SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 61 (File No. 2-47430) [X]
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2-29358
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 (File No. 811-1674) [X]
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IDS Life Variable Annuity Fund B (Individual and Group)
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IDS Tower 10, Minneapolis, Minnesota 55440-0010
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(612) 671-3678
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Mary Ellyn Minenko - IDS Tower 10, Minneapolis 55440-0010
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Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 30, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to section 24-F of the Investment Company
Act of 1940.
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IDS LIFE VARIABLE
ANNUITY FUND B
Individual Variable Annuity Contracts and
Group Variable Annuity Contracts
PROSPECTUS/APRIL 30, 1999
IDS Life Variable Annuity Fund B (the Fund) is a segregated asset account of IDS
Life Insurance Company (IDS Life). The investment objective of the Fund is long-
term capital appreciation. The Fund invests primarily in common stocks of U.S.
corporations. The Fund also may invest in preferred stocks and in corporate and
government bonds.
This prospectus describes the following types of qualified variable annuity
contracts offered by IDS Life:
- - three individual variable annuity contracts for use with qualified plans.
- - a group variable annuity contract for plans adopted by public school systems
and certain tax-exempt organizations.
NEW CONTRACTS ARE NOT CURRENTLY BEING OFFERED. This prospectus gives you facts
about the Fund. You should read it and keep it with your investment records for
future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS ANNUITY 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 ANNUITY
INVOLVES RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
IDS LIFE VARIABLE ANNUITY FUND B
IDS TOWER 10
MINNEAPOLIS, MINNESOTA 55440-0010
(800) 437-0602
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IDS LIFE VARIABLE ANNUITY FUND B
IDS LIFE VARIABLE ANNUITY FUND B
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IDS LIFE INSURANCE COMPANY
IDS Tower 10
Minneapolis, Minnesota 55440-0010
PROSPECTUS, APRIL 30, 1999
Individual Variable Annuity Contracts and Group Variable Annuity Contracts
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TABLE OF CONTENTS PAGE
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Summary of Contents............................................................. 3
Financial highlights............................................................ 5
The variable annuity............................................................ 5
Investment objective............................................................ 6
Risks........................................................................... 6
Non-fundamental policies........................................................ 7
Fundamental policies............................................................ 7
Portfolio manager............................................................... 8
Investment agreements........................................................... 8
Brokerage....................................................................... 8
The contracts................................................................... 9
The fixed account............................................................... 9
Automated transfers and partial surrenders...................................... 10
Measuring the value of your contract............................................ 10
Valuing Fund assets............................................................. 11
When we credit your purchase payments........................................... 12
The investment factor........................................................... 12
Valuing an accumulation unit.................................................... 12
Valuing an annuity unit......................................................... 12
Annuity payment starting date................................................... 13
Table of settlement rates....................................................... 13
Annuity payment plans........................................................... 14
The charges you pay............................................................. 16
Surrendering your contract...................................................... 18
Special rules if the annuitant dies before the annuity payment starting date.... 19
Special features of the Group Variable Annuity Contract......................... 19
Your right to cancel installment contracts...................................... 20
What about your taxes?.......................................................... 20
Voting rights................................................................... 22
Management...................................................................... 23
Directors and officers of IDS Life Insurance Company............................ 24
Other Information............................................................... 25
Financial statements............................................................ F-1
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IDS LIFE VARIABLE ANNUITY FUND B
SUMMARY OF CONTENTS
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ABOUT THE VARIABLE ANNUITY - IDS Life offers variable annuities for sale through
the Fund, a diversified open-end management investment company. Variable annuity
contracts guarantee regular payments to contract purchasers. The amount of these
payments is influenced by the performance of the securities in which the Fund
invests (page 5).
FINANCIAL HIGHLIGHTS - This table shows important financial information you will
need to evaluate the Fund's performance (page 5).
INVESTMENT OBJECTIVE - The Fund's investment objective is long-term capital
appreciation in order to build up values and to make annuity payments. The Fund
invests primarily in common stock and also may invest in preferred stock and in
government and corporate bonds. The Fund may invest in foreign securities,
futures contracts and options. There is no guarantee that the Fund will achieve
its investment objective because any investment involves risk (page 6).
PORTFOLIO MANAGER - Mitzi Malevich, senior portfolio manager, manages the Fund.
(page 8).
INVESTMENT AGREEMENTS - The Fund is a segregated asset account of IDS Life
Insurance Company, a stock life insurance company. IDS Life manages the
investments of the Fund pursuant to an Investment Management Agreement. Under
this agreement, IDS Life receives a management fee equal to 0.4% of the Fund's
average daily net assets for each year. Under a Distribution and Services
Agreement, IDS Life also serves as principal underwriter of the Fund. IDS Life
annually pays 0.25% of the Fund's net assets to American Express Financial
Corporation, for investment advice regarding management of the Fund's
investments (page 8).
CONTRACTS - This prospectus describes the following types of tax-qualified
variable annuity contracts:
- - A single payment deferred annuity that you can purchase by making an initial
payment of at least $3,000 (page 9).
- - A single payment immediate annuity that you can purchase by making an initial
payment of at least $3,000 (page 9).
- - A flexible installment deferred annuity that you can purchase by making 10 or
more annual payments of at least $300 (page 9).
Each of the individual variable annuity contracts described above is for use
with plans qualifying under Sections 401, 403, 408 or 408A of the Internal
Revenue Code of 1986, as amended (the Code). As the annuitant, you are the owner
unless your application states otherwise.
- - A group variable annuity contract designed to provide benefits under annuity
plans adopted by public school systems and certain tax-exempt organizations
pursuant to Section 403(b) of the Code. The contract is issued to the employer
as owner and provides benefits to all group contract participants
(participants) in the underlying annuity plan. Generally, IDS Life will not
issue a contract to an employer unless there are at least five employees who
are plan participants or who already own contracts based on the Fund. A
participant makes an annual contribution. The contribution must be at least
$300 per year if your retirement date is 10 years or more from your
application date. If your retirement date is less than 10 years from your
application date, the contribution must be large enough so that contributions
total at least $3,000 by your retirement date.
TRANSFERS BETWEEN ACCOUNTS - Before the annuity payment starting date, you may
give IDS Life written or telephone instructions to transfer the contract value
of your investment between the fixed account and the variable account. Transfers
must be for at least $50 (page 10).
CHARGES YOU PAY - IDS Life deducts a combined sales and administrative charge
from payments made into the Fund (page 16).
Additionally, IDS Life may deduct for premium taxes. Most states don't have
premium taxes but in those that do, IDS Life
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IDS LIFE VARIABLE ANNUITY FUND B
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may make a deduction. State premium taxes range from 0 to 3.5% of the gross
purchase payments. (page 17).
SURRENDERING YOUR CONTRACT - You can surrender all or part of your deferred
annuity contract any time before the annuity payment starting date by giving IDS
Life written or telephone instructions. IDS Life will cash in the number of
accumulation units or fixed dollar accumulation value required for the amount of
money you request. IDS Life will give the accumulation units the accumulation
unit value it determines on the date IDS Life receives your request. However,
you can't surrender part of your contract if the remaining accumulation value is
less than $20. You cannot make any surrenders after annuity payments have
started. You will pay income tax on your surrender and you may have to pay an
IRS penalty tax on early withdrawal if you surrender part or all of your
contract before reaching age 59 1/2. In addition, the code may impose 20% income
tax withholding. The Tax Reform Act of 1986 restricts your right to receive a
distribution from a Tax-Sheltered Annuity (TSA).
You may lose money if you surrender your contract too soon because the
percentage that IDS Life deducts is higher in the earlier years.
A surrender by a participant in a plan or program qualified under Sections 401,
403, 408 or 408A of the Code may result in adverse tax consequences. You should
consult a tax advisor before making a surrender request (page 18).
FEDERAL TAX INFORMATION - According to current interpretations of federal income
tax law, generally there is no federal income tax on any increase in your
annuity's value until you receive a distribution. Under certain circumstances,
there may be a 10% IRS penalty tax on early withdrawal and 20% income tax
withholding on distributions (page 20).
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ADDITIONAL INFORMATION
For information about the Fund's history, organization and headquarters as well
as information about IDS Life and American Express Financial Corporation (AEFC),
see page 25.
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IDS LIFE VARIABLE ANNUITY FUND B
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FINANCIAL HIGHLIGHTS FROM
JAN. 1, 1989 TO DEC. 31, 1998
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Year ended Dec. 31,
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1998 1997 1996 1995 1994 1993
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Accumulation unit value at beginning of
year......................................... $24.71 $20.26 $16.55 $12.18 $12.69 $11.60
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Income from investment operations:
Net investment income (loss)................. (.19) (.16) (.09) (.03) .03 (.02)
Net gains (losses) (both realized and
unrealized).................................. 4.77 4.61 3.80 4.40 (.54) 1.11
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Total from investment operations............. 4.58 4.45 3.71 4.37 (.51) 1.09
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Accumulation unit value at end of year....... $29.29 $24.71 $20.26 $16.55 $12.18 $12.69
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Total return*................................ 18.54% 21.96% 22.42% 35.88% (4.00%) 9.42%
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RATIOS/SUPPLEMENTAL DATA
Total contract owner's equity at end of year
(000 omitted)................................ $ 796,179 $ 758,172 $ 673,907 $ 613,941 $ 494,520 $ 534,556
Ratio of operating expenses to average net
assets....................................... 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
Ratio of net investment income (loss) to
average net assets........................... (.73%) (.72%) (.50%) (.19%) .25% (.17%)
Portfolio turnover rate...................... 16% 29% 12% 44% 61% 64%
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1992 1991 1990 1989
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Accumulation unit value at beginning of
year......................................... $10.87 $7.29 $7.14 $5.43
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Income from investment operations:
Net investment income (loss)................. (.03) .02 .07 .05
Net gains (losses) (both realized and
unrealized).................................. .76 3.56 .08 1.66
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Total from investment operations............. .73 3.58 .15 1.71
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Accumulation unit value at end of year....... $11.60 $10.87 $7.29 $7.14
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Total return*................................ 6.72% 49.03% 2.12% 31.46%
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RATIOS/SUPPLEMENTAL DATA
Total contract owner's equity at end of year
(000 omitted)................................ $ 506,150 $ 500,877 $ 355,049 $376,790
Ratio of operating expenses to average net
assets....................................... 1.40% 1.41% 1.41% 1.43%
Ratio of net investment income (loss) to
average net assets........................... (.28%) .26% .93% .75%
Portfolio turnover rate...................... 74% 67% 56% 55%
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* Total return does not reflect payment of a sales charge.
This table pertains to accumulation units only. When you begin to receive your
annuity payments, accumulation units change to annuity units. The value of an
annuity unit (assuming a 3.5% investment rate) was $10.51 as of Dec. 31, 1998,
$9.17 as of Dec. 31, 1997, $7.78 as of Dec. 31, 1996, $6.58 as of Dec. 31, 1995,
$5.02 as of Dec. 31, 1994, $5.41 as of Dec. 31, 1993, $5.11 as of Dec. 31, 1992,
$4.96 as of Dec. 31, 1991, $3.46 as of Dec. 31, 1990 and $3.51 as of Dec. 31,
1989. The value of an annuity unit (assuming a 5% investment rate) was $6.83 as
of Dec. 31, 1998, $6.05 as of Dec. 31, 1997, $5.21 as of Dec. 31, 1996, $4.47 as
of Dec. 31, 1995, $3.46 as of Dec. 31, 1994, $3.78 as of Dec. 31, 1993, $3.63 as
of Dec. 31, 1992, $3.57 as of Dec. 31, 1991, $2.53 as of Dec. 31, 1990 and $2.60
as of Dec. 31, 1989.
The information in this table is derived from financial statements of the Fund
that have been audited by Ernst & Young LLP, independent auditors. The
independent auditor's report and additional information about the performance of
the Fund are in the Fund's annual report, which you can obtain without charge if
it is not included with this prospectus.
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THE VARIABLE ANNUITY
An annuity is a contract with a life insurance company that guarantees regular
income to the purchaser. Most people buy annuities to provide income in their
retirement years. When many people think of an annuity, they think of a fixed
dollar annuity. With a fixed dollar annuity, the insurance company bears the
risk of investment gain or loss and guarantees payment of an exact monthly
amount. A variable annuity also guarantees you regular payments. However, the
amount of the payments will fluctuate with the performance of the securities in
which the annuity fund invests. So if the securities go up in value, you may
receive larger annuity payments. If they go down, you may receive smaller
annuity payments.
5
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IDS LIFE VARIABLE ANNUITY FUND B
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INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation. There is no
guarantee the Fund will achieve its investment objective because any investment
involves risk. IDS Life can change the Fund's investment objective without the
approval of the Fund's contract holders, but IDS Life has no intention of doing
so.
The Fund invests primarily in U.S. common stocks. The Fund also may invest in
preferred stocks and in corporate and government bonds. Some bonds issued by
agencies of the U.S. government are not supported by the full faith and credit
of the United States.
The Fund may invest up to 30% of its total assets at the time of purchase in
foreign securities. In selecting foreign investments, the Fund generally will
seek to invest in companies that it anticipates will experience economic growth
at least as great as that anticipated in the U.S. companies in which it invests.
The securities that the Fund believes offer attractive opportunities for
investment may change from time to time.
The Fund may use derivative instruments from time to time. However, at this
time, the use of such instruments is not a principal strategy of the Fund.
For temporary purposes, the Fund may make certain investments. It may buy short-
term U.S. and Canadian government securities. It may invest in bank obligations
including negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances and letters of credit. The Fund may buy
short-term corporate notes and obligations rated in the top two classifications
or the equivalent by Standard and Poor's or Moody's.
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RISKS
Please remember that you may lose money. Principal risks associated with an
investment in the Fund include:
- - Market Risk
- - Interest Risk
- - Foreign Risk
- - Liquidity Risk
MARKET RISK
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
INTEREST RATE RISK
The risk of losses attributable to changes in interest rates. This term is
generally associated with, but not limited to, bond prices (when interest rates
rise, bond prices fall).
FOREIGN RISK
The following are all components of foreign risk:
COUNTRY RISK includes the political, economic, and other conditions of a
country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.
CURRENCY RISK results from the constantly changing exchange rate between local
currency and the U.S. dollar. Whenever the Fund holds securities valued in a
foreign currency or holds the currency, changes in the exchange rate add or
subtract from the value of the investment.
CUSTODY RISK refers to the process of clearing and settling trades. It also
covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle.
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IDS LIFE VARIABLE ANNUITY FUND B
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Local agents are held only to the standard of care of the local market.
Governments or trade groups may compel local agents to hold securities in
designated depositories that are not subject to independent evaluation. The less
developed a country's securities market is, the greater the likelihood of
problems occurring.
LIQUIDITY RISK
Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.
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NON-FUNDAMENTAL POLICIES
No more than 5% of the Fund's net assets can be used at any one time for good
faith deposits on futures and premiums for options on futures that do not offset
existing investment positions.
The Fund will not buy securities on margin (use borrowed money to buy
securities) or sell short. With short sales, an investor sells a security that
it does not own in anticipation of a decline in the market value of the
security. To complete the transaction, the investor must borrow the security to
make delivery to the buyer. The investor is obligated to replace the security
that was borrowed by purchasing it at the market price on the replacement date.
The price at such time may be more or less than the price at which the investor
sold the security.
The Fund will not invest in illiquid securities if more than 10% of the Fund's
net assets would be invested in such securities.
The Fund may invest its assets in an open-end management investment company
(another fund) having substantially the same investment objectives, policies and
restrictions as the Fund for the purpose of having those assets managed as part
of a combined pool.
The Board of Managers of the Fund can change the investment policies described
above without the consent of contract holders.
FUNDAMENTAL POLICIES
The Fund observes the following fundamental investment restrictions, that cannot
change without approval by a vote of the contract holders:
- - The Fund will not borrow money or property except as a temporary measure for
extraordinary or emergency purposes.
