- ------------
Other comprehensive loss (114,048) -- -- (114,048) --
-------------
Comprehensive loss (80,061)
------------- -------- ------------ ------------ -------------
Balance, December 31, 1999 $406,088 $2,000 $282,872 $(69,753) $190,969
============= ======== ============ ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
See accompanying notes.
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
($ thousands)
<S> <C> <C> <C>
1999 1998 1997
----------- ----------- -----------
Cash flows from operating activities:
Net income $ 33,987 $ 22,026 $ 28,313
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accrued investment income 5,064 (2,152) (8,017)
Change in accounts receivable (102) 349 9,304
Change in deferred policy acquisition costs, net 16,191 28,022 (21,276)
Change in other assets 34 74 4,840
Change in policy claims and other policyholders' funds 4,708 (3,939) (16,099)
Deferred income tax (benefit) provision 711 (9,591) (2,485)
Change in other liabilities (7,064) 7,595 1,255
Amortization of premium (accretion of discount), net 2,315 122 (2,316)
Net realized (gain) loss on investments (6,565) 4,788 509
Other, net (1,562) 2,544 959
----------- ----------- -----------
Net cash provided by (used in) operating activities 47,717 49,838 (5,013)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases -- -- (1,996)
Maturities 65,705 73,601 41,221
Sales 8,466 31,117 30,601
Fixed maturities available for sale:
Purchases (593,888) (298,885) (688,050)
Maturities 248,317 335,357 231,419
Sales 469,126 48,492 73,366
Other investments:
Purchases (28,520) (161,252) (199,593)
Sales 57,548 78,681 29,139
Change in amounts due to brokers (29,132) 19,412 (53,796)
----------- ----------- ------------
Net cash provided by (used in) investing activities 197,622 126,523 (537,689)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 299,899 302,158 783,339
Surrenders and other benefits (753,821) (707,052) (552,903)
Interest credited to account balances 208,583 228,533 231,437
Capital contribution from parent -- -- 40,000
----------- ----------- -----------
Net cash (used in) provided by financing activities (245,339) (176,361) 501,873
----------- ----------- -----------
Net decrease in cash and cash equivalents -- -- (40,829)
Cash and cash equivalents at beginning of year -- -- 40,829
----------- ----------- -----------
Cash and cash equivalents at end of year $ -- $ -- $ --
=========== =========== ==========
See accompanying notes.
</TABLE>
<PAGE>
1. Summary of significant accounting policies
Nature of business
American Enterprise Life Insurance Company (the Company) is a stock life
insurance company that is domiciled in Indiana and is licensed to transact
insurance business in 48 states. The Company's principal product is
deferred annuities, which are issued primarily to individuals. It offers
single premium and annual premium deferred annuities on both a fixed and
variable dollar basis.
Immediate annuities are offered as well.
Basis of presentation
The Company is a wholly-owned subsidiary of IDS Life Insurance Company (IDS
Life), which is a wholly owned subsidiary of American Express Financial
Corporation (AEFC). AEFC is a wholly owned subsidiary of American Express
Company. The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the United
States which vary in certain respects from reporting practices prescribed
or permitted by the Indiana Department of Insurance (see Note 4).
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and carried
at amortized cost. All other fixed maturities are classified as available
for sale and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are reported as a separate
component of accumulated other comprehensive (loss) income, net of deferred
income taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received
from brokers who deal in mortgage-backed securities.
Mortgage loans on real estate are carried at amortized cost less an
allowance for mortgage loan losses. The estimated fair value of the
mortgage loans is determined by a discounted cash flow analysis using
mortgage interest rates currently offered for mortgages of similar
maturities.
<PAGE>
1. Summary of significant accounting policies (continued)
Impairment of mortgage loans is measured as the excess of the loan's
recorded investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate, or the
fair value of collateral. The amount of the impairment is recorded in an
allowance for mortgage loan losses. The allowance for mortgage loan losses
is maintained at a level that management believes is adequate to absorb
estimated losses in the portfolio. The level of the allowance account is
determined based on several factors, including historical experience,
expected future principal and interest payments, estimated collateral
values, and current and anticipated economic and political conditions.
Management regularly evaluates the adequacy of the allowance for mortgage
loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on
management's judgment as to the ultimate collectibility of principal,
interest payments received are either recognized as income or applied to
the recorded investment in the loan.
The cost of interest rate caps and floors is amortized to investment income
over the life of the contracts and payments received as a result of these
agreements are recorded as investment income when realized. The amortized
cost of interest rate caps and floors is included in other investments.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
fair value.
Supplementary information to the statements of cash flows for the years
ended December 31, is summarized as follows:
1999 1998 1997
---- ----- ----
Cash paid during the year for:
Income taxes $22,007 $19,035 $19,456
Interest on borrowings 2,187 5,437 1,832
Contractholder charges
Contractholder charges include surrender charges and fees collected
regarding the issue and administration of annuity contracts.
<PAGE>
1. Summary of significant accounting policies (continued)
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation, policy
issue costs, and certain sales expenses, have been deferred on annuity
contracts. These costs are amortized using primarily the interest method.
Amortization of deferred policy acquisition costs requires the use of
assumptions including interest margins, mortality margins, persistency
rates, maintenance expense levels and, for variable products, separate
account performance. For universal life-type insurance and deferred
annuities, actual experience is reflected in the Company's amortization
models monthly. As actual experience differs from the current assumptions,
management considers the need to change key assumptions underlying the
amortization models prospectively. The impact of changing prospective
assumptions is reflected in the period that such changes are made and is
generally referred to as an unlocking adjustment. During 1998, unlocking
adjustments resulted in a net increase in amortization of $11 million. Net
unlocking adjustments in 1999 and 1997 were not significant.
Liabilities for future policy benefits
Liabilities for universal-life type insurance and fixed and variable
deferred annuities are accumulation values.
Federal income taxes
The Company's taxable income is included in the consolidated federal income
tax return of American Express Company. The Company provides for income
taxes on a separate return basis, except that, under an agreement between
AEFC and American Express Company, tax benefit is recognized for losses to
the extent they can be used on the consolidated tax return. It is the
policy of AEFC and its subsidiaries that AEFC will reimburse subsidiaries
for all tax benefits.
Included in other liabilities at December 31, 1999 and 1998 are $2,147 and
$3,504, respectively, payable to IDS Life for federal income taxes.
Separate account business
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity contract owners. The Company
receives mortality and expense risk fees from the variable annuity separate
accounts.
<PAGE>
1. Summary of significant accounting policies (continued)
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of
the annuitants and beneficiaries from the mortality assumptions implicit in
the annuity contracts. The Company makes periodic fund transfers to, or
withdrawals from, the separate account assets for such actuarial
adjustments for variable annuities that are in the benefit payment period.
The Company also guarantees that the rates at which administrative fees are
deducted from contract funds will not exceed contractual maximums.
Accounting changes
American Institute of Certified Public Accountants (AICPA) Statement of
Position (SOP) 98-1, "Accounting for Costs of Computer Software Developed
or Obtained for Internal Use" became effective January 1, 1999. The SOP
requires the capitalization of certain costs incurred after the date of
adoption to develop or obtain software for internal use. Software utilized
by the Company is owned by AEFC and capitalized by AEFC. As a result, the
new rule did not have a material impact on the Company's results of
operations or financial condition.
Effective January 1, 1999, the Company adopted AICPA SOP 97-3, "Accounting
by Insurance and Other Enterprises for Insurance-Related Assessments,"
providing guidance for the timing of recognition of liabilities related to
guaranty fund assessments. The Company had historically carried balance in
other liabilities on the balance sheet for potential guaranty fund
assessment exposure. Adoption of the SOP did not have a material impact on
the Company's results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective January 1, 2001.
This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative depends on the intended use of
the derivative and the resulting designation. The ultimate financial effect
of the new rule will be measured based on the derivatives in place at
adoption and cannot be estimated at this time.
