SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM S-1
INITIAL REGISTRATION STATEMENT
AMERICAN EXPRESS EQUITY INDEXED SAVINGS CERTIFICATES
UNDER
THE SECURITIES ACT OF 1933
IDS CERTIFICATE COMPANY
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(Exact name of registrant as specified in charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
6725
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(Primary Standard Industrial Classification Code Number)
41-6009975
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(I.R.S. Employer Identification No.)
IDS Tower 10, Minneapolis, MN 55440, (612) 671-3131
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(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Bruce A. Kohn - IDS Tower 10, Minneapolis, MN 55440-0010, (612) 671-2221
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(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Approximate date of commencement of proposed sale to the public May 31, 2000.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
<PAGE>
CONTENTS OF THIS REGISTRATION STATEMENT
Cover Page
Prospectus
Part II Information
Signatures
<PAGE>
American Express Equity Indexed Savings Certificates
Prospectus
May 31, 2000
Potential for stock market growth with safety of principal.
American Express Certificate Company (the Issuer) issues American Express Equity
Indexed Savings Certificates (the Certificates). The Issuer offers two classes
of Certificates - Full Participation Certificates and Guaranteed Yield
Certificates. You may:
o Purchase a Certificate in any amount from $2,000 through $1 million
unless you receive prior authorization from the Issuer to invest more.
o Participate in any increase of the stock market based on the Standard &
Poor's 500 Composite Stock Price Index (S&P 500) Index while protecting
your principal, up to a maximum return between 9% and 10% for a 52-week
term (see page 2).
o Decide whether to link all of your return to the index by buying a Full
Participation Certificate or whether the Issuer will guarantee part of
your return, with a reduced participation in the index, by buying a
Guaranteed Yield Certificate.
o Keep your Certificate for up to ten successive 52-week terms.
Purchasers of the Certificates or other similar certificates through some
distribution channels may be eligible for special rates. See "Initial Interest
and Participation Rates" on page 2.
Like all investment companies, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The Certificates are backed solely by the assets of the Issuer. To the extent
you link your interest to the S&P 500 Index, you might earn no interest. See
"Risk Factors" on page 2.
The Issuer is not a bank or financial institution, and the securities it offers
are not deposits or obligations of, or backed or guaranteed or endorsed by, any
bank or financial institution, nor are they insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency.
The distributor and selling dealers are not required to sell any specific amount
of securities.
Issuer:
American Express Certificate Company
200 AXP Financial Center
Minneapolis, MN 55474
800-862-7919 (toll free)
Distributor:
American Express Financial Advisors Inc.
American Express companies
<PAGE>
Initial Interest and Participation Rates
The Issuer is a face amount certificate company, a kind of investment company,
and the Certificates are face amount certificates.
The Issuer guarantees return of your principal. The interest on your Certificate
is linked to stock market performance as measured by the S&P 500 Index, based on
Tuesday closing values of the S&P 500 Index at the beginning and end of a
52-week term. The index used for the Certificates excludes dividends on the 500
stocks in the index. See "About the Certificate" for more explanation.
Here are the interest rates and market participation percentages in effect June
1, 2000:
Class of Certificate Maximum Market participation Minimum
Return percentage Interest
- --------------------- ----------- ------------------------ ---------------------
Full Participation 10% 100% None
- --------------------- ----------- ------------------------ ---------------------
Guaranteed Yield 10% 25% Currently 2.50%
- --------------------- ----------- ------------------------ ---------------------
These rates may or may not have changed when you apply to purchase your
Certificate. For your first term, if you buy a Guaranteed Yield Certificate,
your minimum interest rate will be 2.50%. Rates for later terms are set at the
discretion of the Issuer and may differ from the rates shown here.
The Issuer may offer different maximum returns, market participation percentages
and minimum interest rates for the Certificates or other similar face-amount
certificates for different distribution channels or in other circumstances. For
more information call 800-862-7919 and see "Promotions and Pricing Flexibility"
under "About the Certificates." Face-amount certificates from the Issuer and
certificates of deposit (CDs) from American Express Centurion Bank, an affiliate
of the Issuer, may be available with different rates, including high rate CDs
through Membership B@nkingsm.
Risk Factors
You should consider the following when investing in a Certificate:
To the extent you link your interest to the S&P 500 Index, you might earn no
interest. If you choose to link all of your return on your Certificate to the
S&P 500 Index, you earn interest only if the value of the S&P 500 Index is
higher on the last day of your term than it was on the first day of your term.
See "Interest" under "About the Certificate."
The Certificates are backed solely by the assets of the Issuer. Most of our
assets are debt securities and are subject to the following risks:
Interest rate risk: The price of debt securities generally falls as interest
rates increase, and rises as interest rates decrease. In general, the longer the
maturity of a bond, the greater its loss of value as interest rates increase,
and the greater its gain in value as interest rates decrease. See "How Your
Money Is Used and Protected."
Credit risk: This is the risk that the issuer of a security, or the counterparty
to a contract, will default or otherwise become unable to honor a financial
obligation (such as payments due on a bond or note). Credit ratings of the
issuers of securities in our portfolio vary. See "How Your Money Is Used and
Protected."
<PAGE>
Table of Contents
Initial Interest and Participation Rates p
Risk factors p
About the Certificates
The Issuer and You p
Read and Keep This Prospectus p
Investment Amounts p
Face Amount and Principal p
Certificate Term p
Value at Maturity p
Receiving Cash Before End of Term p
Interest p
Promotions and Pricing Flexibility p
Historical Data on the S&P 500 Index p
Calculation of Return p
About the S&P 500 Index p
Opportunities at the End of a Term p
How to Invest and Withdraw Funds p
Buying Your Certificate p
Other Full and Partial Withdrawal Policies p
Book Entry Only p
Taxes on Your Earnings p
Gifts to Minors p
How to Determine the Correct TIN p
Foreign Investors p
How Your Money Is Used and Protected p
Invested and Guaranteed by the Issuer p
Regulated by Government p
Backed by Our Investments p
Investment Policies p
How Your Money Is Managed p
Relationship Between the Issuer and
American Express Financial Corporation p
Capital Structure and Certificates Issued p
Investment Management and Services p
Distribution p
Selling Dealers p
Transfer Agent p
Employment of Other American Express Affiliates p
Directors and Officers p
Independent Auditors p
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Appendix p
Annual Financial Information p
Summary of Selected Financial Information p
Management's Discussion and Analysis of Financial
Condition and Results of Operations p
Report of Independent Auditors p
Financial Statements p
Notes to Financial Statements p
<PAGE>
About the Certificates
The Issuer and You
In this prospectus, "we," "us," "our" and "ours" refer to the Issuer and "you,"
"your" and "yours" refer to the owner of a Certificate. An investor must
purchase and hold a Certificate through a Direct Participant in the Depository
Trust Company, New York, New York ("DTC"). See "Book Entry Only."
Read and Keep This Prospectus
This prospectus describes terms and conditions of your American Express Equity
Indexed Savings Certificate. It contains facts that can help you decide if a
Certificate is the right investment for you. Read the prospectus before you
invest and keep it for future reference. No one has the authority to change the
terms and conditions of the American Express Equity Indexed Savings Certificates
as described in the prospectus, or to bind the Issuer by any statement not in
it.
Investment Amounts
You may purchase an American Express Equity Indexed Savings Certificate in any
amount from $2,000 through $1 million (unless you receive prior approval from
the Issuer to invest more) payable in U.S. currency. The Issuer will accept an
application to purchase a Certificate only from a Direct Participant in DTC. To
purchase a Certificate, you must arrange for a selling dealer to apply to
purchase the Certificate as or through a Direct Participant in DTC on your
behalf. The Issuer has complete discretion to determine whether to accept an
application and sell a Certificate. If you wish to invest more than $1 million,
you should seek prior approval from the Issuer through your selling dealer.
Face Amount and Principal
The face amount of your Certificate is the amount of your initial investment.
Your principal is the value of your Certificate at the beginning of each term.
The Issuer guarantees your principal. It consists of the amount you actually
invest plus interest credited to your account less withdrawals, penalties and
any interest paid to you in cash.
