SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 16 TO
FORM S-6
File No. 33-11165
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: IDS Life Variable Life Separate Account
B. Name of depositor: IDS LIFE INSURANCE COMPANY
C. Complete address of depositor's principal executive offices:
IDS Tower, Minneapolis, Minnesota 55440-0010
D. Name and complete address of agent for service:
Mary Ellyn Minenko, Esq.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440-0010
E. Title and amount of securities being registered:
Flexible Premium Variable Life Insurance Policy
F. Proposed maximum aggregate offering price to the public of the securities
being registered:
Registration of Indefinite Amount of Securities Pursuant to Rule
24f-2 under the Investment Company Act of 1940.
G. Amount of filing fee:
Registrant's Rule 24f-2 Notice for its most recent fiscal year was filed
on or about February 24, 1998.
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H. Approximate date of proposed public offering:
It is proposed that this filing will become effective (check appropriate space)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
X on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
1...........Cover Page; The variable account
2 IDS Life
3 Not applicable
4 Distribution of the policy
5 The variable account
6 The variable account
7 Not applicable
8 Not applicable
9 Not applicable
10 Surrender charge; Total surrenders;
Partial surrenders; Taxation of
policy proceeds; Reinstatement;
Transfers between the fixed account
and the subaccounts; Grace period;
Voting rights; Substitution of
investments; Payment of premiums;
The fixed account; Allocation of
premiums; Transfers between the
fixed account and the subaccounts;
Right to examine policy
11 The fund; The trust
12 The fund; The trust; Cover page
13 Loads, fees, and charges
14 Purchasing your policy; Application
15 Premiums; Payment of premiums;
Transfers between the fixed account
and the subaccounts; The fund, The
trust
16 Premiums; Payment of premiums;
Transfers between the fixed account
and the subaccounts; The fund; The
trust
17 Two ways to request a transfer, loan or surrender; Policy
surrenders
18 The fund; the trust
19 Reports
20 Not applicable
21 Policy loans; fixed account and subaccounts; Two ways to
request a transfer, loan or surrender
22 Not applicable
23 Management of IDS Life
24 Policy value; Death benefits; Payment of policy proceeds
25 IDS Life
26 Not applicable
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27 IDS Life
28 Management of IDS Life
29 Ownership
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 Not applicable
36 Not applicable
37 Not applicable
38 Distribution of the policy
39 IDS Life; Distribution of the policy
40 Not applicable
41 Distribution of the policy; IDS Life
42 Management of IDS Life
43 Not applicable
44 Premiums; Transfers between the fixed account and
subaccounts; Subaccount values
45 Not applicable
46 Subaccount values
47 Not applicable
48 IDS Life
49 Not applicable
50 Not applicable
51 The variable account
52 Substitution of investments
53 IDS Life's tax status
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Not applicable
<PAGE>
Flexible Premium Variable Life Insurance Policy
Prospectus May 1, 1998
The Flexible Premium Variable Life Insurance Policy described in this prospectus
is designed to provide life insurance coverage on the insured named in the
policy and flexibility of premium payments and death benefits. This flexibility
allows you to meet changing insurance needs with a single insurance policy. The
policy is intended to qualify as a life insurance policy under Sections 72, 101
and 7702 of the Internal Revenue Code.
You may allocate policy value to one or more of nine subaccounts of IDS Life
Variable Life Separate Account. Six subaccounts invest in the portfolios of IDS
Life Series Fund: Equity, Income, Money Market, Managed, Government Securities
and International Equity. One subaccount invests in the AIM V.I. Growth and
Income Fund. One subaccount invests in the Putnam VT New Opportunities Fund. One
subaccount invests in the Smith Barney Inc. Stripped ("Zero Coupon") U.S.
Treasury Securities Fund, Series A. There is no guaranteed minimum policy value
with respect to the subaccounts, and you bear the entire investment risk. You
may also allocate policy value to the fixed account, which earns at least a
guaranteed minimum interest rate. The fixed account is the general investment
account of IDS Life.
You may withdraw a portion of the policy's cash surrender value after the first
policy year or surrender it in full at any time for its cash surrender value.
Surrender charges are described under "Loads, fees and charges." You may also
take out policy loans.
The frequency of and amount of premium payments are flexible, subject to certain
restrictions and conditions. Payment of the scheduled premium will not
necessarily keep a policy from lapsing if the cash surrender value is less than
the amount needed to pay the monthly deduction. (See "Loads, fees and charges.")
However, a policy will not lapse if the premiums needed to keep the death
benefit guarantee in effect are paid. The death benefit guarantee may remain in
effect until the insured reaches attained insurance age 70 or the policy has
been in effect for five years, whichever is later.
This prospectus contains detailed information about these and other policy
features, including certain restrictions and limitations that apply. This
prospectus also discusses how the investment return earned by the policy can
affect the policy's death benefit and cash surrender value.
As in the case of other life insurance policies, it may not be advantageous to
purchase flexible premium variable life insurance as a replacement for, or in
addition to an existing flexible premium variable or other life insurance
policy.
web site address: http://www.americanexpress.com/advisors
IDS Life Variable Life Separate Account
Flexible Premium Variable Life Insurance Policy
Issued and sold by: IDS Life Insurance Company, IDS Tower 10,
Minneapolis, MN 55440. Telephone: (612) 671-3131
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This prospectus is valid only when accompanied or preceded by the prospectuses
of the IDS Life Series Fund, Inc., AIM Variable Insurance Funds, Inc., Putnam
Variable Trust, and of the Smith Barney Inc. Stripped ("Zero Coupon") U.S.
Treasury Securities Fund, Series A. All prospectuses should be retained for
future reference.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
IDS Life is not a bank or financial institution and the securities it offers are
not deposits or obligations of, backed or guaranteed or endorsed by any bank or
financial institution nor are they insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. Investments in this
policy involve investment risk including the possible loss of principal.
<PAGE>
Table of contents
Key terms
The policy in brief
The variable account
The funds
IDS Life Series Fund-Equity Portfolio
IDS Life Series Fund-Income Portfolio
IDS Life Series Fund-Money Market Portfolio
IDS Life Series Fund-Managed Portfolio
IDS Life Series Fund-Government Securities Portfolio
IDS Life Series Fund-International Equity Portfolio
AIM V.I. Growth and Income Fund
Putnam VT New Opportunities Fund
Fund objectives
Relationship between funds and subaccounts
Rates of return of the funds and subaccounts
The trust
Objectives and major investments
Estimated rates of return
Trust maturity
Roles of Smith Barney Inc. and IDS Life
The fixed account
Purchasing your policy
Application
Right to examine policy
Premiums
Loads, fees and charges
Premium expense charge
Monthly deduction
Note for Massachusetts and Montana residents
Surrender charge
Partial surrender fee
Mortality and expense risk charge
Transaction charge
Fund expenses
Death benefit guarantee
Grace period
Reinstatement
Policy value
Fixed account value
Subaccount values
Death benefits
Change in death benefit option
Changes in specified amount
Misstatement of age or sex
Suicide
Beneficiary
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Transfers between the fixed account and subaccounts
Fixed account transfer policies
Minimum transfer amounts
Maximum transfer amounts
Maximum number of transfers per year
Two ways to request a transfer, loan or surrender
Automated transfers
Automated dollar-cost averaging
Policy loans
Policy surrenders
Total surrenders
Partial surrenders
Allocations of partial surrenders
Effects of partial surrenders
Taxes
Optional insurance benefits
Waiver of monthly deduction
Accidental death benefit
Other insured rider
Children's insurance rider
Automatic increase benefit rider
Accelerated benefit rider for terminal illness
Payment of policy proceeds
Federal taxes
IDS Life's tax status
Taxation of policy proceeds
Modified endowment contracts
Other tax considerations
IDS Life
Ownership
State regulation
Distribution of the policy
Legal proceedings
Experts
Management of IDS Life
A I M Advisors, Inc., Putnam Investment Management, Inc. and Smith Barney, Inc.
Other information
Substitution of investments
Voting rights
Reports
Policy illustrations
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Key terms
These terms can help you understand details about your policy.
Accumulation unit: An accounting unit used to calculate the policy value of the
subaccounts prior to the insured's death. It is a measure of the net investment
results of each of the subaccounts.
Attained insurance age: The insured's insurance age plus the number of policy
anniversaries since the policy date. Attained insurance age changes only on a
policy anniversary.
Cash surrender value: Proceeds received if the policy is surrendered in full or
matures, equal to the policy value minus any indebtedness and any applicable
surrender charges.
Code: The Internal Revenue Code of 1986, as amended.
Close of business: Closing time of the New York Stock Exchange, normally 3 p.m.,
Central time.
Death benefit guarantee: A feature of the policy guaranteeing that the policy
will not lapse before the insured's attained insurance age 70 (or five policy
years, if later). The guarantee is in effect if, on each monthly anniversary,
total premiums paid, minus any partial surrenders and any indebtedness, equal or
exceed the total required minimum monthly premium payments specified in the
policy.
Fixed account: The general investment account of IDS Life. The fixed account is
made up of all of IDS Life's assets other than those held in any separate
account.
Fixed account value: The portion of the policy value that is allocated to the
fixed account, including indebtedness.
Funds: Mutual funds or portfolios, each with a different investment objective.
You may allocate your premiums into variable subaccounts investing in shares of
any or all of these funds. The following funds are available:
o Under the IDS Life Series Fund, Inc. - Equity Portfolio, Income Portfolio,
Money Market Portfolio, Managed Portfolio, Government Securities Portfolio
and International Equity Portfolio;
o Under the AIM Variable Insurance Funds, Inc. - AIM V.I. Growth and Income
Fund;
o Under the Putnam Variable Trust - Putnam VT New Opportunities Fund.
IDS Life: In this prospectus, "we," "us," "our" and "IDS Life" refer to IDS Life
Insurance Company.
Indebtedness: All existing loans on the policy plus interest that has either
been accrued or added to the policy loan.
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Insurance age: The age of the insured, based upon his or her nearest birthday on
the date of the application.
Insured: The person whose life is insured by the policy.
Maturity date: The insured's attained insurance age 100, if living.
Minimum monthly premium: A monthly premium amount specified in the policy that
determines the total payment required to keep the death benefit guarantee in
effect. The initial minimum monthly premium, determined by IDS Life when the
policy is issued, depends on the insured's sex, insurance age, rate
classification, optional insurance benefits added by rider, and the initial
specified amount. An increase or decrease in specified amount, or the addition,
change or termination of a policy rider will change the minimum monthly premium.
Monthly date: The same day each month as the policy date. If there is no monthly
date in a calendar month, the monthly date is the first day of the next calendar
month.
Net amount at risk: A portion of the death benefit, equal to the total current
death benefit minus the policy value. This is the amount to which cost of
insurance rates are applied in determining the monthly cost of insurance.
Net premium: The portion of a premium that is credited to the policy, equal to
the premium you pay minus a charge of 2.5% to cover sales loads and a charge of
2.5% to cover state premium taxes.
Owner: The entity to which, or individual to whom, the policy is issued or to
whom ownership is subsequently transferred. In the prospectus "you" and "your"
refer to the owner.
Policy anniversary: The same day and month as the policy date each year the
policy remains in force.
Policy date: The date the policy is issued and from which policy anniversaries,
policy years and policy months are determined.
Policy value: The sum of the fixed account value plus the variable account
value.
Proceeds: The amount payable under the policy as follows:
o Upon death of the insured, proceeds will be the death benefit under the
death benefit option in effect as of the date of the insured's death,
minus any indebtedness.
o On the maturity date, proceeds will be the cash surrender value.
o On surrender of the policy prior to the maturity date, the proceeds
will be the cash surrender value.
Rate classification: A group of insureds that IDS Life expects will have similar
mortality experience.
Scheduled premium: A premium, selected by the owner at the time of application,
of a level amount, at a fixed interval of time.
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Specified amount: An amount used to determine the death benefit and the proceeds
payable upon death. Under Option 1, it is the death benefit originally applied
for. Under Option 2, it is the initial net amount at risk. The initial specified
amount is shown in your policy.
Subaccount(s): One or more of the investment divisions of the variable account,
each of which invests in a particular fund or trust.
Surrender charge: A contingent deferred issue and administrative expense charge
and a contingent deferred sales charge assessed against the policy value at the
time of surrender during the first 10 years of the policy and for 10 years after
an increase in coverage.
Trust: A unit investment trust, which is part of Smith Barney Inc. Stripped
("Zero Coupon") U.S. Treasury Securities Fund, Series A. One subaccount of the
variable account invests in the trust, which contains certain debt obligations
of the United States.
Valuation date: A normal business day, Monday through Friday, on which the New
York Stock Exchange is open. The value of each subaccount is set at the close of
business on each valuation date.
Valuation period: The interval commencing at the close of business on each
valuation date and ending at the close of business on the next valuation date.
Variable account: IDS Life Variable Life Separate Account consisting of
subaccounts, each of which invests in a particular fund or unit investment
trust. The policy value in each subaccount depends on the performance of the
particular fund or trust.
Variable account value: The sum of the values that are allocated to the
subaccounts of the variable account.
The policy in brief
The Flexible Premium Variable Life Insurance policy (the policy) is designed to
provide insurance protection on the life of the insured and to build cash value.
Like other life insurance, the policy provides a death benefit that is payable
to the beneficiary upon the insured's death. Unlike traditional, fixed-premium
life insurance, the policy allows you, as the owner, to allocate your premiums
(payments), or transfer policy value, to:
The variable account, consisting of subaccounts, each of which invests
in a fund or unit investment trust with a particular investment
objective. You may direct premiums to any or all of nine of these
subaccounts. Your policy's value may increase or decrease daily,
depending on the investment return. No minimum amount is guaranteed, as
it would be in a traditional life insurance policy. (p.)
The fixed account, which earns interest at rates that are adjusted
periodically by IDS Life. This rate will never be lower than 4.5%. (p.)
The funds: Six subaccounts of the variable account invest in IDS Life Series
Fund, Inc. which includes Equity, Income, Money Market, Managed, Government
Securities and International Equity Portfolios. One subaccount invests in AIM
Variable Insurance Funds, Inc. - AIM V.I. Growth and Income Fund. One subaccount
invests in Putnam Variable Trust - Putnam VT New Opportunities Fund. (p.)
<PAGE>
The trust: One subaccount of the variable account invests in units of the Smith
Barney Inc. Stripped ("Zero Coupon") U.S. Treasury Securities Fund, Series A,
consisting of a unit investment trust. (p.)
Purchasing your policy: To apply, send a completed application and premium
payment to IDS Life's home office. For your application to be accepted, you will
need to meet certain conditions stated in the application form and to supply
medical and other evidence that the person you propose to insure (yourself or
someone else) is insurable according to our underwriting rules. (p.)
Right to examine policy: You may return your policy for any reason and receive a
full refund of your premiums by mailing us the policy and a written request for
cancellation within a specified period. (p.)
Premiums: In applying for your policy, you state how much you intend to pay and
whether you will pay quarterly, semiannually or annually. You may also make
additional, unscheduled premium payments in any amount from $25 to $500,000. We
may refuse premiums in order to comply with the Code. (p.)