- - The Fund will not underwrite securities of other issuers, except as allowed by
applicable law.
- - The Fund does not intend to concentrate investments in any particular
industry, but reserves freedom of action to do so provided that not more than
25% of its total assets, taken at cost, may be so invested at any one time.
- - The Fund may invest up to 10% of its total assets, taken at cost, in real
properties, but will not do so as a principal activity.
- - The Fund will not invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision. The
limitation will not apply to investments in securities issued by the U.S.
government, its agencies or instrumentalities. Up to 25% of the Fund's total
assets may be invested without regard to this 5% limitation.
- - The Fund will not purchase securities of any issuer if immediately after, and
as a result of a purchase, the Fund would own more than 10% of the outstanding
voting securities of the issuer.
- - The Fund may not make cash loans if the total commitment amount exceeds 5% of
the Fund's total assets.
- - The Fund will not buy or sell physical commodities unless acquired as a result
of ownership of securities or other instruments. This will not prevent the
Fund from buying or selling options and futures contracts or from investing in
securities or other instruments backed by, or whose value is derived from,
physical commodities.
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IDS LIFE VARIABLE ANNUITY FUND B
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PORTFOLIO MANAGER
Mitzi Malevich joined American Express Financial Corporation in 1983 and serves
as vice president and senior portfolio manager. She was appointed to manage this
fund and IDS Life Variable Annuity Fund A (Fund A) in January 1995, and has
managed IDS Growth Fund since 1992. Prior to that, she was a portfolio manager
of pension fund accounts.
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INVESTMENT AGREEMENTS
IDS Life is the Fund's investment manager. Under the Investment Management
Agreement between IDS Life and the Fund, IDS Life charges a fee for managing the
Fund's investments. This amounts to 0.4% of the Fund's average daily net assets
for the year.
IDS Life does not keep all of this fee. IDS Life and AEFC have an Investment
Advisory Agreement that calls for IDS Life to pay AEFC a fee for serving as
investment advisor for the Fund. The fee is 0.25% of the Fund's average net
assets for the year.
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.
An Investment Management Agreement and an Advisory Agreement were approved by
the contract holders on Dec. 30, 1983, as a result of the IDS/American Express
Company merger. Both agreements will continue each year as long as they are
approved:
- - by a majority of the Board of Managers of the Fund or a majority of the
outstanding votes of the Fund, and
- - by a majority of the Board of Managers of the Fund who are not "interested
persons" of IDS Life or AEFC.
All votes by the Board of Managers must be taken at a meeting called
specifically to approve or disapprove the agreements and all votes must be cast
in person.
IDS Life may cancel either of its agreements without penalty, provided it gives
60 days' notice in writing. AEFC and the Fund may do the same. If the Fund
decides to cancel its management agreement with IDS Life, it must have the
approval of either the Board of Managers or a majority of the votes of contract
holders. If there is any assignment of either agreement, it ends immediately.
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BROKERAGE
Under the Investment Management Agreement, IDS Life has responsibility for
making the Fund's investment decisions, for executing trades for the Fund's
portfolio and for negotiating any brokerage commissions. IDS Life intends to
direct AEFC to execute trades and negotiate commissions on its behalf. These
services are covered by the Investment Advisory Agreement between AEFC and IDS
Life. When AEFC acts on IDS Life's behalf for the Fund, it follows the rules
described here for IDS Life. The Fund paid total brokerage commissions for each
of the last three years as follows: $247,323 for 1998, $353,485 for 1997 and
$189,380 for 1996. IDS Life intends to continue to examine and consider ways to
reduce brokerage costs.
The Investment Management Agreement generally requires IDS Life to use its best
efforts to obtain the best available price and the most favorable execution.
However, brokerage firms may provide some extra services, including economic or
investment research and analysis. Sometimes it may be desirable to compensate a
broker for research or brokerage services by paying a commission that it might
not otherwise charge, or a commission in excess of what another broker might
charge. The Board of Managers has adopted a policy authorizing IDS Life to do so
to the extent authorized by law, if IDS Life determines, in good faith, that the
amount of commission is
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IDS LIFE VARIABLE ANNUITY FUND B
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reasonable in relation to the value of the brokerage or research services
provided by the broker.
In purchases and sales of securities involving transactions not listed on an
exchange or in listed securities that are traded off of the exchange, the Fund
will deal with a market maker as principal, or a broker as agent, depending upon
the method IDS Life believes will produce the best available price and most
favorable execution as described above. In transactions with a broker who acts
as principal, commissions generally are not stated separately, but are included
in the price of the securities.
AEFC gives investment advice to a number of investment companies and mutual
funds. Where more than one of these companies or funds are interested in the
same securities at the same time, AEFC carries out the sale or purchase in a way
that all agree in advance is fair.
Sharing in a large transaction may affect the price or volume of shares
acquired. But by these transactions, the Fund hopes to gain an advantage in
execution.
The Fund may pay brokerage commissions to broker-dealer affiliates of IDS Life,
AEFC and American Express Company.
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THE CONTRACTS
This prospectus describes the following types of qualified variable annuity
contracts:
- - SINGLE PAYMENT-DEFERRED ANNUITY. You make a single purchase payment. Annuity
payments are deferred until some future date.
- - SINGLE PAYMENT-IMMEDIATE ANNUITY. You make a single payment. Annuity payments
will begin within 60 days after IDS Life approves your application.
- - FLEXIBLE INSTALLMENT PAYMENT-DEFERRED ANNUITY. You make purchase payments in
installments over one or more years. Annuity payments begin at some future
date after you have paid all installments.
- - A GROUP VARIABLE ANNUITY CONTRACT. This contract provides benefits under
annuity plans adopted by public school systems and certain tax-exempt
organizations pursuant to Section 403(b) of the Code. The contract is a master
contract issued to the employer as owner and provides benefits for all annuity
plan participants. Generally IDS Life will not issue a contract to an employer
unless there are at least five employees who are plan participants or who
already own contracts based on the Fund. The annual contribution a participant
makes must be at least equal to the larger of (1) an amount which, when
multiplied by the number of contract years between the application date and
the retirement date, equals $3,000 or (2) $300 a year. A participant may
increase the amount of this annual contribution within the limits provided by
the Code. However, if the annual contribution is more than twice that of the
very first annual contribution, IDS Life may place some further conditions on
contributions. No contribution will be accepted that is not within the
employee exclusion allowance provided by Section 403(b) of the Code. The
contract provides several optional settlement modes that each plan participant
may elect. However, if at the annuity starting date the accumulation value of
the contract is less than $2,000, then the accumulation value may be paid in a
lump sum.
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THE FIXED ACCOUNT
The fixed account is an additional account to which you may allocate purchase
payments and contract values. It provides guaranteed values and periodically
adjusted interest-crediting rates.
If you have a deferred annuity contract, you can change your mind from time to
time and apply all or part of your future purchase payments to the fixed
account.
Also, the contract provides that once each contract year, you can transfer
accumulation values of at least $250 from
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IDS LIFE VARIABLE ANNUITY FUND B
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the variable account to the fixed account or from the fixed account to the
variable account. This right ends 30 days before annuity payments begin.
Presently, IDS Life does not intend to limit the number of transfers from the
variable account to the fixed account; however, IDS Life limits transfers from
the fixed account to the variable account to one per contract year. Just write
or telephone IDS Life and indicate the dollar amount, percentage of, or number
of variable accumulation units to transfer from the Fund or the amount of fixed
dollar accumulation value to transfer to the Fund.
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AUTOMATED TRANSFERS AND PARTIAL SURRENDERS
IDS Life currently allows deferred annuity contract holders to establish:
- - automated transfers of contract values between the fixed account and variable
account; or
- - automated partial surrenders of contract values.
Both services can be in effect at the same time. You can establish them through
a one-time written or telephone request to IDS Life.
The minimum transfer amount from any account or partial surrender amount from
the contract is $50. You can make the transfer or surrender on a monthly,
quarterly, semi-annual or annual basis. You may start or stop this service at
any time but you must give IDS Life 30 days' notice to change any automated
transfer or surrender instructions that are currently in place. Automated
transfers or partial surrenders are subject to all of the other contract
provisions and terms including provisions relating to the transfer of money
between accounts. They are not available for 1969 Series Contracts that were
issued prior to May 1971.
Automated transfers from the fixed account may not exceed an amount that will
deplete the fixed account within 12 months. If you have made any type of
transfer from the fixed account, you may not transfer contract values from the
variable account back to the fixed account until the next contract anniversary.
For more information regarding surrenders, see page 18.
Under some contracts, applicable law may restrict automated partial surrenders.
When automated partial surrenders are in effect, additional purchase payments
may not be appropriate and, therefore, are not permitted.
IDS Life has the authority to honor any telephone requests believed to be
authentic and will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. As long as IDS
Life follows the procedures IDS Life and its affiliates will not be liable for
any loss resulting from fraudulent requests. IDS Life will process your transfer
and/or variable surrender request on the valuation date (any normal business
day, Monday through Friday, that the New York Stock Exchange (NYSE) is open
after we receive it. At times when the volume of telephone requests is unusually
high, IDS Life will take special measures to ensure that your call is answered
as promptly as possible. IDS Life will not allow a telephone surrender request
within 30 days of a phoned-in address change.
You may request that telephone withdrawals not be authorized from your account
by writing IDS Life.
Automated partial surrenders may result in income taxes and IRS penalty taxes
being applied to all or a portion of the amount surrendered. See the sections on
Tax charges and Surrendering your contract (page 20).
Consult your tax advisor if you have any questions about the taxation of your
annuity.
- ---------------------------------------
MEASURING THE VALUE OF YOUR CONTRACT
Because values are always changing with the performance of the Fund's
investments, it is not easy to measure value with a
10
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- -----------------------------------------------------------------
variable annuity contract. For this reason IDS Life uses a technique that
involves "units." IDS Life measures the performance of the Fund by changes in
the value of a single unit, rather than the total value of the Fund. There are
two kinds of units. As long as you are paying into the Fund they are called
"accumulation units." When you begin to receive your annuity payments, they
change to "annuity units."
- - Accumulation units are used to measure the value of deferred annuity contracts
during the period before IDS Life makes annuity payments to you.
<TABLE>
<S> <C> <C> <C> <C>
number of your value of one total
accumulation x accumulation = accumulation
units unit value
</TABLE>
When you buy a deferred annuity contract, IDS Life will credit your purchase
payments as accumulation units to your contract.
- - Annuity units determine the value of each annuity payment. When you buy an
immediate annuity contract, IDS Life will credit your purchase payment as
annuity units to your account.
Under a deferred annuity contract, when annuity payments begin, IDS Life will
convert your accumulation value into annuity units. From then on, your annuity
payments are based on the current annuity unit value.
<TABLE>
<S> <C> <C> <C> <C>
number of your annuity value of one
annuity units x unit value = annuity
payment
</TABLE>
DATES WE REVALUE UNITS - VALUATION DATE
IDS Life values your units at least once every seven days. At the present time,
IDS Life values your units each business day at the close of trading on the
NYSE. During an emergency, the Fund can suspend redemption. Those emergency
situations would occur if:
- - The NYSE closes for reasons other than the usual weekend and holiday closings,
or trading on the NYSE is restricted,
- - Disposal of the Fund's securities is not reasonable, or it is not reasonably
practical for the Fund to determine the fair value of its net assets, or
- - The Securities and Exchange Commission under the provisions of the Investment
Company Act of 1940 (1940 Act) declares a period of emergency to exist.
- ---------------------------------------
SPLITTING UNITS
IDS Life can split accumulation or annuity units. We will do so only if it is in
the best interests of the contract holders, the annuitants and IDS Life.
- ---------------------------------------
THE VALUATION PERIOD
The valuation period starts after the close of business (when the NYSE closes,
normally 3 p.m. Central time) on one valuation date and ends with the close of
business on the next valuation date.
- ---------------------------------------
VALUING FUND ASSETS
We determine the net value of the Fund's assets at the start of each valuation
period by taking the total value of the Fund's assets and subtracting
liabilities. The net asset value per share generally changes each day. We value
the Fund's securities as follows:
- - We value securities traded on national securities exchanges at the last quoted
sales price on that day. If a particular security hasn't been traded on a
certain day, we take the average price between the last bid (offer to buy) and
the last asked (offer to sell) price.
- - We also value securities with readily available market quotations but without
a listing on an exchange at the average between the last bid and the last
asked price.
- - We value short-term securities maturing more than 60 days from the valuation
date at the market price or approximate market value based on current interest
11
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
rates. We value short-term securities maturing in 60 days or less but that
originally had maturities of more than 60 days at the acquisition date on an
amortized cost basis using the market value on the 61st day before maturity.
We value short-term securities maturing in 60 days or less at the acquisition
date at amortized cost. Amortized cost is an approximation of market value
determined by systematically increasing the carrying value of a security if
acquired at a discount, or systematically reducing the carrying value if
acquired at a premium, so that the carrying value is equal to maturity value
on the maturity date.
- - We value securities and other assets without a ready market price at fair
value. The Board of Managers is responsible for using valuation methods they
believe give fair value. In cases like this, they may use an outside
organization to value these securities. These organizations may use methods
that take into consideration yields, trading characteristics and other market
data.
- ---------------------------------------
WHEN WE CREDIT YOUR PURCHASE PAYMENTS
IDS Life credits each purchase payment at the end of the valuation period during
which we receive it at our corporate office.
- ---------------------------------------
THE INVESTMENT FACTOR
On each valuation date, IDS Life calculates an investment factor for the
valuation period. This factor measures the Fund's investment performance during
the period. Here is how the investment factor is determined:
First, we determine the investment income for the period by combining the Fund's
income (interest and any dividends), net realized and unrealized capital gains
or losses on investments and expenses.
Then, we determine the net investment rate by dividing the Fund's net investment
income by the net value of the Fund's assets at the beginning of the valuation
period.
Finally, the investment factor for any valuation period is the sum of 1 plus the
net investment rate. If the Fund has a negative investment rate for a period,
the investment factor will be less than 1.
- ---------------------------------------
VALUING AN ACCUMULATION UNIT
IDS Life uses accumulation units to measure the value of your contract during
the period before annuity payments begin. We determine the value of an
accumulation unit by multiplying the accumulation unit value for the last
valuation period by the investment factor for the current period.
Here is an example: Assume the Fund's assets at the start of the day were $1
million and the investment income for the day was $2,000. The total expenses
were $398.35 and the value of an accumulation unit the day before was $1.101000.
Step 1. First, we determine the net investment income. This is income minus
expenses or $1,601.65 ($2,000 - $398.35).
Step 2. Next we determine the investment rate. This is the net investment income
divided by the assets at the start of the day or 0.001602 ($1,601.65 divided by
$1,000,000).
Step 3. The investment factor is one plus the investment rate, or 1.001602.
Step 4. Finally, we determine the value of an accumulation unit by multiplying
yesterday's accumulation unit value by the investment factor. The current value
of an accumulation unit comes out to $1.102764 ($1.101000 x 1.001602).
- ---------------------------------------
VALUING AN ANNUITY UNIT
When you are ready to receive annuity payments, IDS Life exchanges your
accumulation units for annuity units. Annuity units measure each variable
annuity
12
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
payment. To determine the value of an annuity unit, we multiply the annuity unit
value on the last valuation date by the product of (1) the investment factor for
the current period, and (2) the neutralizing factor.
The neutralizing factor removes the assumed investment rate that is built into
the variable annuity tables in your contract. The neutralizing factor for a
one-day valuation period is 0.999866, when the usual 5% assumed investment rate
is used.
Here is a shortcut for calculating the value of an annuity unit:
Substitute the term "annuity unit" for the term "accumulation unit" each time it
appears in the example used for calculating accumulation unit values.
Then take the answer in Step 4 ($1.102764) and multiply it by the neutralizing
factor (0.999866). The answer is the current value of an annuity unit, or
$1.102616.
