SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 (File No. 33-52518) [X]
---------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 (File No. 811-3217) [X]
---------
(Check appropriate box or boxes)
IDS LIFE ACCOUNT F
IDS LIFE ACCOUNT IZ
IDS LIFE ACCOUNT JZ
IDS LIFE ACCOUNT G
IDS LIFE ACCOUNT H
IDS LIFE ACCOUNT N
IDS LIFE ACCOUNT KZ
IDS LIFE ACCOUNT LZ
IDS LIFE ACCOUNT MZ
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(Exact Name of Registrant)
IDS Life Insurance Company
- --------------------------------------------------------------------------------
(Name of Depositor)
200 AXP Financial Center, Minneapolis, MN 55474
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
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Mary Ellyn Minenko, 200 AXP Financial Center, Minneapolis, MN 55474
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(Name and Address of Agent for Service)
It is proposed that this filing will 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)
[ ] on (date) pursuant to paragraph (a) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
previously filed post-effective amendment.
<PAGE>
<PAGE>
PROSPECTUS
MAY 1, 2000
EMPLOYEE BENEFIT ANNUITY
GROUP FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY.
IDS LIFE ACCOUNTS F, IZ, JZ, G, H, N, KZ, LZ AND MZ
ISSUED BY: IDS LIFE INSURANCE COMPANY (IDS LIFE)
200 AXP Financial Center
Minneapolis, MN 55474
800-862-7919
This prospectus contains information that you should know before investing. You
also will receive the American Express-Registered Trademark- Variable Portfolio
Funds prospectus. Please read the prospectuses carefully and keep them for
future reference. This contract is available for salary-reduction plans that
meet the requirements of Section 403(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS CONTRACT 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 CONTRACT
INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the SEC, and is available without charge by contacting IDS Life at the telephone
number above or by completing and sending the order form on the last page of
this prospectus. The table of contents of the SAI is on the last page of this
prospectus.
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PROSPECTUS -- MAY 1, 2000 1
<PAGE>
TABLE OF CONTENTS
KEY TERMS.................................... 3
THE CONTRACT AND CERTIFICATE IN BRIEF........ 4
EXPENSE SUMMARY.............................. 6
CONDENSED FINANCIAL INFORMATION
(UNAUDITED)................................ 8
FINANCIAL STATEMENTS......................... 9
PERFORMANCE INFORMATION...................... 10
THE VARIABLE ACCOUNTS AND THE FUNDS.......... 11
THE FIXED ACCOUNT............................ 13
BUYING THE CONTRACT AND CERTIFICATE.......... 13
CHARGES...................................... 14
VALUING YOUR INVESTMENT...................... 17
MAKING THE MOST OF YOUR CERTIFICATE.......... 19
SURRENDERS................................... 22
TSA -- SPECIAL SURRENDER PROVISIONS.......... 23
CHANGING OWNERSHIP........................... 23
BENEFITS IN CASE OF DEATH.................... 24
THE ANNUITY PAYOUT PERIOD.................... 25
TAXES........................................ 27
VOTING RIGHTS................................ 29
ABOUT THE SERVICE PROVIDERS.................. 29
YEAR 2000.................................... 30
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION..................... 31
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2 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
KEY TERMS
THESE TERMS CAN HELP YOU UNDERSTAND DETAILS ABOUT THE CONTRACT AND CERTIFICATE.
ACCUMULATION UNIT: A measure of the value of each variable account before
annuity payouts begin.
ANNUITANT: The person on whose life or life expectancy the annuity payouts are
based.
ANNUITY PAYOUTS: An amount paid at regular intervals under one of several plans.
BENEFICIARY: The person you designate to receive benefits in case of a
participant's death while the contract is in force and before annuity payouts
begin.
CERTIFICATE: The document we deliver to you that represents your participation
in the contract.
CERTIFICATE VALUE: The total value of your certificate before we deduct any
applicable charges.
CERTIFICATE YEAR: A period of 12 months, starting on the effective date of your
certificate and on each anniversary of the effective date.
CLOSE OF BUSINESS: When the New York Stock Exchange (NYSE) closes, normally
4 p.m. Eastern time.
CONTRACT OWNER (OWNER): The person or party entitled to ownership rights stated
in the contract and in whose name the contract is issued.
FIXED ACCOUNT: An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
FUNDS: Investment options under your certificate. You may allocate purchase
payments into variable accounts investing in shares of any or all of these
funds.
PARTICIPANT (YOU, YOUR): The person named in the certificate who has all rights
under the certificate, except as reserved by the owner.
RETIREMENT DATE: The date when annuity payouts are scheduled to begin.
SURRENDER VALUE: The amount you are entitled to receive if you make a full
surrender from your certificate. It is the certificate value minus any
applicable charges.
VALUATION DATE: Any normal business day, Monday through Friday, that the NYSE is
open. Each valuation date ends at the close of business. We calculate the value
of each variable account at the close of business on each valuation date.
VARIABLE ACCOUNTS: Separate accounts to which you may allocate purchase
payments; each invests in shares of one fund. The value of your investment in
each variable account changes with the performance of the particular fund.
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PROSPECTUS -- MAY 1, 2000 3
<PAGE>
THE CONTRACT AND CERTIFICATE IN BRIEF
PURPOSE: The purpose of the certificate is to allow you to accumulate money for
retirement. You do this by making one or more investments (purchase payments)
that may earn returns that increase the value of your certificate. The contract
and related certificate provide lifetime or other forms of payouts beginning at
a specified date (the retirement date). As in the case of other annuities, it
may not be advantageous for you to purchase this certificate as a replacement
for, or in addition to, an existing annuity.
FREE LOOK PERIOD: You may return your certificate to your sales representative
or to our office within the time stated on the first page of your certificate
and receive a full refund of the certificate value. No charges will be deducted.
However, you bear the investment risk from the time of purchase until you return
the certificate; the refund amount may be more or less than the payment you
made. (Exception: If the law requires, we will refund all of your purchase
payments.)
ACCOUNTS: Currently, you may allocate your purchase payments among any or all
of:
- - the variable accounts, each of which invests in a fund with a particular
investment objective. The value of each variable account varies with the
performance of the particular fund in which it invests. We cannot guarantee
that the value at the retirement date will equal or exceed the total purchase
payments you allocate to the variable accounts. (p. 11)
- - the fixed account, which earns interest at a rate that we adjust periodically.
(p. 13)
BUYING THE CONTRACT AND CERTIFICATE: A sales representative will help the owner
complete and submit an application for a contract and help you complete and
submit an enrollment form for the certificate. Applications and enrollment forms
are subject to acceptance at our office. After your initial purchase payment,
you have the option of making additional purchase payments in the future. The
maximum amount of purchase payments is determined by any restrictions imposed by
the Internal Revenue Code of 1986, as amended (the Code). (p. 13)
- - Minimum purchase payment -- $1,000 unless you pay in installments under a
group billing arrangement such as a payroll deduction.
- - Minimum installment purchase payment -- $25 monthly or $300 annually.
- - Maximum first-year purchase payment(s) -- $50,000 to $1,000,000 depending on
your age.
- - Maximum purchase payment for each subsequent year -- $50,000.
TRANSFERS: Subject to certain restrictions you currently may redistribute money
among the accounts without charge at any time until annuity payouts begin, and
once per year among the variable accounts after annuity payouts begin. You may
establish automated transfers among the accounts. Fixed account transfers are
subject to special restrictions. (p. 20)
SURRENDERS: You may surrender all or part of your certificate value at any time
before the retirement date subject to certain restrictions imposed by the Code.
Surrenders may be subject to charges and tax penalties (including a 10% IRS
penalty if you surrender prior to your reaching age 59 1/2) and may have other
tax consequences. (p. 23)
CHANGING OWNERSHIP: Restrictions apply concerning change of ownership of rights
under a contract or certificate. (p. 24)
BENEFITS IN CASE OF DEATH: If the participant dies before annuity payouts begin,
we will pay the beneficiary an amount at least equal to the certificate value.
(p. 25)
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4 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
ANNUITY PAYOUTS: You can apply your certificate value to an annuity payout plan
that begins on the retirement date. You may choose from a variety of plans to
make sure that payouts continue as long as you like. We can make payouts on a
fixed or variable basis, or both. Total monthly payouts include amounts from
each variable account and the fixed account. During the annuity payout period,
you cannot be invested in more than five variable accounts at any one time
unless we agree otherwise. (p. 26)
TAXES: Generally, your certificate value grows tax-deferred until you surrender
it or begin to receive payouts. (Under certain circumstances, IRS penalty taxes
may apply). Even if you direct payouts to someone else, you will still be taxed
on the distribution. (p. 28)
CHARGES: We assess certain charges in connection with your certificate:
- - $30 annual administrative charge;
- - 1.00% mortality and expense risk fee (if you allocate money to one or more
variable account);
- - surrender charge;
- - any premium taxes that may be imposed on us by state or local governments
(currently, we deduct any applicable premium tax when annuity payouts begin
but we reserve the right to deduct this tax at other times such as when you
make purchase payments or when you surrender your certificate); and
- - the operating expense of the funds in which the variable account invests.
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PROSPECTUS -- MAY 1, 2000 5
<PAGE>
EXPENSE SUMMARY
The purpose of the following information is to help the owner and participant
understand the various costs and expenses associated with the contract and
related certificates.
There is no sales charge when purchasing the contract or certificate. We show
all costs that we deduct directly from the contract or certificate or indirectly
from the variable accounts and funds below. Some expenses may vary as we explain
under "Charges." Please see the fund prospectuses for more information on the
operating expenses for each fund.
ANNUAL CONTRACT OWNERS EXPENSES
SURRENDER CHARGE* (contingent deferred sales charge as a percentage of amount
surrendered)
<TABLE>
<CAPTION>
SURRENDER CHARGE
CERTIFICATE YEAR PERCENTAGE
<S> <C>
1 8%
2 8
3 8
4 8
5 7
6 6
7 5
8 4
9 3
10 2
11 1
12 and later 0
</TABLE>
ADMINISTRATIVE CHARGE $30
ANNUAL VARIABLE ACCOUNT EXPENSES
(as a percentage of average variable account value):
MORTALITY AND EXPENSE RISK FEE
1%
*The surrender charge is further limited so that it will never exceed 8.5%
aggregate purchase payments made to the certificate.
SURRENDER CHARGE UNDER ANNUITY PAYOUT PLAN E -- PAYOUTS FOR A SPECIFIED
PERIOD: The amount equal to the difference in the present value of remaining
payments using the assumed investment rate and such present value using the
assumed investment rate plus 1.55%. The surrender charge is further limited so
that it will never exceed 8.5% of aggregate purchase payments made to the
certificate.
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6 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
ANNUAL OPERATING EXPENSES OF THE FUNDS
(AFTER FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS, IF APPLICABLE, AS A
PERCENTAGE OF AVERAGE DAILY NET ASSETS)
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<TABLE>
<CAPTION>
MANAGEMENT 12B-1 OTHER
FEES FEES EXPENSES TOTAL(1)
<S> <C> <C> <C> <C>
AXP(SM) Variable Portfolio -
Bond Fund .60% .13 .08 .81%
Capital Resource Fund .60% .13 .06 .79%
Cash Management Fund .51% .13 .05 .69%
Extra Income Fund .62% .13 .08 .83%
Global Bond Fund .84% .13 .12 1.09%
International Fund .83% .13 .11 1.07%
Managed Fund .59% .13 .04 .76%
New Dimensions
Fund-Registered Trademark- .61% .13 .07 .81%
Strategy Aggressive Fund .60% .13 .07 .80%
</TABLE>
(1) 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.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and...
<TABLE>
<CAPTION>
NO SURRENDER OR SELECTION
FULL SURRENDER AT THE OF AN ANNUITY PAYOUT PLAN AT THE
END OF EACH TIME PERIOD END OF EACH TIME PERIOD
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AXP(SM) Variable Portfolio -
Bond Fund $102.28 $148.89 $186.74 $254.88 $19.87 $61.44 $105.54 $227.97
Capital Resource Fund 102.10 148.32 185.78 252.80 19.67 60.82 104.50 225.83
Cash Management Fund 101.15 145.47 180.94 242.31 18.64 57.71 99.26 215.08
Extra Income Fund 102.47 149.46 187.71 256.96 20.08 62.06 106.59 230.11
Global Bond Fund 104.93 156.83 200.17 283.64 22.74 70.11 120.09 257.47
International Fund 104.74 156.27 199.21 281.61 22.54 69.49 119.06 255.39
Managed Fund 101.81 147.47 184.33 249.66 19.36 59.88 102.93 222.62
New Dimensions Fund-Registered Trademark- 102.28 148.89 186.74 254.88 19.87 61.44 105.54 227.97
Strategy Aggressive Fund 102.19 148.60 186.26 253.84 19.77 61.13 105.02 226.90
</TABLE>
* In this example, the $30 administrative charge is approximated as a 0.129%
charge based on our average certificate size. Premium taxes imposed by some
state and local governments are not reflected in this table.
YOU SHOULD NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
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PROSPECTUS -- MAY 1, 2000 7
<PAGE>
CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following tables give per-unit information about the financial history of
each variable account.
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1999 1998 1997 1996 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACCOUNT G (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - BOND FUND)
Accumulation unit
value at beginning
of period $5.27 $5.25 $4.86 $4.59 $3.80 $3.99 $3.48 $3.21 $2.76
Accumulation unit
value at end of
period $5.31 $5.27 $5.25 $4.86 $4.59 $3.80 $3.99 $3.48 $3.21
Number of
accumulation units
outstanding at end
of period (000
omitted) 238,818 287,881 316,789 362,167 393,697 361,640 405,429 330,000 270,858
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
ACCOUNT F (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - CAPITAL RESOURCE FUND)
Accumulation unit
value at beginning
of period $10.09 $8.21 $6.67 $6.25 $4.94 $4.93 $4.82 $4.67 $3.22
Accumulation unit
value at end of
period $12.36 $10.09 $8.21 $6.67 $6.25 $4.94 $4.93 $4.82 $4.67
Number of
accumulation units
outstanding at end
of period (000
omitted) 449,948 507,310 556,866 628,555 641,903 576,724 488,632 402,977 309,984
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
ACCOUNT H (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - CASH MANAGEMENT FUND)
Accumulation unit
value at beginning
of period $2.56 $2.46 $2.36 $2.27 $2.18 $2.12 $2.09 $2.04 $1.95
Accumulation unit
value at end of
period $2.66 $2.56 $2.46 $2.36 $2.27 $2.18 $2.12 $2.09 $2.04
Number of
accumulation units
outstanding at end
of period (000
omitted) 129,561 98,897 87,255 89,644 102,568 84,475 74,935 102,277 126,489
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Simple yield(1) 4.99% 3.70% 4.06% 3.73% 3.97% 4.12% (1.56)% 1.67% 3.26%
Compound yield(1) 5.12% 3.77% 4.14% 3.80% 4.04% 4.21% (1.55)% 1.69% 3.31%
- -------------------------------------------------------------------------------------------------------------------------------
ACCOUNT LZ(2) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - EXTRA INCOME FUND)
Accumulation unit
value at beginning
of period $1.12 $1.18 $1.05 $1.00 -- -- -- -- --
Accumulation unit
value at end of
period $1.17 $1.12 $1.18 $1.05 -- -- -- -- --
Number of
accumulation units
outstanding at end
of period (000
omitted) 218,583 228,165 175,024 59,939 -- -- -- -- --
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
ACCOUNT KZ(2) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - GLOBAL BOND FUND)
Accumulation unit
value at beginning
of period $1.18 $1.10 $1.07 $1.00 -- -- -- -- --
Accumulation unit
value at end of
period $1.12 $1.18 $1.10 $1.07 -- -- -- -- --
Number of
accumulation units
outstanding at end
of period (000
omitted) 70,499 78,150 65,609 24,878 -- -- -- -- --
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DEC. 31, 1990
- -------------------- ---------------
<S> <C>
ACCOUNT G (INVESTING
Accumulation unit
value at beginning
of period $2.67
Accumulation unit
value at end of
period $2.76
Number of
accumulation units
outstanding at end
of period (000
omitted) 236,926
Ratio of operating
expense to average
net assets 1.00%
- --------------------
ACCOUNT F (INVESTING
Accumulation unit
value at beginning
of period $3.23
Accumulation unit
value at end of
period $3.22
Number of
accumulation units
outstanding at end
of period (000
omitted) 242,767
Ratio of operating
expense to average
net assets 1.00%
- --------------------
ACCOUNT H (INVESTING
Accumulation unit
value at beginning
of period $1.82
Accumulation unit
value at end of
period $1.95
Number of
accumulation units
outstanding at end
of period (000
omitted) 139,005
Ratio of operating
expense to average
net assets 1.00%
Simple yield(1) 6.25%
Compound yield(1) 6.44%
- --------------------
ACCOUNT LZ(2) (INVES
Accumulation unit
value at beginning
of period --
Accumulation unit
value at end of
period --
Number of
accumulation units
outstanding at end
of period (000
omitted) --
Ratio of operating
expense to average
net assets --
- --------------------
ACCOUNT KZ(2) (INVES
Accumulation unit
value at beginning
of period --
Accumulation unit
value at end of
period --
Number of
accumulation units
outstanding at end
of period (000
omitted) --
Ratio of operating
expense to average
net assets --
- --------------------
</TABLE>
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8 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1999 1998 1997 1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACCOUNT IZ(3) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - INTERNATIONAL FUND)
Accumulation unit
value at beginning
of period $1.74 $1.52 $1.49 $1.38 $1.25 $1.29 $0.98 $1.00 --
Accumulation unit
value at end of
period $2.51 $1.74 $1.52 $1.49 $1.38 $1.25 $1.29 $0.98 --
Number of
accumulation units
outstanding at end
of period (000
omitted) 898,715 1,042,405 1,168,353 1,220,486 1,088,874 913,364 405,536 69,874 --
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% --
- --------------------------------------------------------------------------------------------------------------------
ACCOUNT N (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - MANAGED FUND)
Accumulation unit
value at beginning
of period $4.03 $3.51 $2.97 $2.56 $2.09 $2.21 $1.98 $1.86 $1.45
Accumulation unit
value at end of
period $4.58 $4.03 $3.51 $2.97 $2.56 $2.09 $2.21 $1.98 $1.86
Number of
accumulation units
outstanding at end
of period (000
omitted) 986,013 1,100,357 1,178,735 1,197,162 1,212,021 1,127,834 910,254 650,797 496,554
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------
ACCOUNT MZ(2) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - NEW DIMENSIONS FUND-REGISTERED TRADEMARK-)
Accumulation unit
value at beginning
of period $1.74 $1.37 $1.11 $1.00 -- -- -- -- --
Accumulation unit
value at end of
period $2.27 $1.74 $1.37 $1.11 -- -- -- -- --
Number of
accumulation units
outstanding at end
of period (000
omitted) 1,188,480 1,001,826 831,259 350,598 -- -- -- -- --
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
ACCOUNT JZ(3) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO - STRATEGY AGGRESSIVE FUND)
Accumulation unit
value at beginning
of period $1.91 $1.88 $1.68 $1.46 $1.12 $1.21 $1.08 $1.00 --
Accumulation unit
value at end of
period $3.24 $1.91 $1.88 $1.68 $1.46 $1.12 $1.21 $1.08 --
Number of
accumulation units
outstanding at end
of period (000
omitted) 927,190 1,087,314 1,168,829 1,172,793 1,007,976 780,423 347,336 115,574 --
Ratio of operating
expense to average
net assets 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% --
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DEC. 31, 1990
- -------------------- ---------------
<S> <C>
ACCOUNT IZ(3) (INVES
Accumulation unit
value at beginning
of period --
Accumulation unit
value at end of
period --
Number of
accumulation units
outstanding at end
of period (000
omitted) --
Ratio of operating
expense to average
net assets --
- --------------------
ACCOUNT N (INVESTING
Accumulation unit
value at beginning
of period $1.42
Accumulation unit
value at end of
period $1.45
Number of
accumulation units
outstanding at end
of period (000
omitted) 400,961
Ratio of operating
expense to average
net assets 1.00%
- --------------------
ACCOUNT MZ(2) (INVES
Accumulation unit
value at beginning
of period --
Accumulation unit
value at end of
period --
Number of
accumulation units
outstanding at end
of period (000
omitted) --
Ratio of operating
expense to average
net assets --
- --------------------
ACCOUNT JZ(3) (INVES
Accumulation unit
value at beginning
of period --
Accumulation unit
value at end of
period --
Number of
accumulation units
outstanding at end
of period (000
omitted) --
Ratio of operating
expense to average
net assets --
- --------------------
</TABLE>
(1) Net of annual contract administrative charge and mortality and expense risk
fee.