Loads, fees and charges: Your policy is subject to the following charges, which
compensate IDS Life for administering and distributing the policy as well as
paying policy benefits and assuming related risks:
o Premium expense charge -- 2.5% sales charge and 2.5% premium tax charge
for a total of 5% of each premium payment. This charge pays some
distribution expenses and state and local premium taxes.
o Monthly deduction -- charged against the value of your policy each
month, covering the cost of insurance, cost of issuing the policy,
certain administrative expenses, a death benefit guarantee charge and
optional insurance benefits.
o Surrender charge -- applies if you surrender your policy for its full
cash surrender value, or the policy lapses, during the first 10 years
and for 10 years after requesting an increase in the specified amount
(the minimum death benefit specified in your application). The
surrender charge consists of a deferred charge for costs of issuing the
policy and a deferred sales charge. It is based on the initial
specified amount and on any increase in the specified amount.
o Partial surrender fee -- applies if you surrender part of the value of
your policy; equals $25 or 2% of the amount surrendered, if less.
o Mortality and expense risk charge -- applies only to the subaccounts;
equals, on an annual basis, 0.9% of the average daily net asset value
of the subaccounts.
o Transaction charge -- applies only to subaccounts that invest in the
trusts; equals, on an annual basis, 0.25% of their average daily net
asset value.
o Fund expenses -- applies only to the funds. The investment management fee
equals, on an annual basis, 0.5% of the average daily net assets of the IDS
Life Series Fund Money Market Portfolio; 0.95% of the average daily net
assets of IDS Life Series Fund International Equity Portfolio; 0.63% of the
daily net assets of Putnam VT New Opportunities Fund; 0.65% of the average
daily net assets of the AIM V.I. Growth and Income Fund and 0.7% of the
average daily net assets of the IDS Life Series Fund Equity, Income,
Managed and Government Securities Portfolios. The funds also pay taxes,
brokerage commissions and nonadvisory expenses. IDS Life has agreed to a
voluntary limit of 0.1%, on an annual basis, of the average daily net
assets of each IDS Life Series Fund portfolio for these nonadvisory
expenses. (p.)
Death benefit guarantee: Your policy will not lapse regardless of investment
performance if the death benefit guarantee is in effect. To keep the death
benefit guarantee in effect, you must pay the minimum monthly premiums specified
in the policy. The death benefit guarantee applies only until the insured
reaches attained insurance age 70 or the policy has been in effect for five
years, whichever is later. (p.)
Grace period: If the cash surrender value of your policy becomes less than the
amount needed to pay the monthly deduction and the death benefit guarantee is
not in effect, you will have 61 days to pay a premium that raises the cash
surrender value to an amount sufficient to pay the monthly deduction. If you
don't, the policy will lapse. (p.)
Reinstatement: If your policy lapses, it can be reinstated within five years, if
you make certain payments and present evidence satisfactory to IDS Life that the
insured remains insurable. The death benefit guarantee cannot be reinstated.
(p.)
Death benefits: Your policy's death benefit can never be less than the specified
amount in your policy application, unless you change that amount or your policy
has outstanding indebtedness. The relationship between the policy value and the
death benefit depends on which of two options you choose:
o Option 1 level amount: The death benefit is the greater of the
specified amount or a percentage of policy value.
o Option 2 variable amount: The death benefit is the greater of the
specified amount plus the policy value or a percentage of policy value.
You may change the death benefit option or specified amount within certain
limits; doing so will generally affect policy charges. (p.)
Transfers between the fixed account and subaccounts: You may, at no charge,
transfer policy value from one subaccount to another or between subaccounts and
the fixed account. (Certain restrictions apply to transfers involving the fixed
account.) You can request up to five transfers per year by phone or mail. You
can also arrange for automated transfers on a monthly, quarterly, semiannual or
annual basis. (p.)
Policy loans: You may borrow against your policy's cash surrender value. A
policy loan, even if repaid, can have a permanent effect on the death benefit
and policy value. A loan may also have tax consequences if your policy lapses or
you surrender it. (p.)
Policy surrenders: You may cancel the policy while the insured is living and
receive its cash surrender value. The cash surrender value is the policy value
minus indebtedness, minus any applicable surrender charges. (p.)
<PAGE>
Exchange right: For two years after the policy is issued, you can exchange it
for one that provides benefits that do not vary with the investment return of
the subaccounts. Because the policy itself offers a fixed return option, all you
need do is transfer all of the policy value in the subaccounts to the fixed
account. (p.)
Payment of policy proceeds: Proceeds will be paid when you surrender the policy,
the insured dies or the policy matures, which occurs when the insured reaches
attained insurance age 100. You or the beneficiary may choose whether payment is
to be made in a lump sum or under one or more of certain options. (p.)
Federal taxes: The death benefit is not considered part of the beneficiary's
income and thus is not subject to federal income taxes. Part or all of any
proceeds received through full or partial surrender, maturity, lapse, policy
loan or assignment of policy value may be subject to federal income tax as
ordinary income. Proceeds other than death benefits from certain policies,
classified as "modified endowments," are taxed differently from proceeds of
conventional life insurance contracts and may also be subject to an additional
10% IRS penalty tax if you are younger than 59 1/2. A policy is considered to be
a modified endowment if it was applied for or materially changed after June 21,
1988, and premiums paid in the early years exceed certain modified endowment
limits. (p.)
The variable account
You can direct your premiums to any or all of nine subaccounts of the variable
account. These subaccounts invest in the following funds:
Subaccount invests exclusively in shares of
U IDS Life Series Fund-Equity Portfolio
V IDS Life Series Fund-Income Portfolio
W IDS Life Series Fund-Money Market Portfolio
X IDS Life Series Fund-Managed Portfolio
Y IDS Life Series Fund-Government Securities Portfolio
IL IDS Life Series Fund-International Equity Portfolio
FGI AIM V.I. Growth and Income Fund
FNO Putnam VT New Opportunities Fund
One subaccount invests in units of the Smith Barney Inc. Stripped ("Zero
Coupon") U.S. Securities Fund, Series A, a unit investment trust:
Subaccount invests in a trust with maturity date of
2004V Nov. 15, 2004
The variable account was established on Oct. 16, 1985, under Minnesota law and
is registered as a single unit investment trust under the Investment Company Act
of 1940. Such registration does not involve any SEC supervision of the account's
management or investment practices or policies. Subaccount IL was added to the
variable account on Oct. 28, 1994. Subaccounts FGI and FNO were added to the
variable account on Nov. 22, 1996.
The variable account meets the definition of a "separate account" under federal
securities laws. Income, capital gains or capital losses of each subaccount are
credited to or charged against the assets of that subaccount alone. No
subaccount will be charged with liabilities of any other subaccount or of any
other business conducted by IDS Life. The variable
<PAGE>
account's net assets are held in relation to the policies described in this
prospectus as well as other variable life insurance policies that we issue that
are not described in this prospectus.
At all times, IDS Life will maintain assets in the subaccounts with total market
value at least equal to the reserves and other liabilities required to cover
insurance benefits under all contracts participating in the subaccount.
The funds
IDS Life Series Fund, Inc., a Minnesota corporation, is a diversified, open-end
management investment company incorporated on May 8, 1985. IDS Life Series Fund
consists of six portfolios:
IDS Life Series Fund-
Equity Portfolio
Objective: capital appreciation. Invests primarily in common stocks and other
securities convertible into common stock.
IDS Life Series Fund-
Income Portfolio
Objective: to maximize current income while attempting to conserve the value of
the investment and to continue the high level of income for the longest period
of time. At least 50% of net assets will normally be invested in high-quality,
lower-risk corporate bonds, unrated corporate bonds believed to have the same
investment qualities and government bonds. Other investments may include
lower-rated corporate bonds, bonds and common stocks sold together as a unit,
preferred stock and foreign securities.
IDS Life Series Fund-
Money Market Portfolio
Objective: to provide maximum current income consistent with liquidity and
conservation of capital. Invests in relatively short-term money market
securities, such as marketable debt securities issued or guaranteed as to
principal and interest by the U.S. government or its agencies or
instrumentalities, bank certificates of deposit, bankers' acceptances, letters
of credit and high-grade commercial paper.
IDS Life Series Fund-
Managed Portfolio
Objective: to maximize total investment return through a combination of capital
appreciation and current income. If the investment manager believes the stock
market will be moving higher, it can emphasize stocks that offer potential for
appreciation. At other times, the manager may increase the portfolio's holdings
in bonds and money-market securities providing high current income.
<PAGE>
IDS Life Series Fund-
Government Securities Portfolio
Objective: to provide a high current return and safety of principal. Invests
primarily in debt obligations issued or guaranteed as to principal and interest
by the U.S. government, its agencies and instrumentalities.
IDS Life Series Fund-
International Equity Portfolio
Objective: capital appreciation. Invests primarily in common stocks of foreign
issuers and foreign securities convertible into common stock. Other investments
may include certain international bonds if the portfolio manager believes they
have greater potential for capital appreciation than equities.
AIM Variable Insurance Funds, Inc., a Maryland corporation, is an open-end,
series, management investment company incorporated on January 22, 1993. The
variable account invests in the following fund:
AIM V.I. Growth and Income Fund
Objective: to seek growth of capital, with current income as a secondary
objective. The Fund seeks to achieve its objective by generally investing at
least 65% of its net assets in stocks of companies believed by management to
have the potential for above average growth in revenues and earnings.
Putnam Variable Trust is a Massachusetts business trust organized on September
24, 1987. The variable account invests in the following fund:
Putnam VT New Opportunities Fund
Objective: seeks long term capital appreciation by investing principally in
common stocks of companies in sectors of the economy which Putnam Management,
Inc. ("Putnam Management") believes possesses above-average, long-term growth
potential.
Fund objectives
Fund objectives for all funds except Putnam VT New Opportunities Fund can be
changed only if holders of a majority of outstanding shares agree. The objective
of Putnam VT New Opportunities Fund may be changed by the Trustees without a
vote of the shareholders, but as a matter of policy, the Trustees would not
materially change the fund's objective without shareholder approval. Because
fund investments are subject to the risk of changing economic conditions and the
ability of the investment manager to anticipate such changes, there can be no
guarantee that the investment objectives of a fund will be achieved.
Relationship between funds and subaccounts
Shares of each fund are sold to the appropriate subaccount at net asset value
without a sales charge. Dividends and capital gain distributions from a fund are
reinvested at net asset value without a sales charge and retained as an asset of
the appropriate subaccount. Fund shares will be redeemed by the appropriate
subaccount, without fee to the
<PAGE>
subaccount, to the extent necessary to make death benefit or other payments
under the policy. Currently, shares of the IDS Life Series Fund Portfolios are
available to serve as the underlying investment for variable life insurance.
Shares of AIM V.I. Growth and Income Fund and Putnam VT New Opportunities Fund
are available to serve as the underlying investment for variable life insurance
contracts, variable annuities and qualified plans. In the future, shares of the
IDS Life Series Fund Portfolios may be available to serve as the underlying
investment for variable life insurance contracts, variable annuities and
qualified plans. It is conceivable that in the future it may be disadvantageous
for variable life insurance separate accounts, variable annuity separate
accounts and/or qualified plans to invest in the available funds simultaneously.
Although IDS Life and the funds do not currently foresee any such disadvantages,
the boards of directors or trustees of the appropriate funds will monitor events
in order to identify any material conflicts between such policy owners, contract
owners and qualified plans to determine what action, if any, should be taken in
response to a conflict. If a board were to conclude that separate funds should
be established for variable life insurance, variable annuity and qualified plan
separate accounts, the variable life insurance policyholders would not bear any
expenses associated with establishing separate accounts. Please refer to the
fund prospectuses for risk disclosure regarding mixed and shared funding.
IDS Life acts as the investment manager and American Express Financial
Corporation acts as the investment advisor of the IDS Life Series Fund, Inc.
American Express Trust Company acts as custodian of the IDS Life Series Fund,
Inc.'s investments.
A I M Advisors, Inc. acts as the investment advisor for AIM V.I. Growth and
Income Fund. Putnam Management acts as the investment manager for Putnam VT New
Opportunities Fund.
The investment managers or advisors receive fees for their services as described
under "Loads, fees and charges."
Detailed information about the funds, their investment objectives, policies and
risks, may be found in the fund prospectuses.
Diversification: The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h) of the Code.
Each fund portfolio intends to comply with these requirements.
Ownership rules: The U.S. Treasury and the IRS have indicated they may provide
additional guidance concerning how many subaccounts may be offered and how many
exchanges among subaccounts may be allowed before the owner is considered to
have investment control and thus is currently taxed on income earned within
subaccount assets. We do not know at this time what the additional guidance will
be or when action will be taken. We reserve the right to modify the policy, as
necessary, to ensure that the owner will not be subject to current taxation as
the owner of the subaccount assets.
<PAGE>
Rates of return of the fund and subaccounts
This section presents rates of return first for the funds, and then for the
corresponding subaccounts. Rates of return are different in the two cases
because those of the subaccounts reflect additional charges. All charges and
expenses mentioned in the section are explained fully under "Loads, fees and
charges."
Rates of return of the funds:
In the following table are average annual rates of return based on the actual
investment performance of the funds after deduction of applicable fund charges
(including the investment management fees and nonadvisory expenses) for the
periods indicated. These rates do not reflect charges that apply to the
subaccounts or the policy and therefore do not illustrate how actual investment
performance will affect policy benefits. Moreover, these rates of return are not
an estimate or guarantee of future performance.
Period ending 12/31/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
10 years or
Fund 1 year 3 years 5 years Since inception*
- --------------------------------------------- --------------- --------------- -------------- ---------------
IDS Life Series Fund - Equity (Beta 0.**)
IDS Life Series Fund - Income
IDS Life Series Fund - Money Market
IDS Life Series Fund - Managed (Beta 0.**)
IDS Life Series Fund - Government Securities
IDS Life Series Fund - International Equity
AIM V.I. Growth and Income Fund
Putnam VT New Opportunities Fund
</TABLE>
*IDS Life Series Fund-Equity, Income, Money Market, Managed and Government
Securities Portfolios commenced operations on January 20, 1986. IDS Life Series
Fund-International Equity Portfolio commenced operations on October 28, 1994.
AIM V.I. Growth and Income Fund and Putnam VT New Opportunities Fund each
commenced operations on May 2, 1994.
**Beta is a volatility measure based on calculations of the fund's monthly
return compared to the S&P 500 Index. A beta less than 1 indicates performance
that is less volatile than the market; A beta more than 1 indicates performance
that is more volatile than the market.
Rates of return of subaccounts
Average annual rates of return in the following table reflect all charges
incurred by the funds and charges against the subaccounts (including the
mortality and expense risk charge). The rates do not reflect the premium expense
charge, surrender charge or monthly deduction. For all subaccounts, we show
actual performance from the date the subaccounts began investing in the funds.
For the subaccounts investing in AIM V.I. Growth and Income Fund and Putnam VT
New Opportunities Fund, we also show performance from the commencement date of
the Fund as if the subaccounts had invested in the funds at that time.
<PAGE>
Period ending 12/31/97
<TABLE>
<CAPTION>
Since commencement Since commencement
of the subaccounts of the Funds
10 years or
Since Since
Subaccount Investment 1 year 3 years 5 years commencement* 1 year 3 years commencement
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------ ----------------------- ------- --------- --------- ---------------- ----- ------ --------------
U Equity
V Income
W Money Market
X Managed
Y Government Securities
IL International Equity
FGI Growth and Income Fund
FNO New Opportunities Fund
</TABLE>
*Subaccounts U,V,W,X and Y commenced operations on June 17, 1987. Subaccount IL
investing in International Equity Portfolio commenced operations on Oct. 28,
1994. FGI and FNO subaccounts each commenced operations on Nov. 22, 1996.
The trust
Smith Barney Inc. Stripped ("Zero Coupon") U.S. Treasury Securities Fund, Series
A, consists of a unit investment trust. Currently one is available for
investment which matures in 2004.
Objectives and major investments
The objective of the trust is to provide safety of capital and income through
investment in a portfolio consisting primarily of:
o bearer debt obligations issued by the United States that have been stripped
of their unmatured interest coupons,
o coupons stripped from debt obligations of the United States, and
o receipts and certificates for such stripped debt obligations and coupons.
The trust will also contain a Treasury note or notes providing interest income
to pay anticipated expenses of the trust.