The assumed investment rate is not always 5%. For example, contracts subject to
Texas law cannot use more than a 3.5% investment rate. You can request a 3.5%
investment rate by sending a written request to IDS Life at its home office. The
current policy of IDS Life is to grant a request received no later than 30 days
before settlement.
Why would you want a lower assumed investment rate? The value of an annuity unit
will rise or fall to the extent that the actual investment rate for the period
is more or less than the assumed investment rate. A lower assumed rate produces
a lower initial annuity payment, but later payments will rise faster if unit
values are going up. Later payments will fall more slowly if unit values are
dropping.
- ---------------------------------------
ANNUITY PAYMENT STARTING DATE
INDIVIDUAL CONTRACTS. For deferred contracts paid for in annual installments or
with a single payment, you select the annuity payment starting date in your
application. You may change the payment date at any time not less than 30 days
before annuity payments are to start.
FOR SINGLE PAYMENT DEFERRED CONTRACTS, the annuity payment starting date must be
at least 60 days after the application date.
For IMMEDIATE CONTRACTS, the annuity payment starting date must be no later than
60 days after the application date.
You can only wait so long before annuity payments begin. The annuity payment
starting date must come before the annuitant's 75th birthday.
GROUP CONTRACTS. For group contracts, the participants elects the annuity
starting date and the annuity payment plan in the Statement of Participation.
The participant may change either election anytime not less than 30 days before
annuity payments start. The annuity starting date must be at least so many years
after the application date that the number of years multiplied by the annual
purchase payment equals or exceeds $3,000.
Additionally, the annuity payment starting date must be no later than the
certificate anniversary nearest the annuitant's 75th birthday.
For all annuities except Roth IRAs, to avoid IRS penalty taxes, the retirement
date generally must be:
- - on or after the date the annuitant reaches age 59 1/2; and
- - for IRAs, by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2; or
- - for all other qualified annuities, 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.
- ---------------------------------------
TABLE OF SETTLEMENT RATES
The Progressive Annuity Table in your contract shows the amount of the first
13
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
monthly payment for each $1,000 of contract value according to the adjusted age
and, when applicable, the sex of the annuitant.
Adjusted age is equal to the annuitant's birthday nearest the settlement date
minus any adjustments depending on the calendar year of birth of the annuitant
as follows:
<TABLE>
<CAPTION>
Calendar year of Adjustment for
annuitant's birth Male Female
<S> <C> <C>
- ----------------------------------------------------------
Prior to 1920........................... 0 4
1920 through 1939....................... 1 5
1940 through 1954....................... 2 6
1955 through 1969....................... 3 7
After 1969.............................. 4 8
- ----------------------------------------------------------
</TABLE>
In ARIZONA GOVERNING COMMITTEE FOR TAX DEFERRED ANNUITY AND DEFERRED
COMPENSATION PLANS, ETC. ET AL. V. NATHALIE NORRIS, ETC., the United States
Supreme Court decided that Title VII of the Civil Rights Act of 1964 prohibits
an employer from offering its employees the option of receiving retirement
benefits from one of several companies selected by the employer, all of which
pay a woman lower monthly retirement benefits than a similarly situated man. The
Court ordered that all retirement benefits derived from contributions made on
and after Aug. 1, 1983, must be calculated without regard to the sex of the
annuitant.
IDS Life has been administering contributions received since Aug. 1, 1983, on
the company's in-force annuity contracts to provide retirement benefits without
regard to the sex of the annuitant in those markets which are affected by the
Norris decision. IDS Life also has amended new contracts in order to assure
continued compliance by employers with the obligations imposed on them by the
Norris decision.
- ---------------------------------------
ANNUITY PAYMENT PLANS
You may select on the application how you want annuity payments made and when
the payments are to begin. If you have a deferred annuity contract, you may
change your payment plan at any time at least 30 days before the annuity payment
starting date.
Here are the plans available for all annuity contracts as described in this
prospectus:
- - 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, 10 OR 15 YEARS CERTAIN: We make monthly
payouts for a guaranteed payout period of five, 10 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 has expired.
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.
RESTRICTIONS FOR SOME QUALIFIED PLANS - If your annuity was purchased under a
Section 401(k) plan, Section 403(b) plan (TSA), or as an IRA, you must select a
payment plan that provides for payments:
- - over the life of the annuitant;
- - over the joint lives of the annuitant and beneficiary;
14
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- -----------------------------------------------------------------
- - 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
beneficiary.
A beneficiary of a variable annuity contract may ask for one lump-sum payment
under Plan B or Plan C. This payment may be subject to 20% income tax
withholding if made directly to a surviving spouse. IDS Life will not grant the
request if you asked us not to.
If you have not selected a plan by the annuity payment starting date, Plan B
with 120 guaranteed monthly payments will be used.
If the value of the contract is less than $2,000 on the annuity payment starting
date, IDS Life may pay the accumulation value in a lump-sum.
- ---------------------------------------
DETERMINATION OF MONTHLY ANNUITY PAYMENTS FOR DEFERRED CONTRACTS
When annuity payments are to begin, IDS Life computes the first monthly variable
annuity payment on the valuation date on or right before the seventh day before
the annuity payment starting date.
IDS Life makes the computations using the table of settlement rates in your
contract unless we agree on an optional table. IDS Life uses a different table
if you elected a 3.5% assumed investment rate. We divide the amount of the first
payment by the annuity unit value to give the number of annuity units for your
contract.
IDS Life will determine each monthly payment after the first one by multiplying
the number of annuity units by the current annuity unit value. IDS Life will
compute payouts made by check on the valuation date on or right before the fifth
day before the annuity payment date. IDS Life will compute payouts made by a
transfer to another IDS fund account on the valuation date on or right before
the annuity payment date.
Here is an example: Assume the variable accumulation value on the valuation date
seven days before the annuity payment starting date was $30,000, and the plan
you selected produces an initial payment of $6 for each $1,000 of accumulation
value. Ignoring premium taxes, if any, the first payment would be $180
(30 x $6 = $180).
Now assume the annuity unit value on the valuation date seven days before the
annuity payment starting date is $1.800000. The number of annuity units for your
contract is 100 ($180 divided by $1.800000 = 100). Ordinarily, IDS Life will pay
the value of the same number of annuity units each month.
- ---------------------------------------
DETERMINATION OF MONTHLY ANNUITY PAYMENTS FOR IMMEDIATE CONTRACTS
IDS Life multiplies the number of your annuity units by the value of one unit.
IDS Life determines the value of one unit on the valuation date on or right
before the seventh day before the annuity payment is due. The following example
shows how we determine the number of your annuity units:
Assume the net purchase payment is $30,000, and the conversion factor, based on
actuarial tables and the contract you selected, is $5.50.
Assume the value of one annuity unit on the valuation date is $1.500000.
First divide the net purchase payments by $1,000: $30,000 divided by $1,000 =
$30. Next multiply the answer by the conversion factor: $30 x $5.50 = $165.
Divide the answer by the value of one unit. This gives the number of annuity
units paid out each month: $165 divided by $1.500000 = 110 units.
15
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
THE CHARGES YOU PAY
1) SALES AND ADMINISTRATIVE CHARGES
The tables below show the deductions from your purchase payments for sales and
administrative charges for single payment contracts and flexible installment
payment contracts. The net amount invested is the total purchase payments minus
the deduction for sales and administrative charges.
<TABLE>
<CAPTION>
SINGLE PAYMENT CONTRACTS, 1972 SERIES
- ------------------------------------------------------------------------------------------------
Part of Total charge Total deduction
the total Deduction Deduction for as percentage of as percentage of
purchase for sales administrative total purchase net amount
payment charge charge payment invested
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
First $1,500 13.0% 2.0% 15.0% 17.65%
Next $48,500 3.0 1.0 4.0 4.17
Over $50,000 1.5 0.5 2.0 2.04
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE INSTALLMENT PAYMENT CONTRACTS, 1972 SERIES
- -------------------------------------------------------------------------------------------------
Part of Total deduction
the total Deduction Deduction for Total charge as percentage of
purchase for sales administrative as percentage of net amount
payment charge charge total purchase payment invested
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
First $1,500 13.0% 2.0% 15.0% 17.65%
Next $48,500 2.0 2.0 4.0 4.17
Over $50,000 0.5 1.5 2.0 2.04
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
The effect of the deductions shown above is illustrated in the following table:
- -------------------------------------------------------------------------------------------
Sales and admin. Sales and admin.
Deduction for Charge as a Charge as a
$25 Monthly Total the sales percentage of percentage of
purchase purchase and admin. total purchase aggregate net
payments payments charge payments amount invested
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1 Year $ 300 $ 45 15.00% 17.65%
5 Years 1,500 225 15.00 17.65
10 Years 3,000 285 9.50 10.50
15 Years 4,500 345 7.67 8.30
20 Years 6,000 405 6.75 7.24
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Sales and admin. Sales and admin.
Deduction for Charge as a Charge as a
$100 Monthly Total the sales percentage of percentage of
purchase purchase and admin. total purchase aggregate net
payments payments charge payments amount invested
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1 Year $1,200 $ 180 15.00% 17.65%
5 Years 6,000 405 6.75 7.24
10 Years 12,000 645 5.38 5.68
15 Years 18,000 885 4.92 5.17
20 Years 24,000 1,125 4.69 4.92
- -------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1971 SERIES
- ---------------------------------------------------------------------------------------------
Part of Total charge Total deduction
the total Deduction Deduction for as percentage of as percentage of
purchase for sales administrative total purchase net amount
payment charge charge payment invested
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
First $1,000 18% 2% 20% 25.00%
Next $49,000 3 1 4 4.17
Over $50,000 1.5 .5 2 2.04
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1969 SERIES
- -------------------------------------------------------------------------------------------
Part of Total charge Total deduction
the total Deduction Deduction for as percentage of as percentage of
purchase for sales administrative total purchase net amount
payment charge charge payment invested
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
First $1,000 18% 2% 20% 25.00%
Next $49,000 2 2 4 4.17
Over $50,000 1.5 .5 2 2.04
- -------------------------------------------------------------------------------------------
</TABLE>
The table below shows the deduction from your purchase payments for sales and
administrative charges for group contracts. The net amount invested is the total
purchase payments minus the deduction for sales and administrative charges.
<TABLE>
<CAPTION>
GROUP CONTRACT - EMPLOYER PLAN
- -------------------------------------------------------------------------------------------
Part of Total charge Total deduction
the total Deduction Deduction for as percentage of as percentage of
purchase for sales administrative total purchase net amount
payment charge charge payment invested
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1st $10,000 3.75% 2.0% 5.75% 6.10%
Next $40,000 2.0 2.0 4.0 4.17
Excess over $50,000 0.5 1.5 2.0 2.04
- -------------------------------------------------------------------------------------------
</TABLE>
Under a Distribution and Services Agreement with the Fund, IDS Life is the
principal underwriter and performs all sales and administrative duties. It pays
salaries, sales commissions, legal, accounting, auditing or actuarial fees, and
death benefits under deferred variable annuity contracts. The deductions for
sales and administrative charges came to $128,315 for 1998, $146,651 for 1997
and $167,677 for 1996.
IDS Life may reduce or eliminate the sales and administrative charge but only to
the extent IDS Life anticipates that we will incur lower sales and
administrative expenses or perform fewer services. Generally, this will occur
with programs established by an employer for all employees or for all employees
in a class, under which employees do not individually enroll in the program.
2) PREMIUM TAXES
Some states may charge a premium tax in an amount of up to 3.5%. If a state
requires payment of a premium tax on your contract, IDS Life may deduct it from
your purchase payments or from your contract's accumulation value.
3) INCREASES IN LIFE EXPECTANCY AND ADMINISTRATIVE EXPENSES
IDS Life will bear any expenses that occur because of an increase in
administrative expenses, or because of an increase in the life expectancy of
people receiving variable annuity payments. But, it is not responsible for
increases in brokers' fees and transfer taxes on the purchase and sale of
assets.
For bearing this risk, IDS Life charges the Fund a fee equal to 1% of the Fund's
average daily net assets for the year. This came to $7,728,057 for 1998,
$7,467,475 for 1997 and $6,591,985 for 1996.
17
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- -----------------------------------------------------------------
If the fee is more than enough to cover the increases, IDS Life will keep the
difference. If the fee is not enough, IDS Life bears the loss.
4) CHARGE FOR INVESTMENT MANAGEMENT
For acting as investment manager, IDS Life charges the Fund a fee equal to 0.4%
of the Fund's average net assets for the year, less any brokerage credits. This
came to $3,091,389 for 1998, $2,987,154 for 1997 and $2,637,138 for 1996.
5) TAX CHARGES
IDS Life is taxed as a life insurance company under Subchapter L of the Code.
IDS Life treats the Fund as part of IDS Life for federal income tax purposes.
IDS Life must pay all taxes that come about because of the Fund. For this
reason, IDS Life can charge the Fund for tax charges. Under current federal
income tax law, no taxes are payable with respect to any income of the Fund.
Investment results credited to a contract are not taxed until you receive
annuity benefits.
- ---------------------------------------
SURRENDERING YOUR CONTRACT
You can surrender all or part of your deferred annuity contract any time before
the annuity payment starting date. Under certain contracts issued in connection
with optional retirement programs for employers of certain state supported
educational institutions, the contract holder must join in the request. There is
no surrender charge for either partial or full surrenders. You cannot surrender
the contract in whole or in part after annuity payments have started unless the
remaining payments are not dependent on life contingencies.
Immediate annuity contracts can be surrendered at any time as long as the
remaining payments are not dependent on life contingencies. See annuity payment
plans on page 14.
For a discussion of automated partial surrenders, see page 10.
There are special rules for a participant in the Texas Optional Retirement
Program (Texas ORP). The Texas ORP restricts the payment of program benefits to
participating employees prior to termination of employment. Accordingly, no
contract offered by this prospectus will be issued to fund participation in the
Texas ORP unless the purchaser instructs the company not to accept surrender of
the contract prior to termination of employment, retirement, death or total
disability of the participating employee.
Make your request to IDS Life in writing. IDS Life will cash in the number of
accumulation units for the amount you request. The units are valued at the next
accumulation unit value calculated after IDS Life receives your request in our
Minneapolis home office. You cannot surrender part of your contract if the
remaining accumulation value will be less than $20, and you cannot repay any
amount you surrender. IDS Life usually will mail a check to you within seven
days after we process your request. However, IDS Life can delay sending your
check until we are sure we have received good payment for the accumulation units
you want to surrender.
You may receive extra money if the Fund's state premium tax liability is reduced
as a result of your surrender. If it is, you will receive either the amount of
the reduction or the amount already deducted from your purchase payments for
premium taxes, whichever is less.
A surrender by a participant in certain qualified plans or programs may result
in adverse tax consequences. Consult a qualified tax advisor before requesting a
surrender.
DISTRIBUTION RESTRICTIONS. The Code imposes certain restrictions on an owner's
right to receive early distributions attributable to salary reduction
contributions from a contract purchased for a retirement plan qualified under
Section 403(b) of the Code as a TSA.
Distributions attributable to salary reduction contributions may be made from
the TSA contract only if the owner has attained age 59 1/2, has become disabled
as defined in the Code, has separated from the
18
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
service of the employer that purchased the contract, or upon the death of the
owner. Additionally, if the Owner should encounter a financial hardship (within
the meaning of the Code), he or she may receive a distribution of all contract
values except those arising from earnings on them. These restrictions apply to
amounts credited to the contract after Dec. 31, 1988. Even though a distribution
may be permitted under these rules (e.g., for hardship or after separation from
service), it may nonetheless be subject to a 10% tax (in addition to income tax)
as a premature distribution and 20% income tax withholding may be imposed (see
page 20).
