SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM S-1
POST-EFFECTIVE AMENDMENT NUMBER 25 TO
REGISTRATION STATEMENT NUMBER 33-22503
American Express Stock Market Certificate
UNDER
THE SECURITIES ACT OF 1933
IDS CERTIFICATE COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
6725
- --------------------------------------------------------------------------------
(Primary Standard Industrial Classification Code Number)
41-6009975
- --------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)
IDS Tower 10, Minneapolis, MN 55440, (612) 671-3131
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<PAGE>
Explanatory Note
The prospectuses contained in Part I of the Registration Statement are
substantially similar and are for the same product. They reflect differences in
the distribution of the products. The prospectus used by American Express Bank
International (AEBI), as indicated on the cover, refers to AEBI and relationship
managers. The prospectus distributed by American Express Financial Advisors Inc.
refers to financial advisors. The prospectus distributed by Securities America,
Inc. refers to registered representatives and generally omits client service
information.
<PAGE>
American Express Stock Market Certificate
Prospectus
April 26, 2000
Potential for stock market growth with safety of principal.
American Express Certificate Company (AECC or AXP Certificate Company), a
subsidiary of American Express Financial Corporation, issues American Express
Stock Market Certificates. You may:
o Purchase this certificate in any amount from $1,000 through $1 million.
o Participate in any increase of the stock market based on the S&P 500 Index
while protecting your principal.
o Decide whether AECC will guarantee part of your return or whether to link
all of it to the market.
o Keep your certificate for up to 14 terms.
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.
This certificate is backed solely by the assets of AECC. See "Risk factors" on
page 2p.
American Express Certificate Company 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 agent are not required to sell any specific amount
of certificates.
Issuer:
American Express Certificate Company
American Express Tower 10
Minneapolis, MN 55440-0010
800-437-3133 (toll free)
Distributor:
American Express Financial Advisors Inc.
An American Express company
<PAGE>
Initial interest and participation rates
AECC guarantees return of your principal. The interest on your certificate is
linked to stock market performance as measured by the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index). See "About the certificate" for
more explanation.
Here are the interest rates and market participation percentages in effect April
26, 2000:
Maximum Market participation percentage Minimum
Return Interest
- --------------------- ----------------------------------- ---------------------
__% 100% (full) None
- --------------------- ----------------------------------- ---------------------
__% 25% (partial) Currently 2.50%
- --------------------- ----------------------------------- ---------------------
These rates may or may not have changed when you apply to purchase your
certificate. For your first term, if you choose the partial participation option
for your certificate, your minimum interest rate will be between 2.00% and
3.00%. Rates for later terms are set at the discretion of AECC and may differ
from the rates shown here.
Risk factors
You should consider the following when investing in this certificate:
This certificate is backed solely by the assets of AECC. Most of our assets are
debt securities whose price generally falls as interest rates increase, and
rises as interest rates decrease. Credit ratings of the issuers of securities in
our portfolio vary. See "Invested and guaranteed by AECC," "Regulated by the
government," "Backed by our investments" and "Investment policies" under "How
your money is used and protected."
If you choose to link all of your return on this 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.
<PAGE>
Table of contents
Initial interest and participation rates p
Risk factors p
About the certificate
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
Two ways to make investments p
Full and partial withdrawals p
Transfers to other accounts p
Two ways to request a withdrawal or transfer p
Three ways to receive payment when you withdraw funds p
Retirement plans: special policies p
Transfer of ownership p
For more information p
Taxes on your earnings p
Retirement accounts p
Gifts to minors p
How to determine the correct TIN p
Foreign investors p
Trusts p
How your money is used and protected p
Invested and guaranteed by AECC p
Regulated by government p
Backed by our investments p
Investment policies p
How your money is managed p
Relationship between AECC and American
Express Financial Corporation p
Capital structure and certificates issued p
Investment management and services p
Distribution p
<PAGE>
Selling Agreement with American Express Bank International p]
Other selling agents p
Transfer agent p
Employment of other American Express affiliates p
Directors and officers p
Independent auditors p
American Express Certificates p
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 certificate
Read and keep this prospectus
This prospectus describes terms and conditions of your American Express Stock
Market Certificate. It contains facts that can help you decide if the
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 Stock Market Certificate as
described in the prospectus, or to bind AECC by any statement not in it.
Investment amounts
You may purchase the American Express Stock Market Certificate in any amount
from $1,000 through $1 million (unless you receive prior approval from AECC to
invest more) payable in U.S. currency. You may also make additional lump-sum
investments in any amount at the end of any term as long as your total amount
paid in is not more than the $1 million (unless you receive prior approval from
AECC to invest more).
The certificate may be used as an investment for your Individual Retirement
Account (IRA). If so used, the amount of your contribution (investment) will be
subject to limitations in applicable federal law.
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
subsequent term. AECC guarantees your principal. It consists of the amount you
actually invest plus interest credited to your account and any additional
investment you make 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%. AECC credits interest to your account at the end of the term.
You have not taken any interest as cash, or made any withdrawals. You have
invested an additional $2,500 prior to the beginning of the next term.
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
plus $5 Interim interest (See "Interim interest")
minus ($0) Interest paid to you in cash
plus $2,500 Additional investment to your certificate
minus ($0) Withdrawals and applicable penalties
============
$13,230 Principal at the beginning of the next term
Certificate term
Your first certificate term is a 52-week period. It begins on the Wednesday
after AECC accepts your application and ends the Tuesday before the 52-week
anniversary of its acceptance. For example, if AECC accepts your application on
a Wednesday, your first term would begin the next Wednesday. Your certificate
will earn interest at the interim interest rate then in effect until the term
begins. It will not earn any participation interest until the term begins. If
you choose to continue to receive participation interest, subsequent terms are
52-week periods that begin on the Wednesday following the 14-day grace period at
the end of the prior 52-week term. You may begin your next term on any Wednesday
during the 14-day period by providing prior written instructions to AECC. If you
choose to receive fixed interest, subsequent terms will be up to 52 weeks as
described in "Fixed interest" under "Interest" below.
<PAGE>
Value at maturity
Your certificate matures after 14 terms. Then you will receive a distribution
for its value. Participation terms are always 52 weeks. Fixed interest terms may
be less than 52 weeks if you change to participation before the end of the
52-week period. At maturity, the value of your certificate will be the total of
your actual investments, 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. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to invest and withdraw funds."
Interest
You choose from two types of participation interest for your first term: 1) full
participation, or 2) partial participation together with minimum interest.
Interest earned under both of these options has an upper limit which is the
maximum annual return explained below. After your first term, you may choose
full or partial participation; or not to participate in any market movement and
receive a fixed rate of interest.
Full participation interest: With this option:
o you participate 100% in any percentage increase in the S&P 500 Index up to
the maximum return.
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."
Partial participation and minimum interest: This option allows you to
participate in a specified part (market participation rate) of any increase in
the S&P 500 Index together with a rate of interest guaranteed by AECC in advance
for each term (minimum interest). Your return consists of two parts:
o a percentage of any increase in the S&P 500 Index, and
o a rate of interest guaranteed by AECC in advance for each term.
Together, they cannot exceed the maximum return.
If you choose the partial participation option for your first term, the minimum
interest paid on your certificate will be between 2.00% and 3.00%.
The market participation rate and the minimum interest rate on the date of this
prospectus are listed on the inside cover under "Initial interest and
participation rates."
Fixed interest: After your first term, this fixed interest option allows you to
stop participating in the market entirely for some period of time. A fixed
interest term is 52 weeks unless you choose to start a new participation term
before your 52 week term ends. You may choose to receive a fixed rate of
interest for any term after the first term. During the term when you are
receiving fixed interest, you can change from your fixed interest selection to
again participate in the market. If you make the change from fixed interest
<PAGE>
to participation interest, your next term would begin on the Wednesday following
our receipt of notice of your new selection. In this way, you may have a term
(during which you would earn fixed interest) that is less than 52 weeks. You may
not change from participation interest to fixed interest during a term.
Maximum annual return: This is the cap, or upper limit, of your return. Your
total return including both participation and minimum interest for a term for
which you have chosen participation interest will be limited to this maximum
return percentage.
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.
Interim interest: When we accept your application, we pay interim interest to
your account for the time before your first term begins. We also pay interim
interest for the 14-day period between terms unless you write or call to ask us
to begin your next term earlier. You may withdraw this interest in cash at any
time before it becomes part of your certificate's principal without a withdrawal
penalty. If it is not withdrawn, the interest will become part of your
certificate's principal at the start of the next succeeding term. For example,
the interest you earn between the end of the first and the beginning of the
second term will become part of the principal at the start of your third term.
Interim interest rates for the time before your first term begins will be within
a range 15 basis points (.15%) below to 85 basis points (.85%) above the average
interest rate published for 12-month certificates of deposit (CDs) in the BANK
RATE MONITOR(R) (BRM) Top 25 Market Average(R). BANK RATE MONITOR and National
Index are marks owned by BANKRATE.COMSM, a division of Intelligent Life
Corporation, N. Palm Beach, FL 33408. If the BRM Average is no longer publicly
available or feasible to use, AECC may use another, similar index as a guide for
setting rates.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service has
no connection with the Issuer, AEFC or any of their affiliates.
The BRM Top 25 Market Average(R) is an index of rates and annual effective
yields offered on various length CDs by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. CDs in the BRM Average are government insured fixed-rate time deposits.
The BRM may be available in your local library. To obtain information or current
BRM Average rates, call the Client Service Organization at the telephone numbers
listed on the back cover.
Earning interest: AECC 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. Fixed interest
accrues and is credited daily and compounds at the end of your term. Both
minimum and fixed interest are calculated on a 30-day month and 360-day year
basis. Interim interest accrues and is credited daily and compounds at the end
of your term immediately following the period in which interim interest is
credited.
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 on the front of this prospectus. We review
rates weekly, and have complete discretion to decide what interest rate will be
declared.
<PAGE>
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 American Express financial advisor, or the Client Service Organization at
the telephone numbers listed on the back cover.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling 800-437-3133.
Promotions and pricing flexibility
AECC may sponsor or participate in promotions involving the certificate and its
respective terms. For example, we may offer different rates 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 different rates based on your amount invested, geographic
location and whether the certificate is purchased for an IRA or a qualified
retirement account.
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 Feb. 28, 1999. The values of the S&P 500 Index are
reprinted with the permission of S&P.
S&P 500 Index values -- December 1983 to February 2000
1400
1200 Chart shows closing values of the S&P from above 100 in Dec. 1983
to just over 1200 in Feb. 1999
1000
800
600
400
200
`83 `84 `85 `86 `87 `88 `89 `90 `91 `92 `93 `94 `95 `96 `97 `98 `99
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.
<PAGE>
S&P 500 Index - December 1984 to February 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%
20%
Label of "Y" axis reads: 52-week return
10%
0%
- -10%
- -20%
`84 `85 `86 `87 `88 `89 `90 `91 `92 `93 `94 `95 `96 `97 `98 `99
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 February 2000
25 Chart shows the distribution of all of the 52-week price returns of
the S&P 500 from 12/31/84 through 2/28/99 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
The last chart illustrates, on a moving weekly basis, the actual 52-week return
of the Stock Market Certificate at full and partial participation compared to
the price return of the NYSE Composite Index(R) through October 1992 and the S&P
500 Index after October 1992. For non-guaranteed funds received before Nov. 3,
1992, and guaranteed funds received before Nov. 4, 1992, Stock Market
Certificate participation interest was based on the NYSE Composite Index(R)
rather than the S&P 500 Index.
<PAGE>
Actual 12-Month Return 1/5/93 to x/x/00
45%
40%
35% Chart shows actual returns of the certificate at full and
25% participation with the full participation generally
tracking the market indexes over the
30% period and 25% level of participation tracking at the 25% level
of return.
25%
20%
15%
10%
5%
0%
1/93 6/93 12/93 6/94 12/94 5/95 11/95 5/96 11/96 4/97 10/97 4/98 10/98 2/99 x/00
The Stock Market Certificate was first available on Jan. 24, 1990. The
performance reflects the returns on the 52-week anniversary date, falling on a
Wednesday, of each of the weeks shown.
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.
The NYSE Composite Index(R) is a registered service mark of the New York Stock
Exchange, Inc. (NYSE) and is a composite covering price movements of all common
stocks listed on the NYSE.
How an index has performed in the past does not indicate how the stock market or
the certificate will perform in the future. There is no assurance that
certificate owners will receive interest on their accounts beyond any minimum
interest or fixed 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 your interest participation
selection.