U.S. Treasury securities that have been stripped of their unmatured interest
coupons are essentially bonds or notes that pay no interest. For this reason
they are purchased at a deep discount from their face value and, if held to
maturity, return the full face value.
Before maturity, the value of trust units will be more volatile than would the
value of units of a trust containing unstripped U.S. Treasury securities of
comparable maturities. The value may affect death benefits and policy value,
which will fluctuate accordingly.
<PAGE>
Estimated rates of return
Because amounts invested in stripped U.S. Treasury securities will grow to their
face values if held to maturity, we can estimate the compound rate of growth to
maturity, based on certain assumptions about trust expenses. The net rate of
return to maturity is calculated based on the estimated compound rate of growth
in the units and these charges. Since the value of the trust's units will vary
daily, reflecting the market value of the underlying securities, the compound
rate of growth to maturity and net rate of return to maturity will also vary
daily. Estimated net rates of return from March 31, 1998 to maturity for the
trust, taking account of anticipated expenses are:
Trust maturity date Net rate of return to maturity
Nov. 15, 2004 --%
Rates of return to owners will be less than rates of return for trust units
themselves because the units are held in subaccounts of the variable account,
which are subject to policy charges not reflected in the above estimates. (See
"Loads, fees and charges" for a full discussion of applicable charges.)
Trust maturity
On the maturity date of a particular trust, the policy value allocated to the
subaccount that invests in the trust will automatically be reallocated to
Subaccount W, which invests in the IDS Life Series Fund--Money Market Portfolio,
unless you give us other directions in writing at least seven days before the
maturity date. We will notify you in writing 30 days before the trust matures.
Roles of Smith Barney Inc. and IDS Life
Smith Barney sponsors the trust and sells units to the subaccounts. Because the
trust invests in a specified portfolio, there is no investment manager. The
price of the trust's units includes a transaction charge, paid directly by IDS
Life to Smith Barney out of IDS Life's general account assets. This charge is
limited by agreement between IDS Life and Smith Barney and will not be greater
than that ordinarily paid by a dealer for similar securities. We will seek
reimbursement for the amounts paid through a daily asset charge, described under
"Loads, fees and charges."
Trust units will be sold to the extent necessary for IDS Life to provide
benefits and make reallocation under the policies. Units will be sold to Smith
Barney, which has undertaken to maintain a secondary market in units of the
trust.
IDS Life and Smith Barney reserve the right to discontinue the sale of new units
of a trust and to create additional trusts in the future.
More detailed information may be found in the current prospectus for the Smith
Barney Inc. Stripped ("Zero Coupon") U.S. Treasury Securities Fund, Series A.
<PAGE>
The fixed account
You can allocate premiums to the fixed account or transfer policy value from the
subaccounts to the fixed account (with certain restrictions, explained in
"Transfers between the fixed account and subaccounts").
The fixed account is the general investment account of IDS Life. It includes all
assets owned by IDS Life other than those in the variable account and other
separate accounts. Subject to applicable law, IDS Life has sole discretion to
decide how assets of the fixed account will be invested.
Placing policy value in the fixed account does not entitle you to share in the
fixed account's investment experience, nor does it expose you to the account's
investment risk. Instead, IDS Life guarantees that the policy value you place in
the fixed account will accrue interest at an effective annual rate of at least
4.5%, independent of the actual investment experience of the account. IDS Life
bears the full investment risk for amounts allocated to the fixed account.
IDS Life is not obligated to credit interest at any rate higher than 4.5%,
although we may do so at our sole discretion. In recent years interest was
credited as follows:
1988 8.0 to 9.25%
1989 8.25 to 9.5%
1990 8.25 to 9.2%
1991 7.55 to 8.55%
1992 6.5 to 8.05%
1993 5.7 to 7.4%
1994 5.7 to 7.6%
1995 5.75 to 7.6%
1996 5.5 to 7.2%
1997 5.5 to 6.95%
These rates are not indicative of future interest rates. The rate of return to
you as owner will be less than the rate credited because policy charges
(described under "Loads, fees and charges") reduce your net return.
Interest in excess of 4.5% will not be credited on any portion of policy value
in the fixed account against which you have a policy loan outstanding.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 and the fixed account
has not been registered as an investment company under the Investment Company
Act of 1940. Accordingly, neither the fixed account nor any interests in it are
subject to the provisions of these Acts and the staff of the SEC has not
reviewed the disclosures in this prospectus relating to the fixed account.
Disclosures regarding the fixed account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
<PAGE>
Purchasing your policy
Application
To apply for coverage, complete an application and send it with your premium
payment to IDS Life's home office. In your application, you:
o select a specified amount of insurance;
o select a death benefit option;
o designate a beneficiary; and
o state how premiums are to be allocated among the fixed account and/or the
subaccounts.
Insurability: Before issuing your policy, IDS Life requires satisfactory
evidence of the insurability of the person whose life you propose to insure
(yourself or someone else). Our underwriting department will review your
application and any medical information or other data required to determine
whether the proposed individual is insurable under our underwriting rules. Your
application may be declined if IDS Life determines the individual is not
insurable and any premium you have paid will be returned.
Age limit: IDS Life generally will not issue a policy to persons over the
insurance age of 75. It may, however, do so at its sole discretion.
Rate classification: The rate classification is based on the insured's health,
occupation or other relevant underwriting standards. This classification will
affect your monthly deduction and may affect the cost of certain optional
insurance benefits. (See "Loads, fees and charges" and "Optional insurance
benefits.")
Other conditions: In addition to proving insurability, you and the insured must
also meet certain conditions, stated in the application form, before coverage
will become effective and your policy will be delivered to you.
Death of the insured: If the insured dies before the policy is issued and:
o if all conditions stated in the application have not been met, IDS
Life's sole liability will be to return the premium paid plus any
interest earned.
o if all conditions stated in the application have been met, IDS Life's
liability will be the lesser of the death benefit applied for or
$150,000.
Incontestability: IDS Life will have two years from the effective date of your
policy to contest the truth of statements or representations in your
application. After the policy has been in force during the insured's lifetime
for two years from the policy date, IDS Life cannot contest the policy.
<PAGE>
Right to examine policy
You may return your policy for any reason and receive a full refund of all
premiums paid. To do so, you must mail or deliver the policy to IDS Life or your
financial advisor with a written request for cancellation, by the latest of:
o the 10th day after you receive it (15th day in Colorado, 20th day in North
Dakota);
o the 10th day (15th day in Colorado, 20th day in North Dakota) after IDS
Life mails or personally delivers a written notice of withdrawal right; or
o the 45th day after you sign your application.
On the date your request is postmarked or received, the policy will immediately
be considered void from the start.
Premiums
Payment of premiums:
In applying for your policy, you decide how much you intend to pay and how often
you will make payments. During the first several policy years, IDS Life requires
that premiums sufficient to keep the death benefit guarantee in effect be paid
to keep the policy in force.
You may schedule payments annually, semiannually or quarterly. (Payment at any
other interval must be approved by IDS Life.) This premium schedule is shown in
your policy.
The scheduled premium serves only as an indication of your intent as to the
frequency and amount of future premium payments. You may skip scheduled premium
payments at any time if your cash surrender value is sufficient to pay the
monthly deduction or if the death benefit guarantee will remain in effect.
You may also change the amount and frequency of scheduled premium payments by
written request. IDS Life reserves the right to limit the amount of such
changes. Any change in the premium amount is subject to applicable tax laws and
regulations.
Although you have flexibility in paying premiums, the amount and frequency of
your payments will affect the policy value, cash surrender value and length of
time your policy will remain in force, as well as affect whether the death
benefit guarantee remains in effect.
Premium limitations:
You may make unscheduled premium payments at any time and in any amount from $25
to $500,000. IDS Life reserves the right to limit the number and amount of
unscheduled premium payments.
Also, in order to receive favorable tax treatment under the Code, premiums paid
during the life of the policy must not exceed certain limitations. To comply
with the Code, IDS Life can either refuse excess premiums as they are paid or
refund excess premiums with interest no later than 60 days after the end of the
policy year in which they were paid.
<PAGE>
Allocation of premiums:
Until your application is approved by IDS Life, we hold all premiums in the
fixed account and we credit interest on the net premiums (gross premiums minus
premium expense charge) at the current fixed account rate. As of the date your
application is approved, we will allocate the net premiums plus accrued interest
to the account(s) you have selected in your application. At that time, we will
begin to assess the various loads, fees, charges and expenses.
Any amount allocated to a subaccount is converted into accumulation units of
that subaccount, as explained under "policy value." Similarly, when transferring
value between subaccounts, accumulation units in one subaccount are converted
into a cash value, which is then converted into accumulation units of the second
subaccount.
Your ability to allocate policy value to the trust may be limited by the
availability of trust units.
Loads, fees and charges
policy charges compensate IDS Life for:
o providing the insurance benefits of the policy;
o issuing the policy;
o administering the policy;
o assuming certain risks in connection with the policy; and
o distributing the policy.
Some of these charges are deducted from your premium payments. Others are
deducted periodically from your policy value in the fixed and/or subaccounts.
You may also be assessed a charge if you surrender your policy or the policy
lapses.
Premium expense charge
We deduct this charge from each premium payment. The amount remaining after the
deduction, called the net premium, is credited to the account(s) you have
selected. The premium expense charge has two parts:
Sales charge: 2.5% of each premium payment. Partially compensates IDS Life for
expenses in distributing the policy, including agents' commissions, advertising
and printing of prospectuses and sales literature. (These expenses also may be
partially compensated by the contingent deferred sales charge, discussed under
"Surrender charge," below.)
Premium tax charge: 2.5% of each premium payment. Compensates IDS Life for
paying taxes imposed by certain states and governmental subdivisions on premiums
received by insurance companies. All policies in all states are charged the
average rate of 2.5% even though state premium taxes vary from 2% to 3.5%. This
2.5% rate may be different than the actual premium tax IDS Life expects to pay
in your state.
<PAGE>
Monthly deduction
On each monthly date we deduct from the value of your policy in the fixed and/or
subaccounts an amount equal to the sum of:
1. the cost of insurance for the policy month;
2. the policy fee shown in your policy;
3. the death benefit guarantee charge shown in your policy; and
4. charges for any optional insurance benefits provided by rider for the
policy month.
Each of the four components is explained below.
You specify, in your policy application, what percentage of the monthly
deduction from 0% to 100% will be taken from the fixed account and from each of
the subaccounts. You may change these percentages for future monthly deductions
by written request.
Monthly deductions will be taken from the fixed account and the subaccounts on a
pro rata basis if:
o you do not specify the accounts from which the monthly deduction is to be
taken;
o the value in the fixed account or any subaccount is insufficient to pay the
portion of the monthly deduction you have specified; or
o you purchased the policy in Texas.
If the cash surrender value of your policy is not enough to cover the monthly
deduction on a monthly anniversary, the policy may lapse. However, the policy
will not lapse if the death benefit guarantee is in effect. (See "Death benefit
guarantee;" also "Grace period" and "Reinstatement" at the end of this section
on policy costs.)
Components of the monthly deduction:
1. Cost of insurance: primarily, the cost of providing the death benefit under
your policy, which depends on:
o the amount of the death benefit;
o the policy value; and
o the statistical risk that the insured will die in a given period.
The cost of insurance for a policy month is calculated as:
[a x (b - c)] + d
where:
(a) is the monthly cost of insurance rate, which reflects the insured's
statistical mortality risk, based on his or her sex, attained insurance age (age
at last policy anniversary) and rate classification. Generally, the cost of
insurance rate will increase as the insured's attained insurance age increases.
<PAGE>
Rates are set by IDS Life, based on its expectations as to future mortality
experience. We may change the rates from time to time; any change will apply to
all individuals of the same rate classification. However, rates will not exceed
the Guaranteed Maximum Monthly Cost of Insurance Rates shown in your policy,
which are based on the 1980 Commissioners Standard Ordinary Smoker and Nonsmoker
Mortality Tables, Age Nearest Birthday.
Policies purchased on or after May 1, 1991 with an initial specified amount of
$350,000 or greater qualify for lower cost of insurance rates than policies
purchased with a specified amount less than $350,000. In addition, all policies
purchased on or after May 1, 1993 (October 1, 1993 for policies purchased in New
Jersey) and before November 20, 1997 qualify for lower cost of insurance rates
than policies purchased earlier. Cost of insurance rates that are modified to
reflect IDS Life and industry-wide changes in mortality experience apply to all
policies purchased on or after November 20, 1997. [These modified cost of
insurance rates effective November 20, 1997 do not apply to policies purchased
in New Jersey.]
(b) is the death benefit on the monthly date divided by 1.0036748 (which reduces
IDS Life's net amount at risk, solely for computing the cost of insurance, by
taking into account assumed monthly earnings at an annual rate of 4.5%);
(c) is the policy value on the monthly date. At this point, the policy value has
been reduced by the policy fee, death benefit guarantee charge and any charges
for optional riders;
(d) is any flat extra insurance charges assessed as a result of special
underwriting considerations.
Note for Massachusetts and Montana residents
Please disregard all policy provisions in this prospectus that are based on the
sex of the insured. The policy will be issued on a unisex basis. Also disregard
references to mortality tables; the tables will be replaced with an 80% male,
20% female blend of the 1980 Commissioners Standard Ordinary Smoker and
Non-Smoker Mortality Tables, Age Nearest Birthday.
2. Policy fee: $5 per month. Waived for policies purchased on or after May 1,
1991 with an initial specified amount of $350,000 or more. This charge
reimburses IDS Life for expenses of issuing the policy, such as processing the
application (primarily underwriting) and setting up computer records; and of
administering the policy, such as processing claims, maintaining records, making
policy changes and communicating with owners. We reserve the right to change the
charge in the future, but guarantee that it will never exceed $7.50 per month.
<PAGE>
3. Death benefit guarantee charge: 1 cent per $1,000 of the current specified
amount and 1 cent per $1,000 of coverage under any other insured rider. This
charge compensates IDS Life for the risk assumed in providing the death benefit
guarantee. The charge is included in the monthly deduction in the first five
policy years or until the insured's attained insurance age 70, whichever is
later. The charge will not be deducted if the death benefit guarantee is no
longer in effect. For any policy month in which the monthly deduction is paid by
a waiver of monthly deduction rider, the minimum monthly premium will be zero.
(See "Death benefit guarantee," later in this section for an explanation of the
minimum monthly premium and "Other insured rider," under "Optional insurance
benefits.")
4. Optional insurance benefit charges: charges for any optional benefits added
to the policy by rider. See "Optional insurance benefits."
Surrender charge
If you surrender your policy or the policy lapses during the first 10 policy
years and in the 10 years following an increase in specified amount a surrender
charge will be assessed. The surrender charge is the sum of two parts:
Contingent deferred issue and administrative expense charge:
Reimburses IDS Life for costs of issuing the policy, such as processing the
application (primarily underwriting) and setting up computer records. For the
initial specified amount, this charge is $4 per thousand dollars of initial
specified amount. It remains level during the first five policy years and then
decreases monthly until it is zero at the end of 10 policy years. If the
specified amount of the policy is increased, an additional charge will apply.
The additional charge will be $4 per thousand dollars of increase in specified
amount. It remains level during the first five years following the effective
date of the increase and then decreases monthly until it is zero at the end of
the 10th year following the increase.
Contingent deferred sales charge:
Partially compensates IDS Life for expenses of distributing the policy,
including financial advisors' commissions, advertising and printing the
prospectus and sales literature. For the initial specified amount, this charge
is the sum of 27.5% of premium payments up to a maximum amount shown in the
policy plus 6.5% of all other premium payments. The maximum amount shown in the
policy will be based on the insured's insurance age, sex, rate classification
and initial specified amount. If the specified amount of the policy is
increased, an additional charge will apply. The additional charge will be 6.5%
of all premium payments attributable to the increase. Premiums attributable to
the increase are calculated as
a x (b + c)
where:
(a) is the amount of the increase in the specified amount divided by the total
specified amount after the increase; (b) is the policy value on the date of the
increase; and (c) is all premium payments paid on or after the date of the
increase.