<PAGE>
2. Investments
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available. Estimated
values are determined by established procedures involving, among other
things, review of market indices, price levels of current offerings of
comparable issues, price estimates and market data from independent brokers
and financial files.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1999 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- ---------- -------- -------- ----------
U.S. Government agency obligations $ 7,514 $ 23 $ 431 $ 7,106
State and municipal obligations 3,002 44 -- 3,046
Corporate bonds and obligations 816,826 5,966 23,311 799,482
Mortgage-backed securities 179,007 296 4,834 174,469
---------- -------- -------- ----------
$1,006,349 $ 6,329 $ 28,576 $ 984,103
========== ======== ======== ==========
Available for sale
U.S. Government agency obligations $ 2,047 $ -- $ 47 $ 1,999
State and municipal obligations 2,250 -- 190 2,060
Corporate bonds and obligations 1,419,150 7,445 90,703 1,335,892
Mortgage-backed securities 988,352 1,929 25,746 964,536
------------ -------- -------- ----------
$2,411,799 $ 9,374 $116,686 $2,304,487
========== ======== ======== ==========
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1998 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- ---------- -------- -------- ----------
U.S. Government agency obligations $ 8,652 $ 423 $ -- $ 9,075
State and municipal obligations 3,003 149 -- 3,152
Corporate bonds and obligations 877,140 48,822 6,670 919,292
Mortgage-backed securities 192,398 2,844 29 195,213
---------- -------- -------- ----------
$1,081,193 $ 52,238 $ 6,699 $1,126,732
========== ======== ======== ==========
Available for sale
U.S. Government agency obligations $ 2,062 $ 116 $ -- $ 2,178
Corporate bonds and obligations 1,472,814 69,990 34,103 1,508,701
Mortgage-backed securities 1,051,836 32,232 89 1,083,979
---------- -------- -------- ----------
$2,526,712 $102,338 $34,192 $2,594,858
========== ======== ======= ==========
</TABLE>
<PAGE>
2. Investments (continued)
The amortized cost and fair value of investments in fixed maturities at
December 31, 1999 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 26,214 $ 26,334
Due from one to five years 412,533 408,638
Due from five to ten years 331,187 320,146
Due in more than ten years 57,408 54,516
Mortgage-backed securities 179,007 174,469
------------- -------------
$ 1,006,349 $ 984,103
=========== ============
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 46,937 $ 47,236
Due from one to five years 75,233 73,525
Due from five to ten years 1,037,001 980,633
Due in more than ten years 264,276 238,557
Mortgage-backed securities 988,352 964,536
------------ ------------
$2,411,799 $2,304,487
During the years ended December 31, 1999, 1998 and 1997, fixed maturities
classified as held to maturity were sold with amortized cost of $8,466,
$31,117 and $29,561, respectively. Net gains and losses on these sales were
not significant. The sales of these fixed maturities were due to
significant deterioration in the issuers' creditworthiness.
In addition, fixed maturities available for sale were sold during 1999 with
proceeds of $469,126 and gross realized gains and losses of $10,374 and
$4,147 respectively. Fixed maturities available for sale were sold during
1998 with proceeds of $48,492 and gross realized gains and losses of $2,835
and $4,516, respectively. Fixed maturities available for sale were sold
during 1997 with proceeds of $73,366 and gross realized gains and losses of
$1,081 and $1,440, respectively.
At December 31, 1999, bonds carried at $3,277 were on deposit with various
states as required by law.
<PAGE>
2. Investments (continued)
At December 31, 1999, investments in fixed maturities comprised 81 percent
of the Company's total invested assets. These securities are rated by
Moody's and Standard & Poor's (S&P), except for securities carried at
approximately $486 million which are rated by AEFC internal analysts using
criteria similar to Moody's and S&P. A summary of investments in fixed
maturities, at amortized cost, by rating on December 31 is as follows:
Rating 1999 1998
---------------------- ----------- -----------
Aaa/AAA $1,168,144 $1,242,301
Aa/AA 42,859 45,526
Aa/A 52,416 60,019
A/A 422,668 422,725
A/BBB 189,072 228,656
Baa/BBB 995,152 1,030,874
Baa/BB 64,137 79,687
Below investment grade 483,700 498,117
------------ ------------
$3,418,148 $3,607,905
At December 31, 1999, approximately 94 percent of the securities rated
Aaa/AAA were GNMA, FNMA and FHLMC mortgage-backed securities. No holdings
of any other issuer were greater than one percent of the Company's total
investments in fixed maturities.
At December 31, 1999, approximately 19 percent of the Company's invested
assets were mortgage loans on real estate. Summaries of mortgage loans by
region of the United States and by type of real estate are as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
---------------------------------- ----------- ----------- ---------- -----------
South Atlantic $194,325 $ -- $198,552 $ 651
Middle Atlantic 118,699 -- 129,284 520
East North Central 126,243 -- 134,165 2,211
Mountain 103,751 -- 113,581 --
West North Central 125,891 513 119,380 9,626
New England 43,345 802 46,103 --
Pacific 41,396 -- 43,706 --
West South Central 31,153 -- 32,086 --
East South Central 7,100 -- 7,449 --
----------- ------------ ----------- ------------
791,903 1,315 824,306 13,008
Less allowance for losses 6,650 -- 8,500 --
----------- ------------ ----------- ------------
$785,253 $ 1,315 $815,806 $13,008
======== ======== ======== =======
<PAGE>
2. Investments (continued)
December 31, 1999 December 31, 1998
------------------------------ ------------------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
---------- -------------- ---------- ------------
Department/retail stores $232,449 $ 1,315 $253,380 $ 781
Apartments 181,346 -- 186,030 2,211
Office buildings 202,132 -- 206,285 9,496
Industrial buildings 83,186 -- 82,857 520
Hotels/Motels 43,839 -- 45,552 --
Medical buildings 32,284 -- 33,103 --
Nursing/retirement homes 6,608 -- 6,731 --
Mixed Use 10,059 -- 10,368 --
---------- -------------- ---------- ------------
791,903 1,315 824,306 13,008
Less allowance for losses 6,650 -- 8,500 --
----------- -------------- ----------- ------------
$785,253 $ 1,315 $815,806 $13,008
======== ========== ======== =======
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real estate at
the time of origination of the loan. The Company holds the mortgage
document, which gives it the right to take possession of the property if
the borrower fails to perform according to the terms of the agreement.
Commitments to purchase mortgages are made in the ordinary course of
business. The fair value of the mortgage commitments is $nil.
At December 31, 1999, the Company's recorded investment in impaired loans
was $5,200 with an allowance of $1,250. At December 31, 1998, the Company's
recorded investment in impaired loans was $1,932 with an allowance of $500.
During 1999 and 1998, the average recorded investment in impaired loans was
$5,399 and $2,736, respectively.
The Company recognized $136, $251 and $nil of interest income related to
impaired loans for the years ended December 31, 1999, 1998 and 1997,
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
---- ---- ----
Balance, January 1 $8,500 $3,718 $2,370
Provision (reduction) for investment losses (1,850) 4,782 1,805
Loan payoffs -- -- (457)
------ --------- -------
Balance, December 31 $6,650 $8,500 $3,718
====== ====== ======
Net investment income for the years ended December 31 is summarized as
follows:
1999 1998 1997
----- ----- ----
Interest on fixed maturities $265,199 $285,260 $278,736
Interest on mortgage loans 63,721 65,351 55,085
Interest on cash equivalents 534 137 704
Other (1,755) (2,493) 1,544
---------- ---------- ----------
327,699 348,255 336,069
Less investment expenses 4,953 8,036 3,801
--------- ---------- ----------
$322,746 $340,219 $332,268
======== ======== ========
</TABLE>
<PAGE>
2. Investments (continued)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
---- ---- ----
Fixed maturities $ 6,534 $ 863 $ 1,638
Mortgage loans (1,650) (4,816) (1,348)
Other investments (1,819) (835) (799)
--------- -------- -------
$ 3,065 $(4,788) $ (509)
========= ======= =======
Changes in net unrealized appreciation (depreciation) of investments for
the years ended December 31 are summarized as follows:
1999 1998 1997
----- ----- ----
Fixed maturities available for sale $(175,458) $(8,032) $57,188
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
The income tax expense (benefit) for the years ended December 31, consists
of the following:
1999 1998 1997
---- ---- ----
Federal income taxes:
Current $ 15,531 $ 23,227 $17,668
Deferred 711 (9,591) (2,485)
-------- -------- -------
16,242 13,636 15,183
State income taxes-current 433 759 1,462
-------- -------- -------
Income tax expense $ 16,675 $ 14,395 $16,645
======== ======== =======
</TABLE>
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate, for the years ended December 31,
are attributable to:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ---------------------
Provision Rate Provision Rate Provision Rate
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $17,731 35.0% $13,972 35.0% $15,735 35.0%
Increases (decreases) are
attributable to:
Tax-excluded interest (14) -- (35) (0.1) (41) (0.1)
State tax, net of federal benefit 281 0.5 493 1.2 956 2.1
Reduction of mortgage loss
reserve (1,225) (2.4) -- -- -- --
Other, net (98) (0.2) (35) -- (5) --
------ ----- -------- ------ ---- ------
Total income taxes $16,675 32.9 % $14,395 36.1% $16,645 37.0%
======= ===== ======= ==== ======= ====
</TABLE>
<PAGE>
3. Income taxes (continued)
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:
Deferred income tax assets: 1999 1998
------- -------
Policy reserves $46,243 $51,298
Unrealized losses on investments 39,678 --
Other 1,070 2,214
-------- --------
Total deferred income tax assets 86,991 53,512
-------- --------
Deferred income tax liabilities:
Deferred policy acquisition costs 49,490 52,908
Unrealized gains on investments -- 23,803
-------- --------
Total deferred income tax liabilities 49,490 76,711
-------- --------
Net deferred income tax assets (liabilities) $37,501 ($23,199)
======= ========
The Company is required to establish a valuation allowance for any portion
of the deferred income tax assets that management believes will not be
realized. In the opinion of management, it is more likely than not that the
Company will realize the benefit of the deferred income tax assets and,
therefore, no such valuation allowance has been established.