This restriction on the right to receive a distribution does not affect the
availability of the amount credited to the contract as of Dec. 31, 1988, and if
the contract has a loan provision, the right to receive a loan continues to
exist. The restrictions do not apply to transfers or exchanges of contract value
within the annuity or to another registered variable annuity contract or
investment vehicle available through the employer.
- ---------------------------------------
SPECIAL RULES IF THE ANNUITANT DIES BEFORE THE ANNUITY PAYMENT STARTING DATE
Under a single payment or flexible installment deferred annuity contract, if the
annuitant dies before annuity payments begin, the beneficiary will receive the
greater of:
- - the sum of all purchase payments minus surrenders and unrepaid withdrawals; or
- - the accumulation value of the contract.
Under the group variable contract, if the participant dies before annuity
payments begin, the beneficiary will receive the greater of:
- - the sum of all contributions made by the participant less surrenders; or
- - the accumulation value of the participant's account.
IDS Life will pay this death benefit in a lump sum at the end of the valuation
period during which its death claim requirements are fulfilled, unless an
election has been made to provide an annuity payable to the participant's
beneficiary. Payments made directly to a surviving spouse (instead of being
rolled over into an IRA) may be subject to 20% income tax withholding.
- ---------------------------------------
SPECIAL FEATURES OF THE GROUP VARIABLE ANNUITY CONTRACT
MODIFICATIONS. From time to time, IDS Life may modify the group variable annuity
contract in order to conform the contract or give participants the benefit of
any federal or state law or any regulation of the U.S. Treasury Department.
Without the consent of the affected participant, no modification will affect the
amount or terms of an annuity purchased prior to the effective date of the
modification. We cannot make any modification without the contract holder's
approval prior to the fifth contract anniversary.
On or after this anniversary, IDS Life may make modifications to the contract
without the contract holder's consent. The effect of these modifications may
include the deductions from contributions for sales and administrative expense,
periodic deductions for mortality and expense assurances and investment
management, and the annuity settlement date. At least 90 days' notice of this
type of modification will be given to the contract holder. No modification made
after the fifth contract year will affect the rights of any participant who was
a participant prior to the effective date of the modification except for that
portion of the participant's contributions which exceeds twice the amount of the
first annual contribution. The amount in excess of twice the first annual
contribution will receive the benefit of the assurances given new entrants into
the plan in the year the excess is first received by IDS Life. These assurances
will continue so long as the participant continues to make such excess
contributions.
EXPERIENCE RATING. The group variable annuity contract provides for experience
19
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
rating at the discretion of IDS Life. If the charges made by IDS Life for
mortality and expense assurances exceed the expenses incurred, IDS Life may
allocate all, a portion, or none of the excess as an experience rating credit.
No experience rating credits have been paid to date. IDS Life will determine the
experience rating credit, if any, which accrues to any group variable annuity
contract annually upon each contract anniversary by IDS Life. IDS Life will
determine application of the credit accruing to any group variable annuity
contract in one of two ways:
- - by a reduction in the amount deducted from subsequent contributions; or
- - by the crediting of a number of additional accumulation units or annuity
units, as applicable, equal in value to the amount of the credit due (such
additional units shall be credited without the deduction imposed on
contributions).
ASSIGNMENT PROHIBITED. No benefit or privilege under the contract may 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 IDS Life.
SUSPENSION. IDS Life may suspend a group variable annuity contract upon at least
90 days' written notice to the contract holder if the contract holder has failed
to make any contributions during the contract year immediately preceding such
notice. A contract holder may suspend a contract upon written notice to IDS Life
at least 90 days in advance of the effective date of the suspension. Upon
suspension, IDS Life may refuse to accept further contributions. Suspension will
in no way affect the accumulation units or annuity units previously credited to
any participant.
TERMINATION OF CONTRIBUTIONS. Upon termination of contributions on behalf of a
participant for any reason prior to the retirement date, the participant may
elect to withdraw the value of, or leave his total account in force under the
contract until its value is withdrawn as a surrender, paid upon the death of the
participant, or used to provide an annuity for the participant. When a
participant's variable account is left in force under the contract, the account
will continue to reflect the net investment experience of the Fund except that
if the value of the participant's total account is less then $1,000, IDS Life
may fulfill its obligations with respect to a participant by payment of the
value in a lump sum.
- ---------------------------------------
YOUR RIGHT TO CANCEL INSTALLMENT CONTRACTS
You will receive a Statement of Charges and a Notice of Cancellation Rights
within 60 days after the contract is sent to you. You will have 45 days from the
time this notice was sent to you to cancel your installment contract. You will
receive the current accumulation value of your account plus any amounts deducted
for taxes and charges.
If you bought this annuity under an Individual Retirement Annuity program and
cancel the contract within seven days after the date of issuance, IDS Life will
refund the greater of the total amount of purchase payments, or the value of the
net amount invested, without reduction in either case for sales and contract
administrative charges and taxes.
- ---------------------------------------
WHAT ABOUT YOUR TAXES?
GROUP CONTRACT. If your plan is sponsored by a public school system or an
organization that is tax exempt pursuant to Section 501(c)(3) of the Code, then
contributions made for the purchase of an annuity contract under Section 403(b)
are excludable from your gross income. Any annual contributions that exceed the
limits on contributions to a 403(b) contract are not excluded from your gross
income.
Once you begin to receive annuity payments, you will be taxed as provided in
Section 72 of the Code. Ordinarily, this means that your total annual annuity
payments are taxed as ordinary income. If you elect to receive a lump sum
payment
20
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
rather than annuity payments, the entire amount received may be taxed as
ordinary income.
INDIVIDUAL CONTRACT. Generally, under present law, you are not taxed on any
increase in the value of the units credited to your individual annuity contract
until you receive payments. When payments from a retirement plan or contract
begin, they are taxed under Section 72 of the Code. Ordinarily, this means that
your total annual annuity payments are taxed as ordinary income. However, you
may be in a lower tax bracket after retirement due to lower income and larger
deductions. If you elect to receive a lump sum payment rather than annuity
payments, the entire amount received may be taxed as ordinary income. Amounts
received from Roth IRAs may be received tax free if you meet certain
distribution requirements.
If you surrender part or all of your annuity, you will be taxed on the payment
you receive to the extent that the value of your contract exceeds your
investment in the contract. In general, this means that your surrender payment
will be taxed as ordinary income. In addition, your regular tax may be increased
by 10% of the portion of the distribution includable in income unless the
distribution is:
- - after you reach age 59 1/2;
- - because of your death (or the death of the primary annuitant if the owner is
not an individual);
- - because you are disabled;
- - part of a series of substantially equal periodic payments over the life
expectancy of the owner (or joint life expectancies of the owner and
beneficiary); or
- - because you separate from service on account of early retirement after
reaching age 55.
These are the major exceptions to the 10% additional tax. Consult your tax
advisor before taking any action.
In general, if you receive all or part of the contract value from a qualified
annuity (but not an IRA or Roth IRA), mandatory 20% federal income tax
withholding (and possibly state income tax withholding) will be imposed at the
time the payment is made. In addition, federal and state income tax and the 10%
IRS penalty tax for early withdrawals may apply to amounts properly includable
in income. This mandatory 20% income tax withholding will not be imposed if:
- - instead of receiving the payment, you elect to have the payment rolled over
directly to an IRA or another eligible plan;
- - the payment is one of a series of substantially equal periodic payments made
at least annually, over your life or life expectancy (or joint lives or life
expectancies of you and your designated beneficiary) or made over a period of
10 years or more; or
- - the payment is a minimum distribution required under the Code.
These are the major exceptions to the mandatory 20% income tax withholding.
Payments made to a surviving spouse instead of being directly rolled over into
an IRA also may be subject to 20% income tax withholding. For taxable
distributions that are not subject to the mandatory 20% withholding, federal
income tax and possibly state income tax will be withheld from the taxable part
of your distribution unless you elect otherwise.
Unlike life insurance proceeds, the death benefit under your annuity contract
(except a Roth IRA) is not tax exempt. The gain, if any, is taxable as ordinary
income to the beneficiary in the year(s) he or she receives the payments. The
death benefit under a Roth IRA generally is not taxable as ordinary income to
the beneficiary.
IDS Life intends the contract to qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contract are to be interpreted to
ensure or maintain tax qualification, in spite of any other provisions of the
contract. IDS Life reserves the right to amend the contract to reflect any
clarifications that may be needed or are appropriate to maintain qualification
or to conform the contract to any applicable
21
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
changes in the tax qualification requirements. We will send you a copy of any
amendments.
IMPORTANT: IDS Life bases this discussion of federal tax laws upon our
understanding of these laws as they are currently interpreted. Federal tax laws
or current interpretations of them may change. For this reason and because tax
consequences are complex and highly individual and cannot always be anticipated,
you should consult a tax advisor if you have any questions about taxation of
your contract.
- ---------------------------------------
VOTING RIGHTS
The Fund grants and defines voting rights of contract holders and group plan
participants under its regulations. To the extent permitted under the 1940 Act,
IDS Life may modify these voting rights without a vote of a majority of the
outstanding voting units. Variable contract holders and group plan participants
can vote on:
- - any changes in fundamental investment restrictions;
- - the approval of and any changes to the investment management and advisory
agreements;
- - the election of the Board of Managers; and
- - the acceptance of the Fund's independent auditors.
A variable contract holder or group plan participant with accumulation units has
a number of votes equal to the number of accumulation units owned. Under a
contract where annuity payments have started, IDS Life determines the number of
votes by dividing the present value of all future annuity payments by the value
of one accumulation unit on the record date. So, there may be a gradual decline
in the number of votes to which a contract holder or group plan participant is
entitled as we continue to make annuity payments under the contract. The record
date will be set by the Board of Managers not more than 60 days before the
regular meeting or any special meeting of variable contract holders or group
plan participants. Cumulative voting is not authorized.
U.S. Bank National Association (U.S. Bank) of St. Paul, MN, as custodian for
Keogh Act plans and for the IDS Incentive and Thrift Plan, was owner of record
of 1,536,302 units of the Fund on Dec. 31, 1998, constituting 5.8% of the voting
units. U.S. Bank votes these units in accordance with instructions from the
beneficial owners. If U.S. Bank fails to receive timely instructions from a
beneficial owner, it will vote these units in the same proportion as units voted
according to received instructions.
22
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
MANAGEMENT
- -----------------------------------------------------------------
MEMBERS OF THE BOARD OF MANAGERS AND OFFICERS OF THE FUND
GUMER C. ALVERO*
MEMBER OF THE BOARD OF MANAGERS
IDS Tower 10
Minneapolis, MN
Vice President - General Manager of Variable Annuity Products Group, American
Express Financial Corporation since April 1998. Executive Assistant to
President/CEO from April 1996 to April 1998. Program Manager in Financial
Institution Group, April 1994 to April 1996.
RICHARD W. KLING*
CHAIRMAN OF THE BOARD OF MANAGERS
AND PRESIDENT
IDS Tower 10
Minneapolis, MN
Director of IDS Life Insurance Company since February 1984; President since
March 1994. Executive Vice President, Marketing and Products from January 1988
to March 1994. Senior Vice President, American Express Financial Corporation,
since 1994; Director of IDS Life Series Fund, Inc.
EDWARD LANDES
MEMBER OF THE BOARD OF MANAGERS
30 South 9th Street
Minneapolis, MN
Development consultant. Director of Endowment Development, YMCA of Metropolitan
Minneapolis since 1996. Vice President for Financial Development, YMCA of
Metropolitan Minneapolis from 1985 to 1995. Former sales manager - Supplies
Division and district manager - Data Processing Division of IBM Corporation.
Retired 1983.
CARL N. PLATOU
MEMBER OF THE BOARD OF MANAGERS
312 South 6th Street
Minneapolis, MN
President Emeritus and Chief Executive Officer, Fairview Hospital and Healthcare
Services. Director, St. Thomas University since 1990.
GORDON H. RITZ
MEMBER OF THE BOARD OF MANAGERS
404 WCCO Radio Building
Minneapolis, MN
Director, Mid-America Publishing and Atrix International, Inc. Former president,
Com Rad Broadcasting Corp. Former director, Sunstar Foods.
LORRAINE R. HART*
VICE PRESIDENT, INVESTMENTS
IDS Tower 10
Minneapolis, MN
Vice President - Insurance investments of American Express Financial Corporation
since 1989. Vice President - Investments of IDS Life since 1992.
JEFFREY S. HORTON*
VICE PRESIDENT AND TREASURER
IDS Tower 10
Minneapolis, MN
Vice President and Treasurer of IDS Life since July 1996.
TIMOTHY S. MEEHAN*
SECRETARY
IDS Tower 10
Minneapolis, MN
Secretary of American Express Financial Corporation, American Express Financial
Advisors Inc. and IDS Life Series Fund, Inc. since October 1995. Senior counsel
to American Express Financial Corporation since 1995. Counsel from 1990 to 1995.
WILLIAM A. STOLTZMANN*
GENERAL COUNSEL AND ASSISTANT SECRETARY
IDS Tower
Minneapolis, MN
Vice President and Assistant General Counsel, American Express Financial
Corporation, since November 1985, and Vice President, General Counsel and
Secretary, IDS Life, since December 1989.
PHILIP C. WENTZEL*
CONTROLLER
IDS Tower 10
Minneapolis, MN
Vice President and Controller IDS Life. Vice President - Finance, Risk
Management Products, American Express Financial Corporation.
*INTERESTED PERSON OF THE FUND BY REASON OF BEING AN EMPLOYEE OF IDS LIFE OR
AMERICAN EXPRESS FINANCIAL CORPORATION.
You vote at each regular meeting for the Fund's Board of Managers. Members who
are not salaried employees of IDS Life or one of its affiliates receive up to
$4,000 annually for serving on the Board. All officers of the Fund are salaried
employees of IDS Life or AEFC and do not receive remuneration from the Fund. The
officers and managers of the Fund aggregately hold less than 1% of the
outstanding voting units.
23
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
DIRECTORS AND OFFICERS OF IDS LIFE INSURANCE COMPANY*
- -----------------------------------------------------------------
THE DIRECTORS:
DAVID R. HUBERS
Director since September 1989; President and Chief Executive Officer, American
Express Financial Corporation, since August 1993 and Director, American Express
Financial Corporation, since January 1984. Senior Vice President, Finance and
Chief Financial Officer, American Express Financial Corporation, from January
1984 to August 1993.
RICHARD W. KLING
Director since February 1984; President since March 1994; Executive Vice
President, Marketing and Products from January 1988 to March 1994. Senior Vice
President, American Express Financial Corporation, since May 1994, Vice
President from 1988 to 1994. Director of IDS Life Series Fund, Inc. and Chairman
of the Board of Managers and President of IDS Life Variable Annuity Funds A & B.
PAUL F. KOLKMAN
Director since May 1984; Executive Vice President since March 1994; Vice
President, Finance from May 1984 to March 1994; Vice President, American Express
Financial Corporation, since January 1987. Vice President and Chief Actuary of
IDS Life Series Fund, Inc.
PAULA R. MEYER
Director and Executive Vice President, Assured Assets since June 1998. Piper
Capital Management (PCM) President from October 1997 to May 1998. PCM Director
of Marketing from June 1995 to October 1997. PCM Director of Retail Marketing
from December 1993 to June 1995.
JAMES A. MITCHELL
Chairman of the Board since March 1994; Director since July 1984.
BARRY J. MURPHY
Director and Executive Vice President, Client Service since March 1994; Senior
Vice President, American Express Financial Corporation since May 1994. Senior
Vice President, Operations, Travel Related Services (TRS), a subsidiary of
American Express Company, from July 1992 to April 1994; Vice President, TRS,
from November 1989 to July 1992.
STUART A. SEDLACEK
Director since March 1994; Vice President, American Express Financial
Corporation, since September 1988.
- ---------------------------------------
OFFICERS OTHER THAN DIRECTORS
WILLIAM A. STOLTZMANN
Vice President, General Counsel and Secretary since 1989; Vice President and
Assistant General Counsel, American Express Financial Corporation, since
November 1985. Vice President, General Counsel and Secretary, American
Enterprise Life Insurance Company, American Partners Life Insurance Company.