<PAGE>
Maximum surrender charge:
The total surrender charge is subject to an overall upper limit or "maximum
surrender charge." The "maximum surrender charge" for the initial specified
amount will be shown in the policy. It is based on the insured's insurance age,
sex, rate classification and initial specified amount. The "maximum surrender
charge" for the initial specified amount will remain level during the first five
policy years and then decrease monthly until it is zero at the end of 10 policy
years. If the specified amount is increased, an "additional maximum surrender
charge" will apply. The "additional maximum surrender charge" will be shown in a
revised policy. It will be based on the insured's attained insurance age, sex,
rate classification and the amount of the increase. The "additional maximum
surrender charge" will remain level during the first five years following the
effective date of the increase and then decrease monthly until it is zero at the
end of the 10th year following the increase.
If premium payments are equal to or somewhat higher than the premiums needed to
keep the death benefit guarantee in effect, for several years the surrender
charge will generally be the charge described in the "Contingent deferred issue
and administrative expense charge" and "Contingent deferred sales charge"
sections above. After that, the "Maximum surrender charge" will generally apply.
If premium payments are paid at a significantly higher level, the "Maximum
surrender charge" will generally apply in all years.
Partial surrender fee
If you surrender part of the value of your policy, you will be charged $25 (or
2% of the amount surrendered, if less). This fee is guaranteed not to increase
for the duration of your policy.
Mortality and expense risk charge
This charge applies only to the subaccounts and not to the fixed account. It is
equal, on an annual basis, to 0.9% of the daily net asset value of the
subaccounts -- a level guaranteed for the life of the policy. The subaccounts
pay this fee at the time that dividends are distributed from the funds in which
they invest. Computed daily, the charge compensates IDS Life for:
o Mortality risk -- the risk that the cost of insurance charge will be
insufficient to meet actual claims.
o Expense risk -- the risk that the policy fee and the contingent deferred
issue and administrative expense charge (described above) may be
insufficient to cover the cost of administering the policy.
Any profit from the mortality and expense risk charge would be available to IDS
Life for any proper corporate purpose including, among others, payment of sales
and distribution expenses, which we do not expect to be covered by the sales and
surrender charges discussed earlier. Any further deficit will have to be made up
from IDS Life's general assets.
<PAGE>
Transaction charge
IDS Life makes a daily charge against the assets of the subaccount that invests
in the trust. This charge is intended to reimburse us for the transaction fee we
pay from our general account assets to Smith Barney on the sale of the trust
units to the subaccounts.
The asset charge is equivalent to an effective annual rate of 0.25% of the value
of the subaccounts investing in the trust. This amount may be increased in the
future but will not exceed an effective annual rate of 0.5% of the value of
these subaccounts. The charge will be based on our costs (taking into account
the interest we lose on the amounts paid to Smith Barney).
Fund expenses
The investment managers receive fees for their services to the funds. The funds
also pay taxes, brokerage commissions and nonadvisory expenses, such as
custodian and trustee fees, registration fees for shares, postage, fidelity and
security bond costs, legal fees and other miscellaneous fees and charges. IDS
Life has agreed to a voluntary limit of 0.1%, on an annual basis, of the average
daily net assets of each of the IDS Life Series Fund Portfolios for these
nonadvisory expenses, even though actual expenses on IDS Life Series
Fund-Government Securities Portfolio ranged up to 0.18%, IDS Life Series
Fund-Money Market Portfolio ranged up to 0.23% and IDS Life Series
Fund-International Equity Portfolio ranged up to 0.37%. IDS Life reserves the
right to discontinue limiting these nonadvisory expenses at 0.1%. However, its
present intention is to continue the limit until the time that actual expenses
are less than the limit. Other expenses for the year ended Dec. 31, 1996 were
0.09% for Putnam VT New Opportunities. For AIM V.I. Growth and Income Fund other
expenses (annualized) were 0.13% for the period ended Dec. 31, 1996.
The investment management fee is deducted from the IDS Life Series Fund -
Equity, Income, Money Market, Government Securities, International Equity
Portfolios and the Putnam VT New Opportunities Fund and AIM V.I. Growth and
Income daily.
The investment management fee equals, on an annual basis:
o IDS Life Series Fund-Money Market Portfolio -- 0.5% of average daily net
assets
o Putnam VT New Opportunities Fund -- 0.63% of average daily net assets
o AIM V.I. Growth and Income Fund -- 0.65% of average daily net assets
o IDS Life Series Funds-Equity, Income, Managed and Government Securities
Portfolios -- 0.7% of average daily net assets
o IDS Life Series Fund-International Equity Portfolio -- 0.95% of average
daily net assets
IDS Life has entered into certain agreements under which it is compensated by
the advisors and/or distributors of the AIM V.I. Growth and Income Fund and the
Putnam VT New Opportunities Fund for the administrative services it provides to
these funds.
<PAGE>
Other information on charges
IDS Life may reduce or eliminate various fees and charges when we
incur lower sales costs and/or perform fewer administrative services than usual.
The two most common cases are:
o policies made available by an employer to a group of employees.
o policies purchased on or after May 1, 1991 with an initial specified amount
of $350,000 or greater.
Death benefit guarantee
Your policy will remain in force even if the cash surrender value is
insufficient to cover the monthly deduction if you have paid the minimum monthly
premiums shown in the policy. Although the minimum premium is specified as a
monthly amount, you may pay on any schedule you choose, as long as:
the sum of premiums paid - partial surrenders - outstanding indebtedness
equals or exceeds
minimum monthly premium x number of months since policy date (including the
current month)
This guarantee applies only until the insured reaches attained insurance age 70
or the policy has been in force for five years, whichever is later. For factors
affecting the minimum monthly premium, see "Changes in specified amount" under
"Death benefit" and "Optional insurance benefits."
If, on a monthly date, you have not paid enough premiums to keep the death
benefit guarantee in effect, we will mail a notice to your last known address,
asking you to pay a premium sufficient to bring your total up to the required
minimum. If you do not pay this amount within 61 days, your policy will lapse
(terminate) if the cash surrender value is less than the amount needed to pay
the monthly deduction. Although the policy can be reinstated as explained below,
the death benefit guarantee cannot be reinstated.
Grace period
If on a monthly date the cash surrender value of your policy is less than the
amount needed to pay the next monthly deduction, your policy will still remain
in force for at least 61 days.
IDS Life will mail a notice to your last known address, requesting payment of a
premium that will raise the cash surrender value to an amount sufficient to
cover the next three monthly deductions. If we receive this premium before the
end of the 61-day grace period, we will use the payment to cover all monthly
deductions and any other charges then due. Any balance will be added to the
policy value and allocated in the same manner as other premium payments. If you
do not pay the premium, the policy will lapse without value, unless the death
benefit guarantee described above is in effect.
<PAGE>
If a policy lapses with outstanding indebtedness, any excess of the outstanding
indebtedness over the premium paid generally will be taxable to the owner. (See
"Federal taxes.") If the insured dies during the grace period, any overdue
monthly deductions will be deducted from the death benefit.
Reinstatement
Your policy may be reinstated within five years after it lapses, unless you
surrendered it for cash. To reinstate, IDS Life will require:
o a written request;
o evidence satisfactory to IDS Life that the insured remains insurable;
o payment of a premium that will keep the policy in force for at least three
months;
o payment of the monthly deductions that were not collected during the grace
period; and
o payment or reinstatement of any indebtedness.
The effective date of a reinstated policy will be the monthly date on or next
following the day IDS Life accepts your application for reinstatement. The
suicide period (see "Death benefits") will apply from the effective date of
reinstatement (except in Georgia, Oklahoma, Pennsylvania, South Carolina,
Tennessee and Virginia). Surrender charges will also be reinstated.
IDS Life will have two years from the effective date of reinstatement to contest
the truth of statements or representations in the reinstatement application.
Policy value
The value of your policy is the sum of values in the fixed account and each
subaccount of the variable account.
Fixed account value
The value in the fixed account on the policy date (when the policy is issued)
equals the portion of your initial net premium that you have allocated to the
fixed account, plus interest accrued before the policy date, minus the portion
of the monthly deduction for the first policy month that you have allocated to
the fixed account.
<PAGE>
On any later date, the value in the fixed account equals:
o the value on the previous monthly date; plus
o net premiums allocated to the fixed account since the last monthly date;
plus
o any transfers to the fixed account from the subaccounts, including loan
transfers, since the last monthly date; plus
o accrued interest on all of the above; minus
o any transfers from the fixed account to the subaccounts, including loan
repayment transfers, since the last monthly date; minus
o any partial surrenders or partial surrender fees allocated to the fixed
account since the last monthly date; minus
o interest on any transfers or partial surrenders, from the date of the
transfer or surrender to the date of calculation; minus
o any portion of the monthly deduction for the coming month that is allocated
to the fixed account if the date of calculation is a monthly date.
Subaccount values
The value in each subaccount changes daily, depending on the investment
performance of the fund portfolio or trust in which that subaccount invests and
on other factors detailed below. There is no guaranteed minimum subaccount
value. You as owner bear the entire investment risk.
Calculation of subaccount value: The value of each subaccount on each valuation
date equals:
o the value of the subaccount on the preceding valuation date, multiplied by
the net investment factor for the current valuation period (explained
below); plus
o net premiums received and allocated to the subaccount during the current
valuation period; plus
o any transfers to the subaccount (from the fixed account or other
subaccounts, including loan repayment transfers) during the period; minus
o any transfers from the subaccount including loan transfers during the
current valuation period; minus
o any partial surrenders and partial surrender fees allocated to the
subaccount during the period; minus
o any portion of the monthly deduction allocated to the subaccount during the
period.
The net investment factor measures the investment performance of a subaccount
from one valuation period to the next. Because performance may fluctuate, the
value of a subaccount may increase or decrease from day to day.
Accumulation units: The policy value allocated to each subaccount is converted
into accumulation units. Each time you direct a premium payment or transfer
policy value into one of the subaccounts, a certain number of accumulation units
are credited to your policy for that subaccount. Conversely, each time you take
a partial surrender or transfer value out of a subaccount, a certain number of
accumulation units are subtracted.
<PAGE>
Accumulation units are the true measure of investment value in each subaccount.
For subaccounts investing in the funds, they're related to, but not the same as,
the net asset value of the corresponding fund. The dollar value of each
accumulation unit can rise or fall daily, depending on the investment
performance of the underlying fund, on any change in the value of trust units
and on certain charges. Here's how unit values are calculated:
Number of units: To calculate the number of units for a particular subaccount,
we divide your investment (net premium or transfer amount) by the current
accumulation unit value.
Accumulation unit value: The current value for each subaccount equals the last
value times the current net investment factor.
Net investment factor: Determined at the end of each valuation period, this
factor equals (a divided by b) - c, where:
(a) equals:
o net asset value per share of the fund or value of a unit of the trust; plus
o per-share amount of any dividend or capital gain distribution made by the
relevant fund to the subaccount; plus
o any credit or minus any charge for reserves to cover any tax liability
resulting from the investment operations of the subaccount.
(b) equals:
o net asset value per share of the fund or value of a unit of the trust at
the end of the preceding valuation period; plus
o any credit or minus any charge for reserves to cover any tax liability in
the preceding valuation period.
(c) is a percentage factor representing the mortality and expense risk charge
and, for the subaccount investing in the trust, the transaction charge, as
described in "Loads, fees and charges," above.
Factors that affect subaccount accumulation units:
Accumulation units may change in two ways; in number and in value. Here are the
factors that influence those changes:
<PAGE>
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the subaccounts;
o transfers into or out of the subaccount(s);
o partial surrenders and partial surrender fees;
o surrender charges; and/or
o monthly deductions
Accumulation unit values may fluctuate due to:
o changes in underlying fund(s) net asset value or the value of the trust;
o dividends distributed to the subaccount(s);
o capital gains or losses of underlying funds;
o fund operating expenses;
o mortality and expense risk charges; and/or
o the transaction charge for the subaccount investing in the trust.
Death benefits
When you purchase your policy, you decide on the minimum amount of protection
you want for the beneficiary if the insured dies. This amount is called the
specified amount. Your policy's death benefit can never be less than this amount
unless you change it or unless your policy has an outstanding indebtedness.
You also choose one of two death benefit options, which determines how the
policy's value will affect the amount paid to the beneficiary if the insured
dies while the policy is in force:
Option 1 (level amount): Under this option, the policy's value is part of the
specified amount. The Option 1 death benefit is the greater of:
o the specified amount on the date of the insured's death; or
o the applicable percentage of the policy value on the date of death, if
death occurs on a valuation date, or on the next valuation date
following the date of death. (See table below.)
Thus, the death benefit remains level -- at the specified amount -- as long as
the applicable percentage of policy value is less than or equal to that amount.
Only when the applicable percentage of policy value exceeds the specified amount
will the death benefit vary with the policy value. After attained insurance age
40, the applicable percentage decreases as the insured's age increases.
<PAGE>
<TABLE>
<CAPTION>
Applicable percentage table
Insured's attained Applicable percentage of Insured's attained Applicable percentage of
insurance age policy value insurance age policy value
<S> <C> <C> <C> <C>
40 or younger 250% 61 128%
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 - 95 105
55 150 96 104
56 146 97 103
57 142 98 102
58 138 99 101
59 134 100 100
60 130
</TABLE>
Option 2 (variable amount): Under this option, the policy value is added to the
specified amount. The Option 2 death benefit is the greater of:
o the policy value plus the specified amount; or
o the applicable percentage of policy value (from the preceding table) on
the date of death, if death occurs on a valuation date, or on the next
valuation date following the date of death.
Under Option 2 the death benefit will always vary as the policy value varies.
The death benefit will equal the sum of the specified amount plus the policy
value until the applicable percentage of the policy value exceeds that sum.
Examples: Option 1 Option 2
- --------- -------- --------
specified amount $100,000 $100,000
policy value $5,000 $5,000
death benefit $100,000 $105,000
policy value increases to $8,000 $8,000
death benefit $100,000 $108,000
policy value decreases to $3,000 $3,000
death benefit $100,000 $103,000
<PAGE>
If you want to have premium payments and favorable investment performance
reflected partly in the form of an increasing death benefit, you should consider
Option 2. If you are satisfied with the specified amount of insurance protection
and prefer to have premium payments and favorable investment performance
reflected to the maximum extent in the policy value, you should consider Option
1. Under Option 1, the cost of insurance is lower because IDS Life's net amount
at risk is generally lower; for this reason the monthly deduction is less and a
larger portion of your premiums and investment returns is retained in the policy
value.
Change in death benefit option
You may make a written request to change the death benefit option once per
policy year. A change in the death benefit option also will change the specified
amount. You do not need to provide additional evidence of insurability.
If you change from Option 1 to Option 2: The specified amount will decrease by
an amount equal to the policy value on the effective date of the change. You
cannot change from Option 1 to Option 2 if the resulting specified amount would
fall below the minimum specified amount (currently $50,000 for the first two
policy years, $40,000 in years three through 10 and $25,000 thereafter).
The minimum specified amount for policies purchased on or after May 1, 1991 with
an initial specified amount of $350,000 or more is $350,000 in the first policy
year, $325,000 in years two to five, $300,000 in years six to 10 and $275,000
thereafter.
If you change from Option 2 to Option 1: The specified amount will increase by
an amount equal to the policy value on the effective date of the change.
An increase or decrease in specified amount resulting from a change in the death
benefit option will affect the monthly deduction because the cost of insurance
and the death benefit guarantee charge both depend upon the specified amount.
The charge for certain optional insurance benefits may also change.
The surrender charge, however, will not be affected.
