IDS Life
Variable
Annuity
Fund A
Invests in a wide range of securities with
the objective of long-term capital
appreciation for contract owners.
1999 SEMIANNUAL REPORT
AMERICAN EXPRESS Financial Advisors
Managed by IDS Life Insurance Company
<PAGE>
Message from the executive vice president
(picture of) Pamela J. Moret
If you're an experienced investor, you know that the past six months was a
volatile period in many financial markets. But history tells us that substantial
market moves are nothing new. Though they're often unpredictable, declines --
whether they're brief or long-lasting, moderate or substantial -- are always a
possibility.
The potential for such volatility reinforces the need for investors to
periodically review their long-term financial goals and examine whether their
investment program remains on track to achieving them. Your quarterly investment
statements are one part of that monitoring process. The other is a meeting with
your American Express financial advisor. That becomes even more important if
there's a major change in your financial situation or in the financial markets.
IDS Life Variable Annuity Fund A held its shareholder meeting in June 1999.
Shareholders approved all of the proposals advanced by management including:
o The election of Board members.
o The selection of Ernst & Young LLP as independent auditors, and;
o Changes with respect to fundamental investment policies.
No other business was presented at the meeting. Thanks to all of you for your
effort in reviewing the proxy material and voting your proxies.
Pamela J. Moret
Executive Vice President, Variable Assets
IDS Life Insurance Company
<PAGE>
From your portfolio manager: A perspective
(picture of) Mitzi Malevich
Despite a sharp setback for the stock market in late winter, the Fund posted a
strong gain during the first half of the fiscal year -- January through June
1999.
On June 30, 1999, the accumulation unit value of IDS Life Variable Annuity Fund
A was $29.81, compared with $24.53 at the beginning of the year. The increase
represented a gain of 21.52% for the six months. (If you purchased additional
accumulation units during the period, your return would have been affected by
the sales and administrative charges, as described in the Fund's prospectus.)
Spurred largely by three reductions in short-term interest rates by the Federal
Reserve in late 1998, the stock market was surging when the period began. In
fact, the Fund gained nearly 10% in January alone.
The new year's celebration came to an abrupt end, though, in February, when
concerns arose that the rushing economy might soon fan a fire under inflation.
The result was a run-up in long-term interest rates that, in turn, sent stocks
into a rapid retreat.
But, with the remarkable resilience that has been its hallmark in recent years,
the stock market mounted a fresh advance that not only erased the downturn but
established an all-time high before the six months were out.
For the most part, the market's gains were again driven by a relatively small
number of large-capitalization growth stocks. Because those issues form the core
of the Fund's investments, the trend continued to work to the Fund's advantage.
As has been the case for some time, technology-related stocks comprised the
greatest area of investment. Although they were highly volatile, they did make
the biggest contribution to performance. Other substantial exposures were to
consumer stocks, including health care and retailing issues, and financial
services stocks.
Consistent with my management style, I did little stock-trading during the
period, and I maintained only a small amount of cash reserves, preferring to
keep the great bulk of the assets invested in stocks.
Looking toward the rest of 1999, I would note that the stock market appears to
have "broadened out" somewhat in recent months. That is, a wider variety of
stocks have begun to advance. While that may mean that the large-capitalization
growth-stock focus of this Fund will be less of an advantage over the near term,
I think it will prove to be a positive trend in terms of the overall health of
the market in the years ahead.
Mitzi Malevich
<PAGE>
The 10 Largest Holdings Percent Value (as of
(of net assets) June 30, 1999)
Tellabs 8.52% $40,537,500
Cisco Systems 7.32 34,830,000
MCI WorldCom 5.44 25,875,000
Intl Business Machines 5.43 25,850,000
Microsoft 5.31 25,252,500
Tyco Intl 3.59 17,055,000
EMC 3.47 16,500,000
Guidant 3.24 15,431,250
Applied Materials 3.04 14,449,950
Intel 3.00 14,280,000
For further detail about these holdings, please refer to the section entitled
"Investments in securities."