For example: Assume your initial investment (face amount) of $10,000 has earned
a return of 7.25%. The Issuer credits interest to your account at the end of the
term. You have not taken any interest as cash, or made any withdrawals. Your
principal for the next term will equal:
$10,000 Face amount (initial investment)
plus $725 Interest credited to your account at the end of
the term
minus ($0) Interest paid to you in cash
minus ($0) Withdrawals and applicable penalties
============
$10,725 Principal at the beginning of the next term
Certificate Term
Your first Certificate term is a 52-week period. It begins on the Wednesday the
Issuer accepts a selling dealer's application on your behalf and ends the
Tuesday before the 52-week anniversary of its acceptance. Initially, the Issuer
expects to accept applications for Certificates on the first Wednesday of the
month, though the Issuer in its sole discretion may accept applications on any
day. Under normal circumstances, to consider an application for acceptance on a
Wednesday, the Issuer must receive it by the preceding Tuesday. Your Certificate
will not earn any interest until the term begins. You will be notified in
advance of the end of your term. This notice will include the new maximum return
and the new market participation
<PAGE>
percentage for Certificates and the minimum interest rate for Guaranteed Yield
Certificates. We will follow your instructions on the amount to surrender, if
any. We will automatically renew the remainder of your Certificate for a new
52-week term.
Value at Maturity
Your Certificate matures after 10 terms. Then you will receive a distribution
for its value. Your Certificate term is always 52 weeks. At maturity, the value
of your Certificate will be the total of your actual investment, plus credited
interest not paid to you in cash, less any withdrawals and withdrawal penalties.
Certain other fees may apply.
Receiving Cash Before End of Term
If you need money before your Certificate term ends, you may withdraw part or
all of its value at any time, less any penalties that apply. The service
document describes procedures for withdrawing money. For conditions under which
penalties apply, see "Penalties for withdrawal during a term" and "Loss of
interest" in "Buying Your Certificate" and "Other Full and Partial Withdrawal
Policies" under "How to Invest and Withdraw Funds" below.
Interest
By choosing whether to buy a Full Participation Certificate or a Guaranteed
Yield Certificate, you choose from two types of participation interest for your
first term: 1) full participation interest (with a Full Participation
Certificate), or 2) partial participation interest together with minimum
interest (with a Guaranteed Yield Certificate). Interest earned on both of these
Certificates has an upper limit which is the maximum return explained below.
After your first term, you may transfer from a Full Participation Certificate to
a Guaranteed Yield Certificate, or from a Guaranteed Yield Certificate to a Full
Participation Certificate. Such a transfer is a purchase of a new Certificate,
and you must meet the requirements for new purchases of Certificates.
Full Participation Certificate: With this Certificate:
o you participate 100% in any percentage increase in the S&P 500 Index,
calculated as explained below under "Calculation of Return," up to the
maximum return. For the maximum return in effect on the date of this
prospectus, see "Initial Interest and Participation Rates" on page 2.
o you earn interest only if the value of the S&P 500 Index is higher on the
last day of your term than it was on the first day of your term.
o your return is linked to stock market performance.
The S&P 500 Index is frequently used to measure the relative performance of the
stock market. For a more detailed discussion of the S&P 500 Index, see "About
the S&P 500 Index."
Guaranteed Yield Certificate: This Certificate allows you to participate in a
specified part (market participation rate) of any percentage increase in the S&P
500 Index together with a rate of interest guaranteed by the Issuer in advance
for each term (minimum interest). Your return consists of two parts:
o a percentage of any percentage increase in the S&P 500 Index, calculated as
explained below under "Calculation of Return," and
o a rate of interest guaranteed by the Issuer in advance for each term.
<PAGE>
Together, they cannot exceed the maximum return. For the maximum return in
effect on the date of this prospectus, see "Initial Interest and Participation
Rates" on page 2.
The market participation rate and the minimum interest rate on the date of this
prospectus are listed on the inside front cover under "Initial Interest and
Participation Rates."
Maximum return: This is the cap, or upper limit, of your return for a
Certificate term. Your total return including both market participation and, if
you own a Guaranteed Yield Certificate, minimum interest will be limited to this
maximum return percentage. For the maximum return in effect on the date of this
prospectus, see "Initial Interest and Participation Rates" on page 2.
Determining the S&P 500 Index value: The stock market closes at 3 p.m. Central
time. The S&P 500 Index value is available at approximately 4:30 p.m. This is
the value we currently use to determine participation interest. Occasionally,
Standard & Poor's (S&P) makes minor adjustments to the closing value after 4:30
p.m., and the value we use may not be exactly the one that is published the next
business day. In the future, we may use a later time cut-off if it becomes
feasible to do so. If the stock market is not open or the S&P 500 Index is
unavailable as of the last day of your term, the preceding business day for
which a value is available will be used instead. Each Tuesday's closing value of
the S&P 500 Index is used for establishing the term start and the term end
values each week.
Earning interest: The Issuer calculates, credits and compounds participation
interest at the end of your Certificate term. Minimum interest accrues daily and
is credited and compounded at the end of your Certificate term. Minimum interest
is calculated on a 30-day month and 360-day year basis.
Rates for future periods: After the initial term, the maximum return, market
participation percentage or minimum interest rate on your Certificate may be
greater or less than those shown in the front of this prospectus. We review
rates weekly, and have complete discretion to decide what maximum return, market
participation percentage and minimum interest rate will be declared.
To find out what your Certificate's new maximum return, market participation
percentage and minimum interest rate will be for your next term, please consult
your selling dealer, or call the Issuer at the telephone numbers listed on the
back cover.
The Certificates or a similar face-amount certificate may be available through
other distributors or selling dealers with different interest rates or related
features and consequently with different returns. You may obtain information
about other such distributors or selling dealers by calling 800-437-3133.
Promotions and Pricing Flexibility
The Issuer may sponsor or participate in promotions involving the Certificates
or similar face-amount certificates and their respective terms. For example, we
may offer a different maximum return, market participation percentage and
minimum rate to new clients, to existing clients, or to individuals who purchase
or use other products or services offered by American Express Company or its
affiliates. These promotions will generally be for a specified period of time.
We also may offer a different maximum return, market participation percentage
and minimum rate based on the amount invested and geographic location.
<PAGE>
Historical Data on the S&P 500 Index
The following chart illustrates the month-end closing values of the index from
Dec. 31, 1983 through April __, 2000. The values of the S&P 500 Index are
reprinted with the permission of S&P.
S&P 500 Index values -- December 1983 to April 2000
1400
1200 Chart shows closing values of the S&P from above 100 in Dec. 1983 to
just over ________ in April 2000
1000
800
600
400
200
`83 `84 `85 `86 `87 `88 `89 `90 `91 `92 `93 `94 `95 `96 `97 `98
S&P 500 Index Average Annual Return
Beginning date Period held Average annual
Dec. 31, in years return
1989 10 ______%
1994 5 ______
1998 1 ______
The next chart illustrates, on a moving 52-week basis, the price return of the
S&P 500 Index measured for every 52-week period beginning with the period ended
Dec. 31, 1984. The price return is the percentage return for each period using
month-end closing prices of the S&P 500 Index. Dividends and other distributions
on the securities comprising the S&P 500 Index are not included in calculating
the price return.
S&P 500 Index - December 1984 to April 2000
50%
40% Chart shows 52-week Moving Price Return of the S&P from a high of
almost 50% to a low of approximately -20%
30%
Label of "Y" axis reads: 52-week return
20%
10%
0%
- -10%
- -20%
`84 `85 `86 `87 `88 `89 `90 `91 `92 `93 `94 `95 `96 `97 `98
<PAGE>
Using the same data on price returns described above, the next graph expands on
the information in the preceding chart by illustrating the distribution of all
the 52-week price returns of the S&P 500 Index beginning with the 52-week period
ending Dec. 31, 1984. The graph also shows the number of times these price
returns fell within certain ranges.
S&P 500 Index - December 1984 to April 2000
25 Chart shows the distribution of all of the 52-week price returns of
the S&P 500 from 12/31/84 through 4/ /00 with a high of just over
25 and a low between 0 and 5.
20
15 Label of "Y" axis reads: Observations
10
5
-15 -10 -5 0 5 10 15 20 25 29.9 >=30
Your interest earnings are tied to the movement of the S&P 500 Index. They will
be based on any increase in this Index as measured on the beginning and ending
date of each 52-week term. Of course, if this Index is not higher on the last
day of your term than it was on the first day, your principal will be secure but
you will earn no participation interest.