PHILIP C. WENTZEL
Vice President and Controller IDS Life. Vice President - Finance, Risk
Management Products, American Express Financial Corporation.
*THE ADDRESS FOR ALL OF THE DIRECTORS AND PRINCIPAL OFFICERS IS: IDS TOWER 10,
MINNEAPOLIS, MN 55440-0010.
24
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
OTHER INFORMATION
- -----------------------------------------------------------------
HISTORY
The Fund is an open-end diversified investment company as defined under the 1940
Act. It was organized as a segregated asset account by IDS Life under Minnesota
law on May 10, 1968.
IDS Life is a stock life insurance company organized under Minnesota law on Aug.
7, 1957. It conducts a conventional life insurance business in addition to its
variable annuity business.
- ---------------------------------------
ASSETS OF THE FUND
On Dec. 31, 1998, there were 13,482 outstanding contracts. The assets were
$825,088,893.
The Fund holds these assets solely for the variable contract holders. The assets
are not used to pay liabilities of any other business of IDS Life.
- ---------------------------------------
HEADQUARTERS
The corporate office of IDS Life is located in the IDS Tower in Minneapolis,
Minnesota.
- ---------------------------------------
OWNERSHIP OF IDS LIFE AND AMERICAN EXPRESS FINANCIAL CORPORATION
All of the capital stock of IDS Life is owned by AEFC. On Jan. 12, 1984,
Investors Diversified Services, Inc., of which IDS Life was a wholly owned
subsidiary, was merged into a wholly owned subsidiary of American Express
Company to form IDS Financial Services Inc. On Jan. 1, 1995, IDS Financial
Corporation's name was changed to AEFC, and IDS Financial Services Inc.'s name
was changed to American Express Financial Advisors Inc. AEFC serves as
investment advisor for the Fund. AEFC is an investment advisor for a number of
open-end investment companies and for its subsidiaries. AEFC's headquarters is
IDS Tower, Minneapolis, Minnesota.
- ---------------------------------------
OTHER AFFILIATIONS
IDS Life also distributes different variable annuity contracts not described in
this prospectus and variable life insurance policies.
The members of the Fund's Board of Managers also serve on the Board of Managers
of Fund A and on the Board of Directors of IDS Life Series Fund, Inc.
IDS Life manages Fund B, Fund A and nine mutual funds existing within the IDS
MUTUAL FUND GROUP advised by American Express Financial Corporation. These nine
mutual funds are available for purchase only through variable annuity contracts
which are distributed by IDS Life and its subsidiaries, IDS Life Insurance
Company of New York, American Enterprise Life Insurance Company, American
Partners Life Insurance Company and American Centurion Life Assurance Company.
The names of these funds are: IDS Life Capital Resource Fund, IDS Life
Aggressive Growth Fund, IDS Life International Equity Fund, IDS Life Special
Income Fund, IDS Life Managed Fund, IDS Life Moneyshare Fund, IDS Life Growth
Dimensions Fund, IDS Life Global Yield Fund and IDS Life Income Advantage Fund.
IDS Life also manages IDS Life Series Fund, Inc., which is available for
purchase only through policies distributed by IDS Life and IDS Life Insurance
Company of New York.
25
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
CUSTODIAN
Pursuant to a custodian agreement, the Fund's securities and cash are held by
American Express Trust Company, 1200 Northstar Center West, 625 Marquette
Avenue, Minneapolis, MN 55402-2307.
The custodian has entered into a sub-custodian arrangement with Morgan Stanley
Trust Company (Morgan Stanley), One Pierrepont Plaza, Brooklyn, NY 11201. As
part of this arrangement, portfolio securities purchased outside the United
States may be held in custody and deposit accounts that have been established by
Morgan Stanley with one or more domestic or foreign banks, or through the
facilities of one or more clearing agencies or central securities depositories
as may be permitted by law and by the Fund's sub-custodian agreement.
- ---------------------------------------
INSURANCE REGULATION
IDS Life is regulated by the Department of Commerce of the State of Minnesota.
From time to time, the department examines the company's liabilities and
reserves and certifies their correctness. IDS Life also is subject to insurance
laws and regulations of other states where it is licensed to do business.
- ---------------------------------------
FINANCIAL STATEMENTS
The Report of Independent Auditors and the Financial Statements, including Notes
to Financial Statements and the schedule of investments in securities, contained
in the 1998 Annual Report to IDS Life Variable Annuity Fund B contract holders,
are incorporated in this Prospectus by reference. No other portion of the Annual
Report, however, is incorporated by reference.
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 the Fund. The Fund has
no computer systems of its own but is dependent upon the systems of AEFC and
certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31,1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by June
30,1999. 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
potential materiality of any such impact is not known at this time.
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.
26
<PAGE>
IDS LIFE VARIABLE ANNUITY FUND B
- --------------------------------------------------------------------------------
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 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 puts 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 are included in the Benacquisto lawsuit, the second action includes
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 and AEFC believe they have meritorious defenses to the claims raised in
the lawsuits. The outcome of any litigation cannot be predicted with certainty.
In the opinion of management, however, the ultimate resolution of the above
lawsuits and others filed against IDS Life should not have a material adverse
effect on IDS Life's consolidated financial position.
27
<PAGE>
1 9 9 9 P R O S P E C T U S
IDS LIFE VARIABLE
ANNUITY FUND B
- ---------------------------------------------------------------
IDS LIFE INSURANCE COMPANY
IDS Tower 10
Minneapolis, Minnesota 55440-0010
---------------------
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 85
SPENCER, IA
---------------------
S-6165 J (4/99)
<PAGE>
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
IDS LIFE FINANCIAL INFORMATION
- -----------------------------------------------------------------
The financial statements shown below are those of the insurance company and not
those of any other entity. They are included for the purpose of informing the
investor as to the financial condition of the insurance company and its ability
to carry out its obligations under its variable contracts.
IDS LIFE INSURANCE COMPANY
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS DEC. 31, 1998 DEC. 31, 1997
ASSETS ($ thousands, except share amounts)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value: 1998,
$8,420,035; 1997, $9,743,410).................................... $ 7,964,114 $ 9,315,450
Available for sale, at fair value (amortized cost: 1998,
$13,344,949; 1997, $12,515,030).................................. 13,613,139 12,876,694
Mortgage loans on real estate.................................... 3,505,458 3,618,647
Policy loans..................................................... 525,431 498,874
Other investments................................................ 366,604 318,591
- -------------------------------------------------------------------------------------------------
Total investments................................................ 25,974,746 26,628,256
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents........................................ 22,453 19,686
Amounts recoverable from reinsurers.............................. 262,260 205,716
Amounts due from brokers......................................... 327 8,400
Other accounts receivable........................................ 47,963 37,895
Accrued investment income........................................ 366,574 357,390
Deferred policy acquisition costs................................ 2,496,352 2,479,577
Other assets..................................................... 30,487 22,700
Separate account assets.......................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total assets..................................................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities.................................................. $ 21,172,303 $ 22,009,747
Universal life-type insurance.................................... 3,343,671 3,280,489
Traditional life insurance....................................... 225,306 213,676
Disability income and long-term care insurance................... 660,320 533,124
Policy claims and other policyholders' funds..................... 70,309 68,345
Deferred income taxes, net....................................... 16,930 61,582
Amounts due to brokers........................................... 195,406 381,458
Other liabilities................................................ 410,285 345,383
Separate account liabilities..................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total liabilities................................................ 53,443,931 50,108,308
- -------------------------------------------------------------------------------------------------
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....................................... 288,327 290,847
Accumulated other comprehensive income, net of tax:
Net unrealized securities gains.................................. 169,584 226,359
Retained earnings................................................ 2,645,721 2,345,610
- -------------------------------------------------------------------------------------------------
Total stockholder's equity....................................... 3,106,632 2,865,816
- -------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity....................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF INCOME ($ thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Revenues:
Premiums:
Traditional life insurance....................................... $ 53,132 $ 52,473 $ 51,403
Disability income and long-term care insurance................... 176,298 154,021 131,518
- ------------------------------------------------------------------------------------------------------------
Total premiums................................................... 229,430 206,494 182,921
- ------------------------------------------------------------------------------------------------------------
Policyholder and contractholder charges.......................... 383,965 341,726 302,999
Management and other fees........................................ 401,057 340,892 271,342
Net investment income............................................ 1,986,485 1,988,389 1,965,362
Net realized gain (loss) on investments.......................... 6,902 860 (159)
- ------------------------------------------------------------------------------------------------------------
Total revenues................................................... 3,007,839 2,878,361 2,722,465
- ------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other benefits:
Traditional life insurance....................................... 29,835 28,951 26,919
Universal life-type insurance and investment contracts........... 108,349 92,814 85,017
Disability income and long-term care insurance................... 27,414 22,333 19,185
Increase in liabilities for future policy benefits:
Traditional life insurance....................................... 6,052 3,946 1,859
Disability income and long-term care insurance................... 73,305 63,631 57,230
Interest credited on universal life-type insurance and investment
contracts........................................................ 1,317,124 1,386,448 1,370,468
Amortization of deferred policy acquisition costs................ 382,642 322,731 278,605
Other insurance and operating expenses........................... 287,326 276,596 261,468
- ------------------------------------------------------------------------------------------------------------
Total benefits and expenses...................................... 2,232,047 2,197,450 2,100,751
- ------------------------------------------------------------------------------------------------------------
Income before income taxes....................................... 775,792 680,911 621,714
Income taxes..................................................... 235,681 206,664 207,138
- ------------------------------------------------------------------------------------------------------------
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-2
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY OTHER
TOTAL ADDITIONAL COMPREHENSIVE
STOCKHOLDER'S CAPITAL PAID-IN INCOME, RETAINED
THREE YEARS ENDED DEC. 31, 1998 ($ thousands) EQUITY STOCK CAPITAL NET OF TAX EARNINGS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995................................ $2,331,708 $3,000 $278,814 $ 230,129 $1,819,765
Comprehensive income:
Net income................................................ 414,576 -- -- -- 414,576
Unrealized holding losses arising during the year, net of
deferred policy acquisition costs of $10,325 and taxes of
$82,982................................................... (154,111) -- -- (154,111) --
Reclassification adjustment for losses included in net
income, net of tax of $(5,429)............................ 10,084 -- -- 10,084 --
----------- ----------
Other comprehensive loss.................................. (144,027) -- -- (144,027) --
-----------
Comprehensive income...................................... 270,549 -- -- -- --
Capital contribution from parent.......................... 4,801 -- 4,801 -- --
Other changes............................................. 2,022 -- -- -- 2,022
Cash dividends to parent.................................. (165,000) -- -- -- (165,000)
---------------------------------------------------------------
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
effect on 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
effect on 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
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Policy loan issuance, excluding universal life-type insurance.... (53,883) (54,665) (49,314)
Policy loan repayment, excluding universal life-type insurance... 57,902 46,015 41,179
Change in amounts recoverable from reinsurers.................... (56,544) (47,994) (43,335)
Change in other accounts receivable.............................. (10,068) 6,194 (4,981)
Change in accrued investment income.............................. (9,184) (14,077) 4,695
Change in deferred policy acquisition costs, net................. (10,443) (156,486) (294,755)
Change in liabilities for future policy benefits for traditional
life, disability income and long-term care insurance............. 138,826 112,915 97,479
Change in policy claims and other policyholders' funds........... 1,964 (15,289) 27,311
Change in deferred income tax provision (benefit)................ (19,122) 19,982 (65,609)
Change in other liabilities...................................... 64,902 13,305 46,724
Amortization of premium (accretion of discount), net............. 9,170 (5,649) (23,032)
Net realized (gain) loss on investments.......................... (6,902) (860) 159
Policyholder and contractholder charges, non-cash................ (172,396) (160,885) (154,286)
Other, net....................................................... 10,786 7,161 (10,816)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities.............. $ 485,119 $ 223,914 $ (14,005)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed maturities held to maturity:
Purchases........................................................ $ (1,020) $ (1,996) $ (43,751)
Maturities, sinking fund payments and calls...................... 1,162,731 686,503 759,248
Sales............................................................ 236,963 236,761 279,506
Fixed maturities available for sale:
Purchases........................................................ (4,100,238) (3,160,133) (2,299,198)
Maturities, sinking fund payments and calls...................... 2,967,311 1,206,213 1,270,240
Sales............................................................ 278,955 457,585 238,905
Other investments, excluding policy loans:
Purchases........................................................ (555,647) (524,521) (904,536)
Sales............................................................ 579,038 335,765 236,912
Change in amounts due from brokers............................... 8,073 2,647 (11,047)
Change in amounts due to brokers................................. (186,052) 119,471 140,369
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities.............. 390,114 (641,705) (333,352)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Activity related to universal life-type insurance and
investment contracts:
Considerations received.......................................... 1,873,624 2,785,758 3,567,586
Surrenders and death benefits.................................... (3,792,612) (3,736,242) (4,250,294)
Interest credited to account balances............................ 1,317,124 1,386,448 1,370,468
Universal life-type insurance policy loans:
Issuance......................................................... (97,602) (84,835) (86,501)
Repayment........................................................ 67,000 54,513 58,753
Capital transaction with parent.................................. -- 7,232 4,801
Dividends paid................................................... (240,000) (200,000) (165,000)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities........................ (872,466) 212,874 499,813
- ------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents............. 2,767 (204,917) 152,456
Cash and cash equivalents at beginning of year................... 19,686 224,603 72,147
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year......................... $ 22,453 $ 19,686 $ 224,603
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
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 material intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles 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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS
Fixed maturities that the Company has both the positive intent and the ability
to hold to maturity are classified as held to maturity and carried at amortized
cost. All other fixed maturities and all marketable equity securities are
classified as available for sale and carried at fair value. Unrealized gains and
losses on securities classified as available for sale are reported as a separate
component of other comprehensive income, net of deferred policy acquisition
costs 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.
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
F-5
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
experience, expected future principal and interest payments, estimated
collateral values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the reserve for
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 purchases and writes 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. Gains or losses on
index options that do not qualify as hedges are marked to market through the
income statement.
The Company also uses index options to manage the risks related to a certain
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.
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.
Supplementary information to the consolidated statements of cash flows for the
years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
CASH PAID DURING THE YEAR FOR:
Income taxes....................... $215,003 $174,472 $317,283
Interest on borrowings............. 14,529 8,213 4,119
- -----------------------------------------------------------------
</TABLE>
RECOGNITION OF PROFITS ON ANNUITY CONTRACTS AND INSURANCE POLICIES
Profits on fixed deferred annuities are recognized by the Company over the lives
of the contracts, using primarily the interest method. Profits represent the
excess of investment income earned from investment of contract considerations
over interest credited to contract owners and other expenses.
F-6
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
LIABILITIES FOR FUTURE POLICY BENEFITS
Liabilities for universal life-type insurance and deferred annuities are
accumulation values.
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 6% to 8%.
REINSURANCE
The maximum amount of life insurance risk retained by the Company on any one
life is $750 of life benefit plus $50 of accidental death benefits. The maximum
amount of life insurance risk retained on any joint-life
F-7
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
combination is $1,500. The excesses are reinsured with other life insurance
companies, primarily on a yearly renewable term basis. Long-term care policies
are primarily reinsured on a coinsurance basis. Beginning in 1998, the Company
retains all disability income and waiver of premium 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, 1998 and 1997 are $26,291 payable
to and $12,061, receivable from, 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.
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
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires the reporting and display of
comprehensive income and its components. Comprehensive income is defined as the
aggregate change in stockholder's equity excluding changes in ownership
interests. For the Company, it is net income and the unrealized gains or losses
on available-for-sale securities, net of the effect on deferred policy
acquisition costs, taxes and reclassification adjustment.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use." The SOP, which is effective
January 1, 1999, 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 will be capitalized by AEFC. As a
result, the new rule will not have a material impact on the Company's results of
operations or financial condition.