<PAGE>
For example, assume:
Term ending value of S&P 500 Index 968
Term beginning value of S&P 500 Index 890
Maximum return 9%
Minimum return 2.50%
Partial participation rate 25%
968 Term ending value of S&P 500 Index
minus 890 Term beginning value of S&P 500 Index
-----
equals 78 Difference between beginning and ending values
78 Difference between beginning and ending values
divided by 890 Term beginning value of S&P 500 Index
equals 8.76% Percent increase - full participation return
8.76% Percent increase or decrease
times 25.00% Partial participation rate
equals 2.19%
plus 2.50% 2.50% minimum interest rate
equals 4.69% Partial participation return
In both cases in the example, the return would be less than the 9% maximum.
Maximum Return and Partial Participation Minimum Rate History - The following
table illustrates the maximum annual returns and partial participation minimum
rates that have been in effect since the Stock Market Certificate was
introduced.
Partial participation
Start of Term Maximum annual return minimum rate
- ----------------------------------------------------------------------------
Jan. 24, 1990 18.00% 5.00%
Feb. 5, 1992 18.00 4.00
May 13, 1992 15.00 4.00
Sept. 9, 1992 12.00 3.00
Nov. 11, 1992 10.00 2.50
Nov. 2, 1994 10.00 2.75
April 26, 1995 12.00 [3.50/3.75]
Jan. 17, 1996 10.00 3.25
Feb. 26, 1997 10.00 3.00
May 7, 1997 10.00 2.75
Oct. 8, 1997 10.00 2.50
Dec. 16 1998 9.00 2.50
<PAGE>
Examples:
To help you understand the way this certificate works, here are some
hypothetical examples. The following are three different examples of market
scenarios and how they affect the certificate's return.
Assume for all examples that:
o you purchased the certificate with a $10,000 original investment;
o the partial participation rate is 25%;
o the minimum interest rate for partial participation is 2.50%;
o the maximum total return for full and partial participation is 9%.
<TABLE>
<CAPTION>
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
- --------------------------------------------------------------------------------
<S> <C>
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000Original investment
+ 800 8% x $10,000 + 250 2.50% (Minimum interest rate) x $10,000
Participation interest + 200 25% x 8% x $10,000 Participation interest
- -------- -------
$10,800 Ending balance $10,450 Ending balance
(8% Total return) (4.50% Total return)
</TABLE>
<TABLE>
<CAPTION>
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
- --------------------------------------------------------------------------------
<S> <C>
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000Original investment
+ 0 Participation interest + 250 2.50% (Minimum interest rate) x $10,000
- --------
$10,000 Ending balance + 0 Participation interest
- - -------
(0% Total return) $10,250 Ending balance
(2.50% Total return)
</TABLE>
<TABLE>
<CAPTION>
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
- --------------------------------------------------------------------------------
<S> <C>
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000Original investment
+ 900 9% x $10,000 + 250 2.50% (Minimum interest rate) x $10,000
Maximum interest + 400 25% x 16% x $10,000 Participation interest
- -------- -------
$10,900 Ending balance $10,650 Ending balance
(9% Total return) (6.50% Total return)
</TABLE>
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. AECC 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 the American Express Stock Market Certificate
excludes dividends on the 500 stocks.
<PAGE>
"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 AECC. The certificate is not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the owners
of the certificate or any member of the public regarding the advisability of
investing in securities generally or in the certificate particularly or the
ability of the S&P 500 Index to track general stock market performance. S&P's
only relationship to AECC 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 AECC or the certificate. S&P has no obligation to take the
needs of AECC or the owners of the certificate 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 certificate to be issued or in the determination or
calculation of the equation by which the certificate is to be converted into
cash. S&P has no obligation or liability in connection with the administration,
marketing or trading of the certificate.
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 AECC, owners of the certificate, 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 send you a notice
indicating the comparable index that will be used and give you the option to
surrender your certificate, if desired, and receive your principal, without
being assessed a surrender charge.
Opportunities at the end of a term
Grace period: When your certificate term ends, you have 14 days before a new
term automatically begins. During this 14-day grace period you can:
o change your interest selection,
o add money to your certificate,
o change your term start date,
o withdraw part or all of your money without a withdrawal penalty or loss of
interest,
o or receive your interest in cash.
Fixed interest only: The grace period does not apply if you made the change from
fixed interest back to participation interest during a term as discussed in
"Fixed interest" under "Interest" above. Instead, your new 52-week term will
begin on the Wednesday following our receipt of your notice of your new interest
selection.
New term: If you do not make changes, your certificate will continue with your
current selections when the new term begins 14 days later. You will earn interim
interest during this 14-day grace period. If you don't want to wait 14 days
before starting your next market participation term, you must phone or send
written instructions before your current term ends. You can tell us to start
your next term on any Wednesday that is during the grace period and immediately
following the date on which we receive your notice. Your notice may also tell us
to change your interest selection or add to your certificate. You cannot
withdraw part of your money and skip the 14-day grace period. If you make a
withdrawal, a 7 or 14 day grace period is required. The notification that we
send you at the end of the term cannot be sent before the term ends because
indexing information and
<PAGE>
interest (if any) are included in the notice and are not known until the term
ends. Any additional payments received during the current term will be applied
at the end of the current term. By starting your new term early and waiving the
14-day grace period, you are choosing to start your next term without knowing
the ending value of your current term.
How to invest and withdraw funds
Buying your certificate
Your American Express financial advisor will help you fill out and submit an
application to open an account with us and purchase a certificate. If you
purchase your certificate other than through an American Express financial
advisor - for example, through a direct marketing channel - you may be given
different purchase instructions. We will process the application at our
corporate offices in Minneapolis. When we have accepted your application and we
have received your initial investment, we will 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. After your term begins, we will send
you notice of the value of the S&P 500 Index on the day your term began. The
rates in effect on the date we accept your application are the rates that apply
to your certificate. See "Purchase policies" below.
Important: When you open an account, you must provide AECC with your correct
Taxpayer Identification Number (TIN), which is either your Social Security or
Employer Identification number. See "Taxes on your earnings."
Purchase policies:
o Investments must be received and accepted in the Minneapolis headquarters
on a business day before 3 p.m. Central time to be included in your account
that day. Otherwise your purchase will be processed the next business day.
o If you purchase a certificate with a personal check or other non-guaranteed
funds, AEFC will wait one day for the process of converting your check to
federal funds (e.g., monies of member banks within the Federal Reserve
Bank) before your purchase will be accepted and you begin earning interest.
o AECC has complete discretion to determine whether to accept an application
and sell a certificate.
A number of special policies apply to purchases, withdrawals and exchanges
within IRAs, 401(k) plans and other qualified retirement plans. See "Retirement
plans: special policies."
Two ways to make investments
1
By mail
Send your check along with your name and account number to:
Regular mail: Express mail:
American Express American Express
Financial Advisors Inc. Financial Advisors Inc.
Client Service Organization Client Service Organization
P.O. Box 74 733 Marquette Ave.
Minneapolis, MN 55440-0074 Minneapolis, MN 55440-0010
<PAGE>
2
By wire
For investment into an established account, you may wire money to:
Norwest Bank Minnesota
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit American Express Financial Advisors Account
#00000-30015 for personal account # (your account number) for (your name).
If this information is not included, the order may be rejected and all money
received, less any costs AECC incurs, will be returned promptly.
o Minimum amount you may wire: $1,000.
o Wire orders can be accepted only on days when your bank, AEFC, AECC and
Norwest Bank Minnesota are open for business.
o Wire purchases are completed when wired payment is received and we accept
the purchase.
o Bank wire purchases are not sent until the next business day.
o Wire investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to be credited
that day. Otherwise your purchase will be processed the next business day.
o AECC, AEFC and its other subsidiaries are not responsible for any delays
that occur in wiring funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
Full and partial withdrawals
You may withdraw your certificate for its full value or make a partial
withdrawal of $100 or more at any time. If you purchase this certificate for an
IRA, 401(k), or other retirement plan account, early withdrawals or cash
payments of interest taken prematurely may be subject to IRS penalty taxes.
o Complete withdrawal of your certificate is made by giving us proper
instructions. To complete these transactions, see "Two ways to request a
withdrawal or transfer."
o If your withdrawal request is received in the Minneapolis headquarters on a
business day before 3 p.m. Central time, it will be processed that day and
payment will be sent the next business day.
Otherwise, your request will be processed one business day later.
o Full and partial withdrawals of principal during a term are subject to
penalties, described below.
o You may not make a partial withdrawal if it would reduce your certificate
balance to less than $1,000. If you request such a withdrawal, we will
contact you for revised instructions.
<PAGE>
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. [We will also waive withdrawal penalties on
withdrawals for IRA certificate accounts for your required distributions. See
"Retirement plans special policies".]
When you request a full or partial withdrawal during a term, we pay you 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. However, we
will pay accrued fixed and interim interest to the date of the withdrawal.
Following are examples describing a $2,000 withdrawal during a term for
participation and fixed interest:
Participation interest
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.
Fixed interest
Account balance $ 10,000
Interest credited to date 100
Withdrawal of credited interest (100)
Withdrawal of principal (1,900)
2% withdrawal penalty (on $1,900 principal withdrawn) (38)
===========
Balance after withdrawal $ 8,062
Retirement plans: In addition, you may be subject to IRS penalties for early
withdrawals if your certificate is in an IRA, 401(k) or other qualified
retirement plan account.
Other full and partial withdrawal policies:
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before AECC mails a check to you. We may mail a
check earlier if the bank provides evidence that your check has cleared.
o If your certificate is pledged as collateral, 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).
Transfers to other accounts
You may transfer part or all of your certificate to any other American Express
Certificate or into another new or existing American Express Financial Advisors
Inc. account that has the same ownership (subject to any terms and conditions
that may apply).
<PAGE>
Two ways to request a withdrawal or transfer
1
By phone
Call the Client Service Organization at the telephone numbers listed on the back
cover.
o Maximum phone request: $50,000.
o Transfers into an American Express Financial Advisors Inc. account with the
same ownership.
o A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
o We will honor any telephone withdrawal or transfer request and will use
reasonable procedures to confirm authenticity.
You may request that telephone withdrawals not be authorized from your account
by writing the Client Service Organization.
2
By mail
Send your name, account number and request for a withdrawal or transfer to:
Regular mail:
American Express Financial Advisors Inc.
Client Service Organization
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Financial Advisors Inc.
Client Service Organization
733 Marquette Ave.
Minneapolis, MN 55440-0010
Written requests are required for:
o Transactions over $50,000.
o Pension plans and custodial accounts where the minor has reached the age at
which custodianship should terminate.
o Transfers to another American Express Financial Advisors Inc. account with
different ownership. (All current registered owners must sign the request.)
Three ways to receive payment when you withdraw funds
1
By regular or express mail
o Mailed to address on record; please allow seven days for mailing.
o Payable to name(s) you requested.
<PAGE>
o We will charge a fee if you request express mail delivery. We will deduct
the fee from your remaining certificate balance, provided that balance
would not be less than $1,000. If the balance would be less than $1,000, we
will deduct the fee from the proceeds of the withdrawal.
2
By wire
o Minimum wire withdrawal: $1,000.
o Request that money be wired to your bank.
o Bank account must be in same ownership as AECC account.
o Pre-authorization required. Complete the bank wire authorization section in
the application or use a form supplied by your American Express financial
advisor. All registered owners must sign.
o We may deduct a service fee from your balance (for partial withdrawals) or
from the proceeds of a full withdrawal.
3
By electronic transfer
o Available only for pre-authorized scheduled partial withdrawals and other
full or partial withdrawals.
o No charge.
o Deposited electronically in your bank account.
o Allow two to five business days from request to deposit.
Retirement plans: special policies
o If the certificate is purchased for a 401(k) plan or other qualified
retirement plan account, the terms and conditions of the certificate apply
to the plan as the owner of this certificate. However, the terms of the
plan, as interpreted by the plan trustee or administrator, will determine
how a participant's individual account under the plan is administered.
These terms may differ from the terms of the certificate.
o If your certificate is held in a Custodial Retirement Plan (or Keogh plan),
special rules may apply at maturity. If no other investment instructions
are provided directing how to handle your certificate at maturity, the full
value of the certificate will automatically transfer to a new or existing
cash management account according to rules outlined in the Custodial
Retirement Plan document.
o The annual custodial fee for IRA or non-401(k) qualified retirement plans
may be deducted from your certificate account. It may reduce the amount
payable at maturity or the amount received upon an early withdrawal.
o Retirement plan withdrawals may be subject to withdrawal penalties or loss
of interest even if they are not subject to federal tax penalties.
o We will waive withdrawal penalties on withdrawals for IRA certificate
accounts for your required distributions.