How an index has performed in the past does not indicate how the stock market or
the Certificates will perform in the future. There is no assurance that
Certificate owners will receive interest on their accounts beyond any minimum
interest selected. The index could decline.
Calculation of Return
The increase or decrease in the S&P 500 Index, as well as the actual return paid
to you, is calculated as follows:
Rate of return on S&P 500 Index
Term ending value of S&P 500 Index minus
Term beginning value of S&P 500 Index divided by
Term beginning value of S&P 500 Index equals
Rate of return on S&P 500 Index
The actual return paid to you will depend on whether you select a Full
Participation Certificate of a Guaranteed Yield Certificate.
<PAGE>
For example, assume:
Term ending value of S&P 500 Index 1,425
Term beginning value of S&P 500 Index 1,300
Maximum return 10%
Minimum return 2.50%
Guaranteed Yield Certificate participation percentages 25%
1,425 Term ending value of S&P 500 Index
minus 1,300 Term beginning value of S&P 500 Index
-------
equals 125 Difference between beginning and ending values
125 Difference between beginning and ending values
divided by 1,300 Term beginning value of S&P 500 Index
-------
equals 9.62% Percent increase -Full Participation Certificate
return
9.62% Percent increase or decrease
times 25.00% Guaranteed Yield Certificate participation
percentage
equals 2.40%
plus 2.50% 2.50% minimum interest rate
-------
equals 4.90% Guaranteed Yield Certificate return
In both cases in the example, the return would be less than the 10% maximum.
Examples:
To help you understand the way the Certificates work, here are some hypothetical
examples. The following are three different examples of market scenarios and how
they affect a Certificate's return. Assume for all examples that:
o you purchased a Certificate with a $10,000 original investment;
o the Guaranteed Yield Certificate market participation percentage is 25%;
o the minimum interest rate for Guaranteed Yield Certificates is 2.50%;
o the maximum return for Full Participation Certificates and Guaranteed Yield
Certificates is 10%.
1. If the S&P 500 Index value rises
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 8% increase in the S&P 500 Index Index 1,080
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Full Participation Certificate Guaranteed Yield Certificate
$10,000 Original investment $10,000 Original investment
+ 800 8% x $10,000 + 250 2.50%(Minimum interest rate)
x $10,000
Participation interest + 200 25% x 8% x $10,000 market
participation interest
________ ________
$10,800 Ending balance $10,450 Ending balance
(8% Total return) (4.50% Total return)
2. If the Market and the S&P 500 Index value fall
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 4% decrease in the S&P 500 Index Index 961
- --------------------------------------------------------------------------------
Full Participation Certificate Guaranteed Yield Certificate
$10,000 Original investment $10,000 Original investment
+ 0 Participation interest + 250 2.50% (Minimum interest
_________ rate) x $10,000
$10,000 Ending balance + 0 Market participation
interest
_________
(0% Total return) $10,250 Ending balance
(2.50% Total return)
<PAGE>
3. If the Market and the S&P 500 Index value rise above the maximum return
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 16% increase in the S&P 500 Index Index 1,160
- --------------------------------------------------------------------------------
Full Participation Certificate Guaranteed Yield Certificate
$10,000 Original investment $10,000 Original investment
+ 1,000 10% x $10,000 + 250 2.50% (Minimum interest
rate) x $10,000
Maximum interest + 400 25% x 16% x $10,000
market participation
_________ _________ interest
$11,000 Ending balance $10,650 Ending balance
(10% Total return) (6.50% Total return)
About the S&P 500 Index
The description in this prospectus of the S&P 500 Index, including its make-up,
method of calculation and changes in its components, are derived from publicly
available information regarding the S&P 500 Index. The Issuer does not assume
any responsibility for the accuracy or completeness of such information.
The S&P 500 Index is composed of 500 common stocks, most of which are listed on
the New York Stock Exchange. The S&P 500 Index is published by S&P and is
intended to provide an indication of the pattern of common stock movement. S&P
chooses the 500 stocks to be included in the S&P 500 Index with the aim of
achieving a distribution by broad industry groupings that approximates the
distribution of these groupings in the U.S. common stock population. Changes in
the S&P 500 Index are reported daily in the financial pages of many major
newspapers. The index used for American Express Equity Indexed Savings
Certificates excludes dividends on the 500 stocks.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies Inc. and have been licensed
for use by the Issuer. The Certificate's are not sponsored, endorsed, sold or
promoted by S&P. S&P makes no representation or warranty, express or implied, to
the owners of the Certificates or any member of the public regarding the
advisability of investing in securities generally or in the Certificates
particularly or the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to the Issuer is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index, which is determined,
composed and calculated by S&P without regard to the Issuer or the Certificates.
S&P has no obligation to take the needs of the Issuer or the owners of the
Certificates into consideration in determining, composing or calculating the S&P
500 Index. S&P is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Certificates to
be issued or in the determination or calculation of the equation by which the
Certificates are to be converted into cash. S&P has no obligation or liability
in connection with the administration, marketing or trading of the Certificates.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500 Index
or any data included therein and S&P shall have no liability for any errors,
omissions, or interruptions therein. S&P makes no warranty, express or implied,
as to the results to be obtained by the Issuer, owners of the Certificates, or
any person or entity from the use of the S&P 500 Index or any data included
therein. S&P makes no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 Index or any data included therein. Without limiting any
of the foregoing, in no event shall S&P have any liability for any special,
punitive, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.
If for any reason the S&P 500 Index were to become unavailable or not reasonably
feasible to use, we would use a comparable stock market index for determining
participation interest. If this were to occur, we would provide the selling
dealer through which you hold your Certificate with a notice to pass on to you
by a practical means such as correspondence (which may be electronic if you have
so agreed) or a quarterly account statement. The notice would indicate the
comparable index and give you the option to withdraw your principal without an
early withdrawal penalty. If you chose early withdrawal, you would lose any
interest accrued during the term.
<PAGE>
Opportunities at the End of a Term
When your Certificate term ends, you may withdraw part or all of your money
without a withdrawal penalty or loss of interest. The remainder, if any, of your
Certificate will automatically renew for a new 52-week term. When your next term
starts, you won't know your earned interest on the term just ended.
How to Invest and Withdraw Funds
Buying Your Certificate
You may apply to purchase a Certificate only through the distributor or a
selling dealer. For a description of distribution and arrangements with selling
dealers, see "Distribution" and "Selling Dealers" under "How Your Money is
Managed." To purchase a Certificate, you must apply through a participant in the
DTC. See "Book Entry Only". Your purchase occurs when the Issuer accepts an
application to purchase Certificates from a DTC participant (a "Direct
Participant") for which you are the beneficial owner and receives good funds
from that Direct Participant for the purchase. Initially, the Issuer expects to
accept applications for Certificates on the first Wednesday of the month, though
the Issuer in its sole discretion may accept applications on any day. Under
normal circumstances, to consider an application for acceptance on a Wednesday,
the Issuer must receive it by the preceding Tuesday.
The selling dealer purchasing a Certificate on your behalf is to send you a
confirmation showing the acceptance date, the date your term begins and the
interest selection you have made detailing your market participation percentage
and, if applicable, the minimum interest rate for your first term, and the value
of the S&P 500 Index on the day your term began. The rates in effect on the date
we accept the application from the Direct Participant are the rates that apply
to your Certificate.
Important: You must provide the selling dealer who purchases on your behalf with
your correct Taxpayer Identification Number (TIN), which is either your Social
Security or Employer Identification number. See "Taxes on Your Earnings."
Penalties for withdrawal during a term: If you withdraw money during a term, you
will pay a penalty of 2% of the principal withdrawn. The 2% penalty is waived
upon death of the Certificate owner.
You may not make a partial withdrawal if it would reduce your Certificate
balance to less than $2,000. If you request such a withdrawal, the Direct
Participant who purchased on your behalf is to contact you for revised
instructions.
When the Direct Participant requests a full or partial withdrawal on your behalf
during a term, we pay the Direct Participant on your behalf from the principal
of your Certificate.
Loss of interest: If you make a withdrawal at any time other than at the end of
the term, you will lose any interest accrued on the withdrawal amount since we
credit minimum and participation interest only at the end of a term.