In December 1997, the AICPA issued 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 will adopt the SOP on January 1, 1999. The Company has historically
carried a balance
F-8
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in other liabilities on the balance sheet for potential guaranty fund assessment
exposure. Adoption of the SOP will 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, 2000. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation.
Earlier application of all of the provisions of this Statement is encouraged,
but it is permitted only as of the beginning of any fiscal quarter that begins
after issuance of the Statement. This Statement cannot be applied retroactively.
The ultimate financial impact of the new rule will be measured based on the
derivatives in place at adoption and cannot be estimated at this time.
RECLASSIFICATION
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
presentation.
- --------------------------------------------------------------------------------
2. INVESTMENTS
Fair values of investments in fixed maturities represent quoted market prices
and estimated values when quoted prices are not available. Estimated values are
determined by established procedures involving, among other things, review of
market indices, price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial files.
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.............. 9,683 491 -- 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 $483,161 $ 27,239 $ 8,420,035
- ----------------------------------------------------------------------------------------------------
</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........... $ 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>
F-9
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
The amortized cost, gross unrealized gains and losses and fair values of
investmentsin fixed maturities and equity securities at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
HELD TO MATURITY COST GAINS LOSSES FAIR VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 41,932 $ 2,949 $ -- $ 44,881
State and municipal obligations.............. 9,684 568 -- 10,252
Corporate bonds and obligations.............. 7,280,646 415,700 9,322 7,687,024
Mortgage-backed securities................... 1,983,188 25,976 7,911 2,001,253
- -----------------------------------------------------------------------------------------------------
$9,315,450 $445,193 $17,233 $ 9,743,410
- -----------------------------------------------------------------------------------------------------
</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........... $ 65,291 $ 4,154 $ -- $ 69,445
State and municipal obligations.............. 11,045 1,348 -- 12,393
Corporate bonds and obligations.............. 5,308,129 232,761 30,198 5,510,692
Mortgage-backed securities................... 7,130,565 160,478 6,879 7,284,164
- -----------------------------------------------------------------------------------------------------
Total fixed maturities....................... 12,515,030 398,741 37,077 12,876,694
Equity securities............................ 3,000 361 -- 3,361
- -----------------------------------------------------------------------------------------------------
$12,518,030 $399,102 $37,077 $ 12,880,055
- -----------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of investments in fixed maturities at December
31, 1998 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................. $ 354,296 $ 359,020
Due from one to five years.............. 2,111,369 2,249,847
Due from five to ten years.............. 3,012,227 3,189,789
Due in more than ten years.............. 877,155 982,006
Mortgage-backed securities.............. 1,609,067 1,639,373
- ------------------------------------------------------------------
$7,964,114 $ 8,420,035
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
<S> <C> <C>
- ------------------------------------------------------------------
Due in one year or less................. $ 102,463 $ 104,475
Due from one to five years.............. 682,336 725,859
Due from five to ten years.............. 3,904,326 4,044,378
Due in more than ten years.............. 2,718,659 2,654,382
Mortgage-backed securities.............. 5,937,165 6,084,045
- ------------------------------------------------------------------
$13,344,949 $13,613,139
- ------------------------------------------------------------------
</TABLE>
During the years ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $230,036,
$229,848 and $277,527, 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 1998 with proceeds of
$278,955 and gross realized gains and losses of $15,658 and $22,102,
respectively. Fixed maturities
F-10
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
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. Fixed maturities
available for sale were sold during 1996 with proceeds of $238,905 and gross
realized gains and losses of $571 and $16,084, respectively.
At December 31, 1998, bonds carried at $14,302 were on deposit with various
states as required by law.
At December 31, 1998, investments in fixed maturities comprised 83 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 $3.6
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 1998 1997
<S> <C> <C>
- ------------------------------------------------------------------
Aaa/AAA................................. $ 7,629,628 $ 9,195,619
Aaa/AA.................................. 2,277 --
Aa/AA................................... 308,053 232,451
Aa/A.................................... 301,325 246,792
A/A..................................... 2,525,283 2,787,936
A/BBB................................... 1,148,736 1,200,345
Baa/BBB................................. 6,237,014 5,226,616
Baa/BB.................................. 492,696 475,084
Below investment grade.................. 2,664,051 2,465,637
- ------------------------------------------------------------------
$21,309,063 $21,830,480
- ------------------------------------------------------------------
</TABLE>
At December 31, 1998, 93 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, 1998, approximately 13 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, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
REGION SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
East North Central............ $ 750,705 $ 16,393 $ 748,372 $ 32,462
West North Central............ 491,006 81,648 456,934 14,340
South Atlantic................ 839,233 21,020 922,172 14,619
Middle Atlantic............... 476,448 6,169 545,601 15,507
New England................... 263,761 2,824 316,250 2,136
Pacific....................... 195,851 16,946 184,917 3,204
West South Central............ 136,841 1,412 125,227 --
East South Central............ 46,029 -- 60,274 --
Mountain...................... 345,379 8,473 297,545 28,717
- --------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- --------------------------------------------------------------------------------------
$3,505,458 $154,885 $3,618,647 $110,985
- --------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
PROPERTY TYPE SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Department/retail stores...... $ 1,139,349 $ 59,305 $ 1,189,203 $ 27,314
Apartments.................... 960,808 9,272 1,089,127 16,576
Office buildings.............. 783,576 50,450 716,729 34,546
Industrial buildings.......... 298,549 13,263 295,889 21,200
Hotels/motels................. 109,185 14,122 101,052 --
Medical buildings............. 124,369 -- 99,979 9,748
Nursing/retirement homes...... 46,696 -- 72,359 --
Mixed Use..................... 65,151 -- 71,007 --
Other......................... 17,570 8,473 21,947 1,601
- -----------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- -----------------------------------------------------------------------------------------
$ 3,505,458 $ 154,885 $ 3,618,647 $ 110,985
- -----------------------------------------------------------------------------------------
</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, 1998 and 1997, the Company's recorded investment in impaired
loans was $24,941 and $45,714, respectively, with allowances of $6,662 and
$9,812, respectively. During 1998 and 1997, the average recorded investment in
impaired loans was $37,873 and $61,870, respectively.
The Company recognized $1,809, $2,981and $4,889 of interest income related to
impaired loans for the years ended December 31, 1998, 1997 and 1996
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Balance, January 1................. $38,645 $37,495 $37,340
Provision for investment losses.... 7,582 8,801 10,005
Loan payoffs....................... (800) (3,851) (4,700)
Foreclosures and writeoffs......... (5,632) (3,800) (5,150)
- --------------------------------------------------------------
Balance, December 31............... $39,795 $38,645 $37,495
- --------------------------------------------------------------
</TABLE>
At December 31, 1998, the Company had commitments to purchase investments other
than mortgage loans for $223,011. Commitments to purchase investments are
made in the ordinary course of business. The fair value of these commitments is
$nil.
Net investment income for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Interest on fixed maturities....... $1,676,984 $1,692,481 $1,666,929
Interest on mortgage loans......... 301,253 305,742 283,830
Other investment income............ 43,518 25,089 43,283
Interest on cash equivalents....... 5,486 5,914 5,754
- -----------------------------------------------------------------------
2,027,241 2,029,226 1,999,796
Less investment expenses........... 40,756 40,837 34,434
- -----------------------------------------------------------------------
$1,986,485 $1,988,389 $1,965,362
- -----------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Fixed maturities................... $12,084 $16,115 $ 8,736
Mortgage loans..................... (5,933) (6,424) (8,745)
Other investments.................. 751 (8,831) (150)
- --------------------------------------------------------------
$ 6,902 $ 860 $ (159)
- --------------------------------------------------------------
</TABLE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------
Fixed maturities available for sale..... $(93,474) $ 223,441 $(231,853)
Equity securities....................... (203) 53 (52)
- ------------------------------------------------------------------------
</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>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
Federal income taxes:
Current............................ $244,946 $176,879 $260,357
Deferred........................... (16,602) 19,982 (65,609)
- -----------------------------------------------------------------
228,344 196,861 194,748
State income taxes-current......... 7,337 9,803 12,390
- -----------------------------------------------------------------
Income tax expense................. $235,681 $206,664 $207,138
- -----------------------------------------------------------------
</TABLE>
Increases (decreases) to the federal tax provision applicable to pretax income
based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
PROVISION RATE PROVISION RATE PROVISION RATE
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes based
on the statutory rate....................................... $271,527 35.0% $238,319 35.0% $217,600 35.0%
(Decreases) increases are attributable to:
Tax-excluded interest and dividend income................... (12,289) (1.6) (10,294) (1.5) (9,636) (1.5)
State taxes, net of federal benefit......................... 4,769 .6 6,372 .9 8,053 1.3
Affordable housing credits.................................. (19,688) (2.5) (20,705) (3.0) (5,090) (.8)
Other, net.................................................. (8,638) (1.1) (7,028) (1.0) (3,789) (.7)
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes........................................ $235,681 30.4% $206,664 30.4% $207,138 33.3%
- --------------------------------------------------------------------------------------------------------------------------
</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, 1998, the Company had a policyholders' surplus
account balance of $20,114. The policyholders' surplus account is only
F-13
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
3. INCOME TAXES (CONTINUED)
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>
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------
Deferred tax assets:
Policy reserves........................................ $756,769 $748,204
Life insurance guaranty fund assessment reserve........ 15,289 20,101
Other.................................................. 4,253 9,589
- ---------------------------------------------------------------------------
Total deferred tax assets.............................. 776,311 777,894
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs...................... 698,471 700,032
Unrealized gain on investments......................... 91,315 121,885
Investments, other..................................... 3,455 17,559
- ---------------------------------------------------------------------------
Total deferred tax liabilities......................... 793,241 839,476
- ---------------------------------------------------------------------------
Net deferred tax liabilities........................... $ 16,930 $ 61,582
- ---------------------------------------------------------------------------
</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 aggregated $1,598,203 as of December 31, 1998 and $1,468,677
as of December 31, 1997 (see Note 3 with respect to the income tax effect of
certain distributions). In addition, any dividend distributions in 1999 in
excess of approximately $353,933 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>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Statutory net income............... $ 429,903 $ 379,615 $ 365,585
Statutory capital and surplus...... 1,883,405 1,765,290 1,565,082
- -----------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
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, 1998 and 1997. 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, $103 and $780 in 1998, 1997
and 1996, 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 $211, $201 and $174 in 1998, 1997 and 1996, 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 1998, 1997 and 1996 were $1,503, $1,245 and $990,
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
1998, 1997 and 1996 was $1,352, $1,330 and $1,449, respectively.
Charges by AEFC for use of joint facilities, technology support, marketing
services and other services aggregated $411,337, $414,155 and $397,362 for 1998,
1997 and 1996, respectively. Certain of these costs are included in deferred
policy acquisition costs.
- --------------------------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1998, 1997 and 1996, traditional life insurance and universal
life-type insurance in force aggregated $81,074,928, $74,730,720 and
$67,274,354, respectively, of which $4,912,313, $4,351,904 and $3,875,921 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 $66,378,
$60,495 and $48,250 and reinsurance recovered from reinsurers amounted to
$20,982, $19,042, and $15,612 for the years ended December 31, 1998, 1997 and
1996, respectively. Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company, its parent and its subsidiaries conduct
business involving insurers' sales practices, alleged agent misconduct, failure
to properly supervise agents, and other matters. The Company has been named as a
defendant in three of these types of actions.
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from the Company and its subsidiaries. The
complaints put at issue various alleged sales practices and misrepresentations,
alleged breaches of fiduciary duties and alleged violations of consumer fraud
statutes. The Company and its subsidiaries believe they have meritorious
defenses to the claims raised in these lawsuits.
The outcome of any litigation cannot be predicted with certainty. In the opinion
of
F-15
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
management, however, the ultimate resolution of these lawsuits, taken in the
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 auditing the Company's returns 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 $100,000.
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 $nil at December 31, 1998 and 1997.
- --------------------------------------------------------------------------------
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-16
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
TOTAL
DECEMBER 31, 1998 NOTIONAL CARRYING FAIR CREDIT
ASSETS: 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>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NOTIONAL CARRYING FAIR TOTAL CREDIT
ASSETS: AMOUNT AMOUNT VALUE EXPOSURE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Assets:
Interest rate caps............ $4,600,000 $24,963 $ 15,665 $15,665
Interest rate floors.......... 1,000,000 1,561 4,551 4,551
Options purchased/written..... 279,737 9,808 10,449 10,449
Liabilities:
Options written............... 7,373 (89) 114 --
Off balance sheet:
Interest rate swaps........... 1,267,000 -- (45,799) --
- ---------------------------------------------------------------------------------
$36,243 $ (15,020) $30,655
- ---------------------------------------------------------------------------------
</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 1999 to 2003. The put and call options expire on various
dates from 1999 to 2005.
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 is also using 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 will be
accrued and reported in accrued investment income and other liabilities, as
appropriate, and management and other fees.
The Company offers a certain 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.
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 changing economic
conditions in the equity market. The Company entered into index option
F-17
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
collars (combination of puts and calls) to hedge anticipated fee income for 1998
and 1999 related to separate accounts and mutual funds which invest in equity
securities. Testing has demonstrated the impact of these instruments on the
income statement closely correlates with the amount of fee income the Company
realizes. In the event that testing demonstrates that this correlation no longer
exists, or in the event the Company disposes of the index options collars, the
instruments will be marked-to-market through the income statement. At December
31, 1998 deferred losses on purchased put and written call index options were
$2,933 and $7,435, respectively. At December 31, 1997 deferred losses on
purchased put index options were $2,428 and deferred gains on written call index
options were $5,275.
- --------------------------------------------------------------------------------
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>
1998 1997
- ----------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
FINANCIAL ASSETS
Investments:
Fixed maturities (Note 2):
Held to maturity.............. $ 7,964,114 $ 8,420,035 $ 9,315,450 $ 9,743,410
Available for sale............ 13,613,139 13,613,139 12,876,694 12,876,694
Mortgage loans on real estate
(Note 2)...................... 3,505,458 3,745,617 3,618,647 3,808,570
Other:
Equity securities (Note 2).... 3,158 3,158 3,361 3,361
Derivative financial
instruments (Note 8).......... 41,161 47,680 36,332 30,665
Other......................... 28,872 28,872 82,347 85,383
Cash and cash equivalents
(Note 1)...................... 22,453 22,453 19,686 19,686
Separate account assets
(Note 1)...................... 27,349,401 27,349,401 23,214,504 23,214,504
FINANCIAL LIABILITIES
Future policy benefits for
fixed annuities............... $19,855,203 $19,144,838 $20,731,052 $19,882,302
Derivative financial
instruments (Note 8).......... 10,526 84,539 89 45,685
Separate account
liabilities................... 25,005,732 24,179,115 21,488,282 20,707,620
- ----------------------------------------------------------------------------------
</TABLE>
At December 31, 1998 and 1997, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related contracts
carried at $1,226,985 and $1,185,155, respectively, and policy loans of $90,115
and $93,540, respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1998 and 1997. The fair value of
deferred 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 1998 and 1997.
At December 31, 1998 and 1997, 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 $2,343,669 and
$1,726,222, respectively.
F-18
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- -----------------------------------------------------------------
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, 1998 and 1997, 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, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of IDS Life Insurance
Company at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
February 4, 1999
F-19
<PAGE>
PART II. OTHER INFORMATION
Item 1. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
List of financial statements filed as part of this Post-Effective Amendment to
the Registration Statement:
Financial statements included in the prospectus, Part I:
IDS Life Insurance Company:
Consolidated Balance Sheets as of December 31, 1998, and December 31, 1997.
Consolidated Statements of Income for the years ended December 31, 1998,
1997, and 1996.
Consolidated Statements of Stockholder's Equity, three years ended December
31, 1998.