(2) Operations commenced on May 1, 1996.
(3) Operations commenced on Jan. 13, 1992.
FINANCIAL STATEMENTS
You can find our audited financial statements and the audited financial
statements of the variable accounts in the SAI.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 9
<PAGE>
PERFORMANCE INFORMATION
Performance information for the variable accounts may appear from time to time
in advertisements or sales literature. This information reflects the performance
of a hypothetical investment in a particular variable account during a specified
time period. Although we base performance figures on historical earnings, past
performance does not guarantee future results.
We include non-recurring charges (such as surrender charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
- - administrative charge,
- - mortality and expense risk fee, and
- - surrender charge (assuming a surrender at the end of the illustrated period).
We also show optional total return quotations that do not reflect a surrender
charge deduction (assuming no surrender). We may show total return quotations by
means of schedules, charts or graphs.
AVERAGE ANNUAL TOTAL RETURN is the average annual compounded rate of return of
the investment over a period of one, five and ten years (or up to the life of
the variable account if it is less than ten years old).
CUMULATIVE TOTAL RETURN is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return will generally be higher than average annual
total return.
ANNUALIZED SIMPLE YIELD (FOR VARIABLE ACCOUNTS INVESTING IN MONEY MARKET
FUNDS) "annualizes" the income generated by the investment over a given
seven-day period. That is, we assume the amount of income generated by the
investment during the period will be generated each seven-day period for a year.
We show this as a percentage of the investment.
ANNUALIZED COMPOUND YIELD (FOR VARIABLE ACCOUNTS INVESTING IN MONEY MARKET
FUNDS) is calculated like simple yield except that we assume the income is
reinvested when we annualize it. Compound yield will be higher than the simple
yield because of the compounding effect of the assumed reinvestment.
ANNUALIZED YIELD (FOR VARIABLE ACCOUNTS INVESTING IN INCOME FUNDS) divides the
net investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage.
You should consider performance information in light of the investment
objectives, policies, characteristics and quality of the fund in which the
variable account invests and the market conditions during the specified time
period. Advertised yields and total return figures include charges that reduce
advertised performance. Therefore, you should not compare variable account
performance to that of mutual funds that sell their shares directly to the
public. (See the SAI for a further description of methods used to determine
total return and yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on the first page of this
prospectus.
- --------------------------------------------------------------------------------
10 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
THE VARIABLE ACCOUNTS AND THE FUNDS
You may allocate payments to any or all of the variable accounts that invest in
shares of the following funds:
<TABLE>
<CAPTION>
IDS LIFE
ACCOUNT ESTABLISHED INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISOR OR MANAGER
<S> <C> <C> <C> <C>
G 05/13/81 AXP(SM) Variable Portfolio - Objective: high level of current IDS Life Insurance Company (IDS
Bond Fund income while conserving the value Life), investment manager;
of the investment and continuing a American Express Financial
high level of income for the Corporation (AEFC), investment
longest time period. Invests advisor.
primarily in bonds and other debt
obligations.
F 05/13/81 AXP(SM) Variable Portfolio - Objective: capital appreciation. IDS Life, investment manager; AEFC
Capital Resource Fund Invests primarily in U.S. common investment advisor.
stocks and other securities
convertible into common stocks.
H 05/13/81 AXP(SM) Variable Portfolio - Objective: maximum current income IDS Life, investment manager; AEFC
Cash Management Fund consistent with liquidity and investment advisor.
conservation of capital. Invests
primarily in money market
securities.
LZ 04/02/96 AXP(SM) Variable Portfolio - Objective: high current income, IDS Life, investment manager; AEFC
Extra Income Fund with capital growth as a secondary investment advisor.
objective. Invests primarily in
high-yielding, high-risk corporate
bonds issued by U.S. and foreign
companies and governments.
KZ 04/02/96 AXP(SM) Variable Portfolio - Objective: high total return IDS Life, investment manager; AEFC
Global Bond Fund through income and growth of investment advisor.
capital. Non-diversified mutual
fund that invests primarily in
debt obligations of U.S. and
foreign issuers.
IZ 09/20/91 AXP(SM) Variable Portfolio - Objective: capital appreciation. IDS Life, investment manager; AEFC
International Fund Invests primarily in common stocks investment advisor. American
or convertible securities of Express Asset Management
foreign issuers that offer growth International, Inc., a wholly-
potential. owned subsidiary of AEFC, is the
sub-investment advisor.
N 04/17/85 AXP(SM) Variable Portfolio - Objective: maximum total IDS Life, investment manager; AEFC
Managed Fund investment return through a investment advisor.
combination of capital growth and
current income. Invests primarily
in a combination of common and
preferred stocks, convertible
securities, bonds and other debt
securities.
MZ 04/02/96 AXP(SM) Variable Portfolio - Objective: long-term growth of IDS Life, investment manager; AEFC
New Dimensions capital. Invests primarily in investment advisor.
Fund-Registered Trademark- common stocks of U.S. and foreign
companies showing potential for
significant growth.
JZ 09/20/91 AXP(SM) Variable Portfolio - Objective: capital appreciation. IDS Life, investment manager; AEFC
Strategy Aggressive Fund Invests primarily in common stocks investment advisor.
of small-and medium-sized
companies.
</TABLE>
The investment objectives and policies of some of the funds are 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
results may differ significantly from other funds with similar investment
objectives and policies.
The investment manager and advisor cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectus for facts you
should know before investing. The funds' prospectus is also available by
contacting us at the address or telephone number on the first page of this
prospectus.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 11
<PAGE>
The Internal Revenue Service (IRS) issued final regulations relating to the
diversification requirements under Section 817(h) of the Code. Each fund intends
to comply with these requirements.
All variable accounts were established under Minnesota law and are registered
together as a single unit investment trust under the Investment Company Act of
1940 (the 1940 Act). This registration does not involve any supervision of our
management or investment practices and policies by the SEC. All obligations
arising under the contracts are general obligations of IDS Life.
Each variable account meets the definition of a separate account under federal
securities laws. We credit or charge income, capital gains and capital losses of
each variable account only to that variable account. State insurance law
prohibits us from charging a variable account with liabilities of any other
variable account or of our general business. Each variable account's net assets
are held in relation to the contracts described in this prospectus as well as
other contracts that we issue that are not described in this prospectus.
The U.S. Treasury and the IRS indicated that they may provide additional
guidance on investment control. This concerns how many variable accounts an
insurance company may offer and how many exchanges among variable accounts it
may allow before the participant would be currently taxed on income earned
within variable account assets. At this time, we do not know what the additional
guidance will be or when action will be taken. We reserve the right to modify
the contract/certificate, as necessary, so that the participant will not be
subject to current taxation as the owner of the variable account assets.
We intend to comply with all federal tax laws so that the contract/certificate
continues to qualify as an annuity for federal income tax purposes. We reserve
the right to modify the contract as necessary to comply with any new tax laws.
- --------------------------------------------------------------------------------
12 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
THE FIXED ACCOUNT
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of our general account.
We credit and compound interest daily. We will change the interest rates from
time to time at our discretion. These rates will be based on various factors,
including, but not limited to, the interest rate environment, returns earned on
investments backing these annuities, the rates currently in effect for new and
existing company annuities, product design, competition, and the company's
revenues and expenses.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the fixed account.)
BUYING THE CONTRACT AND CERTIFICATE
A sales representative will help the owner prepare and submit an application.
The sales representative will also help each participant prepare and submit an
enrollment form. These forms will be sent to our office. Unless otherwise
provided in the contract, the owner has all rights under the contract. Your
interest under the contract, as evidenced by your certificate, is subject to the
terms of the owner's contract.
When you enroll in the certificate, you may select:
- - the accounts in which you want to invest;
- - the date you want to start receiving annuity payouts (the retirement date);
and
- - a beneficiary.
The owner selects the frequency with which to make purchase payments.
If the application and enrollment forms are complete, we will process them
within two business days after we receive them at our office. If we accept the
application, we will send the owner a contract. If we accept your enrollment
form, we will send you a certificate. If we cannot accept an application or
enrollment form within five business days, we will decline it and return any
payment. We will credit additional purchase payments to the accounts on the
valuation date we receive them. We will value additional payments at the next
accumulation unit value calculated after we receive payment at our office.
THE RETIREMENT DATE
Annuity payouts are scheduled to begin on the retirement date. When we process
your application, we will establish the retirement date to the maximum age or
date described below. You can also select a date within the maximum limits. You
can align this date with your actual retirement from a job, or it can be a
different future date, depending on your needs and goals and on certain
restrictions. You also can change the date, provided you send us written
instructions at least 30 days before annuity payouts begin.
TO AVOID IRS PENALTY TAXES, the retirement date generally must be:
- - on or after the date you reach age 59 1/2; and
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 13
<PAGE>
- - by April 1 of the year following the calendar year when the annuitant reaches
age 70 1/2 or, if later, retires (except that 5% business owners may not
select a retirement date that is later than April 1 of the year following the
calendar year when they reach age 70 1/2).
If you take the minimum 403(b) plan distributions as required by the Code from
another tax-qualified investment, or in the form of partial surrenders under the
certificate, retirement payments can start as late as your 85th birthday or the
tenth contract anniversary, if later.
Certain restrictions on retirement dates apply to participants in the Texas
Optional Retirement Program, should the Employee Benefit Annuity be available in
the program. (See "Special surrender provisions.")
BENEFICIARY
If death benefits become payable before the retirement date while the contract
and certificate are in force and before annuity payouts begin, we will pay your
named beneficiary all or part of the certificate value. If there is no named
beneficiary, then your estate will be the beneficiary. (See "Benefits in Case of
Death" for more about beneficiaries.)
PURCHASE PAYMENTS
MINIMUM ALLOWABLE PURCHASE PAYMENTS*
<TABLE>
<S> <C>
If paying by installments under a scheduled If paying by any other method:
payment plan: $1,000 initial payment
$25 per month $50 for any additional payments
</TABLE>
Installments must total at least $300 per year.
* If no purchase payments have been made on a participant's behalf for
24 months and previous payments total $600 or less, we have the right to pay
the participant the total value of the certificate in a lump sum. This right
does not apply to contracts sold to New Jersey residents.
MAXIMUM ALLOWABLE PURCHASE PAYMENTS**
For the first year, this is based on the participant's age on the effective date
of the certificate.
<TABLE>
<S> <C>
For the first year: For each subsequent year:
$1,000,000 up to age 75 $50,000
$500,000 for ages 76 to 85
$50,000 for ages 86 to 90
</TABLE>
** These limits apply in total to all IDS Life annuities and certificates you
own. We reserve the right to increase maximum limits or reduce age limits.
The Code's limits on annual contribution also apply.
HOW TO MAKE PURCHASE PAYMENTS
BY SCHEDULED PAYMENT PLAN:
A sales representative can help the owner set up an automatic salary reduction
arrangement.
CHARGES
ADMINISTRATIVE CHARGE
We charge this fee for establishing and maintaining records for each certificate
under the contract. We deduct $30 from the certificate value at the end of each
certificate year. We prorate this charge among the variable accounts and the
fixed account in
- --------------------------------------------------------------------------------
14 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
the same proportion your interest in each account bears to your total
certificate value. If you surrender a certificate, we will deduct the annual
charge at the time of surrender. We cannot increase the annual administrative
charge and it does not apply after annuity payouts begin or when we pay death
benefits.
MORTALITY AND EXPENSE RISK FEE
We charge this fee daily to your variable accounts. The unit values of your
variable accounts reflect this fee and it totals 1% of the variable accounts'
average daily net assets on an annual basis. This fee covers the mortality risk
and expense risk that we assume. Approximately two-thirds of this amount is for
our assumption of mortality risk, and one-third is for our assumption of expense
risk. This fee does not apply to the fixed account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payouts according to the terms of the contract, no
matter how long a specific annuitant lives and no matter how long our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in our actuarial tables, then we must take money from our general
assets to meet our obligations. If, as a group, annuitants do not live as long
as expected, we could profit from the mortality risk fee.
Expense risk arises because we cannot increase the administrative charge and
this charge may not cover our expenses. We would have to make up any deficit
from our general assets. We could profit from the expense risk fee if future
expenses are less than expected.
The variable accounts pay us the mortality and expense risk fee they accrued as
follows:
- - First, to the extent possible, the variable accounts pay this fee from any
dividends distributed from the funds in which they invest.
- - Then, if necessary, the funds redeem shares to cover any remaining fees
payable.
We may use any profits we realize from the variable accounts' payment to us of
the mortality and expense risk fee for any proper corporate purpose, including,
among others, payment of distribution (selling) expenses. We do not expect that
the surrender charge, discussed in the following paragraphs, will cover sales
and distribution expenses.
SURRENDER CHARGE
If part or all of a certificate is surrendered within the first 11 certificate
years, the following surrender charge applies:
<TABLE>
<CAPTION>
SURRENDER CHARGE AS A
SURRENDER YEAR PERCENTAGE OF AMOUNT SURRENDERED
<S> <C>
1 8%
2 8
3 8
4 8
5 7
6 6
7 5
8 4
9 3
10 2
11 1
12 and later 0
</TABLE>
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 15
<PAGE>
The surrender charge is further limited so that it will never exceed 8.5% of
aggregate purchase payments made to the certificate.
For a partial surrender that is subject to a surrender charge, the amount
deducted for the surrender charge will be a percentage of the total amount
surrendered. We will deduct the charge from the value remaining after we pay you
the amount you requested. Example: Assume you request a surrender of $1,000 and
there is a 7% surrender charge. The surrender charge is $75.26 for a total
surrender amount of $1,075.26. This charge represents 7% of the total amount
surrendered and we deduct it from the certificate value remaining after we pay
you the $1,000 you requested. If you make a full surrender of your certificate,
we also will deduct the applicable administrative charge.
SURRENDER CHARGE UNDER ANNUITY PAYOUT PLAN E -- PAYOUTS FOR A SPECIFIED PERIOD:
Under this payout plan, you can choose to take a surrender. The amount that you
can surrender is the present value of any remaining variable payouts. The
discount rate we use in the calculation will be 5.05% if the assumed investment
rate is 3.5% and 6.55% if the assumed investment rate is 5%. The surrender
charge is equal to the difference in discount values using the above discount
rates and the assumed investment rate. The surrender charge is further limited
so that it will never exceed 8.5% of aggregate purchase payments made to the
contract. We reserve the right to reduce or eliminate the surrender charge.
SURRENDER CHARGE CALCULATION EXAMPLE:
Owner requests a $1,000 partial surrender and the surrender charge is 5%:
<TABLE>
<S> <C>
$1,000 partial surrender
------------------ = $ 1,052.63
.95
</TABLE>
<TABLE>
<S> <C>
Total amount surrendered $1,052.63
X 0.05
--------
Total surrender charge $ 52.63
</TABLE>
WAIVER OF SURRENDER CHARGE
We do not assess surrender charges:
- - for amounts surrendered after the 11th certificate year;
- - for amounts surrendered due to a participant's retirement under the plan on or
after age 55;
- - for amounts surrendered due to the death of the participant; or
- - upon settlement of the certificate under an annuity payout plan
POSSIBLE GROUP REDUCTIONS: In some cases we may incur lower sales and
administrative expenses due to the size of the group, the average contribution
and the use of group enrollment procedures. In such cases, we may be able to
reduce or eliminate the administrative and surrender charges. However, we expect
this to occur infrequently.
PREMIUM TAXES
Certain state and local governments may impose premium taxes on us (up to 3.5%).
These taxes depend upon your state of residence or the state in which the
contract and certificate were sold. Currently, we deduct any applicable premium
taxes when annuity payouts begin, but we reserve the right to deduct this tax at
other times such as when you make purchase payments or when you surrender your
certificate.
- --------------------------------------------------------------------------------
16 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
VALUING YOUR INVESTMENT
We value your accounts as follows:
FIXED ACCOUNT
We value the amounts you allocated to the fixed account directly in dollars. The
fixed account value equals:
- - the sum of your purchase payments and transfer amounts allocated to the fixed
account;
- - plus interest credited;
- - minus the sum of amounts surrendered (including and applicable surrender
charges) and amounts transferred out; and
- - minus any prorated administrative charge.