<PAGE>
o If you withdraw all funds from your last account in an IRA at American
Express Trust Company, a termination fee will apply as set out in Your
Guide to IRAs, the IRS disclosure information received when you opened your
account.
o The IRA termination fee will be waived if a withdrawal occurs after you
have reached age 70 1/2 or upon the owner's death.
Transfer of ownership
While this certificate is not negotiable, AECC will transfer ownership upon
written notification to our Client Service Organization. However, if you have
purchased your certificate for an IRA, 401(k) plan or other qualified retirement
plan, you may be unable to transfer or assign the certificate without losing the
account's favorable tax status. Please consult your tax advisor.
For more information
For information on purchases, withdrawals, exchanges, transfers of ownership,
proper instructions and other service questions regarding your certificate,
please consult your American Express financial advisor or call the Client
Service Organization at the telephone numbers listed on the back cover.
If you purchase your certificate other than through a financial advisor, you may
be given different purchase and withdrawal instructions.
Taxes on your earnings
Participation and minimum interest on your certificate is taxable when credited
to your account. Fixed and interim interest are fully taxable as earned. Each
calendar year we provide the certificate account owner and the IRS with reports
of all earnings over $10 (Form 1099). Withdrawals are reported to the
certificate owner and the IRS on Form 1099-B, "Proceeds from Broker
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 American Express Stock Market Certificate is
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
American Express Stock Market Certificate constitutes a VRDI, then the income
earned on the certificate will be treated as original issue discount and
reported when credited to the owner's account. If the certificate is not treated
as a VRDI, but rather is 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. AECC 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.
Retirement accounts
If you are using the certificate as an investment for an IRA, 401(k) plan
account or other qualified retirement plan account, income tax rules for your
IRA or qualified plan apply. Generally, you will pay no income taxes on your
investment's earnings -- and, in many cases, on part or all of the investment
itself -- until you begin to make withdrawals.
AECC will withhold federal income taxes of 10% on IRA withdrawals unless you
tell us not to. AECC is required to withhold federal income taxes of 20% on most
other qualified plan distributions, unless the distribution is directly rolled
over to another qualified plan or IRA.
<PAGE>
Withdrawals from retirement accounts are generally subject to a penalty tax of
10% by the IRS if you make them before age 59 1/2, unless you are disabled or if
they are made by your beneficiary in the event of your death. Other exceptions
may also apply.
Consult your tax advisor to see how these rules apply to you before you request
a distribution from your plan or IRA.
Gifts to minors
The 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
$1,200 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, 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 on your application when you open an account.
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
<TABLE>
<CAPTION>
<S> <C>
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)
- ------------------------------------------------------- -----------------------------------------------------
<PAGE>
- ------------------------------------------------------- -----------------------------------------------------
Sole proprietorship The owner
- ------------------------------------------------------- -----------------------------------------------------
Partnership The partnership
- ------------------------------------------------------- -----------------------------------------------------
Corporate The corporation
- ------------------------------------------------------- -----------------------------------------------------
Association, club or tax-exempt organization The organization
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
For details on TIN requirements, ask your financial advisor or contact your
local American Express Financial Advisors Inc. office 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.ustreas.gov/prod/forms_pubs/).
Foreign investors
Tax treatment of your investment: Interest paid on your certificate is most
likely "portfolio interest" as defined in U.S. Internal Revenue Code Section
871(h) if earned by a nonresident alien who has supplied the Issuer with Form
W-8, Certificate of Foreign Status. 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 Issuer will not accept purchases
of certificates by nonresident 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. American Express Certificate Company will need the new forms on file for
all clients by January 1, 2001. Depending on your status, you may provide us
with 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 (ITIN). 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 backup withholding on interest payments and withdrawals from
certificates.
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, AECC generally will not act
on instructions with regard to the certificate unless AECC first receives, at a
minimum, a statement from persons AECC believes are knowledgeable about your
estate. The statement must be satisfactory to AECC and must tell us that, on
your date of death, your estate did not include any property in the United
States for U.S. estate tax purposes. In other cases, we generally will not
<PAGE>
take action regarding your certificate until we receive a transfer certificate
from the IRS or evidence satisfactory to AECC 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.
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 this 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 AECC
AECC, a wholly owned subsidiary of AEFC, issues and guarantees the American
Express Stock Market Certificate. We are by far the largest issuer of face
amount certificates in the United States, with total assets of more than $____
billion and a net worth in excess of $____ 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.
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 Stock Market Certificate is a security, its offer
and sale are subject to regulation under federal and state securities laws. (The
American Express Stock Market Certificate is a face-amount certificate. It is
not a bank product, an equity investment, 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
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
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 certificates by more than $___ 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 AECC as described in
Note 2 to the financial statements. In general, amortized
<PAGE>
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, AECC has agreed to maintain
capital and surplus equal to 5% of outstanding liabilities on certificates (not
including loans made on certificates in accordance with terms of some
certificates that no longer are offered by AECC). AECC is not obligated to
continue to rely on the relief and continue to comply with the conditions of the
relief. Similarly, AECC has entered into a written, informal agreement with the
Minnesota Commerce Department to maintain capital equal to 5% of the assets of
AECC (less any loans on outstanding certificates). When computing its capital,
AECC 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
Government agency bonds
Preferred stocks
Mortgages
Municipal bonds
As of Dec. 31, 1999 about __% 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 AECC 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."
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, AECC relies both on independent rating agencies
and the investment manager's credit analysis. Under normal circumstances, at
least 85% of the securities in AECC's
<PAGE>
portfolio will be rated investment grade, or in the opinion of AECC's investment
advisor will be the equivalent of investment grade. Under normal circumstances,
AECC 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 AECC and will be sold only when
AECC believes it is advantageous to do so.
As of Dec. 31, 1999, AECC held about __% 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.
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 AECC, will be less than 5% of AECC'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 AECC's assets.
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. When-issued securities are subject to market fluctuations and they
may affect AECC'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
<PAGE>
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. AECC may enter
into other financial transactions, including futures and other derivatives, for
the purpose of managing the interest rate exposures associated with AECC'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.
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. AECC's
investment advisor will follow guidelines established by the board 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
AECC's investment portfolio will be held in securities that are illiquid. In
valuing its investment portfolio to determine this 15% limit, AECC will use
statutory accounting under an SEC order. 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 AECC and American Express Financial Corporation
AECC 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 __,2000.
AECC files reports on Form 10K 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, N.W., 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.
Before AECC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. As of Jan. 1, 1995,
IDS Financial Corporation changed its name to AEFC. AECC 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 $___ billion. American
Express Financial Advisors Inc., a wholly owned subsidiary of AEFC, provides a
broad range of financial planning services for individuals and businesses
through its nationwide network of more than 180 offices and more than 9,000
financial advisors. American Express Financial Advisors' financial planning
services are comprehensive, beginning with a detailed written analysis that's
tailored to your needs. Your analysis may address one or all of these six
essential areas: financial position, protection planning, investment planning,
income tax planning, retirement planning and estate planning.
<PAGE>
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 including American Express Bank International) and Travelers
Cheque and related services.
Capital structure and certificates issued
AECC has authorized, 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, AECC had issued (in face amount)
$__________ of installment certificates and $__________ of single payment
certificates. As of Dec. 31, 1999, AECC had issued (in face amount) $__________
of installment certificates and $__________ 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 AECC 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).
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 AECC except mortgage loans, real estate, and
any other asset on which we pay an outside advisory or service fee.
<PAGE>
Advisory and services fee for the past three years
Percentage of
Year Total fees included assets
1999 $ _________ ____%
1998 9,084,332 0.24
1997 17,232,602 0.50
Estimated advisory and services fees for 2000 are $__________.
Other expenses payable by AECC: 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., we
pay for the distribution of this certificate by American Express Financial
Advisors Inc. as follows.
o 0.90% of the initial investment on the first day of the certificate's term,
and
o 0.90% of the certificate's reserve at the beginning of each subsequent
term,
for certificates sold through American Express Financial Advisors, but not for
certificates sold through Securities America, Inc. (SAI) or American Express
Bank International (AEBI).
This fee is not assessed to your certificate account.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $________ during the year ended Dec. 31,
1999. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $________ during 2000.
See Note 1 to financial statements regarding deferral of distribution fee
expense.
<PAGE>
American Express Financial Advisors Inc. pays commissions to its financial
advisors. 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 AECC, approved these distribution agreements.
Selling Agent Agreements with American Express Bank International and Securities
America, Inc.
In turn, under Selling Agent Agreements with American Express Financial Advisors
Inc., AEBI and SAI receive compensation for their services as selling agents for
this certificate as follows:
o AEBI receives a fee equal to 1.0% per term of the principal amount of each
certificate for which AEBI is the selling agent.
o SAI receives a sales commission equal to 0.80%, and marketing support fees
and other compensation equal to 0.10%, per term of the principal amount of
each certificate for which SAI is the selling agent.
American Express Financial Advisors Inc. has entered into a consulting agreement
with AEBI under which AEBI provides consulting services related to any selling
agent agreements between American Express Financial Advisors Inc. and other Edge
Act corporations. For these services, American Express Financial Advisors Inc.
pays AEBI a fee for this certificate equal to 0.20% per term of the principal
amount of each certificate for which another Edge Act corporation is the selling
agent.
Such payments will be made quarterly in arrears.
These fees are not assessed to your certificate account.
AEBI is an Edge Act corporation organized under the provisions of Section 25(a)
of the Federal Reserve Act. It is a wholly owned subsidiary of American Express
Bank Ltd. (AEBL). As an Edge Act corporation, AEBI is subject to the provisions
of Section 25(a) of the Federal Reserve Act and Regulation K of the Board of
Governors of the Federal Reserve System (the Federal Reserve). It is supervised
and regulated by the Federal Reserve.
AEBI has an extensive international high net-worth client base that is serviced
by a marketing staff in New York and Florida. The banking and financial products
offered by AEBI include checking, money market and time deposits, credit
services, check collection services, foreign exchange, funds transfer,
investment advisory services and securities brokerage services. As of Dec. 31,
1999, AEBI had total assets of $___ million and total equity of $___ million.
Although AEBI is a banking entity, the American Express Stock Market Certificate
is not a bank product, nor is it backed or guaranteed by AEBI, by AEBL, or by
any other bank, nor is it guaranteed or insured by the FDIC or any other federal
agency. AEBI is registered where necessary as a securities broker-dealer.
Other Selling agents
This certificate may be sold through other selling agents, under arrangements
with American Express Financial Advisors at commissions of up to:
o __% of the initial investment on the first day of the certificate's term;
and
o __% of the certificate's reserve at the beginning of each subsequent term.
This fee is not assessed to your certificate account.
<PAGE>
In addition, AECC may pay distributors, and American Express Financial Advisors
Inc. may pay selling agents, additional compensation for selling and
distribution activities under certain circumstances. From time to time, AECC or
American Express Financial Advisors Inc. may pay or permit other promotional
incentives, in cash or credit or other compensation.
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. AECC pays AECSC a monthly fee of one-twelfth of $10.353 per
certificate owner account for this service.
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
AECC's sole shareholder, AEFC, elects the board of directors that oversees
AECC'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 $______ 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.
<PAGE>
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 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.
Pamela J. Moret*
Born in 1956. Director since December 1999. Chair 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 AECC as that term is defined in 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 December 1997. Vice president
and corporate treasurer of AEFC since December 1997. Controller, American
Express Technologies-Financial Services of AEFC from July 1997 to December 1997.
Controller, Risk Management Products of AEFC from May 1994 to July 1997.
Director of finance and analysis, Corporate Treasury of AEFC from June 1990 to
May 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. Senior 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 of AECC 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.
AECC 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 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 Act and is therefore unenforceable.
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 our financial statements 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 AECC.
American Express Certificates
Other certificates issued by AECC: Your American Express financial advisor can
give you more information on five other certificates issued by AECC. These
certificates offer a wide range of investment terms and features.
American Express Cash Reserve Certificate - A single payment certificate that
permits additional investments on which AECC guarantees interest in advance for
a three-month term.
American Express Flexible Savings Certificate - A single payment certificate
that permits additional investments and on which AECC guarantees interest in
advance for a term of six, 12, 18, 24, 30 or 36 months.