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996.
Notes to Consolidated Financial Statements.
Report of Independent Auditors dated February 4, 1999.
(b) Exhibits
1. Resolution of the Executive Committee of the Board of Directors of
Investors Syndicate Life Insurance and Annuity Company dated May 10, 1968,
filed as Exhibit 1 to Registrant's Registration Statement No. 2-29358 filed
on June 14, 1968, and refiled electronically April 27, 1994 as Exhibit 1
with Post-Effective Amendment No. 55, is incorporated herein by reference.
2. Amended and Restated Regulations of IDS Life Variable Annuity Fund B, dated
June 22, 1979, filed as Exhibit 2 to Registrant's Post-Effective Amendment
No. 32 to Registration Statement No. 2-29358 filed on December 27, 1979,
and refiled electronically on April 11, 1995 are incorporated herein by
reference.
3. Not applicable.
4. Contracts filed as Exhibit 4 to Registrant's Post-Effective Amendment No.
32 to Registration Statement No. 2-29358 filed on December 27, 1979, are
incorporated herein by reference.
<PAGE>
5.(a)Investment Advisory Agreement between IDS Life Insurance Company and
IDS/American Express dated January 12, 1984, filed as Exhibit 5(a) to
Registrant's Post-Effective Amendment No. 43, and refiled electronically
April 27, 1994 as Exhibit 5(a) with Post-Effective Amendment No. 55, is
incorporated herein by reference.
5.(b)Investment Management and Advisory Agreement between IDS Life Insurance
Company and IDS Life Variable Annuity Fund B dated January 12, 1984, filed
as Exhibit 5(b) to Registrant's Post-Effective Amendment No. 43, and
refiled electronically April 27, 1994 as Exhibit 5(b) with Post-Effective
Amendment No. 55, is incorporated herein by reference.
6. Distribution and Services Agreement between Registrant and IDS Life
Insurance Company, dated January 12, 1984, filed as Exhibit 6 to
Registrant's Post-Effective Amendment No. 43, and refiled electronically
April 27, 1994 as Exhibit 6 with Post-Effective Amendment No. 55, is
incorporated herein by reference.
7. None.
8.(a)Custodian Agreement between Registrant, IDS Life Insurance Company and
American Express Trust Company, dated July 12, 1990, filed as Exhibit 8(a)
to Registrant's Post-Effective Amendment No. 52 to this Registration
Statement, filed April 15, 1991, and refiled electronically April 27, 1994
as Exhibit 8(a) with Post-Effective Amendment No. 55, is incorporated
herein by reference.
8.(b)Custody Agreement between Morgan Stanley Trust Company and IDS Bank &
Trust Company, dated May 1993, filed electronically on April 11, 1995 as
Exhibit No. 8(b) to Post-Effective Amendment No. 57 is incorporated herein
by reference.
9. Not applicable.
10. Opinion of counsel and consent to its use as to the legality of the
securities registered is filed electronically herewith.
11. Consent of Independent Auditors, filed electronically herewith.
<PAGE>
Exhibits 12 through 15: not applicable.
16. Financial Data Schedules, filed electronically herewith.
17.(a) IDS Life Insurance Company Power of Attorney to sign Amendments to this
Registration Statement dated August 19, 1997, is incorporated by reference
to Exhibit 17(a) to Registrant's Post Effective Amendment No.60 filed on or
about May 1, 1998.
17.(b) IDS Life Variable Annuity Fund B Board of Managers Power of Attorney to
sign Amendments to this Registration Statement dated March 25, 1997, filed
electronically as Exhibit 17(b) to Registrant's Post-Effective Amendment
No. 59 is incorporated by reference.
17.(c) IDS Life Insurance Company Power of Attorney to sign Amendments to this
Registration Statement dated April 9, 1998 is incorporated by reference to
Exhibit 17(c) to Registrant's Post Effective Amendment No.60 filed on or
about May 1, 1998.
17.(d) IDS Life Variable Annuity Fund B Power of Attorney dated April 19, 1999
is filed electronically herewith as Exhibit 17(d).
Item 2. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Both the Registrant and IDS Life Variable Annuity Fund A are separate
accounts of IDS Life. Consequently, the securities and funds of the Registrant
and Fund A are technically those of IDS Life, even though the securities and
Funds of the two Funds are maintained as separate accounts under Minnesota Law
pursuant to a safekeeping agreement with American Express Trust Company. As
separate Accounts, Minnesota Law provides that the assets of the Funds are not
chargeable with liabilities arising out of any other business of IDS Life and
are held for the exclusive benefit of owners of variable annuity contracts based
on the Funds.
Item 3. NUMBER OF HOLDERS OF SECURITIES
Number of Record Holders
Title of Class as of March 31, 1999
Variable Annuities 13,210
<PAGE>
Item 4. INDEMNIFICATION
The Regulations of the Registrant provide that each member of the Board of
Managers and each Officer of the Fund shall be indemnified by IDS Life, of which
the Fund is a separate account, for reasonable costs and expenses actually and
necessarily incurred in defense of any action, suit or proceedings where the
defendant is a party by reason of being a Manager or Officer. No indemnification
will be forthcoming in the event of an adjudication of willful misfeasance, bad
faith, gross negligence or reckless disregard by the Officer or Manager of the
duties of his office.
In the absence of an adjudication expressly absolving the Office or Manager of
the afore-detailed wrongful conduct, indemnification may still be advanced
should 2/3 of the members of the Board of Directors of IDS Life who were not
involved in the processing resolve there was no instance of such wrongful
conduct. In the instance of such a resolution, the indemnification claim still
must be found to be reasonable in amount and proper in presentation by
independent counsel of IDS Life. Should any proceeding be settled,
indemnification shall not exceed the costs, fees and expenses which would have
been incurred had the proceeding been litigated. The payment of indemnification
by IDS Life will not prevent a variable contract holder from challenging the
payment by appropriate legal action on the basis that the payment was improper
because of willful misfeasance, bad faith, gross negligence or reckless
disregard by an Officer or Manager of his duties.
The By-Laws of the Registrant's investment management underwriter, IDS
Life, also contains an indemnification clause. The clause provides that IDS Life
shall indemnify any person who was or is a party or is threatened to be made a
party, by reason of the fact that he is or was a Manager of Variable Annuity
Funds A and B, director, officer, employee or agent of IDS Life, or is or was
serving at the direction of IDS Life as a Manager of Variable Annuity Funds A
and B, Director, Officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, to any threatened, pending or
completed action, suit or proceeding, wherever brought, to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended, provided that this Article shall not indemnify or protect any such
Manager of Variable Annuity Funds A and B, Director, Officer, employee or agent
against any liability to IDS Life 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.
At the time of the filing of the Registration Statement of the Registrant, IDS
Life included the following undertaking with regard to the foregoing
indemnification procedures:
"Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provision, or otherwise ISL [sic ____. IDS Life] 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 of ISL
[sic ____. IDS Life] 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, ISL [sic ____. IDS Life] 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>
<TABLE>
<CAPTION>
Item 5. Business and Other Connections of Investment Adviser (American Express Financial Corporation)
Directors and officers of American Express Financial Corporation who are
directors and/or officers of one or more other companies:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Name and Title Other company(s) Address Title within other
company(s)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ronald G. Abrahamson, American Express Client IDS Tower 10 Director and Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Alger, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter J. Anderson, Advisory Capital IDS Tower 10 Director
Director and Senior Vice Strategies Group Inc. Minneapolis, MN 55440
President
American Express Asset Director and Chairman of
Management Group Inc. the Board
American Express Asset Director, Chairman of the
Management International, Board and Executive Vice
Inc. President
American Express Financial Senior Vice President
Advisors Inc.
IDS Capital Holdings Inc. Director and President
IDS Futures Corporation Director
NCM Capital Management 2 Mutual Plaza Director
Group, Inc. 501 Willard Street
Durham, NC 27701
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ward D. Armstrong, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
American Express Trust Director and Chairman of
Company the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John M. Baker, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Senior Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Joseph M. Barsky III, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Timothy V. Bechtold, American Centurion Life IDS Tower 10 Director and President
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Life Insurance Company Executive Vice President
IDS Life Insurance Company P.O. Box 5144 Director and President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John C. Boeder, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas W. Brewers, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Karl J. Breyer, American Express Financial IDS Tower 10 Senior Vice President
Director, Corporate Senior Advisors Inc. Minneapolis, MN 55440
Vice President
American Express Financial Director
Advisors Japan Inc.
American Express Minnesota Director
Foundation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Cynthia M. Carlson, American Enterprise IDS Tower 10 Director, President and
Vice President Investment Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Vice President
Advisors Inc.
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mark W. Carter, American Express Financial IDS Tower 10 Senior Vice President and
Senior Vice President and Advisors Inc. Minneapolis, MN 55440 Chief Marketing Officer
Chief Marketing Officer
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James E. Choat, American Centurion Life IDS Tower 10 Executive Vice President
Director and Senior Vice Assurance Company Minneapolis, MN 55440
President
American Enterprise Life Director, President and
Insurance Company Chief Executive Officer
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
IDS Life Insurance Company P.O. Box 5144 Executive Vice President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Kenneth J. Ciak, AMEX Assurance Company IDS Tower 10 Director and President
Vice President and General Minneapolis, MN 55440
Manager
American Express Financial Vice President and General
Advisors Inc. Manager
IDS Property Casualty 1 WEG Blvd. Director and President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul A. Connolly, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
Colleen Curran, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
American Express Service Vice President and Chief
Corporation Legal Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Luz Maria Davis American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas K. Dunning, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon L. Eid, American Express Financial IDS Tower 10 Senior Vice President,
Director, Senior Vice Advisors Inc. Minneapolis, MN 55440 General Counsel and Chief
President, General Counsel Compliance Officer
and Chief Compliance Officer
American Express Financial Vice President and Chief
Advisors Japan Inc. Compliance Officer
American Express Insurance Director and Vice President
Agency of Arizona Inc.
American Express Insurance Director and Vice President
Agency of Idaho Inc.
American Express Insurance Director and Vice President
Agency of Nevada Inc.
American Express Insurance Director and Vice President
Agency of Oregon Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Director and Vice President
Alabama Inc.
IDS Insurance Agency of Director and Vice President
Arkansas Inc.
IDS Insurance Agency of Director and Vice President
Massachusetts Inc.
IDS Insurance Agency of Director and Vice President
New Mexico Inc.
IDS Insurance Agency of Director and Vice President
North Carolina Inc.
IDS Insurance Agency of Director and Vice President
Ohio Inc.
IDS Insurance Agency of Director and Vice President
Wyoming Inc.
IDS Real Estate Services, Vice President
Inc.
Investors Syndicate Director
Development Corp.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Robert M. Elconin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon M. Fines, American Express Asset IDS Tower 10 Senior Vice President and
Vice President Management Group Inc. Minneapolis, MN 55440 Chief Investment Officer
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas L. Forsberg, American Centurion Life IDS Tower 10 Director
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
American Express Financial Director, President and
Advisors Japan Inc. Chief Executive Officer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey P. Fox, American Enterprise Life IDS Tower 10 Vice President and
Vice President and Corporate Insurance Company Minneapolis, MN 55440 Controller
Controller
American Express Financial Vice President and
Advisors Inc. Corporate Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Harvey Golub, American Express Company American Express Tower Chairman and Chief
Director World Financial Center Executive Officer
New York, NY 10285
American Express Travel Chairman and Chief
Related Services Company, Executive Officer
Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David A. Hammer, American Express Financial IDS Tower 10 Vice President and
Vice President and Marketing Advisors Inc. Minneapolis, MN 55440 Marketing Controller
Controller
IDS Plan Services of Director and Vice President
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lorraine R. Hart, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Centurion Life Vice President
Assurance Company
American Enterprise Life Vice President
Insurance Company
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and Vice
Insurance Company President
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Vice President
Funds A and B
Investors Syndicate Director and Vice
Development Corp. President
IDS Life Insurance Company P.O. Box 5144 Vice President
of New York Albany, NY 12205
IDS Property Casualty 1 WEG Blvd. Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Scott A. Hawkinson, American Express Financial IDS Tower 10 Vice President and
Vice President and Controller Advisors Inc. Minneapolis, MN 55440 Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Janis K. Heaney, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James G. Hirsh, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Darryl G. Horsman, American Express Trust IDS Tower 10 Director and President
Vice President Company Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey S. Horton, AMEX Assurance Company IDS Tower 10 Vice President, Treasurer
Vice President and Corporate Minneapolis, MN 55440 and Assistant Secretary
Treasurer
American Centurion Life Vice President and
Assurance Company Treasurer
American Enterprise Vice President and
Investment Services Inc. Treasurer
American Enterprise Life Vice President and
Insurance Company Treasurer
American Express Asset Vice President and
Management Group Inc. Treasurer
American Express Asset Vice President and
Management International Treasurer
Inc.
American Express Client Vice President and
Service Corporation Treasurer
American Express Vice President and
Corporation Treasurer
American Express Financial Vice President and
Advisors Inc. Treasurer
American Express Financial Vice President and
Advisors Japan Inc. Treasurer
American Express Insurance Vice President and
Agency of Arizona Inc. Treasurer
American Express Insurance Vice President and
Agency of Idaho Inc. Treasurer
American Express Insurance Vice President and
Agency of Nevada Inc. Treasurer
American Express Insurance Vice President and
Agency of Oregon Inc. Treasurer
American Express Minnesota Vice President and
Foundation Treasurer
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Kentucky Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Maryland Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Pennsylvania Inc.
American Partners Life Vice President and
Insurance Company Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President, Treasurer
and Assistant Secretary
IDS Certificate Company Vice President and
Treasurer
IDS Insurance Agency of Vice President and
Alabama Inc. Treasurer
IDS Insurance Agency of Vice President and
Arkansas Inc. Treasurer
IDS Insurance Agency of Vice President and
Massachusetts Inc. Treasurer
IDS Insurance Agency of Vice President and
New Mexico Inc. Treasurer
IDS Insurance Agency of Vice President and
North Carolina Inc. Treasurer
IDS Insurance Agency of Vice President and
Ohio Inc. Treasurer
IDS Insurance Agency of Vice President and
Wyoming Inc. Treasurer
IDS Life Insurance Company Vice President, Treasurer
and Assistant Secretary
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Treasurer
IDS Life Series Fund Inc. Vice President and
Treasurer
IDS Life Variable Annuity Vice President and
Funds A & B Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Vice President and
Corporation Treasurer
IDS Plan Services of Vice President and
California, Inc. Treasurer
IDS Real Estate Services, Vice President and
Inc. Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Vice President and
Treasurer
Investors Syndicate Vice President and
Development Corp. Treasurer
IDS Property Casualty 1 WEG Blvd. Vice President, Treasurer
Insurance Company DePere, WI 54115 and Assistant Secretary
Public Employee Payment Vice President and
Company Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David R. Hubers, AMEX Assurance Company IDS Tower 10 Director
Director, President and Chief Minneapolis, MN 55440
Executive Officer
American Express Financial Chairman, President and
Advisors Inc. Chief Executive Officer
American Express Service Director and President
Corporation
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of Director and President
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Martin G. Hurwitz, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Jensen, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Director
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Marietta L. Johns, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Nancy E. Jones, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ora J. Kaine, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Linda B. Keene, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
G. Michael Kennedy, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan D. Kinder, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Richard W. Kling, AMEX Assurance Company IDS Tower 10 Director
Director and Senior Vice Minneapolis, MN 55440
President
American Centurion Life Director and Chairman of
Assurance Company the Board
American Enterprise Life Director and Chairman of
Insurance Company the Board
American Express Director and President
Corporation
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Director and President
Agency of Arizona Inc.
American Express Insurance Director and President
Agency of Idaho Inc.
American Express Insurance Director and President
Agency of Nevada Inc.
American Express Insurance Director and President
Agency of Oregon Inc.
American Express Property Director and President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and President
Casualty Insurance Agency
of Pennsylvania Inc.