VARIABLE ACCOUNTS
We convert amounts you allocated to the variable accounts into accumulation
units. Each time you make a purchase payment or transfer amounts into one of the
variable accounts, we credit a certain number of accumulation units to your
certificate for that account. Conversely, each time you take a partial
surrender, transfer amounts out of a variable account or we assess an
administrative charge, we subtract a certain number of accumulation units from
your certificate.
The accumulation units are the true measure of investment value in each account
during the accumulation period. They are related to, but not the same as, the
net asset value of the fund in which the account invests. The dollar value of
each accumulation unit can rise or fall daily depending on the variable account
expenses, performance of the fund and on certain fund expenses. Here is how we
calculate accumulation unit values:
NUMBER OF UNITS: To calculate the number of accumulation units for a particular
account we divide your investment by the current accumulation unit value.
ACCUMULATION UNIT VALUE: The current accumulation unit value for each variable
account equals the last value times the account's current net investment factor.
WE DETERMINE THE NET INVESTMENT FACTOR BY:
- - adding the fund's current net asset value per share, plus the per share amount
of any accrued income or capital gain dividends to obtain a current adjusted
net asset value per share; then
- - dividing that sum by the previous adjusted net asset value per share; and
- - subtracting the percentage factor representing the mortality and expense risk
fee from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a variable
account.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 17
<PAGE>
FACTORS THAT AFFECT VARIABLE ACCOUNT ACCUMULATION UNITS
Accumulation units may change in two ways -- in number and in value.
The number of accumulation units you own may fluctuate due to:
- - additional purchase payments you allocate to the variable accounts;
- - transfers into or out of the variable accounts;
- - partial surrenders;
- - surrender charges; and/or
- - prorated portions of the certificate administrative charge.
Accumulation unit values will fluctuate due to:
- - changes in funds' net asset value;
- - dividends distributed to the variable accounts;
- - capital gains or losses of funds;
- - fund operating expenses; and/or
- - mortality and expense risk fees.
- --------------------------------------------------------------------------------
18 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
MAKING THE MOST OF YOUR CERTIFICATE
AUTOMATED DOLLAR-COST AVERAGING
Currently, you can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For example, you
might transfer a set amount monthly from a relatively conservative variable
account to a more aggressive one, or to several others, or from the fixed
account to one or more variable accounts. There is no charge for dollar-cost
averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market values of the funds. Since you
invest the same amount each period, you automatically acquire more units when
the market value falls and fewer units when it rises. The potential effect is to
lower your average cost per unit.
HOW DOLLAR-COST AVERAGING WORKS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT ACCUMULATION NUMBER OF UNITS
MONTH INVESTED UNIT VALUE PURCHASED
<S> <C> <C> <C>
By investing an Jan $100 $20 5.00
equal number of Feb 100 18 5.56
dollars each month... Mar 100 17 5.88
you automatically Apr 100 15 6.67
buy more units May 100 16 6.25
when the per unit Jun 100 18 5.56
market price is low... Jul 100 17 5.88
and fewer units Aug 100 19 5.26
when the per unit Sept 100 21 4.76
market price is high. Oct 100 20 5.00
</TABLE>
You paid an average price of only $17.91 per unit over the 10 months, while the
average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any variable account will gain in
value nor will it protect against a decline in value if market prices fall.
Because dollar-cost averaging involves continuous investing, your success 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. For specific features contact your sales representative.
TRANSFERRING MONEY BETWEEN ACCOUNTS
You may transfer money from any one variable account, or the fixed account, to
another account before annuity payouts begin. (Certain restrictions apply to
transfers involving the fixed account.) We will process your transfer on the
valuation date we receive your request. We will value your transfer at the next
accumulation unit value calculated after we receive your request. There is no
charge for transfers. Before making a transfer, you should consider the risks
involved in switching investments.
We may suspend or modify transfer privileges at any time.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 19
<PAGE>
TRANSFER POLICIES
- - You may transfer certificate values between the variable accounts, or from the
variable accounts to the fixed account at any time. However, if you made a
transfer from the fixed account to the variable accounts, you may not make a
transfer from any variable account back to the fixed account until the next
eligible transfer period (if any) as defined in the plan, or until the next
certificate anniversary.
- - You may transfer certificate values from the fixed account to the variable
accounts once per certificate year (except for automated transfers, which can
be set up at any time for certain transfer periods subject to certain
minimums).
- - Once annuity payouts begin, you may not make transfers to or from the fixed
account, but you may make transfers once per certificate year among the
variable accounts.
HOW TO REQUEST A TRANSFER OR SURRENDER
1 BY LETTER
- --------------------------------------------------------------------------------
Send your name, certificate number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or surrender to:
IDS LIFE INSURANCE COMPANY
70200 AXP FINANCIAL CENTER
MINNEAPOLIS, MN 55474
MINIMUM AMOUNT
Transfers or surrenders: $250 or entire account balance
MAXIMUM AMOUNT
Transfers or surrenders: Certificate value
2 BY AUTOMATED TRANSFERS
- --------------------------------------------------------------------------------
Your sales representative can help you set up automated transfers among your
variable accounts or fixed account.
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that are
currently in place.
- - Automated transfers from the fixed account to the variable accounts may not
exceed an amount that, if continued, would deplete the fixed account within
12 months.
- - Automated transfers are subject to all of the contract provisions and terms,
including transfer of certificate values between accounts.
MINIMUM AMOUNT
Transfers: $50
- --------------------------------------------------------------------------------
20 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
3 BY PHONE
- --------------------------------------------------------------------------------
For salary reduction plans only.
Call between 7 a.m. and 6 p.m. Central time:
1-800-862-7919 (TOLL FREE)
TTY service for the hearing impaired:
1-800-285-8846 (TOLL FREE)
MINIMUM AMOUNT
Transfers or surrenders:
$250 or entire account balance
MAXIMUM AMOUNT
Transfers: Certificate value
Surrenders: $50,000
We answer telephone requests promptly, but you may experience delays when the
call volume is unusually high. If you are unable to get through, use the mail
procedure as an alternative.
We will honor any telephone transfer or surrender requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. We will not
allow a telephone surrender within 30 days of a phoned-in address change. As
long as we follow the procedures, we (and our affiliates) will not be liable for
any loss resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You may request
that telephone transfers or surrenders NOT be authorized from your account by
writing to us.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 21
<PAGE>
SURRENDERS
Subject to certain restrictions imposed by the Code, you may surrender all or
part of your certificate at any time before annuity payouts begin by sending us
a written request or calling us. We will process your surrender request on the
valuation date we receive it. For total surrenders, we will compute the value of
the certificate at the next accumulation unit value calculated after we receive
your request. We may ask you to return the certificate. You may have to pay
surrender charges (see "Charges - Surrender charge") and IRS taxes and penalties
(see "Taxes"). You cannot make surrenders after annuity payouts begin except
under Plan E (see "The Annuity Payout Period - Annuity payout plans").
SURRENDER POLICIES
If you have a balance in more than one account and you request a partial
surrender, we will withdraw money from all of your variable accounts and/or the
fixed account in the same proportion as your value in each account correlates to
the total contract value, unless requested otherwise.
RECEIVING PAYMENT
By regular or express mail:
- - payable to you;
- - mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
By wire:
- - request that payment be wired to your bank;
- - bank account must be in the same ownership as your certificate; and
- - pre-authorization required.
For instructions, contact your sales representative.
Normally, we will send the payment within seven days after receiving your
request. However, we may postpone the payment if:
-- the surrender amount includes a purchase payment check that has not
cleared;
-- the NYSE is closed, except for normal holiday and weekend closings;
-- trading on the NYSE is restricted, according to SEC rules;
-- an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
-- the SEC permits us to delay payment for the protection of security holders.
- --------------------------------------------------------------------------------
22 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
TSA -- SPECIAL SURRENDER PROVISIONS
PARTICIPANTS IN TAX-SHELTERED ANNUITIES
The Code imposes certain restrictions on your right to receive early
distributions from a TSA:
- - Distributions attributable to salary reduction contributions (plus earnings)
made after Dec. 31, 1988, or to transfers or rollovers from other contracts,
may be made from the TSA only if:
-- you are at least age 59 1/2;
-- you are disabled as defined in the Code;
-- you separated from the service of the employer who purchased the contract;
or
-- the distribution is because of your death.
- - If you encounter a financial hardship (as defined by the Code), you may
receive a distribution of all certificate values attributable to salary
reduction contributions made after Dec. 31, 1988, but not the earnings on
them.
- - Even though a distribution may be permitted under the above rules, it may be
subject to IRS taxes and penalties (see "Taxes").
- - The employer must comply with certain nondiscrimination requirements for
certain types of contributions under a TSA contract to be excluded from
taxable income. You should consult your employer to determine whether the
nondiscrimination rules apply to you.
- - The above restrictions on distributions do not affect the availability of the
amount transferred or rolled over to the certificate as of Dec. 31, 1988. The
restrictions also do not apply to transfers or exchanges of certificate values
within the certificate, or to another registered variable annuity contract or
investment vehicle available through the employer.
- - If the contract/certificate has a loan provision, the right to receive a loan
from your fixed account is described in detail in your contract/certificate.
You may borrow from the certificate value allocated to the fixed account.
PARTICIPANTS IN THE TEXAS OPTIONAL RETIREMENT PROGRAM
You cannot receive distributions before retirement unless you become totally
disabled or end your employment at a Texas college or university. This
restriction affects your right to:
- - surrender all or part of your certificate at any time; and
- - move up your retirement date.
If you are in the program for only one year, the portion of the purchase
payments made by the state of Texas will be refunded to the state with no
surrender charge. These restrictions are based on an opinion of the Texas
Attorney General interpreting Texas law.
CHANGING OWNERSHIP
The contract and related certificates cannot be sold, assigned, transferred,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other than
us. Your vested rights under the certificate are nonforfeitable.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 23
<PAGE>
BENEFITS IN CASE OF DEATH
If you die before annuity payouts begin while this certificate is in force, we
will pay your beneficiary as follows:
If death occurs before the annuitant's 75th birthday, the beneficiary receives
the greater of:
- - the certificate value; or
- - purchase payments made to the certificate, minus any surrenders.
If death occurs on or after the annuitant's 75th birthday, the beneficiary
receives the certificate value.
IF YOUR SPOUSE IS SOLE BENEFICIARY and you die before the retirement date, your
spouse may keep the certificate in force. To do this your spouse must, within 60
days after we receive proof of death, give us written instructions to keep the
certificate in force. If you die before the retirement date, your spouse may
keep the certificate in force until the date on which you would have reached age
70 1/2 or any other date permitted by the Code.
PAYMENTS: We will pay the beneficiary in a single sum unless you give us other
written instructions. However, the beneficiary may receive payouts under any
annuity payout plan available under this certificate if:
- - the beneficiary asks us in writing within 60 days after we receive proof of
death; and
- - payouts begin no later than one year after your death, or other date as
permitted by the Code; and
- - the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will process the death claim on the valuation
date our death claim requirements are fulfilled. We will determine the
certificate's value at the next accumulation unit value calculated after our
death claim requirements are fulfilled. We pay interest, if any, from the date
of death at a rate no less than required by law. We will mail payment to the
beneficiary within seven days after our death claim requirements are fulfilled.
(See "Taxes.")
- --------------------------------------------------------------------------------
24 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
THE ANNUITY PAYOUT PERIOD
As the participant, you have the right to decide how and to whom annuity payouts
will be made starting at the retirement date. You may select one of the annuity
payout plans outlined below, or we may mutually agree on other payout
arrangements. We do not deduct any surrender charges under the payout plans
listed below.
The contract and related certificates allow you to determine whether we will
make payouts on a fixed or variable basis, or a combination of fixed and
variable. The amounts available to purchase payouts under the plan you select is
the certificate value on your retirement date (less any applicable premium tax).
You may reallocate this certificate value to the fixed account to provide fixed
dollar payouts and/or among the variable accounts to provide variable annuity
payouts. During the annuity payout period, you cannot invest in more than five
variable accounts at any one time unless we agree otherwise.
Amounts of fixed and variable payouts depend on:
- - the annuity payout plan you select;
- - your age;
- - the annuity table in the contract and related certificates; and
- - the amounts allocated to the accounts at settlement on the retirement date.
In addition, for variable payouts only, amounts depend on the investment
performance of the accounts you select. These payouts will vary from month to
month because the performance of the funds will fluctuate. (In the case of fixed
annuities, payouts remain the same from month to month.)
For information with respect to transfers between accounts after annuity payouts
begin, see "Making the Most of Your Certificate -- Transfer policies."
ANNUITY TABLE
The annuity table in your certificate shows the amount of the first monthly
payment for each $1,000 of certificate value according to the age and, when
applicable, the sex of the annuitant. (Where required by law, we will use a
unisex table of settlement rates.) The table assumes that the certificate value
is invested at the beginning of the annuity payout period and earns a 5% rate of
return, which is reinvested and helps to support future payouts.
SUBSTITUTION OF 3.5% TABLE
If you ask us at least 30 days before the retirement date, we will substitute an
annuity table based on an assumed 3.5% investment rate for the 5% table in the
certificate. The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or decrease. Using
the 5% table results in a higher initial payment, but later payouts will
increase more slowly when annuity unit values rise and decrease more rapidly
when they decline.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 25
<PAGE>
ANNUITY PAYOUT PLANS
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before certificate values are used to purchase the
payout plan:
PLAN A -- LIFE ANNUITY -- NO REFUND: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death. We will not make any further payouts. This means that if the annuitant
dies after we have made only one monthly payout, we will not make any more
payouts.
PLAN B -- LIFE ANNUITY WITH FIVE, TEN OR 15 YEARS CERTAIN: We make monthly
payouts for a guaranteed payout period of five, ten or 15 years that you elect.
This election will determine the length of the payout period to the beneficiary
if the annuitant should die before the elected period expires. We calculate the
guaranteed payout period from the retirement date. If the annuitant outlives the
elected guaranteed payout period, we will continue to make payouts until the
annuitant's death.
PLAN C -- LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until the
annuitant's death, with our guarantee that payouts will continue for some period
of time. We will make payouts for at least the number of months determined by
dividing the amount applied under this option by the first monthly payout,
whether or not the annuitant is living.
PLAN D -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly
payouts while both the annuitant and a joint annuitant are living. If either
annuitant dies, we will continue to make monthly payouts at the full amount
until the death of the surviving annuitant. Payouts end with the death of the
second annuitant.
PLAN E -- PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a specific
payout period of ten to 30 years that you elect. We will make payouts only for
the number of years specified whether the annuitant is living or not. Depending
on the selected time period, it is foreseeable that an annuitant can outlive the
payout period selected. During the payout period, you can elect to have us
determine the present value of any remaining variable payouts and pay it to you
in a lump sum. We determine the present value of the remaining annuity payouts
which are assumed to remain level at the initial payment. The discount rate we
use in the calculation will vary between 5.05% and 6.55% depending on the
applicable assumed investment rate. (See "Charges -- Surrender charge under
Annuity Payout Plan E.") You can also take a portion of the discounted value
once a year. If you do so, your monthly payouts will be reduced by the
proportion of your surrender to the full discounted value. A 10% IRS penalty tax
could apply if you take a withdrawal. (See "Taxes.")
RESTRICTIONS ON PAYOUT OPTIONS: You may be required to select a payout plan
that provides for payouts:
- - over the life of the annuitant;
- - over the joint lives of the annuitant and a designated beneficiary;
- - for a period not exceeding the life expectancy of the annuitant; or
- - for a period not exceeding the joint life expectancies of the annuitant and a
designated beneficiary.
You have the responsibility for electing a payout option that complies with your
certificate and with applicable law.
IF WE DO NOT RECEIVE INSTRUCTIONS: You must give us written instructions for the
annuity payouts at least 30 days before your retirement date. If you do not, we
will make payouts under Plan B, with 120 monthly payouts guaranteed, unless this
option is contrary to applicable provisions of the Code. Certificate values that
you allocated to the fixed account will provide fixed dollar payouts and
certificate values that you allocated among variable accounts will provide
variable annuity payouts.
- --------------------------------------------------------------------------------
26 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
IF MONTHLY PAYOUTS WOULD BE LESS THAN $20: We will calculate the amount of
monthly payouts at the time the certificate value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the certificate value to the participant in a lump sum.
DEATH AFTER ANNUITY PAYOUTS BEGIN
If the annuitant dies after annuity payouts begin, we will pay any amount
payable to the beneficiary as provided in the annuity payout plan in effect.
TAXES
Generally, under current law, your certificate has a tax-deferral feature. This
means any increase in the value of the fixed account and/or variable accounts in
which you invest is taxable to you only when you receive a payout or surrender
except to the extent that contributions were made with after-tax dollars.
(However, see detailed discussion below.) Any portion of the annuity payouts and
any surrenders requested that represent ordinary income are normally taxable. We
will send you a tax information reporting form for any year in which we made a
taxable distribution according to our records.
QUALIFIED ANNUITIES: Your certificate may be used to fund a tax-deferred
retirement plan that is already tax-deferred under the Code. The certificate
will not provide any necessary or additional tax-deferral if it is used to fund
a retirement plan that is tax-deferred. Special rules apply to these retirement
plans. Your rights to benefits may be subject to the terms and conditions of
these retirement plans regardless of the terms of the contract.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions under the contract comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions during your life (except for Roth IRAs) and after your
death. You should refer to your retirement plan or adoption agreement, or
consult a tax advisor for more information about these distribution rules.
ANNUITY PAYOUTS: The entire payout generally is includable as ordinary income
and subject to tax to the extent that contributions were made with after-tax
dollars. If you or your employer invested in the certificate with deductible or
pre-tax dollars, such amounts are not considered to be part of your investment
in the certificate and will be taxed when paid to you.
SURRENDERS: If you surrender part or all of the certificate before your annuity
payouts begin, your surrender payment will be taxed. You also may have to pay a
10% IRS penalty for surrenders before reaching age 59 1/2, unless certain
exceptions apply. Other penalties may apply.
DEATH BENEFITS TO BENEFICIARIES: The death benefit under a certificate is not
tax-exempt. Any amount your beneficiary receives that represents previously
deferred earnings within the certificate is taxable as ordinary income to the
beneficiary in the years he or she receives the payments.
PENALTIES: If you receive amounts from the certificate before reaching age
59 1/2, you may have to pay a 10% IRS penalty on the amount includable in your
ordinary income. However, this penalty will not apply to any amount received by
you or your beneficiary:
- - because of your death;
- - because you become disabled (as defined in the Code);
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 27
<PAGE>
- - if the distribution is part of a series of substantially equal periodic
payments, after separation from service, made at least annually, over your
life or life expectancy (or joint lives or life expectancies of you and your
designated beneficiary); or
- - after you separate from service during or after the year you attain age 55.