American Express Installment Certificate - An installment payment certificate
that declares interest in advance for a three-month period and offers bonuses in
the third through sixth years for regular investments.
American Express Market Strategy Certificate-A certificate that pays interest at
a fixed rate or linked to one-year stock market performance, as measured by a
broad market index, for a series of one-year terms starting every month or at
other intervals the client selects.
American Express Preferred Investors Certificate - A single payment certificate
that combines a competitive fixed rate of return with AECC's guarantee of
principal for large investments of $250,000 to $5 million.
<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, AECC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(Back Cover)
Quick telephone reference*
Client Service Organization
Withdrawals, transfers, inquiries
National/Minnesota: 800-437-3133
TTY Service
For the hearing impaired
800-846-4852
American Express Easy Access Line
Account value, cash transaction information, current rate information (automated
response, Touchtone(R) phones only)
National/Minnesota: 800-862-7919
Mpls./St. Paul area: 800-862-7919
American Express Stock Market Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
Web site address: http://www.americanexpress.com/advisors
Distributed by American Express Financial Advisors Inc.
6009
<PAGE>
American Express Stock Market Certificate
Prospectus
April 26, 2000
Potential for stock market growth with safety of principal.
American Express Certificate Company (the Issuer, AECC or AXP Certificate
Company), a subsidiary of American Express Financial Corporation, issues
American Express Stock Market Certificates. You may:
o Purchase this certificate in any amount from $1,000 through $1 million.
o Participate in any increase of the stock market based on the S&P 500 Index
while protecting your principal.
o Decide whether the Issuer will guarantee part of your return or whether to
link all of it to the market.
o Keep your certificate for up to 14 terms.
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.
This certificate is backed solely by the assets of the Issuer. See "Risk
factors" on page 2p.
American Express Certificate Company 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 agents are not required to sell any specific amount
of certificates.
Issuer:
American Express Certificate Company
Unit 557
IDS Tower 10
Minneapolis, MN 55440-0010
800-437-3133
612-671-3131
Distributor
American Express Financial Advisors Inc.
Selling Agent:
American Express Bank International
<PAGE>
Initial interest and participation rates
The Issuer guarantees return of your principal. The interest on your certificate
is linked to stock market performance as measured by the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index).
See "About the certificate" for more explanation.
Here are the interest rates and market participation percentages in effect April
26, 2000:
Maximum Market participation percentage Minimum
Return Interest
- --------------- ------------------------------------ ---------------------------
9% 100% (full) None
- --------------- ------------------------------------ ---------------------------
9% 25% (partial) Currently 2.50%
- --------------- ------------------------------------ ---------------------------
These rates may or may not have changed when you apply to purchase your
certificate. For your first term, if you choose the partial participation option
for your certificate, your minimum interest rate will be between 2.00% and
3.00%. Rates for later terms are set at the discretion of the Issuer and may
differ from the rates shown here.
Risk factors
You should consider the following when investing in this certificate:
This certificate is backed solely by the assets of the Issuer. Most of our
assets are debt securities whose price generally falls as interest rates
increase, and rises as interest rates decrease. Credit ratings of the issuer of
securities in our portfolio vary. See "Invested and guaranteed by the Issuer,"
"Regulated by the government," "Backed by out investments" and "Investment
policies" under "How your money is used and protected."
If you choose to link all of your return on this 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.
<PAGE>
Table of contents
Initial interest and participation rates p
Risk factors p
About the certificate
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
How to make investments at term end p
Full and partial withdrawals p
Other full and partial withdrawal policies p
Transfers to other accounts p
Two ways to request a withdrawal or transfer p
Two ways to receive payment when you withdraw funds p
Transfer of ownership p
For more information p
Taxes on your earnings p
Foreign investors p
Trusts 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 Agreement with American Express Bank International
and Securities America, Inc. p
Other selling agents p
About American Express Bank International p
<PAGE>
Transfer agent p
Employment of other American Express affiliates p
Directors and officers p
Independent auditors p
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
About the certificate
Read and keep this prospectus
This prospectus describes terms and conditions of your American Express Stock
Market Certificate. It contains facts that can help you decide if the
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 Stock Market Certificate as
described in the prospectus, or to bind the Issuer by any statement not in it.
This prospectus describes American Express Stock Market Certificate distributed
by American Express Financial Advisors Inc. American Express Bank International
(AEBI) has an arrangement with American Express Financial Advisors Inc. under
which the certificate is offered to AEBI's clients who are neither citizens nor
residents of the United States and to certain U.S. trusts. The certificate is
currently available through AEBI offices located in Florida and New York. This
certificate also may be available through other selling agents.
<PAGE>
Investment amounts
You may purchase the American Express Stock Market Certificate in any amount
from $1,000 through $1 million (unless you receive prior approval from AECC to
invest more) payable in U.S. currency. You may also make additional lump-sum
investments in any amount at the end of any term as long as your total amount
paid in is not more than the $1 million (unless you receive prior approval from
AECC to invest more).
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
subsequent term. The Issuer guarantees your principal. It consists of the amount
you actually invest plus interest credited to your account and any additional
investment you make 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%. AECC credits interest to your account at the end of the term.
You have not taken any interest as cash, or made any withdrawals. You have
invested an additional $2,500 prior to the beginning of the next term.
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
plus $5 Interim interest (See "Interim interest")
minus ($0) Interest paid to you in cash
plus $2,500 Additional investment to your certificate
minus ($0) Withdrawals and applicable penalties
============
$13,230 Principal at the beginning of the next term
Certificate term
Your first certificate term is a 52-week period. It begins on the Wednesday
after AECC accepts your application and ends the Tuesday before the 52-week
anniversary of its acceptance. For example, if AECC accepts your application on
a Wednesday, your first term would begin the next Wednesday. Your certificate
will earn interest at the interim interest rate then in effect until the term
begins. It will not earn any participation interest until the term begins. If
you choose to continue to receive participation interest, subsequent terms are
52-week periods that begin on the Wednesday following the 14-day grace period at
the end of the prior 52-week term. You may begin your next term on any Wednesday
during the 14-day period by providing prior written instructions to the Issuer.
If you choose to receive fixed interest, subsequent terms will be up to 52 weeks
as described in "Fixed interest" under "Interest" below.
Value at maturity
Your certificate matures after 14 terms. Then you will receive a distribution
for its value. Participation terms are always 52 weeks. Fixed interest terms may
be less than 52 weeks if you change to participation before the end of the
52-week period. At maturity, the value of your certificate will be the total of
your actual investments, plus credited interest not paid to you in cash, less
any withdrawals and withdrawal penalties. Certain other fees may apply.
<PAGE>
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. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to invest and withdraw funds."
Interest
You choose from two types of participation interest for your first term: 1) full
participation, or 2) partial participation together with minimum interest.
Interest earned under both of these options has an upper limit which is the
maximum annual return explained below. After your first term, you may choose
full or partial participation; or not to participate in any market movement and
receive a fixed rate of interest.
Full participation interest: With this option:
o you participate 100% in any percentage increase in the S&P 500 Index up to
the maximum return.
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."
Partial participation and minimum interest: This option allows you to
participate in a specified part (market participation rate) of any increase in
the S&P 500 Index together with a rate of interest guaranteed by AECC in advance
for each term (minimum interest). Your return consists of two parts:
o a percentage of any increase in the S&P 500 Index, and
o a rate of interest guaranteed by AECC in advance for each term.
Together, they cannot exceed the maximum return.
If you choose the partial participation option for your first term, the minimum
interest paid on your certificate will be between 2.00% and 3.00%.
The market participation rate and the minimum interest rate on the date of this
prospectus are listed on the inside cover under "Initial interest and
participation rates."
Fixed interest: After your first term, this fixed interest option allows you to
stop participating in the market entirely for some period of time. A fixed
interest term is 52 weeks unless you choose to start a new participation term
before your 52 week term ends. You may choose to receive a fixed rate of
interest for any term after the first term. During the term when you are
receiving fixed interest, you can change from your fixed interest selection to
again participate in the market. If you make the change from fixed interest to
participation interest, your next term would begin on the Wednesday following
our receipt of notice of your new selection. In this way, you may have a term
(during which you would earn fixed interest) that is less than 52 weeks. You may
not change from participation interest to fixed interest during a term.
<PAGE>
Maximum annual return: This is the cap, or upper limit, of your return. Your
total return including both participation and minimum interest for a term for
which you have chosen participation interest will be limited to this maximum
return percentage.
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.
Interim interest: When we accept your application, we pay interim interest to
your account for the time before your first term begins. We also pay interim
interest for the 14-day period between terms unless you write or call to ask us
to begin your next term earlier. You may withdraw this interest in cash at any
time before it becomes part of your certificate's principal without a withdrawal
penalty. If it is not withdrawn, the interest will become part of your
certificate's principal at the start of the next succeeding term. For example,
the interest you earn between the end of the first and the beginning of the
second term will become part of the principal at the start of your third term.
Interim interest rates for the time before your first term begins will be within
a range 15 basis points (.15%) below to 85 basis points (.85%) above the average
interest rate published for 12-month certificates of deposit (CDs) in the BANK
RATE MONITOR(R) (BRM) Top 25 Market Average(R). BANK RATE MONITOR and National
Index are marks owned by BANKRATE.COMSM, a division of Intelligent Life
Corporation, N. Palm Beach, FL 33408. If the BRM Average is no longer publicly
available or feasible to use, AECC may use another, similar index as a guide for
setting rates.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service has
no connection with the Issuer, AEFC or any of their affiliates.
The BRM Top 25 Market Average(R) is an index of rates and annual effective
yields offered on various length CDs by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. CDs in the BRM Average are government insured fixed-rate time deposits.
The BRM may be available in your local library. To obtain information or current
BRM Average rates, call the Client Service Organization in Minneapolis at the
telephone numbers listed on the back cover.
Earning interest: AECC 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. Fixed interest
accrues and is credited daily and compounds at the end of your term. Both
minimum and fixed interest are calculated on a 30-day month and 360-day year
basis. Interim interest accrues and is credited daily and compounds at the end
of your term immediately following the period in which interim interest is
credited.
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 on the front of this prospectus. We review
rates weekly, and have complete discretion to decide what interest rate will be
declared.
<PAGE>
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:
o Your American Express Bank International (AEBI) relationship manager.
o The Issuer's Client Service Organization at the telephone numbers listed on
the back cover.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling the Client Service Organization in Minneapolis at the
telephone numbers listed on the back cover.
Promotions and pricing flexibility
The Issuer may sponsor or participate in promotions involving the certificate
and its respective terms. For example, we may offer different rates to new
clients, to existing clients, or to individuals who purchase or use 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
different rates based on your amount invested.
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 Feb. 28, 1999. The values of the S&P 500 Index are
reprinted with the permission of S&P.
S&P 500 Index values -- December 1983 to February 2000
1400
1200 Chart shows closing values of the S&P from above 100 in Dec. 1983 to
just over 1200 in Feb. 1999
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.
<PAGE>
S&P 500 Index - December 1984 to February 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 `99
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 February 2000
25 Chart shows the distribution of all of the 52-week price returns of the
S&P 500 from 12/31/84 through 2/28/99 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
The last chart illustrates, on a moving weekly basis, the actual 52-week return
of the Stock Market Certificate at full and partial participation compared to
the price return of the NYSE Composite Index(R) through October 1992 and the S&P
500 Index after October 1992. For non-guaranteed funds received before Nov. 3,
1992, and guaranteed funds received before Nov. 4, 1992, Stock Market
Certificate participation interest was based on the NYSE Composite Index(R)
rather than the S&P 500 Index.
The chart reflects the returns payable each week by AECC on any participation
terms ending that week. There may be weeks in which no investor actually ends a
participation term.
<PAGE>
Actual 12-Month Return 1/5/93 to x/x/00
45%
40%
35% Chart shows actual returns of the certificate at full and
25% participation with the full participation generally
tracking the market indexes over the
30% period and 25% level of participation tracking at the 25% level of
return.
25%
20%
15%
10%
5%
0%
1/93 6/93 12/93 6/94 12/94 5/95 11/95 5/96 11/96 4/97 10/97 4/98 10/98 2/99 x/00
The Stock Market Certificate was first available on Jan. 24, 1990. The
performance reflects the returns on the 52-week anniversary date, falling on a
Wednesday, of each of the weeks shown.
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.
The NYSE Composite Index(R) is a registered service mark of the New York Stock
Exchange, Inc. (NYSE) and is a composite covering price movements of all common
stocks listed on the NYSE.