4. Stockholder's equity
Retained earnings available for distribution as dividends to IDS Life are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by state insurance regulatory authorities.
Statutory unassigned surplus aggregated $58,223 and $45,716 as of December
31, 1999 and 1998, respectively. In addition, dividends in excess of
$15,241 would require approval by the Insurance Department of the state of
Indiana.
Statutory net income and stockholder's equity as of December 31, are
summarized as follows:
1999 1998 1997
--------- --------- -------
Statutory net income $ 15,241 $ 37,902 $ 23,589
Statutory stockholder's equity 343,094 330,588 302,264
5. Related party transactions
The Company has purchased interest rate floors from IDS Life and entered
into an interest rate swap with IDS Life to manage its exposure to interest
rate risk. The interest rate floors had a carrying amount of $8,258 and
$6,651 at December 31, 1999 and 1998, respectively. The interest rate swap
is an off balance sheet transaction.
The Company has no employees. Charges by IDS Life for services and use of
other joint facilities aggregated $38,931, $28,482 and $24,535 for the
years ended December 31, 1999, 1998 and 1997, respectively. Certain of
these costs are included in deferred policy acquisition costs.
<PAGE>
6. Lines of credit
The Company has an available line of credit with AEFC aggregating $50,000.
The rate for the line of credit is established by reference to various
indices plus 20 to 45 basis points, depending on the term. There were no
borrowings outstanding under this agreement at December 31, 1999 or 1998.
7. Derivative financial instruments
The Company enters into transactions involving derivative financial
instruments to manage its exposure to interest rate risk, including hedging
specific transactions. The Company does not hold derivative instruments for
trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate. The Company is
not impacted by market risk related to derivatives held for non-trading
purposes beyond that inherent in cash market transactions. Derivatives are
largely used to manage risk and, therefore, the cash flow and income
effects of the derivatives are inverse to the effects of the underlying
transactions.
Credit risk is the possibility that the counterparty will not fulfill the
terms of the contract. The Company monitors credit risk related to
derivative financial instruments through established approval procedures,
including setting concentration limits by counterparty, and requiring
collateral, where appropriate. A vast majority of the Company's
counterparties are rated A or better by Moody's and Standard & Poor's.
Credit risk related to interest rate caps and floors is measured by
replacement cost of the contracts. The replacement cost represents the fair
value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over
the life of the agreement. Notional amounts are not recorded on the balance
sheet. Notional amounts far exceed the related credit exposure.
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
Notional Carrying Fair Total Credit
December 31, 1999 Amount Amount Value Exposure
----------------- -------- -------- ------ ------------
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $ 900,000 $ 3,212 $ 4,437 $ 4,437
Interest rate floors 2,000,000 8,258 2,251 2,251
Off balance sheet assets:
Interest rate swaps 2,000,000 -- 18,274 18,274
--------- -------- --------
$11,470 $24,962 $24,962
======= ======= =======
<PAGE>
7. Derivative financial instruments (continued)
Notional Carrying Fair Total Credit
December 31, 1998 Amount Amount Value Exposure
----------------- -------- -------- ------ ------------
Assets:
Interest rate caps $ 900,000 $ 5,452 $ 1,518 $ 1,518
Interest rate floors 1,000,000 6,651 17,798 17,798
Off balance sheet liabilities:
Interest rate swaps 1,000,000 -- (33,500) --
--------- ---------- --------
$12,103 ($ 14,184) $19,316
======= =========== =======
</TABLE>
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. All interest rate caps, floors and
swaps will expire on various dates from 2000 to 2006.
Interest rate caps, floors and swaps are used to manage the Company's
exposure to interest rate risk. These instruments are used primarily to
protect the margin between interest rates earned on investments and the
interest rates credited to related annuity contract holders.
8. Fair values of financial instruments
The Company discloses fair value information for most on- and off-balance
sheet financial instruments for which it is practicable to estimate that
value. Fair value of life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are excluded.
Off-balance sheet intangible assets are also excluded. Management believes
the value of excluded assets and liabilities is significant. The fair value
of the Company, therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------------------- --------------------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
---------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $1,006,349 $984,103 $1,081,193 $1,126,732
Available for sale 2,304,487 2,304,487 2,594,858 2,594,858
Mortgage loans on real estate (Note 2) 785,253 770,095 815,806 874,064
Derivative financial instruments (Note 7) 11,470 24,962 12,103 19,316
Separate account assets (Note 1) 220,994 220,994 123,185 123,185
Financial Liabilities
Future policy benefits for fixed annuities $3,905,849 $3,778,945 $4,152,059 $4,000,789
Separate account liabilities 220,994 209,942 123,185 115,879
Derivative financial instruments (Note 7) -- -- -- 33,500
</TABLE>
At December 31, 1999 and 1998, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $15,633 and $14,793, respectively. The fair value of
these benefits is based on the status of the annuities at December 31, 1999
and 1998.
<PAGE>
8. Fair values of financial instruments (continued)
The fair values of deferred annuities and separate account liabilities are
estimated as the carrying amount less applicable surrender charges. The
fair value for annuities in non-life contingent payout status is estimated
as the present value of projected benefit payments at rates appropriate for
contracts issued in 1999 and 1998.
9. Commitments and contingencies
In January 2000, AEFC reached an agreement in principle to settle three
class-action lawsuits. The Company had been named as a co-defendant in one
of these lawsuits. It is expected the settlement will provide $215 million
of benefits to more than 2 million participants. The agreement in principle
to settle also provides for release by class members of all insurance and
annuity market conduct claims dating back to 1985 and is subject to a
number of contingencies including a definitive agreement and court
approval. The portion of the settlement allocated to the Company did not
have a material impact on the Company's financial position or results from
operations.
10. YEAR 2000 ISSUE (unaudited)
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
the Company. All of the major systems used by the Company are maintained by
AEFC and are utilized by multiple subsidiaries and affiliates of AEFC. The
Company's businesses are heavily dependent upon AEFC's computer systems and
have significant interaction with systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to the Company, was conducted to identify the
major systems that could be affected by the Year 2000 issue. Steps were
taken to resolve potential problems including modification to existing
software and the purchase of new software. As of December 31, 1999, AEFC
had completed its program of corrective measures on its internal systems
and applications, including Year 2000 compliance testing. As of December
31, 1999, AEFC had also completed an evaluation of the Year 2000 readiness
of other third parties whose system failures could have an impact on the
Company's operations.
AEFC's Year 2000 project also included establishing Year 2000 contingency
plans for all key business units. Business continuation plans, which
address business continuation in the event of a system disruption, are in
place for all key business units. At December 31, 1999, these plans had
been amended to include specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the results of actual production
since January 1, 2000, management believes no material adverse consequences
were experienced, and there was no material effect on the Company's
business, results of operations, or financial condition as a result of the
Year 2000 issue.
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 the depositor provide that the Corporation shall have
the power to indemnify a director, officer, agent or employee of the Corporation
pursuant to the provisions of applicable statues or pursuant to contract.
The Corporation may purchase and maintain insurance on behalf
of any director, officer, agent or employee of the Corporation against any
liability asserted against or incurred by the director, officer, agent or
employee in such capacity or arising out of the director's, officer's, agent's
or employee's status as such, whether or not the Corporation would have the
power to indemnify the director, officer, agent or employee against such
liability under the provisions of applicable law.
The By-Laws of the depositor provide that it shall indemnify a
director, officer, agent or employee of the depositor pursuant to the provisions
of applicable statutes or pursuant to contract.
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.
REPRESENTATIONS PURSUANT TO RULE 6E-3(T)
This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
<PAGE>
CONTENTS OF THE REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 74 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.A (1)(a)
to the Initial Registration Statement No. 33-54471,
filed on or about July 5, 1994, is incorporated
herein by reference.
(b) Resolution of the Board of Directors of American
Enterprise Life Insurance Company establishing the
Separate Account, dated November 3, 1999, filed
electronically as Exhibit 1.A (1)(b) to Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-84121, and is incorporated herein by reference.
(2) Not applicable.
(3) (a) Not applicable.
(b) (1) Form of Selling Agreement for American Enterprise
Life Insurance Company is filed electronically
herewith.