Following is an example describing a $2,000 withdrawal during a term:
Account balance $ 10,000
Interest (interest is credited at the end of the term) 0
Withdrawal of principal (2,000)
2% withdrawal penalty (40)
===========
Balance after withdrawal $ 7,960
You will forfeit any accrued interest on the withdrawal amount.
<PAGE>
Other Full and Partial Withdrawal Policies
o If your Certificate is pledged as collateral on our books, any withdrawal
will be delayed until we get approval from the secured party.
o Any payments to you may be delayed under applicable rules, regulations or
orders of the Securities and Exchange Commission (SEC).
Book Entry Only
DTC will act as securities depository for the Certificates. The Certificates
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve system, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that Direct Participants deposit with DTC. DTC
also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange LLC, and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its Direct
and Indirect Participants (the "Rules") are on file with the Securities and
Exchange Commission.
Purchases of Certificates under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Certificates on DTC's records.
The ownership interest of each actual purchaser of each Certificate ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC or the
Issuer of their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Certificates are to be accomplished by entries made on the
books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
The Issuer expects to issue only book-entry securities and does not expect to
deposit a physical certificate with DTC. Beneficial Owners will not receive
physical certificates representing their ownership interests in Certificates.
To facilitate subsequent transfers, all Certificates deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Certificates with DTC and their
registration in the name of Cede & Co. or such other nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Certificates. DTC's records reflect only the identity of the
Direct Participants to whose accounts such Certificates are credited, which may
or may not be the Beneficial Owners. The Direct and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
<PAGE>
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Withdrawal proceeds, and interest payments on the Certificates will be paid to
Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC. DTC's practice is to credit Direct Participants'
accounts, upon DTC's receipt of funds and corresponding detail information from
the Issuer on payable date in accordance with their respective holdings shown on
DTC's records. Payments by Direct Participants or Indirect Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers and
registered in "street name," and will be the responsibility of such Participant
and not of DTC or the Issuer, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of withdrawal
proceeds and interest to Cede & Co. (or such other nominee as may be requested
by an authorized representative of DTC) is the responsibility of the Issuer,
disbursement of such payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect
to the Certificates at any time by giving reasonable notice to the Issuer. Under
such circumstances, in the event that a successor securities depository is not
obtained, the Issuer may rely solely on the books of its transfer agent to
reflect registered ownership of Certificates.
The Issuer may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, the Issuer
may rely solely on the books of its transfer agent to reflect registered
ownership of Certificates.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that the Issuer believes to be reliable, but the
Issuer takes no responsibility for the accuracy thereof.
Taxes on Your Earnings
Participation and minimum interest on your Certificate is taxable when credited
to your account and reportable each calendar year to you and the Internal
Revenue Service (the IRS) and the distributor or selling agent carrying your
account. Withdrawals are reportable to the Certificate owner and the IRS on Form
1099-B, "Proceeds from Broker and Barter Exchange Transactions."
Revised proposed regulations: The IRS has issued revised proposed regulations
governing the tax treatment of debt instruments which provide for variable rates
of interest. This includes interest based on the price of property that is
actively traded or on an index of the prices of such property. Under these
revised proposed regulations, the Certificates are likely to constitute a debt
instrument that would be treated as a variable rate debt instrument (VRDI)
rather than a contingent debt instrument (CDI). If the Certificates constitute a
VRDI, then the income earned on the Certificates will be treated as original
issue discount and reported when credited to the owner's account. If the
Certificates are not treated as a VRDI, but rather are treated as a CDI, then
the owner may have taxable income to report, even though the account owner has
not received any cash distributions. Furthermore, the timing and character of
the income may be different from that of a VRDI. The Issuer cannot guarantee
whether the revised proposed regulations will be adopted as final in this
present form or will again be modified. As always, you should consult your tax
advisor for information regarding the tax implications of your Certificate.
<PAGE>
Gifts to Minors
If permitted under the terms of your account with a selling dealer, a
Certificate may be given to a minor under either the Uniform Gifts or Uniform
Transfers to Minors Act (UGMA/UTMA), whichever applies in your state.
UGMAs/UTMAs are irrevocable. Generally, under federal tax laws, income over
$1,400 for the year 2000 on property owned by children under age 14 will be
taxed at the parents' marginal tax rate, while income on property owned by
children 14 or older will be taxed at the child's rate.
Your TIN and backup withholding: As with any financial account you open, when
you open your account with a selling dealer, you must list your current and
correct TIN, which is either your Social Security or Employer Identification
number. You must certify your TIN under penalties of perjury. If you purchase
through the distributor filling the role of a selling dealer, your certification
of your TIN is required by the time you apply to purchase a Certificate.
If you don't provide the correct TIN, you could be subject to backup withholding
of 31% of your interest earnings. You could also be subject to further
penalties, such as:
o a $50 penalty for each failure to supply your correct TIN;
o a civil penalty of $500 if you make a false statement that results in no
backup withholding; and
o criminal penalties for falsifying information.
You could also be subject to backup withholding because you failed to report
interest on your tax return as required.
To help you determine the correct TIN to use on various types of accounts,
please use this chart:
How to Determine the Correct TIN
For this type of account: Use the Social Security or
Employer Identification Number
of:
Individual or joint account The individual or one of the
owners listed on the joint
account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors Act)
A revocable living trust The grantor-trustee
(the person who puts the money
into the trust)
An irrevocable trust, pension trust or
estate The legal entity (not the
personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
<PAGE>
Partnership The partnership
Corporate The corporation
Association, club or tax-exempt organization The organization
For details on TIN requirements, ask your registered representative for federal
Form W-9, "Request for Taxpayer Identification Number and Certification." You
also may obtain the form on the Internet at
(http://www.irs.gov/prod/forms_pubs/).
Foreign Investors
Tax treatment of your investment: If you are not a citizen or resident of the
United States (nonresident alien), and you have supplied a form W-8, Certificate
of Foreign Status, interest paid on your Certificate is most likely "portfolio
interest" as defined in U.S. Internal Revenue Code Section 871(h). If the
Certificate is treated as a CDI, part of the earned income may be treated as a
capital gain instead of portfolio interest. Form W-8 must be supplied with both
a current mailing address and an address of foreign residency, if different. The
distributor (if filling the role of a selling dealer) will not, and a selling
dealer might not accept purchases of certificates by non-resident aliens without
an appropriately certified Form W-8 (or approved substitute). The Form W-8, in
effect before January 1, 2001, must be resupplied every three calendar years. If
you have supplied a Form W-8 that certifies that you are a nonresident alien,
the interest income or capital gain will be reported at year end to you and to
the U.S. government on a Form 1042-S, Foreign Person's U.S. Source Income
Subject to Withholding. Your interest income or capital gain will be reported to
the IRS even though it is not taxed by the U.S. government. The United States
participates in various tax treaties with foreign countries. Those treaties
provide that tax information may be shared upon request between the United
States and such foreign governments.
Changes in tax regulation: The U.S. Internal Revenue Service has issued new
regulations changing the certification requirements for nonresident aliens. As a
result of the changes, new Forms W-8 have been designed and are available for
use. Your selling dealer should have your new form on file by January 1, 2001.
Depending on your status, you may provide any one of four new Forms W-8. Most
clients will use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner
for United States Tax Withholding, but consult your tax advisor to ensure that
you are using the correct form. The new Forms W-8 must be resupplied every four
calendar years, up from three years with the current form.
A few other changes may affect you. Foreign trusts must apply for a permanent
U.S. individual tax identification number (TIN). Individuals applying for
benefits under a tax treaty will have additional requirements.
Withholding taxes: If you fail to provide a Form W-8 as required above, you will
be subject to 31% backup withholding on interest payments and withdrawals from
certificates.
Estate tax: If you are a nonresident alien and you die while owning a
Certificate, and if you purchase or hold through the distributor or another
affiliate of the Issuer, then, depending on the circumstances, the distributor
or other affiliate generally will not act on instructions with regard to the
Certificate before receiving, at a minimum, a statement from persons the
distributor or other affiliate believes are knowledgeable about your estate. The
statement must be satisfactory to the distributor or other affiliate and must
tell us that, on your date of death, your estate did not include any property in
the United States for U.S.