Other penalties or exceptions may apply if you surrender your certificate before
your plan specifies that payments can be made.
MANDATORY WITHHOLDING: If you receive directly all or part of the certificate
value, mandatory 20% Federal income tax withholding generally (and possibly
state income tax withholding) will be imposed at the time the payment is made.
Any withholding that is done represents a prepayment of your tax due for the
year and you would take credit for such amounts on the annual tax return you
file. This mandatory withholding will not be imposed if:
- - instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
- - the payment is one in a series of substantially equal periodic payments, made
at least annually, over your life or life expectancy (or the joint lives or
life expectancies of you and your designated beneficiary) or over a specified
period of ten years or more; or
- - the payment is a minimum distribution required under the Code.
Payments made to a surviving spouse instead of being directly rolled over to an
IRA may also be subject to mandatory 20% income tax withholding.
ELECTIVE WITHHOLDING: If the distribution is not subject to mandatory
withholding as described above, you can elect not to have any withholding occur.
To do this you must provide us with a valid Social Security Number or Taxpayer
Identification Number.
If you do not make this election and if the payout is part of an annuity payout
plan, the amount of withholding generally is computed using payroll tables. You
can provide us with a statement of how many exemptions to use in calculating the
withholding. If the distribution is any other type of payment (such as a partial
or full surrender), withholding is computed using 10% of the taxable portion.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment outside the United States.
IMPORTANT: Our discussion of federal tax laws is based upon our understanding of
these laws as they are currently interpreted. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax advisor if you have any questions about taxation of the contract
and/or related certificates.
TAX QUALIFICATION: We intend that the contract (and your certificate) qualify as
an annuity for Federal income tax purposes. To that end, the provisions of the
contract and your certificate are to be interpreted to ensure or maintain such
tax qualification, in spite of any other provisions to the contrary. We reserve
the right to amend the contract and/or related certificates to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification or to conform the contract and/or certificates to any applicable
changes in the tax qualification requirements. We will send you a copy of any
such amendment.
- --------------------------------------------------------------------------------
28 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
VOTING RIGHTS
The certificate holder with investments in the variable accounts may vote on
important fund policies until annuity payouts begin. Once they begin, the person
receiving them has voting rights. We will vote fund shares according to the
instructions of the person with voting rights.
Before annuity payouts begin, the number of votes is determined by applying the
percentage interest in each variable account to the total number of votes
allowed to the account.
After annuity payouts begin, the number of votes is equal to:
- - the reserve held in each account for your certificate, divided by
- - the net asset value of one share of the applicable fund.
As we make annuity payouts, the reserve for the annuity decreases; therefore,
the number of votes also will decrease.
We calculate votes separately for each account. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we received instructions. We also will vote
the shares for which we have voting rights in the same proportion as the votes
for which we received instructions.
ABOUT THE SERVICE PROVIDERS
ISSUER AND PRINCIPAL UNDERWRITER
IDS Life issues and is the principal underwriter for the contracts and
certificates. IDS Life is a stock life insurance company organized in 1957 under
the laws of the State of Minnesota and is located at 200 AXP Financial Center,
Minneapolis, MN 55474. IDS Life conducts a conventional life insurance business.
IDS Life is a wholly-owned subsidiary of AEFC, which itself is a wholly-owned
subsidiary of American Express Company, a financial services company
headquartered in New York City. 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. American Express Financial
Advisors Inc. (AEFA) serves individuals and businesses through its nationwide
network of more than 600 supervisory offices, more than 3,800 branch offices and
9,480 financial advisors.
IDS Life pays commissions of up to 7% of the total purchase payments on the
certificates. IDS Life pays a portion of this total commission to district
managers and field vice presidents of the selling representative.
LEGAL PROCEEDINGS
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life and AEFC do business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents and
other matters. IDS Life and AEFC, like other life and health insurers, from time
to time are involved in such litigation. On December 13, 1996, an action
entitled Lesa Benacquisto and Daniel Benacquisto vs. IDS Life Insurance Company
and American Express Financial Corporation was commenced in Minnesota state
court. The action was brought by individuals who replaced an existing IDS Life
insurance policy
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 29
<PAGE>
with a new IDS Life policy. The plaintiffs purport to represent a class
consisting of all persons who replaced existing IDS Life policies with new
policies from and after January 1, 1985. The complaint put at issue various
alleged sales practices and misrepresentations, alleged breaches of fiduciary
duties and alleged violations of consumer fraud statutes. IDS Life and AEFC
filed an answer to the complaint on February 18, 1997, denying the allegations.
A second action, entitled Arnold Mork, Isabella Mork, Ronald Melchart and Susan
Melchart vs. IDS Life Insurance Company and American Express Financial
Corporation was commenced in the same court on March 21,1997. In addition to
claims that were included in the Benacquisto lawsuit, the second action include
an allegation of improper replacement of an existing IDS Life annuity contract.
A subsequent class action, Richard Thoresen and Elizabeth Thoresen vs. AEFC,
American Partners Life Insurance Company, American Enterprise Life Insurance
Company, American Centurion Life Assurance Company, IDS Life Insurance Company
and IDS Life Insurance Company of New York, was filed in the same court on
October 13, 1998 alleging that the sale of annuities in tax-deferred
contributory retirement investment plans (E.G. IRAs) was done through deceptive
marketing practices, which IDS Life denies. Plaintiffs in each of the above
actions seek damages in an unspecified amount and also seek to establish a
claims resolution facility for the determination of individual issues.
IDS 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 wrong doing. We do not anticipate that this proposed settlement
or any other lawsuits in which IDS 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 IDS Life and the
variable accounts. All of the major systems used by IDS Life and the variable
accounts are maintained by AEFC and are utilized by multiple subsidiaries and
affiliates of AEFC. IDS Life's and the variable accounts' 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 IDS Life and the variable accounts, 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. As of Dec. 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 IDS Life's and the
variable accounts' 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. As of Dec. 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 Jan. 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on IDS Life's and the variable
accounts' business, results of operations, or financial condition as a result of
the Year 2000 issue.
- --------------------------------------------------------------------------------
30 IDS LIFE EMPLOYEE BENEFIT ANNUITY
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
Performance Information.......... ........... 3
Calculating Annuity Payouts.................. 5
Rating Agencies.............................. 7
Principal Underwriter........................ 7
Independent Auditors......................... 7
Financial Statements
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PROSPECTUS -- MAY 1, 2000 31
<PAGE>
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
/ / IDS Life Employee Benefit Annuity
/ / American Express Variable Portfolio Funds
MAIL YOUR REQUEST TO:
IDS LIFE INSURANCE COMPANY
200 AXP FINANCIAL CENTER
MINNEAPOLIS, MN 55474
WE WILL MAIL YOUR REQUEST TO:
Your name _____________________________________________________________________
Address _______________________________________________________________________
City _________________________ State ___________ Zip ________________________
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
EMPLOYEE BENEFIT ANNUITY
IDS LIFE ACCOUNTS F, IZ, JZ, G, H, N, KZ, LZ and MZ
May 1, 2000
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ are separate accounts
established and maintained by IDS Life Insurance Company (IDS Life).
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained from your financial advisor, or by writing or calling us at the address
and telephone number below. The prospectus is incorporated in this SAI by
reference.
IDS Life Insurance Company
200 AXP Financial Center
Minneapolis, MN 55474
800-862-7919
<PAGE>
TABLE OF CONTENTS
Performance Information.............................................p. 3
Calculating Annuity Payouts.........................................p. 6
Rating Agencies.....................................................p. 7
Principal Underwriter...............................................p. 8
Independent Auditors................................................p. 8
Financial Statements
<PAGE>
PERFORMANCE INFORMATION
The variable accounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the variable
accounts in terms of the average annual compounded rate of return of a
hypothetical investment in the contract and certificate over a period of one,
five and 10 years (or, if less, up to the life of the variable accounts),
calculated according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. Although we base performance figures on historical
earnings, past performance does not guarantee future results.
Average Annual Total Return With Surrender For Periods Ending Dec. 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Variable Account Investing In: 1 Year 5 Years 10 Years Since
Inception
AXPSM Variable Portfolio
G Bond Fund (10/81)* -7.49% 5.29% 6.79% --%
F Capital Resource Fund (10/81) 12.59 18.32 14.04 --
H Cash Management Fund (10/81) -4.73 2.44 3.54 --
LZ Extra Income Fund (5/96) -3.36 -- -- 1.98
KZ Global Bond Fund (5/96) -13.06 -- -- 0.59
IZ International Fund (1/92) 32.51 13.21 -- 11.59
N Managed Fund (4/86) 4.48 15.26 12.09 --
MZ New Dimensions Fund (5/96) 20.11 -- -- 22.17
JZ Strategy Aggressive Fund 55.66 21.68 -- 15.19
(1/92)
* (Commencement dates of the Funds)
Average Annual Total Return Without Surrender For Periods Ending Dec. 31, 1999
Variable Account Investing In: 1 Year 5 Years 10 Years Since Inception
AXPSM Variable Portfolio
G Bond Fund (10/81)* 0.55% 6.83% 7.00% --%
F Capital Resource Fund (10/81) 22.38 20.05 14.27 --
H Cash Management Fund (10/81) 3.55 3.94 3.75 --
LZ Extra Income Fund (5/96) 5.05 -- -- 4.33
KZ Global Bond Fund (5/96) -5.50 -- -- 2.90
IZ International Fund (1/92) 44.04 14.87 -- 12.16
N Managed Fund (4/86) 13.56 16.94 12.32 --
MZ New Dimensions Fund (5/96) 30.55 -- -- 24.98
JZ Strategy Aggressive Fund 69.19 23.46 -- 15.78
(1/92)
</TABLE>
* (Commencement dates of the Funds)
<PAGE>
Cumulative Total Return
Cumulative total return represents the cumulative change in the value of an
investment for a given period (reflecting change in a variable account's
accumulation unit value). We compute cumulative total return by using the
following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, at the
end of the period (or fractional portion thereof).
Total return figures reflect the deduction of the surrender charge which assumes
you withdraw the entire contract value at the end of the one, five and ten year
periods (or, if less, up to the life of the variable account). We may also show
performance figures without the deduction of a surrender charge. In addition,
total return figures reflect the deduction of all other applicable charges
including the contract administrative charge and mortality and expense risk fee.
Calculation of Yield for Variable Accounts Investing in Money Market Fund
Annualized Simple Yield:
For the variable account investing in the money market fund, we base quotations
of simple yield on:
(a) the change in the value of a hypothetical variable account (exclusive of
capital changes and income other than investment income) at the beginning
of a particular seven-day period;
(b) less a pro rata share of the variable account expenses accrued over the
period;
(c) dividing this difference by the value of the variable account at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The variable account's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period,
and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable surrender charge, or
o any realized or unrealized gains or losses.
Annualized Compound Yield:
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
You must consider (when comparing an investment in variable accounts investing
in money market funds with fixed annuities) that fixed annuities often provide
an agreed-to or guaranteed yield for a stated period of time, whereas the
variable account's yield fluctuates. In comparing the yield of the variable
account to a money market fund, you should consider the different services that
the contract provides.
<PAGE>
Annualized Yields Based on the Seven-Day Period Ending Dec. 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Variable Account Investing In: Simple Yield Compound Yield
---------------- ------------- ------------ --------------
H AXPSM Variable Portfolio - Cash Management Fund 4.99% 5.12%
</TABLE>
Annualized Yield for Variable Accounts Investing in Income Funds
For the variable accounts investing in income funds, we base quotations of yield
on all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it by dividing net
investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of accumulation units outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per accumulation unit on the last day
of the period
The variable account earns yield from the increase in the net asset value of
shares of the fund in which it invests and from dividends declared and paid by
the fund, which are automatically invested in shares of the fund.
Annualized Yield Based on the 30-Day Period Ended Dec. 31, 1999
Variable Account Investing in: Yield
---------------- ------------- -----
G AXPSM Variable Portfolio - Bond Fund 7.52%
LZ AXPSM Variable Portfolio - Extra Income Fund 11.11
KZ AXPSM Variable Portfolio - Global Bond Fund 5.66
The yield on the variable account's accumulation unit may fluctuate daily and
does not provide a basis for determining future yields.
Independent rating or statistical services or publishers or publications such as
those listed below may quote variable account performance, compare it to
rankings, yields or returns, or use it in variable annuity accumulation or
settlement illustrations they publish or prepare.
The Bank Rate Monitor National Index, Barron's, Business Week, CDA Technologies,
Donoghue's Money Market Fund Report, Financial Services Week, Financial Times,
Financial World, Forbes, Fortune, Global Investor, Institutional Investor,
Investor's Business Daily, Kiplinger's Personal Finance, Lipper Analytical
Services, Money, Morningstar, Mutual Fund Forecaster, Newsweek, The New York
Times, Personal Investor, Stanger Report, Sylvia Porter's Personal Finance, USA
Today, U.S. News & World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
<PAGE>
CALCULATING ANNUITY PAYOUTS
The Variable Accounts
We do the following calculations separately for each of the variable accounts.
The separate monthly payouts, added together, make up your total variable
annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your certificate on the valuation date, and
deduct any applicable premium tax; then
o apply the result to the annuity table contained in the certificate or
another table at least as favorable.
The annuity table shows the amount of the first monthly payment for each $1,000
of value which depends on factors built into the table, as described below.
Annuity Units: We then convert the value of your variable account to annuity
units. To compute the number of units credited to you, we divide the first
monthly payment by the annuity unit value (see below) on the valuation date. The
number of units in your variable account is fixed. The value of the units
fluctuates with the performance of the underlying fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date; by
o the fixed number of annuity units credited to you.
Annuity Unit Values: We originally set this value at $1 for each variable
account. To calculate later values we multiply the last annuity value by the
product of:
o the net investment factor; and
o the neutralizing factor.
The purpose of the neutralizing factor is to offset the effect of the assumed
rate built into the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor: We determine the net investment factor by:
o adding the fund's current net asset value per share plus the per share
amount of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted net asset value per share; and
o subtracting the percentage factor representing the mortality and expense
risk fee from the result.
Because the net asset value of the fund may fluctuate, the net investment factor
my be greater or less than one, and the annuity unit value may increase or
decrease. You bear this investment risk in a variable account.
<PAGE>
The Fixed Account
We guarantee your fixed annuity payout amounts. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your fixed account at the retirement date or the date you
have selected to begin receiving your annuity payouts; then
o using an annuity table, we apply the value according to the annuity payout
plan you select.
The annuity payout table we use will be the one in effect at the time you choose
to begin your annuity payouts. The values in the table will be equal to or
greater than the table in your certificate.
RATING AGENCIES
The following chart reflects the ratings given to us by independent rating
agencies. These agencies evaluate the financial soundness and claims-paying
ability of insurance companies based on a number of different factors. This
information does not relate to the management or performance of the variable
accounts of the contract. This information relates only to the fixed account and
reflects our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
A.M. Best A+ (Superior)
- ---------------------------
Duff & Phelps AAA
- ---------------------------
Moody's Aa2 (Excellent)
A.M. Best's superior rating reflects our strong distribution network, favorable
overall balance sheet, consistently improving profitability, adequate level of
capitalization and asset/liability management expertise.
Duff & Phelps rating reflects our consistently excellent profitability record,
leadership position in chosen markets, stable operating leverage and effective
use of asset/liability management techniques.
Moody's excellent rating reflects our leadership position in financial planning,
strong asset, liability management and good capitalization. IDS Life has a
strong market focus and greatly emphasizes quality service. This information
applies only to fixed products invested in IDS Life's General Account and
reflects IDS Life's ability to fulfill its obligations under its contracts. This
information does not relate to the management and performance of the separate
account assets associated with IDS Life's variable products.
<PAGE>
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is IDS Life which offers the contract
on a continuous basis.
Surrender charges we received for the last three years aggregated total
19,803,247, $17,936,810 and $14,502,145, respectively.
Commissions we paid for the last three years aggregated total $21,517,281,
$17,634,855 and $17,883,488, respectively.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP (1400 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402)
independent auditors, as stated in their report appearing herein.
FINANCIAL STATEMENTS
<PAGE>
Annual Financial Information
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying individual and combined statements of net
assets of IDS Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ as of December 31,
1999, and the related statements of operations for the year then ended, and the
statements of changes in net assets for each of the two years in the period then
ended. These financial statements are the responsibility of the management of
IDS Life Insurance Company. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1999 with
the affiliated mutual fund managers. 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 individual and combined financial position of IDS
Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ at December 31, 1999, and the
individual and combined results of their operations and changes in their net
assets for the periods described above, in conformity with accounting principles
generally accepted in the United States.