(c) Schedules of Sales Commissions filed electronically
as Exhibit 1.A.(c) to Pre-Effective Amendment No. 1
to the Registration Statement No. 333-84121, is
incorporated herein by reference.
(4) Not applicable.
(5) (a) Flexible Premium Variable Life Insurance Policy (
(SIG-VUL)filed electronically as Exhibit 1.A (5)(a)
to Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-84121, is incorporated herein by
reference.
(b) Accidental Death Benefit Rider filed electronically
as Exhibit 1.A.(5)(b) to Pre-Effective Amendment No.
1 to the Registration Statement No. 333-84121, is
incorporated herein by reference.
(c) Additional Insured Rider (Term Insurance) filed
electronically as Exhibit 1.A.(5)(c) to Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-84121, is incorporated herein by reference.
(d) Children's Level Term Insurance Rider filed
electronically as Exhibit 1.A.(5)(d) to Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-84121, is incorporated herein by reference.
<PAGE>
(e) Term Insurance Rider filed electronically as Exhibit
1.A.(5)(e) to Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-84121, is incorporated
herein by reference.
(f) Waiver of Monthly Deduction Rider for Total
Disability filed electronically as Exhibit
1.A.(5)(f) to Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-84121, is incorporated
herein by reference.
(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) Copy of Participation Agreement between American
Enterprise Life Insurance Company and the Variable
Insurance Products Fund, Fidelity Distributors
Corporation, dated September 1, 1999 filed
electronically as Exhibit 1.A.(8)(a) to Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-84121, is incorporated herein by reference.
(b) Copy of Participation Agreement between American
Enterprise Life Insurance Company and the Variable
Insurance Products Fund III, Fidelity Distributors
Corporation, dated September 1, 1999 filed
electronically as Exhibit 1.A.(8)(b) to Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-84121, is incorporated herein by reference.
(c) Form of Participation Agreement between American
Enterprise Life Insurance Company and Royce Capital
Fund, Royce & Associates, Inc., dated September 1,
1999 filed electronically as Exhibit 1.A.(8)(c) to
Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-84121, is incorporated herein by
reference.
(d) Form of Participation Agreement between American
Enterprise Life Insurance Company and Warburg Pincus
Trust, Credit Suisse Asset Management, LLC and Credit
Suisse Asset Management Securities, Inc., dated
September 1, 1999 filed electronically as Exhibit
1.A.(8)(d) to Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-84121, is incorporated
herein by reference.
(e) Form of Participation Agreement between American
Enterprise Life Insurance Company and MFS Variable
Insurance Trust, Massachusetts Financial Services
Company, dated September 1, 1999 filed electronically
as Exhibit 1.A.(8)(e) to Pre-Effective Amendment No.
1 to the Registration Statement No. 333-84121, is
incorporated herein by reference.
<PAGE>
(f) Form of Participation Agreement between American
Enterprise Life Insurance Company and Lazard Asset
Management, Lazard Retirement Series, Inc., dated
September 1, 1999 filed electronically as Exhibit
1.A.(8)(f) to Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-84121, is incorporated
herein by reference.
(g) Form of Participation Agreement between American
Enterprise Life Insurance Company and Baron Capital
Funds, BAMCO Inc., dated September 1, 1999 filed
electronically as Exhibit 1.A.(8)(g) to Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-84121, is incorporated herein by reference.
(h) Form of Participation Agreement between American
Enterprise Life Insurance Company and Putnam Capital
Manager Trust, Putnam Mutual Funds Corp., dated
January 16, 1995, filed electronically as Exhibit 8.2
to Post-Effective Amendment No. 2 to Registration
Statement No. 33-54471, is incorporated herein by
reference.
(9) None.
(10) Form of Application for the Flexible Premium Variable
Life Insurance Policy filed electronically as Exhibit
1.A.(10) to Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-84121, is incorporated
herein by reference.
(11) American Enterprise Life Insurance Company's
Description of Transfer and Redemption Procedures and
Method of Conversion to Fixed Benefit Policies filed
electronically as Exhibit 11 to Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-84121, is incorporated herein by reference.
B. (1) Not applicable.
(2) Not applicable.
C. Not applicable.
2. Opinion of counsel is filed electronically herewith.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Actuarial opinion of Mark Gorham is filed electronically herewith.
7. (a) Written actuarial consent of Mark Gorham is filed electronically
herewith.
(b) Written auditor consent of Ernst & Young LLP is filed electronically
herewith.
(c) Power of Attorney to sign amendments to this Registration Statement
dated July 29, 1999 filed electronically as Exhibit 7 (c) to its
Initial Registration Statement on Form S-6 is incorporated by
reference.
<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, certifies that it meets all of the requirements for effectiveness of
this Pre-Effective Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 25th
day of April, 2000.
American Enterprise Variable Life Separate Account
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling
Director, President and Chairman of the Board
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 25th day of April, 2000.
Signature Title
/s/ James E. Choat* Director, President and Chief Executive
James E. Choat Officer
/s/ Jeffrey S. Horton* Vice President and Treasurer
Jeffrey S. Horton
/s/ Richard W. Kling* Director, President and Chairman of the Board
Richard W. Kling
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ Paula R. Meyer* Director and Executive Vice President,
Paula R. Meyer Assured Assets
/s/ William A. Stoltzmann* Director, Vice President, General Counsel and
William A. Stoltzmann Secretary
/s/ Philip C. Wentzel* Vice President and Controller
Philip C. Wentzel
*Signed pursuant to Power of Attorney dated July 29, 1999 filed electronically
as an Exhibit 7(c) to its Initial Registration Statement on Form S-6 is
incorporated herein by reference.
By: /s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Vice President, Group Counsel and Assistant Secretary
Exhibit 1.A.(b)(1): Form of Selling Agreement for American Enterprise Life.
Exhibit 2: Opinion amd Consent of Counsel, dated April 25, 2000.
Exhibit 6: Actuary Opinion, dated April 24, 2000.
Exhibit 7(a): Actuary Consent, dated April 24, 2000.
Exhibit 7(b): Auditors Consent, dated April 24, 2000.
SELLING AGREEMENT
FOR
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
This SELLING AGREEMENT ("Agreement") is entered into as of Effective Date of
Agreement>> ("Effective Date") by and between American Enterprise Life Insurance
Company ("Company"), American Express Financial Advisors Inc. ("Distributor",
together with Company, "American Express"), Name of Broker Dealer
("Broker-Dealer"), and Lead Insurance Agency and its affiliated insurance
agencies identified on Exhibit A who have also executed this Agreement or an
Affiliate Participation Agreement (each an "Agency").
Recitals
The purpose of this Agreement is to establish the terms and conditions under
which Broker-Dealer and Agency (referred to and defined further in Section 1.1
herein as "Authorized Selling Firm") will market and sell Company's variable
annuity and/or variable life insurance products. American Express and Authorized
Selling Firm intend that Authorized Selling Firm will be responsible for
managing and supervising the marketing and sales of Company's variable annuity
and/or variable life insurance products by its Producers pursuant to this
Agreement.
In consideration of the mutual covenants contained herein, the parties agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
1.1 "Authorized Selling Firm" means the Broker-Dealer taken together with
the Agency or Agencies, with respect to the sale of Products under this
Agreement, in accordance with the terms and conditions of the SEC
no-action letter First of America Brokerage Service, Inc. (dated
September 28, 1995).
1.2 "Broker-Dealer" is an entity duly registered as a broker-dealer with
the Securities and Exchange Commission ("SEC"), the National
Association of Securities Dealers ("NASD"), and states where required.
1.3 "Company Rules" mean any written instructions, bulletins, manuals,
training materials, and any underwriting or suitability guidelines
provided to Authorized Selling Firm by the Company.
1.4 "Producer" is a duly licensed individual who sells Products as an
employee or independent contractor of Agency and who is appropriately
registered with the NASD and licensed and appointed in accordance with
all applicable insurance laws.
1.5 "Products" are those variable annuity and/or life insurance products
issued by Company which will be marketed or sold by Agency,
Broker-Dealer and their Producers under this Agreement, and which are
set forth in the Product Exhibit(s) attached hereto.
1.6 "Replacement" is the sale of a Product which is funded by the purchaser
with money obtained from the liquidation of another life insurance
policy or annuity contract, either of which was previously issued
either by Company or by any other life insurance company.
1.7 "Agency" is an insurance agency licensed in one or more states, and
affiliated with Broker-Dealer by ownership or contract with respect to
the sale of Products under this Agreement. Broker-Dealer may also act
as "Agency".
<PAGE>
1.8 "Territory" may be any 48 of the 50 United States (all states other
than New York and New Hampshire), and the District of Columbia, but
includes only those jurisdictions in which Agency is authorized to
market and sell the Products under this Agreement, as shown on each of
the Product Exhibits attached and, as updated from time to time.