How an index has performed in the past does not indicate how the stock market or
the certificate will perform in the future. There is no assurance that
certificate owners will receive interest on their accounts beyond any minimum
interest or fixed 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
<PAGE>
The actual return paid to you will depend on your interest participation
selection.
For example, assume:
Term ending value of S&P 500 Index 968
Term beginning value of S&P 500 Index 890
Maximum return 9%
Minimum return 2.50%
Partial participation rate 25%
968 Term ending value of S&P 500 Index
minus 890 Term beginning value of S&P 500 Index
-----
equals 78 Difference between beginning and ending values
78 Difference between beginning and ending values
divided by 890 Term beginning value of S&P 500 Index
equals 8.76% Percent increase - full participation return
8.76% Percent increase or decrease
times 25.00% Partial participation rate
equals 2.19%
plus 2.50% 2.50% minimum interest rate
equals 4.69% Partial participation return
In both cases in the example, the return would be less than the 9% maximum.
Maximum Return and Partial Participation Minimum Rate History - The following
table illustrates the maximum annual returns and partial participation minimum
rates that have been in effect since the Stock Market Certificate was
introduced.
Start of Term Maximum annual return Partial participation minimum rate
Jan. 24, 1990 18.00% 5.00%
Feb. 5, 1992 18.00 4.00
May 13, 1992 15.00 4.00
Sept. 9, 1992 12.00 3.00
Nov. 11, 1992 10.00 2.50
Nov. 2, 1994 10.00 2.75
April 26, 1995 12.00 3.75
Jan. 17, 1996 10.00 3.25
Feb. 26, 1997 10.00 3.00
May 7, 1997 10.00 2.75
Oct. 8, 1997 10.00 2.50
Dec. 16 1998 9.00 2.50
<PAGE>
Examples:
To help you understand the way this certificate works, here are some
hypothetical examples. The following are three different examples of market
scenarios and how they affect the certificate's return.
Assume for all examples that:
o you purchased the certificate with a $10,000 original investment;
o the partial participation rate is 25%;
o the minimum interest rate for partial participation is 2.50%;
o the maximum total return for full and partial participation is 9%.
<TABLE>
<CAPTION>
1. If the S&P 500 Index value rises
<S> <C> <C> <C>
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
- ----------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000Original investment
+ 800 8% x $10,000 + 250 2.50% (Minimum interest rate) x $10,000
Participation interest + 200 25% x 8% x $10,000 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 interest Partial participation interest and minimum interest
$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 Participation interest
- - -------
(0% Total return) $10,250 Ending balance
(2.50% Total return)
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 interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 900 9% x $10,000 + 250 2.50% (Minimum interest rate) x $10,000
Maximum interest + 400 25% x 16% x $10,000 Participation interest
- -------- -------
$10,900 Ending balance $10,650 Ending balance
(9% Total return) (6.50% Total return)
</TABLE>
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.
<PAGE>
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 the American Express Stock Market Certificate
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 is not sponsored, endorsed, sold or
promoted by S&P. S&P makes no representation or warranty, express or implied, to
the owners of the certificate or any member of the public regarding the
advisability of investing in securities generally or in the certificate
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 certificate.
S&P has no obligation to take the needs of the Issuer or the owners of the
certificate 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 certificate to
be issued or in the determination or calculation of the equation by which the
certificate is to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the certificate.
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 certificate, 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 send you a notice
indicating the comparable index that will be used and give you the option to
surrender your certificate, if desired, and receive your principal, without
being assessed a surrender charge.
<PAGE>
Opportunities at the end of a term
Grace period: When your certificate term ends, you have 14 days before a new
term automatically begins. During this 14-day grace period you can:
o change your interest selection,
o add money to your certificate,
o change your term start date,
o withdraw part or all of your money without a withdrawal penalty or loss
of interest,
o or receive your interest in cash.
Fixed interest only: The grace period does not apply if you made the change from
fixed interest back to participation interest during a term as discussed in
"Fixed interest" under "Interest" above. Instead, your new 52-week term will
begin on the Wednesday following our receipt of your notice of your new interest
selection.
New term: If you do not make changes, your certificate will continue with your
current selections when the new term begins 14 days later. You will earn interim
interest during this 14-day grace period. If you don't want to wait 14 days
before starting your next market participation term, you must phone or send
written instructions before your current term ends. You can tell us to start
your next term on any Wednesday that is during the grace period and immediately
following the date on which we receive your notice. Your notice may also tell us
to change your interest selection, add to your certificate or withdraw part of
your money. The notification that we send you at the end of the term cannot be
sent before the term ends because indexing information and interest (if any) are
included in the notice and are not known until the term ends. Any additional
payments received during the current term will be applied at the end of the
current term. By starting your new term early and waiving the 14-day grace
period, you are choosing to start your next term without knowing the ending
value of your current term.
How to invest and withdraw funds
Buying your certificate
Your AEBI relationship manager or other selling agent representative will help
you fill out and submit an application to open an account with us and purchase a
certificate. We will process the application at our corporate offices in
Minneapolis. When we have accepted your application and we have received your
initial investment, we will 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. After your term begins, we will send you notice of the
value of the S&P 500 Index on the day your term began. The rates in effect on
the date we accept your application are the rates that apply to your
certificate. See "Purchase policies" below.
Important: When you open an account, you must provide a Form W-8 or approved
substitute. See "Taxes on your earnings."
Purchase policies:
The Issuer has complete discretion to determine whether to accept an application
and sell a certificate.
<PAGE>
How to make investments at term end
By wire
If you have an established account, you may wire money to:
Norwest Bank Minnesota
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit American Express Account #00-29-882 for personal
account # (your account number) for (your name).
If this information is not included, the order may be rejected and all money
received less any costs AECC incurs will be returned promptly.
o Minimum amount you may wire: $1,000.
o Wire orders can be accepted only on days when your bank, AEFC, AECC and
Norwest Bank Minnesota are open for business.
o Purchases made by wire are accepted by AEFC only from banks located in the
United States.
o Wire purchases are completed when wired payment is received and we accept
the purchase.
o Wire investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to be credited
that day. Otherwise your purchase will be processed the next business day.
o The Issuer, AEFC, its subsidiaries, AEBI, and other selling agents are not
responsible for any delays that occur in wiring funds, including delays in
processing by the bank.
o You must pay any fee the bank charges for wiring.
Full and partial withdrawals
You may withdraw your certificate for its full value or make a partial
withdrawal of $100 or more at any time. However:
o Complete withdrawal of your certificate is made by giving us proper
instructions. To complete these transactions, see "Two Ways to request a
withdrawal or transfer."
o If your withdrawal request is received in the Minneapolis headquarters on a
business day before 3 p.m. Central time, it will be processed that day and
payment will be sent the next business day.
Otherwise, your request will be processed one business day later.
o Full and partial withdrawals of principal during a term are subject to
penalties, described below.
o You may not make a partial withdrawal if it would reduce your certificate
balance to less than $1,000. If you request such a withdrawal, we will
contact you for revised instructions.
<PAGE>
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.
When you request a full or partial withdrawal during a term, we pay you 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. However, we
will pay accrued fixed and interim interest to the date of the withdrawal.
Following are examples describing a $2,000 withdrawal during a term for
participation and fixed interest:
Participation interest
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.
Fixed interest
Account balance $ 10,000
Interest credited to date 100
Withdrawal of credited interest (100)
Withdrawal of principal (1,900)
2% withdrawal penalty (on $1,900 principal withdrawn) (38)
===========
Balance after withdrawal $ 8,062
Other full and partial withdrawal policies:
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before the Issuer mails a check to you. We may mail
a check earlier if the bank provides evidence that your check has cleared.
o If your certificate is pledged as collateral, 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).
Transfers to other accounts
You may transfer part or all of your certificate to other American Express
Certificates available through AEBI.
<PAGE>
Two ways to request a withdrawal or transfer
1
By phone
Your AEBI relationship manager or other selling agent relationship officer will
handle this transaction for you. You may also call the Client Service
Organization between 8 a.m. and 6 p.m. Minneapolis time at the telephone numbers
listed on the back cover.
o Maximum phone request: $50,000.
o A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
o We will honor any telephone withdrawal or transfer request and will use
reasonable procedures to confirm authenticity. We can decline the telephone
request if we do not have enough information to confirm the request is
authentic.
You may request that telephone withdrawals not be authorized from your account
by writing the Client Service Organization.
2
By mail
Your AEBI relationship manager or other selling agent representative will handle
this transaction for you. You may also send your name, account number and
request for a withdrawal or transfer to:
Regular mail:
American Express Financial Advisors Inc.
Client Service Organization
Unit 557
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Financial Advisors Inc.
Client Service Organization
Unit 557
733 Marquette Ave.
Minneapolis, MN 55440-0010
Written requests are required for:
o Transactions over $50,000.
o Transfers to another certificate with different ownership and marketed
through AEBI (all current registered owners must sign the request).
<PAGE>
Two ways to receive payment when you withdraw funds
1
By regular or express mail
o Mailed to address on record; please allow seven days for mailing.
o Payable to name(s) you requested.
o We will charge a fee if you request express mail delivery. For a partial
withdrawal leaving a remaining balance of more than $1,000, the fee will be
deducted from the remaining balance. If the remaining balance is less than
$1,000, or if it is a full withdrawal, we will deduct the fee from proceeds
of the withdrawal.
2
By wire
o Minimum wire withdrawal: $1,000.
o Request that money be wired to your bank.
o Bank account must be in same ownership as the Issuer's account.
o Pre-authorization required. Complete the bank wire authorization section in
the application or use a form supplied by your AEBI relationship manager or
other selling agent representative. All registered owners must sign.
o We may deduct a service fee from your balance (for partial withdrawals) or
from the proceeds of a full withdrawal.
Transfer of ownership
While this certificate is not a negotiable instrument, it may be transferred or
assigned on the Issuer's records if proper written notice is received by the
Issuer. Ownership may be assigned or transferred to individuals or an entity
who, for U.S. tax purposes, is considered to be neither a citizen nor resident
of the United States. You may also pledge the certificate to AEBI or another
American Express Company affiliate or to another selling agent as collateral
security. Your AEBI or other selling agent representative can help you transfer
ownership.
For more information
For information on purchases, withdrawals, exchanges, transfers of ownership,
proper instructions and other service questions regarding your certificate,
please consult your AEBI relationship manager or other selling agent
representative, or call the Issuer's client service number in Minneapolis listed
on the back cover.
<PAGE>
Taxes on your earnings
Foreign investors
Tax treatment of your investment: Interest paid on your certificate is most
likely "portfolio interest" as defined in U.S. Internal Revenue Code Section
871(h) if earned by a nonresident alien who has supplied the Issuer with Form
W-8, Certificate of Foreign Status. 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 Issuer will not accept purchases
of certificates by nonresident 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. American Express Certificate Company will need the new forms on file for
all clients by January 1, 2001. Depending on your status, you may provide us
with 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 (ITIN). 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 backup withholding on interest payments and withdrawals from
certificates.
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, the Issuer generally will not
act on instructions with regard to the certificate unless the Issuer first
receives, at a minimum, a statement from persons the Issuer believes are
knowledgeable about your estate. The statement must be satisfactory to the
Issuer and must tell us that, on your date of death, your estate did not include
any property in the United States for U.S. estate tax purposes. In other cases,
we generally will not take action regarding your certificate until we receive a
transfer certificate from the IRS or evidence satisfactory to the Issuer 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.
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 this 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.
<PAGE>
How your money is used and protected
Invested and guaranteed by the Issuer
The Issuer, a wholly owned subsidiary of AEFC, issues and guarantees the
American Express Stock Market Certificate. We are by far the largest issuer of
face amount certificates in the United States, with total assets of more than
$____ billion and a net worth in excess of $____ 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.
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 Stock Market Certificate is a security, its offer
and sale are subject to regulation under federal and state securities laws. (The
American Express Stock Market Certificate is a face-amount certificate. It is
not a bank product, an equity investment, 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
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
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 certificates by more than $___ 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 AECC 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, AECC has agreed to maintain
capital and surplus equal to 5% of outstanding liabilities on certificates (not
including loans made on certificates in accordance with terms of some
certificates that no longer are offered by AECC). AECC is not obligated to
continue to rely on the relief and continue to comply with the conditions of the
relief. Similarly, AECC has entered into a written, informal agreement with the
Minnesota Commerce Department to maintain capital equal to 5% of the assets of
AECC (less any loans on outstanding certificates). When computing its capital,
AECC values its assets on the basis of statutory accounting for insurance
companies rather than generally accepted accounting principles.