Changes in specified amount
Subject to certain limitations, you may make a written request to increase or
decrease the specified amount once each policy year after the first. Changes in
specified amount may have tax implications, discussed in the section "Modified
endowment contracts" under "Federal taxes."
Increases: If you increase the specified amount, additional evidence of
insurability that is satisfactory to IDS Life may be required. The effective
date of the increase will be the monthly anniversary on or next following our
approval of the increase. The increase may not be less than $10,000, and no
increase will be permitted after the insured's attained insurance age 75.
<PAGE>
An increase in the specified amount will have the following effects on policy
charges:
o Your monthly deduction will increase because the cost of insurance and the
death benefit guarantee charge both depend upon the specified amount.
o Charges for certain optional insurance benefits will increase.
o The minimum monthly premium will increase if the death benefit guarantee is
in effect.
o The surrender charge will increase.
At the time of the increase in specified amount, the cash surrender value of
your policy must be sufficient to pay the monthly deduction on the next monthly
anniversary. The increased surrender charge will reduce the cash surrender
value. If the remaining cash surrender value is not sufficient to cover the
monthly deduction, we will require you to pay additional premiums within the
61-day grace period. If you do not, the policy will lapse unless the death
benefit guarantee is in effect. Because the minimum monthly premium will
increase, additional premiums may also be required to keep the death benefit
guarantee in effect.
Decreases: Any decrease in specified amount will take effect on the monthly
anniversary on or next following our receipt of your written request. The
specified amount remaining after the decrease may not be less than the minimum
specified amount (currently $50,000 for the first two policy years, $40,000 in
years three through 10, and $25,000 thereafter). If, following a decrease in
specified amount, the policy would no longer qualify as life insurance under
federal tax law, the decrease may be limited to the extent necessary to meet
these requirements.
The minimum specified amount for policies purchased on or after May 1, 1991 with
an initial specified amount of $350,000 or more is $350,000 in the first policy
year, $325,000 in years two to five, $300,000 in years six to 10 and $275,000
thereafter.
A decrease in specified amount will affect your costs as follows:
o Your monthly deduction will decrease because the cost of insurance and the
death benefit guarantee charge both depend upon the specified amount.
o Charges for certain optional insurance benefits will decrease.
o The minimum monthly premium will decrease if the death benefit guarantee is
in effect.
o The surrender charge will not change.
No surrender charge is imposed when you request a decrease in the specified
amount.
Decreases in the specified amount will be deducted from the current specified
amount in this order:
1. First from the portion due to the most recent increase; 2. Next from portions
due to the next most recent increases successively; and 3. Then from the initial
specified amount when the policy was issued.
<PAGE>
This procedure may affect the cost of insurance if different rate
classifications have been applied to the current specified amount. The rate
classification applicable to the most recent increase in the specified amount
will be eliminated first, then the rate classification applicable to the next
most recent increase, and so on.
Misstatement of age or sex
If the insured's age or sex has been misstated, the proceeds payable upon death
will be:
o the policy value on the date of death; plus
o the amount of insurance that would have been purchased by the cost of
insurance deducted for the policy month during which death occurred, if
that cost had been calculated using rates for the correct age and sex;
minus
o the amount of any outstanding indebtedness on the date of death.
Suicide
Suicide by the insured, whether sane or insane, within two years from policy
date is not covered by the policy. If suicide occurs, the only amount payable to
the beneficiary will be the premiums paid, minus the amount of any outstanding
indebtedness.
In Colorado and North Dakota, the suicide period is shortened to one year. In
Missouri, IDS Life must prove that the insured intended to commit suicide at the
time he or she applied for coverage.
Beneficiary
Initially, the beneficiary will be the person you designate in your application
for the policy. You may change the beneficiary by giving written notice to IDS
Life, subject to requirements and restrictions stated in the policy. If you do
not designate a beneficiary, or if the designated beneficiary dies before the
insured, the beneficiary will be you or your estate.
<PAGE>
Transfers between the fixed account and subaccounts
You may transfer policy values from one subaccount to another or between
subaccounts and the fixed account. For most transfers, if we receive your
request before the close of business, we will process it that day. Requests
received after the close of business will be processed the next business day.
There is no charge for transfers. Before transferring policy value, you should
consider the risks involved in switching investments.
We may suspend or modify the transfer privilege at any time. Transfers involving
the fixed account are subject to the restrictions below.
Fixed account transfer policies
o Transfers from the fixed account must be made during a 30-day period
starting on a policy anniversary, except for automated transfers, which
can be set up for monthly, quarterly or semiannual transfer periods.
o If we receive your request to transfer amounts from the fixed account
within 30 days before the policy anniversary, the transfer will become
effective on the anniversary.
o If we receive your request on or within 30 days after the policy
anniversary, the transfer will be effective on the day we receive it.
o We will not accept requests for transfers from the fixed account at any other
time.
o If you have made a transfer from the fixed account to one or more
subaccounts, you may not make a transfer from any subaccount back to
the fixed account until the next policy anniversary. We will waive this
limitation once during the first two policy years if you exercise the
policy's right to exchange provision. (See "Exchange right.")
Minimum transfer amounts
From a subaccount to another subaccount or the fixed account:
For mail and phone transfers, $250 or the entire subaccount balance, whichever
is less.
For automated transfers, $50.
From the fixed account to a subaccount:
$250 or the entire fixed account balance minus any outstanding indebtedness,
whichever is less.
For automated transfers, $50.
<PAGE>
Maximum transfer amounts
From a subaccount to another subaccount or the fixed account: None.
From the fixed account to a subaccount: Entire fixed account balance minus any
outstanding indebtedness.
Maximum number of transfers per year
Five for mail and phone transfers. Twelve for automated transfers.
Two ways to request a transfer, loan or surrender
Provide your name, policy number, Social Security Number or Taxpayer
Identification Number when you request a transfer.
1 By letter
Regular mail:
IDS Life Insurance Company
P.O. Box 499
Minneapolis, MN 55440
Express mail:
IDS Life Insurance Company
733 Marquette Ave.
Minneapolis, MN 55402
2 By phone
Call between 7 a.m. and 6 p.m. Central Time:
1-800-437-0602 (toll free) or
(612) 671-4738 (Minneapolis/St. Paul area)
TTY service for the hearing impaired:
1-800-285-8846 (toll free)
o We answer phone requests promptly, but you may experience delays when
call volume is unusually high. If you are unable to get through, use
mail procedure as an alternative.
o We will honor any telephone transfer or surrender request believed to
be authentic and will use reasonable procedures to confirm that they
are. These include asking identifying questions and tape recording
calls. As long as these procedures are followed, neither IDS Life nor
its affiliates will be liable for any loss resulting from fraudulent
requests.
o Telephone transfers are automatically available. You may request that
telephone transfers not be authorized from your account by writing IDS
Life.
<PAGE>
Automated transfers
In addition to written and phone requests, you can arrange to have policy value
transferred from one account to another automatically. Your financial advisor
can help you set up an automated transfer.
Automated transfer policies:
o Minimum automated transfer: $50
o Frequency: monthly, quarterly, semiannually or annually
o Only one automated transfer arrangement can be in effect at any time.
Policy values may be transferred to one or more subaccounts and the
fixed account but can be transferred from only one account.
o You can start or stop this service by written request. You must allow
seven days for us to change any instructions that are currently in
place.
o Automated transfers from the fixed account may not exceed an amount
that, if continued, would deplete the fixed account within 12 months.
o If you have made a transfer from the fixed account to one or more
subaccounts, you may not make a transfer from any subaccount back to
the fixed account until the next policy anniversary.
o If your request is submitted with an application for a policy, it will
not take effect until the policy is issued.
o If the value of the account from which policy value is being
transferred is less than the $50 minimum, the transfer arrangement will
automatically be stopped.
o Automated transfers are subject to all other policy provisions and
terms including provisions relating to the transfer of money between
the fixed account and the subaccounts.
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost averaging --
investing a fixed amount at regular intervals. For example, you might have a set
amount transferred monthly from a relatively conservative subaccount to a more
aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit value, caused by fluctuations in the market value(s) of the underlying
fund. Since you invest the same amount each period, you automatically acquire
more units when the market value falls, fewer units when it rises. The potential
effect is to lower your average cost per unit. There is no charge for
dollar-cost averaging.
<PAGE>
How dollar-cost averaging works
Amount Accumulation Number of units
Month invested unit value purchased
Jan $100 $20 5.00
Feb 100 16 6.25
Mar 100 9 11.11
Apr 100 5 20.00
May 100 7 14.29
June 100 10 10.00
July 100 15 6.67
Aug 100 20 5.00
Sept 100 17 5.88
Oct 100 12 8.33
(footnotes to table) By investing an equal number of dollars each month...
(arrow in table pointing to April) you automatically buy more units when the per
unit market price is low.
(arrow in table pointing to August) and fewer units when the per unit market
price is high.
You have paid an average price of only $10.81 per unit over the 10 months, while
the average market price actually was $13.10.
Dollar-cost averaging does not guarantee that any subaccount will gain in value,
nor will it protect against a decline in value if market prices fall. Because
this strategy involves continuous investing, your success with dollar-cost
averaging will depend upon your willingness to continue to invest regularly
through periods of low price levels. Dollar-cost averaging can be an effective
way to help meet your long-term goals.
Policy loans
You may borrow against your policy by written or telephone request. (See chart
under "Transfers between the fixed account and subaccounts" for address and
phone numbers for your requests.) Loans by telephone are limited to $50,000. A
loan request received before close of business will be processed the same day. A
request received after close of business will be processed the following
business day.
Interest rate: 6.1% payable in advance, which is equivalent to a 6.5% effective
rate. For policies purchased on or after May 1, 1993 (October 1, 1993 for New
Jersey), we expect to reduce the loan interest rate after a policy's 10th
anniversary to 4.3% payable in advance, equivalent to a 4.5% effective rate.
Minimum loan: $500 ($200 for Connecticut residents) or the remaining loan value,
whichever is less.
<PAGE>
Maximum loan:
o In Texas, 100% of the policy value in the fixed account, minus a pro rata
portion of surrender charges.
o In Virginia, 90% of the policy value minus surrender charges.
o In all other states, 85% of the policy value minus surrender charges.
We will compute the maximum loan value as of the end of the valuation period
during which we receive your loan request. In doing so, we will deduct from the
loan value interest for the period until the next policy anniversary.
Payment of loaned funds: Generally, we will pay loans within seven days after we
receive your request (with certain exceptions - see "Deferral of payments,"
under "Payment of policy proceeds").
Allocation of loans to accounts: If you do not specify whether the loan is to
come from the fixed account or the subaccounts, it will be made from the
subaccounts and the fixed account in proportion to their values, minus
indebtedness. When a loan is made from a subaccount, accumulation units are
redeemed and the proceeds transferred into the fixed account. We will credit the
loaned amount with 4.5% annual interest.
Repayments: Loan repayments will be allocated to subaccounts and/or the fixed
account using the premium allocation percentages in effect unless you tell us
otherwise. Repayments must be in amounts of at least $25.
Overdue interest: If accrued interest is not paid when due, we will increase the
amount of indebtedness in the fixed account to cover the amount due. Interest
added to a policy loan will be charged the same interest rate as the loan
itself. We will take such interest from the fixed account and/or subaccounts,
using the monthly deduction allocation percentages. If the value in the fixed
account or any subaccount is not enough to pay the interest so allocated, all of
the interest will be taken from all of the accounts in proportion to their
value, minus indebtedness.
Effects of policy loans: If you do not repay your loan, it will reduce the death
benefit and policy value. Even if you do repay it, your loan can have a
permanent effect on death benefits and policy values, because money borrowed
against the subaccounts will not share in the investment results of the relevant
fund(s) or trust(s).
Taxes: If your policy lapses or you surrender it with an outstanding
indebtedness, and the amount of outstanding indebtedness plus the cash surrender
value is more than the sum of premiums you paid, you will generally be liable
for taxes on the excess. (See "Federal taxes.")
Policy surrenders
You may surrender your policy in full or in part by written or telephone
request. (See chart under "Transfers between the fixed account and
subaccounts.") A surrender request received before close of business will be
processed the same day. A request received after close of business will be
processed the following business day. We may require that you return your
policy.
<PAGE>
We will normally process your payment within seven days; however, we reserve the
right to defer payment. (See "Deferral of payments," under "Payment of policy
proceeds.")
Total surrenders: If you surrender your policy totally, you receive its cash
surrender value -- the policy value minus outstanding indebtedness and
applicable surrender charges. (See "Loads, fees and charges.") We will compute
the value of each subaccount as of the end of the valuation period during which
your request is received.
Partial surrenders: After the first policy year, you may surrender any amount
from $500 up to 85% of the policy's cash surrender value. (Partial surrenders by
telephone are limited to $50,000.) You will be charged a partial surrender fee,
described under "Loads, fees and charges."
Allocation of partial surrenders: Unless you specify otherwise, IDS Life will
make partial surrenders from the fixed account and subaccounts in proportion to
their values at the end of the valuation period during which your request is
received. In determining these proportions, we first subtract the amount of any
outstanding indebtedness from the fixed account value.
Effects of partial surrenders:
o The policy value will be reduced by the amount of the partial surrender and
fee.
o The death benefit will be reduced by the amount of the partial
surrender and fee, or, if the death benefit is based on the applicable
percentage of policy value, by an amount equal to the applicable
percentage times the amount of the partial surrender.
o A partial surrender may terminate the death benefit guarantee. The
surrender amount is deducted from total premiums paid, which may reduce
the total below the level required to keep the death benefit guarantee
in effect.
o If Option 1 is in effect, the specified amount will be reduced by the
amount of the partial surrender and fee. IDS Life will deduct this
decrease from the current specified amount in this order:
1. First from the specified amount provided by the most recent
increase; 2. Next from the next most recent increases successively; 3.
Then from the initial specified amount when the policy was issued.
Because they reduce the specified amount, partial surrenders may affect the cost
of insurance. IDS Life will not allow a partial surrender if it would reduce the
specified amount below the required minimum.
(See "Decreases" under "Death benefits.")
o If Option 2 is in effect, a partial surrender does not affect the specified
amount.
Taxes: Upon surrender, you will generally be liable for taxes on any excess of
the cash surrender value plus outstanding indebtedness over the premium paid.
(See "Federal taxes.")
<PAGE>
Exchange right
For two years after the policy is issued, you can exchange it for one that
provides benefits that do not vary with the investment return of the
subaccounts. Because the policy itself offers a fixed return option, all you
need to do is transfer all of the policy value in the subaccounts to the fixed
account. We will automatically credit all future premium payments to the fixed
account unless you request a different allocation.
Such transfer will not count against the five-transfers-per-year limit. Also,
any restrictions on transfers into the fixed account will be waived.
There will be no effect on the policy's death benefit, specified amount, net
amount at risk, rate classification(s) or issue age. Only the method of funding
the policy value will be affected.
Paid-up insurance option
You may request that the cash surrender value of the policy be used to purchase
an amount of paid-up insurance. Your request may be made in writing during the
30 days before any policy anniversary. The paid-up insurance policy will take
effect as of the policy anniversary and will mature on the original policy's
maturity date. You will forfeit all rights to make future premium payments and
all riders will terminate.
The amount and cash surrender value of the paid-up insurance will be based on
the cost of insurance rates guaranteed in the policy and on the fixed account
guaranteed interest rate. The paid-up policy's death benefit amount, minus its
cash surrender value, cannot be greater than your current policy's death
benefit, minus its policy value (both as of the date of the paid-up policy's
purchase). The amount of paid-up insurance will remain level and will not be
less than required by law.
Any cash surrender value that is not used to purchase the paid-up insurance
amount will be paid to you. At any time before the insured's death, you may
surrender the paid-up insurance for its cash surrender value.