(icon of) pie chart
The 10 holdings listed here make up 48.36% of net assets
<PAGE>
<TABLE>
<CAPTION>
Statement of assets, liabilities and contract owners' equity June 30, 1999
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost, $199,207,769)............................................................................... $475,105,258
Cash in bank on demand deposit................................................................................. 393,913
Dividends and interest receivable............................................................................... 123,232
Receivable from IDS Life Insurance Company for contract purchase payments....................................... 11,275,771
----------
Total assets.................................................................................................... $486,898,174
------------
Liabilities
Payable for contract terminations............................................................................... $ 11,257,452
Payable to IDS Life Insurance Company for:
Mortality and expense assurance fee............................................................................. 6,398
Investment management fee....................................................................................... 11,667
------
Total liabilities............................................................................................... $ 11,275,517
-------------
Contract owners' equity
Contracts in accumulation period-- 15,671,012 units at $29.81 per unit (Note 5)................................. $467,206,835
Contracts in payment period .................................................................................... 8,415,822
---------
Total contract owners' equity................................................................................... 475,622,657
-----------
Total liabilities and contract owners' equity................................................................... $486,898,174
------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations Six months ended June 30, 1999
Investment income (loss) -- net
(Unaudited)
Income:
<S> <C>
Dividends ...................................................................................................... $ 1,021,468
Interest........................................................................................................ 469,679
-------
Total income.................................................................................................... 1,491,147
---------
Expenses:
Mortality and expense assurance fee (Note 2).................................................................... 2,188,096
Investment management fee (Note 3).............................................................................. 875,284
-------
Total expenses.................................................................................................. 3,063,380
---------
Investment income (loss)-- net.................................................................................. (1,572,233)
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on investments......................................................................... 16,559,255
Net change in unrealized appreciation (depreciation) on investments............................................. 70,969,324
----------
Net gain (loss) on investments.................................................................................. 87,528,579
----------
Net increase (decrease) in contract owners' equity from operations.............................................. $85,956,346
-----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in contract owners' equity
Six months ended Year ended
Operations June 30, 1999 Dec. 31, 1998
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net.................................................... $ (1,572,233) $ (2,466,330)
Net realized gain (loss) on investments........................................... 16,559,255 29,234,208
Net change in unrealized appreciation (depreciation) on investments............... 70,969,324 35,513,564
---------- ----------
Net increase (decrease) in contract owners' equity from operations................ 85,956,346 62,281,442
---------- ----------
Contract transactions
Net contract purchase payments (Note 2)........................................... 773,645 1,715,061
Repayment of temporary withdrawals................................................ (3,394) 25,885
Net transfers from (to) fixed annuities........................................... (679,827) (3,139,872)
Contract termination payments and temporary withdrawals........................... (16,873,652) (32,599,118)
Annuity payments.................................................................. (537,174) (849,610)
-------- --------
Net increase (decrease) from contract transactions................................ (17,320,402) (34,847,654)
----------- -----------
Net increase (decrease) in contract owners' equity................................ 68,635,944 27,433,788
---------- ----------
Contract owners' equity at beginning of period.................................... 406,986,713 379,552,925
----------- -----------
Contract owners' equity at end of period.......................................... $475,622,657 $406,986,713
------------ ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
1. Organization and summary of significant accounting policies
IDS Life Variable Annuity Fund A (the Fund) is organized as a segregated asset
account of IDS Life Insurance Company (IDS Life) under Minnesota law and is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund's assets are held for the exclusive
benefit of its variable annuity contract owners and are not chargeable with any
liabilities arising from the other business activities of IDS Life. The
significant accounting policies followed by the Fund are summarized as follows:
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Investments in securities
Securities traded on national securities exchanges are valued at the last quoted
sales price on the principal exchange on which traded. Securities traded in the
over-the-counter market are valued at the mean of the last quoted bid and asked
price. Short-term securities that mature in 60 days or less are valued at
amortized cost. Those maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates. Short-term securities originally purchased with maturities of more than
60 days but which currently mature in 60 days or less are valued on an amortized
cost basis using the market value or approximate market value on the 61st day
before maturity. Bonds and other securities are valued at fair value as
determined by the Board of Managers when market quotations are not readily
available. Determination of fair value involves, among other things, references
to market indexes, matrices and data from independent brokers.