<PAGE>
estate tax purposes. In other cases, the distributor or other affiliate
generally will not take action regarding your Certificate before receiving a
transfer certificate from the IRS or evidence satisfactory to the distributor or
other affiliate that the estate is being administered by an executor or
administrator appointed, qualified and acting within the United States. In
general, a transfer certificate requires the opening of an estate in the United
States and provides assurance that the IRS will not claim your Certificate to
satisfy estate taxes.
If you purchase or hold a Certificate through a selling dealer and need
information on procedures and policies in the event of your death while owning a
Certificate, contact your selling dealer.
Trusts: If the investor is a trust, the policies and procedures described above
will apply with regard to each grantor who is a nonresident alien.
Important: The information in this prospectus is a brief and selective summary
of certain federal tax rules that apply to a Certificate and is based on current
law and practice. Tax matters are highly individual and complex. Investors
should consult a qualified tax advisor about their own position.
How Your Money is Used and Protected
Invested and Guaranteed by the Issuer
The Issuer, a wholly owned subsidiary of American Express Financial Corporation
(AEFC), issues and guarantees the American Express Equity Indexed Savings
Certificates. We are by far the largest issuer of face amount certificates in
the United States, with total assets of more than $3.7 billion and a net worth
in excess of $141 million on Dec. 31, 1999.
We back our certificates by investing the money received and keeping the
invested assets on deposit. Our investments generate interest and dividends, out
of which we pay:
o interest to certificate owners,
o and various expenses, including taxes, fees to AEFC for advisory and other
services, distribution fees to American Express Financial Advisors Inc, and
selling agent fees to selling agents.
For a review of significant events relating to our business, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations." No
national rating agency rates our Certificates or our other face amount
certificates.
Most banks and thrifts offer investments known as CDs that are similar to our
certificates in many ways. Early withdrawals of bank CDs often result in
penalties. Banks and thrifts generally have federal deposit insurance for their
deposits and lend much of the money deposited to individuals, businesses and
other enterprises. Other financial institutions and some insurance companies may
offer investments with comparable combinations of safety and return on
investment.
Regulated by Government
Because the American Express Equity Indexed Savings Certificates are a
securities, their offer and sale are subject to regulation under federal and
state securities laws. (The American Express Equity Indexed Savings Certificates
are face-amount certificates. They are not bank products, equity investments, a
form of life insurance or an investment trust.)
The federal Investment Company Act of 1940 requires us to keep investments on
deposit in a segregated custodial account to protect all of our outstanding face
amount certificates. These investments back the entire value of your
Certificate. Their amortized cost must exceed the required carrying value of the
<PAGE>
outstanding certificates by at least $250,000. As of Dec. 31, 1999, the
amortized cost of these investments exceeded the required carrying value of our
outstanding face amount certificates by more than $238 million. The law requires
us to use amortized cost for these regulatory purposes. Among other things, the
law permits Minnesota statutes to govern qualified assets of the Issuer as
described in Note 2 to the financial statements. In general, amortized cost is
determined by systematically increasing the carrying value of a security if
acquired at a discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the maturity date.
As a condition to regulatory relief from the SEC, the Issuer has agreed to
maintain capital and surplus equal to 5% of outstanding liabilities on face
amount certificates (not including loans made on certificates in accordance with
terms of some certificates that no longer are offered by the Issuer). The Issuer
is not obligated to continue to rely on the relief and continue to comply with
the conditions of the relief. Similarly, the Issuer has entered into a written,
informal understanding with the Minnesota Commerce Department that the Issuer
will maintain capital equal to 5% of the assets of the Issuer (less any loans on
outstanding certificates). When computing its capital for these purposes, the
Issuer values its assets on the basis of statutory accounting for insurance
companies rather than generally accepted accounting principles.
Backed by Our Investments
Our investments are varied and of high quality. This was the composition of our
portfolio as of Dec. 31, 1999:
Type of investment Net amount invested
Corporate and other bonds 49%
Government agency bonds 22
Preferred stocks 16
Mortgages 11
Municipal bonds 1
Cash and cash equivalents 1
As of Dec. 31, 1999, about 89% of our securities portfolio (including bonds and
preferred stocks) is rated investment grade. For additional information
regarding securities ratings, please refer to Note 3B to the financial
statements.
Most of our investments are on deposit with American Express Trust Company,
Minneapolis, although we also maintain separate deposits as required by certain
states. American Express Trust Company is a wholly owned subsidiary of AEFC.
Copies of our Dec. 31, 1999, schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments regarding the
valuation, carrying values and unrealized appreciation (depreciation) of
investment securities, see Notes 1, 2 and 3 to the financial statements.
Investment Policies
In deciding how to diversify the portfolio -- among what types of investments in
what amounts -- the officers and directors of the Issuer use their best
judgment, subject to applicable law. The following policies currently govern our
investment decisions:
Debt securities-
Most of our investments are in debt securities as referenced in the table in
"Backed by Our Investments" under "How your Money is Used and Protected."
<PAGE>
The price of bonds generally falls as interest rates increase, and rises as
interest rates decrease. The price of a bond also fluctuates if its credit
rating is upgraded or downgraded. The price of bonds below investment grade may
react more to whether a company can pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations, are more likely
to experience a default, and sometimes are referred to as junk bonds. Reduced
market liquidity for these bonds may occasionally make it more difficult to
value them. In valuing bonds, the Issuer relies both on independent rating
agencies and the investment manager's credit analysis. Under normal
circumstances, at least 85% of the securities in the Issuer's portfolio will be
rated investment grade, or in the opinion of the Issuer's investment advisor
will be the equivalent of investment grade. Under normal circumstances, the
Issuer will not purchase any security rated below B- by Moody's Investors
Service, Inc. or Standard & Poor's Corporation. Securities that are subsequently
downgraded in quality may continue to be held by the Issuer and will be sold
only when the Issuer believes it is advantageous to do so.
As of Dec. 31, 1999, the Issuer held about 11% of its investment portfolio
(including bonds, preferred stocks and mortgages) in investments rated below
investment grade.
Purchasing securities on margin -
We will not purchase any securities on margin or participate on a joint basis or
a joint-and-several basis in any trading account in securities.
Commodities -
We have not and do not intend to purchase or sell commodities or commodity
contracts except to the extent that transactions described in "Financial
transactions including hedges" in this section may be considered commodity
contracts.
Underwriting -
We do not intend to engage in the public distribution of securities issued by
others. However, if we purchase unregistered securities and later resell them,
we may be considered an underwriter (selling securities for others) under
federal securities laws.
Borrowing money -
From time to time we have established a line of credit with banks if management
believed borrowing was necessary or desirable. We may pledge some of our assets
as security. We may occasionally use repurchase agreements as a way to borrow
money. Under these agreements, we sell debt securities to our lender, and
repurchase them at the sales price plus an agreed-upon interest rate within a
specified period of time. There is no limit on the extent to which we may borrow
money, except that borrowing must be through the sale of certificates, or must
be short-term and privately arranged and not intended to be publicly offered.
Real estate -
We may invest in limited partnership interests in limited partnerships that
either directly, or indirectly through other limited partnerships, invest in
real estate. We may invest directly in real estate. We also invest in mortgage
loans secured by real estate. We expect that equity investments in real estate,
either directly or through a subsidiary of the Issuer, will be less than 5% of
the Issuer's assets.
Lending securities -
We may lend some of our securities to broker-dealers and receive cash equal to
the market value of the securities as collateral. We invest this cash in
short-term securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan, the borrower
makes cash payments to us equal to all interest, dividends and other
distributions paid on the loaned securities. We will try to vote these
securities if a major event affecting our investment is under consideration. We
expect that outstanding securities loans will not exceed 10% of our assets.
<PAGE>
When-issued securities-
Some of our investments in debt securities are purchased on a when-issued or
similar basis. It may take as long as 45 days or more before these securities
are available for sale, issued and delivered to us. We generally do not pay for
these securities or start earning on them until delivery. We have established
procedures to ensure that sufficient cash is available to meet when-issued
commitments. The Issuer's ability to invest in when-issued securities is not
limited except by its ability to set aside cash or high quality investments to
meet when-issued commitments. When-issued securities are subject to market
fluctuations and they may affect the Issuer's investment portfolio the same as
owned securities.