American Express Service Vice President
Corporation
American Partners Life Director and Chairman of
Insurance Company the Board
IDS Certificate Company Director and Chairman of
the Board
IDS Insurance Agency of Director and President
Alabama Inc.
IDS Insurance Agency of Director and President
Arkansas Inc.
IDS Insurance Agency of Director and President
Massachusetts Inc.
IDS Insurance Agency of Director and President
New Mexico Inc.
IDS Insurance Agency of Director and President
North Carolina Inc.
IDS Insurance Agency of Director and President
Ohio Inc.
IDS Insurance Agency of Director and President
Wyoming Inc.
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Manager, Chairman of the
Funds A and B Board and President
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
IDS Life Insurance Company P.O. Box 5144 Director and Chairman of
of New York Albany, NY 12205 the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John M. Knight American Express Financial IDS Tower 10 Vice President
Advisors Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul F. Kolkman, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Claire Kolmodin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Steve C. Kumagai, American Express Financial IDS Tower 10 Director and Senior Vice
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440 President
President
Kurt A Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lori J. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Daniel E. Laufenberg, American Express Financial IDS Tower 10 Vice President and Chief
Vice President and Chief U.S. Advisors Inc. Minneapolis, MN 55440 U.S. Economist
Economist
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter A. Lefferts, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Trust Director
Company
IDS Plan Services of Director
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Lennick, American Express Financial IDS Tower 10 Director and Executive
Director and Executive Vice Advisors Inc. Minneapolis, MN 55440 Vice President
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jonathan S. Linen, IDS Tower 10
Director Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mary J. Malevich, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Fred A. Mandell, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Sarah A. Mealey, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paula R. Meyer, American Enterprise Life IDS Tower 10 Vice President
Vice President Insurance Company Minneapolis, MN 55440
American Express Director
Corporation
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and President
Insurance Company
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President
Investors Syndicate Director, Chairman of the
Development Corporation Board and President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James A. Mitchell, AMEX Assurance Company IDS Tower 10 Director
Director and Executive Vice Minneapolis, MN 55440
President
American Enterprise Director
Investment Services Inc.
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director and Senior Vice
Corporation President
American Express Tax and Director
Business Services Inc.
IDS Certificate Company Director
IDS Life Insurance Company Director, Chairman of the
Board and Chief Executive
Officer
IDS Plan Services of Director
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William P. Miller, Advisory Capital IDS Tower 10 Vice President
Vice President and Senior Strategies Group Inc. Minneapolis, MN 55440
Portfolio Manager
American Express Asset Senior Vice President and
Management Group Inc. Chief Investment Officer
American Express Financial Vice President and Senior
Advisors Inc. Portfolio Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Pamela J. Moret, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Vice President
Company
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barry J. Murphy, American Express Client IDS Tower 10 Director and President
Director and Senior Vice Service Corporation Minneapolis, MN 55440
President
American Express Financial Senior Vice President
Advisors Inc.
IDS Life Insurance Company Director and Executive
Vice President
Mary Owens Neal, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael J. O'Keefe, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James R. Palmer, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Carla P. Pavone, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Thomas P. Perrine, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan B. Plimpton, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ronald W. Powell, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Vice President and
Corporation Assistant Secretary
IDS Plan Services of Vice President and
California, Inc. Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Punch, American Express Financial IDS Tower 10 Vice President and Project
Vice President and Project Advisors Inc. Minneapolis, MN 55440 Manager
Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Frederick C. Quirsfeld, American Express Asset IDS Tower 10 Senior Vice President and
Senior Vice President Management Group Inc. Minneapolis, MN 55440 Senior Portfolio Manager
American Express Financial Senior Vice President
Advisors Inc.
Rollyn C. Renstrom, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
ReBecca K. Roloff, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stephen W. Roszell, Advisory Capital IDS Tower 10 Director
Senior Vice President Strategies Group Inc. Minneapolis, MN 55440
American Express Asset Director, President and
Management Group Inc. Chief Executive Officer
American Express Asset Director
Management International,
Inc.
American Express Asset Director
Management Ltd.
American Express Financial Senior Vice President
Advisors Inc.
American Express Trust Director
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Erven A. Samsel, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stuart A. Sedlacek, AMEX Assurance Company IDS Tower 10 Director
Senior Vice President and Minneapolis, MN 55440
Chief Financial Officer
American Enterprise Life Executive Vice President
Insurance Company
American Express Financial Senior Vice President and
Advisors Inc. Chief Financial Officer
American Express Trust Director
Company
American Partners Life Director and Vice President
Insurance Agency
IDS Certificate Company Director and President
IDS Life Insurance Company Executive Vice President
and Controller
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Donald K. Shanks, AMEX Assurance Company IDS Tower 10 Senior Vice President
Vice President Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Property Casualty 1 WEG Blvd. Senior Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
F. Dale Simmons, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Centurion Life Vice President
Assurance Company
American Enterprise Life Vice President
Insurance
American Express Financial Vice President
Advisors Inc.
American Partners Life Vice President
Insurance Company
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Partnership Services Director and Vice President
Corporation
IDS Real Estate Services Chairman of the Board and
Inc. President
IDS Realty Corporation Director and Vice President
IDS Life Insurance Company P.O. Box 5144 Vice President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Judy P. Skoglund, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Bridget Sperl, American Express Client IDS Tower 10 Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lisa A. Steffes, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William A. Stoltzmann, American Enterprise Life IDS Tower 10 Director, Vice President,
Vice President and Assistant Insurance Company Minneapolis, MN 55440 General Counsel and
General Counsel Secretary
American Express Director, Vice President
Corporation and Secretary
American Express Financial Vice President and
Advisors Inc. Assistant General Counsel
American Partners Life Director, Vice President,
Insurance Company General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity General Counsel and
Funds A & B Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James J. Strauss, American Express Financial IDS Tower 10 Vice President
Vice President and General Advisors Inc. Minneapolis, MN 55440
Auditor
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey J. Stremcha, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
Barbara Stroup Stewart, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Wesley W. Wadman, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Asset Director and Senior Vice
Management International, President
Inc.
American Express Asset Director and Vice Chairman
Management Ltd.
American Express Financial Vice President
Advisors Inc.
IDS Fund Management Limited Director and Vice Chairman
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Norman Weaver Jr., American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Arizona Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael L. Weiner, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Sales Support Inc. Director, Vice President
and Assistant Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lawrence J. Welte, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffry F. Welter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Edwin M. Wistrand, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
American Express Financial Vice President and Chief
Advisors Japan Inc. Legal Officer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael D. Wolf, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440 and Senior Portfolio
Manager
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael R. Woodward, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
Item 6. PRINCIPAL UNDERWRITERS
(a) IDS Life is the Principal underwriter for IDS Life
Variable Annuity Fund A, IDS Life Variable Annuity
Fund B, IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ,
AND MZ, IDS Life Account RE, 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.
Item 6 (b). Principal Underwriter (IDS Life Insurance Company)
Name and Principal Business Address Position and Offices with Underwriter Positions and Offices with
Registrant
- ------------------------------------- ----------------------------------------- -------------------------------------
<S> <C> <C>
Timothy V. Bechtold Executive Vice President None
IDS Tower 10
Minneapolis, MN 55440
David J. Berry Vice President None
IDS Tower 10
Minneapolis, MN 55440
Mark W. Carter Executive Vice President None
IDS Tower 10
Minneapolis, MN 55440
Robert M. Elconin Vice President None
IDS Tower 10
Minneapolis, MN 55440
Lorraine R. Hart Vice President Vice President
IDS Tower 10
Minneapolis, MN 55440
Jeffrey S. Horton Vice President, Treasurer and Assistant Vice President and Treasurer
IDS Tower 10 Secretary
Minneapolis, MN 55440
David R. Hubers Director None
IDS Tower 10
Minneapolis, MN 55440
James M. Jensen Vice President None
IDS Tower 10
Minneapolis, MN 55440
Richard W. Kling Director and President Manager, Chairman of the Board and
IDS Tower 10 President
Minneapolis, MN 55440
Paul F. Kolkman Director and Executive Vice President None
IDS Tower 10
Minneapolis, MN 55440
Paula R. Meyer Director and Executive Vice President None
IDS Tower 10
Minneapolis, MN 55440
James A. Mitchell Director, Chairman of the Board and None
IDS Tower 10 Chief Executive Officer
Minneapolis, MN 55440
Pamela J. Moret Executive Vice President None
IDS Tower 10
Minneapolis, MN 55440
Barry J. Murphy Director and Executive Vice President None
IDS Tower 10
Minneapolis, MN 55440
James R. Palmer Vice President None
IDS Tower 10
Minneapolis, MN 55440
Stuart A. Sedlacek Director and Executive Vice President None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President and Assistant Treasurer None
IDS Tower 10
Minneapolis, MN 55440
William A. Stoltzmann Vice President, General Counsel and General Counsel and Assistant
IDS Tower 10 Secretary Secretary
Minneapolis, MN 55440
Philip C. Wentzel Vice President and Controller Controller
IDS Tower 10
Minneapolis, MN 55440
</TABLE>
<PAGE>
Item 7. LOCATION OF ACCOUNTS AND RECORDS
IDS Life Insurance Company
IDS Tower
Minneapolis, Minnesota
Item 8. MANAGEMENT SERVICES
Not Applicable.
Item 9. DISTRIBUTION EXPENSES
Not Applicable.
Item 10. UNDERTAKINGS
(a) and (b) These undertakings were filed in Registrant's
initial Registration Statement.
(c) 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
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, IDS Life Variable Annuity Fund B, certifies
that it meets all the requirements for effectiveness of this Registration
Statement pursuant to rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, in the city of Minneapolis, and
State of Minnesota on the 28th day of April, 1999.
IDS LIFE VARIABLE ANNUITY FUND B
By: /s/ Richard W. Kling**
Richard W. Kling
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on the 28th day of April, 1999.
Signature Title
/s/ Gumer C. Alvero**** Member, Board of Managers
Gumer C. Alvero
/s/ Edward Landes** Member, Board of Managers
Edward Landes
/s/ Carl N. Platou** Member, Board of Managers
Carl N. Platou
/s/ Gordon H. Ritz** Member, Board of Managers
Gordon H. Ritz
/s/ Richard W. Kling** Chairman of the Board
Richard W. Kling of Managers and President
/s/ Lorraine R. Hart** Vice President, Investments
Lorraine R. Hart
/s/ Jeffrey S. Horton** Vice President and
Jeffrey S. Horton Treasurer
/s/ Timothy S. Meehan** Secretary
Timothy S. Meehan
<PAGE>
Signature Title
/s/ William A. Stoltzmann** General Counsel and
William A. Stoltzmann Assistant Secretary
/s/ Philip C. Wentzel**** Controller
Philip C. Wentzel
**Signed pursuant to IDS Life Variable Annuity Fund B Board of Managers Power of
Attorney dated March 25, 1997 filed electronically as Exhibit 17(b) to
Registrant's Post-Effective Amendment No. 59 to this Registration Statement:
****Signed pursuant to IDS Life Variable Annuity Fund B Power of Attorney dated
April 19, 1999 filed herewith as Exhibit 17(d).
by __________________________
Mary Ellyn Minenko
<PAGE>
SIGNATURES
Pursuant to the requirements of 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 all the requirements for effectiveness of this Amendment
to its Registration Statement pursuant to rule 485(b) under the Securities Act
of 1933 and has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, in the city
of Minneapolis, and State of Minnesota on the 28th day of April, 1999.
IDS LIFE INSURANCE COMPANY
By: /s/ Richard W. Kling*
Richard W. Kling
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on the 28th day of April, 1999.
Signature Title
/s/ James A. Mitchell* Chairman of the Board
James A. Mitchell and Chief Executive Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ Jeffrey S. Horton*** Vice President and Treasurer
Jeffrey S. Horton
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/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
<PAGE>
*Signed pursuant to Power of Attorney, dated August 19, 1997 filed
electronically as Exhibit 17(a) to Registrant's Post-Effective Amendment No. 60.
***Signed pursuant to Power of Attorney dated April 9, 1998 filed electronically
as Exhibit 17(c) to Registrant's Post-Effective Amendment No. 60.
by _________________________
Mary Ellyn Minenko
<PAGE>
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 61
TO REGISTRATION STATEMENT NO. 2-47430; 2-29358
This Post-Effective Amendment comprises the following papers and documents.
The facing sheet.
Part I.
Prospectus.
Financial Statements.
Part II.
Other Information.
Signatures.
Exhibit Index
10. Opinion of counsel and consent to its use as to the legality of the
securities registered.
11. Consent of Independent Auditors.
16. Financial Data Schedules.
17.(d) IDS Life Variable Annuity Fund B Power of Attorney dated April 19, 1999.
April 28, 1999
IDS Life Variable Annuity Fund B
(Individual and Group)
IDS Tower 10
Minneapolis, Minnesota 55440-0010
Re: Registration Statement on Form N-1
File No: 2-47430 and 2-29358
Ladies and Gentlemen:
I am familiar with the establishment of IDS Life Variable Annuity Fund B
("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 on behalf of the Account with the Securities and
Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
option:
1. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
2. 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,
Mary Ellyn Minenko
Attorney at Law
(612) 671-3678
MEM/NL/dm
Consent of Independent Auditors
We consent to the use of our report dated February 4, 1999 on the consolidated
financial statements IDS Life Insurance Company and the incorporation by
reference of our report dated February 4, 1999 on the financial statements of
IDS Life Variable Fund B in Post-Effective Amendment No. 61 to the Registration
Statement (Form N-1, No. 2-47430 and 2-29358) and related Prospectus for the
registration of IDS Life Variable Annuity Fund B interests to be offered by IDS
Life Insurance Company.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
April 27, 1999
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 13613139
<DEBT-CARRYING-VALUE> 7964114
<DEBT-MARKET-VALUE> 8420035
<EQUITIES> 3158
<MORTGAGE> 3505458
<REAL-ESTATE> 109883
<TOTAL-INVEST> 25974746
<CASH> 22453
<RECOVER-REINSURE> 1756
<DEFERRED-ACQUISITION> 2496352
<TOTAL-ASSETS> 56550563
<POLICY-LOSSES> 25401600
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 70309
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 3103632
<TOTAL-LIABILITY-AND-EQUITY> 56550563
229430
<INVESTMENT-INCOME> 1986485
<INVESTMENT-GAINS> 6902
<OTHER-INCOME> 785022
<BENEFITS> 1562079
<UNDERWRITING-AMORTIZATION> 382642
<UNDERWRITING-OTHER> 287326
<INCOME-PRETAX> 775792
<INCOME-TAX> 235681
<INCOME-CONTINUING> 540111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 540111
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 27248
<PROVISION-CURRENT> 165598
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 160731
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 32115
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
IDS LIFE VARIABLE ANNUITY FUND A
IDS LIFE VARIABLE ANNUITY FUND B
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
The undersigned, as a as a member of the Board of Managers or officer of IDS
Life Variable Annuity Funds A & B, which are open-end, diversified investment
companies organized as segregated asset accounts of IDS Life Insurance Company
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, File Numbers
2-29081 and 811-1653 and 2-47430, 2-29358 and 811-1674, respectively, hereby
constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko, Eileen J.
Newhouse and Timothy S. Meehan or any one of them, as his attorney-in-fact and
agent, to sign for him in his name, place and stead any and all further filings,
applications (including applications for exemptive relief), periodic reports,
registration statements (with all exhibits and other documents required or
desirable in connection therewith), other documents, and amendments thereto and
to such filings, applications, periodic reports, registration statements, other
documents, and amendments thereto with the Securities and Exchange Commission,
and any necessary states, and grants to any or all of them the full power and
authority to do and perform each and every act required or necessary in
connection therewith.
Dated the 19th day of April, 1999.
/s/ Gumer C. Alvero
Gumer C. Alvero
/s/ Philip C. Wentzel
Philip C. Wentzel