Security transactions are accounted for on the date the securities are purchased
and sold. Dividend income is recorded on the ex-dividend date.
Option contracts
In order to produce incremental earnings, protect gains and facilitate buying
and selling of securities for investment purposes, the Fund may buy and sell put
and call options and write covered call options on portfolio securities. The
risk in writing a call option is that the Fund gives up the opportunity of
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss upon expiration or closing of the option transaction.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option or the cost of a security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
During the six months ended June 30, 1999, the Fund did not buy or sell any put
or call options or write any covered call or put options. There were no option
contracts outstanding as of June 30, 1999.
Futures contracts
In order to gain exposure to or protect itself from changes in the market, the
Fund may buy and sell stock index futures contracts and related options. Risks
of entering into futures contracts and related options include the possibility
that there may be an illiquid market and that a change in the value of the
contract or option may not correlate with the changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
During the six months ended June 30, 1999, the Fund did not buy or sell stock
index futures contracts and related options. There were no stock index futures
contracts outstanding as of June 30, 1999.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the rate of exchange on the transaction date. It is
not practicable to identify that portion of realized and unrealized gain or loss
arising from changes in the exchange rates from the portion arising from changes
in the market value of investments.
The Fund may also enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete the obligations of the contract.
There were no forward foreign currency exchange contracts outstanding as of
June 30, 1999.
Federal income taxes
IDS Life is taxed as a life insurance company. The Fund is treated as part of
IDS Life for federal income tax purposes. Under current federal income tax law,
no taxes are payable with respect to any income of the Fund.
2. Mortality and expense assurance fee and sales charges
IDS Life makes contractual assurances to the Fund that possible future adverse
changes in administrative expenses and mortality experience of the annuitants
and beneficiaries will not affect the Fund. The mortality and expense assurance
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 Fund.
Charges by IDS Life for its sales and administrative services applicable to the
variable annuity contracts amounted to $33,168 for the six months ended June 30,
1999 and $72,458 for the year ended Dec. 31, 1998. Such charges are not an
expense of the Fund. They are deducted from contract purchase payments and are
not included in the net contract purchase payments to the Fund.
3. Investment management agreement
The Fund has an Investment Management Agreement with IDS Life. For its services,
IDS Life is paid a fee based on the aggregate average daily net assets of the
Fund. The investment management fee paid to IDS Life is computed daily and is
equal on an annual basis to 0.4% of the average daily net assets of the Fund.
In addition to paying its own management fee, the Fund also pays all brokerage
commissions and charges in the purchase and sale of assets. Brokerage charges
are paid to IDS Life for reimbursement of charges incurred in the purchase and
sale of foreign securities.
4. Security transactions and basis for determining realized gain and loss
Cost of purchases and proceeds from sales of securities, (other than short-term
obligations) aggregated $11,455,685 and $49,528,428 for the six months ended
June 30, 1999. Net realized gain on investments has been determined on the basis
of identified costs.
<PAGE>
<TABLE>
<CAPTION>
5. Accumulation units
The changes in number of outstanding units applicable to contracts in the
accumulation period were as follows:
Six months ended Year ended
June 30, 1999 Dec. 31, 1998
<S> <C> <C>
Units outstanding at beginning of period......................... 16,299,010 17,871,071
Additions for contract purchase payments and repayments.......... 28,663 78,469
Net transfers from (to) fixed annuities.......................... (25,606) (145,269)
Deductions for contract terminations and withdrawals............. (631,055) (1,505,261)
-------- ----------
Units outstanding at end of period............................... 15,671,012 16,299,010
---------- ----------
6. 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 Fund. All of the
major systems used by the Fund are maintained by AEFC and are utilized by
multiple subsidiaries and affiliates of AEFC. The Fund's businesses are heavily
dependent upon AEFC's computer systems and have significant interactions with
systems of third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps have been taken to resolve potential problems including
modification to existing software and the purchase of new software. AEFC's
target date for substantially completing its program of corrective measures on
internal business critical systems was Dec. 31, 1998. As of June 30, 1999,
AEFCcompleted its program of corrective measures on its internal systems and
applications, including Year 2000 compliance testing. The Year 2000 readiness of
other third parties whose system failures could have an impact on the Fund's
operations continues to be evaluated. The failure of external parties to resolve
their own Year 2000 issues in a timely manner could result in a material
financial risk to AEFCand the Fund.