Ernst & Young LLP
Minneapolis, Minnesota
March 17, 2000
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ
Statements of Net Assets
December 31, 1999
Segregated Asset Account
Assets G F H LZ KZ
Investments in shares of mutual funds:
<S> <C> <C> <C> <C> <C>
at cost $1,368,073,917 $3,753,357,115 $ 345,736,949 $ 298,565,693 $ 83,880,459
-------------- -------------- ------------- ------------- ------------
at market value $1,268,218,477 $5,587,813,623 $ 345,735,652 $ 256,517,285 $ 78,933,907
Dividends receivable 7,909,866 -- 1,524,039 2,341,713 371,542
Accounts receivable from IDS Life
for contract purchase payments -- -- -- -- --
Total assets 1,276,128,343 5,587,813,623 347,259,691 258,858,998 79,305,449
============= ============= =========== =========== ==========
Liabilities Payable to IDS Life for:
Mortality and expense risk fee 1,094,640 4,757,034 291,335 221,556 68,018
Contract terminations 543,554 1,840,943 2,117,612 16,808 49,189
------- --------- --------- ------ ------
Total liabilities 1,638,194 6,597,977 2,408,947 238,364 117,207
--------- --------- --------- ------- -------
Net assets applicable to
contracts in
accumulation period $1,268,127,475 $5,560,488,201 $ 344,460,554 $ 256,561,673 $ 78,682,536
Net assets applicable to
contracts in
payment period 6,362,674 20,727,445 390,190 2,058,961 505,706
--------- ---------- ------- --------- -------
Total net assets $1,274,490,149 $5,581,215,646 $ 344,850,744 $ 258,620,634 $ 79,188,242
============== ============== ============= ============= ============
Accumulation units outstanding 238,818,203 449,947,982 129,560,547 218,583,454 70,499,453
=========== =========== =========== =========== ==========
Net asset value per accumulation unit $ 5.31 $ 12.36 $ 2.66 $ 1.17 $ 1.12
====== ======= ====== ====== ======
Combined
Variable
Assets IZ N MZ JZ Accounts
Investments in shares of mutual funds:
at cost $1,574,119,468 $3,340,580,042 $1,586,473,213 $1,735,456,631 $14,086,243,487
-------------- -------------- -------------- -------------- ---------------
at market value $2,269,234,585 $4,542,542,611 $2,722,247,564 $3,011,905,099 $20,083,148,803
Dividends receivable -- -- -- -- 12,147,160
Accounts receivable from IDS Life
for contract purchase payments -- -- -- 566,097 566,097
------- -------
Total assets 2,269,234,585 4,542,542,611 2,722,247,564 3,012,471,196 20,095,862,060
============= ============= ============= ============= ==============
Liabilities Payable to IDS Life for:
Mortality and expense risk fee 1,931,655 3,873,507 2,299,384 2,549,817 17,086,946
Contract terminations 518,232 1,704,301 374,366 -- 7,165,005
------- --------- ------- ---------
Total liabilities 2,449,887 5,577,808 2,673,750 2,549,817 24,251,951
--------- --------- --------- --------- ----------
Net assets applicable to
contracts in
accumulation period $2,260,105,226 $4,514,396,088 $2,701,916,565 $3,000,547,925 $19,985,286,243
Net assets applicable to
contracts in
payment period 6,679,472 22,568,715 17,657,249 9,373,454 86,323,866
--------- ---------- ---------- --------- ----------
Total net assets $2,266,784,698 $4,536,964,803 $2,719,573,814 $3,009,921,379 $20,071,610,109
============== ============== ============== ============== ===============
Accumulation units outstanding 898,714,868 986,012,926 1,188,479,994 927,190,210
=========== =========== ============= ===========
Net asset value per accumulation unit $ 2.51 $ 4.58 $ 2.27 $ 3.24
====== ====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ
Statements of Operations
Year ended December 31, 1999
Segregated Asset Account
Investment income G F H LZ KZ
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 96,802,368 $ 510,873,784 $ 14,216,321 $ 26,422,885 $ 4,066,352
Mortality and expense risk fee 14,083,721 51,910,821 3,070,480 2,681,558 867,223
---------- ---------- --------- --------- -------
Investment income (loss) - net 82,718,647 458,962,963 11,145,841 23,741,327 3,199,129
========== =========== ========== ========== =========
Realized and unrealized gain (loss) on investments - net Realized gain (loss) on
sales of investments in mutual funds:
Proceeds from sales 265,013,097 684,551,643 300,562,398 27,096,218 12,862,425
Cost of investments sold 281,559,739 465,932,285 300,564,470 31,031,184 13,311,084
----------- ----------- ----------- ---------- ----------
Net realized gain (loss) on investments (16,546,642) 218,619,358 (2,072) (3,934,966) (448,659)
Net change in unrealized appreciation or
depreciation of invest (57,777,057) 388,030,726 (1,694) (6,705,343) (7,628,917)
----------- ----------- ------ ---------- ----------
Net gain (loss) on investments (74,323,699) 606,650,084 (3,766) (10,640,309) (8,077,576)
----------- ----------- ------ ----------- ----------
Net increase (decrease) in net assets
resulting from operations $ 8,394,948 $1,065,613,047 $ 11,142,075 $ 13,101,018 $ (4,878,447)
=========== ============== ============ ============ ============
Combined
Variable
Investment income IZ N MZ JZ Accounts
Dividend income from mutual funds $ 296,141,489 $ 300,690,482 $ 27,030,034 $ 214,636,871 $1,490,880,586
Mortality and expense risk fee 18,857,635 44,215,421 21,469,091 21,408,832 178,564,782
---------- ---------- ---------- ---------- -----------
Investment income (loss) - net 277,283,854 256,475,061 5,560,943 193,228,039 1,312,315,804
=========== =========== ========= =========== =============
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on
sales of investments in mutual funds:
Proceeds from sales 436,084,981 525,056,641 18,411,290 386,667,035 2,656,305,728
Cost of investments sold 324,503,281 394,447,426 12,126,396 308,579,893 2,132,055,758
----------- ----------- ---------- ----------- -------------
Net realized gain (loss) on investments 111,581,700 130,609,215 6,284,894 78,087,142 524,249,970
Net change in unrealized appreciation or
depreciation of invest 331,640,637 180,249,841 602,990,330 981,864,623 2,412,663,146
----------- ----------- ----------- ----------- -------------
Net gain (loss) on investments 443,222,337 310,859,056 609,275,224 1,059,951,765 2,936,913,116
----------- ----------- ----------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 720,506,191 $ 567,334,117 $ 614,836,167 $1,253,179,804 $4,249,228,920
============= ============= ============= ============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ
Statements of Changes in Net Assets
Year ended December 31, 1999
Segregated Asset Account
Operations G F H LZ KZ
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 82,718,647 $ 458,962,963 $ 11,145,841 $ 23,741,327 $ 3,199,129
Net realized gain (loss) on investments (16,546,642) 218,619,358 (2,072) (3,934,966) (448,659)
Net change in unrealized appreciation or
depreciation of investments (57,777,057) 388,030,726 (1,694) (6,705,343) (7,628,917)
----------- ----------- ------ ---------- ----------
Net increase (decrease) in net assets
resulting from operations 8,394,948 1,065,613,047 11,142,075 13,101,018 (4,878,447)
========= ============= ========== ========== ==========
Contract transactions
Contract purchase payments 26,900,180 85,781,934 15,204,189 4,974,177 1,210,372
Net transfers* (105,970,257) (153,370,052) 155,684,183 12,654,268 (374,882)
Transfers for policy loans 1,842,920 7,473,199 567,692 129,522 54,571
Annuity payments (650,605) (1,742,554) (32,682) (159,063) (31,086)
Contract charges (969,307) (3,741,628) (176,826) (121,868) (37,981)
Contract terminations:
Surrender benefits (162,008,938) (516,624,685) (87,695,413) (25,706,863) (8,608,732)
Death benefits (16,680,663) (33,535,221) (3,629,477) (2,099,593) (552,543)
----------- ----------- ---------- ---------- --------
Increase (decrease) from
contract transactions (257,536,670) (615,759,007) 79,921,666 (10,329,420) (8,340,281)
------------ ------------ ---------- ----------- ----------
Net assets at beginning of year 1,523,631,871 5,131,361,606 253,787,003 255,849,036 92,406,970
------------- ------------- ----------- ----------- ----------
Net assets at end of year $1,274,490,149 $5,581,215,646 $ 344,850,744 $ 258,620,634 $ 79,188,242
============== ============== ============= ============= ============
Accumulation unit activity
Units outstanding at beginning of year 287,880,919 507,310,351 98,897,110 228,164,851 78,149,847
Contract purchase payments 5,098,452 8,005,258 5,835,845 4,287,084 1,060,861
Net transfers* (20,122,969) (14,287,555) 59,720,497 10,864,149 (391,555)
Transfers for policy loans 349,885 696,515 217,786 111,325 47,996
Contract charges (184,951) (351,026) (68,602) (105,541) (33,441)
Contract terminations:
Surrender benefits (30,971,111) (48,274,604) (33,652,531) (22,910,831) (7,832,934)
Death benefits (3,232,022) (3,150,957) (1,389,558) (1,827,583) (501,321)
---------- ---------- ---------- ---------- --------
Units outstanding at end of year 238,818,203 449,947,982 129,560,547 218,583,454 70,499,453
=========== =========== =========== =========== ==========
Combined
Variable
Operations IZ N MZ JZ Accounts
Investment income (loss) - net $ 277,283,854 $ 256,475,061 $ 5,560,943 $ 193,228,039 $ 1,312,315,804
Net realized gain (loss) on investments 111,581,700 130,609,215 6,284,894 78,087,142 524,249,970
Net change in unrealized appreciation or
depreciation of investments 331,640,637 180,249,841 602,990,330 981,864,623 2,412,663,146
----------- ----------- ----------- ----------- -------------
Net increase (decrease) in net assets
resulting from operations 720,506,191 567,334,117 614,836,167 1,253,179,804 4,249,228,920
=========== =========== =========== ============= =============
Contract transactions
Contract purchase payments 40,338,256 83,597,175 72,874,934 48,904,810 379,786,027
Net transfers* (116,553,908) (96,836,944) 508,860,423 (147,410,390) 56,682,441
Transfers for policy loans 2,859,054 5,702,415 2,773,692 3,088,741 24,491,806
Annuity payments (469,919) (1,986,186) (1,121,855) (587,286) (6,781,236)
Contract charges (1,368,024) (3,046,411) (1,397,495) (1,513,611) (12,373,151)
Contract terminations:
Surrender benefits (189,429,712) (431,500,196) (217,155,832) (217,020,605) (1,855,750,976)
Death benefits (11,050,653) (33,236,282) (9,098,257) (11,508,774) (121,391,463)
----------- ----------- ---------- ----------- ------------
Increase (decrease) from
contract transactions (275,674,906) (477,306,429) 355,735,610 (326,047,115) (1,535,336,552)
------------ ------------ ----------- ------------ --------------
Net assets at beginning of year 1,821,953,413 4,446,937,115 1,749,002,037 2,082,788,690 17,357,717,741
------------- ------------- ------------- ------------- --------------
Net assets at end of year $2,266,784,698 $4,536,964,803 $2,719,573,814 $3,009,921,379 $20,071,610,109
============== ============== ============== ============== ===============
Accumulation unit activity
Units outstanding at beginning of year 1,042,405,301 1,100,356,781 1,001,825,924 1,087,313,726
Contract purchase payments 21,186,358 19,976,712 38,519,407 23,744,035
Net transfers* (61,546,990) (22,881,117) 269,878,345 (76,329,658)
Transfers for policy loans 1,496,740 1,359,792 1,466,009 1,493,862
Contract charges (711,536) (727,064) (734,890) (727,228)
Contract terminations:
Surrender benefits (98,137,917) (104,002,022) (117,609,944) (102,783,256)
Death benefits (5,977,088) (8,070,156) (4,864,857) (5,521,271)
---------- ---------- ---------- ----------
Units outstanding at end of year 898,714,868 986,012,926 1,188,479,994 927,190,210
=========== =========== ============= ===========
*Includes transfer activity from (to) other accounts and transfers from (to) IDS
Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ
Statements of Changes in Net Assets
Year ended December 31, 1998
Segregated Asset Accounts
Operations G F H LZ KZ
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $103,828,473 $329,763,435 $8,809,573 $24,475,295 $3,755,760
Net realized gain (loss) on investmets 2,070,205 118,824,562 (632) (493,547) 26,972
Net change in unrealized appreciation or
depreciation of investments (96,451,963) 540,393,789 191 (40,099,627) 1,835,832
----------- ----------- --- ----------- ---------
Net increase (decrease) in net assets
resulting from operations 9,446,715 988,981,786 8,809,132 (16,117,879) 5,618,564
========= =========== ========= =========== =========
Contract transactions
Contract purchase payments 38,193,749 105,479,671 17,799,064 8,136,532 2,038,404
Net transfers* (27,040,242) (108,133,439) 65,210,894 79,088,999 19,960,605
Transfers for policy loans 1,985,036 7,449,789 385,793 131,965 51,676
Annuity payments (514,367) (1,252,612) (22,173) (92,089) (17,032)
Contract charges (1,195,650) (3,987,171) (149,937) (119,647) (39,574)
Contract terminations:
Surrender benefits (148,764,277) (412,678,091) (51,592,016) (20,503,088) (7,210,042)
Death benefits (14,915,925) (25,027,040) (1,774,081) (1,466,072) (410,791)
----------- ----------- ---------- ---------- --------
Increase (decrease)
from contract transactions (152,251,676) (438,148,893) 29,857,544 65,176,600 14,373,246
------------ ------------ ---------- ---------- ----------
Net assets at beginning of year 1,666,436,832 4,580,528,713 215,120,327 206,790,315 72,415,160
------------- ------------- ----------- ----------- ----------
Net assets at end of year $1,523,631,871 $5,131,361,606 $253,787,003 $255,849,036 $92,406,970
============== ============== ============ ============ ===========
Accumulation unit activity
Units outstanding at beginning of year 316,788,701 556,866,324 87,255,005 175,023,644 65,608,959
Contracts purchase payments 7,194,454 11,916,818 7,095,301 6,839,352 1,792,193
Net transfers* (4,997,642) (12,362,984) 25,681,176 65,787,681 17,576,406
Transfers for policy loans 375,028 843,187 153,649 111,933 45,365
Contract charges (226,888) (453,322) (60,456) (99,946) (33,633)
Contract terminations:
Surrender benefits (28,247,658) (46,477,597) (20,439,462) (18,148,390) (6,465,380)
Death benefits (3,005,076) (3,022,075) (788,103) (1,349,423) (374,063)
---------- ---------- -------- ---------- --------
Units outstanding at end of year 287,880,919 507,310,351 98,897,110 228,164,851 78,149,847
=========== =========== ========== =========== ==========
Combined
Variable
Operations IZ N MZ JZ Accounts
Investment income (loss) - net $5,790,424 $449,709,297 $(5,277,784) $113,612,698 $567,590,394
Net realized gain (loss) on investmets 49,483,016 74,842,609 2,085,266 33,506,290 159,944,153
Net change in unrealized appreciation or
depreciation of investments 195,486,480 60,772,481 356,854,753 (116,897,748) 498,051,798
----------- ---------- ----------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations 250,759,920 585,324,387 353,662,235 30,221,240 1,225,586,345
=========== =========== =========== ========== =============
Contract transactions
Contract purchase payments 53,287,596 102,722,742 64,342,063 65,985,738 288,376,543
Net transfers* (94,797,288) (8,531,530) 314,642,480 (35,763,509) 195,510,758
Transfers for policy loans 2,850,813 5,797,400 2,358,750 3,183,399 14,242,038
Annuity payments (322,447) (1,407,902) (436,312) (400,799) (2,584,492)
Contract charges (1,544,330) (3,325,118) (1,046,612) (1,742,005) (7,697,639)
Contract terminations:
Surrender benefits (158,297,324) (355,471,928) (116,815,110) (172,177,805) (809,972,209)
Death benefits (9,473,917) (28,459,626) (5,413,424) (8,726,997) (52,484,755)
---------- ----------- ---------- ---------- -----------
Increase (decrease)
from contract transactions (208,296,897) (288,675,962) 257,631,835 (149,641,978) (374,609,756)
------------ ------------ ----------- ------------ ------------
Net assets at beginning of year 1,779,490,390 4,150,288,690 1,137,707,967 2,202,209,428 9,342,111,635
------------- ------------- ------------- ------------- -------------
Net assets at end of year $1,821,953,413 $4,446,937,115 $1,749,002,037 $2,082,788,690 $10,193,088,224
============== ============== ============== ============== ===============
Accumulation unit activity
Units outstanding at beginning of year 1,168,353,202 1,178,734,680 831,259,213 1,168,829,188
Contracts purchase payments 31,638,503 27,547,912 42,906,289 35,152,612
Net transfers* (58,491,047) (2,527,414) 209,719,850 (20,661,784)
Transfers for policy loans 1,695,063 1,525,609 1,565,644 1,704,172
Contract charges (924,518) (898,151) (701,700) (937,617)
Contract terminations:
Surrender benefits (93,910,984) (95,728,467) (79,116,097) (91,770,066)
Death benefits (5,954,918) (8,297,388) (3,807,275) (5,002,779)
---------- ---------- ---------- ----------
Units outstanding at end of year 1,042,405,301 1,100,356,781 1,001,825,924 1,087,313,726
============= ============= ============= =============
*Includes transfer activity from (to) other accounts and transfers from (to) IDS
Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ
Notes to Financial Statements
1. ORGANIZATION
IDS Life Accounts G, F, H, LZ, KZ, IZ, N, MZ and JZ (collectively, the Accounts)
were established as segregated asset accounts of IDS Life Insurance Company (IDS
Life) under Minnesota law and are registered collectively as a single unit
investment trust under the Investment Company Act of 1940, as amended (the 1940
Act). Accounts G, F and H were established on May 13, 1981 and commenced
operations on Oct. 13, 1981. Account N was established on April 17, 1985 and
commenced operations on April 30, 1986. Accounts IZ and JZ were established on
Sept. 20, 1991 and commenced operations on Jan. 13, 1992. Accounts LZ, KZ and MZ
were established on April 2, 1996 and commenced operations on April 30, 1996.
Each Account invests exclusively in shares of the following funds (collectively,
the Funds), which are registered under the 1940 Act as diversified,
(non-diversified for Global Bond) open-end management investment companies and
have the following investment managers.
Account Invests exclusively in shares of Investment Manager
<S> <C> <C>
G AXPSM Variable Portfolio-- Bond Fund IDS Life Insurance Company 1
F AXPSM Variable Portfolio-- Capital Resource Fund IDS Life Insurance Company 1
H AXPSM Variable Portfolio-- Cash Management Fund IDS Life Insurance Company 1
LZ AXPSM Variable Portfolio-- Extra Income Fund IDS Life Insurance Company 1
KZ AXPSM Variable Portfolio-- Global Bond Fund IDS Life Insurance Company 1
IZ AXPSM Variable Portfolio-- International Fund IDS Life Insurance Company 2
N AXPSM Variable Portfolio-- Managed Fund IDS Life Insurance Company 1
MZ AXPSM Variable Portfolio-- New Dimensions Fund(R) IDS Life Insurance Company 1
JZ AXPSM Variable Portfolio-- Strategy Aggressive Fund IDS Life Insurance Company 1
1 American Express Financial Corporation (AEFC) is the investment advisor.
2 AEFC is the investment advisor. American Express Asset Management
International, Inc. is the sub-investment advisor.
The assets of each Account are not chargeable with liabilities arising out of
the business conducted by any other segregated asset account or by IDS Life.
IDS Life serves as issuer of the contracts.
</TABLE>
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in the Funds
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective Funds. Investment
transactions are accounted for on the date the shares are purchased and sold.
The cost of investments sold and redeemed is determined on the average cost
method. Dividend distributions received from the Funds are reinvested in
additional shares of the Funds and are recorded as income by the subaccounts on
the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the Accounts' share of the Funds' undistributed
net investment income, undistributed realized gain or loss and the unrealized
appreciation or depreciation on their investment securities.