<PAGE>
Backed by our investments
The Issuer's 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
Government agency bonds
Preferred stocks
Mortgages
Municipal bonds
As of Dec. 31, 1999 about __% 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."
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, AECC relies both on independent rating agencies
and the investment manager's credit analysis. Under normal circumstances, at
least 85% of the securities in AECC's portfolio will be rated investment grade,
or in the opinion of AECC's investment advisor will be the equivalent of
investment grade. Under normal circumstances, AECC 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 AECC and will be sold only when AECC believes it is advantageous
to do so.
As of Dec. 31, 1999, AECC held about __% of its investment portfolio (including
bonds, preferred stocks and mortgages) in investments rated below investment
grade.
<PAGE>
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.
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 AECC, will be less than 5% of AECC'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 AECC's assets.
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. When-issued securities are subject to market fluctuations and they
may affect AECC's investment portfolio the same as owned securities.
<PAGE>
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.
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. AECC's
investment advisor will follow guidelines established by the board 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
AECC's investment portfolio will be held in securities that are illiquid. In
valuing its investment portfolio to determine this 15% limit, AECC will use
statutory accounting under an SEC order. 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 __,2000.
The Issuer files reports on Form 10K 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, N.W., 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 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 $___ billion. American
Express Financial Advisors Inc., a wholly owned subsidiary of AEFC, provides a
broad range of financial planning services for individuals and businesses
through its nationwide network of more than 180 offices and more than 9,000
financial advisors. American Express Financial Advisors' financial planning
services are comprehensive, beginning with a detailed written analysis that's
tailored to your needs. Your analysis may address one or all of these six
essential areas: financial position, protection planning, investment planning,
income tax planning, retirement planning and estate planning.
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 including American Express Bank International) and Travelers
Cheque and related services.
Capital structure and certificates issued
The Issuer has authorized, 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) $__________ of installment certificates and $__________ of single
payment certificates. As of Dec. 31, 1999, the Issuer had issued (in face
amount) $__________ of installment certificates and $__________ 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 $ _________ ____%
1998 $ 9,084,332 0.24
1997 $ 17,232,602 0.50
Estimated advisory and services fees for 2000 are $__________.
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.
<PAGE>
Distribution
Under a Distribution Agreement with American Express Financial Advisors Inc., we
pay for the distribution of this certificate by American Express Financial
Advisors Inc. as described below:
o 0.90% of the initial investment on the first day of the certificate's term,
and
o 0.90% of the certificate's reserve at the beginning of each subsequent
term,
for certificates sold through American Express Financial Advisors, but not for
certificates sold through Securities America, Inc. (SAI) or American Express
Bank International (AEBI).
This fee is not assessed to your certificate account.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $________ during the year ended Dec. 31,
1999. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $________ during 2000.
See Note 1 to financial statements regarding deferral of distribution fee
expense.
American Express Financial Advisors Inc. pays 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 these distribution agreements.
Selling Agent Agreements with American Express Bank International and Securities
America, Inc.
In turn, under Selling Agent Agreements with American Express Financial Advisors
Inc., AEBI and SAI receive compensation for their services as selling agents for
this certificate as follows:
o AEBI receives a fee equal to 1.0% per term of the principal amount of each
certificate for which AEBI is the selling agent.
o SAI receives a sales commission equal to 0.80%, and marketing support fees
and other compensation equal to 0.10%, per term of the principal amount of
each certificate for which SAI is the selling agent.
American Express Financial Advisors Inc. has entered into a consulting agreement
with AEBI under which AEBI provides consulting services related to any selling
agent agreements between American Express Financial Advisors Inc. and other Edge
Act corporations. For these services, American Express Financial Advisors Inc.
pays AEBI a fee for this certificate equal to 0.20% per term of the principal
amount of each certificate for which another Edge Act corporation is the selling
agent.
Such payments will be made quarterly in arrears.
These fees are not assessed to your certificate account.
<PAGE>
About AEBI
AEBI is an Edge Act corporation organized under the provisions of Section 25(a)
of the Federal Reserve Act. It is a wholly owned subsidiary of American Express
Bank Ltd. (AEBL). As an Edge Act corporation, AEBI is subject to the provisions
of Section 25(a) of the Federal Reserve Act and Regulation K of the Board of
Governors of the Federal Reserve System (the Federal Reserve). It is supervised
and regulated by the Federal Reserve.
AEBI has an extensive international high net-worth client base that is serviced
by a marketing staff in New York and Florida. The banking and financial products
offered by AEBI include checking, money market and time deposits, credit
services, check collection services, foreign exchange, funds transfer,
investment advisory services and securities brokerage services. As of Dec. 31,
1999, AEBI had total assets of $___ million and total equity of $___ million.
Although AEBI is a banking entity, the American Express Stock Market Certificate
is not a bank product, nor is it backed or guaranteed by AEBI, by AEBL, or by
any other bank, nor is it guaranteed or insured by the FDIC or any other federal
agency. AEBI is registered where necessary as a securities broker-dealer.
Other Selling agents
This certificate may be sold through other selling agents, under arrangements
with American Express Financial Advisors at commissions of up to:
o __% of the initial investment on the first day of the certificate's term;
and
o __% of the certificate's reserve at the beginning of each subsequent term.
This fee is not assessed to your certificate account.
In addition, AECC may pay distributors, and American Express Financial Advisors
Inc. may pay selling agents, additional compensation for selling and
distribution activities under certain circumstances. For example, American
Express Financial Advisors Inc. may pay a fee to SAI in order to attend the
national sales conference of SAI, and, among other activities, promote sales of
the certificate. From time to time, AECC or American Express Financial Advisors
Inc. may pay or permit other promotional incentives, in cash or credit or other
compensation.
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. AECC pays AECSC a monthly fee of one-twelfth of $10.353 per
certificate owner account for this service.
<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
AECC'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 $__________ 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 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.
<PAGE>
Pamela J. Moret*
Born in 1956. Director since December 1999. Chair 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 AECC as that term is defined in 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 December 1997. Vice president
and corporate treasurer of AEFC since December 1997. Controller, American
Express Technologies-Financial Services of AEFC from July 1997 to December 1997.
Controller, Risk Management Products of AEFC from May 1994 to July 1997.
Director of finance and analysis, Corporate Treasury of AEFC from June 1990 to
May 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. Senior 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 of AECC 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.
AECC 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 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 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 our financial statements 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 AECC.
<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, AECC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(Back cover)
Quick telephone reference*
Selling Agent
American Express Bank International
Region Offices
101 East 52nd Street
4th Floor
New York, NY 10022
(212) 415-9500
1221 Brickell Avenue
8th Floor
Miami, FL 33131
(305) 350-2502
*You may experience delays when call volumes are high.
American Express Stock Market Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
800-437-3133
612-671-3131
Distributed by American Express Financial Advisors Inc.
6038
<PAGE>
American Express Stock Market Certificate
Prospectus
April 26, 2000
Potential for stock market growth with safety of principal.
American Express Certificate Company (AECC or AXP Certificate Company), a
subsidiary of American Express Financial Corporation, issues American Express
Stock Market Certificates. You may:
o Purchase this certificate in any amount from $2,000 through $1 million
unless you receive prior authorization from AECC to invest more.
o Participate in any increase of the stock market based on the S&P 500 Index
while protecting your principal.
o Decide whether AECC will guarantee part of your return or whether to link
all of it to the market.
o Keep your certificate for up to 14 terms.
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.
This certificate is backed solely by the assets of AECC. See "Risk factors" on
page 2p.
American Express Certificate Company 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 agent are not required to sell any specific amount
of securities.
Issuer:
American Express Certificate Company
IDS Tower 10
Minneapolis, MN 55440-0010
800-437-3133 (toll free)
Distributor:
American Express Financial Advisors Inc.
Selling Agent:
Securities America, Inc.
American Express companies
<PAGE>
Initial interest and participation rates
AECC guarantees return of your principal. The interest on your certificate is
linked to stock market performance as measured by the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index). See "About the certificate" for
more explanation.
Here are the interest rates and market participation percentages in effect April
26, 2000:
Maximum Market participation percentage Minimum
Return Interest
- ------------------------- ------------------------------------ ----------------
9% 100% (full) None
- ------------------------- ------------------------------------ ----------------
9% 25% (partial) Currently 2.50%
- ------------------------- ------------------------------------ ----------------
These rates may or may not have changed when you apply to purchase your
certificate. For your first term, if you choose the partial participation option
for your certificate, your minimum interest rate will be between 2.00% and
3.00%. Rates for later terms are set at the discretion of AECC and may differ
from the rates shown here.
Risk factors
You should consider the following when investing in this certificate:
This certificate is backed solely by the assets of AECC. Most of our assets are
debt securities whose price generally falls as interest rates increase, and
rises as interest rates decrease. Credit ratings of the issuers of securities in
our portfolio vary. See "Invested and guaranteed by AECC," "Regulated by the
government," "Backed by our investments" and "Investment policies" under "How
your money is used and protected."
If you choose to link all of your return on this 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.
<PAGE>
Table of contents
Initial interest and participation rates p
Risk factors p
About the certificate
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 your funds p
Buying your certificate p
Transfer of ownership p
Taxes on your earnings p
Gifts to minors p
How to determine the correct TIN p
Foreign investors p
Trusts p
How your money is used and protected p
Invested and guaranteed by AECC p
Regulated by government p
Backed by our investments p
Investment policies p
How your money is managed p
Relationship between AECC and American
Express Financial Corporation p
About Securities America, Inc. p
Capital structure and certificates issued p
Investment management and services p
Distribution p
Selling Agreement with American Express Bank International
and Securities America, Inc. p
Other selling agents p
Transfer agent p
Employment of other American Express affiliates p
Directors and officers p
Independent auditors p
<PAGE>
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 certificate
Read and keep this prospectus
This prospectus describes terms and conditions of your American Express Stock
Market Certificate. It contains facts that can help you decide if the
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 Stock Market Certificate as
described in the prospectus, or to bind AECC by any statement not in it.
Investment amounts
You may purchase the American Express Stock Market Certificate in any amount
from $2,000 through $1 million (unless you receive prior approval from AECC to
invest more) payable in U.S. currency. You may also make additional lump-sum
investments in any amount at the end of any term as long as your total amount
paid in is not more than the $1 million (unless you receive prior approval from
AECC to invest more).
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
subsequent term. AECC guarantees your principal. It consists of the amount you
actually invest plus interest credited to your account and any additional
investment you make 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%. AECC credits interest to your account at the end of the term.
You have not taken any interest as cash, or made any withdrawals. You have
invested an additional $2,500 prior to the beginning of the next term.
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
plus $5 Interim interest (See "Interim interest")
minus ($0) Interest paid to you in cash
plus $2,500 Additional investment to your certificate
minus ($0) Withdrawals and applicable penalties
============
$13,230 Principal at the beginning of the next term
Certificate term
Your first certificate term is a 52-week period. It begins on the Wednesday
after AECC accepts your application and ends the Tuesday before the 52-week
anniversary of its acceptance. For example, if AECC accepts your application on
a Wednesday, your first term would begin the next Wednesday. Your certificate
will earn interest at the interim interest rate then in effect until the term
begins. It will not earn any participation interest until the term begins. If
you choose to continue to receive participation interest, subsequent terms are
52-week periods that begin on the Wednesday following the 14-day grace period at
the end of the prior 52-week term. You may begin your next term on any Wednesday
during the 14-day period by providing prior written instructions to AECC. If you
choose to receive fixed interest, subsequent terms will be up to 52 weeks as
described in "Fixed interest" under "Interest" below.
<PAGE>
Value at maturity
Your certificate matures after 14 terms. Then you will receive a distribution
for its value. Participation terms are always 52 weeks. Fixed interest terms may
be less than 52 weeks if you change to participation before the end of the
52-week period. At maturity, the value of your certificate will be the total of
your actual investments, 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, as well as conditions under
which penalties apply.
Interest
You choose from two types of participation interest for your first term: 1) full
participation, or 2) partial participation together with minimum interest.
Interest earned under both of these options has an upper limit which is the
maximum annual return explained below. After your first term, you may choose
full or partial participation; or not to participate in any market movement and
receive a fixed rate of interest.
Full participation interest: With this option:
o you participate 100% in any percentage increase in the S&P 500 Index up to
the maximum return.
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."