AEFC's Year 2000 project includes 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. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered. S
Notes to Financial Statements
7. Financial highlights
The table below shows certain important financial information for evaluating the
Fund's results.
Fiscal period ended Dec. 31,
1999a 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Accumulation unit value at beginning of period $24.53 $20.91 $17.04 $13.93 $10.27
Income from investment operations:
Net investment income (loss)................ (.09) (.14) (.12) (.07) (.02)
Net gains (losses)(both realized and unrealized) 5.37 3.76 3.99 3.18 3.68
Total from investment operations............ 5.28 3.62 3.87 3.11 3.66
Accumulation unit value at end of period.... $29.81 $24.53 $20.91 $17.04 $13.93
Total returnb............................... 21.52% 17.31% 22.71% 22.33% 35.64%
Ratios/supplemental data
Total contract owner's equity at end of period
(000 omitted)............................ $475,623 $406,987 $379,553 $327,778 $284,407
Ratio of operating expenses to average net assets 1.40%c 1.40% 1.40% 1.40% 1.40%
Ratio of net investment income (loss) to average
net assets............................... (.72%)c (.63%) (.62%) (.43%) (.19%)
Portfolio turnover rate..................... 3% 19% 33% 13% 46%
a Six months ended June 30, 1999 (Unaudited).
b Total return does not reflect payment of a sales charge.
c Adjusted to an annual basis.
The foregoing table pertains to accumulation units only. There are two kinds of
units. As long as contract holders are paying into the Fund they are called
"accumulation" units. When contract owners begin to receive the annuity, they
change to "annuity" units.
The value of an annuity unit (assuming a 3.5% investment rate) was $10.23 as of
June 30, 1999, $8.56 as of Dec. 31, 1998, $7.55 as of Dec. 31, 1997, $6.37 as of
Dec. 31, 1996 and $5.39 as of Dec. 31, 1995. The value of an annuity unit
(assuming a 5% investment rate) was $6.52 as of June 30, 1999, $5.49 as of Dec.
31, 1998, $4.92 as of Dec. 31, 1997, $4.21 as of Dec. 31, 1996 and $3.61 as of
Dec. 31, 1995.
</TABLE>
<PAGE>
Investments in securities, June 30, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (94.3%)
Issuer Shares Value(a)
Banks and savings & loans (3.3%)
BankBoston 80,000 $4,090,000
Washington Mutual 330,000 11,673,750
Total 15,763,750
Beverages & tobacco (2.6%)
Coca-Cola 199,200 12,450,000
Chemicals (2.8%)
Waste Management 250,000 13,437,500
Communications equipment & services (11.8%)
Andrew Corp 130,000(b) 2,461,875
MasTec 120,000(b) 3,390,000
Nokia Oyj ADR Cl A 100,000(c) 9,156,250
Tellabs 600,000(b) 40,537,500
Total 55,545,625
Computers & office equipment (24.7%)
Cisco Systems 540,000(b) 34,830,000
Compaq Computer 100,000 2,368,750
EMC 300,000(b) 16,500,000
Hewlett-Packard 70,000 7,035,000
Intl Business Machines 200,000 25,850,000
Microsoft 280,000(b) 25,252,500
Solectron 80,000(b) 5,335,000
Total 117,171,250
Electronics (10.3%)
Applied Materials 195,600(b) 14,449,950
Intel 240,000 14,280,000
Maxim Integrated Products 140,000(b) 9,310,000
Texas Instruments 75,000 10,875,000
Total 48,914,950
Energy (2.3%)
Anadarko Petroleum 300,000 11,043,750
Energy equipment & services (3.5%)
Halliburton 160,000 7,240,000
Schlumberger 150,000(c) 9,553,125
Total 16,793,125
Financial services (6.5%)
Associates First Capital Cl A 200,000 8,862,500
Citigroup 262,500 12,468,750
Merrill Lynch & Co 120,000 9,592,500
Total 30,923,750
Health care (9.9%)
Boston Scientific 200,000(b) 8,787,500
Guidant 300,000 15,431,250
Medtronic 70,000 5,451,250
Pfizer 120,000 13,170,000
Warner-Lambert 60,000 4,162,500
Total 47,002,500
Health care services (1.5%)
HEALTHSOUTH Rehabilitation 489,200(b) 7,307,425