Use of Estimates
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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.
Federal Income Taxes
IDS Life is taxed as a life insurance company. The Accounts are treated as part
of IDS Life for federal income tax purposes. Under existing federal income tax
law, no income taxes are payable with respect to any investment income of the
Accounts.
3. MORTALITY AND EXPENSE RISK FEE
IDS Life makes contractual assurances to the Accounts that possible future
adverse changes in administrative expenses and mortality experience of the
contract owners and annuitants will not affect the Accounts. The mortality and
expense risk fee paid to IDS Life is computed daily and is equal, on an annual
basis, to 1% of the average daily net assets of the Accounts.
4. CONTRACT ADMINISTRATIVE CHARGES
An annual charge of $20 is deducted from the contract value of each Variable
Retirement Annuity contract. An annual charge of $30 is deducted from the
contract value of each Combination Retirement Annuity contract. A quarterly
charge of $125 is deducted from the contract value of each Group Variable
Annuity contract. An annual charge of $30 is deducted from the certificate value
of each Employee Benefit Annuity certificate. A quarterly charge of $6 is
deducted from the contract value of each Flexible Annuity contract. The annual
charges are deducted at contract or certificate year end and the quarterly
charges are deducted at contract quarter end, during the accumulation period,
for administrative services provided to the Accounts by IDS Life.
A contingent deferred sales charge (surrender charge or withdrawal charge) will
be imposed upon:
a) certain Variable Retirement Annuity contract surrenders during the first
seven years,
b) Combination Retirement Annuity contract surrenders during the first seven,
eight or eleven years, depending on type of contract,
c) Group Variable Annuity contract withdrawals during the first seven years, d)
Employee Benefit Annuity certificate surrenders during the first eleven
years, and
e) Flexible Annuity contract surrenders of amounts other than those representing
earnings or those representing purchase payments six contract years old or
more.
Charges by IDS Life for surrenders are not identified on an individual
segregated asset account basis. Charges for all segregated asset accounts
amounted to $19,803,247 in 1999 and $17,936,810 in 1998. Such charges are not
treated as a separate expense of the Accounts. They are ultimately deducted from
contract surrender benefits paid by IDS Life. <PAGE> <TABLE> <CAPTION>
5. INVESTMENT IN SHARES
The Accounts' investment in shares of the Funds as of Dec. 31,1999 were as follows:
Account Investment Shares NAV
<S> <C> <C> <C>
G AXPSM Variable Portfolio-- Bond Fund 120,277,080 $10.54
F AXPSM Variable Portfolio-- Capital Resource Fund 153,528,959 36.40
H AXPSM Variable Portfolio-- Cash Management Fund 345,769,149 1.00
LZ AXPSM Variable Portfolio-- Extra Income Fund 29,911,078 8.58
KZ AXPSM Variable Portfolio-- Global Bond Fund 8,145,468 9.69
IZ AXPSM Variable Portfolio-- International Fund 117,076,316 19.38
N AXPSM Variable Portfolio-- Managed Fund 229,235,019 19.82
MZ AXPSM Variable Portfolio-- New Dimensions Fund(R) 119,099,157 22.86
JZ AXPSM Variable Portfolio-- Strategy Aggressive Fund 125,937,446 23.92
6. INVESTMENT TRANSACTIONS
The Accounts' purchases of Funds' shares, including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Account Investment 1999 1998
<S> <C> <C> <C>
G AXPSM Variable Portfolio-- Bond Fund $ 83,923,375 $ 97,115,658
F AXPSM Variable Portfolio-- Capital Resource Fund 534,353,576 361,299,794
H AXPSM Variable Portfolio-- Cash Management Fund 393,328,065 310,085,733
LZ AXPSM Variable Portfolio-- Extra Income Fund 38,404,776 94,930,969
KZ AXPSM Variable Portfolio-- Global Bond Fund 7,466,938 20,617,085
IZ AXPSM Variable Portfolio-- International Fund 440,143,815 90,031,710
N AXPSM Variable Portfolio-- Managed Fund 309,803,081 447,421,778
MZ AXPSM Variable Portfolio-- New Dimensions Fund(R) 382,381,592 265,183,065
JZ AXPSM Variable Portfolio-- Strategy Aggressive Fund 255,839,303 161,144,482
Combined Variable Accounts $2,445,644,521 $1,847,830,274
7. YEAR 2000 (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 IDS Life and the
Accounts. All of the major systems used by IDS Life and the Accounts are
maintained by AEFC and are utilized by multiple subsidiaries and affiliates of
AEFC. IDS Life's and the Accounts' businesses are heavily dependent upon AEFC's
computer systems and have significant interaction with the systems of third
parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to IDS Life and the Accounts, 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. As of Dec. 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 IDS Life's and the Accounts' 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. As of Dec. 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 Jan. 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on IDS Life's and the Accounts'
business, results of operations, or financial condition as a result of the Year
2000 issue.
</TABLE>
<PAGE>
<PAGE>
IDS LIFE INSURANCE COMPANY
FINANCIAL INFORMATION
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
IDS LIFE INSURANCE COMPANY
We have audited the accompanying consolidated balance sheets of IDS Life
Insurance Company (a wholly-owned subsidiary of American Express Financial
Corporation) as of December 31, 1999 and 1998, and the related consolidated
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 consolidated financial position of IDS Life Insurance
Company at December 31, 1999 and 1998, and the consolidated 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.
ERNST & YOUNG LLP
February 3, 2000
Minneapolis, Minnesota
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, ($ THOUSANDS) 1999 1998
<S> <C> <C>
ASSETS
- ------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost
(fair value:
1999, $7,105,743; 1998, $8,420,035) $ 7,156,292 $ 7,964,114
Available for sale, at fair value
(amortized cost:
1999, $13,703,137; 1998,
$13,344,949) 13,049,549 13,613,139
- ------------------------------------------------------------------
20,205,841 21,577,253
Mortgage loans on real estate 3,606,377 3,505,458
Policy loans 561,834 525,431
Other investments 506,797 366,604
- ------------------------------------------------------------------
Total investments 24,880,849 25,974,746
Cash and cash equivalents 32,333 22,453
Amounts recoverable from reinsurers 327,168 262,260
Amounts due from brokers 145 327
Other accounts receivable 48,578 47,963
Accrued investment income 343,449 366,574
Deferred policy acquisition costs 2,665,175 2,496,352
Deferred income taxes, net 216,020 --
Other assets 33,089 30,487
Separate account assets 35,894,732 27,349,401
- ------------------------------------------------------------------
Total assets $64,441,538 $56,550,563
- ------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities $20,552,159 $21,172,303
Universal life-type insurance 3,391,203 3,343,671
Traditional life insurance 226,842 225,306
Disability income and long-term care
insurance 811,941 660,320
Policy claims and other policyholders'
funds 24,600 70,309
Deferred income taxes, net -- 16,930
Amounts due to brokers 148,112 195,406
Other liabilities 579,678 410,285
Separate account liabilities 35,894,732 27,349,401
- ------------------------------------------------------------------
Total liabilities 61,629,267 53,443,931
- ------------------------------------------------------------------
Commitments and contingencies
Stockholder's equity:
Capital stock, $30 par value per
share;
100,000 shares authorized, issued and
outstanding 3,000 3,000
Additional paid-in capital 288,327 288,327
Accumulated other comprehensive (loss)
income, net of tax:
Net unrealized securities (losses) gains (411,230) 169,584
- ------------------------------------------------------------------
Retained earnings 2,932,174 2,645,721
- ------------------------------------------------------------------
Total stockholder's equity 2,812,271 3,106,632
- ------------------------------------------------------------------
Total liabilities and stockholder's
equity $64,441,538 $56,550,563
==================================================================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-2 IDS LIFE INSURANCE COMPANY
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, ($ THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
REVENUES:
- -----------------------------------------------------------------------------
Premiums:
Traditional life insurance $ 53,790 $ 53,132 $ 52,473
Disability income and long-term care
insurance 201,637 176,298 154,021
- -----------------------------------------------------------------------------
Total premiums 255,427 229,430 206,494
Policyholder and contractholder charges 411,994 383,965 341,726
Management and other fees 473,108 401,057 340,892
Net investment income 1,919,573 1,986,485 1,988,389
Net realized gain on investments 26,608 6,902 860
- -----------------------------------------------------------------------------
Total revenues 3,086,710 3,007,839 2,878,361
- -----------------------------------------------------------------------------
BENEFITS AND EXPENSES:
- -----------------------------------------------------------------------------
Death and other benefits:
Traditional life insurance 29,819 29,835 28,951
Universal life-type insurance and
investment contracts 118,561 108,349 92,814
Disability income and long-term care
insurance 30,622 27,414 22,333
Increase in liabilities for future
policy benefits:
Traditional life insurance 7,311 6,052 3,946
Disability income and long-term care
insurance 87,620 73,305 63,631
Interest credited on universal life-type
insurance and investment contracts 1,240,575 1,317,124 1,386,448
Amortization of deferred policy
acquisition costs 332,705 382,642 322,731
Other insurance and operating expenses 335,180 287,326 276,596
- -----------------------------------------------------------------------------
Total benefits and expenses 2,182,393 2,232,047 2,197,450
- -----------------------------------------------------------------------------
Income before income taxes 904,317 775,792 680,911
Income taxes 267,864 235,681 206,664
- -----------------------------------------------------------------------------
Net income $ 636,453 $ 540,111 $ 474,247
=============================================================================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
TOTAL ADDITIONAL COMPREHENSIVE
STOCKHOLDER'S CAPITAL PAID-IN (LOSS) INCOME, RETAINED
THREE YEARS ENDED DECEMBER 31, 1999 ($ THOUSANDS) EQUITY STOCK CAPITAL NET OF TAX EARNINGS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $2,444,080 $3,000 $283,615 $ 86,102 $2,071,363
Comprehensive income:
Net income 474,247 -- -- -- 474,247
Unrealized holding gains arising during the year,
net of deferred policy acquisition costs of
($7,714) and taxes of ($75,215) 139,686 -- -- 139,686 --
Reclassification adjustment for losses included in
net income, net of tax of ($308) 571 -- -- 571 --
Other comprehensive income 140,257 -- -- 140,257 --
- ---------------------------------------------------------------------------------------------------------------------
Comprehensive income 614,504 -- -- -- --
Capital contribution from parent 7,232 -- 7,232 -- --
Cash dividends to parent (200,000) -- -- -- (200,000)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 2,865,816 3,000 290,847 226,359 2,345,610
Comprehensive income:
Net income 540,111 -- -- -- 540,111
Unrealized holding losses arising during the year,
net of deferred policy acquisition costs of
$6,333 and taxes of $32,826 (60,964) -- -- (60,964) --
Reclassification adjustment for losses included in
net income, net of tax of ($2,254) 4,189 -- -- 4,189 --
Other comprehensive loss (56,775) -- -- (56,775) --
Comprehensive income 483,336 -- -- -- --
Other changes (2,520) -- (2,520) -- --
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends to parent (240,000) -- -- -- (240,000)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 3,106,632 3,000 288,327 169,584 2,645,721
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 $3,106,632 $3,000 $288,327 $ 169,584 $2,645,721
Comprehensive income:
Net income 636,453 -- -- -- 636,453
Unrealized holding losses arising during the year,
net of deferred policy acquisition costs of
$28,444 and taxes of $304,936 (566,311) -- -- (566,311) --
Reclassification adjustment for gains included in
net income, net of tax of $7,810 (14,503) -- -- (14,503) --
- ---------------------------------------------------------------------------------------------------------------------
Other comprehensive loss (580,814) -- -- (580,814) --
Comprehensive income 55,639 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends to parent (350,000) -- -- -- (350,000)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $2,812,271 $3,000 $288,327 $(411,230) $2,932,174
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-4 IDS LIFE INSURANCE COMPANY
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, ($ THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------------------------------------------------
Net income $ 636,453 $ 540,111 $ 474,247
Adjustments to reconcile net income to
net cash provided by operating
activities: Policy loans, excluding
universal life-type insurance:
Issuance (56,153) (53,883) (54,665)
Repayment 54,105 57,902 46,015
Change in amounts recoverable from
reinsurers (64,908) (56,544) (47,994)
Change in other accounts receivable (615) (10,068) 6,194
Change in accrued investment income 23,125 (9,184) (14,077)
Change in deferred policy acquisition
costs, net (140,379) (10,443) (156,486)
Change in liabilities for future policy
benefits for traditional life,
disability income and long-term care
insurance 153,157 138,826 112,915
Change in policy claims and other
policyholders' funds (45,709) 1,964 (15,289)
Deferred income tax provision (benefit) 79,796 (19,122) 19,982
Change in other liabilities 169,395 64,902 13,305
(Accretion of discount), amortization of
premium, net (17,907) 9,170 (5,649)
Net realized gain on investments (26,608) (6,902) (860)
Policyholder and contractholder charges,
non-cash (175,059) (172,396) (160,885)
Other, net (5,324) 10,786 7,161
- -------------------------------------------------------------------------------
Net cash provided by operating
activities $ 583,369 $ 485,119 $ 223,914
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------------------------------------------------
Fixed maturities held to maturity:
Purchases $ (3,030) $ (1,020) $ (1,996)
Maturities, sinking fund payments and
calls 741,949 1,162,731 686,503
Sales 66,547 236,963 236,761
Fixed maturities available for sale:
Purchases (3,433,128) (4,100,238) (3,160,133)
Maturities, sinking fund payments and
calls 1,442,507 2,967,311 1,206,213
Sales 1,691,389 278,955 457,585
Other investments, excluding policy
loans:
Purchases (657,383) (555,647) (524,521)
Sales 406,684 579,038 335,765
Change in amounts due from brokers 182 8,073 2,647
Change in amounts due to brokers (47,294) (186,052) 119,471
- -------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 208,423 390,114 (641,705)
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------------------------------------------------
Activity related to universal life-type
insurance and investment contracts:
Considerations received 2,031,630 1,873,624 2,785,758
Surrenders and other benefits (3,669,759) (3,792,612) (3,736,242)
Interest credited to account balances 1,240,575 1,317,124 1,386,448
Universal life-type insurance policy
loans:
Issuance (102,239) (97,602) (84,835)
Repayment 67,881 67,000 54,513
Capital transaction with parent -- -- 7,232
Dividends paid (350,000) (240,000) (200,000)
- -------------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (781,912) (872,466) 212,874
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 9,880 2,767 (204,917)
Cash and cash equivalents at beginning
of year 22,453 19,686 224,603
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 32,333 $ 22,453 $ 19,686
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota. The Company is a
wholly-owned subsidiary of American Express Financial Corporation (AEFC), which
is a wholly owned subsidiary of American Express Company. The Company serves
residents of all states except New York. IDS Life Insurance Company of New York
is a wholly owned subsidiary of the Company and serves New York State residents.
The Company also wholly owns American Enterprise Life Insurance Company,
American Centurion Life Assurance Company, American Partners Life Insurance
Company and American Express Corporation.
The Company's principal products are deferred annuities and universal life
insurance, which are issued primarily to individuals. It offers single premium
and flexible premium deferred annuities on both a fixed and variable dollar
basis. Immediate annuities are offered as well. The Company's insurance products
include universal life (fixed and variable), whole life, single premium life and
term products (including waiver of premium and accidental death benefits). The
Company also markets disability income and long-term care insurance.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying consolidated 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 state insurance regulatory authorities (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 and all marketable equity securities are
classified as available for sale and carried at fair value. Unrealized gains and
losses on securities classified as available for sale are reported as a separate
component of accumulated other comprehensive (loss) income, net of the related
deferred policy acquisition costs effect and deferred 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.
- --------------------------------------------------------------------------------
F-6 IDS LIFE INSURANCE COMPANY
<PAGE>
Mortgage loans on real estate are carried at amortized cost less reserves 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.
Impairment of mortgage loans is measured as the excess of a 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 a reserve for mortgage
loan losses. The reserve 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 reserve account is determined based on several factors, including
historical experience, expected future principal and interest payments,
estimated collateral values, and current economic and political conditions.
Management regularly evaluates the adequacy of the reserve 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. Amounts paid or received
under interest rate swap agreements are recognized as an adjustment to
investment income.
The Company may purchase and write index options to hedge the fee income earned
on the management of equity securities in separate accounts and the underlying
mutual funds. These index options are carried at market value and are included
in other investments or other liabilities, as appropriate. Gains or losses on
index options that qualify as hedges are deferred and recognized in management
and other fees in the same period as the hedged fee income.
The Company also uses index options to manage the risks related to a certain
annuity product that pay interest based upon the relative change in a major
stock market index between the beginning and end of the product's term.
Purchased options used in conjunction with this product are reported in other
investments and written options are included in other liabilities. The
amortization of the cost of purchased options, the proceeds of written options
and the changes in intrinsic value of the contracts are included in net
investment income.
Policy loans are carried at the aggregate of the unpaid loan balances which do
not exceed the cash surrender values of the related policies.
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.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-7
<PAGE>
Supplementary information to the consolidated statements of cash flows for the
years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $214,940 $215,003 $174,472
Interest on borrowings 4,521 14,529 8,213
</TABLE>
RECOGNITION OF PROFITS ON ANNUITY CONTRACTS AND INSURANCE POLICIES
Profits on fixed deferred annuities are recognized by the Company over the lives
of the contracts, using primarily the interest method. Profits represent the
excess of investment income earned from investment of contract considerations
over interest credited to contract owners and other expenses.
The retrospective deposit method is used in accounting for universal life-type
insurance. Under this method, profits are recognized over the lives of the
policies in proportion to the estimated gross profits expected to be realized.
Premiums on traditional life, disability income and long-term care insurance
policies are recognized as revenue when due, and related benefits and expenses
are associated with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association is
accomplished by means of the provision for future policy benefits and the
deferral and subsequent amortization of policy acquisition costs.
Policyholder and contractholder charges include the monthly cost of insurance
charges, issue and administrative fees and surrender charges. These charges also
include the minimum death benefit guarantee fees received from the variable life
insurance separate accounts. Management and other fees include investment
management fees from underlying proprietary mutual funds and mortality and
expense risk fees received from the variable annuity and variable life insurance
separate accounts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally sales compensation, policy
issue costs, underwriting and certain sales expenses, have been deferred on
insurance and annuity contracts. The deferred acquisition costs for most single
premium deferred annuities and installment annuities are amortized using
primarily the interest method. The costs for universal life-type insurance and
certain installment annuities are amortized as a percentage of the estimated
gross profits expected to be realized on the policies. For traditional life,
disability income and long-term care insurance policies, the costs are amortized
over an appropriate period in proportion to premium revenue.