1.9 "Contract" is the variable annuity or variable life insurance policy
validly issued by Company to a purchaser meeting underwriting standards
of the Company.
2. TERM OF AGREEMENT. This Agreement shall remain in effect beginning upon the
Effective Date, until such time it is terminated pursuant to Section 9,
"Termination."
3. APPOINTMENT AND AUTHORIZATION OF AGENCY AND BROKER-DEALER.
3.1 Appointment and Authorization of Agency and Broker-Dealer. Company and
Distributor hereby appoint Agency and hereby authorize Broker-Dealer to
solicit sales of and sell Products in accordance with the terms and
conditions of this Agreement as an Authorized Selling Firm, and Agency and
Broker-Dealer hereby accept the appointment and authorization. These two
appointments, taken together, constitute the appointment of Authorized
Selling Firm. Authorized Selling Firm's authority will be nonexclusive, and
will be limited to the performance of the services and responsibilities set
forth in this Agreement.
4. DUTIES, OBLIGATIONS AND LIMITATIONS OF AUTHORIZED SELLING FIRM. Commencing
on the Effective Date, Authorized Selling Firm will faithfully perform all
of Authorized Selling Firm's duties within the scope of the agency
relationship created under this Agreement to the best of Authorized Selling
Firm's knowledge, skill and judgment. As Authorized Selling Firm, Agency
and Broker-Dealer shall be jointly and severally responsible and liable to
American Express for the faithful performance of all obligations and duties
except those which this Agreement specifically identifies as duties of
Broker-Dealer. Authorized Selling Firm's duties shall include, but not be
limited to the following:
4.1 Recruitment of Producers. Authorized Selling Firm may recruit
Producers to sell under the supervision of Authorized Selling Firm. A
Producer so recruited may not solicit or sell Products prior to
acquiring any required state insurance license(s) in the state(s)
where such Producer will solicit and sell Products, being registered
with the NASD as a representative of the Broker-Dealer, being
appointed by Company as an agent, and completing the training
described in Section 4.4.11.
4.2 Licensing, Registration and Appointment of Agency and Producers.
Agency shall be responsible for the preparation and submission of
proper licensing forms and the assurance that all Producers recruited
by Authorized Selling Firm are appropriately licensed as insurance
agents in the state(s) where such Producers will solicit and sell
Products. Broker-Dealer shall be responsible for the preparation and
submission to the NASD of proper representative registration forms and
the assurance that all Producers are and remain registered as
representatives of Broker-Dealer with the NASD. Authorized Selling
Firm shall recommend Producers for appointment with Company, but
Company shall retain sole authority to make appointments and may, by
written notice to Authorized Selling Firm, refuse to permit any
Producer to solicit contracts for the sale of the Products. Company
shall be responsible for the preparation and submission of proper
appointment forms and the payment of appointment fees in those states
that require the Company to appoint Producers.
4.3 Compliance with Company Policies and Applicable Laws. Authorized
Selling Firm will comply with all Company Rules and with all
applicable federal and state laws and regulations.
<PAGE>
4.4 Supervision and Administration. Authorized Selling Firm shall have
full, joint and several responsibility for the training and
supervision of all of its Producers who are engaged directly or
indirectly in the offer or sale of the Products, and all such
Producers shall be subject to the control of Authorized Selling Firm
with respect to their securities and insurance regulated activities in
connection with the Products. Authorized Selling Firm shall be
responsible for all acts or omissions of Producers. Agency's
supervisory and administrative responsibilities include, but are not
limited to:
4.4.1 ensuring that Producers comply with Company Rules and all federal and
state laws and regulations applicable to the Products;
4.4.2 ensuring that Producers comply with all terms of the Agreement in
soliciting, selling and providing service for Products;
4.4.3 supplying sales literature and application forms approved by Company
to Producers;
4.4.4 assisting Producers in responding to customer inquiries;
4.4.5 promptly delivering to Producers relevant Company communications and
Company Rules concerning Products, such as changes in rates,
regulatory notices or new Product announcements;
4.4.6 on all Replacement sales, ensuring that Producers provide Product
applicants sufficient information and disclosures to ensure the
suitability of the Replacement sale. Such information includes that
which is required by the rules of the NASD and any state insurance
authority but is not limited to:
(a) all fees, expenses and possible charges, such as surrender
charges, on both the new and the surrendered investments;
(b) any change in the investment risk to the Product
applicant;
(c) any change in the nature or the provider of any guarantees
associated with the Product and/or the surrendered product;
All such information will be retained by Agency for seven
years from the date of the completion and signature of any
application, and will be made available to Company as is shown
in Section 4.8, "Accurate Record; Audit," herein
4.4.7 notifying Company if any Agency or Producer fails to maintain the
required state insurance license or becomes inactive;
4.4.8 promptly informing Company of any violation of law or Company Rules by
Authorized Selling Firm or Producer, or of any allegation by Contract
holder or regulatory agency of wrongdoing as regards the activities of
Authorized Selling Firm, or a Producer with respect to the Products;
and
4.4.9 any other duties necessary or appropriate to perform Authorized
Selling Firm's obligations under this Agreement.
4.4.10 Broker-Dealer will fully comply with and will ensure Agency's and
Producers' compliance with the requirements of the NASD, the SEC and
all other applicable federal and state laws, and, with Agency, will
establish and maintain such rules and procedures as may be necessary
to cause diligent supervision of the securities activities of Agency
and Producers. Broker-Dealer's duties with respect to Agency and
Producers' securities activities, include, but are not limited to:
<PAGE>
(a) delivering to each person submitting an application a prospectus for
the Product to be furnished by American Express in the form required
by the applicable federal laws or by the acts or statutes of any
applicable state, province or country;
(b) reviewing all Product applications for accuracy and completeness, and
to determine the suitability of the sale, which includes reasonable
efforts to obtain information concerning the applicant's financial and
tax status, investment objectives and any other information used or
considered reasonable in making a Product recommendation;
(c) complying with all applicable requirements of the Securities Exchange
Act of 1934 ("1934 Act") and the NASD, including the requirements to
maintain and preserve books and records pursuant to Section 17(a) of
the 1934 Act and the rules thereunder and making such records and
files available to staff of American Express and personnel of state
insurance departments, the NASD, SEC or other regulatory agencies
which have authority over American Express.
4.4.11 Authorized Selling Firm shall be responsible for ensuring that their
Producers who market and sell the Products are trained on (i) the
product specifications and features, (ii) all Company Rules and other
requirements communicated to Authorized Selling Firm that American
Express has adopted to satisfy insurance laws and regulations
regarding replacements, and (iii) standards that American Express has
established for and communicated to Authorized Selling Firms and their
Producers to use in meeting their respective duties to ensure suitable
sales of the Products before they begin to solicit or sell Products.
If Authorized Selling Firm chooses not to use Company-provided
materials in training their Representatives on (i), (ii) and (iii)
above, then Authorized Selling Firm shall provide to American Express,
for approval, documentation of its own form and content of training to
be used, prior to the execution of this Agreement.
After the execution of this Agreement, to the extent that Authorized
Selling Firm uses training material related to the sale of the
Products that is materially different from that contained in the
Company-provided training material, Authorized Selling Firm must
provide that training material to American Express for approval prior
to use. Authorized Selling Firm shall also be responsible for assuring
that its Producers comply with all Company-provided materials, and
with the applicable suitability requirements of the National
Association of Securities Dealers, Inc. ("NASD"), and any state or
federal law, as amended from time to time, in selling the Products.
4.5 Collection and Submission of Premiums. American Express and Authorized
Selling Firm agree that Authorized Selling Firm will assure its
Producers' collection and timely remittance of premiums received from
the sale of Products. All premiums associated with sales of variable
life insurance policies will be remitted using the Check with
Application method described below. Generally, five methods of
collection and remittance are available for variable annuity sales.
Authorized Selling Firm will decide which of the methods listed below
it will employ for variable annuity sales.
4.5.1 Check with Application: in which the premium is paid in a check from
the applicant payable to Company.
4.5.2 Gross Sweep: in which the premium will be deposited into a
Company-owned account. Company, upon notification of a sale, will
deposit the premium into its own premium receipt account.
<PAGE>
4.5.3 Gross ACH Through Clearing Broker: in which the Authorized Selling
Firm contracts with a Clearing Broker to transfer and clear funds from
sales (the "Clearing Broker"). The Clearing Broker will remit the
entire premium to Company using the ACH transfer facility available to
financial institutions. If this method is chosen, then Section 7.1.4
is applicable.
4.5.4 Net Wire: in which the Authorized Selling Firm transfers and clears
premiums from sales, retaining its commission and forwarding the net
amount only to Company.