Household products (1.3%)
ServiceMaster 340,050 6,375,938
Industrial equipment & services (1.4%)
Deere & Co 171,000 6,775,875
Insurance (1.7%)
American Intl Group 70,000 8,194,375
Multi-industry conglomerates (3.6%)
Tyco Intl 180,000(c) 17,055,000
Utilities-- telephone (7.1%)
MCI WorldCom 300,000(b) 25,875,000
Sprint 120,000 6,337,500
Sprint PCS 30,000 1,713,750
Total 33,926,250
Total common stocks
(Cost: $172,816,758) $448,681,063
<PAGE>
Bond (0.1%)
Issuer Coupon Principal Value(a)
rate amount
U.S. Treasury
05-15-16 7.25% $250,000 $274,984
Total bond
(Cost: $241,271) $274,984
Short-term securities (5.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (5.3%)
Federal Home Loan Mtge Corp Disc Nts
07-01-99 4.77% $4,800,000 $4,800,000
07-08-99 4.75 4,400,000 4,395,962
07-08-99 4.77 2,200,000 2,197,972
07-09-99 4.75 6,200,000 6,193,496
08-23-99 5.01 1,300,000 1,289,960
Federal Natl Mtge Assn Disc Nts
07-20-99 4.77 4,000,000 3,989,994
08-18-99 5.08 1,100,000 1,092,593
08-24-99 5.08 1,200,000 1,190,928
Total 25,150,905
Commercial paper (0.2%)
CAFCO
07-08-99 4.88 500,000(d) 499,528
Ciesco LP
07-19-99 4.92 500,000 498,778
Total 998,306
Total short-term securities
(Cost: $26,149,740) $26,149,211
Total investments in securities
(Cost: $199,207,769)(e) $475,105,258
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. As of June 30, 1999, the
value of foreign securities represented 7.52% of net assets.
(d) Commercial paper sold within terms of a private placement
memorandum, exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended, and may be sold only to dealers in that program
or other "accredited investors." This security has been determined to be
liquid under guidelines established by the board.
(e) At June 30, 1999, the cost of securities for federal income tax purposes was
approximately $199,207,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation.................... $280,724,000
Unrealized depreciation.................... (4,826,000)
----------
Net unrealized appreciation................ $275,898,000
<PAGE>
Managers and officers
Board of Managers
Gumer C. Alvero
vice president, American Express Financial Corporation
Rodney P. Burwell
chairman, Xerxes Corporation
Jean B. Keffeler
independent management consultant
Richard W. Kling
president, IDSLife Insurance Company
Thomas R. McBurney
president, McBurney Management Advisors Principal officers
Richard W. Kling
chairman of the board and president
Lorraine R. Hart
vice president, investments
Jeffrey S. Horton
vice president and treasurer
Timothy S. Meehan
secretary
William A. Stoltzmann
general counsel and assistant secretary
Philip C. Wentzel
controller
<PAGE>
Additional information
The investment objective of IDSLife Variable Annuity Fund A is to invest in
securities that offer opportunities for long-term capital appreciation
consistent with accumulating Fund value and providing annuity payments under
variable annuity contracts issued by IDS Life.
There is a sales and administrative charge to the contract owner included in the
purchase payment.
This report is for the information of contract owners of IDSLife Variable
Annuity Fund A, but it may be used as sales literature when preceded or
accompanied by the current prospectus. For details and other material
information, see the current prospectus.
Issuer and investment manager:
IDS Life Insurance Company,
Minneapolis, Minn.
Custodian:
American Express Trust Company
Minneapolis, Minn.
Sub-custodian:
Bank of New York
New York, NY
<PAGE>
IDS Life
Variable
Annuity
Fund A
1999 SEMIANNUAL REPORT
S-6445 N (8/99)
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 85
SPENCER, IA
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
AMERICAN EXPRESS Financial Advisors