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
1999, unlocking adjustments resulted in a net decrease in amortization of $56.8
million. Net unlocking adjustments in 1998 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.
- --------------------------------------------------------------------------------
F-8 IDS LIFE INSURANCE COMPANY
<PAGE>
Liabilities for equity indexed deferred annuities are determined as the present
value of guaranteed benefits and the intrinsic value of index-based benefits.
Liabilities for fixed annuities in a benefit status are based on established
industry mortality tables and interest rates ranging from 5% to 9.5%, depending
on year of issue.
Liabilities for future benefits on traditional life insurance are based on the
net level premium method, using anticipated mortality, policy persistency and
interest earning rates. Anticipated mortality rates are based on established
industry mortality tables. Anticipated policy persistency rates vary by policy
form, issue age and policy duration with persistency on cash value plans
generally anticipated to be better than persistency on term insurance plans.
Anticipated interest rates range from 4% to 10%, depending on policy form, issue
year and policy duration.
Liabilities for future disability income and long-term care policy benefits
include both policy reserves and claim reserves. Policy reserves are based on
the net level premium method, using anticipated morbidity, mortality, policy
persistency and interest earning rates. Anticipated morbidity and mortality
rates are based on established industry morbidity and mortality tables.
Anticipated policy persistency rates vary by policy form, issue age, policy
duration and, for disability income policies, occupation class. Anticipated
interest rates for disability income and long-term care policy reserves are 3%
to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 5 to 10
years.
Claim reserves are calculated based on claim continuance tables and anticipated
interest earnings. Anticipated claim continuance rates are based on established
industry tables. Anticipated interest rates for claim reserves for both
disability income and long-term care range from 5% to 8%.
REINSURANCE
The maximum amount of life insurance risk retained by the Company is $750 on any
policy insuring a single life and $1,500 on any policy insuring a joint-life
combination. Beginning in 1999, the Company retains only 20% of the mortality
risk on new variable universal life insurance policies. Risk not retained is
reinsured with other life insurance companies, primarily on a yearly renewable
term basis. Long-term care policies are primarily reinsured on a coinsurance
basis. The Company retains all disability income and waiver of premium risk.
Beginning in 2000, the Company will retain all accidental death benefit risk.
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 $852 receivable
from and $26,291 payable to, respectively, AEFC for federal income taxes.
SEPARATE ACCOUNT BUSINESS
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity and variable life insurance contract
owners. The Company receives investment management fees from the proprietary
mutual funds used as investment options for variable annuities and variable life
insurance. The Company receives mortality and expense risk fees from the
separate accounts.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-9
<PAGE>
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.
For variable life insurance, the Company guarantees that the rates at which
insurance charges and administrative fees are deducted from contract funds will
not exceed contractual maximums. The Company also guarantees that the death
benefit will continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
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 a liability for estimated
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 the recognition of all derivatives as either
assets or liabilities on 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 adoption of the new rule will depend on the derivatives in
place at adoption and cannot be estimated at this time.
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.
- --------------------------------------------------------------------------------
F-10 IDS LIFE INSURANCE COMPANY
<PAGE>
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 37,613 $ 236 $ 2,158 $ 35,691
State and municipal
obligations 9,681 150 -- 9,831
Corporate bonds and
obligations 5,713,475 91,571 113,350 5,691,696
Mortgage-backed securities 1,395,523 4,953 31,951 1,368,525
- ------------------------------------------------------------------------------
$7,156,292 $96,910 $147,459 $7,105,743
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 46,325 $ 612 $ 2,231 $ 44,706
State and municipal
obligations 13,226 519 191 13,554
Corporate bonds and
obligations 7,960,352 60,120 560,450 7,460,022
Mortgage-backed securities 5,683,234 9,692 161,659 5,531,267
- --------------------------------------------------------------------------------
Total fixed maturities 13,703,137 70,943 724,531 13,049,549
Equity securities 3,000 16 -- 3,016
- --------------------------------------------------------------------------------
$13,706,137 $70,959 $724,531 $13,052,565
- --------------------------------------------------------------------------------
</TABLE>
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 39,888 $ 4,460 $ -- $ 44,348
State and municipal
obligations 9,683 490 -- 10,173
Corporate bonds and
obligations 6,305,476 447,752 27,087 6,726,141
Mortgage-backed securities 1,609,067 30,458 152 1,639,373
- -------------------------------------------------------------------------------
$7,964,114 $483,160 $27,239 $8,420,035
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-11
<PAGE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 52,043 $ 3,324 $ -- $ 55,367
State and municipal
obligations 11,060 1,231 -- 12,291
Corporate bonds and
obligations 7,332,344 271,174 155,181 7,448,337
Mortgage-backed securities 5,949,502 151,511 3,869 6,097,144
- --------------------------------------------------------------------------------
Total fixed maturities 13,344,949 427,240 159,050 13,613,139
Equity securities 3,000 158 -- 3,158
- --------------------------------------------------------------------------------
$13,347,949 $427,398 $159,050 $13,616,297
- --------------------------------------------------------------------------------
</TABLE>
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.
<TABLE>
<CAPTION>
AMORTIZED FAIR
HELD TO MATURITY COST VALUE
- ----------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 238,740 $ 239,747
Due from one to five years 2,996,713 3,012,721
Due from five to ten years 1,922,199 1,893,918
Due in more than ten years 603,117 590,832
Mortgage-backed securities 1,395,523 1,368,525
- ----------------------------------------------------------------
$7,156,292 $7,105,743
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
- ------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 271,381 $ 274,415
Due from one to five years 595,747 592,533
Due from five to ten years 4,936,041 4,669,573
Due in more than ten years 2,216,734 1,981,761
Mortgage-backed securities 5,683,234 5,531,267
- ------------------------------------------------------------------
$13,703,137 $13,049,549
- ------------------------------------------------------------------
</TABLE>
During the years ended December 31, 1999, 1998 and 1997, fixed maturities
classified as held to maturity were sold with amortized cost of $68,470,
$230,036 and $229,848, respectively. Net gains and losses on these sales were
not significant. The sale of these fixed maturities was due to significant
deterioration in the issuers' credit worthiness.
Fixed maturities available for sale were sold during 1999 with proceeds of
$1,691,389 and gross realized gains and losses of $36,568 and $14,255,
respectively. Fixed maturities available for sale were sold during 1998 with
proceeds of $278,955 and gross realized gains and losses of $15,658 and $22,102,
respectively. Fixed maturities available for sale were sold during 1997 with
proceeds of $457,585 and gross realized gains and losses of $6,639 and $7,518,
respectively.
At December 31, 1999, bonds carried at $14,559 were on deposit with various
states as required by law.
- --------------------------------------------------------------------------------
F-12 IDS LIFE INSURANCE COMPANY
<PAGE>
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 $3.7
billion which are rated by AEFC's 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:
<TABLE>
<CAPTION>
RATING 1999 1998
- ------------------------------------------------------------------
<S> <C> <C>
Aaa/AAA $ 7,144,280 $ 7,629,628
Aaa/AA 1,920 2,277
Aa/AA 301,728 308,053
Aa/A 314,168 301,325
A/A 2,598,300 2,525,283
A/BBB 1,014,566 1,148,736
Baa/BBB 6,319,549 6,237,014
Baa/BB 348,849 492,696
Below investment grade 2,816,069 2,664,051
- ------------------------------------------------------------------
$20,859,429 $21,309,063
- ------------------------------------------------------------------
</TABLE>
At December 31, 1999, 90 percent of the securities rated Aaa/AAA are GNMA, FNMA
and FHLMC mortgage-backed securities. No holdings of any other issuer are
greater than one percent of the Company's total investments in fixed maturities.
At December 31, 1999, approximately 14 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
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
REGION SHEET TO PURCHASE SHEET TO PURCHASE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East North Central $ 715,998 $ 10,380 $ 750,705 $ 16,393
West North Central 555,635 42,961 491,006 81,648
South Atlantic 867,838 23,317 839,233 21,020
Middle Atlantic 428,051 1,806 476,448 6,169
New England 259,243 4,415 263,761 2,824
Pacific 238,299 3,466 195,851 16,946
West South Central 144,607 4,516 136,841 1,412
East South Central 43,841 -- 46,029 --
Mountain 381,148 9,380 345,379 8,473
- ----------------------------------------------------------------------------------
3,634,660 100,241 3,545,253 154,885
Less allowance for losses 28,283 -- 39,795 --
- ----------------------------------------------------------------------------------
$3,606,377 $100,241 $3,505,458 $154,885
- ----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-13
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
PROPERTY TYPE SHEET TO PURCHASE SHEET TO PURCHASE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Department/retail stores $1,158,712 $ 33,829 $1,139,349 $ 59,305
Apartments 887,538 11,343 960,808 9,272
Office buildings 931,234 26,062 783,576 50,450
Industrial buildings 309,845 5,525 298,549 13,263
Hotels/motels 103,625 -- 109,185 14,122
Medical buildings 114,045 -- 124,369 --
Nursing/retirement homes 45,935 -- 46,696 --
Mixed use 66,893 -- 65,151 --
Other 16,833 23,482 17,570 8,473
- ----------------------------------------------------------------------------------
3,634,660 100,241 3,545,253 154,885
Less allowance for losses 28,283 -- 39,795 --
- ----------------------------------------------------------------------------------
$3,606,377 $100,241 $3,505,458 $154,885
- ----------------------------------------------------------------------------------
</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 and 1998, the Company's recorded investment in impaired
loans was $21,375 and $24,941, respectively, with allowances of $5,750 and
$6,662, respectively. During 1999 and 1998, the average recorded investment in
impaired loans was $23,815 and $37,873, respectively.
The Company recognized $1,190, $1,809 and $2,981 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 losses related to all
loans:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $39,795 $38,645 $37,495
Provision (reduction) for
investment losses (9,512) 7,582 8,801
Loan payoffs (500) (800) (3,851)
Foreclosures and writeoffs (1,500) (5,632) (3,800)
- --------------------------------------------------------------
Balance, December 31 $28,283 $39,795 $38,645
- --------------------------------------------------------------
</TABLE>
At December 31, 1999, the Company had no commitments to purchase investments
other than mortgage loans.
- --------------------------------------------------------------------------------
F-14 IDS LIFE INSURANCE COMPANY
<PAGE>
Net investment income for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Interest on fixed maturities $1,598,059 $1,676,984 $1,692,481
Interest on mortgage loans 285,921 301,253 305,742
Other investment income 70,892 43,518 25,089
Interest on cash equivalents 5,871 5,486 5,914
- -----------------------------------------------------------------------
1,960,743 2,027,241 2,029,226
Less investment expenses 41,170 40,756 40,837
- -----------------------------------------------------------------------
$1,919,573 $1,986,485 $1,988,389
- -----------------------------------------------------------------------
</TABLE>
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $22,387 $12,084 $16,115
Mortgage loans 10,211 (5,933) (6,424)
Other investments (5,990) 751 (8,831)
- --------------------------------------------------------------
$26,608 $ 6,902 $ 860
- --------------------------------------------------------------
</TABLE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities available for sale $(921,778) $(93,474) $223,441
Equity securities (142) (203) 53
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes:
Current $178,444 $244,946 $176,879
Deferred 79,796 (16,602) 19,982
- -----------------------------------------------------------------
258,240 228,344 196,861
State income taxes-current 9,624 7,337 9,803
- -----------------------------------------------------------------
Income tax expense $267,864 $235,681 $206,664
- -----------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-15
<PAGE>
Increases (decreases) to the income tax provision applicable to pretax income
based on the statutory rate 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 $316,511 35.0% $271,527 35.0% $238,319 35.0%
Tax-excluded interest and
dividend income (9,626) (1.1) (12,289) (1.6) (10,294) (1.5)
State taxes, net of
federal benefit 6,256 0.7 4,769 0.6 6,372 0.9
Affordable housing
credits (31,000) (3.4) (19,688) (2.5) (20,705) (3.0)
Other, net (14,277) (1.6) (8,638) (1.1) (7,028) (1.0)
- -------------------------------------------------------------------------------
Total income taxes $267,864 29.6% $235,681 30.4% $206,664 30.4%
- -------------------------------------------------------------------------------
</TABLE>
A portion of life insurance company income earned prior to 1984 was not subject
to current taxation but was accumulated, for tax purposes, in a policyholders'
surplus account. At December 31, 1999, the Company had a policyholders' surplus
account balance of $20,114. The policyholders' surplus account is only taxable
if dividends to the stockholder exceed the stockholder's surplus account or if
the Company is liquidated. Deferred income taxes of $7,040 have not been
established because no distributions of such amounts are contemplated.
Significant components of the Company's deferred tax assets and liabilities as
of December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy reserves $733,647 $756,769
Unrealized loss on available for sale
investments 221,431 --
Investments, other 1,873 --
Life insurance guaranty fund assessment
reserve 4,789 15,289
Other -- 4,253
- ------------------------------------------------------------
Total deferred tax assets 961,740 776,311
- ------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs 740,837 698,471
Unrealized gain on available for sale
investments -- 91,315
Investments, other -- 3,455
Other 4,883 --
- ------------------------------------------------------------
Total deferred tax liabilities 745,720 793,241
- ------------------------------------------------------------
Net deferred tax assets (liabilities) $216,020 $(16,930)
- ------------------------------------------------------------
</TABLE>
The Company is required to establish a valuation allowance for any portion of
the deferred tax assets that management believes will not be realized. In the
opinion of management, it is more likely than not that the Company will realize
the benefit of the deferred tax assets and, therefore, no such valuation
allowance has been established.
4. STOCKHOLDER'S EQUITY
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with accounting
practices prescribed by state insurance regulatory authorities. Statutory
unassigned surplus
- --------------------------------------------------------------------------------
F-16 IDS LIFE INSURANCE COMPANY
<PAGE>
aggregated $1,693,356 as of December 31, 1999 and $1,598,203 as of December 31,
1998 (see Note 3 with respect to the income tax effect of certain
distributions). In addition, any dividend distributions in 2000 in excess of
approximately $418,845 would require approval of the Department of Commerce of
the State of Minnesota.
Statutory net income for the years ended December 31 and capital and surplus as
of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Statutory net income $ 478,173 $ 429,903 $ 379,615
Statutory capital and surplus 1,978,406 1,883,405 1,765,290
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company loans funds to AEFC under a collateral loan agreement. The balance
of the loan was $nil at December 31, 1999 and 1998. This loan can be increased
to a maximum of $75,000 and pays interest at a rate equal to the preceding
month's effective new money rate for the Company's permanent investments.
Interest income on related party loans totaled $nil, $nil and $103 in 1999, 1998
and 1997, respectively.
The Company participates in the American Express Company Retirement Plan which
covers all permanent employees age 21 and over who have met certain employment
requirements. Employer contributions to the plan are based on participants' age,
years of service and total compensation for the year. Funding of retirement
costs for this plan complies with the applicable minimum funding requirements
specified by ERISA. The Company's share of the total net periodic pension cost
was $223, $211 and $201 in 1999, 1998 and 1997, respectively.
The Company also participates in defined contribution pension plans of American
Express Company which cover all employees who have met certain employment
requirements. Company contributions to the plans are a percent of either each
employee's eligible compensation or basic contributions. Costs of these plans
charged to operations in 1999, 1998 and 1997 were $1,906, $1,503 and $1,245,
respectively.
The Company participates in defined benefit health care plans of AEFC that
provide health care and life insurance benefits to retired employees and retired
financial advisors. The plans include participant contributions and service
related eligibility requirements. Upon retirement, such employees are considered
to have been employees of AEFC. AEFC expenses these benefits and allocates the
expenses to its subsidiaries. The Company's share of postretirement benefits in
1999, 1998 and 1997 was $1,147, $1,352 and $1,330, respectively.
Charges by AEFC for use of joint facilities, technology support, marketing
services and other services aggregated $485,177, $411,337 and $414,155 for 1999,
1998 and 1997, respectively. Certain of these costs are included in deferred
policy acquisition costs.
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1999, 1998 and 1997, traditional life insurance and universal
life-type insurance in force aggregated $89,271,957, $81,074,928 and $74,730,720
respectively, of which $8,281,576, $4,912,313 and $4,351,904 were reinsured at
the respective year ends. The Company also reinsures a portion of the risks
assumed under disability income and long-term care policies. Under all
reinsurance agreements, premiums ceded to reinsurers amounted to $76,970,
$66,378 and $60,495 and reinsurance recovered from reinsurers amounted to
$27,816, $20,982, and $19,042 for the years ended December 31, 1999, 1998 and
1997, respectively. Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-17
<PAGE>
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 all three
lawsuits. It is expected the settlement will provide $215 million of benefits to
more than 2 million class 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 settlement costs
allocated to the Company are included in the accompanying 1999 statement of
income and did not have a material impact on the Company's consolidated
financial position or results from operations.
The Company is named as a defendant in various other lawsuits. The outcome of
any litigation cannot be predicted with certainty. In the opinion of management,
however, the ultimate resolution of these lawsuits, taken in aggregate should
not have a material adverse effect on the Company's consolidated financial
position.
The IRS routinely examines the Company's federal income tax returns and is
currently completing the audit for the 1990 through 1992 tax years. Management
does not believe there will be a material adverse effect on the Company's
consolidated financial position as a result of this audit.
7. LINES OF CREDIT
The Company has available lines of credit with its parent aggregating $200,000
($100,000 committed and $100,000 uncommitted). The interest rate for any
borrowings is established by reference to various indices plus 20 to 45 basis
points, depending on the term. Borrowings outstanding under this agreement were
$50,000 uncommitted at December 31, 1999 and $nil at December 31, 1998.
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into transactions involving derivative financial instruments
to manage its exposure to interest rate risk and equity market 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 or equity market index.
The Company is not impacted by market risk related to derivatives held for
non-trading purposes beyond that inherent in cash market transactions.
Derivatives held for purposes other than trading are largely used to manage risk
and, therefore, the cash flow and income effects of the derivatives are inverse
to the effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not fulfill the terms
of the contract. The Company monitors credit 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 and index options is
measured by the 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 risk.