Optional insurance benefits
You may choose to add the following benefits to your policy, in the form of
riders (if certain requirements are met):
Waiver of monthly deduction (WMD): Under WMD, we will waive the monthly
deduction if the insured becomes totally disabled for six months or longer prior
to the attained insurance age 60 policy anniversary. The waiver will not start
until the disability has continued for at least six months; however, once it
starts, monthly deductions taken from policy values during the six-month waiting
period will be credited back to the policy, using the premium allocation
percentage then in effect. Monthly deductions will then be waived as long as the
insured remains disabled. For any month in which the monthly deduction is
covered by this rider, the minimum monthly premium needed to keep the death
benefit guarantee in effect will be zero.
During disability the specified amount cannot be increased, the death benefit
option cannot be changed to Option 1 and any benefits provided by riders cannot
be increased.
<PAGE>
Accidental death benefit (ADB): ADB provides an additional death benefit if the
insured's death is caused by accidental injury prior to the insured's attained
insurance age 70 policy anniversary.
Other insured rider (OIR): OIR provides a level, adjustable death benefit on the
life of each other insured covered. The minimum face amount that can be issued
to each other insured is $25,000. OIR does not develop policy value.
Coverage under OIR will terminate on the earliest of the following:
o The monthly anniversary date on or next following receipt of a written
request to end coverage.
o The date the basic policy matures, is surrendered or terminates for any
reason other than the insured's death.
o 31 days after the insured's death. No charge is made for coverage during
this period.
o The date of conversion of the coverage to an individual life insurance
policy on the life of the other insured. OIR is convertible to any level
benefit, level premium whole life or flexible premium adjustable whole life
insurance policy offered by us at the time of conversion.
o The date the other insured attains insurance age 100.
If the other insured's age or sex has been misstated, the amount payable upon
his or her death will be the amount of insurance that would have been purchased
by the cost of the OIR for the policy month during which death occurred, had the
cost been calculated using rates for the correct age and sex.
Children's insurance rider (CIR): Each unit of CIR provides $1,000 level term
insurance on each eligible child. To be eligible, children must:
o be insurable children, stepchildren or legally adopted children of the
insured;
o be named in the application for this rider;
o be members of the primary insured's household (actually living with the
insured) at the time of application; and
o be at least 15 days old and have not passed their 19th birthday.
After the CIR is issued, it automatically insures children born to, legally
adopted by, or who become stepchildren of the insured after the date of the CIR
application, if they are at least 15 days old and have not passed their 19th
birthday. The maximum number of units for one family is 10.
Insurance under CIR expires on the earlier of the child's 22nd birthday or the
primary insured's attained insurance age 65 policy anniversary. If the primary
insured parent dies, the insurance on each child will be changed to paid-up term
insurance, which will provide the same coverage as provided under the CIR and
will expire at the same time coverage under the CIR would have expired.
<PAGE>
The coverage provided on each child may be converted, without evidence of
insurability, to level premium whole life or flexible premium adjustable whole
life insurance within 31 days before or after the earlier of the child's 22nd
birthday or the primary insured's attained insurance age 65 policy anniversary.
Up to five times the amount of insurance on each child may be converted.
Automatic Increase Benefit Rider (AIB):
This rider automatically increases the specified amount of the policy each
policy anniversary for 10 years. When you apply, you may select a 2%, 3%, 4%, 5%
or 6% increase amount. The maximum amount of each increase is $25,0000. If you
decline an automatic increase, the rider will terminate. This rider in not
available in New Jersey.
Accelerated Benefit Rider for Terminal Illness (ABRTI):
If the insured is terminally ill and death is expected to occur within 6 months
the rider provides that a portion of the death benefit may be withdrawn prior to
death. The amount that may be withdrawn is 50% of the death benefit, but no more
than $250,000. The amount withdrawn creates a lien against the policy's total
death benefit and is charged interest. At the insured's death, the policy
beneficiary will receive only the death benefit that remains after the lien is
deducted.
Payment of policy proceeds
Proceeds will be paid when:
o you surrender the policy;
o the insured dies; or
o the policy maturity date is reached, which occurs when the insured
reaches attained insurance age 100.
All proceeds will be paid by check. We will compute the amount of the death
benefit and pay it in a single sum unless you select one of the payment options
below. We will pay interest at a rate not less than 4% per year (8% in Arkansas
and Colorado) on single sum death proceeds, from the date of the insured's death
to the settlement date (the date on which proceeds are paid in a lump sum or
first placed under a payment option). You will be charged a fee if you request
express mail delivery.
Payment options:
During the insured's lifetime, you may request in writing that we pay policy
proceeds under one or more of the three payment options below. (The beneficiary
may also select a payment option, unless you say that he or she can't.) You
decide how much of the proceeds will be placed under each option (minimum:
$5,000). Any such amount will be transferred to IDS Life's general account.
Unless we agree otherwise, payments under all options must be made to a natural
person.
You may also, by written request, change a prior choice of payment option, or
elect a payment option other than the three below if we agree.
<PAGE>
If you elect a payment option for pre-death proceeds, payments under this option
may be subject to federal income tax as ordinary income. If you elect Option A,
the full pre-death proceeds will be taxed as a full surrender or maturity as
described in "Taxation of policy proceeds" and may also be subject to an
additional 10% penalty tax if the policy is a modified endowment. The interest
paid under Option A will be ordinary income subject to income tax in the year
earned. The interest payments will not be subject to the 10% penalty tax.
If you elect Option B or Option C for payment of pre-death proceeds, any
indebtedness at the time of election will be taxed as a partial surrender as
described in "Taxation of policy proceeds" and may also be subject to an
additional 10% penalty tax if the policy is a modified endowment. The remainder
of the proceeds will be used to make payments under the option elected. A
portion of each payment will be taxed as ordinary income and a portion of each
payment will be considered a return of the investment in the policy and will not
be taxed. An owner's investment in the policy is described in "Taxation of
policy proceeds". All payments made after the investment in the policy is fully
recovered will be subject to tax. Amounts paid under Option B or Option C that
are subject to tax may also be subject to an additional 10% penalty tax. (See
"Penalty tax.")
Death benefit proceeds applied to any payment option are not considered part of
the beneficiary's income and thus are not subject to federal income tax.
Payments of interest under Option A will be ordinary income subject to tax.
Under Option B or Option C, a portion of each payment will be ordinary income,
subject to tax and a portion of each payment will be considered a return of the
beneficiary's investment in the policy. The beneficiary's investment in the
policy is the death benefit proceeds applied to the payment option. All payments
made after the investment in the policy is fully recovered will be subject to
tax.
Option A -- Interest payments: We will pay interest on any proceeds placed under
this option at a rate of 4% per year compounded annually, at regular intervals
and for a period that is agreeable to both you and us. At the end of any payment
interval, you may withdraw proceeds in amounts of at least $100. At any time,
you may withdraw all of the proceeds that remain or you may place them under a
different payment option approved by us.
Option B -- Payments for a specified period: We will make fixed monthly payments
for any number of years you specify. Here are examples of monthly payments for
each $1,000 placed under this option:
Payment period Monthly payment per $1,000
(years) placed under Option B
5 $18.32
10 10.06
15 7.34
20 6.00
25 5.22
30 4.72
Monthly amounts for other payment periods will be furnished at your request,
free of charge.
<PAGE>
Option C -- Lifetime income: We will make monthly payments for the life of the
person (payee) who is to receive the income. Payment will be guaranteed for 10,
15 or 20 years.
The amount of each monthly payment per $1,000 placed under this option will be
based on the table of settlement rates in effect at the time of the first
payment. The amount depends on the sex and adjusted age of the payee on that
date. Adjusted age means the age of the payee (on the payee's nearest birthday)
minus an adjustment as follows:
<TABLE>
<CAPTION>
Calendar year of payee's Adjustment Calendar year of payee's Adjustment
birth birth
<S> <C> <C> <C> <C> <C>
Before 1920 0 1945 - 1949 6
1920 - 1924 1 1950 - 1959 7
1925 - 1929 2 1960 - 1969 8
1930 - 1934 3 1970 - 1979 9
1935 - 1939 4 1980 - 1989 10
1940 - 1944 5 After 1989 11
</TABLE>
The amount of each monthly payment per $1,000 placed under this option will not
be less than amounts shown in the next table.
Monthly amounts for any adjusted age not shown will be furnished at your
request, without charge.
<TABLE>
<CAPTION>
Adjusted age payee Life income per $1,000 with payments guaranteed for
- --------------------------- --------------------------------------------------------------------------------
10 years 15 years 20 years
Male Female Male Female Male Female
- --------------------------- ------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.81 $4.47 $4.74 $4.45 $4.65 $4.40
55 5.20 4.80 5.09 4.74 4.94 4.87
60 5.70 5.22 5.51 5.12 5.25 4.98
65 6.35 5.77 5.98 5.58 5.54 5.32
70 7.14 6.50 6.47 6.12 5.77 5.63
75 8.00 7.40 6.87 6.64 5.91 5.85
</TABLE>
Deferral of payments:
We reserve the right to defer payments of cash surrender value, policy loans or
variable death benefits in excess of the specified amount if:
o the payments derive from a premium payment made by a check that has not
cleared the banking system (good payment has not been collected);
o the NYSE is closed (other than customary weekend and holiday closings);
o in accordance with SEC rules, trading on the NYSE is restricted or,
because of an emergency, it is not practical to dispose of securities
held in the subaccount or determine the value of the subaccount's net
assets.
Any loans or surrenders from the fixed account may be delayed up to six months
from the date we receive the request. If we postpone the payment of surrender
proceeds more than 30 days, we will pay you interest on the amount surrendered
at an annual rate of 3% for the period of postponement.
<PAGE>
Federal taxes
The following is a general discussion of the policy's federal income tax
implications. It is not intended as tax advice. Because the effect of taxes on
the value and benefits of your policy depends on your individual situation as
well as IDS Life's tax status, YOU SHOULD CONSULT A TAX ADVISOR TO FIND OUT HOW
THESE GENERAL CONSIDERATIONS APPLY TO YOU. The discussion is based on our
understanding of federal income tax laws as currently interpreted by the
Internal Revenue Service (IRS); both the laws and their interpretation may
change.
The policy is intended to qualify as a life insurance policy for federal income
tax purposes. To that end, the provisions of the policy are to be interpreted to
ensure or maintain this tax qualification. IDS Life reserves the right to change
the policy in order to ensure that it will continue to qualify as life insurance
for tax purposes. We will send you a copy of any changes.
IDS Life's tax status
IDS Life is taxed as a life insurance company under the Code. For federal income
tax purposes, the subaccounts are considered a part of IDS Life, although their
operations are treated separately in accounting and financial statements.
Investment income from the subaccounts is reinvested and becomes part of the
subaccounts' value. This investment income, including realized capital gains, is
not taxed to IDS Life and therefore no charge is made against the subaccounts
for our federal income taxes. IDS Life reserves the right to make such a charge
in the future if there is a change in the tax treatment of variable life
insurance contracts or in IDS Life's tax status as we currently understand it.
Taxation of policy proceeds
The death benefit is not considered part of the beneficiary's income and thus is
not subject to federal income taxes.
Part or all of any pre-death proceeds received through full surrender or
maturity, lapse, partial surrender, policy loan or assignment of policy value or
payment options may be subject to federal income tax as ordinary income. (See
the following table.) In some cases, the tax liability depends on whether the
policy is a modified endowment (explained following the table). The taxable
amount may also be subject to an additional 10% penalty tax if the policy is a
modified endowment.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Source of proceeds Taxable portion of pre-death proceeds
Full surrender: Amount received plus any indebtedness, minus your investment
in the policy.*
Lapse: Any outstanding indebtedness minus your investment in the
policy.*
Partial surrenders Lesser of:
(modified endowments): the amount received or policy value minus your investment in
the policy.*
Policy loans and assignments Lesser of:
(modified endowments): the amount of the loan / assignment or policy value minus
your investment in the policy.*
Partial surrenders Generally, if the amount received is greater than your
(other policies): investment in the policy,* the amount in excess of your
investment is taxable. However,
during the first 15 policy years,
a different amount may be taxable
if the partial surrender results
in or is necessitated by a
reduction in benefits.
Policy loans and assignments None
(other policies)
Payment options: If proceeds of the policy
will be paid under one of the
payment options, see the "Payment
option" section for tax
information.
</TABLE>
* The owner's investment is equal to premiums paid, minus the nontaxable portion
of any previous partial surrenders, plus the taxable portion of any previous
policy loans.
Modified endowment contracts
In 1988, Congress created a new class of life insurance policies called
"Modified Endowment Contracts," which are taxed differently from conventional
life insurance contracts. Policies applied for, or materially changed, on or
after June 21, 1988, are considered to be modified endowments if premiums paid
in the first seven years of the policy, or the first seven years following a
material change, exceed certain limits. (Also, any life insurance policy
received in exchange for a modified endowment is itself a modified endowment.)
We have established procedures for monitoring whether a contract may become a
modified endowment contract.
Modified endowment limits are calculated when the policy is issued and are based
on the benefits provided and on the risk classification of the insured. They are
later recalculated if certain increases or reductions in benefits occur.
<PAGE>
Increases in benefits: Limits are recalculated when an increase is considered a
"material change," as are most increases requested by the owner, such as an
increase in specified amount, addition of a rider benefit or an increase in an
existing rider benefit. (Automatic increases under the terms of the policy, such
as an increase in death benefit due to operation of the applicable percentage
table described in the "Death benefits" section or to policy value growth under
Option 2, are generally not considered material changes.) A policy becomes a
modified endowment if premiums paid in the early years following a material
change exceed the recalculated limits.
Reductions in benefits: When benefits are reduced within seven years after issue
or after the most recent material change, the limits are recalculated as if the
reduced level of benefits had always been in effect. In most cases, this
recalculation will further restrict the amount of premium that can be paid
without exceeding modified endowment limits. If premiums already paid exceed the
recalculated limits, the policy becomes a modified endowment even if no further
premiums are paid.
Distributions affected: Modified endowment rules apply to distributions in the
year the policy becomes a modified endowment and in all subsequent years. In
addition, the rules apply to distributions taken two years before the policy
becomes a modified endowment, which are presumed to be taken in anticipation of
that event.
Serial purchase of modified endowments: All modified endowments issued by the
same insurer (or affiliated companies of the insurer) to the same owner during
any calendar year are treated as one policy in determining the amount of any
loan or distribution that is taxable.
Penalty tax: If a policy is a modified endowment, the taxable portion of
pre-death proceeds from a full surrender, maturity, lapse, partial surrender,
policy loan or assignment of policy value or certain payment options may be
subject to a 10% penalty tax unless:
o the distribution occurs after the owner attains age 59-1/2;
o the distribution is attributable to the owner becoming disabled (within the
meaning of Code Section 72(m)(7); or
o the distribution is part of a series of substantially equal periodic
payments made at least once a year over the life (or life expectancy) of
the owner or over the joint lives (or life expectancies) of the owner and
the owner's beneficiary.
Other tax considerations
Interest paid on policy loans: If the loan is used for personal purposes, such
interest is not tax-deductible. Other rules apply if the loan is used for trade
or business or investment purposes or if the policy is owned by a business or a
corporation.
Policy changes: Changing ownership, exchanging or assigning the policy may have
tax consequences, depending on the circumstances.
Other taxes: Federal estate tax, state and local estate tax, inheritance tax,
gift tax and other tax consequences of ownership or receipt of policy proceeds
will also depend on the circumstances.
<PAGE>
Qualified retirement plans: The policy may be used in conjunction with certain
qualified plans. Since the rules governing such use are complex, a purchaser
should consult a competent pension consultant.