Financial transactions including hedges-
We buy or sell various types of options contracts for hedging purposes or as a
trading technique to facilitate securities purchases or sales. We may buy
interest rate caps for hedging purposes. These pay us a return if interest rates
rise above a specified level. If interest rates do not rise above a specified
level, the interest rate caps do not pay us a return. The Issuer may enter into
other financial transactions, including futures and other derivatives, for the
purpose of managing the interest rate exposures associated with the Issuer's
assets or liabilities. Derivatives are financial instruments whose performance
is derived, at least in part, from the performance of an underlying asset,
security or index. A small change in the value of the underlying asset, security
or index may cause a sizable gain or loss in the fair value of the derivative.
There is not a limit on the Issuer's ability to enter into financial
transactions to manage the interest rate risk associated with the Issuer's
assets and liabilities, but the Issuer does not foresee a likelihood that it
will be feasible to hedge most or all of its assets or liabilities. We do not
use derivatives for speculative purposes.
Illiquid securities -
A security is illiquid if it cannot be sold in the normal course of business
within seven days at approximately its current market value. Some investments
cannot be resold to the U.S. public because of their terms or government
regulations. All securities, however can be sold in private sales, and many may
be sold to other institutions and qualified buyers or on foreign markets. The
Issuer's investment advisor will follow guidelines established by the Issuer's
board of directors and consider relevant factors such as the nature of the
security and the number of likely buyers when determining whether a security is
illiquid. No more than 15% of the Issuer's investment portfolio will be held in
securities that are illiquid. In valuing its investment portfolio to determine
this 15% limit, the Issuer will use statutory accounting under an order of the
Securities and Exchange Commission (SEC). This means that, for this purpose, the
portfolio will be valued in accordance with applicable Minnesota law governing
investments of life insurance companies, rather than generally accepted
accounting principles.
Restrictions -
There are no restrictions on concentration of investments in any particular
industry or group of industries or on rates of portfolio turnover.
How Your Money Is Managed
Relationship Between the Issuer and American Express Financial Corporation
The Issuer was originally organized as Investors Syndicate of America, Inc., a
Minnesota corporation, on Oct. 15, 1940, and began business as an issuer of face
amount investment Certificates on Jan. 1, 1941. The company became a Delaware
corporation on Dec. 31, 1977, changed its name to IDS Certificate Company on
April 2, 1984, and to American Express Certificate Company on April 26, 2000.
The Issuer files reports on Forms 10-K and 10-Q with the SEC. The public may
read and copy materials we file with the SEC at the SEC's Public Reference Room
at 450 Fifth Street, NW, Washington, D.C. 20549. The public may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site (http//www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
<PAGE>
Before the Issuer was created, AEFC (formerly known as IDS Financial
Corporation), our parent company, had issued similar face amount certificates
since 1894. As of Jan. 1, 1995, IDS Financial Corporation changed its name to
AEFC. The Issuer and AEFC have never failed to meet their certificate payments.
During its many years in operation, AEFC has become a leading manager of
investments in mortgages and securities. As of Dec. 31, 1999, AEFC managed or
administered investments, including its own, of more than $262 billion.
AEFC itself is a wholly owned subsidiary of American Express Company, a
financial services company with executive offices at American Express Tower,
World Financial Center, New York, NY 10285.
American Express Company is a financial services company engaged through
subsidiaries in other businesses including:
o travel related services (including American Express(R) Card operations
through American Express Travel Related Services Company, Inc. and its
subsidiaries); and
o international banking services (through American Express Bank Ltd. and its
subsidiaries) and Travelers Cheque and related service.
Capital Structure and Certificates Issued
The Issuer has authorized, has issued and has outstanding 150,000 shares of
common stock, par value of $10 per share. AEFC owns all of the outstanding
shares.
As of the fiscal year ended Dec. 31, 1999, the Issuer had issued (in face
amount) $90,939,275 of installment certificates and $1,508,505,715 of single
payment certificates. As of Dec. 31, 1999, the Issuer had issued (in face
amount) $13,684,206,836 of installment certificates and $19,860,383,374 of
single payment certificates since its inception in 1941.
Investment Management and Services
Under an Investment Advisory and Services Agreement, AEFC acts as our investment
advisor and is responsible for:
o providing investment research,
o making specific investment recommendations,
o and executing purchase and sale orders according to our policy of obtaining
the best price and execution.
All these activities are subject to direction and control by our board of
directors and officers. Our agreement with AEFC requires annual renewal by our
board, including a majority of directors who are not interested persons of AEFC
or the Issuer as defined in the federal Investment Company Act of 1940.
For its services, we pay AEFC a monthly fee, equal on an annual basis to a
percentage of the total book value of certain assets (included assets).
<PAGE>
Advisory and services fee computation
Included assets Percentage of total book value
First $250 million 0.750%
Next 250 million 0.650
Next 250 million 0.550
Next 250 million 0.500
Any amount over 1 billion 0.107
Included assets are all assets of the Issuer except mortgage loans, real estate,
and any other asset on which we pay an outside advisory or service fee.
Advisory and services fee for the past three years
Percentage of
Year Total fees included assets
1999 $ 8,691,974 0.26%
1998 9,084,332 0.24
1997 17,232,602 0.50
Estimated advisory and services fees for 2000 are $8,604,000.
Other expenses payable by the Issuer: The Investment Advisory and Services
Agreement provides that we will pay:
o costs incurred by us in connection with real estate and mortgages;
o taxes;
o depository and custodian fees;
o brokerage commissions;
o fees and expenses for services not covered by other agreements and provided
to us at our request, or by requirement, by attorneys, auditors, examiners
and professional consultants who are not officers or employees of AEFC;
o fees and expenses of our directors who are not officers or employees of
AEFC;
o provision for certificate reserves (interest accrued on certificate owner
accounts); and
o expenses of customer settlements not attributable to sales function.
Distribution
Under a Distribution Agreement with American Express Financial Advisors Inc., a
wholly owned subsidiary of AEFC, we pay for the distribution of the Certificates
by American Express Financial Advisors Inc. as follows:
o 1.00% of the initial investment on the first day of each Certificate's
term, and
o 1.00% of the Certificate's reserve at the beginning of each subsequent
term.
This fee is not assessed to your Certificate.
<PAGE>
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $27,950,987 during the year ended Dec. 31,
1999. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $29,408,000 during 2000.
See note 1 to financial statements regarding deferral of distribution fee
expense.
American Express Financial Advisors Inc. pays other selling expenses in
connection with services to us. Our board of directors, including a majority of
directors who are not interested persons of American Express Financial Advisors
Inc. or the Issuer, approved this distribution agreement.
American Express Financial Advisors Inc. also may play the role of a selling
dealer as described in this prospectus.
Selling Dealers
These Certificates may be sold through selling dealers, under arrangements with
American Express Financial Advisors Inc., at commissions of up to:
o 0.80% of the initial investment on the first day of the Certificate's term;
and
o 0.80% of the Certificate's reserve at the beginning of each subsequent
term.
This fee is not assessed to your Certificate.
In addition, the Issuer may pay distributors, and American Express Financial
Advisors Inc. may pay selling dealers, additional compensation for selling and
distribution activities under certain circumstances. For example, American
Express Financial Advisors Inc. may pay a fee to a selling dealer in order to
attend a national sales conference of a selling dealer and, among other
activities, promote sales of Certificates. From time to time, the Issuer or
American Express Financial Advisors Inc. may pay or permit other promotional
incentives, in cash or credit or other compensation to selling dealers or
registered representatives.
Transfer Agent
Under a Transfer Agency Agreement, American Express Client Service Corporation
(AECSC), a wholly owned subsidiary of AEFC, maintains certificate owner accounts
and records. The Issuer pays AECSC a monthly fee of one-twelfth of $10.353 per
certificate owner account for this service. In the case of American Express
Equity Indexed Savings Certificates, the accounts maintained by AECSC will
reflect registered ownership of Certificates by Direct Participants in DTC.
<PAGE>
Employment of Other American Express Affiliates
AEFC may employ an affiliate of American Express Company as executing broker for
our portfolio transactions only if:
o we receive prices and executions at least as favorable as those offered by
qualified independent brokers performing similar services;
o the affiliate charges us commissions consistent with those charged to
comparable unaffiliated customers for similar transactions; and
o the affiliate's employment is consistent with the terms of the current
Investment Advisory and Services Agreement and federal securities laws.
Directors and Officers
The Issuer's sole shareholder, AEFC, elects the board of directors that oversees
the Issuer's operations. The board annually elects the directors, chairman,
president and controller for a term of one year. The president appoints the
other executive officers.