- --------------------------------------------------------------------------------
F-18 IDS LIFE INSURANCE COMPANY
<PAGE>
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 $2,500,000 $ 9,685 $ 12,773 $12,773
Interest rate floors 1,000,000 602 319 319
Options purchased 180,897 49,789 61,745 61,745
Liabilities:
Options written 43,262 (1,677) (2,402) --
Off balance sheet:
Interest rate swaps 1,267,000 -- (17,582) --
------- -------- -------
$58,399 $ 54,853 $74,837
======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL CARRYING FAIR TOTAL CREDIT
DECEMBER 31, 1998 AMOUNT AMOUNT VALUE EXPOSURE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $3,400,000 $ 15,985 $ 4,256 $ 4,256
Interest rate floors 1,000,000 1,082 13,971 13,971
Options purchased 110,912 24,094 29,453 29,453
Liabilities:
Options purchased/written 265,454 (10,526) (11,062) --
Off balance sheet:
Interest rate swaps 1,667,000 -- (73,477) --
-------- -------- -------
$ 30,635 $(36,859) $47,680
======== ======== =======
</TABLE>
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The interest rate caps, floors and swaps expire
on various dates from 2000 to 2003. The purchased and written options expire on
various dates from 2000 to 2006.
Interest rate caps, swaps and floors are used principally to manage the
Company's interest rate risk. These instruments are used to protect the margin
between interest rates earned on investments and the interest rates credited to
related annuity contract holders.
The Company also uses interest rate swaps to manage interest rate risk related
to the level of fee income earned on the management of fixed income securities
in separate accounts and the underlying mutual funds. The amount of fee income
received is based upon the daily market value of the separate account and mutual
fund assets. As a result, changing interest rate conditions could impact the
Company's fee income significantly. The Company entered into interest rate swaps
to hedge anticipated fee income for 1999 related to separate accounts and mutual
funds which invest in fixed income securities. Interest was reported in
management and other fees.
The Company offers an annuity product that pays interest based upon the relative
change in a major stock market index between the beginning and end of the
product's term. As a means of hedging its obligation under the provisions of
this product, the Company purchases and writes options on the major stock market
index.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-19
<PAGE>
Index options are used to manage the equity market risk related to the fee
income that the Company receives from its separate accounts and the underlying
mutual funds. The amount of the fee income received is based upon the daily
market value of the separate account and mutual fund assets. As a result, the
Company's fee income could be impacted significantly by fluctuations in the
equity market. The Company entered into index option collars (combination of
puts and calls) to hedge anticipated fee income for 1999 and 1998 related to
separate accounts and mutual funds which invest in equity securities. Testing
demonstrated the impact of these instruments on the income statement closely
correlates with the amount of fee income the Company realizes. At December 31,
1999 deferred losses on purchased put and written call index options were $nil.
At December 31, 1998 deferred losses on purchased put and written call index
options were $2,933 and deferred gains on written call index options were
$7,435, respectively.
9. 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
values of life insurance obligations and all non-financial instruments, such as
deferred acquisition costs are excluded.
Off-balance sheet intangible assets, such as the value of the field force, 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>
1999 1998
CARRYING FAIR CARRYING FAIR
FINANCIAL ASSETS VALUE VALUE VALUE VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $ 7,156,292 $ 7,105,743 $ 7,964,114 $ 8,420,035
Available for sale 13,049,549 13,049,549 13,613,139 13,613,139
Mortgage loans on real
estate (Note 2) 3,606,377 3,541,958 3,505,458 3,745,617
Other:
Equity securities (Note 2) 3,016 3,016 3,158 3,158
Derivative financial
Instruments (Note 8) 60,076 74,837 41,161 47,680
Other 2,258 2,258 28,872 28,872
Cash and cash equivalents
(Note 1) 32,333 32,333 22,453 22,453
Separate account assets (Note
1) 35,894,732 35,894,732 27,349,401 27,349,401
</TABLE>
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
FINANCIAL LIABILITIES VALUE VALUE VALUE VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Future policy benefits for
fixed annuities $19,189,170 $18,591,859 $19,855,203 $19,144,838
Derivative financial
instruments (Note 8) 1,677 19,984 10,526 84,539
Separate account liabilities 31,869,184 31,016,081 25,005,732 24,179,115
</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 $1,270,094 and $1,226,985, respectively, and policy loans of $92,895
and $90,115, respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1999 and 1998. The fair value of
deferred
- --------------------------------------------------------------------------------
F-20 IDS LIFE INSURANCE COMPANY
<PAGE>
annuities is estimated as the carrying amount less any applicable surrender
charges and related loans. The fair value for annuities in non-life contingent
payout status is estimated as the present value of projected benefit payments at
rates appropriate for contracts issued in 1999 and 1998.
At December 31, 1999 and 1998, the fair value of liabilities related to separate
accounts is estimated as the carrying amount less any applicable surrender
charges and less variable insurance contracts carried at $4,025,548 and
$2,343,669, respectively.
10. YEAR 2000 (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.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-21
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ & MZ:
Statements of Net Assets at Dec. 31, 1999.
Statements of Operations for the year ended Dec. 31, 1999.
Statements of Changes in Net Assets for the years ended Dec. 31, 1999
and Dec. 31, 1998.
Notes to Financial Statements.
Report of Independent Auditors dated March 17, 2000.
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1999 and 1998;
Consolidated Statements of Income for the years ended Dec. 31, 1999,
1998, and 1997; Consolidated Statements of Stockholder's Equity for the
years ended Dec. 31, 1999, 1998, and 1997; Consolidated Statements of
Cash Flows for the years ended Dec. 31, 1999, 1998, and 1997; and Notes
to Consolidated Financial Statements. Report of Independent Auditors
dated February 3, 2000.
(b) Exhibits:
1.1 Copy of Resolution of the Executive Committee of the Board of Directors of
IDS Life establishing Accounts C, D, E, F, G, and H adopted May 13, 1981,
filed electronically as Exhibit 1.1 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
1.2 Copy of Resolution of the Board of Directors of IDS Life establishing
Account N on April 17, 1985, filed electronically as Exhibit 1.2 to
Post-Effective Amendment No. 2 to Registration Statement No. 33-52518 is
incorporated herein by reference.
1.3 Copy of Resolution of the Board of Directors of IDS Life establishing
Accounts IZ and JZ on September 20, 1991, filed electronically as Exhibit
1.3 to Post-Effective Amendment No. 2 to Registration Statement No.
33-52518 is incorporated herein by reference.
1.4 Consent in Writing in Lieu of Meeting of Board of Directors establishing
Accounts MZ, KZ and LZ on April 2, 1996, filed electronically as Exhibit
1.4 to Post-Effective Amendment No. 6 to Registration Statement No.
33-52518 is incorporated herein by reference.
2. Not applicable.
3. Not applicable.
4.1 Copy of Group Deferred Fixed/Variable Contract (form 34607) filed
electronically as Exhibit 4 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
<PAGE>
4.2 Copy of Group Deferred Fixed/Variable Certificate (form 34610-MN) filed
electronically as Exhibit 5 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
5.1 Form of Master Application for Group Deferred Annuity Contract (form
34608C) filed electronically as Exhibit 5.1 to Post-Effective Amendment No.
4 to Registration Statement No. 33-52518 is incorporated herein by
reference.
5.2 Form of Participant Enrollment Form (form 34609A) filed electronically as
Exhibit 5.2 to Post-Effective Amendment No. 4 to Registration Statement No.
33-52518 is incorporated herein by reference.
6.1 Copy of Articles of Incorporation of IDS Life dated July 24, 1957, filed
electronically as Exhibit 6.1 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
6.2 Copy of Amendment to By-Laws of IDS Life filed electronically as Exhibit
6.2 to Post-Effective Amendment No. 2 to Registration Statement No 33-52518
is incorporated herein by reference.
7. Not applicable.
8. Not applicable.
9. Opinion of counsel and consent to its use as to the legality of the
securities registered, filed electronically herewith.
10. Consent of Independent Auditors, filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of Schedule for computation of each performance quotation filed
electronically as Exhibit 13 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
14. Power of Attorney to sign Amendments to this Registration Statement dated
April 20, 2000 is filed electronically herewith.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company)
<S> <C> <C>
Name Principal Business Address Position and Offices with Depositor
- ------------------------------------- ----------------------------------------- ----------------------------------------
200 AXP Financial Center
Timothy V. Bechtold Minneapolis, MN 55474 Executive Vice President, Risk
Management Products
200 AXP Financial Center
David J. Berry Minneapolis, MN 55474 Vice President
200 AXP Financial Center
Mark W. Carter Minneapolis, MN 55474 Executive Vice President, Marketing
200 AXP Financial Center
Robert M. Elconin Minneapolis, MN 55474 Vice President
<PAGE>
200 AXP Financial Center
Lorraine R. Hart Minneapolis, MN 55474 Vice President, Investments
200 AXP Financial Center
Jeffrey S. Horton Minneapolis, MN 55474 Vice President, Treasurer and
Assistant Secretary
200 AXP Financial Center
David R. Hubers Minneapolis, MN 55474 Director
200 AXP Financial Center
James M. Jensen Minneapolis, MN 55474 Vice President, Insurance Product
Development
200 AXP Financial Center
Richard W. Kling Minneapolis, MN 55474 Director, Chief Executive Officer and
President
200 AXP Financial Center
Paul F. Kolkman Minneapolis, MN 55474 Director and Executive Vice President
200 AXP Financial Center
Paula R. Meyer Minneapolis, MN 55474 Director and Executive Vice President,
Assured Assets
James A. Mitchell 200 AXP Financial Center Director and Chairman of the Board
Minneapolis, MN 55474
200 AXP Financial Center
Pamela J. Moret Minneapolis, MN 55474 Director and Executive Vice President,
Variable Assets
200 AXP Financial Center
Barry J. Murphy Minneapolis, MN 55474 Director and Executive Vice President,
Client Service
200 AXP Financial Center
James R. Palmer Minneapolis, MN 55474 Vice President, Taxes
200 AXP Financial Center
Stuart A. Sedlacek Minneapolis, MN 55474 Director and Executive Vice President
200 AXP Financial Center
William A. Stoltzmann Minneapolis, MN 55474 Vice President, General Counsel and
Secretary
200 AXP Financial Center
Philip C. Wentzel Minneapolis, MN 55474 Vice President and Controller
</TABLE>
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
IDS Life Insurance Company is a wholly-owned subsidiary of
American Express Financial Corporation. American Express
Financial Corporation is a wholly-owned subsidiary of American
Express Company (American Express).
<TABLE>
<CAPTION>
The following list includes the names of major subsidiaries of
American Express.
<S> <C>
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Partners LLC Delaware
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Advisors Japan Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Mississippi Inc. Mississippi
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
<PAGE>
IDS Futures Brokerage Group Minnesota
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contractowners
On March 31, 2000, there were 18,278 contract owners of the
Employee Benefit Annuity.
Item 28. Indemnification
The By-Laws of the depositor provide that it shall indemnify any
person who was or is a party or is threatened to be made a party,
by reason of the fact that he is or was a director, officer,
employee or agent of this Corporation, or is or was serving at
the direction of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, to any threatened, pending or
completed action, suit or proceeding, wherever brought, to the
fullest extent permitted by the laws of the State of Minnesota,
as now existing or hereafter amended, provided that this Article
shall not indemnify or protect any such director, officer,
employee or agent against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence, in the
performance of his duties or by reason of his reckless disregard
of his obligations and duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to 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.
<PAGE>
Item 29. Principal Underwriters
(a) IDS Life is the principal underwriter for IDS Life
Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ IDS Life
Variable Annuity Fund A, IDS Life Variable Annuity Fund B,
IDS Life Account MGA and IDS Life Account SBS, IDS Life
Variable Account 10, IDS Life Variable Life Separate
Account and IDS Life Variable Account for Smith Barney.
(b) This table is the same as our response to Item 25 of
this Registration Statement.
(c)
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
IDS Life $21,517,281 $19,803,247 None None
Item 30. Location of Accounts and Records
IDS Life Insurance Company
200 AXP Financial Center
Minneapolis, MN
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as
is necessary to ensure that the audited financial
statements in the registration statement are never more
than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as
part of any application to purchase a contract offered by
the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or
included in the prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of
Additional Information and any financial statements
required to be made available under this Form promptly
upon written or oral request to IDS Life Contract Owner
Service at the address or phone number listed in the
prospectus.
(d) The sponsoring insurance company represents that the fees
and charges deducted under the contract, in the aggregate,
are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by
the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, IDS Life Insurance Company, on behalf of the Registrant certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
Registration Statement and, has caused this Registration Statement to be signed
on its behalf in the City of Minneapolis, and State of Minnesota, on the 27th
day of April, 2000.
IDS LIFE ACCOUNT F
IDS LIFE ACCOUNT IZ
IDS LIFE ACCOUNT JZ
IDS LIFE ACCOUNT G
IDS LIFE ACCOUNT H
IDS LIFE ACCOUNT N
IDS LIFE ACCOUNT KZ
IDS LIFE ACCOUNT LZ
IDS LIFE ACCOUNT MZ
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 27th day of
April, 2000.
Signature Title
/s/ James A. Mitchell* Director and Chairman of the
James A. Mitchell Board
/s/ Richard W. Kling* Director, President and
Richard W. Kling Chief Executive Officer
/s/ Jeffrey S. Horton* Vice President, Treasurer
Jeffrey S. Horton and Assistant Secretary
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Paula R. Meyer* Director and Executive Vice
Paula R. Meyer President
/s/ Pamela J. Moret* Director and Executive Vice
Pamela J. Moret President
<PAGE>
Signature Title
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President
/s/ Philip C. Wentzel* Vice President and Controller
Philip C. Wentzel
*Signed pursuant to IDS Life Insurance Company Power of Attorney dated April 20,
2000 filed electronically herewith as Exhibit 14 by:
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 10
This Post-Effective Amendment is comprised of the following papers and
documents:
The Cover Page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
Registration No. 33-52518/811-3217
EXHIBIT INDEX
Exhibit 9: Opinion of Counsel, dated April 27, 2000.
Exhibit 10: Consent of Independent Auditors, dated April 24, 2000.
Exhibit 14: IDS Life Power of Attorney, dated April 20, 2000.
April 27, 2000
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
RE: Registration Statement on Form N-4
File No.:33-52518
Ladies and Gentlemen:
I am familiar with the establishment of the IDS Life Account F, IZ, JZ, G, H, N,
KZ, LZ, MZ ("Account"), which is a separate account of IDS 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 examinations 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 a 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.
Sincerely,
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Group Counsel
(612-671-3678)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our report dated
February 3, 2000 with respect to the consolidated financial statements of IDS
Life Insurance Company and to the use of our report dated March 17, 2000 with
respect to the financial statements of IDS Life Accounts G, F, H, LZ, KZ, IZ, N,
MZ and JZ, included in Post-Effective Amendment No. 10 to the Registration
Statement (Form N-4, No. 33-52518) and related Prospectus for the registration
of the Employee Benefit Annuity Contracts to be offered by IDS Life Insurance
Company.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
April 24, 2000
IDS LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as officers and/or directors, respectively, of
IDS Life Insurance Company on behalf of the below listed registrants that
previously have filed registration statements and amendments thereto pursuant to
the requirements of the Securities Act of 1933 and the Investment Company Act of
1940 with the Securities and Exchange Commission:
<TABLE>
<S> <C> <C>
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Life Variable Account 10
IDS Life Flexible Portfolio Annuity (FPA) 33-62407 811-07355
American Express Retirement
Advisor Variable AnnuitySM (RAVA) 333-79311 811-07355
American Express Retirement
Advisor Variable AnnuitySM (RAVA-B3) 333-79311 811-07355
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Flexible Annuity 33-4173 811-3217
IDS Life Variable Retirement and Combination
Retirement Annuities (CRA) 2-73114 811-3217
IDS Life Employee Benefit Annuity (EBA) 33-52518 811-3217
IDS Life Group Variable Annuity Contract (GVAC) 33-47302 811-3217
IDS Life Group Variable Annuity Contract
(GVAC Fixed Account) 33-48701 N/A
IDS Life Insurance Company
IDS Life Flexible Payment Market Value Annuity (FP-MVA) 33-50968 N/A
IDS Life Guaranteed Term Annuity (GTA) 33-28976 N/A
Portfolio Guaranteed Term Annuity (PGTA) 333-42793 N/A
IDS Life Variable Life Separate Account
Flexible Premium Variable Life Insurance Policy (VUL) 33-11165 811-4298
Flexible Premium Survivorship Variable Life
Insurance Policy (V2D) 33-62457 811-4298
Flexible Premium Variable Life Insurance Policy (VUL-3) 333-69777 811-4298
Single Premium Variable Life Insurance Policy (SPVL) 2-97637 811-4298
<PAGE>
IDS Life Variable Account for Smith Barney
Single Premium Variable Life Insurance Policy 33-5210 811-4652
(SBS-SPVL)
IDS Life Account SBS
Symphony Annuity (SYMPHONY) 33-40779 811-06315
IDS Life Account RE
Real Estate Variable Annuity (REVA) 33-13375 N/A
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko,
Eileen J. Newhouse, Bruce Kohn and Timothy S. Meehan or any one of them, as his
or her attorney-in-fact and agent, to sign for him or her in his name, place and
stead any and all filings, applications (including applications for exemptive
relief), periodic reports, registration statements for existing or future
products (with all exhibits and other documents required or desirable in
connection therewith), other documents, and amendments thereto and to file such
filings, applications, periodic reports, registration statements, other
documents, and amendments thereto with the Securities and Exchange Commission,
and any necessary jurisdictions, and grants to any or all of them the full power
and authority to do and perform each and every act required, necessary or
appropriate in connection therewith.
Dated the 20th day of April, 2000.
<PAGE>
/s/ Timothy V. Bechtold
Timothy V. Bechtold
Executive Vice President,
Risk Management Products
/s/ Jeffrey S. Horton
Jeffrey S. Horton
Vice President, Treasurer
and Assistant Secretary
/s/ David R. Hubers
David R. Hubers
Director
/s/ Richard W. Kling
Richard W. Kling
Director, President
and Chief Executive Officer
/s/ Paul F. Kolkman
Paul F. Kolkman
Director and Executive Vice President
/s/ Paula R. Meyer
Paula R. Meyer
Director and Executive Vice President, Assured Assets
/s/ James A. Mitchell
James A. Mitchell
Director and Chairman of the Board
/s/ Pamela J. Moret
Pamela J. Moret
Director and Executive Vice President, Variable Assets
/s/ Barry J. Murphy
Barry J. Murphy
Director and Executive Vice President, Client Service
/s/ Stuart A. Sedlacek
Stuart A. Sedlacek
Director and Executive Vice President
/s/ Philip C. Wentzel
Philip C. Wentzel
Vice President and Controller