Partial participation and minimum interest: This option allows you to
participate in a specified part (market participation rate) of any increase in
the S&P 500 Index together with a rate of interest guaranteed by AECC in advance
for each term (minimum interest). Your return consists of two parts:
o a percentage of any increase in the S&P 500 Index, and
o a rate of interest guaranteed by AECC in advance for each term.
Together, they cannot exceed the maximum return.
If you choose the partial participation option for your first term, the minimum
interest paid on your certificate will be between 2.00% and 3.00%.
The market participation rate and the minimum interest rate on the date of this
prospectus are listed on the inside cover under "Initial interest and
participation rates."
<PAGE>
Fixed interest: After your first term, this fixed interest option allows you to
stop participating in the market entirely for some period of time. A fixed
interest term is 52 weeks unless you choose to start a new participation term
before your 52 week term ends. You may choose to receive a fixed rate of
interest for any term after the first term. During the term when you are
receiving fixed interest, you can change from your fixed interest selection to
again participate in the market. If you make the change from fixed interest to
participation interest, your next term would begin on the Wednesday following
our receipt of notice of your new selection. In this way, you may have a term
(during which you would earn fixed interest) that is less than 52 weeks. You may
not change from participation interest to fixed interest during a term.
Maximum annual return: This is the cap, or upper limit, of your return. Your
total return including both participation and minimum interest for a term for
which you have chosen participation interest will be limited to this maximum
return percentage.
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.
Interim interest: When we accept your application, we pay interim interest to
your account for the time before your first term begins. We also pay interim
interest for the 14-day period between terms unless you write or call to ask us
to begin your next term earlier. You may withdraw this interest in cash at any
time before it becomes part of your certificate's principal without a withdrawal
penalty. If it is not withdrawn, the interest will become part of your
certificate's principal at the start of the next succeeding term. For example,
the interest you earn between the end of the first and the beginning of the
second term will become part of the principal at the start of your third term.
Interim interest rates for the time before your first term begins will be within
a range 15 basis points (.15%) below to 85 basis points (.85%) above the average
interest rate published for 12-month certificates of deposit (CDs) in the BANK
RATE MONITOR(R) (BRM) Top 25 Market Average(R). BANK RATE MONITOR and National
Index are marks owned by BANKRATE.COMSM, a division of Intelligent Life
Corporation, N. Palm Beach, FL 33408. If the BRM Average is no longer publicly
available or feasible to use, AECC may use another, similar index as a guide for
setting rates.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service has
no connection with the Issuer, AEFC or any of their affiliates.
The BRM Top 25 Market Average(R) is an index of rates and annual effective
yields offered on various length CDs by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. CDs in the BRM Average are government insured fixed-rate time deposits.
The BRM may be available in your local library. To obtain information or current
BRM Average rates, call the Client Service Organization at the telephone numbers
listed on the back cover.
Earning interest: AECC 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. Fixed interest
accrues and is credited daily and compounds at the end of your term. Both
minimum and fixed interest are calculated on a 30-day month and 360-day year
basis. Interim interest accrues and is credited daily and compounds at the end
of your term immediately following the period in which interim interest is
credited.
<PAGE>
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 on the front of this prospectus. We review
rates weekly, and have complete discretion to decide what 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 American Express financial advisor, or the Client Service Organization at
the telephone numbers listed on the back cover.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling 800-437-3133.
Promotions and pricing flexibility
AECC may sponsor or participate in promotions involving the certificate and its
respective terms. For example, we may offer different rates 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 different rates based on the amount invested and geographic
location.
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 Feb. 28, 1999. The values of the S&P 500 Index are
reprinted with the permission of S&P.
S&P 500 Index values -- December 1983 to February 2000
1400
1200 Chart shows closing values of the S&P from above 100 in Dec. 1983
to just over 1200 in Feb. 1999
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 ______
- ------------------------ ---------------------- -------------------------
<PAGE>
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 February 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 `99
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 February 2000
25 Chart shows the distribution of all of the 52-week price returns of
the S&P 500 from 12/31/84 through 2/28/99 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
The last chart illustrates, on a moving weekly basis, the actual 52-week return
of the Stock Market Certificate at full and partial participation compared to
the price return of the NYSE Composite Index(R) through October 1992 and the S&P
500 Index after October 1992. For non-guaranteed funds received before Nov. 3,
1992, and guaranteed funds received before Nov. 4, 1992, Stock Market
Certificate participation interest was based on the NYSE Composite Index(R)
rather than the S&P 500 Index.
<PAGE>
Actual 12-Month Return 1/5/93 to x/x/00
45%
40%
35% Chart shows actual returns of the certificate at full and
25% participation with the full participation generally
tracking the market indexes over the period and 25% level
30% of participation tracking at the 25% level of return.
25%
20%
15%
10%
5%
0%
1/93 6/93 12/93 6/94 12/94 5/95 11/95 5/96 11/96 4/97 10/97 4/98 10/98 2/99 x/00
The Stock Market Certificate was first available on Jan. 24, 1990. The
performance reflects the returns on the 52-week anniversary date, falling on a
Wednesday, of each of the weeks shown.
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.
The NYSE Composite Index(R) is a registered service mark of the New York Stock
Exchange, Inc. (NYSE) and is a composite covering price movements of all common
stocks listed on the NYSE.
How an index has performed in the past does not indicate how the stock market or
the certificate will perform in the future. There is no assurance that
certificate owners will receive interest on their accounts beyond any minimum
interest or fixed 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
<PAGE>
The actual return paid to you will depend on your interest participation
selection.
For example, assume:
Term ending value of S&P 500 Index 968
Term beginning value of S&P 500 Index 890
Maximum return 9%
Minimum return 2.50%
Partial participation rate 25%
968 Term ending value of S&P 500 Index
minus 890 Term beginning value of S&P 500 Index
-----
equals 78 Difference between beginning and ending values
78 Difference between beginning and ending values
divided by 890 Term beginning value of S&P 500 Index
-----
equals 8.76% Percent increase - full participation return
8.76% Percent increase or decrease
times 25.00% Partial participation rate
equals 2.19%
plus 2.50% 2.50% minimum interest rate
------
equals 4.69% Partial participation return
In both cases in the example, the return would be less than the 9% maximum.
Maximum Return and Partial Participation Minimum Rate History - The following
table illustrates the maximum annual returns and partial participation minimum
rates that have been in effect since the Stock Market Certificate was
introduced.
Partial participation
Start of Term Maximum annual return minimum rate
Jan. 24, 1990 18.00% 5.00%
Feb. 5, 1992 18.00 4.00
May 13, 1992 15.00 4.00
Sept. 9, 1992 12.00 3.00
Nov. 11, 1992 10.00 2.50
Nov. 2, 1994 10.00 2.75
April 26, 1995 12.00 [3.50/3.75]
Jan. 17, 1996 10.00 3.25
Feb. 26, 1997 10.00 3.00
May 7, 1997 10.00 2.75
Oct. 8, 1997 10.00 2.50
Dec. 16 1998 9.00 2.50
<PAGE>
Examples:
To help you understand the way [a participation term of] this certificate works,
here are some hypothetical examples. The following are three different examples
of market scenarios and how they affect the certificate's return. Assume for all
examples that:
o you purchased the certificate with a $10,000 original investment;
o the partial participation rate is 25%;
o the minimum interest rate for partial participation is 2.50%;
o the maximum total return for full and partial participation is 9%.
<TABLE>
<CAPTION>
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
- --------------------------------------------------------------------------------
<S> <C>
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000Original investment
+ 800 8% x $10,000 + 250 2.50% (Minimum interest rate) x $10,000
Participation interest + 200 25% x 8% x $10,000 Participation interest
- -------- -------
$10,800 Ending balance $10,450 Ending balance
(8% Total return) (4.50% Total return)
</TABLE>
2. If the Market and the S&P 500 Index value fall
<TABLE>
<CAPTION>
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
- --------------------------------------------------------------------------------
<S> <C>
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000Original investment
+ 0 Participation interest + 250 2.50% (Minimum interest rate) x $10,000
- --------
$10,000 Ending balance + 0 Participation interest
- - -------
(0% Total return) $10,250 Ending balance
(2.50% Total return)
</TABLE>
3. If the Market and the S&P 500 Index value rise above the maximum return
<TABLE>
<CAPTION>
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
- --------------------------------------------------------------------------------
<S> <C>
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000Original investment
+ 900 9% x $10,000 + 250 2.50% (Minimum interest rate) x $10,000
Maximum interest + 400 25% x 16% x $10,000 Participation interest
- -------- -------
$10,900 Ending balance $10,650 Ending balance
(9% Total return) (6.50% Total return)
</TABLE>
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. AECC 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 the American Express Stock Market Certificate
excludes dividends on the 500 stocks.
<PAGE>
"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 AECC. The certificate is not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the owners
of the certificate or any member of the public regarding the advisability of
investing in securities generally or in the certificate particularly or the
ability of the S&P 500 Index to track general stock market performance. S&P's
only relationship to AECC 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 AECC or the certificate. S&P has no obligation to take the
needs of AECC or the owners of the certificate 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 certificate to be issued or in the determination or
calculation of the equation by which the certificate is to be converted into
cash. S&P has no obligation or liability in connection with the administration,
marketing or trading of the certificate.
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 AECC, owners of the certificate, 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 send you a notice
indicating the comparable index that will be used and give you the option to
surrender your certificate, if desired, and receive your principal, without
being assessed a surrender charge.
Opportunities at the end of a term
Grace period: When your certificate term ends, you have 14 days before a new
term automatically begins. During this 14-day grace period you can:
o change your interest selection,
o add money to your certificate,
o change your term start date,
o withdraw part or all of your money without a withdrawal penalty or loss of
interest,
o or receive your interest in cash.
Fixed interest only: The grace period does not apply if you made the change from
fixed interest back to participation interest during a term as discussed in
"Fixed interest" under "Interest" above. Instead, your new 52-week term will
begin on the Wednesday following our receipt of your notice of your new interest
selection.
New term: If you do not make changes, your certificate will continue with your
current selections when the new term begins 14 days later. You will earn interim
interest during this 14-day grace period. If you don't want to wait 14 days
before starting your next market participation term, you must phone or send
written instructions before your current term ends. You can tell us to start
your next term on any Wednesday that is during the grace period and immediately
following the date on which we receive your notice. Your notice may also tell us
to change your interest selection, add to your certificate or withdraw part of
your money. The notification that we send you at the end of the term cannot be
sent before the term ends because indexing information and interest (if any) are
included in the notice and are not known until the term ends. Any
<PAGE>
additional payments received during the current term will be applied at the end
of the current term. By starting your new term early and waiving the 14-day
grace period, you are choosing to start your next term without knowing the
ending value of your current term.
How to invest and withdraw funds
Buying your certificate
Your registered representative will help you fill out and submit an application
to open an account with us and purchase a certificate. We will process the
application at our corporate offices in Minneapolis. When we have accepted your
application and we have received your initial investment, we will 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. After your
term begins, we will send you notice of the value of the S&P 500 Index on the
day your term began. The rates in effect on the date we accept your application
are the rates that apply to your certificate. See "Purchase policies" below.
Important: When you open an account, you must provide AECC 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, we will contact
you for revised instructions.
When you request a full or partial withdrawal during a term, we pay you 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. However, we
will pay accrued fixed and interim interest to the date of the withdrawal.
Following are examples describing a $2,000 withdrawal during a term for
participation and fixed interest:
Participation interest
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.
Fixed interest
Account balance $ 10,000
Interest credited to date 100
Withdrawal of credited interest (100)
Withdrawal of principal (1,900)
2% withdrawal penalty (on $1,900 principal withdrawn) (38)
===========
Balance after withdrawal $ 8,062
<PAGE>
Other full and partial withdrawal policies:
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before AECC mails a check to you. We may mail a
check earlier if the bank provides evidence that your check has cleared.
o If your certificate is pledged as collateral, 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).
o We will charge a fee if you request express mail delivery. We will deduct
the fee from your remaining certificate balance, provided that balance
would not be less than $2,000. If the balance would be less than $2,000,
we will deduct the fee from the proceeds of the withdrawal.
o We may deduct a service fee from your balance (for partial withdrawals) or
from the proceeds of a full withdrawal.
Transfer of ownership
While this certificate is not negotiable, AECC will transfer ownership upon
written notification to our Client Service Organization.