We paid a total of $32,000 during 1999 to directors not employed by AEFC.
Board of directors
Rodney P. Burwell
Born in 1939. Director beginning in 1999. Chairman, Xerxes Corporation
(fiberglass storage tanks). Director, Fairview Corporation.
Charles W. Johnson
Born in 1929. Director since 1989. Director, Communications Holdings, Inc.
Acting president of Fisk University from 1998 to 1999. Former vice president and
group executive, Industrial Systems, with Honeywell, Inc. Retired 1989.
Jean B. Keffeler
Born in 1945. Director beginning in 1999. Independent management consultant.
Richard W. Kling*
Born in 1940. Director since 1996. Chairman of the board of directors from 1996
to 2000. Director of IDS Life Insurance Company since 1984; president since
1994. Executive vice president of Marketing and Products of AEFC from 1988 to
1994. Senior vice president of AEFC since 1994. Director of IDS Life Series
Fund, Inc. and member of the board of managers of IDS Life Variable Annuity
Funds A and B.
Thomas R. McBurney
Born in 1938. Director beginning in 1999. President, McBurney Management
Advisors. Director, The Valspar Corporation (paints), Wenger Corporation,
Allina, Space Center Enterprises and Greenspring Corporation.
Paula R. Meyer*
Born in 1954. President since 1998. Piper Capital Management (PCM) President
from 1997 to 1998. PCM Director of Marketing from 1995 to 1997. PCM Director of
Retail Marketing from 1993 to 1995.
<PAGE>
Pamela J. Moret*
Born in 1956. Director since December 1999. Chairman of the board of directors
since January 2000. Senior Vice President - Investment Products since November
1999. Vice president - Variable Assets & Services from 1997 to 1999. Vice
president - Retail Services Group from 1996 to 1997. Vice president
Communications from 1992 to 1996. Various attorney positions in General
Counsel's office from 1982 to 1992.
*"Interested Person" of the Issuer as that term is defined in the Investment
Company Act of 1940.
Executive officers
Paula R. Meyer
Born in 1954. President since June 1998.
Jeffrey S. Horton
Born in 1961. Vice president and treasurer since 1997. Vice president and
corporate treasurer of AEFC since 1997. Controller, American Express
Technologies-Financial Services of AEFC from July 1997 to December 1997.
Controller, Risk Management Products of AEFC from 1994 to 1997. Director of
finance and analysis, Corporate Treasury of AEFC from 1990 to 1994.
Timothy S. Meehan
Born in 1957. Secretary since 1995. Secretary of AEFC and American Express
Financial Advisors Inc. since 1995. Senior counsel to AEFC since 1995. Counsel
from 1990 to 1995.
Lorraine R. Hart
Born in 1951. Vice president - Investments since 1994. Vice president -
Insurance Investments of AEFC since 1989. Vice president - Investments of IDS
Life Insurance Company since 1992.
Bruce A. Kohn
Born in 1951. Vice president and general counsel since 1993. Group counsel to
AEFC since 1996. Counsel to AEFC from 1992 to 1996. Associate counsel from 1987
to 1992.
Philip C. Wentzel
Born in 1961. Vice president and controller since January 2000. Vice president -
Finance, Insurance Products of AEFC since 1997. Vice president and controller of
IDS Life since 1998. Director, Financial Reporting and Analysis - IDS Life from
1992 to 1997.
The officers and directors as a group beneficially own less than 1% of the
common stock of American Express Company.
The Issuer has provisions in its bylaws relating to the indemnification of its
officers and directors against liability, as permitted by law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
1933 Act) may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the 1933 Act and is therefore unenforceable.
<PAGE>
Independent Auditors
A firm of independent auditors audits our financial statements at the close of
each fiscal year (Dec. 31). Copies of our annual financial statements (audited)
and semiannual financial statements (unaudited) are available to any Certificate
owner upon request.
Ernst & Young LLP, Minneapolis, has audited the financial statements at Dec. 31,
1999 and 1998 and for each of the years in the three-year period ended Dec. 31,
1999. These statements are included in this prospectus. Ernst & Young LLP is
also the auditor for American Express Company, the parent company of AEFC and
the Issuer.
<PAGE>
Appendix
Description of corporate bond ratings
Bond ratings concern the quality of the issuing corporation. They are not an
opinion of the market value of the security. Such ratings are opinions on
whether the principal and interest will be repaid when due. A security's rating
may change which could affect its price. Ratings by Moody's Investors Service,
Inc. are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Aaa/AAA - Judged to be of the best quality and carry the smallest degree of
investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for interest and
principal may not be quite as good as Aaa or AAA rated securities.
A - Considered upper-medium grade. Protection for interest and principal is
deemed adequate but may be susceptible to future impairment.
Baa/BBB - Considered medium-grade obligations. Protection for interest and
principal is adequate over the short-term; however, these obligations may have
certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such issues are often
in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D - Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment. When assessing each
non-rated security, the Issuer will consider the financial condition of the
issuer of the securities or the protection afforded by the terms of the
security.
<PAGE>
(back cover)
Quick telephone reference*
*You may experience delays when call volumes are high.
American Express Equity Indexed Savings Certificate
200 AXP Financial Center
Minneapolis, MN 55474
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
Item 13. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and distribution
of the securities being registered are to be borne by the
registrant.
Item 14. Indemnification of Directors and Officers.
The By-Laws of IDS Certificate Company provide that it shall
indemnify any person who was or is a party or is threatened to
be made a party, by reason of the fact that he was or is a
director, officer, employee or agent of the company, or is or
was serving at the direction of the company, or any
predecessor corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, to any threatened, pending or
completed action, suit or proceeding, wherever brought, to the
fullest extent permitted by the laws of the state of Delaware,
as now existing or hereafter amended.
The By-Laws further provide that indemnification questions
applicable to a corporation which has been merged into the
company relating to causes of action arising prior to the date
of such merger shall be governed exclusively by the applicable
laws of the state of incorporation and by the by-laws of such
merged corporation then in effect.
See also Item 17.
Item 15. Recent Sales of Unregistered Securities.
(a) Securities Sold
1996 IDS Special Deposits* 41,064,846.74
1997 American Express Special Deposits 182,788,631.00
1998 American Express Special Deposits 91,416,078.00
1999 American Express Special Deposits 50,132,542.00
* Renamed American Express Special Deposits in April 1996.
(b) Underwriters and other purchasers
American Express Special Deposits are marketed by American Express Bank Ltd.
(AEB), an affiliate of IDS Certificate Company, to private banking clients of
AEB in the United Kingdom and Hong Kong.
(c) Consideration
All American Express Special Deposits were sold for cash. The aggregate offering
price was the same as the amount sold in the table above. Aggregate marketing
fees to AEB were $301,946.44 in 1996, $592,068.70 in 1997, $967,791.95 in 1998
and $877,981.60 in 1999.
<PAGE>
(d) Exemption from registration claimed
American Express Special Deposits are marketed, pursuant to the exemption in
Regulation S under the Securities Act of 1933, by AEB in the United Kingdom and
Hong Kong to persons who are not U.S. persons, as defined in Regulation S.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1. (a) Distribution Agreement dated November 18, 1988, between Registrant and
IDS Financial Services Inc., filed electronically as Exhibit 1(a) to
the Registration Statement No. 33-26844, for the American Express
International Investment Certificate (now called, the IDS Investors
Certificate) is incorporated herein by reference.
2. Not Applicable.
3. (a) Certificate of Incorporation, dated December 31, 1977, filed
electronically as Exhibit 3(a) to Post-Effective Amendment No. 10 to
Registration Statement No. 2-89507, is incorporated herein by
reference.
(b) Certificate of Amendment, dated April 2, 1984 filed electronically as
Exhibit 3(b) to Post-Effective Amendment No. 10 to Registration
Statement No. 2-89507, is incorporated herein by reference.
(c) Certificate of Amendment, dated September 12, 1995, filed
electronically as Exhibit 3(c) to Post-Effective Amendment No. 44 to
Registration Statement No. 2-55252, is incorporated herein by
reference.
(d) Certificate of Amendment, dated April 30, 1999, filed electronically
as Exhibit 3(a) to Registrant's March 31, 1999 Quarterly Report on
Form 10-Q is incorporated herein by reference.