4.5.5 Net Wire Through Clearing Broker: in which the Authorized Selling Firm
contracts with a Clearing Broker to transfer and clear funds from
sales (the "Clearing Broker"). The Clearing Broker remits the premium
(net of commissions) to Company, and remits the remaining portion of
the premium (commission) to Agency. If this method is chosen, then
Section 7.1.4 is applicable.
4.6 Solicitation. Authorized Selling Firm, through Producers, will solicit
applicants who appear to meet Company's and Distributor's underwriting
and suitability standards, provided that nothing in this Agreement
shall be deemed to require Authorized Selling Firm to solicit any
particular customer's application for an annuity.
4.7 Company Property. Authorized Selling Firm will safeguard, maintain and
account for all policies, forms, manuals, equipment, supplies,
advertising and sales literature furnished to Authorized Selling Firm
and Producers by American Express and will destroy or return the same
to American Express promptly upon request.
4.8 Accurate Record; Audit. As required by applicable laws and Company's
policies and procedures, Authorized Selling Firm will keep
identifiable and accurate records and accounts of all business and
transactions effected pursuant to this Agreement. Upon reasonable
notice and at reasonable times, continuing during a period of one year
following the termination of this Agreement, Authorized Selling Firm
will permit American Express to visit, inspect, examine, audit and
verify, at Authorized Selling Firms offices or elsewhere, any of the
properties, accounts, files, documents, books, reports, work papers
and other records belonging to or in the possession or control of
Authorized Selling Firm relating to the business covered by this
Agreement, and to make copies thereof and extracts therefrom, provided
that such audit shall not unreasonably interfere with Authorized
Selling Firm's normal course of business.
4.9 Approved Advertising. No sales promotions, promotional materials, or
any advertising relating to Products or Company or Distributor ("Sales
Material") shall be used by Authorized Selling Firm or Producers
unless the specific item has been approved in writing by Company
and/or Distributor before use. Any promotional material developed by
Authorized Selling Firm will become the sole property of Company
and/or Distributor once approved. Any modification of the promotional
materials to enable the use of such in a financial institution setting
must also be approved in accordance with this section.
4.10 Fidelity Bond. Authorized Selling Firm represents and warrants that
all directors, officers, employees and representatives of Agency who
are appointed pursuant to this Agreement as Producers for Company or
who have access to funds of Company, including but not limited to
funds submitted with applications for Products or funds being returned
to owners, are and shall be covered by a blanket fidelity bond,
including coverage for larceny and embezzlement, issued by a reputable
bonding company acceptable to Company. Broker-Dealer shall maintain
the bond at Broker-Dealer and/or Agency's expense. Company may require
evidence, satisfactory to it, that such coverage is in force.
Authorized Selling Firm shall give prompt written notice to Company of
cancellation or change of coverage.
<PAGE>
4.11 Limitations. Authorized Selling Firm shall have no authority with
respect to American Express, nor shall it represent itself as having
such authority, other than as is specifically set forth in this
Agreement. Without limiting the foregoing, neither Agency nor
Broker-Dealer shall, without the express written consent of Company
and/or Distributor, as applicable:
4.11.1 make, waive, alter or change any term, rate or condition stated in any
Company Contract or Company or Distributor approved form, or discharge
any Contract in the name of Company;
4.11.2 waive a forfeiture;
4.11.3 extend the time for the payment of premiums or other monies due
Company;
4.11.4 institute, prosecute or maintain any legal proceedings on behalf of
Company or Distributor in connection with any matter pertaining to
Company's business, nor accept service of process on behalf of Company
or Distributor;
4.11.5 transact business in contravention of the rules and regulations of any
insurance department and/or other governmental authorities having
jurisdiction over any subject matter embraced by this Agreement;
4.11.6 make, accept or endorse notes, or endorse checks payable to Company or
Distributor, or otherwise incur any expense or liability on behalf of
Company or Distributor;
4.11.7 offer to pay or pay, directly or indirectly, any rebate of premium or
any other inducement not specified in the Products to any Contract
holder;
4.11.8 misrepresent the Products for the purpose of inducing a Contract
holder in any other company to lapse, forfeit or surrender his/her
insurance therewith;
4.11.9 give or offer to give any advice or opinion regarding the taxation of
any customer's income or estate in connection with the purchase of any
Product;
4.11.10 enter into an agreement with any person or entity to market or sell
the Products without the written consent of Company and Distributor;
4.11.11 use Company's or Distributor's names, logos, trademarks, service marks
or any other proprietary designation without the prior written
permission of Company; or
4.11.12 engage in any program designed to replace Products with any variable
annuity or variable life insurance products of other companies, at any
time while this Agreement is in force; or provide data to any other
person or organization which would allow or facilitate such
replacement of Company's Products. Nothing herein shall preclude the
replacement of Company's fixed annuity products with Company's own
variable annuity or variable insurance products, so long as such sales
are suitable and documented according to Section 4.4.6, Replacement
Sales. (See also Section 9.3, Post Termination Limitations, and
Section 11, Confidentiality, generally.)
5. COMPANY AND DISTRIBUTOR REPRESENTATIONS AND RESPONSIBILITIES.
5.1 Representations.
<PAGE>
5.1.1 Company represents and warrants that (a) it is duly incorporated in
the State of Indiana and licensed in all states in the Territory; (b)
that all Products, and all Sales Material (as defined in Section 4.9,
above) provided by Company or Distributor have been filed and approved
as required by state insurance departments shown in the Product
Exhibit(s); and (c) that these materials comply with all applicable
laws and regulations and rules of the NASD.
5.1.2 Distributor represents and warrants that it is duly registered as a
broker-dealer with the SEC, the NASD, all fifty states and the
District of Columbia, and is qualified to do business in all states in
which Company is licensed and qualified to do business.
5.1.3 Distributor and Company represent and warrant that Company, as issuer
and on behalf of the underlying investment account(s), has registered
the underlying investment account(s) of the Products with the SEC as a
security under the Securities Act of 1933 ("1933 Act") and as a unit
investment trust under the Investment Company Act of 1940.
5.1.4 Company represents and warrants that the prospectuses and registration
statements relating to the Products do not contain any untrue
statements of material fact or any omission to state a material fact,
the omission of which makes any statement contained in the
prospectuses and registration statements misleading.
5.2 Prospectuses, Sales Literature and Advertising. American Express will
provide to Authorized Selling Firm, without any expense to Authorized
Selling Firm, prospectuses for the Products and such other Sales
Material (as defined is Section 4.9, above) as American Express
determines is necessary or desirable for use in connection with sales
of the Products.
5.3 Transmission of Contracts for Delivery to Contract Owners. Company
will transmit variable annuity contracts directly to Contract holders.
Variable life insurance policies will be transmitted to Producers for
delivery to Contract holders.
5.4 Confirmations. Upon Company's acceptance of any payment for a Product,
Company as agent for Distributor will deliver to each contract owner a
statement confirming the transaction in accordance with Rule 10b-10
under the 1934 Act.
5.5 Contract Holder Services. Company shall provide administrative,
accounting and other services to Contract holders as necessary and
appropriate, in the same manner as such services are provided to
Company's other Contract holders.
5.6 Reservation of Rights. Notwithstanding any other provision of this
Agreement or any other agreement between Company and/or Distributor
and Agency and/or Broker-Dealer, Company reserves the unconditional
right to modify any of the Products in any respect whatsoever or to
suspend the sale of any Products in whole or in part at any time and
without prior notice. Company reserves the unconditional rights to
refuse to accept applications procured by Authorized Selling Firm or
Producers which fail to meet underwriting or other standards of
Company.
5.7 Company Rules. American Express shall provide Authorized Selling Firm
with Company Rules as soon as is practicable. Company and Distributor
shall provide all revisions, modifications and replacements of such
Company Rules to Authorized Selling Firm promptly after issuance by
Company and/or Distributor.
5.8 Compliance with Applicable Laws. Company will comply with all
applicable federal and state laws and regulations.
<PAGE>
6. COMPENSATION. Company shall pay a total compensation on premiums
collected pursuant to this Agreement based on the rates of commission
set forth on the attached Product Exhibit(s). OPTIONAL: [and its
compensation addendum(s)]. No compensation will be paid on the sale of
a product under this Agreement if that sale involves replacement of an
asset or investment issued by Company or by another insurance company
owned or controlled by American Express Company. The Product
Exhibit(s) included in this Agreement are subject to change by Company
at anytime, but only upon written notice to Agency. No such change
shall affect compensation for any Products(s) sold whose applications
are received by Company in Minneapolis, MN prior to effective date of
such change.
6.1 Product Exhibits. Any Product Exhibit(s) included in this Agreement or
subsequently made a part hereof may provide other or additional
conditions regarding compensation and, if so, will be controlling to
the extent of such other or additional conditions.
6.2 Expenses. Except as otherwise provided in this Agreement, or
subsequently agreed to in writing by American Express, Authorized
Selling Firm will be responsible for all costs and expenses of any
kind and nature incurred by Authorized Selling Firm in the performance
of its duties under this Agreement.