Taxes on your earnings
Participation and minimum interest on your certificate is taxable when credited
to your account. Fixed and interim interest are fully taxable as earned. Each
calendar year we provide the certificate account owner and the IRS with reports
of all earnings over $10 (Form 1099). Withdrawals are reported to the
certificate owner and the IRS on Form 1099-B, "Proceeds from Broker
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 American Express Stock Market Certificate is
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
American Express Stock Market Certificate constitutes a VRDI, then the income
earned on the certificate will be treated as original issue discount and
reported when credited to the owner's account. If the certificate is not treated
as a VRDI, but rather is 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. AECC 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.
Gifts to minors
The 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
$1,200 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.
<PAGE>
Your TIN and backup withholding: As with any financial account you open, 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 on your application when you open an account.
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
<TABLE>
<CAPTION>
<S> <C>
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
- ------------------------------------------------------- -----------------------------------------------------
Partnership The partnership
- ------------------------------------------------------- -----------------------------------------------------
Corporate The corporation
- ------------------------------------------------------- -----------------------------------------------------
Association, club or tax-exempt organization The organization
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
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.ustreas.gov/prod/forms_pubs/).
<PAGE>
Foreign investors
Tax treatment of your investment: Interest paid on your certificate is most
likely "portfolio interest" as defined in U.S. Internal Revenue Code Section
871(h) if earned by a nonresident alien who has supplied the Issuer with Form
W-8, Certificate of Foreign Status. 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 Issuer will not accept purchases
of certificates by nonresident 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. American Express Certificate Company will need the new forms on file for
all clients by January 1, 2001. Depending on your status, you may provide us
with 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 (ITIN). 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 backup withholding on interest payments and withdrawals from
certificates.
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, AECC generally will not act
on instructions with regard to the certificate unless AECC first receives, at a
minimum, a statement from persons AECC believes are knowledgeable about your
estate. The statement must be satisfactory to AECC and must tell us that, on
your date of death, your estate did not include any property in the United
States for U.S. estate tax purposes. In other cases, we generally will not take
action regarding your certificate until we receive a transfer certificate from
the IRS or evidence satisfactory to AECC 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.
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 this 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.
<PAGE>
How your money is used and protected
Invested and guaranteed by AECC
AECC, a wholly owned subsidiary of AEFC, issues and guarantees the American
Express Stock Market Certificate. We are by far the largest issuer of face
amount certificates in the United States, with total assets of more than $____
billion and a net worth in excess of $____ 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.
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 Stock Market Certificate is a security, its offer
and sale are subject to regulation under federal and state securities laws. The
American Express Stock Market Certificate is a face-amount certificate. It is
not a bank product, an equity investment, 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
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
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 certificates by more than $___ 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 AECC 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, AECC has agreed to maintain
capital and surplus equal to 5% of outstanding liabilities on certificates (not
including loans made on certificates in accordance with terms of some
certificates that no longer are offered by AECC). AECC is not obligated to
continue to rely on the relief and continue to comply with the conditions of the
relief. Similarly, AECC has entered into a written, informal agreement with the
Minnesota Commerce Department to maintain capital equal to 5% of the assets of
AECC (less any loans on outstanding certificates). When computing its capital,
AECC values its assets on the basis of statutory accounting for insurance
companies rather than generally accepted accounting principles.
<PAGE>
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
Government agency bonds
Preferred stocks
Mortgages
Municipal bonds
As of Dec. 31, 1999, about __% 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 AECC 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."
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, AECC relies both on independent rating agencies
and the investment manager's credit analysis. Under normal circumstances, at
least 85% of the securities in AECC's portfolio will be rated investment grade,
or in the opinion of AECC's investment advisor will be the equivalent of
investment grade. Under normal circumstances, AECC 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 AECC and will be sold only when AECC believes it is advantageous
to do so.
As of Dec. 31, 1999, AECC held about __% 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.
<PAGE>
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.
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 AECC, will be less than 5% of AECC'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 AECC's assets.
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. When-issued securities are subject to market fluctuations and they
may affect AECC'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. AECC may enter into other
financial transactions, including futures and other derivatives, for the purpose
of managing the interest rate exposures associated with AECC'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. 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. AECC's
investment advisor will follow guidelines
<PAGE>
established by the board 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 AECC's investment portfolio will be held in
securities that are illiquid. In valuing its investment portfolio to determine
this 15% limit, AECC will use statutory accounting under an SEC order. 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 AECC and American Express Financial Corporation
AECC 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 ___, 2000.
AECC files reports on Forms 10-K and 10-Q with the Securities and Exchange
Commission (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.
Before AECC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. As of Jan. 1, 1995,
IDS Financial Corporation changed its name to AEFC. AECC 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 $___ 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 services.
About Securities America, Inc.
SAI is a wholly owned subsidiary of Securities America Financial Corporation
(formerly Financial Dynamics Inc.). American Express Financial Corporation
acquired Financial Dynamics Inc. in March 1998. SAI operates as a fee-based
broker dealer. As of March __, 2000 SAI. had ______ registered representatives.
<PAGE>
Capital structure and certificates issued
AECC has authorized, 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, AECC had issued (in face amount)
$__________ of installment certificates and $__________ of single payment
certificates. As of Dec. 31, 1999, AECC had issued (in face amount) $__________
of installment certificates and $__________ 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 AECC 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).
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 AECC 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 $ _________ ____%
1998 $ 9,084,332 0.24
1997 $ 17,232,602 0.50
Estimated advisory and services fees for 2000 are $__________.
<PAGE>
Other expenses payable by AECC: 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 this certificate
by American Express Financial Advisors Inc. as follows:
o 0.90% of the initial investment on the first day of the certificate's term,
and
o 0.90% of the certificate's reserve at the beginning of each subsequent
term,
for certificates sold through American Express Financial Advisors, but not for
certificates sold through American Express Bank International (AEBI), or
Securities America, Inc. (SAI).
This fee is not assessed to your certificate account.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $______________ during the year ended Dec.
31, 1999. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $__________________ 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 AECC, approved these distribution agreements.
Selling Agent Agreements with American Express Bank International and Securities
America, Inc.
In turn, under Selling Agent Agreements with American Express Financial Advisors
Inc., AEBI and SAI receive compensation for their services as selling agents for
this certificate as follows:
o AEBI receives a fee equal to 1.0% per term of the principal amount of each
certificate for which AEBI is the selling agent.
<PAGE>
o SAI receives a sales commission equal to 0.80%, and marketing support fees
and other compensation equal to 0.10%, per term of the principal amount of
each certificate for which SAI is the selling agent.
American Express Financial Advisors Inc. has entered into a consulting agreement
with AEBI under which AEBI provides consulting services related to any selling
agent agreements between American Express Financial Advisors Inc. and other Edge
Act corporations. For these services, American Express Financial Advisors Inc.
pays AEBI a fee for this certificate equal to 0.20% per term of the principal
amount of each certificate for which another Edge Act corporation is the selling
agent.
Such payments will be made quarterly in arrears.
These fees are not assessed to your certificate account.
AEBI is an Edge Act corporation organized under the provisions of Section 25(a)
of the Federal Reserve Act. It is a wholly owned subsidiary of American Express
Bank Ltd. (AEBL). As an Edge Act corporation, AEBI is subject to the provisions
of Section 25(a) of the Federal Reserve Act and Regulation K of the Board of
Governors of the Federal Reserve System (the Federal Reserve). It is supervised
and regulated by the Federal Reserve.
Although AEBI is a banking entity, the Stock Market Certificate is not a bank
product, nor is it backed or guaranteed by AEBI, by AEBL, or by any other bank,
nor is it guaranteed or insured by the FDIC or any other federal agency. AEBI is
registered where necessary as a securities broker-dealer.
Other Selling agents
This certificate may be sold through other selling agents, under arrangements
with American Express Financial Advisors at commissions of up to:
o __% of the initial investment on the first day of the certificate's term;
and
o __% of the certificate's reserve at the beginning of each subsequent term.
This fee is not assessed to your certificate account.
In addition, AECC may pay distributors, and American Express Financial Advisors
Inc. may pay selling agents, additional compensation for selling and
distribution activities under certain circumstances. For example, American
Express Financial Advisors Inc. may pay a fee to SAI in order to attend the
national sales conference of SAI, and, among other activities, promote sales of
the certificate. From time to time, AECC or American Express Financial Advisors
Inc. may pay or permit other promotional incentives, in cash or credit or other
compensation.
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. AECC pays AECSC a monthly fee of one-twelfth of $10.353 per
certificate owner account for this service.
<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.
<PAGE>
Directors and officers
AECC's sole shareholder, AEFC, elects the board of directors that oversees
AECC'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 $______ 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 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.
Pamela J. Moret*
Born in 1956. Director since December 1999. Chair 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 AECC as that term is defined in Investment Company Act
of 1940.
Executive officers
Paula R. Meyer
Born in 1954. President since June 1998.
<PAGE>
Jeffrey S. Horton
Born in 1961. Vice president and treasurer since December 1997. Vice president
and corporate treasurer of AEFC since December 1997. Controller, American
Express Technologies-Financial Services of AEFC from July 1997 to December 1997.
Controller, Risk Management Products of AEFC from May 1994 to July 1997.
Director of finance and analysis, Corporate Treasury of AEFC from June 1990 to
May 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. Senior 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 of AECC 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.
AECC 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 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 Act and is therefore unenforceable.
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 our financial statements 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 AECC.
<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, AECC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(back cover)
Quick telephone reference*
Selling Agent Securities America, Inc. 800-747-6111
Omaha Area:
402-399-9111
*You may experience delays when call volumes are high.
American Express Stock Market Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
6035
<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) Copy of 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.
(b) Copy of Distribution Agreement dated March 29, 1996
between Registrant and American Express Service
Corporation filed electronically as Exhibit 1(b) to
Post-Effective Amendment No. 17 to Registration
Statement No. 2-95577 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) 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) 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.
(f) 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. 9 to Registration Statement No. 33-26844,
is incorporated herein by reference.
(g) 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.
(h) 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.
(i) 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.
(j) Form of 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>
(k) 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.
(l) 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.
(m) 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. Consent of Independent Auditors' Report to be filed
with a subsequent post-effective amendment to this
registration statement.
24. (a) Officers' Power of Attorney, dated September 8, 1998,
filed electronically as Exhibit 24(a) to Post-Effective
Amendment No. 22 to Registration Statement No.
33-22503, is incorporated herein by reference.
(b) Directors' Power of Attorney, dated April 26, 1999,
filed electronically as Exhibit 24(a) to Registrant's
March 31, 1999 Quarterly Report is incorporated herein
by reference.
(c) Director's Power of Attorney, dated December 21, 1999,
filed electronically as Exhibit 24(c) to Post-Effective
Amendment No. 19 to Registration Statement No.
33-26844, is incorporated herein by reference.
25. through 27. -- None.
(b) The financial statement schedules for IDS Certificate Company will be filed
with a subsequent post-effective amendment to Registration Statement No.
2-55252 for Series D-1 Investment Certificate.
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, and American
Express Bank International, as selling agent 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 their
respective 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 their respective 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
<PAGE>
admitted or contemplated), but such liability shall be subject
to the conditions and limitations described in said Acts.
American Express Financial Advisors Inc. and American Express
Bank International 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
respective agents of American Express Financial Advisors Inc.
and American Express Bank International 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 amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Minneapolis and State of Minnesota, on
the 6th day, of January, 2000.
IDS CERTIFICATE COMPANY
By: /s/ Paula R. Meyer*
Paula R. Meyer, President
Pursuant to the requirements of the Securities Act of 1933, this amendment has
been signed below by the following persons in the capacities on the 6th day, of
January, 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/ Jay C. Hatlestad* Vice President and Controller
Jay C. Hatlestad (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 September 8, 1998 filed
electronically as Exhibit 24(a) to Post-Effective Amendment No. 22 to
Registration Statement No. 33-22503, incorporated herein by reference.
/s/Bruce A. Kohn
Bruce A. Kohn
**Signed pursuant to Directors' Power of Attorney dated April 26, 1999 filed
electronically as Exhibit 24(a) to Registrant's March 31, 1999 Quarterly Report,
incorporated herein by reference.
/s/Bruce A. Kohn
Bruce A. Kohn
***Signed pursuant to Director's Power of Attorney dated December 21, 1999 filed
electronically as Exhibit 24(c) to Post-Effective Amendment No. 19 to
Registration Statement No. 33-26844, incorporated herein by reference.
/s/Bruce A. Kohn
Bruce A. Kohn
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 25 TO
REGISTRATION STATEMENT NO. 33-22503
Cover Page
Prospectus
Part II Information
Signatures