(e) Certificate of Amendment, dated January 28, 2000, filed electronically
as Exhibit 3(e) to Post-Effective Amendment No. 47 to Registration
Statement No. 2-55252, is incorporated herein by reference.
(f) Current By-Laws, filed electronically as Exhibit 3(e) to
Post-Effective Amendment No. 19 to Registration Statement No.
33-26844, are incorporated herein by reference.
4. Not Applicable.
5. An opinion and consent of counsel as to the legality of the securities
being registered, filed electronically as Exhibit 16(a)5 to
Post-Effective Amendment No. 24 to Registration Statement No. 2-95577
is incorporated by reference.
6. through 9. -- None.
10. (a) Investment Advisory and Services Agreement between Registrant and
IDS/American Express Inc. dated January 12, 1984, filed electronically
as Exhibit 10(b) to Registrant's Post-Effective Amendment No. 3 to
Registration Statement No. 2-89507, is incorporated herein by
reference.
<PAGE>
(b) Depositary and Custodial Agreement dated September 30, 1985 between
IDS Certificate Company and IDS Trust Company, filed electronically as
Exhibit 10(b) to Registrant's Post-Effective Amendment No. 3 to
Registration Statement No. 2-89507, is incorporated herein by
reference.
(c) Foreign Deposit Agreement dated November 21, 1990, between IDS
Certificate Company and IDS Bank & Trust, filed electronically as
Exhibit 10(h) to Post-Effective Amendment No. 5 to Registration
Statement No. 33-26844, is incorporated herein by reference.
(d) Selling Agent Agreement dated June 1, 1990, between American Express
Bank International and IDS Financial Services Inc. for the American
Express Investors and American Express Stock Market Certificates,
filed electronically as Exhibit 1(c) to the Post-Effective Amendment
No. 5 to Registration Statement No. 33-26844, is incorporated herein
by reference.
(e) Second amendment to Selling Agent Agreement between American Express
Financial Advisors Inc. and American Express Bank International dated
as of May 2, 1995, filed electronically as Exhibit (1) to Registrant's
June 30, 1995, Quarterly Report on Form 10-Q, is incorporated herein
by reference.
(f) Marketing Agreement dated October 10, 1991, between Registrant and
American Express Bank Ltd., filed electronically as Exhibit 1(d) to
Post-Effective Amendment No. 31 to Registration Statement 2-55252, is
incorporated herein by reference.
(g) Amendment to the Selling Agent Agreement dated December 12, 1994,
between IDS Financial Services Inc. and American Express Bank
International, filed electronically as Exhibit 1(d) to Post-Effective
Amendment No. 13 to Registration Statement No. 2-95577, is
incorporated herein by reference.
(h) Selling Agent Agreement dated December 12, 1994, between IDS Financial
Services Inc. and Coutts & Co. (USA) International, filed
electronically as Exhibit 1(e) to Post-Effective Amendment No. 13 to
Registration Statement No. 2-95577, is incorporated herein by
reference.
(i) Consulting Agreement dated December 12, 1994, between IDS Financial
Services Inc. and American Express Bank International, filed
electronically as Exhibit 16(f) to Post-Effective Amendment No. 13 to
Registration Statement No. 2-95577 is incorporated herein by
reference.
(j) Letter amendment dated January 9, 1997 to the Marketing Agreement
dated October 10, 1991, between Registrant and American Express Bank
Ltd. filed electronically as Exhibit 10(j) to Post-Effective Amendment
No. 40 to Registration Statement No. 2-55252, is incorporated herein
by reference.
(k) Letter amendment dated April 7, 1997 to the Selling Agent Agreement
dated June 1, 1990 between American Express Financial Advisors Inc.
and American Express Bank International, filed electronically as
Exhibit 10 (j) to Post-Effective Amendment No. 14 to Registration
Statement 33-26844, is incorporated herein by reference.
<PAGE>
(l) Letter Agreement dated July 28, 1999 amending the Selling Agent
Agreement dated June 1, 1990, or a schedule thereto, as amended,
between American Express Financial Advisors Inc. (formerly IDS
Financial Services Inc.) and American Express Bank International,
filed electronically to Registrant's June 30, 1999 Quarterly Report on
Form 10-Q, is incorporated herein by reference.
(m) Letter Agreement dated July 28, 1999, amending the Marketing Agreement
dated October 10, 1991, or a schedule thereto, as amended, between IDS
Certificate Company and American Express Bank Ltd., filed
electronically to Registrant's June 30, 1999 Quarterly Report on Form
10-Q, is incorporated herein by reference.
(n) Selling Agent Agreement, dated March 10, 1999 between American Express
Financial Advisors Inc. and Securities America, Inc., filed
electronically as Exhibit 10 (l) to Post-Effective Amendment No. 18 to
Registration Statement 33-26844, is incorporated herein by reference.
11. through 22. -- None.
23. To be filed by amendment.
24. (a) Officers' Power of Attorney, dated January 28, 2000, filed
electronically as Exhibit 24(a) to Post-Effective Amendment No. 47 to
Registration Statement No. 2-55252, is incorporated herein by
reference.
(b) Directors' Power of Attorney, dated January 28, 2000, filed
electronically as Exhibit 24(b) to Post-Effective Amendment No. 47 to
Registration Statement No. 2-55252, is incorporated herein by
reference.
25. through 27. -- None.
(b) The financial statement schedules for IDS Certificate Company filed
electronically as Exhibit 16(b) to Post-Effective Amendment No. 47 to
Registration Statement No. 2-55252 are incorporated herein by
reference.
Item 17. Undertakings.
Without limiting or restricting any liability on the part of the other, American
Express Financial Advisors Inc. (formerly, IDS Financial Services Inc.), as
underwriter, will assume any actionable civil liability which may arise under
the Federal Securities Act of 1933, the Federal Securities Exchange Act of 1934
or the Federal Investment Company Act of 1940, in addition to any such liability
arising at law or in equity, out of any untrue statement of a material fact made
by its agents in the due course of their business in selling or offering for
sale, or soliciting applications for, securities issued by the Company or any
omission on the part of its agents to state a material fact necessary in order
to make the statements so made, in the light of the circumstances in which they
were made, not misleading (no such untrue statements or omissions, however,
being admitted or contemplated), but such liability shall be subject to the
conditions and limitations described in said Acts. American Express Financial
Advisors Inc. will also assume any liability of the Company for any amount or
amounts which the Company legally may be compelled to pay to any purchaser under
said Acts because of any untrue statements of a material fact, or any omission
to state a material fact, on the part of the agents of American Express
Financial Advisors Inc. to the extent of any actual loss to, or expense of, the
Company in connection therewith. The By-Laws of the Registrant contain a
provision relating to Indemnification of Officers and Directors as permitted by
applicable law.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this 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 11th day, of April, 2000.
IDS CERTIFICATE COMPANY
By: /s/ Paula R. Meyer*
Paula R. Meyer, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on the 11th day, of April, 2000.
Signature Capacity
/s/ Paula R. Meyer* ** President and Director
Paula R. Meyer (Principal Executive Officer)
/s/ Jeffrey S. Horton* Vice President and Treasurer
Jeffrey S. Horton (Principal Financial Officer)
/s/ Philip C. Wentzel* Vice President and Controller
Philip C. Wentzel (Principal Accounting Officer)
/s/ Rodney P. Burwell** Director
Rodney P. Burwell
/s/ Charles W. Johnson** Director
Charles W. Johnson
/s/ Jean B. Keffeler** Director
Jean B. Keffeler
/s/ Richard W. Kling** Director
Richard W. Kling
/s/ Pamela J. Moret** Director
Pamela J. Moret
/s/ Thomas R. McBurney** Director
Thomas R. McBurney
<PAGE>
*Signed pursuant to Officers' Power of Attorney dated January 28, 2000 filed
electronically as Exhibit 24(a) to Post-Effective Amendment No. 47 to
Registration Statement No. 2-55252, incorporated herein by reference.
/s/ Bruce A. Kohn
Bruce A. Kohn
**Signed pursuant to Directors' Power of Attorney dated January 28, 2000 filed
electronically as Exhibit 24(b) to Post-Effective Amendment No. 47 to
Registration Statement No. 2-55252, incorporated herein by reference.
/s/ Bruce A. Kohn
Bruce A. Kohn