6.3 For Cause Termination Compensation Obligations. In the event of
termination of this Agreement for one or more of the reasons specified
below in Section 9.1, Termination for Cause, no further compensation
shall thereafter be payable.
6.4 Post Termination Compensation Obligations. Upon termination of this
Agreement, Company's obligation to pay compensation to Agency or
Producers shall immediately cease except that:
6.4.1 Company will pay compensation, as the same become due and
payable, upon Products for which the application has been
taken and the required premium has been collected (or has
become irrevocably collectable from a third party) as of the
date of termination, and for which the Company subsequently
issues a policy.
6.4.2 Company will charge back against those commissions due
identified in Product Exhibit(s) in the event of surrenders of
Products sold prior to the termination of this Agreement by
Authorized Selling Firm or Producers. Company will invoice
Agency unless Company and Agency agree upon another method of
payment of such amounts.
6.4.3 Subject to Section 6.4.1, above, Company will pay Supplemental
Trail Commissions as set forth in and as provided by any
Product Exhibit in effect as of the time of the effective date
of termination of this Agreement.
6.5 Compensation Limitations. Agency will not pay or share commissions with
any person or entity that is not appropriately licensed and/or
appointed to sell Products, if such action would violate any applicable
law, rule, or regulation.
6.6 OPTIONAL Advance Commissions on IRS Section 2-1035 Exchanges. Company
will advance commissions monthly, in accordance to the Base Commission
schedules identified in the variable annuity Product Exhibit(s), based
on premium expected to be deposited with Company to effect an IRS
Section 2-1035 exchange of one investment product for a variable
annuity product sold under this Agreement. In the event that the
expected premium does not reach Company within 90 days of the date of
the contract application, the entire commission for the transaction
will be charged back during the next normal commission cycle.>>
<PAGE>
7. INDEMNIFICATION.
7.1 Indemnification of Company and Distributor. Authorized Selling Firm
shall indemnify, defend and hold harmless American Express and any of
its officers, directors and employees, from and against any and all
losses, claims, damages, liabilities, actions, costs or expenses to
which American Express, or any of its officers, directors and
employees, may become subject (including any legal or other expenses
incurred by it in connection with investigating any claim against it
and defending any action and, provided Authorized Selling Firm will
have given prior written approval of such settlement or compromise,
which consent will not be unreasonably withheld or delayed, any
amounts paid in settlement or compromise) insofar as such losses,
claims, damages, liabilities, actions, costs or expenses arise out of
or are based upon:
7.1.1 The acts or omissions of Authorized Selling Firm or any of its
employees, agents or Producers while acting (whether under actual or
apparent authority, or otherwise) on behalf of Authorized Selling Firm
or American Express in connection with this Agreement;
7.1.2 Any breach of any covenant or agreement made by Authorized Selling
Firm under this Agreement; or
7.1.3 The inaccuracy or breach of any representation or warranty made by
Authorized Selling Firm under this Agreement.
7.1.4 The acts or omissions of the Clearing Broker or any employee or agent
of Clearing Broker while performing the activities covered by this
Agreement. The indemnity obligation of this paragraph will extend to
any regulatory penalties incurred by Company as a result of said
activities.
This indemnification obligation shall not apply to the extent that
such alleged act or omission is attributable to American Express
either because (1) American Express directed the act or omission, or
(2) the act or omission by Authorized Selling Firm or any of its
employees, agents or Producers was the result of their compliance with
the Company Rules.
7.2 Indemnification of Agency and Broker-Dealer. American Express shall
indemnify, defend and hold harmless Authorized Selling Firm, any of
its officers, directors and employees, from and against any and all
losses, claims, damages, liabilities, actions, costs or expenses to
which Authorized Selling Firm, or any of its officers, directors and
employees, may become subject (including any legal or other expenses
incurred by it in connection with investigating any claim against it
and defending any action and, provided American Express will have
given prior written approval of such settlement or compromise, which
consent will not be unreasonably withheld or delayed, any amounts paid
in settlement or compromise) insofar as such losses, claims, damages,
liabilities, actions, costs or expenses arise out of or are based
upon:
7.2.1 The acts or omissions of American Express, or any employee or agent of
American Express, (excluding Authorized Selling Firm or Producers)
while acting (whether under actual or apparent authority or otherwise)
on behalf of American Express in connection with this Agreement;
7.2.2 Any breach of any covenant or agreement made by American Express under
this Agreement; or
7.2.3 The inaccuracy or breach of any representation or warranty made by
American Express under this Agreement.
<PAGE>
7.3 Limitation of Liability. Except as expressly stated herein, as between
the parties, in no event will any party to this Agreement be
responsible to any other party for any incidental, indirect,
consequential, punitive, or exemplary damages of any kind arising from
this Agreement, including without limitation, lost revenues, loss of
profits or loss of business. The parties agree that the losses and
damages arising under and/or covered by Section 7.1 and 7.2 shall be
subject to this limitation.
8. ARBITRATION. The parties agree to attempt to settle any
misunderstandings or disputes arising out of this Agreement through
consultation and negotiation in good faith and a spirit of mutual
cooperation. However, if those attempts fail, the parties agree that
any misunderstandings or disputes arising from this Agreement will be
decided by arbitration which will be conducted, upon request of either
party, before three arbitrators (unless both parties agree on one
arbitrator) designated by the American Arbitration Association located
in the city of Company's principal place of business. The parties
further agree that the arbitrator(s) will decide which party must bear
the expenses of the arbitration. This agreement to arbitrate shall not
preclude either party from obtaining provisional remedies such as
injunctive relief or the appointment of a receiver from a court having
jurisdiction, before, during or after the pendency of the arbitration.
The institution and maintenance of such provisional remedies shall not
constitute a waiver of the right of a party to submit a dispute to
arbitration.
9. TERMINATION.
9.1 Termination for Cause. At any time during the Term of this Agreement,
American Express or Authorized Selling Firm may terminate this
Agreement immediately for cause upon written notice of such
termination to the other party. Such written notice shall state the
cause with specificity. As used in this Section, the term "cause"
shall include any one or more of the following:
9.1.1 the conviction of any party, its officers or supervisory
personnel of any felony, of fraud, or of any crime involving
dishonesty;
9.1.2 the intentional misappropriation by a party of funds or
property of any other party, or of funds received for it or
for annuity Contract holders;
9.1.3 the cancellation, or the refusal to renew by the issuing
insurance regulatory authority of, any license, certificate or
other regulatory approval required in order for any party to
perform its duties under this Agreement;
9.1.4 any action by a regulatory authority with jurisdiction over
the activities of a party that would place the party in
receivership or conservatorship or otherwise substantially
interfere or prevent such party from continuing to engage in
the lines of business relevant to the subject matter hereof;
or
9.1.5 a party becoming a debtor in bankruptcy (whether voluntary or
involuntary) or the subject of an insolvency proceeding.
9.2 Termination without Cause. American Express or Authorized Selling Firm
may terminate this Agreement without cause upon 30 days prior written
notice to the other parties.
9.3 Post Termination Limitation. For a period of one year after
termination of this Agreement, Authorized Selling Firm and Producers
shall not knowingly induce or cause, or attempt to induce or cause,
any concerted or organized effort to recommend, promote, encourage or
endorse the termination, surrender, or cancellation of any Product
sold pursuant to this Agreement.
<PAGE>
10. INDEPENDENT CONTRACTOR. This Agreement is not a contract of
employment. Nothing contained in this Agreement shall be construed or
deemed to create the relationship of joint venture, partnership, or
employer and employee between American Express and Authorized Selling
Firm. Each party is an independent contractor and shall be free,
subject to the terms and conditions of this Agreement, to exercise
judgment and discretion with regard to the conduct of business.
11. CONFIDENTIALITY.
11.1 Each party agrees that, during the term of this Agreement and at all
times thereafter, it will not disclose to any unaffiliated person,
firm, corporation or other entity, nor use for its own account, any of
the other parties' trade secrets or confidential information,
including, without limitation, the terms of this Agreement; non-public
program materials; member or customer lists; proprietary information;
information as to the other party's business methods, operations or
affairs, or the processes and systems used in its operations and
affairs, or the processes and systems used in any aspect of the
operation of its business; all whether now known or subsequently
learned by it. If this Agreement is terminated, each party, within 60
days after such termination, will return to the other parties,
respectively, any and all copies, in whatever form or medium, of any
material disclosing any of the other parties' trade secrets or
confidential information as described above.