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v. Norris
that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Since the policy's cost of
insurance rates and purchase rates for certain settlement options distinguish
between men and women, employers and employee organizations should consult with
legal counsel before purchasing the policy for any employment-related insurance
or benefit program. Rates that do not distinguish between men and women are
available when required for employment-related programs in all states except
Illinois, Michigan, New Jersey, South Carolina and Texas.
IDS Life
IDS Life is a stock life insurance company organized under the laws of the State
of Minnesota in 1957. Our address is IDS Tower 10, Minneapolis, MN 55440.
IDS Life conducts a conventional life insurance business in the District of
Columbia and all states except New York. A wholly owned subsidiary of IDS Life,
IDS Life Insurance Company of New York, conducts a substantially identical
business in New York. IDS Life has been in the variable annuity business since
1968 and has sold a number of different variable annuity contracts and variable
life insurance policies, utilizing other separate accounts, unit investment
trusts and mutual funds.
Ownership
IDS Life is a wholly owned subsidiary of American Express Financial Corporation
(AEFC). AEFC, a Delaware corporation, is a wholly-owned subsidiary of American
Express Company.
State regulation
IDS Life is subject to the laws of Minnesota governing insurance companies and
to regulation by the Minnesota Department of Commerce. In addition, IDS Life is
subject to regulation under the insurance laws of other jurisdictions in which
it may operate. An annual statement in a prescribed form is filed with
Minnesota's Department of Commerce and in each state in which IDS Life does
business. IDS Life's books and accounts are subject to review by the Minnesota
Department of Commerce at all times and a full examination of its operations is
conducted periodically. Such regulation does not, however, involve any
supervision of management or investment practices or policies.
Distribution of the policy
IDS Life is the sole distributor of the policy. IDS Life is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. (NASD). Representatives of IDS
Life are licensed insurance and annuity agents and are registered with the NASD
as representatives of IDS Life.
<PAGE>
IDS Life pays its representatives a commission of up to 50% of the initial
minimum monthly premium (annualized) when the policy is sold, plus 3% of all
premiums in excess of 12 times the minimum monthly premium. At the end of policy
years one through 10, IDS Life pays a service fee not greater than 0.3% of the
policy value, net of indebtedness. Additional commissions are paid if an
increase in coverage occurs. IDS Life also pays approximately 27% of the total
representative's commission to the field vice presidents and district sales
managers of the selling representative.
Legal proceedings
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life does business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents, and
other matters. IDS Life, like other life and health insurers, from time to time
is involved in such litigation. On December 13, 1996, an action of this nature
was commenced in Minnesota state court. The plaintiffs purport to represent a
class consisting of all persons who replaced existing IDS Life policies with new
IDS Life policies from and after January 1, 1985. Plaintiffs seek damages in an
unspecified amount and also seek to establish a claims resolution facility for
the determination of individual issues. IDS Life filed an answer to the
Complaint on February 18, 1997. A similar action involving the replacement of
existing IDS Life insurance policies and annuity contracts was filed in the same
court on March 21, 1997.
IDS Life believes it has meritorious defenses to these and other actions arising
in connection with the conduct of its business activities and intends to defend
them vigorously. IDS Life believes that is not a party to, nor are any of its
properties the subject of, any pending legal proceedings which would have a
material adverse effect on its consolidated financial condition.
Experts
The consolidated financial statements of IDS Life Insurance Company at Dec. 31,
1996 and 1995, and for each of the three years in the period ended Dec. 31,
1996, and the individual and combined financial statements of the segregated
asset subaccounts of IDS Life Variable Life Separate Account for Flexible
Premium Variable Life Insurance at Dec. 31, 1996, and for each of the three
years in the period then ended, except for the following subaccounts: IL
subaccount which is for each of the two years in the period ended Dec. 31, 1996
and for the period Oct. 28, 1994 (commencement of operations) to Dec. 31, 1994,
FGI and FNO subaccounts which are for the period Nov. 22, 1996 (commencement of
operations) to Dec. 31, 1996, and 1995V subaccount which is for the period Jan.
1, 1995 to Nov. 15, 1995 (date of maturity of the securities in the trust) and
the year ended Dec. 31, 1994 appearing in this prospectus have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
Actuarial matters included in the prospectus have been examined by James M.
Jensen, F.S.A., M.A.A.A., Vice President, Insurance Product Development, as
stated in his opinion filed as an exhibit to the Registration Statement.
<PAGE>
Management of IDS Life
Directors
David R. Hubers
Director since September 1989; president and chief executive officer, AEFC,
since August 1993, and director, AEFC, since January 1984; senior vice
president, Finance and chief financial officer, AEFC, from January 1984 to
August 1993.
Richard W. Kling
Director since February 1984; president since March 1994. Executive vice
president, Marketing and Products from January 1988 to March 1994; senior vice
president, AEFC, since May 1994; director of IDS Life Series Fund, Inc. and
chairman of the board of managers of IDS Life Variable Annuity Funds A and B.
Paul F. Kolkman
Director since May 1984; executive vice president since March 1994; vice
president, Finance from May 1984 to March 1994; vice president, AEFC, since
January 1987.
James A. Mitchell
Chairman of the board since March 1994; director since July 1984; chief
executive officer since November 1986; president from July 1984 to March 1994;
executive vice president, AEFC, since March 1994; director, AEFC, since July
1984; senior vice president, AEFC, from July 1984 to March 1994.
Barry J. Murphy
Director and executive vice president, Client Service, since March 1994; senior
vice president, Operations, Travel Related Services (TRS), a subsidiary of
American Express Company, since July 1992; vice president, TRS, from November
1989 to July 1992; chief operating officer, TRS, from March 1988 to November
1989.
Stuart A. Sedlacek
Director and executive vice president, Assured Assets since March 1994; vice
president, AEFC, since September 1988.
Officers other than directors
Jeffrey S. Horton
Vice president and treasurer since December 1997; vice president and corporate
treasurer, AEFC, since December 1997; controller, American Express Technologies
- - Financial Services, AEFC, from July 1997 to December 1997; controller, Risk
Management Products, AEFC, from May 1994 to July 1997; director of finance and
analysis, Corporate Treasury, AEFC, from June 1990 to May 1994.
<PAGE>
William A. Stoltzmann
Vice president, general counsel and secretary since 1985; vice president and
assistant general counsel, AEFC, since November 1985.
The address for all of the directors and principal officers is: IDS Tower 10,
Minneapolis, MN 55440-0010.
The officers, employees and sales force of IDS Life are bonded, in the amount of
$100 million, by virtue of a blanket fidelity bond issued to American Express
Company by Saint Paul Fire and Marine, the lead underwriter.
A I M Advisors Inc., Putnam Investment Management, Inc. and Smith Barney Inc.
A I M Advisors, Inc.
A I M Advisors, Inc. ("A I M") was organized in 1976 and is headquartered in
Houston, Texas. A I M is a wholly-owned subsidiary of AIM Management Group Inc.,
an indirect subsidiary of AMVESCO plc. (formerly INVESCO plc.). As of March 18,
1997, total assets advised or managed by A I M and its subsidiaries were
approximately $68 billion.
Putnam Management
Putnam Management has been managing mutual funds since 1937. Today, the firm
serves as the investment manager for the funds in the Putnam Family, with nearly
$141 billion in assets under management in over 7 million shareholder accounts
at December 31, 1996.
Smith Barney Inc.
Smith Barney, sponsor of the trust, a Delaware corporation and a subsidiary of
The Travelers Inc., is engaged in the underwriting, securities and commodities
brokerage business, and is a member of the NYSE, other major securities
exchanges and commodity exchanges and the National Association of Securities
Dealers, Inc. The sponsor sponsors seven open-end investment companies and three
closed-end investment companies as well as a variety of unit investment trusts.
The sponsor has acted as principal underwriter and managing underwriter of other
investment companies. The sponsor, in addition to participating as a member of
various selling groups or as an agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of securities
of such companies and sells securities to such companies in its capacity as a
broker or dealer in securities.
Other information
A registration statement has been filed with the Securities and Exchange
Commission (SEC) under the Securities Act of 1933, as amended. For further
information concerning the policy, its separate account (the variable account)
and IDS Life, please refer to the registration statement, as amended, with
exhibits.
<PAGE>
Substitution of investments
If shares of any fund or trust units are unavailable for purchase by the
appropriate subaccount or if, in the judgment of IDS Life's management, further
investment in such shares is no longer appropriate, shares of another
registered, open-end management investment company or unit investment trust may
be substituted or the investments of the subaccounts may be changed.
In the event of any such substitution or change, IDS Life may, without the
consent or approval of owners, amend the policy and take whatever action is
necessary and appropriate. However, no such substitution or change will be made
without any necessary approval of the SEC or state insurance departments. IDS
Life will notify owners within five days of any substitution or change.
Voting rights
All shares issued by the fund are the same class (kind) -- capital stock. They
are fully paid and nonassessable and can be redeemed or transferred. They can be
issued as full shares or fractions. All shares have equal voting rights; a
fraction of a share has the same kind of rights and privileges as a full share.
Each of the funds issues its own series of common stock. The shares of each fund
represent an interest only in that fund's assets (and profits or losses) and in
the event of liquidation, each share of a fund would have the same rights to
dividends and assets as every other share of that fund.
Each share of a fund has one vote. On some issues, such as election of directors
of IDS Life Series Fund, all shares of the IDS Life Series Fund Portfolios vote
together as one series. When electing directors, all shares of IDS Life Series
Fund Portfolios have cumulative voting rights. Cumulative voting means that
shareholders are entitled to a number of votes equal to the number of shares
they hold multiplied by the number of directors to be elected and they have the
right to divide votes among candidates.
On an issue affecting only one fund -- for example, a fundamental investment
restriction pertaining only to that fund -- its shares vote as a separate
series. If shareholders of a particular fund vote approval of an agreement, the
agreement becomes effective with respect to that fund, whether or not it is
approved by shareholders of the other funds.
IDS Life is the owner of all fund shares and as such holds all voting rights.
However, IDS Life will vote the shares of each fund in accordance with
instructions received from owners. If we do not receive timely instructions from
you, we will vote your shares in the same proportion as the shares for which
instructions are received. Fund shares that are not otherwise attributable to
owners will also be voted by IDS Life in the same proportion as those shares in
that subaccount for which instructions are received.
<PAGE>
We determine the number of fund shares in each subaccount for which you may give
instructions by applying your percentage interest in the subaccount to the total
number of votes attributable to the subaccount. The number will be determined as
of a date chosen by IDS Life, but not more than 60 days before the meeting of
the fund. Fractional votes are counted. You will receive notice of each
shareholder meeting, together with any proxy solicitation materials and a
statement of the number of votes for which you are entitled to give
instructions.
If required by state insurance officials, IDS Life may disregard voting
instructions that would change the goals of one or more of the funds or would
result in approval or disapproval of an investment advisory contract. In
addition, IDS Life itself may disregard voting instructions that would require
changes in the investment policy or investment advisor of one or more of the
funds, if IDS Life reasonably disapproves such changes in accordance with
applicable federal regulations. If IDS Life does disregard voting instructions,
it will, in its next report to owners, advise them of that action and the
reasons for it.
Generally, ownership of units of a unit investment trust does not involve the
exercise of voting rights. However, unit holders in the trust may vote for
removal of the trustee or for amendment or termination of the trust indenture.
In the event of such a vote, IDS Life, as the owner of the units, would solicit
voting instructions from owners under the same procedures used for votes
affecting the fund.
Reports
At least once a year IDS Life will mail to you, at your last known address of
record, a report containing all information required by law or regulation,
including a statement showing the current policy value.
Policy illustrations
The following tables illustrate how policy values, cash surrender values and
death benefits may change with the investment experience of the subaccount. The
tables show how these amounts might vary, for a 35-year-old male nonsmoker,
under Death Benefit Option 1, if:
o the annual rate of return of the fund is 0%, 6% or 12%.
o cost of insurance rates and policy fees are -- current rates and fees
for policies purchased on or after November 20, 1997, and on or after
May 1, 1993 (October 1, 1993 for New Jersey) and before November 20,
1997 -- current rates and fees for policies purchased before May 1,
1993 (October 1, 1993 for New Jersey) -- guaranteed rates and fees.
Any such illustration involves a number of detailed assumptions. (See chart,
"Understanding the illustrations.") To the extent that your own circumstances
differ from those assumed in the illustrations, your expected results would also
differ.
Upon request, you will be furnished with comparable tables illustrating death
benefits, policy values and cash surrender values based on the actual age of the
person you propose to insure and on an initial specified amount and premium
payment schedule. In addition, after you have purchased a policy, you may
request illustrations based on policy values at the time of request.
<PAGE>
Understanding the illustrations:
Rates of return: assumed to be uniform, gross, after-tax, annual rates of 0%, 6%
or 12% for the fund. Results would differ depending on allocations among the
subaccounts, if returns averaged 0%, 6% and 12% for the funds as a whole but
differed across individual funds.
Insured: assumed to be a male insurance age 35, in a standard rate
classification, qualifying for the nonsmoker rate. Results would be lower if the
insured were in a substandard rate classification or did not qualify for the
non-smoker rate.
Premiums: A $900 premium is assumed to be paid in full at the beginning of each
policy year. Results would differ if premiums were paid on a different schedule.
Policy loans and partial withdrawals: It is assumed that none have been made.
(Since indebtedness is assumed to be zero, the cash surrender value in all cases
equals the policy value minus the surrender charge.)
Effect of expenses and charges: The net investment return of the subaccounts,
shown in the tables, is lower than the gross, after-tax return of the fund
because expenses paid by the fund and charges made against the subaccounts have
been deducted. These include:
o the daily investment management fee paid by the funds, assumed to be
equivalent to an annual rate of 0.7% of the fund's average daily net
assets;
o the daily mortality and expense risk charge, equivalent to 0.9% of the
daily net asset value of the subaccounts annually; and
o a nonadvisory expense charge of 0.1% of each fund's average daily net
assets for direct expenses incurred by the fund.
The nonadvisory expense charge for the IDS Life Series Fund is capped by IDS
Life at 0.1%, even though actual expenses on the IDS Life Series Fund-Government
Securities Portfolio ranged up to 0.18%, IDS Life Series Fund-Money Market
Portfolio ranged up to 0.23% and IDS Life Series Fund-International Equity
Portfolio ranged up to 0.37%. Although IDS Life reserves the right to
discontinue capping these expenses, our present intent is to continue the cap
indefinitely until actual expenses are less than the cap. Should IDS Life
discontinue the cap prior to that time, the policy values and death benefits in
the tables generally would be less. Other expenses for the year ended Dec. 31,
1996 were 0.09% for Putnam VT New Opportunities Fund. For AIM V.I. Growth and
Income Fund other expenses (annualized) were 0.13% for the year ended Dec. 31,
1996.
After deduction of the above expenses and charges, the illustrated gross annual
investment rates of return of 0%, 6%, and 12% correspond to approximate net
annual rates of -1.69%, 4.21% and 10.11%, respectively.
Taxes: Results shown in the tables reflect the fact that IDS Life does not
currently charge the subaccounts for federal income tax. If such a charge is
taken in the future, the funds will have to earn more than they do now in order
to produce the death benefits and policy values illustrated.