Nothing in this Agreement shall require a party to keep confidential
any information that:
11.1.1 the party can prove was known to it prior to any disclosure by any
other party;
11.1.2 is or becomes publicly available through no fault of the party;
11.1.3 the party can prove was independently developed by it outside the
scope of this Agreement and with no access to any confidential or
proprietary information of any other party;
11.1.4 is required to be disclosed to governmental regulators or pursuant to
judicial or administrative process or subpoena;
11.1.5 is required in order to perform that party's obligation under this
Agreement;
11.1.6 is required to be disclosed by any applicable law; or
11.1.7 is mutually agreed upon by all parties to this Agreement.
11.2 In the event Authorized Selling Firm during the term of this Agreement
and for a period of one year after the effective date of its
termination, engages in a concerted effort to promote, recommend or
encourage the termination, surrender, or cancellation of any Product
sold under this Agreement, without reasonable grounds to believe that
such termination, cancellation or surrender is in each individual
customer's best interest, then American Express will have the right to
contact present and former purchasers of the Products sold under this
Agreement with a view to retaining the assets in their accounts with
Company, without being found in violation of this Section 11.
12. ASSIGNMENT. The parties to this Agreement may not assign, either
wholly or partially, this Agreement or any of the benefits accrued or
to accrue under it, or subcontract their interests or obligations
under this Agreement, without the written approval of all parties.
<PAGE>
13. AMENDMENT OF AGREEMENT. American Express reserves the right to amend
this Agreement at any time, but no amendment shall be effective until
approved in writing by Authorized Selling Firm, subject to the
provisions of Section 5.6, "Reservation of Rights," Section 6,
"Compensation" and Section 12, "Assignment," herein. Any affiliated
insurance agency signing below or which has executed an Affiliate
Participation Agreement acknowledges and agrees that Agency shall be
authorized to execute any amendment to this Agreement, including all
Exhibits, Addenda, Schedules and Product Exhibit(s), on its behalf,
and that such execution will be binding upon it.
14. MISCELLANEOUS.
14.1 Applicable Law. This Agreement shall be governed by and interpreted
under the laws of the State of Minnesota.
14.2 Severability. Should any part of this Agreement be declared invalid,
the remainder of this Agreement shall remain in full force and effect,
as if the Agreement had originally been executed without the invalid
provisions.
14.3 Notice. Any notice hereunder shall be in writing and shall be deemed
to have been duly given if sent by certified or registered mail,
postage prepaid, or via a national courier service with the capacity
to track its shipments, to the following addresses:
<TABLE>
<CAPTION>
<S> <C>
If to Company: If to Distributor:
American Enterprise Life Insurance Company American Express Financial Advisors Inc.
80 South 8th Street 80 South 8th Street
Minneapolis, MN 55440 Minneapolis, MN 55440
Attn: Compliance Officer (Unit 1818) Attn: Compliance Officer (Unit 1818)
</TABLE>
If to Agency: If to Broker-Dealer:
14.4 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns, subject to the provisions of this Agreement limiting
assignment.
14.5 Headings. The headings in this Agreement are for convenience only and
are not intended to have any legal effect.
14.6 Defined Terms. The terms defined in this Agreement are to be
interpreted in accordance with this Agreement. Such defined terms are
not intended to conform to specific statutory definitions of any
state.
14.7 Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes
all previous communications, representations, understandings and
agreements, either oral or written, between the parties or any
official representative thereof.
14.8 Survival. All terms and conditions of Section 6.4, "Post Termination
Compensation Obligations"; Section 7, "Indemnification"; Section 9.3
"Post Termination Limitations"; Section 11, "Confidentiality," and
(subject to Section 6.4.3) the Supplemental Trail Commission
provisions of any Product Exhibits in effect as of termination of
this Agreement, will survive termination of this Agreement.
<PAGE>
14.9 No Waiver. No failure to enforce, nor any breach of any term or
condition of this Agreement, shall operate as a waiver of such term or
condition, or of any other term or condition, nor constitute nor be
deemed a waiver or release of any other rights at law or in equity, or
of claims which any party may have against any other party, for
anything arising out of, connected with, or based upon this Agreement.
Any waiver, including a waiver of this Section, must be in writing and
signed by the parties hereto.
American Enterprise Life Insurance Company Lead Agency Name
Company Agency
By: ___________________________ By: ______________________
Title: ________________________ Title: ___________________
Date: ________________________ Date: ___________________
American Express Financial Advisors Inc. Broker Dealer Name
Distributor Broker-Dealer
By: __________________________ By: ______________________
Title: _______________________ Title: ___________________
Date: _______________________ Date: ____________________
Affiliate Name Affiliate Name
Affiliated Agency Affiliated Agency
By: ___________________________ By: _______________________
Title: ________________________ Title: ____________________
Date: ________________________ Date: _____________________
<PAGE>
EXHIBIT A
Agency and Affiliated Agencies, Authorized States, Product Description
and Premium Remittance
Effective Date of Agreement: Effective Date of Agreement
SUMMARY:
This Exhibit is intended to summarize the Authorized Selling Firm's Agency and
its affiliated insurance agencies, the states in which the Agency and Affiliated
Agencies holds an insurance license to sell Product, the Product Description and
the method of Premium remittance.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------- ------------------------------------------------ ---------------
Agency or Affiliated Agencies Authorized States of Agency Product Description Remittance of Premiums
or Affiliated Agencies (See Product Exhibits to identify states (See Section 4.5)
where product is available)
- -------------------------------------------------------------------------------------------------------- ------------------------
- -------------------------------------------------------------------------------------------------------- ------------------------
Agency States of Approval for Name of Product Premium Remittance
Agency
Affiliated Agencies
States of Approval for
Affiliated Agency
- -------------------------------------------------------------------------------------------------------- ------------------------
</TABLE>
Effective Revision Date: Effective Date of Revision
Purpose of Revision: Purpose of Revision
April 25, 2000
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
RE: American Enterprise Variable Life Account
Post-Effective Amendment No.1
Flexible Premium Variable Life Insurance Policy
(333-84121/811-09515)
Ladies and Gentlemen:
I am familiar with the establishment of the American Enterprise Variable Life
Account ("Account"), which is a separate account of American Enterprise Life
Insurance Company ("Company") established by the Company's Board of Directors
according to applicable insurance law. I also am familiar with the
above-referenced Registration Statement filed by the Company on behalf of the
Account with the Securities and Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do business
in each jurisdiction where it transacts business. The Company has all
corporate powers required to carry on its business and to issue the
contracts.
2. The Account is validly created and existing separate account of the Company
and is duly authorized to issue the securities registered.
3. The contracts issued by the Company, when offered and sold in accordance
with the prospectus contained in the Registration Statement and in
compliance with applicable law, will be legally issued and represent
binding obligations of the Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Vice President, Group Counsel and Assistant Secretary
April 24, 2000
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Ladies and Gentlemen:
This opinion is furnished in connection with the Post-Effective Amendment No. 1
(Amendment) by American Enterprise Life Insurance Company for the filing of the
American Express Signature Variable Universal Life, a flexible premium variable
life insurance policy ("the SIG-VUL Policy"), File No. 333-84121, under the
Securities Act of 1933. The prospectus included on Form S-6 in the Amendment
describes the SIG-VUL Policy. I am familiar with the SIG-VUL Policy, the
Amendment and the exhibits thereto. In my opinion, the illustrations of Death
Benefits, Policy Values and Surrender Values included in the section of the
prospectus entitled "Illustrations", under the assumptions stated in that
sections are consistent with the provisions of the SIG-VUL Policy.
I hereby consent to the use of this opinion as an exhibit to the registration
statement and to the reference to my name under the heading "Experts" in this
prospectus.
Very Truly Yours,
/s/ Mark Gorham
Mark Gorham, F.S.A., M.A.A.A.
Actuarial Director - Insurance Product Development
CONSENT OF ACTUARY
The Board of Directors
American Enterprise Life Insurance Company
I consent to the reference to me under the caption "Experts" and to the use of
my opinion dated April 24, 2000 on the Illustrations used by American Enterprise
Life Insurance Company in the Prospectus for the filing of the American Express
Signature Variable Universal Life, a flexible premium variable life insurance
policy ("the SIG-VUL Policy") offered by American Enterprise Life Insurance
Company as part of the Post-Effective Amendment No. 1, (Form S-6, File No.
333-84121,) being filed under the Securities Act of 1933.
/s/ Mark Gorham
Mark Gorham, F.S.A., M.A.A.A.
Actuarial Director - Insurance Product Development
Minneapolis, Minnesota
April 24, 2000
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 3, 2000 with respect to the financial
statements of American Enterprise Life Insurance Company, included in
Post-Effective Amendment No. 1 to the Registration Statement (Form S-6, No.
333-84121) and related Prospectus for the registration of the American Express
Signature Variable Universal Life Insurance Policies (SIG-VUL) to be offered by
American Enterprise Life Insurance Company.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Minneapolis, Minnesota
April 24, 2000