<PAGE>
<TABLE>
<CAPTION>
Illustration Policies purchased on or after November 20, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Initial specified amount $100,000 Male - age 35 Current costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 608 $ 657 $ 694 $ 0 $ 0 $ 46
2 1,937 100,000 100,000 100,000 1,206 1,330 1,459 479 602 732
3 2,979 100,000 100,000 100,000 1,783 2,026 2,290 998 1,241 1,505
4 4,073 100,000 100,000 100,000 2,341 2,742 3,195 1,496 1,898 2,351
5 5,222 100,000 100,000 100,000 2,878 3,478 4,182 1,977 2,577 3,281
6 6,428 100,000 100,000 100,000 3,396 4,234 5,258 2,675 3,513 4,537
7 7,694 100,000 100,000 100,000 3,895 5,012 6,434 3,354 4,471 5,893
8 9,024 100,000 100,000 100,000 4,373 5,810 7,717 4,012 5,450 7,356
9 10,420 100,000 100,000 100,000 4,829 6,630 9,119 4,649 6,450 8,938
10 11,886 100,000 100,000 100,000 5,259 7,467 10,646 5,259 7,467 10,646
11 13,425 100,000 100,000 100,000 5,664 8,321 12,314 5,664 8,321 12,314
12 15,042 100,000 100,000 100,000 6,044 9,195 14,136 6,004 9,195 14,136
13 16,739 100,000 100,000 100,000 6,396 10,087 16,128 6,396 10,087 16,128
14 18,521 100,000 100,000 100,000 6,719 10,994 18,305 6,719 10,994 18,305
15 20,392 100,000 100,000 100,000 7,013 11,919 20,689 7,013 11,919 20,684
16 22,356 100,000 100,000 100,000 7,272 12,858 23,297 7,272 12,858 23,297
17 24,419 100,000 100,000 100,000 7,496 13,809 25,153 7,496 13,809 25,153
18 26,585 100,000 100,000 100,000 7,679 14,768 29,281 7,679 14,768 29,281
19 28,859 100,000 100,000 100,000 7,816 15,731 32,707 7,816 15,731 32,707
20 31,247 100,000 100,000 100,000 7,905 16,697 36,467 7,905 16,697 36,467
age 60 45,102 100,000 100,000 100,000 7,422 21,390 61,691 7,422 21,390 61,691
age 65 62,785 100,000 100,000 125,819 4,830 25,402 103,130 4,830 25,402 103,130
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration Policies purchased on or after May 1, 1993 and before November 20, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Initial specified amount $100,000 Male - age 35 Current costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 605 $ 648 $ 691 $ 0 $ 0 $ 43
2 1,937 100,000 100,000 100,000 1,200 1,323 1,452 473 596 725
3 2,979 100,000 100,000 100,000 1,775 2,017 2,280 989 1,231 1,494
4 4,073 100,000 100,000 100,000 2,329 2,729 3,181 1,485 1,885 2,337
5 5,222 100,000 100,000 100,000 2,864 3,461 4,163 1,963 2,560 3,262
6 6,428 100,000 100,000 100,000 3,379 4,214 5,234 2,659 3,493 4,513
7 7,694 100,000 100,000 100,000 3,876 4,988 6,404 3,335 4,447 5,864
8 9,024 100,000 100,000 100,000 4,351 5,782 7,681 3,990 5,422 8,894
9 10,420 100,000 100,000 100,000 4,802 6,595 9,074 4,622 6,415 9,591
10 11,886 100,000 100,000 100,000 5,227 7,425 10,591 5,227 7,425 10,591
11 13,425 100,000 100,000 100,000 5,627 8,272 12,247 5,627 8,272 12,247
12 15,042 100,000 100,000 100,000 6,001 9,138 14,057 6,001 9,138 14,057
13 16,739 100,000 100,000 100,000 6,349 10,021 16,036 6,349 10,021 16,036
14 18,521 100,000 100,000 100,000 6,666 10,920 18,198 6,666 10,920 18,198
15 20,392 100,000 100,000 100,000 6,953 11,834 21,563 6,953 11,834 20,563
16 22,356 100,000 100,000 100,000 7,205 12,761 23,150 7,205 12,761 23,150
17 24,419 100,000 100,000 100,000 7,421 13,699 25,983 7,421 13,699 25,983
18 26,585 100,000 100,000 100,000 7,597 14,645 29,086 7,597 14,645 29,086
19 28,859 100,000 100,000 100,000 7,726 15,594 33,485 7,726 15,594 32,485
20 31,247 100,000 100,000 100,000 7,806 16,543 36,213 7,806 16,543 36,213
age 60 45,102 100,000 100,000 100,000 7,274 21,139 61,221 7,274 21,139 61,221
age 65 62,785 100,000 100,000 124,847 4,629 25,020 102,334 4,629 25,020 102,334
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Initial specified amount $100,000 Male - age 35 Guaranteed costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 575 $ 617 $ 659 $ 0 $ 0 $ 11
2 1,937 100,000 100,000 100,000 1,141 1,261 1,386 414 533 658
3 2,979 100,000 100,000 100,000 1,687 1,921 2,175 901 1,135 1,389
4 4,073 100,000 100,000 100,000 2,213 2,598 3,033 1,369 1,754 2,189
5 5,222 100,000 100,000 100,000 2,720 3,293 3,968 1,819 2,392 3,067
6 6,428 100,000 100,000 100,000 3,196 3,996 4,976 2,475 3,275 4,255
7 7,694 100,000 100,000 100,000 3,654 4,718 6,076 3,113 4,178 5,535
8 9,024 100,000 100,000 100,000 4,082 5,450 7,267 3,722 5,089 6,906
9 10,420 100,000 100,000 100,000 4,493 6,203 8,570 4,313 6,022 8,390
10 11,886 100,000 100,000 100,000 4,876 6,966 9,986 4,876 6,966 9,986
11 13,425 100,000 100,000 100,000 5,231 7,742 11,527 5,231 7,742 11,527
12 15,042 100,000 100,000 100,000 5,559 8,531 13,208 5,559 8,531 13,208
13 16,739 100,000 100,000 100,000 5,849 9,323 15,034 5,849 9,323 15,034
14 18,521 100,000 100,000 100,000 6,114 10,129 17,030 6,114 10,129 17,030
15 20,392 100,000 100,000 100,000 6,341 10,940 19,206 6,341 10,940 19,206
16 22,356 100,000 100,000 100,000 6,521 11,745 21,573 6,521 11,745 21,573
17 24,419 100,000 100,000 100,000 6,667 12,557 24,163 6,667 12,557 24,163
18 26,585 100,000 100,000 100,000 6,766 13,364 26,993 6,766 13,364 26,993
19 28,859 100,000 100,000 100,000 6,809 14,158 30,082 6,809 14,158 30,082
20 31,247 100,000 100,000 100,000 6,786 14,929 33,454 6,786 14,929 33,454
age 60 45,102 100,000 100,000 100,000 5,533 18,272 55,886 5,533 18,272 55,863
age 65 62,785 100,000 100,000 113,155 1,437 19,813 92,750 1,437 19,813 92,750
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration Policies purchased before May 1, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Initial specified amount $100,000 Male - age 35 Current costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 605 $ 648 $ 691 $ 0 $ 0 $ 43
2 1,937 100,000 100,000 100,000 1,200 1,323 1,452 473 596 725
3 2,979 100,000 100,000 100,000 1,775 2,017 2,280 989 1,231 1,494
4 4,073 100,000 100,000 100,000 2,329 2,729 3,181 1,485 1,885 2,337
5 5,222 100,000 100,000 100,000 2,864 3,461 4,163 1,963 2,560 3,262
6 6,428 100,000 100,000 100,000 3,368 4,202 5,222 2,647 3,481 4,501
7 7,694 100,000 100,000 100,000 3,853 4,964 6,379 3,312 4,424 5,839
8 9,024 100,000 100,000 100,000 4,309 5,737 7,633 3,948 5,377 7,273
9 10,420 100,000 100,000 100,000 4,746 6,534 9,006 4,566 6,354 8,826
10 11,886 100,000 100,000 100,000 5,155 7,343 10,500 5,155 7,343 10,500
11 13,425 100,000 100,000 100,000 5,536 8,167 12,127 5,536 8,167 12,127
12 15,042 100,000 100,000 100,000 5,890 9,006 13,902 5,890 9,006 13,902
13 16,739 100,000 100,000 100,000 6,206 9,850 15,932 6,206 9,850 15,832
14 18,521 100,000 100,000 100,000 6,495 10,712 17,945 6,495 10,712 17,945
15 20,392 100,000 100,000 100,000 6,747 11,581 20,250 6,747 11,581 20,250
16 22,356 100,000 100,000 100,000 6,964 12,458 22,769 6,964 12,458 22,769
17 24,419 100,000 100,000 100,000 7,134 13,334 25,519 7,134 13,334 25,519
18 26,585 100,000 100,000 100,000 7,258 14,210 28,526 7,258 14,210 28,526
19 28,859 100,000 100,000 100,000 7,325 15,076 31,813 7,325 15,076 31,813
20 31,247 100,000 100,000 100,000 7,327 15,923 35,405 7,327 15,923 35,405
age 60 45,102 100,000 100,000 100,000 6,474 19,997 58,664 6,474 19,997 58,664
age 65 62,785 100,000 100,000 110,666 3,077 22,796 90,710 3,077 22,796 90,710
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
(REG2)
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission hereto or hereafter duly adopted pursuant to authority conferred in
that section.
RULE 484 UNDERTAKING
The By-Laws of IDS Life Insurance Company provide that:
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that he is or was a Manager
of Variable Annuity Funds A and B, director, officer, employee or agent of this
Corporation, or is or was serving at the direction of the Corporation as a
Manager of Variable Annuity Funds A and B, director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
to any threatened, pending or completed action, suit or proceeding, wherever
brought, to the fullest extent permitted by the laws of the State of Minnesota,
as now existing or hereafter amended, provided that this Article shall not
indemnify or protect any such Manager of Variable Annuity Funds A and B,
director, officer, employee or agent against any liability to the Corporation or
its security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of his duties or
by reason of his reckless disregard of his obligations and duties.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 16 TO
REGISTRATION STATEMENT NO. 33-11165
This Post-Effective Amendment No. 16 comprises the following papers and
documents:
The facing sheet.
The prospectus consisting of 57 pages.
The undertakings to file reports.
The signatures.
The following exhibits:
1. A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2 to the Registration Statement.
(1) (a) Resolution of Board of Directors of IDS Life Insurance
Company establishing the Trust, adopted May 9, 1985, filed
electronically as Exhibit 1(a) to Post-Effective Amendment
No. 12, File No. 33-11165 is incorporated herein by
reference.
(b) Resolution of Board of Directors of IDS Life Insurance
Company reconstituting the Trust, adopted October 16, 1985,
filed electronically as Exhibit 1(b) to Post-Effective
Amendment No. 12, File No. 33-11165 is incorporated herein
by reference.
(2) Not applicable.
(3) (a) Not applicable.
(b) (1) Form of Division Vice President's Employment Agreement
dated November 1991, filed electronically as Exhibit
3(b)1 to Post Effective Amendment No. 13, File No.
33-11165 is incorporated herein by reference.
(2) Form of District Manager's Rider to IDS Life Insurance
Company, Personal Financial Planner's Agreement dated
November 1986, filed electronically as Exhibit 3(b)2 to
Post Effective Amendment No. 13, File No. 33-11165 is
incorporated herein by reference.
(3) Form of Personal Financial Planner's Agreement dated
November 1986, filed electronically as Exhibit 3(b)3 to
Post Effective Amendment No. 13, File No. 33-11165 is
incorporated herein by reference.
<PAGE>
(c) Schedules of Sales Commissions incorporated by reference to
Registrant's original Registration Statement for the
Variable Account on Form N-8B-2 (File No. 811-4298; May 10,
1985).
(4) Not applicable.
(5) Flexible Premium Variable Life Insurance Policy filed with the
Original Registration Statement (File No. 33-11165) on December
31, 1986 and incorporated herein by reference.
(6) (a) Certificate of Incorporation of IDS Life Insurance Company,
dated July 23, 1957, filed electronically as Exhibit
1.A.(6)(a) to Post-Effective Amendment No. 12, File No.
33-11165 is incorporated herein by reference.
(b) Amended By-Laws of IDS Life Insurance Company, filed
electronically to Post-Effective Amendment No. 12, File No.
33-11165 is incorporated herein by reference.
(7) Not applicable.
(8) (a) Form of Investment Management and Services Agreement dated
December 17, 1985 between IDS Life and IDS Life Series Fund,
Inc., filed electronically as Exhibit 8(a) to Post-Effective
Amendment No. 13, File No. 33-11165 is incorporated herein
by reference.
(b) Form of Investment Advisory Agreement dated July 11, 1984
between IDS Life and IDS Financial Services Inc. relating to
the Variable Accounts, filed electronically as Exhibit 8(a)
to Post-Effective Amendment No. 13, File No. 33-11165 is
incorporated herein by reference.
(9) None.
(10) Application form for the Flexible Premium Variable Life Insurance
Policy filed electronically as Exhibit 1.A.(10) to Registrant's
Form N-8B-2 with Post-Effective Amendment No. 11, File No.
33-11165 is incorporated herein by reference.
(11) IDS Life Insurance Company's Description of Transfer and
Redemption Procedures and Method of Conversion to Fixed Benefit
Policies filed electronically as Exhibit 1.A.(11) to Registrant's
Form N-8B-2 with Post-Effective Amendment No. 11, File No.
33-11165 is incorporated herein by reference.
B. (1) Not applicable.
(2) Not applicable.
<PAGE>
C. Not applicable.
2. Opinion and consent of counsel as to the legality of the securities being
registered is filed electronically herewith.
3. Financial Statement Schedules, to be filed by amendment
4. Not applicable.
5. Financial Data Schedules, to be filed by amendment
6. Actuarial opinion of James M. Jensen to be filed by amendment
7. (a) Written consent of Mary Ellyn Minenko dated February 27, 1998 is filed
electronically herewith.
(b) Written actuarial consent of James M. Jensen, to be filed by
amendment.
(c) Written auditor consent of Ernst & Young LLP, to be filed by
amendment.
(d) Directors' Power of Attorney to sign amendments to this Registration
Statement dated March 12, 1997, filed as Exhibit 7(d) to
Post-Effective Amendment No. 15, File No. 33-11165 is incorporated
herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 IDS Life Insurance Company on behalf of the Registrant,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(a)(1) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on behalf of the Registrant by the undersigned, thereunto
duly authorized, in the City of Minneapolis, and State of Minnesota on the 27th
day of February, 1998.
IDS Life Variable Life Separate Account
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By/s/ Richard W. Kling*
Richard W. Kling, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated on the 27th day of February, 1998.
Signature Title
/s/ James A. Mitchell* Director, Chairman of the Board
James A. Mitchell and Chief Executive Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President, Assured Assets
<PAGE>
*Signed pursuant to Power of Attorney dated March 12, 1997 filed as Exhibit No.
7(d) to Post-Effective Amendment No. 15, File No. 33-11165 is incorporated
herein by reference.
By:
- -------------------------------
Mary Ellyn Minenko
IDS Life Variable Life Separate Account
File No. 33-11165
Exhibit Index
Exhibit 2 & 7(a) Written consent of Mary Ellyn Minenko dated February 27, 1998
February 27, 1998
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-6 (File No. 33-11165).
I am familiar with the establishment of the IDS Life Variable Life Separate
Account ("Account") which is a separate account of IDS Life Insurance Company
("Company") established by the Company's Board of Directors pursuant to
Minnesota Insurance Law. I am also familiar with the above-referenced
Registration Statement Form S-6 filed by the Company on behalf of the Account
with the Securities and Exchange Commission with respect to an indefinite amount
of securities.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to opine as follows:
1. The Account is a separate account of the Company, duly established and
validly existing pursuant to Minnesota law, is registered as a unit
investment trust under the Investment Company Act of 1940 and has the power
and authority to issue the securities registered.
2. The securities, being variable life insurance policies, when issued,
offered and sold in accordance with the prospectus contained in the
aforesaid Registration Statement and, upon compliance with local law, are
legal and binding obligations of the Company in accordance with their
terms.
3. There is no limitation as to the number of units of the Account that may be
issued.
4. Assets allocated to and held in the Account pursuant to Minnesota statutes
in accordance with the policies are not chargeable with liabilities arising
out of any other business the Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
Mary Ellyn Minenko
Senior Counsel
